Newmont Corporation (TSE: NGT) (NYSE: NEM) slashed its workforce down by close to a dozen managers, including unloading a member of its C-suite team, as part of a widespread corporate overhaul.
Reported on Monday, Newmont also told employees that it has plans to merge several business units in order to streamline the reporting structure. This will reduce five units to three, and say goodbye to standalone divisions that oversee large-scale operations in Australia and Africa. These will be combined into units that oversee North America and East Asia.
These changes come about as a response to a disappointing October earnings report, which revealed that Newmont is struggling to control costs and capitalize on surging bullion prices. The gold producer has exceeded its expected spending to extract gold from mines in Australia, Canada, Peru, and Papua New Guinea. Top investors criticized chief executive officer Tom Palmer in private conversations with the company after the earnings release, according to one source.
“Following the Newcrest acquisition and progress with our key divestments, we are continuing to execute our strategy focused on a portfolio of Tier 1 assets and projects,” according to a Newmont spokesperson.
“An integral part of this strategy is to ensure that we have an organization that is fit-for-purpose from operational, functional and cost perspectives, and our business is well positioned for long-term success.”
The company is restructuring in response to its USD$15 billion takeover of Newcrest Mining Ltd. in 2023. This acquisition added several major gold and copper mines to its portfolio while the firm shed smaller ones in Australia, Canada, and Ghana.
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Newmont is focusing on its core top-tier properties
Newmont has refocused its operations this year by prioritizing its core top-tier properties and divesting smaller assets. Notable among these divestitures are the sale of the Musselwhite mine in Mexico to Orla Mining (NYSEAMERICAN: ORLA) (TSE: OLA) and the Akyem Gold Mine in Ghana to Zijin Mining Co.
These moves are part of the company’s strategy to concentrate resources on its most productive and high-grade mines, ensuring greater efficiency and profitability.
In Canada, Newmont sold its Éléonore mine to UK-based private mining firm Dhilmar for USD$795-million in cash.
By narrowing its operational focus, Newmont aims to address rising costs and capitalize on surging gold prices. Concentrating on its flagship properties allows the company to improve cost efficiency and advance its exploration initiatives, ensuring a competitive position in the global gold market.
Even though the price of gold is up roughly 30 per cent this year, receiving support by US interest-rate cuts and central-bank activity, Newmont’s shares haven’t rode that wave.
Newmont’s acquisition of Newcrest illustrates the potential risks of large-scale mergers. While the deal brought several high-quality gold and copper mines under Newmont’s control, it also increased the company’s exposure to higher costs and operational challenges.
Conversely, Calibre Mining Corp. (TSE: CXB) (OTMRKTS: CXBMF) is an example of a success story.
After acquiring the El Limon and La Libertad mines in Nicaragua from B2Gold Corp (TSE: BTO) (NYSEAMERICAN: BTG) in 2019, Calibre implemented an operational strategy focused on cost efficiency and sustainable growth. The company has since reported strong production results, driven by its ability to maximize mine synergies and extend the life of its assets.
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Barrick Gold has called for more industry consolidation
There is ongoing consolidation activity in the gold mining sector, with companies aiming to secure growth and address dwindling reserves.
Barrick Gold Corp (TSE: ABX) (NYSE: GOLD), for example, has voiced the need for more industry consolidation, particularly in Africa, due to a “serious reserve crisis.” This reflects a broader challenge across the sector, where reserves among major gold producers have decreased by about 30 per cent since 2012. Companies are increasingly using M&A to rebuild reserves and sustain long-term production.
The gold sector remains fragmented compared to other mining industries, making it ripe for M&A. However, high costs, uncertain gold prices, and lessons from previous price cycles have made companies cautious. Historically, overpayment and poor timing during gold price peaks have led to impairments and reduced returns.
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Calibre Mining is a sponsor of Mugglehead news coverage
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joseph@mugglehead.com
