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Newmont Goldcorp Falls on 1st-Quarter Results

- By Alberto Abaterusso

Shares of Newmont Goldcorp Corp. (NEM) fell 1.77% to $31.63 on Thursday after the miner posted mixed first-quarter results, topping estimates of non-GAAP earnings by 6 cents, reporting 33 cents per diluted share. It missed revenue expectations of $1.8 billion by $10 million.

As a result of lower gold prices, non-GAAP earnings per share decreased 5.7% year-over-year. Revenue declined 1.1%, though the attributable production of gold rose 2% to 1.23 million ounces, in line with 2019 guidance, thanks to a higher grade of mineral processed in Suriname and Peru. With its first full quarter of mining, Subika underground reserves in Ghana also gave a positive contribution to production.

To produce the yellow metal, the mining company endured an all-in sustain cost of $907 an ounce, which was 3.8% lower.

In the quarter, Newmont Goldcorp Corp. also produced 10,000 tons of attributable copper, which was 17% lower. Its all-in sustain cost was $2.26 per pound, 9% higher due to reduced performance of its Boddington asset in Western Australia.

Newmont Goldcorp also has mineral assets in North America, Argentina, the Dominican Republic and the Northern Territory in Australia.

The decline in GAAP earnings of 21 cents was even sharper, at 34.4% from the prior-year quarter as a result of the 2% drop in the average realized gold price to $1,300 per ounce, higher costs for the Newmont Goldcorp transaction and the Nevada Joint Venture.

"Our joint venture in Nevada will generate synergies and create the world's largest gold mining complex, and our combination with Goldcorp will create the world's leading gold business as measured by assets, prospects and people," said CEO Gary J. Goldberg.

Newmont Goldcorp Corp. also recorded a boost in free cash flow to $349 million in the first quarter of 2019 from $35 million in the first quarter of 2018, enriching the liquidity available in cash on hand.

The company has $3.5 billion in cash on hand and securities and net debt of $800 million, supporting what it called an investment-grade profile.

Newmont Mining will also use part of the liquidity to distribute on a 14-cent cash quarterly dividend per share pn June 20 to shareholders of record June 6 and to pay on May 1 a special dividend of 88 cents per share to shareholders who were on the company's record not later than April 17.

The stock has a forward dividend yield of 1.57% as of April 26.

Newmont Goldcorp Corp. expects to produce 5.2 million ounces of attributable gold in 2019, and 4.9 million ounces in 2020, and to produce 4.4 million to 4.9 million ounces every year until 2023.

A 22% drop in the market capitalization of the stock, which was $25.92 billion at close Thursday, over the past 52 weeks, sent the share price to below the 200, 100 and 50-day simple moving average lines. The 52-week range is $29.06 to $40.91.

Wall Street issued an overweight recommendation rating indicating the stock is foreseen to outperform either the industry or the overall market within 52 weeks with an average price target of $41.43, reflecting 31% growth from the share price of $31.63 at close on Thursday.

The achievement of commercial production levels from the Ahafo mill expansion in Ghana and from the Quecher Main project in Peru expected before the end of 2019 corroborates stock appreciation forecasts.

Further, a full year of higher-grade production from the underground mineral project that the miner has recently completed at Subika mineral deposit in Ghana also underpins the expected growth.

Disclosure: I have no positions in any security mentioned.

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This article first appeared on GuruFocus.