Newmont CEO expects gold to stay elevated

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Newmont Goldcorp Corp. [NGT-TSX, NEM-NYSE] CEO Tom Palmer says investors want the gold industry to remain disciplined and “actually achieve the margins that we’re seeing at the moment.”

Holding operations that result from Newmont Mining’s recent US$10 billion takeover of Canadian mining giant Goldcorp, Newmont Goldcorp now ranks as the world’s largest gold producer with assets across the Americas, Africa and Australia.

In an interview with Bloomberg that is also posted on a Scotiabank investor website, Palmer says he sees the price of gold remaining “elevated” as governments continue pandemic stimulus spending. But investors should not expect that view to change Newmont’s focus on fiscal “discipline” any time soon.

Gold jumped to record heights above US$2,000 an ounce in August, a move that helped to lift miners’ cash flow, stock prices and likely the hopes of shareholders expecting higher returns.

Barrick Gold Corp. [ABX-TSX; GOLD-NYSE] after Warren Buffett’s Berkshire Hathaway Inc. added shares of the world’s second largest gold miner to its portfolio.

Buffett, the billionaire Berkshire Chairman, has previously been cautious about investing directly in gold. So, this investment was viewed as an endorsement of an industry where producers are benefitting from the surging bullion price. Even though the price of gold has dipped a bit in recent weeks, it is still trading in record territory above US$1,900 an ounce.

“There are a lot of signals that point to gold staying at these elevated levels – with I think a lot of volatility around it – for some time to come,” Palmer said during a phone interview. Despite the high prices and the cash flow that they generate for miners, Palmer plans to stay focused on such things as improving margins, and investing in existing projects that make money at lower prices and ensuring that balance sheets are well maintained.

“At Newmont, when we talk about discipline, it’s about continuing to run our business profitably at the bottom of the price cycle, at US$1,200 an ounce,” he said.

When Newmont released its 2020 second quarter financial results on July 30, 2020, the company said it had executed restart plans at mines that were previously in care and maintenance. The company also reaffirmed its 2020 production forecast, saying it expects attributable gold production to be approximately 6.0 million ounces this year at an all-in-sustaining cost of US$1,015 an ounce.

On Thursday, Newmont shares eased 1.4% or $1.21 to $87.40 in light trading volume. The shares are currently trading in a 52-week range of $96.45 and $44.00.

The gold price slipped US$15.86 to US$1,943.90 an ounce on Thursday after the U.S. Federal Reserve disappointed expectations, from a short-term perspective, with respect to further stimulus to spur inflation and support an economy battered by the COVID-19 crisis.

The Federal Reserve pledged to keep interest rates pinned near zero levels until inflation was on track to moderately exceed its 2% inflation target for some time.

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