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Newmont Goldcorp

Newly named Newmont Goldcorp Inc. on April 25 announced earnings for the first quarter that were down from last year largely due to costs involved in the Newmont-Goldcorp merger and work on the joint venture with Barrick Gold Corp. for Nevada operations.

The joint venture is still under development, but Newmont Mining Corp. and Goldcorp Inc. officially merged April 18, changing the name to Newmont Goldcorp.

Newmont Goldcorp reported net income from continuing operations of $113 million, or 21 cents per share, in the first quarter of this year, down $170 million, or 32 cents, from the 2018 quarter, and attributed the drop not only to the merger and joint venture costs but also lower realized gold prices.

The average realized price for gold was $1,300 per ounce, down $26 per ounce from the 2018 quarter, according to the earnings report.

The lower gold price was partially offset, however, with higher gold production in the quarter of 1.23 million ounces, compared with a little more than 1.2 million ounces in the first quarter last year at a cost applicable to sales of $701 per ounce, up 6 percent from last year.

Newmont’s adjusted net income of $176 million for the quarter also was down but beat Wall Street expectations. The adjusted net income was 33 cents per share, compared with adjusted net income of $185 million, or 35 cents per share, last year. A survey by Zacks Investment Research of seven analysts showed an expectation of 26 cents per share.

“We delivered $349 million in free cash flow in the quarter while meeting production and cost targets on the back of continued operational excellence,” Newmont Goldcorp Chief Executive Officer Gary Goldberg said. “This performance gave us the means to deliver superior shareholder value in the form of a special dividend and to build a stronger future by advancing profitable projects on three continents and by progressing two historic transactions.”

Newmont Goldcorp also announced a dividend of 14 cents per share, and the company will be paying a one-time special dividend of 88 cents on May 1 to shareholders of record on April 17. The special dividend was an enticement for Newmont shareholders to vote on the merger, and Goldberg at the time tied it to the savings expected with the Barrick-Newmont joint venture.

“Our joint venture in Nevada will generate synergies and create the world’s largest gold mining complex, and our combination with Goldcorp will create the world’s leading gold business as measured by assets, prospects and people,” Goldberg said in the April 25 earnings announcement.

The first-quarter results don’t include Goldcorp figures because the merger came later, but Newmont’s executive vice president and chief financial officer, Nancy Buese, said the earnings report for the second quarter will incorporate figures from the operations that came to the company with the Goldcorp merger.

She also said in the earnings teleconference that results from the Barrick-Newmont joint venture will be reported as a separate entity once the deal is closed, with Barrick in the lead creating financial statements.

Newmont Goldcorp share prices closed April 25 at $31.63, down 57 cents.

North America

For North America, Newmont Goldcorp stated that gold production totaled 474,000 ounces in the first quarter, down from 490,000 in the 2018 quarter, with all but 81,000 ounces in the 2019 quarter coming from Nevada operations. The Cripple Creek & Victor Mine in Colorado produced the 81,000 ounces, compared with 71,000 in the 2018 quarter.

The figures show the Carlin operations produced 218,000 ounces, down from 231,000 in the 2018 quarter, the Phoenix Mine, 49,000 ounces of gold, down from 62,000 ounces in the first quarter of last year, Twin Creeks Mine, 74,000 ounces, down from 81,000 ounces and Long Canyon, 52,000 ounces, up from 45,000 last year.

Phoenix also produced 8,000 pounds of copper, up from 7,000 last year, and the company president and chief operating officer, Tom Palmer, said Phoenix is “shifting to high-grade copper zones and away from gold.”

Total copper production company-wide was down 17 percent to 10,000 metric tons for the first quarter.

Palmer also said in the earnings teleconference that the Chukar underground mine north of Carlin will resume operations in June. Chukar mining ended when a giant slide of a pit wall at the Gold Quarry Mine last year affected access.

He said remediation at Gold Quarry continues, and Carlin operations delivered a steady performance in the first quarter.

North American operations mined at an average cost applicable to sales of $787 per ounce, compared with $765 per ounce in the 2018 quarter. Cost were lowest at Long Canyon near Wells, at $391 per ounce, up from $357 in the 2018 quarter, according to the earnings report.

Joint venture

Looking at the joint venture agreement reached with Barrick in March, Goldberg said in the teleconference that the joint venture will combine not only operations, reserves and assets but talent and create opportunities for employees. He said the Newmont and Barrick teams have been meeting regularly.

Barrick will operate the Nevada joint venture, but there will be a joint board and committees from both companies. Barrick’s share will be 61.5 percent and Newmont’s share, 38.5 percent. The joint venture is expected to close within a couple of months, according to both companies.

Goldberg said he thought Newmont and Barrick “came to a very successful landing” in the creation of the joint venture.

The joint venture will include Barrick’s and Newmont Goldcorp’s Nevada mines, but a couple of exploration projects, including Barrick’s Fourmile, aren’t in the joint venture. Goldberg said there are royalties built into the agreement on exploration projects that go into production.

Newmont-Goldcorp deal

Although Goldcorp results weren’t included for the first quarter, Palmer said Goldcorp’s performance for the quarter was as expected, and he said the merger was “by far the smoothest” of any he has been involved with mainly because of an alignment of the company cultures.

Still there are a couple of problems to work out with the former Goldcorp operations.

Newmont Goldcorp is only in the “early stages” of investigating and determining repairs after a conveyor fire at the Musslewhite Mine in Canada, Palmer said. The fire happened March 29 during a shift change so there were no injuries.

Newmont Goldcorp additionally is dealing with a partial blockade by protesters at the Penasquito Mine in Mexico. Protests involve water supply issues, Palmer said in the teleconference.

He also estimated the predicted $365 million in pretax synergies created by the Newmont-Goldcorp merger would be reached in 2020.

“Our joint venture in Nevada will generate synergies and create the world’s largest gold mining complex, and our combination with Goldcorp will create the world’s leading gold business as measured by assets, prospects and people.” — Newmont Goldcorp CEO Gary Goldberg

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