Newmont Mining Earnings Review: Efficient Production Growth Beats Market Estimates

October 30th, 2017 by Trefis Team
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Newmont Mining

Newmont Mining Corporation (NYSE:NEM) beat market expectations to report strong earnings growth in Q3 2017, driven by higher gold production even though costs remained high.

Higher output was driven by production growth in the new mines of Merian and Long Canyon, which had offset the fall in production of more mature operations. The company’s all-in sustaining cost (AISC), which captures all costs (production costs as well as sustaining capital expenses) required to sustain the ongoing mining operations was reported 2% higher Y-O-Y mainly due to increased investment in exploration and development projects. [1]

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Average realized gold prices were 4% lower compared on a Y-O-Y basis mainly because gold prices had hit record highs during Q3 last year due to the increasing macroeconomic uncertainty in the wake of the UK’s June EU referendum and global economic weakness. Gold prices have otherwise averaged out at a nominal level for 2017 owing to the uncertainty pertaining to North Korea’s nuclear agenda. Realized gold prices were 2% higher than that of last quarter, which has enabled the company to report strong a cash flow position.

After the successful commencement of operations in Tanami mines in Australia, Newmont’s focus has shifted to the Quecher project in Peru, which would extend Yanacocha mine life until 2027 and aid its production level. The company has kept its production and cost outlook for the year unchanged and aims to achieve a higher level of efficiency with its strong project pipeline.

Thus, continued focus on achieving higher operational efficiency would enable the company to remain profitable in the long run as gold prices fluctuate in the midst of strong expectations of of interest rate hikes in the U.S. in the upcoming year as the U.S. economy strengthens.

We have a $36 price estimate for Newmont’s stock, which is in line with the current market price.

Have more questions about Newmont Mining? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such 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 (NEM) Q3 2017 Results – Earnings Call Transcript, Seeking Alpha [↩]