Why Is Newmont Stock Down 33%?

Newmont Corporation (NYSE: NEM), the world’s largest gold miner, has seen its stock underperform since September end, falling by 33% compared to the S&P 500 which is up 1.8%. Newmont’s stock price movement is aligned with that for its peers, including Freeport-McMoRan (NYSE: FCX) which is down 24%, Barrick Gold (NYSE: GOLD)  which is down 27%, and VALE (NYSE: VALE) which is down 28% during the same period. 

Newmont Corporation’s stock has dropped recently due to a combination of disappointing financial results and rising operational costs. The company has faced rising costs at its mining operations, including labor and energy expenses. Investors had high expectations for strong earnings due to the gold price boom, but Newmont’s reported profits, though substantial, were below these projections. This led to a significant negative market reaction. Additionally, costs associated with Newmont’s $17.5 billion acquisition of Newcrest Mining have also added pressure, with the integration and operational adjustments contributing to higher expenditures. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Notably, NEM stock has performed worse than the broader market in each of the last four years. Returns for the stock were 7% in 2021, -21% in 2022, -9% in 2023, and -8% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.

Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could NEM face a similar situation as it did in 2021, 2022, 2023, and 2024 and underperform the S&P over the next 12 months – or will it see a recovery?

Factors that drove changes in Newmont’s stock over recent months

Some of the decline of the last 3 months is justified by the roughly 13% rise in the all-in-sustaining costs for the gold business reaching $1,611 per ounce versus last year, due to higher direct operating costs at some of the mines. Revenue of the company, however, grew by 84% year-over-year to $4.6 billion, due to surging bullion prices coupled with higher gold volumes following the acquisition of Newcrest.

While Newmont has seen significant revenue growth since 2021, its PS multiple has seen a decline falling from 3.6x in 2021 to 2.5x currently. While the company’s PS is now 2.5x there is an upside when the current PS is compared to levels seen in the past years: 3.6x at the end of 2021 and 3.3x as recent as 2023.

What to expect from Newmont’s stock

Newmont reported strong results for Q3 2024, with a significant 30% year-over-year increase in gold production, reaching 1.7 million attributable ounces, primarily driven by the Newcrest acquisition and improved performance at several operations. However, production of gold-equivalent ounces (GEOs) from other metals declined by 10% quarter-over-quarter due to operational challenges at the Peñasquito mine, including lower ore grades and ongoing remediation work. The company achieved an 84% jump in revenue for the quarter, supported by higher gold prices. Despite this, rising costs, including contractor inflation and sustaining capital expenditures, tempered profit margins. The company is on track to achieve its full-year 2024 guidance of around 6.75 million ounces of attributable gold production. So, this recent drop in stock price could reflect short-term challenges, and understanding Newmont’s strategies to address cost issues may be essential for assessing future prospects. We presently estimate  Newmont’s valuation to be around $53 per share, about 35% ahead of the current market price. 

[1] Returns as of 1/14/2025
[2] Cumulative total returns since the end of 2016

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