Newmont Earnings: Weak Result but Production and Margins Set To Improve

Newmont’s NCM 2023 second-quarter result was weak. Adjusted EBITDA of USD 910 million fell 21% compared with the second quarter of 2022. Adjusted net profit after tax was about USD 270 million, or USD 0.33 per share, down 27%, driven by lower gold sales volumes and higher unit cash costs, partially offset by higher realised gold prices. Newmont’s average realised gold price was about USD 1,970 per ounce, 7% higher than the roughly USD 1,840 received last year. It sold around 1.2 million ounces of gold, similar to attributable production, but 18% lower than last year. Lower sales volumes were due to production falling across most mines, with a strike, wildfires, stoppages for safety concerns and mine sequencing adding to seasonal headwinds. All-in sustaining costs rose 23% to about USD 1,470 per ounce, driven by lower sales and operating leverage.

We maintain our fair value estimate for no-moat Newmont of USD 54 per share. We also make no change to our fair value estimate for no-moat Newcrest of AUD 33 per share in line with Newmont’s proposal to purchase Newcrest via scheme of arrangement.

We now forecast 2023 attributable gold sales of around 5.6 million ounces, down from about 6 million. This is driven by its Penasquito mine being placed on care and maintenance given a strike, as well as the generally weak first-half production. While we think many of these production headwinds are temporary, we also think it unlikely that the lost production is fully made up in the second half.

Newmont will pay a quarterly dividend of USD 0.40 per share in September, 27% lower than last year, driven by lower earnings. This represents a 3% yield and a 121% payout ratio, but with production likely to improve in the second half and Newmont’s balance sheet remaining sound, we think this is reasonable. Net debt was USD 2.9 billion or about 0.7 times trailing EBITDA at end June 2023.