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Newmont plans to deleverage its balance sheet

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Mar. 16 2015, Updated 10:06 p.m. ET

Deleveraging the balance sheet

Newmont Mining (NEM) stated that it wants to deleverage its balance sheet. It’s planning to deleverage its balance sheet by pre-paying some of its long-term debt. We’ll analyze its debt position and pre-payment framework below.

 

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Debt profile

Newmont doesn’t have any significant debt due until 2019. It maintained an investment-grade rating and metrics. Its revolver only has one financial covenant—a maximum net debt-to-capital ratio of 62.5%. The company stood at 24.7% as of December 31. At the end of the year, its net debt was ~$4 billion.

Debt pre-payment 

Newmont continues to analyze potential opportunities to pay its liabilities in advance. Last quarter, it made a $100 million payment on the term loan. The term loan has no pre-payment penalty. It allows Newmont to pre-pay near-term maturities first. So, it’s a preferred way to deleverage the balance sheet.

Potentially, Newmont plans to repay $750 million in 2015. That would include its PTNNT (PT Newmont Nusa Tenggara ) project debt as well as additional payments toward its 2019 term loan.

However, Newmont maintained that any pre-payment of debt would be analyzed in the context of the company’s cash position, operating performance, and business environment. It also clearly stated that even assuming lower gold prices, it has enough financial flexibility to repay more than the $166 million of the scheduled 2015 debt payments.

Barrick Gold (ABX) plans to reduce its net debt by $3 billion in 2015. This will be its top priority. In contrast, Goldcorp (GG) has the strongest balance sheet among the senior gold producers in North America.

These three companies form 26.3% of the VanEck Vectors Gold Miners ETF (GDX). Investors can gain access to the gold industry through gold-backed ETFs like the SPDR Gold Trust (GLD).

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