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Can Newmont Realize Lower Unit Costs as Its Projects Come Online?

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Cost performance in the first quarter

Newmont Goldcorp’s (NEM) AISC (all-in sustaining costs) for the first quarter was $845 per ounce, which implies a fall of 4% compared to the same quarter last year. The lower costs were due to higher production, a lower stockpile and leach pad inventory adjustments, and a favorable Australian dollar foreign exchange rate.

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Long-term cost guidance

Newmont Mining maintained its 2019 AISC guidance at $935 per ounce. It expects an improved cost of sales in South America and Africa for 2019. Its AISC, however, is still expected to rise to $975 per ounce in 2020 before settling between $875 and $975 per ounce in the longer term through 2023. During the Q1 conference call, NEM’s CEO Gary Goldberg said that through its merger with Goldcorp, the company could even reduce its AISC to $830 per ounce by 2025.

Long-term upside

Newmont Mining expects new projects to add production at a lower AISC than its current average overall costs. New production should replace the company’s maturing production and add additional production at a low cost, which could improve the company’s overall cost profile.

In the first quarter, Barrick Gold’s (GOLD) AISC was $806 per ounce, and Agnico Eagle Mines (AEM) had AISC of $836 per ounce. Kinross Gold (KGC), which was among the higher-cost producers in the gold mining space (GDX), had AISC of $925 per ounce. Newmont’s AISC was in between the two extremes of GOLD and KGC.

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