Gold miner Newmont's earnings beat expectations. Why did the stock plummet?

Shares of the world's largest gold mining company Newmont collapsed by 8% after the opening of major trading in the U.S. Newmont a day earlier reported revenues and profits for the third quarter, which exceeded expectations due to the rapid rise in the price of gold, which several times updated the record value. Why did investors start the sell-off after the stock rallied 140% this year?

Newmont's stock price was down more than 8% to $81.29 in the first minutes of trading in New York on October 24. This is the minimum for two months.

The fall in quotations is explained by the fact that lower mining volumes did not allow the company to take full advantage of record high gold prices, SeekingAlpha explains. As Barron's writes, analysts also link the fall in Newmont's quotations to the decline in gold prices in recent days and profit taking by investors after a long rally.

After stocks rose about 140% since the beginning of the year - a rate comparable to the industry average - market participants began to withdraw some funds, fearing a correction, Bloomberg added. The spot gold price was down 0.3% to about $4113 a troy ounce on Friday.

Gold producer Newmont announced net income of $1.8 billion, or $1.67 per share, for the quarter ended September 30. Both figures were roughly double what they were for the same period last year ($922 million and $0.8, respectively). Adjusted earnings excluding one-time factors came in at $1.7 per share, while analysts had forecast $1.4, The Wall Street Journal wrote, citing FactSet data.

Revenue rose 20% to $5.5 billion, while analysts expected $5.2 billion, the publication added. However, gold production was down 15% year-on-year due to lower grades, maintenance at two mines and the completion of production at another, Seeking Alpha explained.

The company said it is starting to record cost reductions in certain areas. This was the result of cost-cutting measures taken by retiring CEO Tom Palmer after the completion of a $15 billion deal to acquire Australian gold miner Newcrest Mining, Bloomberg writes. The gold miner's key AISC (All-in Sustaining Costs) performance metric for the latest quarter was $1.56 an ounce: still quite high compared to peers, but nearly 6% below the average estimate and nearly 3% lower than it was a year ago, Bloomberg noted.

"The company expects to realize the full impact of its cost reduction programs: this will be reflected in the 2026 forecast to be presented next year," Newmont said in a statement.

The spot price of gold this year several times updated the record and increased by more than 52%. Thus, the cost of gold on October 10 exceeded $4000 per ounce for the first time, and by October 20 it almost reached $4360. But then investors began to take profits: the price collapsed by about 6% over the next two days, which was the strongest decline in 12 years. It coincided with a large outflow from gold-backed ETFs - on October 22, their aggregate reserves declined most sharply over the past five months, Bloomberg notes.

This article was AI-translated and verified by a human editor