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NEM Breaks Gold Miners’ Jinx with Earnings Beat in Second Quarter

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NEM beats expectations

Newmont Mining (NEM) reported its Q2 2018 earnings on July 26 before the market opened. The company reported earnings per share (or EPS) of $0.26, which beat the consensus expectations by $0.02. Its revenues of $1.66 billion, however, missed expectations by 7%. The miner beat Q1 2018 estimates.

Newmont’s better-than-expected Q2 results are in contrast to earnings misses from peers (GDX) Barrick Gold (ABX), Goldcorp (GG), Agnico Eagle Mines (AEM), and New Gold (NGD), all of which released results yesterday after markets closed.

NEM also announced it would acquire a 50% stake in the Galore Creek Partnership from Novagold Resources (NG) for $275 million. It plans to form a partnership with Teck Resources (TECK), which owns the remaining stake. NEM’s president and CEO, Gary Goldberg, said, “Galore Creek holds the potential to support decades of profitable copper and gold production in a favorable mining jurisdiction, in line with our strategy to create long-term value for our stakeholders.”

Production and costs

NEM’s attributable gold production for Q2 2018 totaled 1.16 million ounces, a decline of 14% year-over-year (or YoY). The decline was mainly due to lower grades at Carlin, Twin Creeks, Boddington, and Akyem. Along with a decline in gold production, its all-in sustaining costs (or AISC) increased by 16% YoY to $1,024 per ounce. This increase was primarily due to:

  • lower production
  • higher stockpile and leach pad inventory adjustments
  • higher oil prices
  • higher sustaining capital and advanced project and exploration expenses

The company maintained its guidance for 2018 at 4.9 million to 5.4 million ounces for production and $965 to $1,025 per ounce for AISC.

Stock performance

Newmont’s stock performance year-to-date has been flat, which means the stock has outperformed the SPDR Gold Shares (GLD) with returns of -5.6% and the VanEck Vectors Gold Miners ETF (GDX) with returns of -6.2%. The stock has been subdued mainly due to the lack of any major catalyst. Investors are looking forward to NEM’s conference call scheduled for 10:00 AM EST today. Management updates could mean a positive catalyst for the stock.

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