NEW YORK (Reuters) - Gold miner Newmont Mining Corp. posted a quarterly net loss on Thursday as a result of huge charges on the value of its discontinued merchant banking operation and the elimination of its gold hedge positions.
Still, the operating results of the world's No. 2 gold producer beat estimates, even as it sold less gold than a year earlier, but at higher average prices.
It also said it was on track to meet production targets this year and would spend $170 million to $175 million for exploration and new mines in Australia, Ghana, Peru and Nevada, as well as possible start-ups in China and Indonesia.
"It was disappointing as far as the write-down, but the bad news had already been telegraphed," said Frank Holmes, chief executive of U.S. Global Investors, whose $5 billion fund includes large mining holdings.
"Their operating results were slightly better than we expected, but they remain unrobust for us, although they are likely to be cleaner in future quarters."
The net loss was $2.06 billion, or $4.57 per share, for the second quarter, compared with a net profit of $161 million, or 36 cents, last year.
Excluding charges of $2.125 billion for the hedges and merchant banking business write-downs, it earned 24 cents per share, a spokesman said.
Analysts, on average, expected 21 cents, according to Reuters Estimates, but excluded only the $1.665 billion charge for eliminating the merchant banking operations.
Revenue rose to $1.30 billion from $1.29 billion. Even though sales of gold owned by Newmont fell to 1.25 million ounces from 1.38 million ounces last year, the average realized price rose to $667 per ounce from $605.
In July, it said it would eliminate its entire 1.85 million ounce gold hedge position and was discontinuing its merchant banking segment.
A spokesman for Denver-based Newmont said Thursday the company was still considering its options for the business and might sell or hold some assets, but was focused on its core operations of gold mining.
President and Chief Executive Richard O'Brien said the move to eliminate its hedging position made Newmont the world's largest unhedged gold producer.
He reiterated Newmont's estimate for full-year gold sales of between 5.2 million and 5.6 million ounces, with costs at $375 to $400 per ounce.
U.S. Global's Holmes said he was concerned that Newmont's return on capital was only about 7 percent, compared with approximately 50 percent for rival Freeport-McMoRan Copper & Gold Inc.
The company has completed a $1.15 billion convertible senior note issue to give it financial flexibility to complete several projects, including Boddington in Australia, the gold mill at Yanacocha in Peru and a power plant in Nevada that will help cut costs by providing its own electricity to mines there.
"We continue to optimize plans for our prospective gold opportunities, including the potential development of our Conga project in Peru and the Akyem project in Ghana," said O'Brien, who replaced the retiring Wayne Murdy as CEO.
Newmont also said its Midas underground mine in Nevada has been shut down since June, when one worker was killed in a cave-in.
State and federal mine safety regulators have suspended operations there pending further review and investigation. Newmont said it cannot predict when the mine would be reopened, but it does not expect a material impact on Nevada production.
Newmont shares, which have declined 8 percent so far this year, were up 21 cents at $41.80 on the New York Stock Exchange Thursday afternoon.
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