As input costs and operating costs increase, gold miners are struggling to capitalize on the higher demand for yellow metal.
Newmont Corp, the largest gold-mining company in world shares fell 15% after its results. Profit and revenue were below analyst expectations.
According to the US-based firm, high costs of diesel and labour as well as other operational expenses were responsible for poor performance.
Barrick Gold, Agnico Eagle Mines and other top Canadian mining companies also experienced a decline in their share prices.
The mining industry is plagued by high labour costs
Gold prices are up since the beginning of this year but higher labor costs plague the top mining firms.
The gold price has risen 30% in the first half of this year, mainly due to a positive outlook for interest rates. Also the geopolitical turmoil is increasing demand for safe havens.
Most mining companies, however, have not been able to take advantage of the recent price increase.
Bloomberg News stated that “Newmont’s Results revealed that the big gold producers continue to struggle with inflationary forces, particularly regarding labour costs that have continued longer than anticipated.”
If Newmont’s conclusions are correct, experts believe the mining industry would be at risk if they were to occur.
Newmont invests in digging up more gold
This US company has spent more on gold mining in Australia, Canada and Papua New Guinea in the last quarter than it did in the prior one.
Capital expenditures also increased 10% as a result of the expansion projects undertaken in Australia and Argentina.
The company has incurred high costs on major assets acquired through the $15 billion acquisition of Newcrest Mining Ltd.
Analysts expect the gold sector to have a bumper earnings season.
Cost of labour
The growing cost of labour at Newmont could cause concern in the mining industry.
Bloomberg News quotes Tom Palmer, the chief executive officer of the company.
The labor cost is where the escalation can be seen.
Costs of operating camps, cost of flying in and out of camps or maintenance shutdowns are all examples of escalating costs beyond what was expected at the beginning of the year.
Barrick Gold Corp misses production expectations
Barrick Gold Corporation announced last week that its gold production for the third quarter was lower than expected due to reduced output from their Carlin and Cortez Mines in Nevada.
Barrick’s preliminary total gold production was 943,000 in ounces for the third quarter ending September. This compares to analysts’ estimates of 975,000.
In the face of rising operating costs in the mining industry, this company has reported a lower output of gold.
Early November is when the second largest gold producer will report their earnings.
Gold miners could benefit from lower prices despite a drop in their shares
Mining companies could enjoy a more successful fourth quarter despite a decline in the shares of their companies, and a disappointment by investors.
Barrick expects to achieve production in 2024 within its gold and copper full-year guidance.
Newmont also posted its largest quarterly profit in the last five years despite falling short of analysts’ predictions. The gold prices are at record levels.
Bloomberg spoke with Carey MacRury a Canaccord Genuity mining analyst:
. The expectations were just too high. The market is telling me that it was a negative day, and I agree.
As new information becomes available, this post Newmont share prices plunge 15% when earnings miss estimates due to labour costs woes could be updated.
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