Fast out of the blocks

Newmont Corporation 14 May 2021 Update
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Newmont Corporation

Fast out of the blocks

Q121 results review

Metals & mining

20 May 2021

Price

US$67.86

Market cap

US$54,308m

Net debt (US$m) end-March 2021

1,196

Shares in issue

800.0m

Free float

99.7%

Code

NEM, NGT

Primary exchange

NYSE (NEM)

Secondary exchange

TSX (NGT)

Share price performance

%

1m

3m

12m

Abs

4.4

9.0

2.6

Rel (local)

(0.9)

(2.3)

(29.5)

52-week high/low

US$70.4

US$54.4

Business description

Founded in 1916, Newmont Corporation is the world’s leading gold company with a world-class portfolio of assets in North and South America, Australia and Africa. It is the only gold producer in the S&P 500 Index, and is widely recognised for its ESG practices and as a leader in value creation, safety and mine execution.

Next events

Ahafo North final investment decision

July 2021

Yanacocha Sulphides decision

H221

Q221 results

July 2021

Q321 results

October/November 2021

Analyst

Charles Gibson

+44 (0)20 3077 5724

Newmont Corporation is a research client of Edison Investment Research Limited

Notwithstanding continued low-level coronavirus induced disruptions, Newmont’s financial results were materially better than Edison’s forecasts for Q121 largely as a consequence of an effective tax rate that was substantially lower than both our forecast and also Newmont’s guidance for the full year. Significantly, the company maintained its quarterly dividend, indicating management’s confidence in both its improving production profile as well as the gold price. This note updates our forecasts for FY21 in the light of Q1 results, as well as prevailing metals prices and assumptions regarding the treatment of tax.

Year end

Revenue (US$m)

PBT
(US$m)

EPS*
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

12/19

9,740

3,693

1.32

**1.44

51.4

2.1

12/20

11,497

3,143

2.66

1.45

25.5

2.1

12/21e

12,160

3,098

2.71

2.20

25.0

3.2

12/22e

12,374

3,437

2.66

2.20

25.5

3.2

Note: *EPS are normalised, excluding amortisation of acquired intangibles and exceptional items. **Includes special dividend of US$0.88/share.

47:53 H1:H2 production ratio and more beyond

At the individual mine level, Penasquito, Merian, Yanacocha and Ahafo outperformed our expectations in Q1, while Tanami and Akyem performed broadly in line. As noted at the time of Newmont’s Q420/FY20 results, both (higher) production and (lower) costs will be weighted towards H221 (approximately in the ratio 47:53) and this effect is expected to be most pronounced in the first and last quarters of the year. In part, this profile will reflect rising grade profiles at Boddington, Ahafo, Merian, Musselwhite, Porcupine and Cripple Creek & Victor Mine (CC&V). However, it will also reflect productivity improvements from the autonomous haulage system ramp-up at Boddington, as well as volume-driven productivity improvements at Ahafo’s Subika underground mine. Additional organic growth, in the form of Ahafo North and Yanacocha Sulphides, stands poised, ready to be sanctioned later this financial year and, beyond that, further laybacks at CC&V and Porcupine. Further into the future, Newmont has exposure to major gold-copper porphyry projects such as Norte Abierto, Galore Creek and Nueva Union (together c 42.59Moz Au plus 31.5bn lbs Cu).

Valuation: US$72.92/share

Despite increasing our basic adjusted EPS forecast for FY21 by 8.7%, we have revised our FY21 valuation of Newmont downwards by 4.5% to US$72.92/share (cf US$76.34/share previously). This valuation is based on a blended average of 29 valuation measures over five years using three different methodologies and the decline largely reflects the de-rating of the senior gold mining sector as a whole since our initiation report was published in early February (see Exhibit 6). In contrast, however, our more distant and absolute valuations have actually risen (see Exhibit 7). This puts Newmont on a premium rating relative to its peers, but may be justified by the company’s size, track record and the fact that almost all of its operations are in top-tier jurisdictions. In the meantime, however, it remains cheap relative to its own historical valuation measures, which, on average, continue to imply a share price close to US$100/share.

Q121 results compared to expectations

Notwithstanding continuing low-level disruptions occasioned by the coronavirus pandemic, Newmont’s Q121 financial results were materially better than Edison’s expectations, albeit in the lower half of a consensus that appeared to be underappreciating the effect of seasonality in FY21.

A summary of the operational highlights of the quarter relative to Edison’s expectations is provided in Exhibit 1. In general, while production was slightly lower than Edison’s expectations, this was balanced by costs that were also lower than expected:

Exhibit 1: Newmont Q121 operational results, actual vs forecast

Region

Production

Costs applicable to sales

Forecast

(koz)

Actual

(koz)

Actual/forecast

(%)

Forecast

(US$/oz)

Actual

(US$/oz)

Actual/forecast

(%)

North America

430

413

-4.0

734

736

+0.3

South America

183

174

-4.9

851

791

-7.1

Australia

278

269

-3.2

724

750

+3.6

Africa

188

205

+9.0

764

758

-0.8

Nevada

347

303

-12.7

765

745

-2.6

Sub-total

1,427

1,364

-4.4

763

752

-1.4

Pueblo Viejo (40%)

81

91

+12.3

Total (attributable) gold

1,508

1,455

-3.5

Source: Newmont Corporation, Edison Investment Research

Operations in South America, in particular, continued to be affected by ongoing disruptions caused by the coronavirus, as did Musselwhite in North America. Ground conditions at Porcupine and rainfall at Tanami also added to the operational headwinds faced by the group during the quarter. However, this was, at least in part, counterbalanced by relative outperformance at Newmont’s African operations, which was attributed to continuing progress under the company’s ‘full potential’ initiative. At the level of the individual mines, Penasquito, Merian, Yanacocha and Ahafo generally outperformed our expectations, with Tanami and Akyem performing approximately in line and the remainder slightly underperforming (albeit with mitigating circumstances in the cases of Cerro Negro and Boddington in the form of lower than expected costs).

As anticipated at the time of our last note on the company (Q121 results preview, published on 19 April 2021), Q121 financial results (when the gold price averaged US$1,796/oz) fell between those of Q220 (when the gold price averaged US$1,713/oz) and Q320 (when it averaged US$1,911/oz) – albeit they more closely approximated the latter than the former. In calculating its basic adjusted net income per share, readers should note that, in this case, Newmont did not adjust for COVID-19 related costs (which was typically its practice in FY20). Had it done so, Newmont estimates that it would have added 2c to earnings, taking basic adjusted net EPS from US$0.74/share to US$0.76/share and to within a cent of the prior consensus of US$0.77/share (within a range of US$0.55–1.05/share, source: Refinitiv, 28 April 2021). Otherwise, pre-tax profits were within 1.8% of Edison’s prior forecast for the quarter, with the major variances being the effective tax rate (which at 31.6% was materially lower than our forecast and also Newmont’s guidance for the full year of 34–38%) and adjustments relating mostly to a change in the fair value of investments. A full analysis of Newmont’s Q121 financial performance relative to both Edison’s prior forecasts and Q420 results is provided in the exhibit below:

Exhibit 2: Newmont quarterly income statement, Q120–Q421 cf Edison forecast

US$m (unless otherwise indicated)

Q120

Q220

Q320

Q420

FY20

Q121e

Q121

*Change

(%)

**Variation

(%)

**Variation

(units)

Sales

2,581

2,365

3,170

3,381

11,497

2,958

2,872

-15.1

-2.9

-86

Costs and expenses

– Costs applicable to sales

1,332

1,058

1,269

1,355

5,014

1,314

1,247

-8.0

-5.1

-67

– Depreciation and amortisation

565

528

592

615

2,300

594

553

-10.1

-6.9

-41

– Reclamation and remediation

38

40

38

250

366

54

46

-81.6

-14.8

-8

– Exploration

44

26

48

69

187

63

35

-49.3

-44.4

-28

– Advanced projects, research and development

27

26

39

30

122

35

31

3.3

-11.4

-4

– General and administrative

65

72

68

64

269

65

65

1.6

0.0

0

– Impairment of long-lived assets

0

5

24

20

49

0

0

-100.0

N/A

0

– Care and maintenance

20

125

26

7

178

0

0

-100.0

N/A

0

– Other expense, net

33

54

68

51

206

69

39

-23.5

-43.5

-30

Total

2,124

1,934

2,172

2,461

8,691

2,193

2,016

-18.1

-8.1

-177

Other income/(expenses)

– Gain on formation of Nevada Gold Mines

0

0

0

0

0

0

0

N/A

N/A

0

– Gain on asset and investment sales, net

593

(1)

1

84

677

0

43

-48.8

N/A

43

– Other income, net

(189)

198

(44)

3

(32)

42

(82)

-2,833.3

-295.2

-124

– Interest expense, net of capitalised interest

(82)

(78)

(75)

(73)

(308)

(78)

(74)

1.4

-5.1

4

322

119

(118)

14

337

(36)

(113)

-907.1

213.9

-77

Income/(loss) before income and mining tax

779

550

880

934

3,143

730

743

-20.4

1.8

13

Income and mining tax benefit/(expense)

23

(164)

(305)

(258)

(704)

(298)

(235)

-8.9

-21.1

63

Effective tax rate (%)

(3.0)

29.8

34.7

27.6

23.4

40.9

31.6

14.5

-22.7

-9.3

Profit after tax

802

386

575

676

2,439

431

508

-24.9

17.9

77

Equity income/(loss) of affiliates

37

29

53

70

189

33

50

-28.6

51.5

17

Net income/(loss) from continuing operations

839

415

628

746

2,628

465

558

-25.2

20.0

93

Net income/(loss) from discontinued operations

(15)

(68)

228

18

163

0

21

16.7

N/A

21

Net income/(loss)

824

347

856

764

2,791

465

579

-24.2

24.5

114

Minority interest

2

3

17

(60)

(38)

18

20

-133.3

11.1

2

Minority interest (%)

0.2

0.9

2.0

(7.9)

(1.4)

3.9

3.5

-144.3

-10.3

-0.4

Net income/(loss) attributable to stockholders

822

344

839

824

2,829

447

559

-32.2

25.1

112

Adjustments to net income

(496)

(83)

(142)

32

(689)

0

35

9.4

N/A

35

Adjusted net income

326

261

697

856

2,140

447

594

-30.6

32.9

147

Net income/(loss) per common share (US$)

Basic

– Continuing operations

1.037

0.513

0.761

1.005

3.317

0.557

0.672

-33.7

20.3

0.113

– Discontinued operations

(0.019)

(0.085)

0.284

0.022

0.203

0.000

0.026

50.0

N/A

0.030

– Total

1.019

0.428

1.045

1.027

3.520

0.557

0.698

-32.0

25.7

0.143

Diluted

– Continuing operations

1.035

0.512

0.758

1.002

3.309

0.554

0.671

-33.0

20.9

0.116

– Discontinued operations

(0.019)

(0.084)

0.283

0.022

0.202

0.000

0.026

50.0

N/A

0.030

– Total

1.016

0.427

1.041

1.025

3.511

0.554

0.697

-31.4

26.4

0.146

Basic adjusted net income per share (US$)

0.404

0.325

0.868

1.067

2.663

0.557

0.742

-30.8

32.9

0.183

Diluted adjusted net income per share (US$)

0.403

0.324

0.865

1.065

2.656

0.554

0.741

-30.2

33.6

0.186

DPS (US$/share)

0.250

0.250

0.400

0.550

1.450

0.550

0.550

0.0

0.0

0.000

Source: Newmont Corporation, Edison Investment Research. Note: *Q121 cf Q420; **Q121 cf Q121e.

As noted at the time of Newmont’s Q420/FY20 results, both (higher) production and (lower) costs are expected to be weighted towards H221 (approximately in the ratio 47:53) and this effect will be most pronounced in the first and last quarters of the year. In part, this profile will reflect rising grade profiles at Boddington and Ahafo, in particular (NB the H1:H2 production ratio at Boddington will be enhanced by productivity improvements from the autonomous haulage system ramp-up, while that at Ahafo will also be volume-driven by productivity improvements throughout the year from the change in mining method at Subika underground to sub-level shrinkage). However, Merian, Musselwhite, Porcupine and CC&V are all expected to exhibit rising production profiles as well as the year progresses. At the same time, costs will be weighted in the other direction; that is to say, H221 costs are expected to be lower than H121 costs. In part, this reflects lower expected production in H121. However, it also reflects higher sustaining capital costs in H121, in particular, relating to the autonomous haulage system being implemented at Boddington.

In the light of Q121 results, the currently prevailing gold price (US$1,793/oz cf US$1,776/oz previously) and slight adjustments to our ongoing treatment of tax (overall, resulting in a reduction in the effective tax rate), our updated financial forecasts for Newmont for the remainder of FY21, by quarter, are now as follows:

Exhibit 3: Newmont quarterly income statement, Q120–Q421e cf Edison prior forecast

US$m (unless otherwise indicated)

Q120

Q220

Q320

Q420

FY20

Q121

Q221e

Q321e

Q421e

FY21e

(current)

FY21e

(prior)

Sales

2,581

2,365

3,170

3,381

11,497

2,872

2,954

3,163

3,171

12,160

12,256

Costs and expenses

– Costs applicable to sales

1,332

1,058

1,269

1,355

5,014

1,247

1,290

1,310

1,305

5,152

5,357

– Depreciation and amortisation

565

528

592

615

2,300

553

598

630

639

2,420

2,424

– Reclamation and remediation

38

40

38

250

366

46

42

42

42

173

215

– Exploration

44

26

48

69

187

35

65

65

65

230

250

– Advanced projects, research and development

27

26

39

30

122

31

37

37

37

141

140

– General and administrative

65

72

68

64

269

65

65

65

65

260

260

– Impairment of long-lived assets

0

5

24

20

49

0

0

0

0

0

0

– Care and maintenance

20

125

26

7

178

0

0

0

0

0

0

– Other expense, net

33

54

68

51

206

39

69

69

69

246

276

Total

2,124

1,934

2,172

2,461

8,691

2,016

2,165

2,218

2,222

8,622

8,923

Other income/(expenses)

– Gain on formation of Nevada Gold Mines

0

0

0

0

0

0

0

– Gain on asset and investment sales, net

593

(1)

1

84

677

43

43

– Other income, net

(189)

198

(44)

3

(32)

(82)

(42)

(42)

(42)

(208)

168

– Interest expense, net of capitalised interest

(82)

(78)

(75)

(73)

(308)

(74)

(79)

(70)

(52)

(275)

(275)

322

119

(118)

14

337

(113)

(121)

(112)

(94)

(440)

(107)

Income/(loss) before income and mining tax

779

550

880

934

3,143

743

668

832

855

3,098

3,226

Income and mining tax benefit/(expense)

23

(164)

(305)

(258)

(704)

(235)

(240)

(300)

(308)

(1,083)

(1,294)

Effective tax rate (%)

(3.0)

29.8

34.7

27.6

23.4

31.6

36.0

36.0

36.0

35.0

40.1

Profit after tax

802

386

575

676

2,439

508

427

533

547

2,015

1,931

Equity income/(loss) of affiliates

37

29

53

70

189

50

40

40

40

170

130

Net income/(loss) from continuing operations

839

415

628

746

2,628

558

467

573

587

2,185

2,061

Net income/(loss) from discontinued operations

(15)

(68)

228

18

163

21

21

0

Net income/(loss)

824

347

856

764

2,791

579

467

573

587

2,206

2,061

Minority interest

2

3

17

(60)

(38)

20

17

17

17

71

65

Do (%)

0.2

0.9

2.0

(7.9)

(1.4)

3.5

3.6

3.0

2.9

3.2

3.2

Net income/(loss) attributable to stockholders

822

344

839

824

2,829

559

450

556

570

2,135

1,996

Adjustments to net income

(496)

(83)

(142)

32

(689)

35

0

0

0

35

0

Adjusted net income

326

261

697

856

2,140

594

450

556

570

2,170

1,996

Net income/(loss) per common share (US$)

Basic

– Continuing operations

1.037

0.513

0.761

1.005

3.317

0.672

0.563

0.695

0.713

2.641

2.493

– Discontinued operations

(0.019)

(0.085)

0.284

0.022

0.203

0.026

0.000

0.000

0.000

0.026

0.000

– Total

1.019

0.428

1.045

1.027

3.520

0.698

0.563

0.695

0.713

2.668

2.493

Diluted

– Continuing operations

1.035

0.512

0.758

1.002

3.309

0.671

0.559

0.690

0.708

2.623

2.475

– Discontinued operations

(0.019)

(0.084)

0.283

0.022

0.202

0.026

0.000

0.000

0.000

0.026

0.000

– Total

1.016

0.427

1.041

1.025

3.511

0.697

0.559

0.690

0.708

2.649

2.475

Basic adjusted net income per share (US$)

0.404

0.325

0.868

1.067

2.663

0.742

0.563

0.695

0.713

2.711

2.493

Diluted adjusted net income per share (US$)

0.403

0.324

0.865

1.065

2.656

0.741

0.559

0.690

0.708

2.692

2.475

DPS (US$/share)

0.250

0.250

0.400

0.550

1.450

0.550

0.550

0.550

0.550

2.200

2.200

Source: Newmont Corporation, Edison Investment Research

Note that, all other things being equal, the more the gold price rises, the more Newmont’s effective tax rate falls as lower tax operations contribute proportionately more to pre-tax profits. After our revisions for the remainder of the year, our basic adjusted EPS forecast of US$2.711/share for FY21 compares to the market consensus, as follows:

Exhibit 4: FY21 Basic adjusted EPS forecast, Edison cf consensus (US$/share)

Q121

Q221e

Q321e

Q421e

Sum Q1–Q421e

FY21e

Edison forecast

0.742

0.563

0.695

0.713

2.713

2.711

Consensus forecast

0.74

0.79

0.93

0.99

3.45

3.53

High

0.74

1.08

1.32

1.56

4.70

4.96

Low

0.74

0.66

0.74

0.70

2.84

2.84

Source: Edison Investment Research, Refinitiv (13 May 2021)

Dividend

Newmont’s dividend for Q121 was maintained at US$0.55/share. Readers are reminded that, at the time of its Q320 results in October 2020, Newmont unveiled a new dividend framework whereby it formally rebased its dividend to a ‘base’ pay-out of US$1.00/share (or US$0.25/share per quarter) at a gold price of US$1,200/oz, but also stated explicitly that it would return 40–60% of incremental attributable free cash flow that it generated above a gold price of US$1,200/oz to shareholders. Under the new framework, Newmont will augment the ‘base’ pay-out in increments of US$0.60–0.90/share per year (or US$0.15–0.225/share per quarter), evaluated in increments of US$300/oz for gold prices above US$1,200/oz, with the goal of targeting 40–60% of incremental free cash flow above a gold price of US$1,200/oz returned to shareholders. Thus a (sustainable) gold price at US$1,800/oz should (on this basis) result in a quarterly dividend of US$0.55/share, whereas a gold price below that level could result in one of US$0.40/share. In this context however, it is worth noting that Newmont affords itself a degree of latitude in the level of the ultimate pay-out in that, should it decide to pay out nearer 60% of incremental attributable free cash flow to shareholders that it generates above a US$1,200/oz gold price, rather than 40%, then there is scope for the quarterly dividend to remain at the higher level, notwithstanding the gold price dipping below the US$1,800/oz level. In consequence, we have left our dividend forecasts for both Q221–Q421 and FY21 unchanged on the basis that we believe that the gold price temporarily dipping below US$1,800/oz is unlikely to result in any readjustment in the quarterly distribution.

Valuation

Edison’s approach to the valuation of Newmont has remained unchanged since our initiation note on the company (see The sustainable leader, published on 9 February 2021) and readers are directed to this note for a fuller explanation of the methodologies involved. The following is an update of our valuation in light of the Q121 results, changes to our treatment of Newmont’s tax charge and short-term revisions to our commodity price forecasts.

Absolute valuation

Newmont is a multi-asset company that has shown a willingness and desire to trade assets in the past in order to maintain production, reduce costs and maximise shareholder returns. As a result, rather than our customary method of discounting maximum potential dividends over the life of operations back to FY21, in the case of Newmont, we have opted to discount forecast dividends back over six years (previously five) from the start of FY21 and then to apply an ex-growth terminal multiple to forecast cash flows in that year (ie FY26) at the appropriate discount rate. In the normal course of events, we would exclude exploration expenditure from such a calculation on the basis that it is an investment. In the case of Newmont, however, we have included it in our estimate of future cash flows on the grounds that it may be a critical component of ongoing business performance in its ability to continually expand and extend the lives of the company’s assets via exploration.

Our estimate of Newmont’s pre-financing cash flow in FY26 is US$5.48 per share (cf US$1.22 per share in FY18). On this basis, our terminal valuation of the company at end-FY26 would be US$86.95/share (based on an assumption of zero growth in cash flows beyond FY26 and an unchanged 6.3% real discount rate). In conjunction with forecast intervening dividends, this terminal value then discounts to a net present value of US$78.08/share at the start of FY21 (again, based on the assumption of zero growth in cash flows beyond FY26 and a 6.3% discount rate).

Exhibit 5: Newmont forecast valuation and cash flow per share, FY21–26e (US$/share)

Source: Edison Investment Research

This (absolute) analysis inherently excludes any value to Newmont from its other development assets, such as Coffee, Galore Creek, Conga, Norte Abierto and Nueva Union, which together represent combined reserves and resources of 53.93Moz attributable to Newmont. It is also conservative in its assumption of zero growth in cash flows after FY26.

Relative Newmont valuation

Newmont’s valuation on a series of commonly used measures, relative to its peer group of the 10 largest publicly quoted senior gold producers, is as follows.

Exhibit 6: Newmont valuation relative to peers

P/E

P/cash flow (x)

EV/EBITDA (x)

Yield (%)

Company

Ticker

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Newmont (Edison)

NEM

25.0

25.5

26.4

12.3

11.5

11.3

9.5

9.2

10.1

3.2

3.2

3.2

Newmont (consensus)

NEM

19.2

17.7

19.6

10.4

9.7

10.6

8.0

7.7

8.3

3.2

3.3

3.2

Barrick

ABX

19.5

18.7

19.3

8.1

8.0

7.9

7.4

7.0

7.0

2.6

1.5

1.8

AngloGold

ANGJ

8.4

7.8

8.4

5.7

5.7

5.2

4.3

4.2

4.4

2.0

1.9

2.0

Polyus

PLZL MM

12.2

11.8

12.8

9.3

8.5

7.2

8.0

7.7

7.3

3.9

4.5

4.6

Gold Fields

GFI

9.2

9.1

8.4

5.8

5.5

4.9

4.4

4.4

4.1

3.3

3.5

3.6

Kinross

K

11.5

7.7

7.8

5.5

4.2

4.2

5.0

3.9

3.6

1.7

1.7

1.6

Agnico-Eagle

AEM

24.1

20.8

21.4

10.3

9.4

9.7

9.0

7.8

8.2

2.1

2.1

2.1

Newcrest

NCM AU

15.7

16.0

15.8

9.1

9.4

9.4

7.7

7.7

7.9

1.5

1.5

1.6

Harmony

HARJ

5.5

5.4

5.9

4.3

3.9

4.0

3.0

2.6

2.8

2.3

3.0

3.1

Endeavour (consensus)

EDV

9.3

7.7

11.0

4.4

4.0

5.1

3.9

3.7

4.7

2.2

6.1

7.9

Average (excl NEM)

12.8

11.7

12.3

7.0

6.5

6.4

5.8

5.4

5.6

2.4

2.9

3.1

Source: Edison Investment Research, Refinitiv. Note: Consensus and peers priced on 13 May 2021.

In comparing this table with the equivalent table in our initiation note on Newmont (see Exhibit 23 on page 25 of The sustainable leader, published on 9 February 2021), it can be seen that there has been something of de-rating of the sector since that date – especially in respect of companies’ dividend yields and Yr1 PE multiples. In addition, it can also be seen that, while Newmont continues to command a premium rating relative to its peer group on the first three valuation measures, it remains materially cheap with respect to its dividend yield. Based on consensus forecasts, we estimate that Newmont’s share price would have to rise by an average of 41.5% for its dividend yield to match those of its peer group. Based on Edison forecasts, we estimate that its share price would have to rise 41.2%.

As before, one further observation concerning the comparability of the above measures is merited. Given its policy of proportionately consolidating its interest in Nevada Gold Mines and the fact that it owns 100% interests in the majority of its remaining mining operations (with the exceptions of Yanacocha and Merian), estimates of cash flow in particular are also close to estimates of cash flow attributable to shareholders (Newmont estimates that 99% of free cash flow was attributable to the company in Q121). This is not always the case in the mining industry, where fully consolidated earnings and cash flow from assets not owned 100% may not so easily approximate cash flow attributable to shareholders, making direct comparison using these measures either difficult or, potentially, misleading.

Blended average valuation

A summary of our updated valuation of Newmont over 29 measures of value across three different methodologies over the course of the next five years is as follows:

Exhibit 7: Newmont valuation summary (US$/share in years shown)

Basis of valuation

FY21e

FY22e

FY23e

FY24e

FY25e

Absolute

6.3% real cost of equity and ex-growth terminal multiple

78.08

80.80

83.69

86.76

90.63

Historical

Share price implied by Edison EPS forecast (US$/share)

66.02

64.90

62.66

63.44

Historical

Share price implied by Edison DPS forecast (US$/share)

123.32

123.32

123.32

89.69

Historical

Share price implied by consensus EPS forecast (US$/share)

86.03

93.34

101.87

93.59

Historical

Share price implied by consensus DPS forecast (US$/share)

122.76

123.88

122.20

140.14

Peer group

Share price implied from Edison EBITDA forecast (US$/share)

42.90

41.01

Peer group

Share price implied from consensus EBITDA forecast (US$/share)

51.26

49.58

Peer group

Share price implied from Edison cash flow per share (US$/share)

38.45

38.21

Peer group

Share price implied from consensus cash flow per share (US$/share)

47.43

44.70

Average (US$/share)

72.92

73.30

98.75

94.72

90.63

Source: Edison Investment Research

Exhibit 8: Financial summary

Accounts: US GAAP, Yr end: December, USD: Millions

 

 

2018A

2019A

2020A

2021E

2022E

2023E

2024E

2025E

Income statement

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

7,253

9,740

11,497

12,160

12,374

11,840

12,393

11,983

Cost of sales

 

 

(4,093)

(5,195)

(5,014)

(5,152)

(5,052)

(5,040)

(5,562)

(5,562)

Gross profit

 

 

3,160

4,545

6,483

7,008

7,322

6,800

6,831

6,421

SG&A (expenses)

 

 

(244)

(313)

(269)

(260)

(260)

(260)

(260)

(260)

R&D costs

 

 

(350)

(415)

(309)

(371)

(406)

(406)

0

0

Other income/(expense)

 

 

(406)

(253)

(831)

(627)

(614)

(613)

(84)

(83)

Exceptionals and adjustments

Exceptionals

 

(424)

2,220

214

(87)

0

0

0

0

Depreciation and amortisation

 

 

(1,215)

(1,960)

(2,300)

(2,420)

(2,557)

(2,656)

(3,414)

(3,623)

Reported EBIT

 

 

945

3,994

3,451

3,373

3,486

2,865

3,073

2,455

Finance income/(expense)

 

 

(207)

(301)

(308)

(275)

(49)

261

5

19

Reported PBT

 

 

738

3,693

3,143

3,098

3,437

3,126

3,078

2,473

Income tax expense (includes exceptionals)

 

 

(419)

(737)

(515)

(913)

(1,222)

(1,023)

(933)

(794)

Reported net income

 

 

380

2,884

2,791

2,206

2,214

2,103

2,145

1,679

Basic average number of shares, m

 

 

533

735

804

801

800

800

800

800

Basic EPS (US$/share)

 

 

0.64

3.82

3.52

2.67

2.66

2.57

2.60

2.01

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

2,584

3,734

5,537

5,880

6,042

5,521

6,487

6,078

Adjusted EBIT

 

 

1,369

1,774

3,237

3,460

3,486

2,865

3,073

2,455

Adjusted PBT

 

 

1,162

1,473

2,929

3,185

3,437

3,126

3,078

2,473

Adjusted EPS (US$/share)

 

 

1.35

1.32

2.66

2.71

2.66

2.57

2.60

2.01

Adjusted diluted EPS (US$/share)

 

 

1.34

1.32

2.66

2.69

2.64

2.55

2.58

1.99

 

 

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

12,258

25,276

24,281

23,676

23,520

23,164

21,250

18,827

Goodwill

 

 

58

2,674

2,771

2,771

2,771

2,771

2,771

2,771

Intangible assets

 

 

0

0

0

0

0

0

0

0

Other non-current assets

 

 

3,122

5,752

5,812

5,855

5,855

5,855

5,855

5,855

Total non-current assets

 

 

15,438

33,702

32,864

32,302

32,146

31,790

29,876

27,453

Cash and equivalents

 

 

3,397

2,243

5,540

5,750

5,819

6,184

8,956

12,152

Inventories

 

 

630

1,014

963

1,136

1,156

1,107

1,158

1,120

Trade and other receivables

 

 

254

373

449

366

373

357

373

361

Other current assets

 

 

996

2,642

1,553

1,574

1,574

1,574

1,574

1,574

Total current assets

 

 

5,277

6,272

8,505

8,827

8,923

9,221

12,061

15,207

Non-current loans and borrowings

 

 

3,608

6,734

6,045

5,495

5,003

4,589

4,589

4,589

Other non-current liabilities

 

 

3,808

8,438

8,076

8,056

8,033

8,011

7,903

7,795

Total non-current liabilities

 

 

7,416

15,172

14,121

13,551

13,036

12,600

12,492

12,384

Trade and other payables

 

 

303

539

493

464

455

454

501

501

Current loans and borrowings

 

 

653

100

657

657

657

657

657

657

Other current liabilities

 

 

831

1,746

2,219

2,219

2,219

2,219

2,219

2,219

Total current liabilities

 

 

1,787

2,385

3,369

3,340

3,331

3,330

3,377

3,377

Equity attributable to company

 

 

10,502

21,420

23,008

23,281

23,651

23,948

24,751

25,076

Non-controlling interest

 

 

1,010

997

871

957

1,049

1,133

1,317

1,822

 

 

 

 

 

 

 

 

 

 

 

Cashflow statement

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

380

2,884

2,791

2,206

2,214

2,103

2,145

1,679

Taxation expenses

 

 

386

832

704

1,083

1,372

1,194

1,101

909

Net finance expenses

 

 

207

301

308

275

49

(261)

(5)

(19)

Depreciation and amortisation

 

 

1,215

1,960

2,300

2,420

2,557

2,656

3,414

3,623

Share based payments

 

 

76

97

72

0

0

0

0

0

Other adjustments

 

 

749

(2,131)

(654)

109

170

169

84

83

Movements in working capital

 

 

(743)

(309)

295

(312)

(228)

(127)

(213)

(141)

Interest paid / received

 

 

(207)

(301)

(308)

(275)

(49)

261

5

19

Income taxes paid

 

 

(236)

(498)

(926)

(1,083)

(1,372)

(1,194)

(1,101)

(909)

Cash from operations (CFO)

 

 

1,827

2,866

4,882

4,423

4,713

4,800

5,430

5,245

Capex

 

 

(1,032)

(1,463)

(1,302)

(1,816)

(2,400)

(2,300)

(1,500)

(1,200)

Acquisitions & disposals net

 

 

(98)

224

1,463

0

0

0

0

0

Other investing activities

 

 

(47)

41

65

0

0

0

0

0

Cash used in investing activities (CFIA)

 

 

(1,177)

(1,226)

91

(1,816)

(2,400)

(2,300)

(1,500)

(1,200)

Net proceeds from issue of shares

 

 

(98)

(479)

(521)

(102)

0

0

0

0

Movements in debt

 

 

0

(1,186)

(175)

(550)

(492)

(414)

0

0

Dividends paid

 

 

(301)

(889)

(834)

(1,820)

(1,829)

(1,799)

(1,319)

(1,339)

Other financing activities

 

 

(56)

(223)

(150)

74

77

77

160

490

Cash from financing activities (CFF)

 

 

(455)

(2,777)

(1,680)

(2,397)

(2,244)

(2,136)

(1,159)

(849)

Currency translation differences and other

 

 

(4)

(3)

6

0

0

0

0

0

Increase/(decrease) in cash and equivalents

 

 

191

(1,140)

3,299

210

69

364

2,772

3,196

Currency translation differences and other

 

 

0

0

0

0

0

0

0

0

Cash and equivalents at end of period

 

 

3,489

2,349

5,648

5,858

5,927

6,292

9,064

12,260

Net (debt) cash

 

 

(864)

(4,591)

(1,162)

(402)

159

938

3,710

6,906

Movement in net (debt) cash over period

 

 

(864)

(3,727)

3,429

760

561

778

2,772

3,196

Source: company sources, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Newmont Corporation and prepared and issued by Edison, in consideration of a fee payable by Newmont Corporation. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

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60325 Frankfurt

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London +44 (0)20 3077 5700

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1185 Avenue of the Americas

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Newmont Corporation and prepared and issued by Edison, in consideration of a fee payable by Newmont Corporation. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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