Newmont Mining drops more than 10% after releasing 2014 guidance

Newmont Mining (NYSE:NEM), the world’s second biggest gold producer, was trading at $21.68 per share on Friday – a more than 10% drop – after releasing its 2013 production results, 2014 guidance and announcing that it might curtail operations in Indonesia.

The news wasn’t all bad. The company reported 2013 gold production at the top end of its guidance range of 5.1 million ounces of gold.

In its 2013 reserve calculation and asset impairment testing, the comapny will apply a gold price assumption of $1,300 per ounce, down from $1,400 last year. For its resources, the gold price assumption will be $1,400, down from $1,600. These figures could result in non-cash impariment chargest in the company’s financial filings due next month.

Newmont’s gold price assumption is more much more optimistic than the world’s biggest gold producer Barrick, which said last week it would recalcualte its reserves under a gold price assumption of $1,100 per ounce.

The company also reported average realized prices for the year of approximately $,1393 per ounce of gold and $2.96 per pound of copper, compared with $1,661 per ounce and $3.43 per pound in 2012.

Throughout the year, Newmont divested more than $600 million of non-core assets. Cost-cutting measures included laying off about 300 employees at the company’s Ghana operations.

The company’s Akyem mine in Ghana began commercial production in the last quarter of the year and exceeded guidance by producing 129,000 ounces of gold.

2013 has been anything but easy for the gold miner. The company lost more than 50% of is value throughout the year, earning the distinction of the second worst performing stock on the S&P 500.

CEO Gary Goldberg told investors on Friday that his firm is reviewing its dividend policy which is linked to gold prices, Reuters reported.

Looking ahead at 2014, Newmont sees a slight uptick in gold and copper output for total production of 5.3 million ounces and 175 thousand tonnes respectively, on the high end. The company also expects stable costs and a 20% reduction in overhead expenses.

According to the AP, this is below the Sterne, Agee & Leach’s gold forecast of 5.5 million ounces.

Citigroup’s Brian Yu wrote the following, as reported by Barron’s Blog.

“2014 Guidance Looks Lower on Production and Higher on Costs. [Newmont] is breaking from its historical reporting convention and guiding on a consolidated basis, expecting production of 5.0-5.4 mln ozs at a cash cost of $740-$790/oz compared to our prior estimate at 5.4 mln ozs at $685/oz. The midpoint of guidance would suggest equity gold production of ~4.7 mln ozs vs 5.1 mln ozs for 2013.”

Meanwhile, investment analysts at RBC Capital downgraded the gold miner from a a “sector perform” rating to an “underperform” rating.

Also dragging down the company’s share price was news on Friday that the miner might curtail its operations in Indonesia due to a dispute with the government over a new export tax, according to Reuters. 

“We’re in a position in the next couple of months to look, if we aren’t able to reach agreement – to have to curtail operations,” Goldberg said.