Newmont Mining - All You Need To Know About The Q4 '16 Results

| About: Newmont Mining (NEM)

Summary

Newmont Mining released its fourth quarter results on February 21, 2017. Revenues of $1,789 million for the quarter jumped 23.2% from $1,452 million a year ago.

NEM reduced net debt to $1.9 billion, ending the year with $2.8 billion cash on hand.

I recommend a hold on NEM until $34 is reached, at which point it would make sense to add cautiously.

Courtesy Newmont mining.

Newmont Mining Corp. (NYSE:NEM)

This article follows my preceding article on Newmont Mining published on October 30, 2016 about the company's 3Q'16 results.

To access the 10-k filing 4Q'16. [click here]

To access the slides presentation. [click here]

To access the 4Q'16 conference call. [click here]

Investment thesis:

Newmont Mining is a top-tier gold miner with a mine portfolio spread around the world. This is one of my long-term gold miner investments, because it demonstrates a long-term growth potential, a good dedicated management and a solid balance sheet with a low level of debt. Investing in the gold sector is a very important hedge against dollar weakness and economy trouble in general.

A quick look at the financials (7 consecutive Quarters):

Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015

Q3 2015

(Excluding Batu Hijau -- See below--)

Q2 2015
Basics

Total Revenues

$ billion

1.789 1.791 2.038 2.032

1.816

(1.452)

2.033

(1.560)

1.908

Net Income from operations (continued)

$ million

(391) 169 50 78

(276)

202

(159)

63

EPS

$/share

(0.73) 0.32 0.09 0.15 (0.54)

0.38

(0.30)

0.13

Adjusted Net income

$ million

133 202 231 182 20

126

(70)

131

Adj. EPS

$/share

0.25 0.38 0.44 0.34 0.04

0.23

(0.13)

0.26

Consolidated cash flow from operations/Q

/Y

$ million

633

2,786

- - -

272

2,145

813

(475)

441

Free cash flow ("FCF")/Q

/Year

$ million

289

784

- - -

(138)

277

478

(159)

119

Cash and cash equivalent

$ million

2,756 2,099 2,902 2,461

2,782

(2,363)

2,964

(2,430)

3,308

Dividend

$/share

0.05 0.05 0.025 0.025 0.025 0.025 0.025

Adjusted EBITDA/Q

/Year

Net Debt to Adj. EBITDA

$ million

629

2,365

x0.8

- - -

292

1,896

758

(513)

692

Net Debt

$ million (less cash)

1,859 2,453 2,669 3,393 3,500 3,121 2,832

Debt

$ billion

4.049 4.552 5.571 5.854 6.087 6.085 6.470

Share Outstanding

in Million

531.15

2/14/2017

537 530.6 529.2 - - -
Mining highlights

Gold Production in

M Oz

1.323 1.246 1.285 1.229

1.129

1.340

(1.210)

1.203

Copper Production

in M Lbs

32 32 38 38 39 48 41

CAS Cost applicable to sale Gold

$/oz

681 706 637 638 680

608

(645)

638
CAS Cost applicable to sale Copper$/lb 1.88 2.14 1.21 1.05 1.18

1.15

(1.78)

1.61
Gold price Oz 1,193 1,329 1,260 1,194 1,084

1,104

(1,112)

1,179
Copper price $/Lb 2.49 2.18 1.94 2.02 1.86 1.95 2.41

AISC (by-product)

$ gold/oz

914 925 876 828 999

835

(885)

909

Capital expenditures

$ million

191 269 294 297 460

335

(316)

322

2017 Outlook Attributable gold production:

M. Gary Goldberg CEO said in the conference call:

In 2017, we expect gold production to increase to between 4.9 million ounces and 5.4 million ounces, as the full year production for Merian and Long Canyon more than offset lower production at Twin Creeks and Yanacocha.

In 2018, production will decline slightly to between 4.6 million ounces and 5.1 million ounces due to higher stripping at Boddington and lower grades at Cripple Creek & Victor, Twin Creeks and Akyem. Both Boddington and Twin Creeks will return to higher production in 2020.

Details per mines and locations.

Newmont Mining Attributable Gold Production (sold) 4Q'16 3Q'16 2Q'16 1Q'16 Total
Carlin 261 273 204 206 944
Phoenix 55 57 45 56 213
Twin Peaks 108 96 114 136 454
CC&V 22 114 114 58 308
Long Canyon 108 0 0 0 108
Yanacocha (51.35%) 81 75 81 92 329
Merian (75%) 74 0 0 0 74
Boddington 206 220 192 189 807
Tanami 102 114 142 104 462
Kalgoorlie (50%) 103 95 96 93 387
Ahafo 85 86 90 88 349
Akyem 126 116 115 114 471
Total 1,331 1,246 1,193 1,136 4,906

Notes:

1 - In November 2016, NEM reached commercial production at Long Canyon, two months ahead of schedule and 20% favorable to budget.

2 - NEM commissioned Merian last October on schedule and 20% below budget.

3 - I commented about the sale of NEM 48.5%, interests in PT Newmont Nusa Tenggara, which operates the Batu Hijau copper and gold mine in Indonesia. [Click here for more details]. In the last conference call it was said:

We optimized our portfolio with the sale of our PTNNT stake for $920 million in cash proceeds and we used these proceeds to retire more than $1.3 billion in debt, improving our liquidity and doubling our dividends.

Commentary:

Newmont Mining released its fourth quarter results on February 22, 2017. It was a good quarter and a great 2016 year. M. Gary Goldberg said in the conference call:

We strengthened our portfolio by building two new mines, Merian and Long Canyon, in two perspective new gold districts; advancing profitable expansions at Cripple Creek & Victor, Tanami and Carlin; adding 10 million higher grade ounces to our reserve and resource base; and selling PTNNT for $920 million in gross cash proceeds. These performance and portfolio improvements helped us create value by doubling free cash flow to $784 million, increasing adjusted EBITDA to $2.4 billion and improving cash on hand to $2.8 billion. We also improved share price by 89% and doubled our dividend payout.

The company recorded a non-cash impairment charge of $970 million in the fourth-quarter associated with the closure of its Yanacocha gold mine in Peru.

I am really pleased to be a long term NEM shareholder. The company delivers a solid balance sheet, generates free cash flow on a quarterly basis and has an exciting project pipeline with a constant production at around 5 M Au Oz for the next two years.

The question today, is not really about the quality of the company, but how the stock will react to the gold price in 2017 if the FED raises interest rate two times, which is quite likely? What will happen to the dollar strength?

Thus far, I believe NEM may have established a support at around $34 if gold price keep trading around $1,230 which is not likely. However, with the new US president and the FED uncertainty, it is difficult to forecast how gold will fare in 2017.

On the other hand, If the gold price stays where it is now, and can breach $1,300, then I believe NEM will rapidly increase.

Technically, NEM traded in a falling wedge pattern as you can see in the chart above which is generally bullish. The stock broke out the pattern early February but not decisively. However, the stock found a resistance at $38, and is now slowly re-testing the $34 support, with a second lower support (stronger) is $31.

I recommend a hold on NEM until $34 is reached, at which point it would make sense to add cautiously. Take some cash off the table if NEM revisited $38 on no news.

However, NEM is a long term investment and should not be used as a trading tool albeit it is always important to trade a small part of your total holding.

Important note: Do not forget to follow me on NEM and other gold miners. Thank you for your support.

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.

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Tagged: , Gold, Earnings
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