Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Newmont Corp (NEM, Financial) produced nearly 1.7 million ounces of gold and 430,000 gold equivalent ounces from copper, silver, lead, and zinc in the third quarter.
- The company generated $1.6 billion in cash flow from operations and $760 million in free cash flow.
- Newmont Corp (NEM) has advanced its noncore divestment program, expecting up to $1.5 billion in combined gross proceeds from recent transactions.
- The company achieved its $500 million synergy run rate target from its acquisition of Newcrest, focusing on G&A, supply chain, and full potential program.
- Newmont Corp (NEM) approved an additional $2 billion share repurchase program, bringing total authorization to $3 billion, and returned $786 million to shareholders through share repurchases and dividends.
Negative Points
- Newmont Corp (NEM) reported its fifth fatality in less than a year, highlighting ongoing safety challenges.
- The company anticipates lower than previously expected gold production from Lihir and Brucejack in 2025, impacting overall production forecasts.
- Higher sustaining capital expenditures are expected, particularly for tailings work at Cadia, which may increase costs.
- The company is experiencing significant labor cost inflation, particularly in contracted labor, impacting overall cost structure.
- Newmont Corp (NEM) faces challenges in achieving productivity targets at certain operations, including Cerro Negro, affecting operational efficiency.
Q & A Highlights
Q: Is it realistic to assume that unit costs will moderate over time, or should we expect inflation to limit cost reductions?
A: Thomas Palmer, President and CEO, explained that historically, there's a correlation between gold prices and production costs due to inflation. If gold prices ease, costs might follow. The focus is on strengthening margins across their 11 managed operations. Karyn Ovelmen, CFO, added that future cost estimates did not initially account for escalation, but current trends will influence 2025 costs.
Q: With the guidance for 2025, should we assume a reduction of 350,000 ounces from the 6 million ounces target due to lower production at Lihir and Brucejack?
A: Thomas Palmer confirmed that the production from the core portfolio for 2025 is expected to be around 5.6 million ounces, considering the adjustments at Lihir and Brucejack. The rest of the portfolio is expected to maintain current trends into 2025.
Q: Can you clarify the significant changes in cost expectations and production forecasts?
A: Thomas Palmer noted that the Q3 cost story was influenced by specific operational factors, such as maintenance and power costs. For 2024 into 2025, the focus is on sustaining capital, particularly at Cadia, and managing production volumes at Lihir and Brucejack. Karyn Ovelmen added that about a third of the cost increase is due to lower sales volumes, another third from higher sustaining capital, and the rest from royalties and G&A.
Q: What is the outlook for Newmont's production and costs in the midterm, considering previous guidance?
A: Thomas Palmer stated that while there was no escalation in the February outlook, the focus remains on driving margins rather than chasing volume. The portfolio is expected to produce around 6 million ounces of gold over the long term, with new lower-cost ounces from projects like Tanami and Ahafo North contributing to future production.
Q: How is Newmont addressing labor inflation, and what are the current trends?
A: Thomas Palmer explained that while employee wage escalation is around 4%, contracted labor costs have seen higher escalation. These costs are being incorporated into the guidance for 2025, reflecting the broader industry trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
