Newmont Mining reported first-quarter profits that exceeded Wall Street expectations, as record gold prices helped offset a decline in production. According to data compiled by LSEG, the company's adjusted earnings per share for the quarter ended March 31 were $2.90, compared to an average analyst estimate of $2.18 per share. First-quarter revenue reached $7.31 billion, a significant increase of 45.9% year-over-year, substantially surpassing market expectations of approximately $6.36 billion. The company's free cash flow hit a record $3.1 billion, surging 161% compared to the prior year. Adjusted EBITDA was $5.2 billion. CEO Natascha Viljoen described it as "one of the strongest quarters in Newmont Mining's history." "Supported by our enhanced capital allocation framework, and following the full execution of the prior repurchase program, we have doubled the size of our share repurchase program with a new $6 billion authorization," Viljoen stated.
However, the seemingly golden performance was overwhelmingly driven by the contribution from gold prices. Boosted by safe-haven demand and interest rate cut expectations, gold prices reached a record high in the first quarter. Although prices later retreated due to inflation concerns sparked by rising crude oil prices amid Middle East tensions, they remained well above year-ago levels. The average realized gold price for the quarter was $4,900 per ounce, a sharp 66.4% increase compared to $2,944 per ounce in the same period last year. In contrast, attributable gold production was only 1.3 million ounces, a 15.6% decline from 1.54 million ounces a year earlier. A simple calculation shows that the passive revenue increase from higher gold prices completely offset the revenue gap caused by the sharp contraction in production, creating an "illusion" of significantly outsized profits.
The company expects unit costs to rise significantly from the first quarter due to increased sustaining capital expenditures, lower silver production, and higher sales costs at the Boddington, Tanami, Lihir, and Peñasquito operations. The company also indicated that rising oil prices and the full-quarter impact of increased royalty rates at its Ghanaian operations would likely affect costs. The production decline reflected lower output at the Boddington mine due to wildfires, lower ore grades at the Tanami mine due to planned mine sequencing changes and heavy rainfall, and reduced production at the Lihir and Cerro Negro mines due to lower ore grades and planned maintenance.
The world's largest gold producer warned that production would decline further in the current quarter. The company stated that it expects approximately 23% of its total annual production to be delivered in the second quarter of 2026, slightly below the first-quarter level. Management maintained its full-year gold production guidance of 5.3 million ounces, expecting production to improve beginning in the third quarter. The company had previously positioned 2026 as a "trough production year," proactively adjusting the mining sequence at key sites like Ahafo South and Cadia to optimize the long-term layout and support a production recovery in 2027. However, whether the second quarter's performance will bottom out as planned remains highly dependent on the ramp-up of capacity after water supply repairs at Boddington and the actual progress of post-earthquake resumption at Cadia, with significant uncertainty remaining.
Simultaneously with ongoing production pressure, Newmont Mining explicitly warned that unit costs in the second quarter would "increase significantly" compared to the first quarter. The reasons are multi-faceted: sustaining capital expenditures are rising due to accelerated mine restarts and equipment deliveries; reduced silver production, an important by-product, indirectly increases the all-in sustaining cost (AISC) for gold through the by-product credit mechanism; and sales costs are concurrently rising at key operations like Boddington, Tanami, Lihir, and Peñasquito. External inflationary factors are also adding pressure: management quantified during the earnings call that for every $10 per barrel movement in oil prices, the cost impact is approximately $60 million, equating to about $12 per ounce on AISC. Furthermore, the newly introduced sliding-scale royalty rate in Ghana, effective for the full year 2026, is expected to add an incremental cost of approximately $25 per ounce for the full year. The first-quarter AISC was $1,029 per ounce. While this was below the full-year guidance of approximately $1,680 per ounce, this low level precisely implies that the average cost for the subsequent three quarters will see a noticeable rebound, concentrating full-year cost control pressure in the second half of the year.
Notably, despite the dual pressures of declining production and rising costs, Newmont Mining made an extremely aggressive decision regarding shareholder returns. Viljoen announced that, following the full execution of the previous repurchase program, the company has doubled its share repurchase authorization, adding $6 billion. In the first quarter, the company spent $1.9 billion on share repurchases. Combined with dividend payments, total returns to shareholders via dividends and buybacks reached $2.7 billion for the quarter. The quarterly dividend was maintained at $0.26 per share. The newly appointed interim Chief Financial Officer revealed that, thanks to the repurchase program, free cash flow per share has increased by approximately 6% since the program's inception. However, market interpretation of this move is divided. As production shrinks and costs rise, the company's free cash flow is highly dependent on gold prices remaining elevated. Should gold prices experience a significant correction due to resurgent inflation, easing geopolitical tensions, or a stronger US dollar, the already tight free cash flow could face simultaneous pressure from repurchase expenditures and rising costs, putting the balance sheet to a severe test.
Currently, the spot gold price has fallen below $4,700, down approximately 16% from the historical peak of $5,595.44 reached on January 29. Rising oil prices stemming from Middle East conflicts have fueled inflation expectations and pushed real interest rates higher, diminishing gold's safe-haven appeal and leading to a significant pullback from record highs. However, Wall Street investment banks remain broadly optimistic about gold's long-term trajectory. Goldman Sachs maintains a medium-term bullish view on gold, with a year-end target price of $5,400, based on expectations for continued central bank buying and two US interest rate cuts within the year, while cautioning that energy supply shocks related to Iran could pose tactical downside risks. UBS has a target price as high as $5,900, believing gold's hedging function remains effective. Morgan Stanley has significantly lowered its expectation to $5,200, suggesting that the timing of rate cuts may be delayed until September or December, and that gold's pricing logic has shifted from being driven by safe-haven sentiment to being driven by interest rates and liquidity. Furthermore, Union Bancaire Privée (UBP) has a target price of $6,000, Wells Fargo has even called for $8,000, and CIBC forecasts $6,000 for 2026 and $6,500 for 2027.
Analyst ratings for Newmont Mining stock also show divergence. BMO Capital Markets raised its target price from $115 to $140, while Stifel Nicolaus had previously raised its target to $175, both maintaining "Outperform" or "Buy" ratings. CIBC maintained an "Outperform" rating but slightly lowered its target price to $176. Conversely, National Bank downgraded its rating from "Outperform" to "Sector Perform" and reduced its target price from $140 to $130, citing factors including rising diesel prices, tax changes in Ghana, and the Cadia suspension. Overall, the current analyst consensus rating is "Moderate Buy," with a consensus target price of approximately $139.81.
The dilemma faced by Newmont Mining—"passively benefiting from external tailwinds while grappling with internal structural deterioration in production, costs, and resource quality"—is not unique. Major global gold mining companies are generally experiencing a profit boom driven by high gold prices, while simultaneously confronting common challenges such as declining grades at aging mines, cost inflation, and heightened geopolitical risks. For investors, when a company's earnings are almost entirely dependent on macroeconomic variables while its own operational capacity is on a downward trajectory, a strategy of purely betting on rising gold prices is becoming increasingly fragile.
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