Gold Miner Newmont Shares Crumble 12% After Earnings Miss on Weaker Bullion Prices

Gold and copper producer Newport Goldcorp announced weaker than expected second quarter earnings Monday sending their stock sharply lower. By lunchtime NEM was trading at 45.26quote price arrow down-6.13 (quote price arrow down -11.94%) a more than two-year low. The companies’ shares have tumbled 40% over the past three months. Profit was down almost 41% from a year ago, reflecting a drop in gold prices and cost of sales jumped 33% while sales fell.

NEwmont Australia BoddingtonNewmont: Boddington Australia

Newmont Q2 2022 Earnings

Newmont second-quarter profit fell well short of expectations, net income declined to $387 million, or 49 cents a share, from $650 million, or 81 cents a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of 46 cents missed the FactSet consensus of 66 cents.

Sales fell 0.2% to $3.06 billion, just above the FactSet consensus of $3.04 billion, while costs applicable to sales rose 33.3% to $1,708 billion.

Newmont said earnings were negatively impacted by higher labor, materials and consumables costs, higher fuel and energy costs and expenses recognized related to the Peñasquito profit-sharing agreement announced in early July.

  • Attributable gold production increased 3% to 1,495 thousand ounces, above 1,455 thousand ounces, while average realized gold price edged up 0.7% to $1,836 per ounce.
  • Declared second quarter dividend of $0.55 per share, consistent with the previous seven quarters***
  • $1 billion share repurchase program to be used opportunistically in 2022, with $475 million remaining***
  • Ended the quarter with $4.3 billion of consolidated cash and $7.3 billion of liquidity with a net debt to adjusted EBITDA ratio of 0.3x*
  • Advancing profitable near-term projects, including Tanami Expansion 2, Ahafo North and Yanacocha Sulfides
  • Completed acquisition of Sumitomo Corporation’s 5 percent interest in Yanacocha, increasing ownership in Sulfides project to 100 percent

“Newmont delivered a solid second quarter performance, producing 1.5 million gold ounces and generating $514 million in free cash flow. Through our industry-leading portfolio of assets and projects, our proven integrated operating model, our balanced and disciplined approach to capital allocation and our values-driven commitment to our purpose of creating value and improving lives through sustainable and responsible mining, Newmont remains well-positioned to safely manage through the evolving and unprecedented challenges that face our industry and the world at large.”

– Tom Palmer, Newmont President and Chief Executive Officer

Gold Highlights

  • Attributable gold production1 increased 3 percent to 1,495 thousand ounces from the prior year quarter primarily due to higher ore grade milled at Boddington, Ahafo and Tanami and a draw-down of in-circuit inventory compared to a build in the prior year.
  • In addition, the current quarter benefited from the increased ownership at Yanacocha due to the acquisition of Buenaventura’s 43.65% ownership in February 2022. These increases were partially offset by lower ore grade milled and lower throughput at Peñasquito and Éléonore.
  • Gold CAS totaled $1.4 billion for the quarter. Gold CAS per ounce increased 23 percent to $932 per ounce from the prior year quarter primarily due to higher direct operating costs as a result of inflationary pressures, driven by higher labor costs and an increase in commodity inputs, including higher fuel and energy costs; as well as lower by-product credits at Yanacocha and a draw-down of higher cost in-circuit inventory compared to a build in the prior year.
  • In addition, Gold CAS includes the allocation of $22 million for the Peñasquito profit-sharing agreement entered into during the second quarter of 2022 related to 2021 results.
  • Gold AISC per ounce3 increased 16 percent to $1,199 per ounce from the prior year quarter primarily due to higher CAS per ounce.
  • Attributable gold equivalent ounce (GEO) production from other metals increased 9 percent to 330 thousand ounces primarily due to higher ore grade milled at Boddington and higher mill recovery and throughput at Peñasquito.
  • CAS from other metals totaled $327 million for the quarter. CAS per GEO2 increased 56 percent to $983 per ounce from the prior year quarter primarily due to higher allocation of costs to other metals and higher direct operating costs as a result of inflationary pressures, driven by higher labor costs and an increase in commodity inputs, including higher fuel and energy costs.
  • In addition, CAS from other metals includes the allocation of $48 million related to the Peñasquito profit-sharing agreement entered into during the second quarter of 2022 related to 2021 results.
  • AISC per GEO3 increased 45 percent to $1,286 per ounce primarily due to higher CAS per GEO and higher treatment and refining costs.
  • Average realized price for gold was $1,836, an increase of $13 per ounce over the prior year quarter.
  • Average realized gold price includes $1,858 per ounce of gross price received, an unfavorable impact of $14 per ounce mark-to-market on provisionally-priced sales and reductions of $8 per ounce for treatment and refining charges.

Outlook

Updated full-year guidance of 6.0 million ounces of attributable gold production, CAS of $900 per ounce and AISC of $1,150 per ounce; reaffirmed original guidance of 1.3 million gold equivalent ounces from copper, silver, lead and zinc with updated co-product cost guidance of $750 per GEO of CAS and $1,050 per GEO of AISC

Updated full-year guidance for development capital spend to $1.1 billion; Provided trends on development capital costs and timeline related to Tanami Expansion 2 and Ahafo North

NEM Global Assets 2019

Newmont Announced Acquiring Goldcorp for $10 billion on January 14, 2019

Newmont Mining Corporation (NEM) agreed to acquire Goldcorp Inc. (GG) for $10 billion in an all-stock deal, which is expected to be completed in the second quarter of 2019.

Under the terms, Newmont will acquire all outstanding Goldcorp equity at an exchange ratio of 0.3280 of a Newmont share and $0.02 for each Goldcorp share, which will represent a 17% premium based on both companies’ 20-day volume weighted average share prices as of January 11, 2019.

The transaction had been approved by the boards of directors of both companies. Closure of the deal was subject to approval by the shareholders of both companies, regulatory approvals in a number of jurisdictions including the EU and Canada, and other customary conditions.

The combined entity was named Newmont Goldcorp and will be one of the world’s largest gold producers by output. Newmont shareholders will own approx. 65% of the combined company while Goldcorp shareholders will own 35%. The majority of Newmont Goldcorp’s reserves and resources, around 75%, will be located in the Americas with the remaining 15% in Australia and 10% in Ghana.

Newmont Goldcorp plans to divest $1 billion to $1.5 billion in assets over the next two years and aims to achieve an annual production target of 6-7 million ounces. In 2017, Newmont produced 5.3 million ounces of gold while Goldcorp produced 2.6 million ounces.

Gary Goldberg will be the Chief Executive Officer of Newmont Goldcorp and Tom Palmer will be the President and Chief Operating Officer. Mr. Goldberg will lead the company through the acquisition and integration process, which is expected to be completed for the most part in the fourth quarter of 2019, after which he will retire and Mr. Palmer will become President and CEO.

Newmont Goldcorp’s shares are traded on the New York Stock Exchange under the ticker symbol NEM and are expected to be listed on the Toronto Stock Exchange following the deal closure. Newmont would be entitled to a $350 million break-fee and Goldcorp would be entitled to a $650 million break-fee, depending on the circumstances.

About Newmont

Newmont is the world’s leading gold company and a producer of copper, silver, zinc and lead. The Company’s world-class portfolio of assets, prospects and talent is anchored in favorable mining jurisdictions in North America, South America, Australia and Africa. Newmont is the only gold producer listed in the S&P 500 Index and is widely recognized for its principled environmental, social and governance practices. The Company is an industry leader in value creation, supported by robust safety standards, superior execution and technical proficiency. Newmont was founded in 1921 and has been publicly traded since 1925.

Source: Newmont

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