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Newmont chief executive Gary Goldberg will be replaced by President Tom Palmer on Oct. 1.Ranu Abhelakh/Reuters

Newmont Goldcorp Corp. needs to do as much as three years of work at the mines it added through its acquisition of Goldcorp to bring them to acceptable levels of performance, its chief executive told Reuters on Thursday.

The company reported a substantial decline in second-quarter profit, driven largely by the transaction’s integration costs. Shares dropped 3.4 per cent to $37.98 at 1:44 p.m. in New York.

“Goldcorp had really cut back to zero its spend on exploration a few years ago, when the gold price turned down,” CEO Gary Goldberg, who will be replaced by president Tom Palmer on Oct. 1, said in an interview.

“Right around the mine areas, they hadn’t done the detailed exploration work that sets you up for longer term.”

Goldcorp had also taken a “just-in-time” approach to mine development, meaning any hiccups led to production problems, Goldberg said.

Newmont is currently integrating operations after it finalized its acquisition of Goldcorp and its Nevada joint venture with Barrick Gold Corp. in the second quarter.

The Denver-based company said it expects attributable gold production of 6.5 million ounces for 2019, at an all-in sustaining cost (AISC) of US$975 an ounce, excluding production at its joint venture, Nevada Gold Mines.

This takes into account the work needed at and around the Goldcorp mines, Mr. Goldberg said.

Newmont will provide an update on its guidance for subsequent years in December, he said.

Net income attributable to shareholders from continuing operations sank to just US$1-million, or zero cents a share, in the three months ended June 30, from US$274 million, or 51 cents a share, a year earlier. Analysts had expected US$188.58 million, or 23 US cents a share, according to Refinitiv data.

Costs incurred while Newmont’s Penasquito mine in Mexico and Musselwhite in Canada were idle, due to a blockade and a conveyor fire respectively, contributed to the decline.

“Results appear disappointing at first look – even allowing for noise from Goldcorp consolidation and Penasquito (blockade),” said analysts at Citi, who have a ‘buy’ rating on the stock, in a note.

“We expect 2019 to be a transition year for Newmont... The key is to exit 2019 with plans in place and demonstrate execution on synergies and operating improvements in 2020-21.”

Second-quarter gold production surged 37 per cent from a year earlier to 1.59 million ounces, with AISC of US$1,016 an ounce, while the average realized gold price rose by US$25 to US$1,317 an ounce.

Newmont posted revenue of US$2.26-billion, compared with US$1.66-billion a year ago and analyst estimates for US$2.38-billion.

This month, Barrick said the Nevada joint venture is expected to produce 1.8 million to 1.9 million ounces of gold in the second half of 2019.

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