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Newmont Mining’s Financial Leverage after Its 4Q16 Earnings

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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.

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Financial metrics

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).

Based on this parameter, Newmont Mining’s financial leverage is lower than that of Barrick Gold (ABX), Yamana Gold (AUY), and Goldcorp (GG).

Abundant liquidity

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.

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