Newmont and Goldcorp Have Remained Buoyant, but What’s in Store?



Newmont and Goldcorp

Newmont Mining (NEM) and Goldcorp (GG) are the only two senior gold mining stocks that have had positive returns YTD (year-to-date).

In the first six months of the year, NEM returned 0.5%, and Goldcorp outperformed its peers significantly with a rise of 7.4%. The VanEck Vectors Gold Miners ETF (GDX) fell 4.0% in the same period.

Newmont’s earnings beat

Newmont Mining reported an earnings beat in the first quarter. While the company’s stock has risen 0.5% YTD, it fell 3.5% in the second quarter. Along with weaker precious metals prices, the lack of any major catalyst might be the reason for the stock’s losses. The company is expecting its unit costs to rise in 2018 due to the working off of higher stripping at Carlin, Boddington, Ahafo, and Twin Creeks.

Newmont has a strong project pipeline, but it might only be able to replace its maturing operations rather than contribute anything significant to its production growth in the long term.

Goldcorp’s earnings beat

Goldcorp’s (GG) first-quarter earnings fell short of analysts’ expectations. Its earnings were lower primarily due to lower-than-expected production and higher costs. Its gold production slipped 10.0% YoY (year-over-year) to 590,000 ounces. Higher average realized gold prices were offset by lower volumes. On the other hand, its all-in sustaining costs came in 1.3% higher YoY due to lower gold sales, lower by-product credits, and higher sustaining capital.

While Goldcorp slightly disappointed the markets, it’s been guiding for lower production and higher costs in the short term. However, the company’s 20-20-20 growth plan, which is aimed at improving its production, reserves, and unit costs by 20% each by 2021, seems to be on track, boosting investors’ confidence in its future growth and profitability.

Like Newmont, Goldcorp has one of the strongest project pipelines in the sector. Its expansionary projects underpin its expected 20% growth in reserves by 2021.

Goldcorp’s proven and probable gold reserves as of June 30, 2017, were 53.5 million ounces—an improvement of 26.5% YoY. In contrast, most of its peers’ (NUGT) (RING) reserves had declined. Barrick Gold (ABX), for example, reported a 25% fall in its 2017 reserves, which came in at 64.5 million ounces. Kinross Gold’s (KGC) reserves also fell 16% YoY in 2017 to 25.9 million ounces.

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