Newmont shares tumble as it warns of cost increases

Gold miner Newmont on Monday raised its annual cost forecast and warned that inflationary pressures would persist into 2023 after its second-quarter profit missed estimates, sending its  shares down 12%.

Higher operating costs related to labour, energy and supplies have forced the miner to hike its annual forecast for all-in sustaining costs (AISC), an industry metric that reflects total expenses, to $1,150/oz from $1,050/oz earlier.

In comparison, the cost in the second quarter ended June 30 rose nearly 16% to $1,199 per ounce of gold.

The miner sees about a 20%-30% spike in prices for raw materials such as cyanide and explosives, used in mining operations, in the second half of the year and a tight labour market to persist into 2023.

This would drive an additional 7% of cost escalation this year, on top of the 5% outlined in December, CEO  Tom Palmer said on a call.

Global miners BHP and Rio Tinto have also signalled that labour crunch and inflationary pressures would continue into 2023.

The companies have been hit by a dip in bullion prices that faced their worst quarter since early 2021, falling nearly 7% in the three months ended June, as a firm dollar and aggressive rate hikes eroded the appeal of the non-yielding asset.

Newmont’s shares fell as much as 12.05% to $45.20 after the company also lowered its annual production guidance to 6-million ounces from 6.2-million ounces earlier, citing operational challenges and competitive labour market in Canada and Australia.

Gold production in the second quarter rose about 3.4% to 1.5-million ounces from a year earlier. On an adjusted basis, Newmont’s quarterly profit of 46c per share missed analysts’ average estimate of 63c per share, according to Refinitiv IBES data.

Reuters