Newmont’s liquidity condition
As of March 31, 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 credit facility has a single financial covenant for a maximum net-debt-to-book capital of 62.5%. As of March 31, the company was at 22.7%.
Prepaying debt to improve financial flexibility
In 1Q15, Newmont Mining prepaid another $200 million of its existing term loan that matures in 2019. Newmont has now deleveraged its balance sheet by roughly $300 million since last November.
This has also resulted in an improved net-debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio. The company’s net-debt-to-EBITDA ratio stood at 1.18x at the end of 1Q15, compared to 1.24x at the end of 1Q14.
Newmont management maintains that it’s on track to pay down $750 million in debt this year, from existing cash flow and cash on hand. This would be a meaningful step toward a more desirable 1x net-debt-to-EBITDA ratio.
Other gold miners are also reducing debt
Barrick Gold’s (ABX) top priority in 2015 is to reduce its net debt by $3 billion. Meanwhile, Goldcorp (GG) has the strongest balance sheet of all senior gold producers in North America. For more on this subject, read Today’s Gold Environment: Can Gold Miners Cut Costs, Reduce Debt?
In the next part of this series, we’ll find out by how much Newmont has outperformed gold prices and its peers. We’ll also explore the reasons for these results.