Surging gold prices propel earnings at Newmont, Kirkland

Mine trucks at Newmont’s Porcupine mines. (Image courtesy of Newmont Goldcorp | Flickr)

Surging gold prices propelled miners Newmont and Kirkland Lake Gold to beat estimates for quarterly profit on Thursday as industry consolidation began to bear fruit for long-suffering shareholders.

Gold prices marked their best annual increase since 2010 last year and are currently above $1,600 per ounce, as concerns over global economic health, low interest rates and geopolitical tensions triggered investor interest in safer assets.

Newmont, Kirkland and others have snapped up rivals in a flurry of deals to replace reserves and lower costs, and are now rewarding investors by hiking payouts and buying back shares.

“That’s what’s going to bring people back to the space,” said Maria Smirnova, portfolio manager at precious metals-focused fund manager Sprott Inc. “We need to show people that mining companies can make money, and not just destroy capital.”

Newmont, Kirkland and others have snapped up rivals in a flurry of deals to replace reserves and lower costs

Kirkland Lake, fresh from acquiring rival Detour Gold, said on Thursday it would double its annual dividend to $0.50 per share and repurchase 20 million of its common shares over two years as it steps up exploration.

Kirkland bumped 2020 spending to $500 million compared with $245 million previously and said production at Detour in Ontario would drop to 530,000 ounces from 601,000 ounces last year.

However, the company pointed toward weaker production at the newly acquired Detour mine this year and cut the reserve grade at its flagship Fosterville underground mine in Australia, sending the shares down 6.5% in Toronto.

The company said it may sell its Holt Complex in Canada as well as Northern Territory, Australia operations as they did not generate adequate returns.

Newmont reiterated its $1.5 billion capital expenditure for the current year as well as plans for a 79% annual dividend increase to $1 per share as it reported earnings that beat analyst estimates.

The shares jumped more 5.3% to a more-than seven year high in midday trade.

The nearly 100-year-old U.S. miner’s average realized gold price jumped 20% to $1,478 per ounce in the fourth quarter, while attributable gold production rose 27% to 1.83 million ounces.

However, the miner maintained its 2020 production forecast of 6.4 million ounces.

Newmont said assets picked up in last year’s $10 billion Goldcorp acquisition helped it almost double adjusted profit to $410 million on Thursday.

“I think we’re demonstrating what those assets can really do when they’re in the hands of an operating company like Newmont,” Chief Executive Tom Palmer told analysts.

(By Jeff Lewis, Nishara Karuvalli Pathikkal, Aakriti Bhalla and Arundhati Sarkar; Editing by Amy Caren Daniel, Nick Macfie, Steve Orlofsky and Marguerita Choy)

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