Skyrocketing gold prices fire up earnings at Newmont and Kirkland
TORONTO Surging gold prices propelled miners Newmont Corp and Kirkland Lake Gold Ltd 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 US$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 with hikes to payouts and share repurchase programs.
Fresh from its acquisition of Detour Gold Corp, Kirkland Lake said on Thursday it would double its annual dividend to US$0.50 per share and repurchase 20 million of its common shares over two years as it steps up exploration.
Newmont shares jumped 4.7 per cent after it reported earnings of 50 cents per share, excluding items, beating the average analyst estimate of 48 cents, according to IBES data from Refinitiv.
The assets it acquired last year from rival Goldcorp helped it almost double adjusted profit to US$410 million.
“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 on Thursday.
The nearly 100-year-old U.S. miner’s average realized gold price jumped 20 per cent to US$1,478 per ounce in the fourth quarter, while attributable gold production rose 27 per cent to 1.83 million ounces. It had previously guided to a 79-per-cent annual dividend increase to US$1 per share.
Kirkland said it expects capital spending of US$500 million this year compared with US$245 million previously, with companywide exploration spending rising to US$160 million from US$130 million led by drilling at Detour.
“At current prices we’re going to generate a substantial amount of free cash flow at Detour this year and next year,” Kirkland chief executive Tony Makuch told analysts.
The company’s share price fell 6.8 per cent in Toronto to $46.21, however, partly reflecting concerns over a cut to the reserve grade at its flagship Fosterville underground mine in Australia.
Kirkland said production at the Detour mine is forecast to reach 700,000 ounces by 2021 at an allin sustaining cost of US$850 per ounce.
The company said it was considering options for its mines at Holt Complex in Canada and in Northern Territory, Australia and designated the assets as non-core as they did not generate adequate returns.