Significant debt reduction
As we’ve discussed previously in this series, Newmont Mining (NEM), along with Barrick Gold (ABX) and Kinross Gold (KGC), saw its debt rise at the peak of the cycle due to expensive acquisitions. These companies are now focusing on steadily paying off their debt. Newmont has reduced its net debt by 83% since 2013. The company’s current priority is to maintain an investment-grade balance sheet and credit rating.
Financial metrics improving
Newmont’s net debt at the end of 1Q18 was ~$1.0 billion, compared with $1.9 billion at the end of 2016. Its net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was 0.4x at the end of 1Q18, compared with 0.7x at the end of 1Q17 and 1.3x at the end of 2015. This improvement was due to EBITDA improvement and net debt reduction.
NEM’s net debt-to-EBITDA metric looks more attractive than peers’ (GDX)(GDXJ). Based on this parameter, its financial leverage is lower than Barrick Gold’s (ABX), Yamana Gold’s (AUY), and Goldcorp’s (GG).
Newmont (NEM) had total liquidity of $6.0 billion at the end of 1Q18. Its liquidity includes ~$3.1 billion in cash and cash equivalents. It also has one of the best credit ratings in the mining sector. With this strong balance sheet and continued free cash flow generation, the company continues to invest in executing its growth strategy and returning cash to shareholders. In the next part of this series, we’ll discuss Newmont’s ability to grow its free cash flow.
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