Newmont says might cut Indonesia activity due to tax dispute

Reuters - Gold and copper producer Newmont Mining Corp might curtail operations in Indonesia unless its dispute with the government over a new export tax is resolved in the next couple months, Chief Executive Gary Goldberg said on Friday.

Goldberg, speaking on a call with analysts and investors, also said Newmont is reviewing its dividend policy, and will update investors on its plans in February. Newmont's dividend is linked to gold prices, which have dropped sharply.

Newmont said last week it is considering legal action and other options in Indonesia, where the government has imposed a new tax on exports of metal concentrates. The company exports concentrate from its Batu Hijau copper and gold mine in the country.

"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.

Freeport, the other major U.S. miner with significant operations in Indonesia, has already said it is deferring some production because of its conflict with the government over the export tax.

Both miners have agreements with the Indonesian government that they say exempt them from new taxes. The companies pay corporate income taxes, royalties and other fees, but no export taxes.

Newmont scheduled Friday's call to discuss its fourth-quarter production figures and its forecasts for 2014, which were released late on Thursday.

Shares fell in early trading as the production forecasts came in below expectations, and RBC Dominion Securities analyst Stephen Walker downgraded the stock to "underperform" from "sector perform."

LOOKING AT DIVIDEND

Moody's Investors Service put Newmont's credit ratings under review for a possible downgrade last week. During Friday's call, Goldberg was asked about Newmont's gold price-linked dividend in light of the potential downgrade.

He said he would discuss dividend plans in more detail on Newmont's next call, in February, but noted that the dividend "clearly sits as one of the items that we're taking a look at as we really focus on free cash flow from the business and how we allocate it."

Moody's said it was reviewing Newmont's ratings because it expected earnings, cash flow and debt protection measures to deteriorate at current gold prices.

A steep decline in the price of gold has cut into miners' earnings and cash flow. Gold miners are expected to take more asset writedowns as they report fourth-quarter results in the coming weeks.

FORECASTS DISAPPOINT

Newmont said late on Thursday it expects consolidated gold production of between 5.0 million and 5.3 million ounces and copper output of between 160,000 and 175,000 tonnes in 2014.

RBC Dominion Securities analyst Walker wrote in a note to clients that the company's 2014 forecast was lower than he had expected: "In Nevada a number of mines are likely entering lower-grade waste-stripping phases," he wrote.

Credit Suisse analyst Anita Soni wrote that the gold production forecast fell short of her estimate.

BMO Capital Markets analysts said Newmont's 2014 copper production estimate was slightly lower than they had expected, but called the production forecasts "essentially in line" in a note to clients.

Newmont's shares dropped 6.7 percent to $22.50 on Friday on the New York Stock Exchange.