Why Newmont Mining Rallied on Friday

Key Points

Newmont delivered a solid earnings beat in the first quarter.

Management ramped share repurchases as shares fell in late February and early March, when the war in Iran broke out.

Higher oil and gas prices will increase costs this year, but perhaps not as much as feared by analysts.

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Shares of gold miner Newmont Mining (NYSE: NEM) rallied 8.5% on Friday.

Newmont, the world's largest gold mining company, reported earnings last night that exceeded expectations. While everyone knows that gold prices were up in the quarter, Newmont's stock is doing even better than gold today, which was only up 20 basis points.

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Newmont delivers and announces a big buyback

In the first quarter, Newmont grew revenue 45.9% to $7.31 billion, while adjusted (non-GAAP) earnings per share rocketed 132% to $2.90. Both figures handily beat analyst expectations.

Newmont had already guided for lower production this year, due to brush fires, weather, and sequenced maintenance at its various mines around the world. However, it appears the actual results were better than expected. All-in sustaining costs dropped to just $1,029 per ounce, compared to an average $4,900-per-ounce realization on gold sales in the quarter.

Management also stepped up share repurchases in the quarter, saying the company repurchased $2.4 billion in shares since the last earnings release on Feb. 19. That step-up in repurchases coincided with a drop in Newmont's stock amid the outbreak of the war with Iran.

Not only that, but the Board of Directors authorized a new $6 billion share repurchase program, so returns to shareholders beyond dividends appear set to continue.

Newmont remains a solid way to bet on gold prices

Management warned that sustaining costs per ounce are set to rise throughout the year, as the Strait of Hormuz closure has led to higher oil and gas prices and other commodity prices that remain inputs to Newmont's mining operations.

Still, Newmont only trades at 13 times this year's earnings expectations, which likely factors that in. More important to Newmont's stock is gold prices, which are up a lot over the past few years but are still about 15% below their highs.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.