Newmont's Trough Is Getting Expensive
Record cash flow and a bigger buyback meet a quantified Red Chris build, rising 2027 costs and a market already 15% off the August peak.
NEM · Earnings Call · 2026-10-22
The cash machine is still running — for now
Newmont's third quarter was, on the surface, more of the same: stable operations, record adjusted earnings and a torrent of free cash flow. The company produced roughly 1.3 million ounces of gold, 23,000 tonnes of copper and 11 million ounces of silver, and realized an average gold price of $4,317 an ounce. That translated into “$2.8 billion of cash flow from operations after working capital, and $1.9 billion of free cash flow” — Brian Tabolt, Executive Vice President and Chief Financial Officer · 2026-10-22. Through nine months, Newmont has generated $7.3 billion of free cash flow — roughly what it generated in all of 2025 — with its strongest production quarter still ahead. More than 80% of year-to-date free cash flow has gone back to shareholders, including $1.6 billion of buybacks since the last call and 115 million shares retired since February 2024, about 10% of the shares outstanding. The cost line also improved. Full-year gold all-in sustaining costs are now guided to roughly $1,520 an ounce, about 10% better than the initial 2026 outlook. But the fourth quarter is guided to be the highest-cost quarter of the year at roughly $1,900 an ounce, and management was explicit that the same forces do not disappear in 2027: “we anticipate unit costs to trend higher next year, reflecting macroeconomic headwinds and lower coproduct credits” — Brian Tabolt, Executive Vice President and Chief Financial Officer · 2026-10-22. Peñasquito silver production is expected to fall roughly 30% from 2026 levels due to mine sequencing, reducing by-product credits. And labor escalation is running above the 3% assumption used for 2026; Brian Tabolt said “we are looking at a general escalation across the organization that will exceed our 2026 assumption, which was about 3%” — Brian Tabolt, Executive Vice President and Chief Financial Officer · 2026-10-22. Oil sensitivity has been formalized too: roughly $60 million direct plus $50 million indirect for every $10 per barrel move, an indirect impact that now includes chemicals, explosives, grinding media and contracted services. That cost language matters because the macro backdrop has turned less friendly. The global tape has been dominated by the Fed rate hike theme, and gold sold off when the Fed raised rates in September. Newmont shares are still up about 5% over the last 90 trading days, but they sit 15.6% below the August 25 peak of $135.14. A strong quarter has not erased the drawdown.Red Chris: the number is finally on the table
The real news is the Red Chris Block Cave Project, now through a full feasibility study and on track for a full funds decision early next year. Management quantified what had only been sketched before: $4.2 billion to $4.8 billion of development capital on a 100% basis, a 13-year initial mine life, roughly 3 million ounces of gold and 850,000 tonnes of copper over that period, and average annual production of 275,000 to 325,000 ounces of gold plus 65,000 to 85,000 tonnes of copper. Commercial production is targeted for 2033. The initial phase is less than 20% of the potential endowment, with East Ridge and future block caves sitting behind it. Roughly 40% of the processing, material-handling and infrastructure spend is expected to be reusable for future expansions. The design changes are substantial — a larger cave, a reoriented footprint, and a processing plant moving from 9 million to 15 million tonnes per year — and management was careful to say the project must stand on its own. “These economics will assume 100% of the capital, though. That’s part of our standard. So, this project needs to be standalone” — Natascha Viljoen, President and Chief Executive Officer · 2026-10-22. That is the right discipline, but it also means the market now has a hard capital number to underwrite. On the prior call, Natascha Viljoen had already warned that “we expect the capital to be higher than what the original numbers were under Newcrest” — Natascha Viljoen, President and Chief Executive Officer · 2026-07-23. The difference today is that the number is no longer a warning; it is a plan.The Barrick overhang clears — at a price
The other strategic shift is Nevada Gold Mines. Newmont announced an amended Joint Venture agreement under which Four Mile, Fiberline and Mike will be contributed to the venture, with a $1.95 billion payment expected in the fourth quarter. For several quarters, the analyst conversation was dominated by the open-ended notice of default and the strained Barrick relationship. That keyword has dropped out of the current top themes entirely, replaced by the JV amendment. The governance overhang is being replaced by a commercial settlement. The cash cost is real. Newmont ended the quarter with $3.2 billion of net cash, modestly above its $1 billion plus-or-minus $2 billion target, but that balance does not reflect the $1.95 billion NGM payment. After the payment, the balance sheet would still be near the top of the target range, but the buffer is thinner. That matters as development capital rises: 2027 development capital is expected to be about $500 million higher than 2026, with roughly half tied to Red Chris. The good news is that Yanacocha water treatment plant completion is expected to free up about $200 million of closure spending in 2027 and $400 million annually from 2028. Tanami's second expansion is now expected to reach commercial production by the end of Q2 2027, earlier than planned, and Cadia's PC2-3 remains on track.What the tape is debating
This is no longer a simple 'trough year, buy the cash flow' story. Newmont still looks cheap on cash flow — the shares trade at roughly 10x trailing free cash flow — but the market is being asked to fund a multi-year copper-gold build while absorbing higher 2027 unit costs and a less accommodative gold macro. Management's improved 2026 cost guidance is a genuine positive; the 2027 cost warning is the offset.The keyword shift tells the story: production growth is now the company's top theme, ahead of the cost and capital-allocation language that dominated prior quarters. That is a narrative pivot from defense to offense. The proof will not arrive in 2026. It arrives with 2027 production growth in the low-to-mid single digits, a 2027 capex step-up, and eventually a Red Chris build that does not produce commercial metal until 2033. Newmont has the cash flow and balance sheet to fund the transition. The question is whether the market will keep paying a premium while the company spends it.While these factors create a more challenging cost environment, we remain focused on rigorous cost discipline productivity improvements, and performance excellence across the business, ensuring we continue to actively manage the costs that are within our control.