Newmont Mining’s relative performance

Newmont Mining (NEM) stock has declined ~14.4% year-to-date—most of these losses occurred after its second-quarter earnings. While its earnings were a beat on market expectations, the overall sentiment in the precious metals and mining space was negative.

Along with weaker precious metal prices (GLD)(SLV), the lack of any major catalyst might be the reason for the stock’s losses. The company expects its unit costs to rise in 2018 due to the working off of higher stripping at some of its mines. The company plans to release its detailed third-quarter earnings report on October 25 before the market opens. It’s slated to hold a conference call the same day.

What Could Drive Newmont Mining’s Stock Performance in Q4 2018?

Production outlook

NEM’s CEO, Gary Goldberg, said during the company’s second-quarter earnings call that “2018 continues to be weighted to the back half of the year when we will reach higher grades in Africa and the Americas.”

He also cited productivity gains as well as bringing new mines and extensions into production as the major reasons for its production outlook. It should be interesting to note the production progress on projects in Africa and the Americas and their production outlook.

Project update

Newmont Mining (NEM) has one of the best project pipelines in the gold industry. It achieved commercial production at the Twin Creeks Underground on July 1, which NEM expects to generate an internal rate of return (or IRR) of ~20.0%.

It also completed Northwest Exodus during the second quarter, which was completed ahead of schedule and within budget. This project is expected to generate an IRR of 40.0%. Since mid-2014, the company has approved eight projects that are expected to add ~1.2 million ounces of gold production at $750.00 per ounce.

NEM remains on track to reach commercial production at Subika Underground in the fourth quarter. The work at its Ahafo Mill Expansion is also ramping up and is expected to reach commercial production in the second half of 2019.

Newmont Mining’s project pipeline remains one of the strongest in the sector (GDX)—better than that of Kinross Gold (KGC), AngloGold Ashanti (AU), and Barrick Gold (ABX). Barrick’s production profile is declining while Kinross’s Tasiast Expansion, which is its major shot at replacing its maturing production, has been mired in geopolitical crosshairs.

In the next part of this series, we’ll look at the key updates that investors can expect in Goldcorp’s (GG) third-quarter earnings.

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