More Trouble for Gold Miners, with Some Exceptions

Newmont Mining Corp. (NYSE: NEM) is supposed to be one of the biggest and best gold miners out there. Its high dividend is a testament to that. The problem is that gold miners have been running into trouble lately. As gold prices remain historically high, the cost of extracting that gold is on the rise.

The company reported on Thursday evening that second-quarter earnings per share fell down to $0.56 from $0.78 a year ago. It also said that revenue was down 6% to $2.2 billion in quarter. The adjusted earnings came to $0.59 per share. To see just how disappointing this report was, Thomson Reuters estimates were up at $0.93 EPS and $2.52 billion in revenue.

Here is the real drag: Newmont cut its full-year production forecast for 2012 down to 5.0 to 5.1 million ounces from a prior range of 5.0 to 5.2 million ounces. That is actually not too big of a drop considering that the baseline remains. The company blamed lower tonnage being mined at its Tanami mine in Australia, as well as planned mill maintenance in Nevada and lower production from Batu Hijau in Indonesia. Newmont said that its attributable gold production during the second quarter was down by 3% to 1.18 million ounces, but the copper production fell by about 10% to 38 million pounds.

Perhaps the biggest concern is the industrywide trend of higher production costs.

Barrick Gold Corp. (NYSE: ABX) reported this week that its quarterly earnings fell by a sharp 35%. To add insult to injury, the gold giant also warned that its capital spending costs on one of its biggest growth projects would be much higher than forecast.

Newmont Mining Corp. (NYSE: NEM) is down a sharp 5% at $43.65 so far today, challenging a 52-week low as the 52-week range is $43.23 to $72.42. Barrick Gold Corp. (NYSE: ABX) was down big on Thursday and has a 2.2% drop today to $31.99, compared to a 52-week range of $31.00 to $55.95. Goldcorp Inc. (NYSE: GG) is sort of holding up, with a drop of only 0.2% to $36.00.

The ETF picture is a bit different. Market Vectors Gold Miners ETF (NYSEMKT: GDX) is down by only 0.8% at $42.46, but the Market Vectors Junior Gold Miners ETF (NYSEMKT: GDXJ) was up by 0.2% at $19.54 so far today. SPDR Gold Shares (NYSEMKT: GLD) is up 0.2% at $157.08, along with gold after a better-than-expected U.S. second-quarter gross domestic product report this morning.

Another exception is Royal Gold Inc. (NASDAQ: RGLD). which is up 0.35% at $73.63, after it provided an update on its Pascua-Lama Construction Project.

JON C. OGG