The world’s largest gold mining company, Newmont Corporation, incurred a substantial loss of $2.475 billion in 2023. The company’s overall performance for the year was lackluster, as reflected in its declining share price, which plummeted from $40.9 per share to $30 per share – a significant decrease of nearly 27%.

This article will assess Newmont’s performance throughout fiscal year 2023, exploring key events and analysing the evolution of the company’s costs and revenues.

Acquisition of Newcrest Mining

The acquisition of Newcrest Mining, initiated in early 2023, reached its culmination on November 6, 2023.

Valued at $17 billion, this landmark deal solidified Newmont Corporation’s position as the world’s premier gold mining entity

This is both in terms of market capitalisation and gold production volume.

The completion of this transaction is poised to elevate Newmont’s annual gold production to an estimated 250 tonnes, representing a nearly 50% surge from its current output. Nonetheless, the acquisition of Newcrest came with a hefty price tag for Newmont.

Record-High Costs

In 2023, total operating costs surged to $13.45 billion, marking a nearly 15% increase. Newmont attributes these elevated costs to inflationary pressures. The cost to produce a troy ounce of gold in 2023 escalated to $1,444, reflecting a more than 19% uptick from 2022.

However, these escalating real time costs were partially mitigated by the rise in gold market prices. The average price of gold in 2023 experienced an 8% increase compared to 2022, measured in US dollars

The surge was propelled by an unprecedented year of gold demand from central banks. Coupled with the geopolitical turmoil stemming from the ongoing conflict in Ukraine and the outbreak of hostilities in the Gaza Strip in early October, the price of gold has maintained a near-constant level above $2000 per troy ounce for the past three months. This could be down to investment in golds reputation as a safe haven asset, for example in the form of gold coins, and gold bars.

More on the subject here: Will gold hit another all time high in 2024?

More on the topic here: Understanding consumer and in industrial demand for gold.

Stagnant Revenue

Newmont’s revenue remained stagnant in 2023, showing no growth compared to 2022 and even falling below the figures from 2021, with a total revenue of $11.8 billion. Given the upward trajectory of costs, this is a trend the company is eager to reverse. Although the acquisition of Newcrest holds promise for additional revenues for Newmont, they are projected to materialise gradually, reaching an estimated $500 million by the end of 2025.

In 2023, Newmont extracted over 5.5 million troy ounces of gold, equivalent to 171 tons. This figure marks a 7% decrease from 2022 and represents the lowest volume recorded since 2018.

The Bigger Picture

While the financials for 2023 may not instill immediate confidence, it’s crucial to acknowledge that Newmont’s assets saw significant growth following the completion of the Newcrest acquisition.

The value of these assets surged to over $55.5 billion, up from $38.5 billion in 2022

Conversely, although the company’s liabilities also increased (from $19.1 billion in 2022 to $26.5 billion in 2023), the assets-to-liabilities ratio declined from 49.7% to 47.7%. This metric holds immense importance as it indicates the proportion of a company’s assets required to settle its debts.

Looking forward to 2024, the company’s strategy is centred on consolidating the investments made in 2023 and implementing cost-cutting measures. As stated by Tom Palmer, President and CEO of Newmont:

With the acquisition of Newcrest, our primary objective for 2023 is to streamline and optimise our portfolio of assets to comprise the premier gold and copper mining operations and projects

Newmont anticipates a 27% increase in gold production to 215 tonnes in 2024, accompanied by a drop in production costs to $1,400 per troy ounce. JP Morgan’s 2024 gold price forecasts project a rise to $2,175 per troy ounce by year-end, suggesting a much-improved profit margin for Newmont.

Conclusion

Despite the array of challenges and transformations encountered in 2023 by the world’s leading gold mining company, Newmont management anticipates a strengthening of operations in 2024.

Given the momentum in gold prices, overseen by the London Bullion Market, expected for 2024, this year holds the potential for substantial profitability for Newmont.

FAQs

1) What will happen to the mining sector in 2024?

In 2024, the mining and metals industry faces a range of risks and opportunities. Explore how geopolitical instability may affect supply and demand in the gold bullion market, and how climate change may influence the gold market as this could result in the amount of gold being mined decreasing. This is just the surface, explore more in this article here.