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Gold miners' earnings affected by inflation, labor costs

Gold miners' earnings affected by inflation, labor costs

Analysts said that higher labor costs and inflation would continue to impact gold miners' profit margins into 2025. However, the rising price of yellow metal will still increase free cash flow.

The gold price rose by nearly 27%, the highest since 2010. It has also risen to new highs in 2018.

Bank of America analysts said that companies covered by their coverage could generate free cash flows of up to $3 billion in the 4th quarter and more in 2025.

Both Newmont and Barrick missed their third-quarter earnings estimates due to higher costs.

Sarah Tomlinson is the director of mine supply for consultancy Metals Focus. She said that labor costs were one of the largest expenses faced by miners.

Newmont's third-quarter profit was below expectations largely due to higher labor costs. The company's all-in-sustaining costs (AISC), a measure of total expenses that is used by the industry, increased nearly 13% compared to the same quarter in 2013.

Barrick's AISC also increased by nearly 20%.

According to Metal Focus mine supply analyst Ross Embleton, fewer people are interested in mining careers. This could be due to the perception that the industry is dirty and polluting.

According to LSEG, Barrick will report an adjusted earning per share for the fourth-quarter on Wednesday. In January, the company announced that it would no longer "publish preliminary production results".

Bank of America analysts predict that the Canadian miner will narrowly miss their gold production guidance for the year 2024 due to its royalties dispute with the Malian military at its Loulo-Gounkoto Mine and the "very challenging ramp-up" of Pueblo Viejo in Dominican Republic.

The brokerage stated in January that it assumed the mine would restart in late 2025E and ramp up to full production by 2026E. However, the terms of the deal were less favorable for Barrick.

Barrick generated $949m in revenue in the first nine-month period of last year from its operations in Mali.

According to LSEG, Newmont is expected report a adjusted earnings per share (EPS) of $1.09 on February 20.

Analysts at Scotiabank said that it could raise its dividend based on cash generated from asset divestments, and a higher gold price. However, the program to buy back shares would have to be balanced.

Analysts from Scotiabank predicted that production would be flat this year, compared to last.

David Hove said that in the fourth quarter last year, and into 2025, miner's could focus on cost control, along with margins, instead of production growth.

(source: Reuters)