Newmont Mining Shares Down As Price of Gold Falls, Analyst Downgrades Company

Shares of Newmont Mining Corp. sagged Thursday as the price of gold faltered and an analyst lowered his rating on the gold producer’s stock.

The December gold contract dropped $17.30 to $624.50 an ounce at midday on the New York Mercantile Exchange. Sector-wide, shares of gold producers retreated along with the metal.

Newmont Mining Corp. shares fell $1.18, or 2.3 percent, to $49.73 in midday trading on the New York Stock Exchange. Barrick Gold Corp. shares dipped 76 cents, or 2.3 percent, to $32.79, while Gold Fields Ltd. shares shed 99 cents, or 4.6 percent, to $20.65 and other gold producers traded lower as well.

Stephen Walker, an analyst with RBC Capital Markets, told clients in a note Thursday that issues at Newmont’s new Leeville, Nev., mine and the company’s struggle to contain costs in lower-grade ore mines in that state may hinder the company’s stock in the coming months. He downgraded Newmont shares to “Sector Perform” from “Outperform” and cut his price target to $67 from $71.

The analyst suggested the declining grade of ore mined at Newmont’s Nevada operations has created “near-term challenges” for the company, as cost improvements from its new mines and a new power plant won’t come to bear until mid-2007.

“Newmont’s average operating costs will improve in the second half 2006 compared to first half 2006, however we believe the shares will perform in line with the sector until the market sees sustained lower costs — particularly from the Nevada assets,” Walker wrote.