Gold mining companies in trouble: Can focusing on high-end mines turn the tide?

Newmont's ledger is speaking

Newmont Corporation (NEM) reported third-quarter gold production of 1.42 million ounces, a year-on-year decline of 15%, and a decrease for the third consecutive quarter. The culprit is its “strategic slimming” — cutting low-end assets, going all-in on Tier-1 mines. It sounds like a clever move to increase efficiency, but the short-term production cost is quite heavy.

The company's annual production is expected to be set at 5.9 million ounces, with an estimated 1.415 million ounces in the fourth quarter, which means a further decline compared to the previous quarter. The new Ahafo North capacity and accelerated production at the Nevada gold mine cannot offset the impact of the depletion at Yanacocha and the grade decline at Ahafo South.

The key questions are at hand: How fast can the new high-end mines ramp up? Can the production ceiling meet expectations? If not, the profit target for 2025 will have to be revised.

The peers haven't had it good either

Barrick Gold (B) produced 829,000 ounces in the third quarter, a year-on-year drop of 12%, marking a decline for two consecutive quarters. This was due to the shutdown of the Loulo-Gounkoto mine. They are betting on a rebound in the fourth quarter.

In comparison, Agnico Eagle Mines (AEM) is considered stable. The production in the third quarter was 866,963 ounces, which is basically flat compared to the same period last year, and the expectation for the full year remains at 3.3-3.5 million ounces. The progress in the first nine months reached 77% of the midpoint of the annual guidance, maintaining a steady pace.

The comparison among these three companies is quite interesting: Newmont is adjusting, Barrick is staunching the bleeding, and Agnico is steadily advancing. The industry is undergoing a capacity restructuring.

Stock Price Trends and Valuation Games

NEM has risen by 124.3% this year, outperforming the industry average of 115.1%—this surge is mainly supported by gold prices. The current 12-month forward price-to-earnings ratio in stock trading is 11.7 times, approximately 5% cheaper than the industry average of 12.35 times.

But the story behind the valuation is even more interesting: analysts expect NEM's earnings per share to grow by 71.3% and 22.1% in 2025 and 2026, respectively. These expectations have been revised upward over the past 60 days, suggesting that the market still has confidence in its transformation strategy.

NEM currently has a Zacks rating of 2 (Buy). From a data-driven perspective, the combination of high gold prices and capacity optimization may support earnings growth. However, the risk of continued production decline cannot be ignored—whether this is truly the path to high-quality growth or a trap is being decided by the market with its money.