Newmont Mining Corporation
) is scheduled to report third-quarter 2013 results after the
closing gong on Oct 31. It delivered a 124.39% negative surprise
in the last reported quarter. The company slipped to a loss in
the quarter, hurt by a sizable impairment charge. Let's see how
things are shaping up for this announcement.
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Factors to Consider this Quarter
Newmont is expected to continue to face headwinds due to higher
mining and non-mining costs. Gold costs jumped 30% from the last
year in second-quarter 2013, impacted by write-downs due to lower
gold prices. In addition, copper costs surged more than
three-and-a-half-fold year over year in the quarter.
Higher operating costs may weigh on Newmont's bottom line in the
third quarter. The company is currently exploring means
(including employee layoffs) to cut costs to remain competitive
amid a challenging business environment.
Moreover, lower ore grades are affecting production across a
number of operations. Newmont's production remains challenged at
the Batu Hijau mine in Indonesia as certain geo-technical issues
are still impacting weight stripping capability. Gold production
from the mine tumbled 25% year over year in the second quarter.
The company may face similar challenges in its Indonesian
operation in the third quarter.
Newmont recently cut its copper production outlook for 2013 based
on lower-than-expected mill throughput at the Boddington mine in
in Australia and lower-than-expected ore grade at the Batu Hijau
mine. Nevertheless, the company backed its gold production
outlook for the full year and expects to benefit from higher mill
throughput in Nevada.
Our proven model does not conclusively show that Newmont is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive Earnings ESP (Expected Surprise
Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen.
That is not the case here as you will see below.
Negative Zacks ESP:
The ESP for Newmont is -3.13% - the difference between the Most
Accurate estimate of 31 cents and the Zacks Consensus Estimate of
32 cents. This indicates a likely negative earnings surprise.
Newmont's Zacks Rank #3 (Hold) combined with a negative ESP makes
surprise prediction difficult. We caution against stocks with
Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings
announcement, especially when the company is seeing negative
Other Stocks to Consider
Here are some other mining companies you may want to consider as
our model shows they have the right combination of elements to
post an earnings beat this quarter:
Pretium Resources Inc.
) has earnings ESP of +25.00% and carries a Zacks Rank #1 (Strong
Silver Standard Resources Inc.
) has earnings ESP of +15.39% and carries a Zacks Rank #3 (Hold).
Barrick Gold Corp.
) has earnings ESP of +4.08% and holds a Zacks Rank #3