Strong Execution Underpins Newmont Confidence

Commodities | 1:59 PM

Newmont Corp delivered another resilient quarter while maintaining full-year guidance and reinforcing confidence in its path to 6Moz of annual gold production.

• Newmont Corp’s 2Q production better-than-expected
• Strong free cash flow supports ongoing buybacks and capital return
• FY27 guidance maintained, capital expenditure weighted to the second half
• Positive views based on valuation and medium-term production growth

By Mark Woodruff

US-based gold miner Newmont Corp’s ((NEM)) second-quarter results were mixed but on balance modestly ahead of consensus. Gold production slightly exceeded expectations, earnings proved broadly in line and net profit and free cash flow (FCF) better-than-forecast.

UBS notes Newmont has generally exceeded expectations over the past 12 months, although guidance downgrades have at times tempered the positive surprises.

This quarter, however, management reaffirmed its medium-term target of lifting production to 6Moz, supported by improving performance at Lihir and Cadia.

While cash returns moderated from the record March quarter, UBS notes Newmont continues to return more cash to shareholders than any other miner. The broker expects this to continue if gold prices remain around US$4,000/oz.

Second-quarter production of 1,293koz exceeded the consensus estimate by 3%, driven by stronger-than-expected output at Lihir (157koz versus 131koz) in Papua New Guinea and 40%-owned Pueblo Viejo (74koz versus 61koz) in the Dominican Republic.

Asset highlights, according to UBS, also include stronger-than-expected production at Yanacocha in northern Peru offset by weaker output at Cadia following a seismic incident, as well as planned maintenance at Penasquito (north-central Mexico) and softer production at Brucejack in northwestern British Columbia, Canada.

Second-quarter by-product all-in sustaining costs (AISC) of US$1,621/oz were 9% better than consensus, while year-to-date AISC of US$1,321/oz now sits -21% below unchanged 2026 guidance of US$1,680/oz.

In short, Macquarie believes little is going wrong operationally, with the company offering defensive appeal through its low-cost asset base and diversified portfolio.

Ord Minnett notes Newmont brought forward some production from the 43.65%-owned Yanacocha mine and the Lihir operation into the June quarter.

While this could imply softer output from both assets in the September quarter, management reiterated the gold miner remains on track to achieve 2026 guidance of 5.3Moz of gold production (and AISC of US$1,680/oz).

Newmont is the world's largest gold producer with a truly global portfolio of assets. The company also produces copper, lead, zinc and silver across numerous mines that produce more than one metal from the same ore body.

Balance sheet

Citi highlights second quarter free cash flow (FCF) equates to an annualised yield of around 9%.

FCF of US$2.2bn exceeded the consensus estimate of $1.85bn, primarily due to a smaller-than-expected working capital outflow and lower capital expenditure, UBS explains.

Macquarie finds capital returns remained a highlight, with the company repurchasing US$1.7bn of shares since its April result and a further US$606m in July, taking total shareholder return to around US$1.9bn.

The company has now retired more than -100m shares, or around -9% of those on issue, since launching the buyback, while maintaining a net cash position of US$3.4bn.

The current share buyback was authorised in 2024 as part of Newmont's capital allocation framework. Following the completion of the initial authorisation, the company increased it by a further US$6bn in April this year.

Net cash increased to US$3.4bn from US$3.2bn, exceeding Newmont's US$3bn target. UBS believes this leaves scope to return more than 100% of FCF via buybacks in the second half, bringing net cash back within the company's US$1bn-US$3bn target range.

Costs

While costs of US$1,621/oz for the June quarter were lower than consensus expected, Macquarie had forecast an even lower number of around US$1,560/oz.

The broker attributes the difference to elevated diesel prices, lower by-product credits, higher sustaining capital expenditure and the full-quarter impact of increased Ghana royalties.

Discussions continue with the Ghanaian government on a stability agreement, Citi observes.

This broker views cost pressures as manageable despite higher oil prices.

Other June quarter operational numbers

Provisional pricing weighed on quarterly revenue, UBS explains, although this is expected to reverse in future periods. Stronger gold production and lower unit costs offset the impact, leaving earnings (EBITDA) broadly in line with consensus.

Revenue of US$6,118m missed the consensus forecast by -2% partly due to lower realised gold prices of US$4,414/oz.

Management attributed around -US$50m of the revenue shortfall to provisional pricing on concentrate sales.

Adjusted earnings of US$3,757m were in line with consensus while adjusted profit of US$2,246m exceeded consensus by 6%, helped by a lower-than-expected tax expense, Macquarie explains.

Capital expenditure for the quarter of US$719m was -18% below consensus due to deferred spending at Cadia following seismic activity. In April this year, a magnitude 4.5 earthquake struck the NSW Central West near Orange, which is 25kms from the Cadia mine.

Ord Minnett notes full-year capital expenditure guidance of US$3.35bn across sustaining and development projects was maintained, although spending is now expected to be more heavily weighted towards the second half of 2026.

UBS expects higher second-half capital expenditure to be driven by the resumption of PC1-2 development and tailings work at Cadia, tailings projects at Boddington (Western Australia) and Tanami (Northern Territory), and seasonal development at Red Chris and Brucejack both in British Columbia, Canada.

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