Newmont's Soaring Unit Costs Warrant Caution: Can It Protect Margins?

Newmont Corporation’s NEM first-quarter 2025 results show concerning increases in unit costs. Its gold costs applicable to sales rose 16% year over year to $1,227 per ounce. All-in sustaining costs (AISC) — the most important cost metric of miners — were $1,651 per ounce for the same period, reflecting a roughly 13% sequential and 15% year-over-year increase. The rise was attributed to a decline in production due to non-core asset divestments as Newmont shifts its focus to Tier 1 assets. 

Newmont expects gold AISC for the total portfolio to be $1,630 per ounce in 2025, reflecting a rise from $1,516 per ounce in 2024. The impacts of increased direct operating costs are leading to cost inflation. Higher materials, labor and contract services costs, despite somewhat easing lately, remain a concern. The company, in particular, is stung by higher labor costs, which constitute about half of its direct costs. For the second quarter, NEM sees unit costs to be similar to or modestly higher than the first quarter due to higher sustaining capital spending. Sustaining capital is expected to peak in the second quarter due to the ramp-up of planned investments. Higher production costs warrant caution, as they will likely weigh on NEM’s profitability. This calls for prudent cost management to maintain competitiveness and sustain margins. 

Among its major peers, Barrick Mining Corporation B also faced cost pressure in the March quarter. Barrick saw a 22% sequential increase in AISC, reaching $1,775 per ounce. This upside was influenced by operational challenges, higher total cash costs per ounce and an uptick in minesite sustaining capital expenditures. Lower production, partly due to the suspension of operations at Barrick’s Loulo-Gounkoto mine, also contributed to the rise. For 2025, Barrick projects AISC in the range of $1,460-$1,560 per ounce, indicating a year-over-year increase at the midpoint. 

Agnico Eagle Mines Limited’s AEM AISC declined 0.6% in the first quarter due to the deferral of certain sustaining capital expenditures. However, Agnico Eagle projects the same to increase in the remainder of 2025. Agnico Eagle forecasts total cash costs per ounce in the range of $915 to $965 and AISC per ounce between $1,250 and $1,300 for 2025, suggesting a year-over-year increase at the midpoint of the respective ranges.

The Zacks Rundown for NEM

Newmont's shares have shot up 43.2% year to date against the Zacks Mining – Gold industry’s rise of 48.1%, largely driven by the gold price rally.

From a valuation standpoint, NEM is currently trading at a forward 12-month earnings multiple of 12.12, a roughly 9.6% discount to the industry average of 13.4X. It carries a Value Score of A.

The Zacks Consensus Estimate for NEM’s 2025 and 2026 earnings implies a year-over-year rise of 20.1% and 11.7%, respectively. The EPS estimates for 2025 and 2026 have been trending higher over the past 60 days.

NEM stock currently carries a Zacks Rank #2 (Buy). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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