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How Does Newmont Mining’s Financial Leverage Look?

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Significant debt reduction

Newmont Mining (NEM) 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.

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Financial metrics improving

Newmont’s net debt at the end of the second quarter was ~$1.0 billion, compared with $1.9 billion at the end of 2016. Its net-debt-to-adjusted EBITDA was 0.4x at the end of the second quarter, compared with 0.7x at the end of the second quarter of 2017 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 multiple looks more attractive than its peers (GDX)GDXJ). Based on this parameter, its financial leverage is lower than Barrick Gold (ABX), Yamana Gold (AUY), and Goldcorp (GG). Newmont Mining’s net-debt-to-forward-EBITDA multiple is 0.35x, compared to 1.07x, 2.17x, and 1.58x, respectively, for ABX, AUY, and GG.

Abundant liquidity

Newmont Mining (NEM) had total liquidity of $6.0 billion at the end of the second quarter. 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 Mining’s ability to grow its free cash flow.

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