Gold Sort of Shines (NEM, GG)

Newmont Mining Corporation (NYSE: NEM) and Goldcorp Inc. (NYSE: GG) both reported earnings this morning. Newmont had net income of $10 million ($0.02 EPS) on revenue of $1.342 billion. On a non-GAAP basis, Newmont beat analysts’ estimates of $0.25 EPS by a penny.  Revenue missed the average estimate of $1.42 billion.

Goldcorp reported EPS of $1.31 for the quarter, skyrocketing past estimates of $0.11. Revenue was $609 million, missing analysts’ estimates of $626.93 million. The big jump in EPS was attributed to a foreign exchange gain of about $985 million. Backing that gain out, Goldcorp’s EPS was $0.12, again just a penny above estimates.

Goldcorp did not provide any guidance for 2009 other than to say that it had increased its proved and probable gold reserves by 7%, to 46.3 million ounces. Goldcorp reported cash costs/gold ounce of $305 for 2008, up from $163 in 2007.

Newmont did not provide any guidance either, but did say it expects to sell 5.2-5.5 million ounces of gold in 2009 at a cost of sales of $400-$440/ounce. That’s lower than the fourth quarter cost of $448/ounce.

Mining gold these days is all about containing costs. The evidence so far is that no gold miner is really able to do this consistently, primarily due to volatility in the markets. Copper and silver prices are down so much that gold alone can’t make up the difference. And the price of gold is now tied to both the dollar and to the price of crude oil. The threat of inflation causes gold prices to rise, but low crude prices can moderate the size and duration of the bump.

Both Newmont and Goldcorp shares are currently trading within 1% of yesterday’s close.

Paul Ausick
February 19, 2009