Significant debt reduction
Newmont Mining (NEM) was among the gold miners—as well as Barrick Gold (ABX) and Kinross Gold (KGC)—whose debt rose at the peak of the cycle due to expensive acquisitions. These companies are now focusing on steadily paying off their debts. Newmont has reduced its net debt by 83% since 2013. To maintain an investment-grade balance sheet and credit rating is the company’s stated priority now.
After its latest debt repayments, the company doesn’t have any debt tranche due until the fourth quarter of 2019.
Financial metrics improving
Newmont’s net debt reduced to 0.8 billion at the end of 2017, compared to $1.9 billion at the end of 2016. Its net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was 0.3x at the end of 4Q17, compared with 0.7x at the end of 1Q17 and 1.3x at the end of 2015. This improvement is due to the improvement in EBITDA as well as the reduction in net debt.
NEM’s net debt-to-EBITDA metric is more attractive compared to peers’ (GDX)(GDXJ). Based on this parameter, its financial leverage is lower than that of Barrick Gold (ABX), Yamana Gold (AUY), and Goldcorp (GG).
Newmont (NEM) had total liquidity of $6.2 billion at the end of 4Q17, compared to $5.9 billion at the end of 3Q117. Its liquidity includes ~$3.3 billion in cash and cash equivalents. It also has one of the best credit ratings in the mining sector.
In the next part of this series, we’ll discuss Newmont’s ability to grow its free cash flows.