Newmont Goldcorp Corp. has topped earnings expectations just days after taking the crown as the world’s biggest gold company, but mine disruptions are leaving analysts with some unanswered questions.
Last week, Colorado-based Newmont Goldcorp – formerly Newmont Mining Corp. – closed its US$10-billion acquisition of Vancouver-based Goldcorp Inc. The deal vaulted Newmont Goldcorp ahead of Toronto-based Barrick Gold Corp., making it the biggest gold miner by production, value and reserves.
As part of the deal, Newmont Goldcorp acquired a suite of new mines and development projects across North and South America. Newmont Goldcorp previously said the combination should lead to cost savings of US$365-million a year.
On Thursday, Newmont Goldcorp issued its results for the first quarter ended March 31, before the Goldcorp acquisition had closed.
Newmont Goldcorp earned net income of US$113-million, or 21 US cents a share, down from US$176-million, or 32 US cents, in the same period last year. The fall in profit was mainly owing to integration costs from acquiring Goldcorp. On an adjusted basis, profit was 33 US cents a share, six US cents higher than predicted.
However, Newmont Goldcorp gave little or no insight into how Goldcorp as a standalone performed during the first quarter and financials for the weeks leading up the close of the transaction weren’t released either. Newmont Goldcorp didn’t provide a specific forecast on what the fully merged company’s full-year production will be for this year. Previously, Newmont Goldcorp has said the combined entity should produce six to seven million ounces a year over the long term.
“The numbers were fine,” John Tumazos, analyst with Homdel, N.J.-based Very Independent Research, said in an interview. “But it’s was all about what they didn’t say.”
Mr. Tumazos said he was concerned that Newmont Goldcorp gave little information on the impact of a fire at an Ontario mine, and disclosed few details on a continuing blockade at a site in Mexico – properties previously owned and operated by Goldcorp.
“It almost left the impression that Goldcorp laid a goose egg and then they handed the keys over to Newmont," he said.
In a conference call with analysts on Thursday, Tom Palmer, Newmont’s chief operating officer, said the fire that occurred at the underground Musselwhite mine in Northern Ontario in late March was “serious," involved the conveyor system and that the company was working to understand the problem.
But Mr. Palmer didn’t say what caused the fire, or the extent of the damage, and provided no estimate on how much it will cost to fix, nor how production might be affected. Immediately after the fire, Goldcorp halted underground production at mine site. On Thursday, Newmont management said that a fully operational Musslewhite would normally account for about 200,000 ounces of gold annually, a small part of the company’s overall production.
Newmont Goldcorp said it was working to end a “partial blockade” by “local stakeholders” at the Penasquito mine in Mexico, which has caused production at the site to drop off. The company said it was a “complex” issue linked to water usage, but expects the overall impact on production to be “minimal.”
Newmont Goldcorp is also freshly digesting its joint venture agreement with rival miner Barrick Gold in Nevada. Previously, both companies had said the pact would lead to a combined US$500-million a year in cost savings.
Shares in Newmont Goldcorp closed at US$31.63, down 57 US cents or about 1.8 per cent, on the New York Stock Exchange on Thursday.