Newmont Corporation Inc

Newmont Corporation Inc (Nasdaq: NEM) is a gold producer which was founded in 1921. It also produces copper, silver, zinc, and lead.

Investment Highlights – HOLD at USD 59.28

• On 15 July 2021, NEM bolstered its portfolio by advancing the Ahafo North Project into the execution phase. It is expected to add 3 million ounces (oz) of gold production over initial 13-year mine life.
• In April 2021, NEM also reduced US$550 million of debt outstanding with available cash, reflecting a disciplined approach to capital allocation. The Company ended the Q2 FY21 with net debt to adjusted EBITDA of 0.2x.
• The Company has a consistent dividend policy and world-class portfolio of long-life assets.
• Newmont has maintained strong profitability margins. Since FY17, its gross margin, operating margin and EBITDA margin have remained above 43.6%, 10.3%, and 33.0%, respectively.
• From a technical standpoint, 14-day RSI (26.03) is in the oversold territory, while the stock price is hovering below the lower standard deviation of the Bollinger Bands.

Key Risks

• The resurgence in Covid-19 cases can increase the Company’s operating costs and impact its operational abilities.
• The volatile gold prices with US dollar strengthening can affect the Company’s financial condition.

Recent News

Dividend Announcement: NEM declared a quarterly dividend of US$0.55 per share to the shareholders in the record at the close of business on 9 September 2021. The dividend is payable on 23 September 2021.

Q2 FY21 Results for six months ended 30 June 2021 (as on 22 July 2021)

 (Source: Company Website)

• During Q2 FY21, NEM produced 1.4 million attributable ounces of gold at an All-in Sustaining Cost of US$1,035 per ounce.
• During the quarter, the Company generated US$993 million of cash from continuing operations, and declared a dividend of US$0.55 per share (in line with Q1 FY21).
• It has also completed US$149 million of share repurchases from the US$1 billion buyback program.
• It has also increased interest in the prospective Golden Triangle and completed the acquisition of GT Gold in May 2021.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Newmont Corporation has been capitalizing on its integrated operating model and strength of its assets and delivered a solid performance in Q2 FY21 with US$578 million in free cash flow and US$1.6 billion in adjusted EBITDA. Its disciplined capital approach is reflected in its dividends and ability to reinvest in profitable projects. Moreover, it is encouraged by the higher average realized prices and higher sales volume. The stock made a 52-week high and low of USD 75.31 and USD 54.18, respectively.

The production and cost outlook can be seen in the image below:

Based on the improved net income, higher free cash flows, reduced leverage, higher average realized gold price, supported by the valuation conducted above, we have given a "HOLD" stance on Newmont Corporation Inc at the current market price of USD 59.28 (as of 22 July 2021 at around 10:00 AM ET), while we look to fresh buying when short-term uncertainty fades away.  

*All forecasted figures and Industry Information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.