Newmont Making The Right Moves To Counter Low Gold Prices

August 31st, 2015 by Trefis Team
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Newmont Mining (NYSE:NEM) has been making all the right moves to combat the prevailing subdued gold pricing environment. The company recently completed the sale of its equity interest in the Valcambi gold refinery in Switzerland for $119 million. [1] The proceeds of the equity stake sale will be partially used to pay down the company’s debt. These moves are a part of the company’s efforts to adapt to an environment of low gold prices.

  • Gold prices have weakened considerably this year, with expectations of an interest rate hike by the Fed keeping prices subdued. An interest rate hike is expected to reduce the investment demand for gold, with investors shifting to interest bearing assets. Gold prices, which averaged $1,266 per ounce in 2014, have averaged less than $1,200 per ounce so far this year, as illustrated by the chart shown below. [2]

Gold Prices in 2015, Source: Kitco

  • Newmont has sold off $1.6 billion worth of non-core assets since mid-2013. [1] The company’s net debt declined to $3.08 billion at the end of Q2 2015 from $4.24 billion at the end of 2014. [3]
  • Newmont’s All-in Sustaining Cost (AISC) metric for gold production fell to $909 per ounce in Q2 2015, around 14% lower than the AISC for the corresponding period of 2014. [4] The AISC metric captures all of the costs required to sustain ongoing mining operations. The decline in AISC is a measure of the success of Newmont’s cost reduction initiatives, which were facilitated by the sale of high cost, non-core gold mines.
  • With gold prices expected to remain subdued in the near term, these measures will stand Newmont in good stead as it continues to grapple with weak gold prices.

See our forecasts for average realized gold prices for Newmont’s North American gold mines

See the links below for more information and analysis:

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Notes:
  1. Newmont Sells Stake in Valcambi Gold Refinery in Switzerland, Newmont Mining News Release [↩] [↩]
  2. Historical Gold Prices, Source: Kitco [↩]
  3. Newmont’s Q2 2015 10-Q, SEC [↩]
  4. Newmont’s Q2 2015 Earnings Presentation, Newmont Mining Website [↩]