Newmont’s Profit Misses as Costs Surge
Newmont Mining Corp. (NYSE: NEM – $37.44) reported fourth quarter adjusted net income of $0.25 a share, trailing the average estimates of $0.31, but well above the year earlier profit of $0.03. Higher costs for the period were to blame and the adjusted figure excludes a $970 million impairment charge related to mine closures in Peru. Revenue rose 23% to $1.8 billion, ahead of the Street view of $1.75 billion. Attributable gold production increased by 17% to 1.3 million ounces. The company said it made some significant portfolio improvements this past year:
- Built Merian and Long Canyon mines $200 million below budget
- Delivered expansions and the investment case at Cripple Creek & Victor mines
- Progressed profitable expansions at Tanami and Northwest Exodus plays
- Generated $920 million in gross cash proceeds from the sale of its stake in the Batu Hijau mine in Indonesia
- Added 10 million ounces of higher grade reserves and resources
Newmont also reduced net debt to $1.9 billion, ending the year with $2.8 billion cash on hand and an industry leading financial profile. The Board also doubled its fourth quarter dividend to $0.05 per share, in line with its improved gold price-linked dividend policy.
The company did not provide any specific financial guidance for the new year, but updated its outlook of profitable gold production of between 4.5 and 5.4 billion ounces of gold over the next five years. Analysts are estimating NEM will earn $1.32 this year vs. the 2016 tally of $1.54. A strengthening U.S. dollar often pushes bullion prices lower. Nonetheless, at the stock’s recent price, there looks to be good opportunity for a combination of long-term capital appreciation and portfolio diversification for those willing to accept some risk.