(Bloomberg) — The gold price is at a record high. But disappointing results at the world’s largest miner of the yellow metal indicate companies may struggle to capitalize on the sizzling demand.
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The shares of Newmont Corp. fell the most in more than 25 years, falling 15% after the Denver-based company posted third-quarter earnings, revenue and profit margins that fell short of analysts’ expectations, hurt by higher labor, diesel and diesel costs. and other operating costs. Top rivals Barrick Gold Corp. also and Agnico Eagle Mines Ltd. saw their shares fall.
Analysts had high expectations for the sector, with gold among the best-performing commodities this year, rising more than 30% on the prospects for lower interest rates and geopolitical unrest. But Newmont’s results showed that major gold producers are still grappling with inflationary pressures, especially on labor costs, which have lasted longer than expected.
“There could be a possible reading here, assuming Newmont’s conclusions are correct, that this is a risk factor for the sector,” said Josh Wolfson, a mining analyst at Royal Bank of Canada.
Newmont earned 80 cents per share, well below the average estimate of 89 cents among analysts surveyed by Bloomberg. Revenue of $4.61 billion also fell short of estimates, as did gross profit margin, which fell below 50%.
The company said it spent more digging up the precious metal at its mines in Australia, Canada, Peru and Papua New Guinea than in the previous quarter. Capital expenditure rose 10% due to expansion projects in Australia and Argentina, while some of the company’s highest expenses came from major assets it acquired last year through its $15 billion takeover of Newcrest Mining Ltd.
Some of these cost issues are specific to the company and not necessarily indicative of a broader industry trend. Newmont is carrying out costly maintenance work at its Lihir mine in Papua New Guinea – a notoriously complex operation in a remote region – and has spent more to restart its Cerro Negro mine in Argentina after operations were halted due to deaths from two employees in April.
But the company’s growing costs to workers could signal problems across the industry.
“It’s in labor costs where we’re seeing that escalation,” CEO Tom Palmer told analysts in a conference call Thursday.
