Newmont warns inflation to spike costs in 2023

Higher operating costs related to labor, energy and supplies have forced the miner to hike its annual forecast for all-in sustaining costs (AISC), an industry metric that reflects total expenses, to $1,150 per ounce from $1,050 per ounce earlier.

In comparison, the cost in the second quarter ended June 30 rose nearly 16% to $1,199 per ounce of gold.

The miner sees about a 20-30% spike in prices for raw materials such as cyanide and explosives, used in mining operations, in the second half of the year and a tight labor market to persist into 2023.

This would drive an additional 7% of cost escalation this year, on top of the 5% outlined in December, Chief executive Tom Palmer said on a call.

Global miners BHP Group and Rio Tinto have also signaled that labor crunch and inflationary pressures would continue into 2023.

The companies have been hit by a dip in bullion prices that faced their worst quarter since early 2021, falling nearly 7% in the three months ended June, as a firm dollar and aggressive rate hikes eroded the appeal of the non-yielding asset.

Newmont’s shares fell as much as 12.05% to $45.20 after the company also lowered its annual production guidance to 6 million ounces from 6.2 million ounces earlier, citing operational challenges and competitive labor market in Canada and Australia.

Gold production in the second quarter rose about 3.4% to 1.5 million ounces from a year earlier.

On an adjusted basis, Newmont’s quarterly profit of 46 cents per share missed analysts’ average estimate of 63 cents per share, according to Refinitiv IBES data.