What Led Newmont to Upgrade Its Production for 2017?



Production growth drivers

Newmont Mining’s (NEM) attributable gold production in 2Q17 came to nearly 1.4 million ounces, or 13% higher than in 2Q16. One of the most important drivers for this growth was the new production at the Merian and Long Canyon mines.

This increase offset declines due to lower grades at its Tanami and Yanacocha mines. Investors might recall that Newmont’s Merian and Long Canyon mines came into commercial production in 2016 below budget and ahead of schedule.

Higher grades at Carlin, Twin Creeks, and Phoenix and higher production at the CC&V (Cripple Creek and Victor) mine also supported Newmont’s production in 2Q17.

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Production outlook

Newmont Mining (NEM) has slightly upgraded its production guidance for 2017. While the company had previously guided for production between 4.9 million and 5.4 million ounces for 2017, it now expects production to come in between 5.0 million and 5.4 million ounces.

This improvement in guidance is due to the expectation of full potential improvements in North America and Africa. Last quarter, Newmont increased its longer-term guidance from 4.5 million–5.0 million ounces to 4.7 million–5.2 million ounces. It maintained its longer-term guidance in its 2Q17 results.

More upside ahead

Newmont stated in its press release that the expansion at the Yanacocha mine represents an upside to both production and cost guidance. Newmont has not included additional projects in its medium-term outlook, which have not been funded or reached an execution stage. This could mean a further upside to Newmont’s production going forward.

Newmont’s peers (GDX) are also trying to increase profitable production. While Agnico Eagle Mines (AEM) and Goldcorp (GG) have steadily increasing production profiles, Barrick Gold’s (ABX) production growth is declining. The upside to Kinross Gold’s (KGC) production growth lies in the Tasiast Phase-I expansion execution and the final decision on going ahead with Tasiast Phase-II expansion.

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


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