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.

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