Newmont Corp. reported adjusted net income for the second quarter of $261 million, or 32 cents per share on Thursday, up from the second quarter of last year with higher gold prices helping offset the higher costs because of the COVID-19 pandemic.
Newmont’s average realized gold price was up $407 per ounce over the second quarter of 2019 at $1,724 per ounce, but since the quarter ended June 30, the price has surged, reaching new highs before slipping on Thursday. The spot price closed Wednesday at $1,970.90 per ounce but was at $1,955.40 per ounce on the New York Mercantile Exchange an hour and a half before closing Thursday.
The 32 cents per share in earnings was two pennies less than Zacks Consensus Estimate for the quarter.
Newmont’s share price was at $65.94, down $1.93 Thursday afternoon.
The company’s adjusted net income was $92 million, or 12 cents per share, in the 2019 quarter, while the company said its net income from continuing operations was $412 million, or 51 cents per share, in the 2020 quarter, $411 million more than the $1 million net income in the second quarter of last year.
Ongoing impacts from COVID-19 are costing Newmont roughly $4 million to $5 million per month, as the company continues pandemic protocols at all its operations, President and Chief Executive Officer Tom Palmer said in the July 30 earnings teleconference.
Palmer said he is “incredibly proud of our employees” as they deal with the pandemic, and he said Newmont is continuing efforts to help the communities where Newmont operates deal with the impacts of COVID-19, including partnering with agencies that deal with domestic violence, as well as providing food and medical assistance and loans to small businesses.
The Greenwood Village, Colorado-based company also reported $33 million in incremental COVID-19 specific costs for the second quarter, such as for additional health and safety procedures, transportation expenses and community fund contributions.
The pandemic resulted in temporary shutdowns at five of Newmont’s operations in Mexico, Canada and South America that affected gold production, but they are all back in production and the company still expects to produce 6 million ounces of gold and another $1 million in co-products this year.
The outlook includes nearly 1.38 million ounces of gold for Newmont’s 38.5% share of Nevada Gold Mines for the year, and the company stated its share of production in the second quarter was 326,000 gold ounces at a cost applicable to sales of $797 per ounce and an all-in sustaining cost of $979 per ounce.
Nevada Gold Mines is a joint venture of Newmont and Barrick Gold Corp., with operator Barrick holding 61.5% of the JV.
The joint venture marked its first anniversary July 1, and Palmer said the joint venture “should have been done a long time ago.” He said some assets were in their twilight years before the joint venture, but they have new life with the combination that provides new access to orebodies.
“The sum of the whole is definitely better than the sum of its parts,” he said in the teleconference.
Overall, Newmont reported gold production of 1.3 million ounces in the second quarter at costs applicable to sales of $748 per ounce and an all-in sustaining cost of $1,097 per ounce, compared with 1.59 million ounces at costs applicable to sales of $759 per ounce and all-in sustaining costs of $1,016 per ounce in the second quarter of 2019.
Palmer said Newmont has top-tier operations in the best mining jurisdictions.
With the rising gold prices providing more cash flow, Newmont declared a 25-cent dividend this week for the quarter, and Executive Vice President and Chief Financial Officer Nancy Buese said in the teleconference the dividend is one way Newmont is sharing the higher cash flow with shareholders.
This was the second quarter with a 25-cent dividend, up from 14 cents a share prior to the increase.
Palmer said in the teleconference that beyond the $1,200 gold price per ounce that provided the base for budgeting, every $100 increase in the gold price provides $400 million in free cash flow, and there are “potential tail winds” for additional cash flow from low oil and gas prices and declining value of the U.S. dollar.
In the earnings news release, he said that “the ongoing favorable gold price environment amplifies our free cash flow generation yet our discipline around capital allocation will not change as well continue to invest in profitable projects and provide shareholders industry-leading returns while maintaining a strong balance sheet.”