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Currency in USD
Last close As at 25/03/2023
USD46.64
▲ 0.04 (0.09%)
Market capitalisation
USD37,024m
Research: Metals & Mining
Newmont’s Q322 results were closely in line with our prior expectations (see our note, Q3 forecasts refined, published on 14 October). Although revenue was 5.6% below our forecast for the quarter (in part on account of provisionally priced sales at the end of Q2, but also on account of the timing of shipments from Penasquito), this was roughly balanced by costs (in US$m), which were 4.8% lower, to result in pre-tax profits that were within 1.0% (or US$3m) and adjusted net income that was within 4.1% (or US$9m) of our prior forecasts. At the same time, Newmont’s Q3 dividend was held at US$0.55/share for the quarter which, among other things, augurs well for future payouts at the current gold price.
Newmont Corporation |
In line with expectations |
Q322 results |
Metals and mining |
2 November 2022 |
Share price performance
Business description
Analyst
Newmont Corporation is a research client of Edison Investment Research Limited |
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Newmont’s Q322 results were closely in line with our prior expectations (see our note, Q3 forecasts refined, published on 14 October). Although revenue was 5.6% below our forecast for the quarter (in part on account of provisionally priced sales at the end of Q2, but also on account of the timing of shipments from Penasquito), this was roughly balanced by costs (in US$m), which were 4.8% lower, to result in pre-tax profits that were within 1.0% (or US$3m) and adjusted net income that was within 4.1% (or US$9m) of our prior forecasts. At the same time, Newmont’s Q3 dividend was held at US$0.55/share for the quarter which, among other things, augurs well for future payouts at the current gold price.
Year end |
Revenue (US$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
11,497 |
3,143 |
2.66 |
1.45 |
15.9 |
3.4 |
12/21 |
12,222 |
1,108 |
2.97 |
2.20 |
14.2 |
5.2 |
12/22e |
11,793 |
1,788 |
1.83 |
2.20 |
23.1 |
5.2 |
12/23e |
11,959 |
2,665 |
2.10 |
2.20 |
20.2 |
5.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Attributable production for the quarter amounted to 1,487koz, which is 3.1% below our prior expectation, albeit in line with Newmont’s reiterated guidance for FY22 of 6,000koz at a cost applicable to sales of US$900/oz. Costs applicable to sales in Q3 were US$968/oz, which was 4.0% above our forecast of US$931/oz. Geographically, North America was an area of notable outperformance, with production recovering by 27.8% relative to Q222 and now firmly above pre-COVID levels after two relatively weak quarters in Q122 and Q222 and costs applicable to sales 7.9% below our prior forecast at US$980/oz. However, this was broadly offset by lower than expected production, and higher than expected costs, in both South America and Australia, while both production and costs were broadly in line with our prior expectations in Africa. Capital expenditure remained steady relative to Q222, at US$529m, primarily owing to higher development capital spend, primarily relating to Tanami Expansion 2, Yanacocha Sulphides, Ahafo North, Pamour and Cerro Negro District Expansion 1.
At the time of our last note (when its share price was US$42.28), we calculated an ex-growth, terminal value for Newmont, as at end-FY27, of US$52.73/share (using a real discount rate of 6.71%), which equated to an immediate valuation of US$48.12/share in FY22 after intervening dividends were taken into account. However, this valuation rose to US$76.62/share in FY27 if the growth in real cash flows thereafter amounted to just 2.0% per year (ie the minimum that might reasonably be expected given the average historical annual increase in the real gold price of 2.0% pa) and to US$64.30/share as at the start of FY22. In the meantime, in both historical and relative terms, Newmont remains cheap with respect to its dividend yield, which we continue to calculate at in excess of 5% and higher than 83% of its peers’ dividend yields over the next three years. Q4 is expected to be Newmont’s strongest quarter and we will review our Q422 and FY22 forecasts and valuation in a fuller note in due course. However, given Q3 results and the current level of the gold price (US$1,652/oz cf US$1,676/oz at the time of our last note), at the moment, we would expect any changes to be immaterial.
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Research: Healthcare
As a follow-up to the c €20.7m Neovacs strategic investment in Pharnext, the French biotech has set up a management trust with Equitis Gestion, as trustee, to manage obligations, rights and activities with respect to the convertible debt. In this capacity, Equitis Gestion will be responsible for managing all securities issued by Pharnext (including warrants to purchase the bonds plus associated warrants to subscribe to common equity) as well as related obligation and exercise rights. As a reminder, the financing has been split across several tranches, of which Pharnext has drawn down the first tranche worth €10.7m. In exchange, the company has issued c two billion warrants to Neovacs to purchase shares in Pharnext. The agreement caps any sale of the Pharnext shares by the trust to 15% of the daily traded volumes (30% in case of specific events).
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