What are Newmont’s capital allocation priorities?



Newmont’s capital allocation priorities

Newmont Mining (NEM) reiterated its capital allocation priorities in its fiscal year 2014 results.


It’s capital allocation priorities include:

  • Improving financial flexibility – Newmont’s first priority is to improve its financial flexibility. It had ~$6 billion in cash, marketable securities, and revolver capacity at the end of 2014. It generated $1,451 million in cash from continuing operations and $341 million in free cash flow in 2014.
  • Deleveraging the balance sheet – Many miners made it their top priority to deleverage their balance sheets. Barrick Gold (ABX) stated in its fiscal year 2014 results release that reducing net debt is its top priority in 2015. Newmont repaid $100 million of its existing term loan. Also, it said that it could pre-pay up to $750 million of its debt in 2015—assuming gold prices of $1,200 per ounce. This would include the scheduled repayment of the PTNNT (PT Newmont Nusa Tenggara) project debt facility, other regional and corporate debt, and $300–$400 million of potential term loan prepayments.
  • Enhancing the portfolio – The company generated almost $1.4 billion in asset sales over the last two years. It wants to further optimize its portfolio by selling non-core assets. Goldcorp (GG) is also following this approach to optimize its portfolio.
  • Returning cash to shareholders – Newmont also wants to maintain its gold price-linked dividend policy. It returned $114 million in dividends to its shareholders during 2014.

Barrick Gold, Newmont, and Goldcorp form 8.8%, 7.2%, and 10.3%, respectively, of the VanEck Vectors Gold Miners ETF (GDX). The SPDR Gold Trust (GLD) provides exposure to physical gold spot price.

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