Newmont warns inflation could cause costs to spike in 2023

Newmont Corp. on Monday raised its annual cost forecast and warned that inflationary pressures would persist into 2023 after its second-quarter profit missed Street estimates, sending the world’s biggest gold miner’s shares down 12 per cent.

Higher operating costs related to labour, 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 US$1,150 per ounce from US$1,050 per ounce earlier.

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

The miner sees about a 20-30 per cent 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 labour market to persist into 2023.

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

Global miners BHP Group and Rio Tinto have also signalled that labour 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 per cent 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 per cent to US$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 labour market in Canada and Australia.