MAC: Mines and Communities

Newmont shareholders face good news and bad

Published by MAC on 2004-04-28

Newmont shareholders face good news and bad

Denver Business Journal

Published: April 28, 2004

Newmont Mining Corp. (NYSE: NEM), the Denver-based mining giant, saw its 2004 first quarter net income drop by $30.6 million from its Q1 2003 financial report.

Newmont announced Wednesday as it welcomed its shareholders to the Mile High City for the company's annual meeting that it had Q1 2004 net income of $86.7 million, or 20 cents per share, compared to $117.3 million, or 29 cents per share, in Q1 2003.

"Our first quarter operating results reflect higher margins and strong cash flows, demonstrating our leverage to higher gold prices. We will continue to focus our efforts on controlling costs, particularly in Nevada, but we also recognize that higher gold prices bring opportunities to mine additional lower-grade, higher-cost ounces that are value-accretive to Newmont shareholders," said Wayne W. Murdy, chairman and CEO, in a statement.

The 2003 Q1 net income included a number of items that generated net gains, primarily related to the acquisition and integration of Franco-Nevada and Normandy Mining.

Net income for 2004 Q1 was impacted by a $47.1 million non-cash, after-tax charge to recognize the cumulative effect of a change in accounting principle to reflect conforming accounting policies upon consolidation of Batu Hijau.

Newmont's 2004 Q1 revenues were $1.14 billion, a marked increase over the $748.5 million revenues reported for 2003 Q1.

Even though the net income picture for the current quarter wasn't as bright as the previous year, it certainly was sufficient for the Newmont board of directors to declared an increased quarterly dividend of 7.5 cents per share, payable on June 23 to holders of record at the close of business on June 2.

In addition, Newmont Mining Corp.of Canada Limited (TSX: NCM) declared an increased quarterly dividend of 7.5 cents (10.139 cents Canadian) per share.

"Today's decision to increase the dividend by 50 percent reflects the company's stronger operating results, improved financial position, and our continued positive outlook for the gold price," Murdy said in the statement.

But while the Newmont shareholders were greeted by positive financial figures, they were also expected to face Newmont's critics who charge the company's operations have polluted drinking water, contaminated fisheries and farmland, and led to serious health problems in its mining communities in Jakarta, Ghana, Indonesia, Peru and Nevada.

According to Newmont's opponents, "The multi-billion-dollar mining company has refused to acknowledge to its shareholders these claims as a significant financial and social liability."

Recently, groups in Ghana and Indonesia have challenged Newmont's refusal to respect local laws and to compensate fairly the families and children harmed by its mining operations.

In Cajamarca, Peru, where Newmont is majority owner of the Yanacocha gold mine, citizens are protesting expansion of the controversial mine to a sixth mountain, Cerro Quilish, an important source of drinking water in the region, according to an Earthworks press release.

"Newmont has profited greatly from Yanacocha, but residents still suffer terrible health effects from a mercury spill that occurred four years ago," said Catholic priest Marco Arana, a Cajamarca resident and member of the community group GRUFIDES, in the press release. "We are fighting to free our community from poverty and contamination and to affirm our right to development that is based on social equality and environmental protection."

Newmont has been sued in Denver by more than 1,000 Peruvian villagers over a the mercury spill in 2000. The mine is jointly owned by Newmont, which has a 51 percent stake, and Compania de Minas Buenaventura.

In an April 9 story, the Denver Business Journal reported that Newmont was seeking help from the state Legislature to avoid being sued in Colorado over matters that happen elsewhere in Newmont's far-flung gold and precious minerals empire. Gov. Bill Owens signed the bill into law on April 8.

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