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Newmont 2Q Profit Declines; Integration Costs Cited

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Editor's note: Updating earlier story with more details from earnings report.

(Kitco News) - Newmont Goldcorp Corp. (NYSE: NEM, TSX: NGT) Thursday reported a decline in its second-quarter profit, in part due to the integration costs incurred when Newmont acquired Goldcorp Inc. plus the cost of non-operating mines.

The results are the first to include the performance of Goldcorp operations, starting with the closing of the transaction on April 18. The merged company is now the world’s largest gold producer.

Net income fell to $1 million, or zero cents per share, from $274 million, or 51 cents a share, in the year-ago quarter. Analysts had expected 23 cents a share, according to news reports.

The company said the lower income was primarily due to integration costs associated with the Goldcorp merger and Nevada joint-venture transaction with Barrick Gold Corp., costs incurred while the Peñasquito and Musselwhite mines were not operational, higher interest expenses, and a prior-year gain from the sale of the company’s royalty portfolio in June 2018.  Mining at Peñasquito was suspended operations for seven weeks due to a blockade by a trucking contractor and community members. Musselwhite was affected by a conveyor fire.

Newmont Goldcorp’s adjusted net income was listed at $92 million, or 12 cents per share, compared to $144 million, or 26 cents, a year ago. Revenue rose 36% year-over-year to $2.3 billion due to higher sales volumes from the Newmont-Goldcorp transaction.

Gold output rose 37% to 1.59 million ounces as a result of new production from the acquired Goldcorp assets and higher grades at Merian and Tanami, slightly offset by lower grades at KCGM and Boddington, the company said.  All-in sustaining costs rose 4% to $1,016 per ounce on higher sustaining capital spending.

“Newmont Goldcorp delivered $679 million in adjusted EBITDA in the second quarter of 2019 as the Goldcorp integration process is well under way and on track to deliver an additional $365 million in annual cash flow,” said Gary Goldberg, chief executive officer.

The company also announced a quarterly dividend of 14 cents per share of common stock, payable on Sept. 26 to shareholders of record at the close of business on Sept. 12.

The average realized price for gold was $1,317 an ounce, a year-on-year increase of $25. The average realized price for copper was $2.48, a decrease of 51 cents. The average realized prices for silver and lead were $14.20 per ounce and $0.76 per pound, respectively.

Newmont Goldcorp said it expects 2019 gold production of 6.5 million ounces. This will be back-half weighted with the completion of the Ahafo Mill Expansion in Africa, the Borden project in Canada and reaching higher grades at Cerro Negro and Peñasquito, the company said. All-in sustaining costs are expected to be $975 per ounce.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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