Company Reports

After no-moat Newmont lowered guidance when it released 2023 results, we anticipated a better 2024 for the company. So far this is the case, with the first quarter in line with our expectations. Adjusted EBITDA of USD 1.7 billion increased 71% from 2023. Higher prices, along with increased sales volumes driven by the acquisition of Newcrest in November 2023, more than offset higher unit costs. Adjusted net profit after taxes of USD 630 million roughly doubled. However, because of the increased share count due to the Newcrest purchase, per-share amounts are a more accurate portrayal of its performance. Adjusted EPS of USD 0.55 rose 38% compared with the first quarter of 2023 and is broadly in line with our 2024 EPS estimate of USD 2.36. We continue to forecast 2024 attributable gold sales of about 6.9 million ounces. Sales volumes are likely to be weighted to the second half of the year as its Peñasquito, Ahafo, and 40%-owned Pueblo Viejo mines increase production after various travails last year. The USD 0.25—about AUD 0.38—per share dividend payable in June is down from the USD 0.40 (AUD 0.62) paid last year but in line with its updated quarterly dividend policy. We forecast 2024 dividends of USD 1 per share, or about AUD 1.54, for a 2.3% forward yield.

Commodity prices diverged in the quarter. Despite solid China steel production, iron ore and metallurgical coal prices are down, while copper rose on supply issues and hopes of faster global growth. However, prices are elevated compared with history and cost-curve support.

Iron ore prices are lower on concerns over China steel demand due to its struggling property market and weak infrastructure spending. However, gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 51. It remains the cheapest miner we cover, trading 27% below fair value.

Newmont is the world’s largest gold miner, with a portfolio reflecting three major deals in recent years. First, it acquired fellow gold producer Goldcorp for a relatively mild premium in 2019. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

Demand growth from China has been the main driver of rising commodity prices in the past two decades. More recently, though, most commodity prices have fallen from highs set with Russia’s invasion of Ukraine, the subsequent sanctions on Russia, and the rerouting of supply chains. Prices, nevertheless, are generally elevated versus the 20-year average, as well as relative to cost support.

Newmont is the world’s largest gold miner, with a portfolio reflecting three major deals in recent years. First, it acquired fellow gold producer Goldcorp for a relatively mild premium in 2019. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

Lower production and dividend guidance, along with increased capital expenditure, were the main takeaways from no-moat Newmont’s 2023 result, which was weaker than we expected. After its recent purchase of Newcrest, we think management has taken the opportunity to reset expectations across the business, including updating mine plans at a number of assets. The company is also targeting the sale of six smaller, higher-cost mines. We think the strategy of owning a portfolio of larger, longer-life, lower-cost mines is reasonable. At around USD 1,440 per ounce in 2023, Newmont’s all-in-sustaining costs remain elevated. Along with rising production from remaining assets across our five-year forecast period, the disposals are likely to help return unit costs to within the second quartile of the industry.

Near-term iron ore prices are higher on strong China steel production. Gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 54. It is the cheapest we cover, trading 30% below fair value.

Newmont is the world’s largest gold miner, with a portfolio reflecting three major deals in recent years. First, it acquired fellow gold producer Goldcorp for a relatively mild premium in 2019. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

Commodity prices diverged in the quarter with strong China steel production driving iron ore and metallurgical coal prices up, while base metals prices dropped on worries of a Western recession. Even so, prices are elevated versus history and cost-curve support.

Newmont is the world’s largest gold miner, with a portfolio reflecting three major deals in recent years. First, it acquired fellow gold producer Goldcorp for a relatively mild premium in 2019. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

We retain our fair value estimate for no-moat Newmont of USD 53 per share after updating our forecasts to incorporate the acquisition of Newcrest and the latter’s financials at end of September 2023. We also extend our coverage to Newmont’s Australian-listed CDIs with an initial fair value estimate of AUD 82 per share. We do not assign an economic moat to the enlarged Newmont and reiterate our Medium Uncertainty Rating for the company.

No-moat Newmont's 2023 third-quarter result was lower than our expectations but still solid. Adjusted EBITDA of USD 930 million increased 10% on the same quarter of 2022. Adjusted net profit after tax was roughly USD 290 million, or USD 0.36 per share, 35% higher than last year, driven by higher gold prices more than offsetting lower sales volumes and higher unit cash costs.

Newmont is the world’s largest gold miner, with a portfolio reflecting two major deals in recent years. First, it acquired fellow gold producer Goldcorp for a relatively mild premium in 2019. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

Strong China steel production is supporting prices for steel inputs despite recession concerns. Otherwise, changes to our commodity price assumptions are mixed, led by higher near-term iron ore prices and lower near-term thermal coal prices. We think thermal coal miner Whitehaven Coal and minerals sands miner Iluka are the cheapest we cover. Both trade at 29% discounts to our AUD 9.50 and AUD 10.50 per share fair value estimates, respectively, with Whitehaven’s down 3% on lower near-term thermal coal prices, partially offset by a weaker Australian dollar. Peer New Hope is also down 3% to AUD 6.10 per share. Iluka’s estimate is unchanged, with a weaker Australian dollar offsetting lower synthetic rutile prices.

Newmont is the world’s largest gold miner, with a portfolio reflecting two major deals in recent years. First, it acquired fellow gold producer Goldcorp for a relatively mild premium in 2019. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

We recommend shareholders of no-moat Newmont and no-moat Newcrest vote in favor of Newmont’s proposed takeover of Newcrest at the companies’ meetings on Oct. 11 and Oct. 13, 2023, respectively. We think a superior offer is unlikely and it is in Newcrest shareholders’ interest to approve the deal, as we think Newmont is paying a fair price to acquire Newcrest. If the deal is approved, which we think is likely, Newcrest shareholders will receive 0.40 Newmont shares for each Newcrest share they own, along with a fully franked dividend of up to USD 1.10 (about AUD 1.72) per share. At current share prices and exchange rates, this totals roughly AUD 24.86 per Newcrest share, excluding up to an additional USD 0.47 (AUD 0.74) in franking credits for Australian taxpayers. Payment of the dividend is subject to the scheme becoming effective.

Commodity prices have generally stabilized after falling on concerns that China’s reopening would underwhelm, along with worries over a recession in the West. Even so, they remain elevated versus history and cost-curve support. The Russian invasion of Ukraine and subsequent sanctions on Russia support energy prices and reinforce the importance of energy security.

Newmont’s 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.

No-moat Newmont’s first-quarter 2023 result was similar to our expectations. Adjusted net income of USD 320 million, or about USD 0.40 per share, was roughly 40% lower than the first quarter of 2022. Adjusted EBITDA fell about 30%, to USD 1 billion. While the company’s average realised gold price of about USD 1,900 per ounce was similar to last year, margins were affected by lower sales volumes and higher unit cash costs. Attributable gold sales declined 8% to about 1.2 million ounces with some sales delayed into the second quarter of 2023. Along with continued inflation, this contributed to higher unit cash costs, up roughly 15% on the same quarter of 2022, to about USD 1,030 per ounce.