Significant debt reduction
In 2016, Newmont Mining (NEM) repaid $1.3 billion in debt, which brings its net debt at the end of 2016 to $1.9 billion compared to $3.5 billion at the end of 2015. NEM has reduced its net debt by two-thirds in the last three years, which has also helped the company improve its financial metrics significantly.
Newmont Mining’s (NEM) net debt-to-adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] came in at 0.8x at the end of 2016 compared to 1.3x at the end of 2015. Newmont Mining’s net debt-to-EBITDA also compares favorably with its peers (GDX) (GDXJ).
Newmont Mining (NEM) ended 2016 with $2.8 billion in cash on hand, and it has one of the best credit ratings in the mining sector. The company noted that it is committed to maintaining an investment-grade credit profile.
In response to a question during the company’s 4Q16 earnings call regarding the use of its huge cash balance, Newmont Mining’s executive vice president and CFO, Nancy Buese, noted, “We have done a lot in this year in terms of retiring our debt, and I think the main focus here is to retain our optionality and have a lot of financial flexibility regardless of what opportunity is in front of us. So, we’ll continue to grow the business, invest in our longer-term opportunities and then also stay alert and aware for M&A, as it may present itself.”
Continue to the next part for a discussion regarding Newmont Mining’s ability to grow its free cash flows.