Newmont Mining - What You Need To Know About Q1 2016

| About: Newmont Mining (NEM)
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Summary

Revenues for Q1 were $2.032 billion, up 11.9% quarter over quarter. Solid results overall from a shareholder's point of view.

Since the beginning of the year, the stock is up approximately 45%, moving strongly with the positive momentum in gold price.

It is perhaps time to take some profit out of the game and wait for some retracement.

Picture: Newmont Stock certificate

Newmont Mining Corp. (NYSE:NEM)

This article follows my preceding article on Newmont Mining published on February 20, 2016 about the company's 4Q'15 results.

1Q'16 earnings presentation here.

A quick look at the financials:

Q1 2016 Q4 2015

Q3 2015

Q2 2015 Q1 2015
Basics

Total Revenues

$ billion

2.032 1.816 2.033 1.908 1.972

Net Income from operations

$ million

78 254 202 131 175

EPS

$/share

0.15 (0.48) 0.38 0.18 0.35

Adjusted Net income

$ million

182 20 126 132 229

Adj. EPS

$/share

0.34 0.04 0.23 0.26 0.46

Consolidated cash flow from operations

$ million

524 275 813 441 628

Free cash flow ("FCF")

$ million

227 (185) 478 119 344

Cash and cash on hand

$ million

2,461 2,782 2,964 3,308 2,598

Dividend

$/share

0.025 0.025 0.025 0.025 0.025

Consolidated EBITDA

$ million

803 435 758 692 815

Net Debt

$ billion (less cash)

3,393 3,305 3,121 2,832 3,854

Debt and long-term liabilities

$ billion

5,854 6,087 6,085 6,470 6.581

Share Outstanding

in Million

529.16 - - - -
Mining highlights

Gold Production in M Oz

Including CC&V mine (8/15)

1,229 1.247 1.34 1.236 1.213
Copper Production in K Lbs 38 39 48 41 37

CAS Cost applicable to sale Gold $/oz

Including CC&V mine (8/15)

638 680 608 638 614
CAS Cost applicable to sale Copper $/lb 1.05 1.18 1.15 1.61 1.35
Gold price Oz 1,194 1,084 1,104 1,179 1,203
Copper price $/Lb 2.02 1.86 1.95 2.41 2.34

AISC $ gold/oz

Including CC&V mine (8/15)

828 999 835 909 849

Capital expenditures

$ billion

0.297 0.460 0.335 0.322 0.284

Commentary:

Newmont Mining released its 1Q'16 results on April 20, 2016, and I am pleased with the results. Since the beginning of the year, the stock is up approximately 45%, moving strongly with the positive momentum in gold price.

Revenues for the 1Q'16 were $2.032 billion, up 11.9% quarter over quarter - solid results overall from a shareholder's point of view. The company confirmed the dividend which is always a plus ($0.10 per year).

Mr. Gary J. Goldberg, CEO, said in the conference call:

We expect steady gold production of between 4.8 million ounces and 5.3 million ounces in 2016, rising to between 5.2 million ounces and 5.7 million ounces in 2017, as new projects come online.

Mr. Gary Goldberg should be proud of the company's achievements. NEM delivered on many fronts this quarter.

  • Merian ($100 million below budget), Long Canyon and Tanami mine expansions are promising near-term projects that are advancing on schedule. CC & V mine expansion reached first production at the New Valley leach facility.
  • Divesting non-core asset by selling NEM's equity stake in Regis for $184 million.
  • The company managed to generate $227 million in free cash flow by reducing the AISC to $828/Au Oz, which is one of the best among its peers.
  • The net debt has been reduced by 16% year over year, and it completed a $500-million bond tender which will lower the company's cash interest payment by about $28 million annually.

An excellent ratio to evaluate the company is the Net Debt to EBITDA, which is 1.2x, (with the highest reserve in ounces per share in the gold sector).

The guidance for 2016 is:

  1. Production 4.825 M Oz-5.295 M Oz
  2. AISC $880-$940/Oz
  3. CapEx $1.135 billion-$1.355 billion.

Ms. Mary Lauren Brlas, CFO, said in the conference call:

In the first quarter, we completed a $500-million debt tender, targeting near-term maturities and highest interest rate debt. On this slide, you can see we paid down $274 million of the 5-1/8 notes due in 2019 and $226 million of the 6-1/4 notes due in 2039. This action had an NPV of $133 million and will lower our cash interest by about $28 million per year going forward. We continue to target between $800 million and $1.3 billion of debt reduction through 2018.

Conclusion:

I have been a NEM shareholder for many years, and NEM is one of my favorites in this sector with Agnico Eagle (NYSE:AEM). I like the management attitude, and the long-term visibility that the company is giving.

However, technically I think the stock is now overvalued at around $31+ (RSI >60), and it is prudent to take some profit and wait for a retracement around $28 to evaluate a potential buy, if the gold price is still influenced by a positive momentum that it has enjoyed since early this year.

Disclosure: I am/we are long NEM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.