What Could Drive Newmont Mining’s Production in 2017 and Beyond?



Production growth drivers

Newmont Mining (NEM) has been trying to achieve higher production every quarter. Its gold production totaled 1.3 million ounces in 4Q16, which represents 17% growth year-over-year (or YoY). The company’s 2016 production totaled 4.9 million ounces, a gain of 7% compared to 2015.

The major reasons behind Newmont Mining’s year-over-year increments in 4Q16 include the following:

  • new production at Merian and Long Canyon
  • offset grade reductions at Yanacocha
  • increased production at CC&V (Cripple Creek and Victor) mine

Investors should note that Newmont Mining acquired CC&V from AngloGold Ashanti (AU) in June 2015.

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Production outlook

Newmont Mining (NEM) maintained its steady gold production outlook of 4.5 million–5.0 million ounces for the next five years. In 2017, the company expects its production to increase to 4.9 million–5.4 million ounces.

The increased production is mainly attributable to the full-year production of its Merian and Long Canyon mines, which would offset lower production at Twin Creeks and Yanacocha.

More upside ahead

Investors should also note that Newmont Mining’s Merian project came online on October 1, 2016, which was 20% below capital budget and on time. The company noted that it expects its annual production to average between 400,000–500,000 ounces of gold at “competitive costs” in the first five full years of operation.

NEM’s Long Canyon project also came online on November 15, 2016, also ahead of schedule and under budget. The company has included additional projects in its medium-term outlook.

Newmont Mining’s peers (GDX) are also trying to increase their production. Agnico Eagle Mines (AEM) and Goldcorp (GG) have stable production profiles, and Barrick Gold’s (ABX) project pipeline has also been improving. Although Kinross Gold (KGC) has some acquisitions to improve its production, the company still might have problems replacing its reserves in the long term.

In the next part, we’ll discuss Newmont Mining’s project pipeline in detail.


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