Newmont Mining Corp. posted adjusted net income of $326 million, or 40 cents per share, in the first quarter, with the help of higher gold prices and lower fuel costs during the COVID-19 pandemic that still includes the shutdown of two mines.
“We are responding to COVID-19 from a position of strength, taking proactive steps to prioritize the well-being of our employees and the communities in which we operate,” Newmont’s president and chief executive officer, Tom Palmer, said Tuesday.
Revenue rose 43 percent in the quarter to $2.58 billion mainly because of new production gained from the acquisition of Goldcorp Inc. in April of last year and higher realized gold prices. The average realized price in the quarter was $1,591 per ounce, up $291 over the price in the 2019 quarter.
Every $100 increase in the gold price results in $400 million in free cash flow to Newmont, according to the company, and Newmont used a gold price of $1,200 to plan for the year. The spot gold prices on Tuesday afternoon on the New York Mercantile Exchange was $1,706.40 per ounce.
Palmer and Chief Financial Officer Nancy Buese said Tuesday revenue also is seeing a boost from low oil prices and the foreign currency exchange rate. She said Newmont had planned at $60 a barrel for oil, and every $10 drop is $25 million for the mining company. A barrel of oil was $24.55 Tuesday.
“With gold prices currently around $1,700 per ounce, favorable oil prices and foreign exchange rates, these tailwinds will more than offset short-term disruptions as we manage through these challenging times,” Buese said.
The adjusted net income was higher than the $176 million, or 33 cents per share, in the 2019 quarter, but still fell below analyst estimates. Zacks Consensus estimate was 43 cents per share, and Thomson Reuters expected 42 cents per share.
Newmont’s share price in afternoon trading Tuesday was $64.82, up $2.
Net income attributable to Newmont shareholders totaled $837 million, or $1.04 per share, for the 2020 quarter, compared with $113 million, or 21 cents per share, in the 2019 quarter.
The two Newmont mines still on care and maintenance because of the pandemic are Penasquito in Mexico and Musselwhite in Canada. Three others that were temporarily down, Eleanore in Canada, Yanacocha in Peru and Cerro Negro in Argentina, are ramping up, Chief Operating Office Rob Atkinson said in the earnings teleconference.
He said 10 of 12 of Newmont’s operations and both joint ventures are still operating, representing 90 percent of the company’s gold production. The joint ventures are Nevada Gold Mines with Barrick Gold Corp., formed last July 1, and Pueblo Viejo Mine in the Dominican Republic. Barrick is 60 percent owner of Pueblo Viejo.
Companywide, gold production totaled 1.5 million ounces in the first quarter, up 20 percent from the 2019 quarter, and this production included 329,000 ounces for Newmont’s 38.5% share of Nevada Gold Mines. Barrick is operator and 61.5 percent owner. NGM cost applicable to sales was $733 per ounce and all-in sustainable cost was $927 per ounce.
Newmont also produced $339,000 in attributable gold ounces companywide from co-products in the quarter.
Cost applicable to sales companywide was $781 per ounce, up 11% over the 2019 quarter, and the all-in sustaining cost was $1,030 per ounce, up 14% over the first quarter of last year. Newmont stated the all-in cost was higher partly because of the care and maintenance costs associated with the pandemic.
Looking again at the pandemic, there have been no positive cases so far in any mines operated by Newmont, Palmer said, and he outlined the company’s response to the coronavirus that has included mobilizing its business continuity planning and rapid response crisis management teams to work with the work force and their nearby communities.
Palmer also said Newmont hasn’t had any big problems with its supply chain during the pandemic, and the company’s two key financial actions have been to maintain pay through the end of June for employees and establishing a $20 million global support fund “to reach those who need it most.”
Newmont’s steps taken involved canceling all non-essential travel in early March, closing offices and having people work from home where possible, limiting the number of people on operating sites to essential numbers, taking temperatures and screening workers, requiring social distancing, including when traveling and at on-site dining rooms, increasing deep cleaning and sanitizing and providing hygiene and health support to communities.
Newmont has looked at the predicted short, mid- and long-term impacts of the pandemic, and Palmer said the biggest financial impact could come during the current quarter, and the company is “well-positioned to withstand this pandemic.”
The company also recently provided a 79 percent higher dividend to shareholders, to 25 cents per share, and continues its program of buying back shares. Nineteen million shares have been bought back in five months, Palmer said.
Newmont additionally reported that in the first quarter the company received $1.4 billion in cash proceeds from the sale of its 50 percent share of Kalgoorlie Consolidated Gold Mines in Australia, its 19.9% share of Continental Gold and its Red Lake complex in Canada.
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