Newmont Mining Flat on 4th Quarter Results

GuruFocus.com

- By Alberto Abaterusso

On Thursday Newmont Mining Corp. (NEM)'s closing share price of $35.41 was flat from the prior day despite the miner, driven by strong operations in Ghana and Colorado, beating analysts on fourth-quarter non-GAAP earnings per share and revenue before the opening bell.

Reporting non-GAAP earnings per share of 40 cents, which was a 2.6% upside from the prior-year quarter, Newmont Mining topped expectations by 16 cents. The mining company also surpassed forecasters on revenue by $170 million with a 5.7% increase in the top line to $2.05 billion.


During the final trimester, Ahafo and Cripple Creek and Victor Gold's recoveries and grades improved so much that they not only offset lower grades at the Kalgoorlie mine in Australia but also overshadowed the 3% year-over-year drop in the gold price to $1,233 per ounce.

Regarding full 2018, a 2% year-over-year decline in revenue to $7.3 billion and in the adjusted Ebitda to $2.6 billion produced a 30-basis-points fall in the adjusted Ebitda margin to 35.6%. Further, free cash flow fell sharply to $805 million in 2018 compared to $1.3 billion in 2017.

Essentially, weaker financial results in 2018 resulted from lower production, lower sales volume, higher adjustments in the stock of mineral to process, higher energy prices and higher funds used as capital expenditures for projects in South America and Africa.

Lower grade and volume of mineral to leach at several mines produced a 3% decrease in the attributable production of gold to 5.1 million ounces and a 4% decrease in the attributable production of copper to 49,000 tons. Thus, in 2018 the all-in sustain cost jumped 2% to $909 per ounce of gold sold and increased 12% to $2.02 per ounce of copper sold.

But, sustained by a 0.4% increase in the average realized gold price to $1,260 per ounce, the U.S. miner was able to return to its shareholders approximately $400 million through share repurchases and dividends.

CEO Gary J. Goldberg said that the performance in 2018 provided Newmont Mining with resources to develop several mineral projects, fund explorations and reach an agreement with Goldcorp Inc. (GG) for the creation of the world's largest gold producer.

The acquisition of Goldcorp is expected to materialize sometime in the second quarter of 2019.

The balance sheet is robust and "one of the strongest in the mining sector," the company said. It had $3.4 billion in cash and securities, with net debt of 900 million. The total debt-adjusted Ebitda is 1.65x versus an industry median of 2.23x.

In addition, Newmont Mining Corp. confirmed its expectations on production and costs for full-year 2019, with attributable gold production of 5.2 million ounces and an AISC of $935 per ounce of metal sold.

The share price of $35.4 at close Thursday resulted from an 8% decline for the 52 weeks through Feb. 21. This share price is above the 200-, 100- and 50-day simple moving average lines and falls into a 52-week range of $29.06 to $41.98. The market capitalization is about $18.86 billion.

The 14-day Relative Strength Indicator is 68.38, suggesting the stock is yet to be overbought.

Wall Street has issued an overweight recommendation rating with an average target price of $39.88 per share of Newmont Mining Corp.

Disclosure: I have no positions in any security mentioned.

This article first appeared on GuruFocus.