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Newmont Mining: Analyzing Its Production Drivers

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Dec. 4 2020, Updated 10:52 a.m. ET

Production drivers

In the fourth quarter, Newmont Mining (NEM) produced 1.44 million ounces—a rise of 8% YoY (year-over-year).

The following factors led to higher production:

  • higher grades and recovery at the Cripple Creek & Victor and Ahafo mines
  • higher production was partially offset by lower grades at KCGM

Newmont Mining’s total production of 5.1 million ounces in 2018 was in line with its guidance of 4.9 million–5.4 million ounces. However, the company’s fiscal production was 3% lower YoY due to lower grades at various sites.

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Production outlook

Newmont Mining expects production of 5.2 million ounces in 2019—an increase of 2% from 2018. The production in 2019 will likely be driven by the fiscal volumes from Newmont Mining’s recently completed Subika Underground project. The company expects production of 4.9 million ounces in 2020 and 4.4 million–4.9 million ounces per year through 2023. The guidance excludes the development projects that haven’t been approved yet.

More upside ahead

Newmont Mining completed two projects during the third quarter and one project during the fourth quarter. Twin Creeks Underground, Northwest Exodus, and Subika Underground will extend the company’s mine life and add lower-cost production. Newmont Mining expects to generate an IRR (internal rate of return) of ~20.0% from Twin Creeks. Northwest Exodus is expected to generate an IRR of 40.0%.

There are several other projects in the company’s pipeline that are advancing through different developmental studies. Newmont Mining hasn’t included these projects in its outlook for its long-term upside.

Newmont Mining’s peers (GDX) are also trying to increase their profitable production. While Barrick Gold’s (GOLD) production growth has fallen, Agnico Eagle Mines (AEM) and Goldcorp (GG) have steadily improved their production profiles with their strong project pipelines.

The upside to Kinross Gold’s (KGC) production growth lies in its Tasiast Expansion Phase 2, which has been temporarily halted pending its negotiations with the government of Mauritania.

Next, we’ll discuss Newmont Mining’s project pipeline.

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