Newmont Mining’s Q4 2016 Earnings Review: Higher Gold Prices And Shipments Drive Earnings Improvement

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Newmont Mining reported a significant improvement in its fourth quarter earnings, driven by higher gold prices and shipment volumes. Gold prices averaged higher in the fourth quarter of 2016 as compared to the corresponding period of the previous year driven by a rally in prices in the third quarter in the wake of the UK’s June 23 EU referendum. Though prices cooled off in the fourth quarter in anticipation of the Fed’s December rate hike, they remained comfortably higher than levels seen in Q4 2015. In addition, Newmont reported a sharp increase in gold production as a result of the ramp up of production from the company’s new Long Canyon and Merian mines. The company’s ongoing cost reduction initiatives, driven by automation and analytics, helped deliver improved cost performance, which helped prop up earnings. [1]

NEM Q4 2016 Earnings

Going forward, the company management reaffirmed its commitment to disciplined capital allocation by focusing on a portfolio of low-cost growth projects. The company divested a number of high-cost mining assets over the past years which helped lower operating costs. In addition, the company continued to focus on debt management. [1] Given the downside risks to gold prices from the Fed’s rate hike cycle, a strong balance sheet will stand the company in good stead going forward. [2]

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Newmont Mining

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Notes:
  1. Newmont Mining’s Q4 2016 Earnings Call Transcript, Seeking Alpha [] []
  2. Fed minutes show support for rate hike ‘fairly soon’, Marketwatch []