Prepaying debt and strengthening its balance sheet is Newmont Mining’s (NEM) top priority. It plans to repay $750 million in 2015. That includes its PTNNT (PT Newmont Nusa Tenggara) project debt as well as payments toward its 2019 term loan.
The term loan doesn’t have a prepayment penalty, so it’s a good way for Newmont to improve its balance sheet.
Improving its balance sheet
Newmont has prepaid $75 million of its debt in 2Q15 in addition to $200 million of prepayment in 1Q15. Newmont has now deleveraged its balance sheet by roughly $380 million since last November. During the earnings call, management maintained that it remains on track to pay down further debt during 2015.
Investors should note that for the first half of 2015, Newmont paid only 37% ($275 million out of $750 million) of its planned debt reduction target. In light of the current weak gold price environment, there could be a downside risk to the company’s planned debt reduction target for 2015.
Improving financial flexibility
As you can see in the above graph, as of June 30, Newmont had $6 billion in cash and cash equivalents, marketable securities, and revolver capacity. The company doesn’t have any significant debt due until 2019. It maintains an investment-grade rating. Newmont’s net debt-to-book capital remains at a healthy 17.9% compared to the maximum 62.5% allowed by its revolver covenants.
Newmont also remains confident about maintaining its dividend due to its strong balance sheet, despite the weak gold price environment.