Newmont Keeps a Lid on Costs as Barrick Stalemate Rolls On
Productivity focus continues as inflationary pressures mount
Newmont Corporation (NYSE: NEM) reported strong second quarter results, despite a lower gold price.
Reported and adjusted net income was US$2.2 billion, or US$2.10 per diluted share, and adjusted EBITDA was US$3.8 billion.
The company generated US$2.9 billion of cash from operating activities, net of working capital impacts of US$90 million and reported record second quarter free cashflow of US$2.2 billion.
The average realised gold price fell to US$4414 an ounce from US$4900/oz.
Newmont produced 1.3 million attributable gold ounces, as well as 7 million ounces of silver and 17,000 tonnes of copper and remains on track to meet full-year guidance of 5.3Moz of attributable gold.
Gold by-product costs applicable to sales were US$1043/oz and all-in sustaining costs were US$1621/oz, a jump from US$1029/oz in the first quarter but below Newmont’s full year AISC guidance of US$1680/oz.
“We remain focused on controlling our absolute cost base to maximise margins and continue supporting strong free cashflow,” Newmont CEO Natascha Viljoen said during a conference call.
“As we signalled last quarter, higher oil prices contributed to the expected increase in second quarter cost.
“However, even after absorbing that pressure, both cost applicable to sales and all-in sustaining costs remain firmly within our full-year guidance ranges, reflecting the continued discipline and cost and productivity initiatives we have been implementing across the portfolio to make the work that we’ve been doing more tangible.
“We have parked nearly 50 mining production units across the portfolio without affecting production.”
Viljoen said more efficient pre-start activities at Cerro Negro in Argentina had increased underground productive time by around 15% per shift, while it was seeing milling efficiencies at Ahafo North in Ghana.
“Across the portfolio, we continue to reduce contract utilisation where possible,” she said.
“These are practical, site-led actions that collectively improve productivity and help offset external cost pressures.”
Newly appointed chief financial officer Brian Tabolt said a planned US$150 million quarter-on-quarter increase in sustaining capital was expected to result in moderately higher unit costs in the current quarter.
He also warned every US$10 per barrel change in the oil price equated to a US$60 million impact.
Barrick stoush unresolved
In February, Newmont revealed it had sent a notice of default to its Nevada Gold Mines partner Barrick Mining Corporation (NYSE: B) under the NGM joint venture agreement.
It came after Barrick announced a proposed initial public offering of its North American assets.
Newmont has a 38.5% interest in Nevada Gold Mines (NGM) in the US and a 40% interest in Pueblo Viejo in the Dominican Republic, both operated by Barrick.
At the time, Newmont expressed concern about the operation and management of NGM due to “a degradation in performance and subsequent asset value over the past six years”.
“We have actively engaged with Barrick over the last few months to find mutually acceptable solutions to our diverging legal, technical, and commercial views on the various aspects of the joint ventures management and past performance, the proposed IPO and the potential resulting complexities, and contribution process for all excluded properties, with the goal of maximising NGM’s performance both in the near and long term,” Viljoen said.
“We have remained resolute in protecting the interests and rights of Newmont shareholders throughout this process, while I remain hopeful of reaching a successful near-term resolution, we find ourselves nearing the end of this extensive direct engagement period, with several key issues still unresolved.
“Most importantly, we remain committed to fostering a strong working relationship with Barrick, playing a role to ensure NGM delivers to its full potential, and protecting and, if required, enforcing our legal rights enshrined in the JV agreement.”
Returns strong
Newmont declared a dividend of US26c per share for the second quarter.
The company has returned US$1.9 billion to shareholders over the past three months via share repurchases and dividends.
It has US$4.3 billion remaining under its current buyback program of US$6 billion.
Since February 2024, Newmont has reduced its share count by more than 100 million shares, or around 9% of shares outstanding.
The company ended the quarter with US$9 billion of cash and US$13 billion in total liquidity, with a net cash position of US$3.4 billion.
Sustaining capital guidance for 2026 remains at US$1.95 billion, with US$819 million spent to date, while development capital guidance remains at US$1.4 billion, with US$524 million invested year-to-date.