Newmont Drops as Cost Struggles Undermine Gold Profit Surge

(Bloomberg) — Newmont Corp. shares fell after the market digested disappointing earnings results that signal the world’s top gold producer is struggling to control costs at its mines and capitalize on surging bullion prices.

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Newmont’s stock fell as much as 4.9% in New York Thursday, a day after posting third-quarter results that missed analysts’ estimates on adjusted earnings, costs and revenue. Newmont fell short of expectations after spending more to dig up the precious metal at mines in Australia, Canada, Peru and Papua New Guinea.

Some of the higher costs came from major assets that Newmont picked up through a $15 billion takeover of Newcrest Mining Ltd. last year. For example, the Denver-based company had 55% higher all-in sustaining costs at its Lihir operation in Papua New Guinea in the three-month period compared to the second quarter. Capital expenses also rose 10% due to expansion projects in Australia and Argentina, Newmont said.

Newmont is the first major gold producer to post results in an earning season where investors have been expecting bumper profits for bullion producers. Gold is among the best-performing commodities this year, surging more than 30% and netting miners windfall returns.

That rally helped Newmont post its highest quarterly profits in five years, raking in $922 million in net income attributable to shareholders for the quarter.

The company’s purchase of Newcrest last year helped cement its position as the world’s top producer. Newmont churned out 1.67 million ounces of gold in the quarter, well surpassing its biggest rival, Barrick Gold Corp., which said it produced 943,000 ounces in preliminary results posted last week.

(Updates shares from first paragraph, details on costs)

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