Newmont maintains guidance despite softer Q3 results

The world’s largest gold producer by volume and market cap Newmont (TSX: NGT; NYSE: NEM) says it is maintaining the full-year production guidance despite a weaker September-quarter performance.

Newmont said its headline profit fell to US$212 million, or US27¢ per share, in the quarter that ended Sept. 30, from US$483 million, or US60¢ per share, a year earlier. Analysts, on average, had an expected income of US36¢ per share.

Revenue for the quarter fell 9% from the prior year’s quarter to US$2.6 billion, mainly owing to lower average realized metal prices, excluding zinc and lower sales volumes.

Its realized gold price fell by US$87 to US$1,691 per oz.

All-in-sustaining costs (AISC) for the quarter rose 13.5% sequentially to US$1,271 per oz. from US$1,120 per oz. previously.

The U.S.-based major said third-quarter gold output rose to 1.49 million oz. from last year’s 1.45 million oz., mainly owing to higher ore grade milled at the Ghana-based Ahafo and Akyem mines and Boddington mine in Western Australia. The company was also impacted by the timing of concentrate sales from Penasquito, in Mexico, resulting in 38,000 oz. of gold and 20,000 gold-equivalent oz. of third-quarter production now scheduled for sale in the current period.

During the release of its second-quarter results, Newmont reduced its annual production guidance to 6 million oz. from 6.2 million oz. on impacts on gold production estimates in the first half and continued inflationary pressures affecting labour, energy, consumables and supply costs.

In its post-earnings analyst call on Tuesday, CEO Tom Palmer was confident that inflationary pressures were waning and should help the gold miner improve performance in the current quarter.

“We are starting to see some relief across energy and consumable costs coming into the fourth quarter, and then seeing that play out into 2023,” said Palmer.

While Palmer said inflation, particularly in energy, fuel and consumables costs, is coming down, he noted that labour costs “are proving to be a bit stickier.”

“Labor cost makes up half of our direct costs.”

He added that Newmont is seeing an about 4% increase on average across wages.

Palmer said that the company is also seeing high levels of cost inflation on the services it contracts during mining.

Newmont forecasts 2022 cash costs of US$900 per oz. and AISC of US$1,150 per oz. (both subject to a +/-5% range).

Canaccord Genuity Capital Markets estimates that Newmont is tracking to the lower end of its gold production guidance and the higher end of its gold cash cost guidance.

Analyst Carey MacRury forecasts 2022 attributable production of 6.025 million oz. at consolidated cash costs of US$903 per oz.

MacRury expects 2023 to look similar to 2022, given some operating challenges this year, including delays to the Tanami expansion and Ahafo North projects and the inflationary backdrop; he forecasts 2023 production of 6.06 million oz. at a gold cash cost of US$882 per oz. As usual, Newmont expects to provide its updated guidance in December.

As a reminder, Newmont’s guidance from last year called for production of 6.0-6.6 million oz. in 2023 at cash costs of US$740-US$840 per oz.

The company’s New York-quoted shares closed 1.4% lower on Tuesday at US$41.71, giving it a market cap of US$33.1 billion.