Significant debt reduction
Newmont Mining (NEM) saw its debt rise at the peak of the cycle due to expensive acquisitions, which have now been brought under control. Its net debt at the end of the third quarter was ~$1.1 billion compared to $1.9 billion at the end of 2016.
Newmont’s net debt-to-adjusted EBITDA multiple was 0.4x at the end of the third quarter compared to 0.7x at the end of the second quarter of 2017 and 1.3x at the end of 2015. This improvement was the result of an EBITDA improvement and a net debt reduction.
Superior financial profile
NEM’s net debt-to-EBITDA multiple looks more attractive than those of its 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 Mining’s forward net debt-to-EBITDA multiple is 0.40x compared to 1.37x, 2.77x, and 2.36x, respectively, for ABX, AUY, and GG.
Newmont’s liquidity profile also remains attractive. It had total liquidity of $6.0 billion at the end of the third 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.
Free cash flow
Newmont Mining generated $154.0 million in FCF (free cash flow) in the third quarter on the back of productivity improvements and higher grades in Africa and South America. During the third quarter, however, its FCF was 48% lower year-over-year due to lower operating cash flow and higher investment in growth projects.
With its strong balance sheet and continued free cash flow generation, the company continues to invest in executing its growth strategy and returning cash to shareholders.