In a far worse session than on the ASX yesterday, Newmont’s US listed shares tumbled ~15% overnight following cost blowouts. The shares had their worst session since the GFC on their subsequent earnings miss and likely swath of downgrades that followed this disappointing 3rd quarter report which came in well short of expectations. Higher costs were across the board but Lihir again made a significant contribution to the miss, most of us have heard this before! The only positive aspect was NEM increased their share repurchase program to $US3bn, but with gold trading around $US2,750 we expect our sector holdings to contribute positive alpha to our portfolio, not detract!
The company does have huge free cash flow (FCF) hence the $US2bn increase of the buyback, helped by strong production, their issue is clearly all around costs, sort this and the stocks cheap – one to watch, not buy yet. They’re AISC was $US1611, up 13% and well ahead of $US1445 estimations. A likely very tough session this morning for local NEM holders who inherited the stock after the US giant took out Newcrest Mining (NCM).
- We are bullish most gold stocks but there’s no need to select ones that cannot deliver operationally, they’re “cheap” for a reason.
MM is neutral towards NEM
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