Newmont’s Q3 Earnings Miss Estimates Amid Mexico Labor Strike

The strike's impact resulted in a 13.4% decline in Newmont's quarterly attributable gold production, which reached 1.29 million ounces.

Newmont (NEM.N) reported third-quarter earnings below Wall Street expectations due to production challenges stemming from a labor strike at its Penasquito mine in Mexico.

The world’s largest gold miner had to suspend its operations at the Mexican mine in June but recently resolved its issues with the workers’ union. It anticipates returning to full production capacity within the next two to three weeks.

The strike’s impact resulted in a 13.4% decline in Newmont’s quarterly attributable gold production, which reached 1.29 million ounces.

Despite this setback, Newmont’s stock saw a surprising rise of nearly 3.1% to $37.9. Analysts believe that this upward trend may be attributed to the positive outlook associated with Newmont’s recent agreement to acquire Australia’s Newcrest (NCM.AX) for A$26.2 billion.

Matthew Miller, a senior equity analyst at CFRA Research, expressed optimism about Newmont’s future, stating, “Newmont’s operations are poised to improve starting in the fourth quarter … we anticipate significant synergies and per-share accretion (on the Newcrest deal).”

In light of the production challenges, Newmont adjusted its 2023 gold production forecast, lowering it from 5.7-6.3 million ounces to 5.3 million ounces, further impacting market sentiment.

However, with the uncertainty around the forecast now resolved, Newmont’s stock rebounded.

Daniel Morgan, an analyst at Barrenjoey in Sydney, noted, “On Wednesday, Newmont stock had declined partly due to concerns about a forecast cut. With that negative catalyst out of the way, the market appears to be relieved.”

For the July-September quarter, the company reported adjusted net income of 36 cents per share, falling short of analysts’ average estimate of 43 cents, as per LSEG data.

Newmont’s financial performance during this period was undoubtedly affected by the labor strike and reduced gold production.

In conclusion, Newmont faced challenges in the third quarter, primarily due to a labor strike at its Penasquito mine in Mexico, resulting in lower-than-expected gold production.

However, with the strike resolved and optimism surrounding its acquisition of Newcrest, the company anticipates improved performance in the coming quarters, offering a positive outlook for its investors.