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Newmont Corporation’s NEM shares have lost 26.7% in the past three months, underperforming the Zacks Mining – Gold industry’s 12.6% decline. The bearishness partly reflects its weaker-than-expected earnings performance in the third quarter and concerns over higher production costs. While NEM gained from an uptick in average realized gold prices and sales volumes, higher unit costs weighed on its third-quarter performance.
Technical indicators show that NEM has been trading below the 50-day simple moving average (SMA) since Oct. 24, 2024. The stock is also trading below the 200-day SMA since Nov. 11, 2024. Following a death crossover on Dec. 20, 2024, the 50-day SMA is reading lower than the 200-day SMA, indicating a bearish trend.
NEM Stock Trades Below 50-Day SMA
Image Source: Zacks Investment Research
Given the significant pullback in NEM’s shares, investors might be tempted to snap up the stock. But is this the right time to buy NEM? Let’s find out.
Higher Costs Weigh on NEM Stock
Newmont is being challenged by higher production costs, which will likely weigh on its margins over the near term. Its gold costs applicable to sales (CAS) rose roughly 13% year over year in 2023. Newmont also saw a 19% surge in all-in-sustaining costs (AISC) — the most important cost metric of miners. CAS climbed around 18% year over year in the third quarter of 2024. NEM’s AISC also rose around 13% year over year in the quarter.
The impacts of increased direct operating costs are leading to cost inflation. Higher materials, labor and contract services costs, despite somewhat easing lately, remain concerns. The company, in particular, is stung by higher labor costs, which constitute about half of its direct costs. NEM is seeing higher general and administrative (G&A) expenses due to increased contracted labor costs. Its G&A expenses shot up roughly 61% year over year in the third quarter and are expected to remain high in the fourth quarter.
Key Projects & Newcrest Buyout to Aid NEM’s Growth
Newmont continues to invest in growth projects in a calculated manner. The company is pursuing several projects, including Tanami Expansion 2 in Australia, the Ahafo North expansion in Ghana and Cadia Panel Caves in Australia. These projects should expand production capacity and extend mine life, driving revenues and profits.
The acquisition of Newcrest Mining Limited has also created an industry-leading portfolio with a multi-decade gold and copper production profile in the most favorable mining jurisdictions globally. The combination of Newmont and Newcrest is expected to deliver significant value for shareholders and generate meaningful synergies. NEM has achieved $500 million in annual run-rate synergies following the Newcrest buyout.
Newmont also remains committed to divesting non-core businesses as it shifts its strategic focus to Tier 1 assets. NEM’s attributable gold production jumped around 29% year over year in the third quarter on strong performance from its managed Tier 1 portfolio. The company, in third-quarter 2024, agreed to divest its Akyem operation in Ghana, its Telfer operation and its 70% stake in the Havieron gold-copper project in Australia for up to $1.5 billion in total gross proceeds. NEM, in November 2024, also agreed to sell its Musselwhite operation in Ontario, Canada, to Orla Mining Ltd for up to $850 million. It also announced the divestment of its Eleonore operation in Northern Quebec, Canada, to Dhilmar Ltd for $795 million in cash. NEM, last month, agreed to sell its Cripple Creek & Victor operation in Colorado to SSR Mining Inc. for up to $275 million. Upon closure of the announced transactions, Newmont will have received up to $3.9 billion in gross proceeds from non-core asset divestitures and investment sales.