Commodities & Metals

How Newmont Overcame Middling Results

Newmont Mining Corp. (NYSE: NEM) reported third-quarter 2020 results before markets opened Thursday. The gold miner posted adjusted earnings per share (EPS) of $0.86 on revenue of $3.17 billion. In the same period a year ago, the company reported EPS of $0.36 on revenues of $2.71 billion. The results also compare to consensus estimates for EPS of $0.85 and $3.29 billion in revenues.

Newmont will pay a dividend of $0.40 per share in the third quarter. That’s a 60% increase compared with the second-quarter payment of $0.25. Under the company’s dividend “framework,” Newmont returns to shareholders 40% to 60% of incremental attributable free cash flow when gold prices are above $1,200 an ounce. The base dividend remains at $0.25 per share per quarter. The third-quarter dividend is payable to shareholders of record on December 11.

Net income fell from $2.2 billion in the year-ago quarter to $839 million, largely the result of a $1.9 billion difference in pretax income. In 2019, net income got a boost of $2.4 billion from the formation of Nevada Gold Mines, a joint venture with Barrick, of which Newmont owns 38.5%.

Third-quarter gold production totaled 1.54 million ounces, less than the 1.64 million produced in the third quarter of last year. All-in sustaining costs rose from $987 an ounce to $1,020 per ounce and costs applicable to sales rose from $733 to $756 an ounce.

Newmont’s average realized price per ounce of gold rose by $437 year over year to $1,913. Copper prices rose by $0.62 per pound to $2.99, and silver prices rose by $4.51 per ounce to $21.69.

Cash flow from operations doubled to $1.6 billion as a result of higher gold prices, and free cash flow rose from $365 million a year ago to $1.3 billion.

Nevada Gold Mines produced 337,000 ounces of gold attributable to Newmont with all-in costs of $904 per ounce. Earnings before interest, taxes, depreciation and amortization for the company’s portion of the joint venture were $374 million.

In its outlook statement, Newmont kept its prior production forecast of about 6 million gold ounces and about 1 million gold-equivalent ounces from other products. All-in costs per gold ounce are forecast at $1,015, and costs applicable to sales are forecast at $760 per ounce. Capital spending is expected to be approximately $1.4 billion, of which $904 million already has been spent.

CEO Tom Palmer noted that the third quarter “was the best quarterly financial performance in Newmont’s history.” With an average realized price per ounce of more than $1,900, it’s hard to figure how it wouldn’t be.

Analysts are forecasting fourth-quarter EPS at $1.02 on revenue of $3.6 billion. For the full year, Newmont is expected to post EPS of $2.56 on sales of $11.6 billion.

The narrow beat on EPS and the miss on revenues have dampened the effect of the good news on the dividend. Shares traded up about 1% early Thursday’s, at $59.28 in a 52-week range of $33.00 to $72.22. The consensus price target on the stock is $79.45. At an annualized rate of $1.00 per share, the dividend yield on the stock is 1.71%. The third-quarter yield based on the company’s framework is around 2.25%.

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