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Newmont sags on quarterly results

Kitco News

Number one gold miner, Newmont (NEM:NYSE), tumbled today after warning about soft metal prices and inflation concerns in its Q2.

Newmont traded down 13% to $44.59 a share.

While gold production was up 3%, lower gold prices hit the miner hard, with net income from continuing operations dropping to $379 million vs $640 million a year earlier.

On it's earnings call, the company broke down inflation costs.

"Over the last eight months, we have observed cost pressures, including the impact from Russia's invasion of Ukraine and increasingly competitive labor market, and the highest global inflation rates our world has seen in nearly 40 years," said CEO Tom Palmer.

"As a consequence, we are anticipating an additional 7% of cost escalation this year. That is on top of the 5% we had already included in our full-year outlook we established last December. Around 1/3 of this increase is related to labor costs. We are seeing contracted services rates that are more than 10% higher than December last year, driven primarily by strong competition for specialized labor, higher levels of post pandemic accretion resulting in higher demand and the pass-through of higher commodity prices and transportation costs."

The company also explained how oil costs are weighing.

"The next 1/3 of the impact comes from an increase in prices for global commodities and raw materials. We're observing escalation in the range of 20% to 30% for certain items such as cyanide and explosives, which is being driven by the increase in the price of natural gas and the availability of ammonia. As well as an increase in the price of steel that is being used in our grinding media and spare parts. And the final third of the impact is coming from higher fuel and energy costs.

"As an example, diesel prices have increased by more than $50 per barrel, adding approximately $20 per ounce to our all-in sustaining costs compared to our original guidance."

To mitigate costs, the company said is relying on its "global networks" and technology.

"[We] are challenging the gold industry by implementing new technology to improve productivity and reduce labor risk, such as our transition last year to a fully autonomous whole truck fleet at Boddington," said Palmer.

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