In each of the past three quarters, Newmont’s EPS has surprised to the high side, and by a significant amount. But the euphoria never lasts, and the stock swoons. After posting first-quarter profits that were double expectations, the stock rose to a 52-week high of $27.90. Shares closed at $18.16 Monday night, down about a third.
In its first-quarter report, the company said its solid showing was due to strong production, continued cost containment and some delayed spending. Newmont’s average realized price per ounce of gold in the first quarter was $1,203, down from $1,293 in the first quarter of 2014. The realized price almost certainly will be lower in the second quarter. Copper prices likely will be right around the first-quarter level of $2.34 per pound.
In early June, Newmont agreed to pay $820 million for AngloGold’s Cripple Creek & Victor mine plus a 2.5% net smelter return royalty for gold production from potential future underground ore. Newmont issued 29 million new shares to pay for the acquisition, which partially explains the drop in the share price from around $26 to its current level.
But the biggest issue for Newmont and other gold miners is the price of the yellow metal itself. The commodity price popped back above $1,100 an ounce Tuesday morning, but margins are threatened by all-in sustaining costs the company has estimated at $960 to $1,020 per ounce for 2015.
As if to prove a point Newmont’s stock traded up about 4.5% Tuesday morning, at $18.97 in a 52-week range of $17.60 to $27.90. In our look at gold mining stocks on Monday, Newmont stood out as the large miner with the best chance to weather the commodity price storm. For what it is worth, gold for August delivery traded above $1,107 per ounce Tuesday morning as well.
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