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Newmont faces challenges ahead of Newcrest Mining merger

A recently resolved strike at one of Newmont’s major mines has led to a reduction in its 2023 output guidance, impacting earnings, just as it prepares to merge with Newcrest Mining on November 6.

The world’s largest gold miner has faced ongoing issues at a significant mine in Mexico, causing disruptions and financial setbacks. The Penasquito mine was suspended in June due to labor disputes, but a resolution was reached earlier this month, with production expected to resume in early to mid-November.

Newmont’s third-quarter net earnings for the three months ending in September fell short of analysts’ expectations, primarily due to weak production caused by the ongoing labor strike at its Mexican mine. Net income declined to $157 million from $218 million compared to the previous year. Newmont reported an average realized gold price of $1,920, reflecting an increase of $229 per ounce from the third quarter of 2022.

The strike’s impact resulted in a 13.4% decline in Newmont’s quarterly attributable gold production, totaling 1.29 million ounces. Consequently, the company revised its 2023 gold production forecast from 5.7-6.3 million ounces to 5.3 million ounces.

Newmont also missed out on the full benefit of the surge in gold prices since October 7 and geopolitical events like the fighting in Gaza and Israel. Gold prices approached $2,000 per ounce on Thursday, marking a 75-dollar increase in the past month.

Despite these challenges, Matthew Miller, senior equity analyst at CFRA Research, expressed optimism about Newmont’s future, particularly with the upcoming Newcrest merger, anticipating significant synergies and per-share accretion.

While Newmont shares rose nearly 2% on Thursday, the overall performance in the past week still reflected a 4.5% decline. This may concern Newcrest shareholders in Australia, even though they are eligible for a special dividend of $1.10 per share if they remained on the register until October 19, with the dividend set to be paid on Friday night.

Additionally, Newmont announced that Newcrest directors Philip Aiken AM and Sally-Anne Layman will join the Newmont board upon the completion of the takeover on November 6.

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