Gold Investors...'Wait & See' Reaction on Newmont (NEM, GDX, ABX, GG)

Newmont Mining Corp. (NYSE: NEM) is up this morning after beating earnings expectations.  It seems that they might be implying that gold producers will not just have to beat earnings to continue their rise with the base gold metal.  Today’s news has  implications for Market Vectors Gold Miners ETF (NYSE: GDX) as the key ETF and for competitors of Goldcorp Inc. (NYSE: GG), Barrick Gold Corporation (NYSE: ABX), and others.

Newmont beat earnings and beat revenue expectations.  It also lowered its upper-end of the production forecast and raised its cost per ounce forecast.  Earnings were $1.08 EPS vs. $0.95 estimates from Thomson Reuters.  Revenues rose more than 25% from last year to right around $2.6 billion versus consensus estimates of nearly $2.4 billion.

The company’s own gold equivalent production on an equity basis for gold was 1.4 million ounces and copper was 83 million pounds.  The average realized gold price in the quarter was $1,221 per ounce and the average realized copper price was $3.67 per pound.  Its cost of production came in at $477 an ounce of gold and $0.73 per pound of copper.

The 2010 outlook for gold production is now 5.4 to 5.4 million ounces from a prior range of 5.3 to 5.4 million ounces.  Newmont also gave an update on the 2010 outlook on its costs to $485 to $500 per ounce from a prior range of $460 to $480 per ounce.  Some of the cost structure is on a weaker dollar but some is also tied to higher gold costs as well.

On Cap-ex, Newmont lowered its 2010 consolidated capital expenditure outlook to $1.3 to $1.5 billion.

Gold is much higher than a year ago, yet investors are taking a wait and see attitude over concerns that costs will rise even if gold remains this high or pulls back some.  Newmont shares are down 0.6% at $60.84 after opening up all the way at $61.87.

Market Vectors Gold Miners ETF (NYSE: GDX) is still up by 0.44% at $57.48 as the other large constituents are still higher on the day.  Newmont comprises over 10% of that ETF alone.  Goldcorp Inc. (NYSE: GG) and Barrick Gold Corporation (NYSE: ABX) are both still marginally positive and those are holding up the “GDX” ETF.  The Market Vectors Gold Miners ETF has weightings of over 12% for Goldcorp and over 16% for Barrick.

JON C. OGG