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What Could Improve Newmont’s Costs in 2018 and Beyond

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Cost performance in 3Q17

Newmont Mining (NEM) reported all-in sustaining costs (or AISC) of $943 per ounce for 3Q17, which is 1.9% higher year-over-year (or YoY) and 6.7% sequentially. The higher costs reflected lower grades at maturing operations and increased investment in exploration and advanced projects. Newmont’s CEO, Gary Goldberg, mentioned during the 3Q17 earnings call that the company is controlling what it can, including improving the ore body modeling, mine planning, mill throughput, and recovery and leveraging technology.

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Cost guidance maintained

Newmont had improved its cost guidance for 2017 to $900–$950 per ounce from $950–$1,000 per ounce in 2Q17. In 3Q17, the company maintained its AISC guidance. Its year-to-date AISC of $909 per ounce is within the 2017 cost range of between $900 and $950 per ounce.

Upside in the long term?

As we mentioned in the previous part of this series, Newmont is expecting its newest nine projects to add production at AISC of just $750 per ounce for the first five years. This new production should replace the maturing production and add additional production at low costs, which could help the overall cost profile for the company.

To be sure, Newmont Mining isn’t unique in bringing down costs. Peers (GDX)(RING) Barrick Gold (ABX), Goldcorp (GG), Agnico-Eagle Mines (AEM), and Yamana Gold (AUY) have also brought down their costs considerably over the past year.

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