DENVER—Newmont Mining Corp., one of the world’s largest gold producers, said Thursday it eliminated all of its forward-sales gold contracts and is working to discontinue its merchant banking division.
The company said it will record a $531 million pre-tax loss as a result of the eliminated hedge position and a $1.7 billion non-cash charge in the second quarter related to the closing of the banking business.
The developments come as Newmont, under new Chief Executive Officer Richard O’Brien, is shifting more of its focus to its core mining operations around the world.
“With the elimination of our gold hedge book, we have renewed our commitment to maximizing gold price leverage for our shareholders,” O’Brien said in a statement.
“In addition, we are focused on delivering improvements in our operating performance and cost structure going forward,” he said.
Analyst Patrick Chidley of Barnard Jacobs Mellet said it appears Newmont will report a “very poor second quarter” because the developments will outweigh operating results.
He said it will be a net positive change in the long run because it clears up the hedges and might attract more investors.
Newmont said it spent $578 million in June to eliminate 1.85 million ounces of gold hedge contracts as of June 30. The price for the contracts was not specified.
Newmont has hired financial and legal advisers to assist with the merchant banking segment’s closure, which will occur over the next year.
Executives are considering alternatives such as a public offering or private sales transaction involving the royalty and equity portfolio.
Newmont made the announcement after the market closed Thursday. Its stock rose 57 cents, or 1.4 percent, to $40.15 in extended trading after closing up 5 cents at $39.58 a share.
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