Currency in USD
Last close As at 25/03/2023
USD46.64
▲ 0.04 (0.09%)
Market capitalisation
USD37,024m
Newmont’s Q322 results are scheduled for release on Tuesday 1 November. This report updates our forecasts for Q3–Q422 for metals prices, as well as output from Nevada Gold Mines (NGM) and Pueblo Viejo, which were announced to the market by Barrick on 13 October.
Newmont Corporation |
Q3 forecasts refined |
Q322 preview |
Metals and mining |
14 October 2022 |
Share price performance
Business description
Next events
Analyst
Newmont Corporation is a research client of Edison Investment Research Limited |
Newmont’s Q322 results are scheduled for release on Tuesday 1 November. This report updates our forecasts for Q3–Q422 for metals prices, as well as output from Nevada Gold Mines (NGM) and Pueblo Viejo, which were announced to the market by Barrick on 13 October.
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 |
20.1 |
5.2 |
Note: *EPS is normalised, excluding amortisation of acquired intangibles and exceptional items.
NGM and Pueblo Viejo production known
On 13 October, Barrick announced Q3 production from NGM and Pueblo Viejo of 425koz and 121koz, respectively, which equates to production attributable to Newmont of 266koz and 81koz – or 41koz lower and 11koz higher than our prior expectations. Although we have reduced our production expectations for Q3 by 7% (not least as a result of the effects of inclement weather in the tropics and southern hemisphere), our full year forecasts for both production and costs applicable to sales are now almost exactly in line with guidance (see Exhibit 3).
Updated medium-term guidance awaited in December
On 15 September, Newmont announced that, in the light of unprecedented and evolving market conditions, it had deferred its full funds investment decision regarding the Yanacocha Sulphides project in Peru until H224 (approximately two years later than previously expected). While we have done our best to adjust our medium- to long-term forecasts to accommodate this delay (which has inevitably affected our pre-financing cash-flow per share forecasts and therefore also our valuation), readers should recognise an inherent degree of uncertainty in our updated numbers ahead of the receipt of detailed five-year guidance from Newmont in early December.
Valuation: Dividend yield tops 5%
Using a real discount rate of 6.71%, our ex-growth, ‘terminal’ valuation of Newmont at end-FY27 is US$52.73/share, which equates to an immediate valuation of US$48.12/share in FY22 after intervening dividends have been taken into account. However, this valuation rises to US$76.62/share in FY27 if the growth in real cash flows thereafter amounts to just 2.0% per annum (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 (cf US$81.10/share previously). In the meantime, in both historical and relative terms, Newmont remains cheap with respect to its dividend yield, which we now calculate at in excess of 5% and higher than 83% of its peers’ dividend yields over the next three years (see Exhibit 8).
Updated FY22 estimates, by quarter
Newmont’s Q322 results are scheduled for release on 1 November. This report updates our forecasts for metals prices, costs and production in the wake of quarter’s end. As in FY21, Newmont expects both (higher) production and (lower) costs to be weighted towards the second half of the year in FY22, approximately in the ratio 47:53. For the purposes of this report, we have updated our production and cost forecasts to reflect guidance at the time of Q222 results as well as a greater than expected weather impact on operations in the tropics and southern hemisphere in Q3. We have also updated our production estimates for NGM and Pueblo Viejo, which were announced by Barrick yesterday. Given this, a summary of our updated production and cost assumptions for Q3 and for the remainder of the year is as follows:
Exhibit 1: Newmont Q122–Q422e operational estimates
Region |
Production (koz) |
Costs applicable to sales (US$/oz) |
||||||||
Q122 |
Q222 |
Q322e |
Q422e |
FY22e |
Q122 |
Q222 |
Q322e |
Q422e |
FY22e |
|
Updated |
||||||||||
North America |
309 |
316 |
354 |
355 |
1,335 |
995 |
1,124 |
1,064 |
1,037 |
1,054 |
South America |
198 |
210 |
217 |
225 |
850 |
921 |
982 |
908 |
798 |
900 |
Australia |
282 |
366 |
361 |
361 |
1,370 |
764 |
710 |
711 |
711 |
722 |
Africa |
198 |
243 |
255 |
275 |
970 |
871 |
838 |
912 |
846 |
868 |
Nevada |
288 |
290 |
266 |
337 |
1,181 |
899 |
1,035 |
1,091 |
848 |
961 |
Sub-total |
1,275 |
1,425 |
1,453 |
1,552 |
5,706 |
890 |
932 |
931 |
851 |
900 |
Pueblo Viejo (40%) |
69 |
70 |
81 |
82 |
302 |
|||||
Total (attributable) gold |
1,344 |
1,495 |
1,534 |
1,634 |
6,008 |
|||||
Prior |
||||||||||
North America |
309 |
316 |
418 |
374 |
1,444 |
995 |
1,124 |
814 |
913 |
904 |
South America |
198 |
210 |
220 |
220 |
832 |
921 |
982 |
819 |
819 |
868 |
Australia |
282 |
366 |
380 |
380 |
1,361 |
764 |
710 |
676 |
676 |
725 |
Africa |
198 |
243 |
261 |
280 |
975 |
871 |
838 |
895 |
832 |
889 |
Nevada |
288 |
290 |
307 |
307 |
1,192 |
899 |
1,035 |
849 |
849 |
858 |
Sub-total |
1,275 |
1,425 |
1,586 |
1,561 |
5,805 |
890 |
932 |
802 |
815 |
845 |
Pueblo Viejo (40%) |
69 |
70 |
70 |
70 |
279 |
|||||
Total (attributable) gold |
1,344 |
1,495 |
1,656 |
1,631 |
6,083 |
Source: Newmont Corporation, Edison Investment Research. Note: Totals may not add up owing to rounding.
In addition to production and cost forecasts, we have updated our metals price forecasts for both Q3 and Q4. As is our custom, we are using the spot price of gold at the time of writing as the basis of our short-term forecasts. In the case of gold, however, our forecast achieved price for Q3 is lower than the average spot price of the quarter of US$1,727/oz on account of an adjustment downwards for approximately 200koz of gold provisionally priced at the end of Q2 at a time when prices were declining. A summary of our updated metals price forecasts for both Q3 and Q422 is as follows:
Exhibit 2: Edison FY22 metals price forecasts
Metal (units) |
Q322 price forecast |
Q422 price forecast |
||||
Previous forecast |
Current forecast |
Change |
Previous forecast |
Current forecast |
Change |
|
Gold (US$/oz) |
1,715 |
1,715 |
u/c |
1,710 |
1,679 |
-1.8 |
Silver (US$/oz) |
18.67 |
19.24 |
+3.1 |
18.60 |
19.94 |
+7.2 |
Zinc (US$/lb) |
1.34 |
1.46 |
+9.0 |
1.34 |
1.36 |
+1.5 |
Lead (US$/lb) |
0.89 |
0.89 |
u/c |
0.89 |
0.93 |
+4.5 |
Copper (US$/lb) |
3.34 |
3.51 |
+5.1 |
3.32 |
3.39 |
+2.1 |
Simple average |
+3.4 |
+2.7 |
Source: Edison Investment Research
In addition, Newmont made a one-off payment to Caterpillar of US$34m in Q3 in respect of the battery electric haul truck collaboration between the two parties (out of a total of US$100m), which we expect to be included in ‘advanced, projects, research and development’. Note that this item is in addition to Newmont’s official guidance for ‘advanced, projects, research and development’ spend for the full year. In the light of these changes, our updated financial forecasts for Newmont for FY22, by quarter, are as follows:
Exhibit 3: Newmont quarterly income statement, Q121–Q422e
US$m (unless otherwise indicated) |
Q122 |
Q222 |
Q322e |
Q322 |
Q422e |
Q422e |
FY22e |
FY22e |
Sales |
3,023 |
3,058 |
3,019 |
2,790 |
2,970 |
2,922 |
11,793 |
11,980 |
Costs and expenses |
||||||||
– Costs applicable to sales |
1,435 |
1,708 |
1,465 |
1,612 |
1,465 |
1,556 |
6,311 |
5,852 |
– Depreciation and amortisation |
547 |
559 |
666 |
581 |
668 |
636 |
2,323 |
2,466 |
– Reclamation and remediation |
61 |
49 |
42 |
47 |
42 |
47 |
203 |
188 |
– Exploration |
38 |
62 |
70 |
70 |
70 |
70 |
240 |
248 |
– Advanced projects, research and development |
44 |
45 |
43 |
77 |
43 |
43 |
208 |
172 |
– General and administrative |
64 |
73 |
65 |
65 |
65 |
65 |
267 |
259 |
– Impairment of long-lived assets |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
– Care and maintenance |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
– Loss on assets held for sale |
0 |
|||||||
– Other expense, net |
35 |
22 |
18 |
7 |
18 |
6 |
70 |
87.5 |
Total |
2,224 |
2,518 |
2,368 |
2,458 |
2,371 |
2,422 |
9,622 |
9,272 |
Other income/(expenses) |
||||||||
– Gain on formation of Nevada Gold Mines |
0 |
0 |
||||||
– Gain on asset and investment sales, net |
0 |
0 |
||||||
– Other income, net |
(109) |
(75) |
0 |
0 |
0 |
0 |
-184 |
(109) |
– Interest expense, net of capitalised interest |
(62) |
(57) |
(55) |
-39 |
(53) |
-42 |
-200 |
(225) |
|
(171) |
(132) |
(55) |
-39 |
(53) |
-42 |
-384 |
(334) |
Income/(loss) before income and mining tax |
628 |
408 |
596 |
293 |
546 |
458 |
1,788 |
2,374 |
Income and mining tax benefit/(expense) |
(214) |
(33) |
(191) |
-94 |
(175) |
-147 |
-488 |
(773) |
Effective tax rate (%) |
34.1 |
8.1 |
32.0 |
32.0 |
32.0 |
32.0 |
27.3 |
32.5 |
Profit after tax |
414 |
375 |
405 |
200 |
371 |
312 |
1,300 |
1,602 |
Equity income/(loss) of affiliates |
39 |
17 |
24 |
33 |
23 |
29 |
117 |
115 |
Net income/(loss) from continuing operations |
453 |
392 |
429 |
232 |
394 |
340 |
1,417 |
1,717 |
Net income/(loss) from discontinued operations |
16 |
8 |
24 |
16 |
||||
Net income/(loss) |
469 |
400 |
429 |
232 |
394 |
340 |
1,441 |
1,733 |
Minority interest |
21 |
13 |
14 |
11 |
14 |
15 |
60 |
62 |
Ditto (%) |
4.5 |
3.3 |
3.2 |
4.8 |
3.5 |
4.3 |
4.2 |
3.6 |
Net income/(loss) attributable to stockholders |
448 |
387 |
415 |
221 |
380 |
325 |
1,381 |
1,670 |
Adjustments to net income |
98 |
(25) |
0 |
0 |
0 |
0 |
73 |
98 |
Adjusted net income |
546 |
362 |
415 |
221 |
380 |
325 |
1,454 |
1,768 |
Net income/(loss) per common share (US$) |
||||||||
Basic |
||||||||
– Continuing operations |
0.545 |
0.477 |
0.524 |
0.278 |
0.480 |
0.410 |
1.710 |
2.086 |
– Discontinued operations |
0.020 |
0.010 |
0.000 |
0.000 |
0.000 |
0.000 |
0.030 |
0.020 |
– Total |
0.565 |
0.487 |
0.524 |
0.278 |
0.480 |
0.410 |
1.740 |
2.106 |
Diluted |
||||||||
– Continuing operations |
0.544 |
0.477 |
0.523 |
0.278 |
0.479 |
0.409 |
1.708 |
2.083 |
– Discontinued operations |
0.020 |
0.010 |
0.000 |
0.000 |
0.000 |
0.000 |
0.030 |
0.020 |
– Total |
0.564 |
0.487 |
0.523 |
0.278 |
0.479 |
0.409 |
1.738 |
2.104 |
Basic adjusted net income per share (US$) |
0.689 |
0.456 |
0.524 |
0.278 |
0.480 |
0.410 |
1.832 |
2.230 |
Diluted adjusted net income per share (US$) |
0.688 |
0.455 |
0.523 |
0.278 |
0.479 |
0.409 |
1.819 |
2.227 |
DPS (US$/share) |
0.550 |
0.550 |
0.550 |
0.550 |
0.550 |
0.550 |
2.200 |
2.200 |
Source: Newmont Corporation, Edison Investment Research
Our basic adjusted EPS forecast of US$1.832/share for FY22 (cf US$2.230/share previously) compares to the market consensus, by quarter, as follows:
Exhibit 4: FY22 basic adjusted EPS forecast, Edison versus consensus (US$/share)
Q122 |
Q222 |
Q322e |
Q422e |
Sum Q1–Q422e |
FY22e |
|
Edison forecast |
0.689 |
0.456 |
0.278 |
0.410 |
1.833 |
1.832 |
Consensus forecast |
0.689 |
0.456 |
0.490 |
0.620 |
2.255 |
2.270 |
High |
0.689 |
0.456 |
0.660 |
1.000 |
2.805 |
2.770 |
Low |
0.689 |
0.456 |
0.310 |
0.220 |
1.675 |
1.760 |
Source: Edison Investment Research, Refinitiv (11 October 2022)
While Edison does not make explicit cash flow forecasts on a quarterly basis, we note one specific item in Q3 that will affect cash flows during the quarter. On 5 July, Newmont announced that it had reached a profit-sharing agreement at Peñasquito, whereby it was to pay its represented workforce an uncapped profit-sharing bonus up to 10%, with an immediate cost equivalent to US$70m related to FY21. This expense was accrued during Q2, but we understand that the actual payment was made in July, which will result in an adjustment to working capital in Q3.
Dividend
Newmont’s Q1 and Q222 dividends were maintained at US$0.55/share. 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’ payout 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 this framework, Newmont then augments its ‘base’ payout in increments of US$0.60–0.90/share per year (or US$0.15–0.225/share per quarter), evaluated in gold price 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. However, it is worth noting that Newmont affords itself a degree of latitude in the level of the ultimate payout 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 (ie US$0.55/share) even if the gold price dips below the US$1,800/oz level. As such, we have left our dividend forecasts unchanged for the remainder of FY22 notwithstanding the fact that the gold price is, at the time of writing, below US$1,800/oz. However, we recognise a risk to this payout at these levels in the event that the gold price continues to weaken under pressure from aggressive Federal Reserve monetary policy tightening.
Projects
Yanacocha Sulphides
On 15 September, Newmont announced that, in the light of unprecedented and evolving market conditions, the war in Ukraine, record inflation, the rising prices of commodities and raw materials, prolonged supply chain disruptions and competitive labour markets, it will delay its full funds investment decision regarding the Yanacocha Sulphides project in Peru to H224 (approximately two years later than had previously been intended). To complement this development, Newmont also announced that it had appointed Dean Gehring as chief development officer (Peru) to lead its Yanacocha operations, generally, and its Sulphides project, in particular.
Ahead of the full funds investment decision on the Sulphides project, Newmont has said that it will continue advanced engineering and long-lead procurement activities to de-risk the project, including the construction of two water treatment plants, with an anticipated initial spend of around US$350m over the next two years (albeit this expenditure will take the form of accretion, rather than capex). Following the investment decision anticipated in H224, the project is expected to be developed over a three-year period, adding average annual production of approximately 525koz gold equivalent ounces per year for the first five full years of operation (now forecast by Edison to start in FY28 cf FY27 previously). Aside from the delay in achieving full production that the delay in making a full funds decision will engender, we also forecast that it will materially alter the timing and phasing of capital expenditure. Whereas Newmont had provided guidance at the end of FY21 that capex would trend downwards from FY22 and FY23 onwards, we now expect a material portion of capex (especially related to the Yanacocha Sulphides project) to be shunted from FY23 and FY24 into FY25–27, approximately as shown in the graph below:
Exhibit 5: Edison revised capex estimates cf FY21 Newmont guidance (US$m) |
Source: Edison Investment Research, Newmont Corporation. Note: * ±5%: **Revised Edison forecast excludes Yanacocha minority acquisition purchase price consideration in FY22. |
MARA
On 23 September, Newmont announced that it had sold its 18.75% shareholding in the MARA project in Argentina to Glencore for a consideration of US$124.9m upon closing plus a US$30m deferred payment upon commercial production being achieved (subject to an annual interest charge of 6%, but capped at US$50m).
The MARA project was formed as a joint venture between Yamana Gold, Glencore and Newmont in December 2020 following the integration of the Minera Alumbrera plant and mining infrastructure into the Agua Rica project. A core asset for Yamana and Glencore, MARA has proven and probable mineral reserves of 5.4Mt of copper and 7.4Moz of gold contained in 1,105Mt of ore (Yamana and Glencore reporting standards based on pre-feasibility study) with an initial mine life of 28 years. Under the new structure, Yamana will remain the operator with 56.25% of MARA, with Glencore owning the remaining 43.75% interest.
Although Newmont’s announcement regarding this transaction was made on 23 September, we anticipate that it will not close and that Newmont will not receive its initial tranche of cash consideration until Q422.
Other
We expect Newmont to provide further updates regarding the progress of its Tanami Expansion 2 and Ahafo North projects, specifically, towards the end of the year or the beginning for FY23.
Valuation
Absolute valuation
Notwithstanding an evolving macroeconomic environment, as well as evolving development pipeline, our approach to the valuation of Newmont has remained unchanged since our initiation note (see The sustainable leader, published on 9 February 2021). In our last note, we valued the company at US$81.10/share assuming 2.0% growth in real, long-term cash flows per share per annum (ie the same as the long-term, real increase in the gold price per annum). This valuation was inherently conservative in that it excluded any explicit value to Newmont from its other development assets, such as Coffee, Galore Creek, Conga, Norte Abierto and Nueva Union, which together represent combined reserves and resources of 53.94Moz attributable to the company.
While preserving the same basic profile, the consequences of shifting capex for Yanacocha Sulphides, in particular, from FY23 and FY24 into FY25–27 has had a material effect on our forecasts for pre-financing cash flows per share in those years (on which our valuation is based), as shown in the graphs below:
Exhibit 6: Previous Newmont forecast valuation and cash flow per share, FY21–27e (US$/share) |
Exhibit 7: Updated Newmont forecast valuation and cash flow per share, FY21–27e (US$/share) |
Source: Edison Investment Research |
Source: Edison Investment Research |
Exhibit 6: Previous Newmont forecast valuation and cash flow per share, FY21–27e (US$/share) |
Source: Edison Investment Research |
Exhibit 7: Updated Newmont forecast valuation and cash flow per share, FY21–27e (US$/share) |
Source: Edison Investment Research |
In empirical terms, our estimate of Newmont’s ‘terminal’ pre-financing cash flow in FY27 has moderated from US$4.35/share to US$3.54/share. On this basis, applying a (real) discount rate of 6.71% (calculated from a nominal expected equity return of 9% and decreased long-term inflation expectations of 2.1456% (cf 2.2376% previously, as defined by the US 30-year break-even inflation rate – source: Bloomberg, 11 October), our terminal valuation of Newmont as at end-FY27 is US$52.73/share or US$48.12/share as at the start of FY22. However, note that this valuation is again based on the inherently conservative assumption of zero growth in (real) cash flows beyond FY27. It increases to a terminal value of US$76.62/share if growth in real cash flows after FY27 amounts of 2.0% per annum (ie the minimum that might be expected from the average historical annual increase in the real price of gold of 2.0% pa) and to US$64.30/share as at the start of FY22 (cf US$81.10/share previously).
Relative Newmont valuation
Newmont’s valuation on a series of commonly used measures, relative to its peer group of the nine largest publicly quoted senior gold producers, is provided below.
Exhibit 8: Newmont valuation relative to peers
Company |
Ticker |
P/E (x) |
P/cash flow (x) |
EV/EBITDA (x) |
Yield (%) |
||||||||
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 |
23.1 |
20.1 |
17.9 |
9.3 |
8.1 |
6.7 |
7.6 |
6.6 |
5.7 |
5.2 |
5.2 |
3.8 |
Newmont (consensus) |
NEM |
18.6 |
18.9 |
18.3 |
8.2 |
8.2 |
8.1 |
6.8 |
6.7 |
6.6 |
5.1 |
4.8 |
4.3 |
Barrick |
ABX |
16.2 |
15.6 |
14.1 |
6.9 |
6.3 |
5.9 |
6.0 |
5.5 |
5.4 |
4.1 |
4.8 |
4.7 |
AngloGold |
ANGJ |
9.5 |
7.2 |
8.4 |
4.1 |
4.1 |
4.1 |
3.9 |
3.1 |
3.3 |
2.7 |
2.4 |
2.7 |
Gold Fields |
GFI |
8.0 |
8.3 |
7.0 |
4.5 |
4.5 |
3.8 |
3.7 |
3.1 |
3.4 |
4.3 |
4.0 |
4.4 |
Kinross |
K |
13.3 |
10.1 |
12.2 |
4.0 |
3.4 |
3.8 |
4.6 |
4.0 |
4.4 |
3.0 |
3.0 |
3.0 |
Agnico Eagle |
AEM |
18.6 |
20.0 |
21.0 |
8.1 |
7.9 |
8.1 |
7.0 |
6.6 |
6.8 |
3.6 |
3.7 |
3.8 |
Newcrest |
NCM AU |
13.1 |
13.7 |
12.4 |
6.0 |
6.2 |
5.9 |
5.2 |
5.4 |
5.1 |
2.0 |
2.2 |
2.6 |
Harmony |
HARJ |
6.2 |
6.7 |
6.9 |
3.7 |
2.8 |
3.1 |
3.1 |
2.9 |
3.2 |
1.8 |
2.5 |
2.1 |
Endeavour (consensus) |
EDV |
11.4 |
10.8 |
10.0 |
3.9 |
4.1 |
3.9 |
3.6 |
4.0 |
3.8 |
4.0 |
4.3 |
4.0 |
Average (excl NEM) |
12.0 |
11.5 |
11.5 |
5.1 |
4.9 |
4.8 |
4.6 |
4.3 |
4.4 |
3.2 |
3.4 |
3.4 |
Source: Edison Investment Research, Refinitiv. Note: Consensus and peers priced on 11 October 2022.
From the table above, it can be seen that while Newmont continues to command a premium rating relative to its peer group on most valuation measures, it remains cheap with respect to its dividend yield in at least 20 out of 24 instances (ie 83%) over the next three years. Based on consensus forecasts, we estimate that Newmont’s share price would have to rise by an average of 60.8% for its dividend yield to match those of its peers. Based on our forecasts, we estimate its share price would have to rise 54.9%.
As previously, one further observation concerning the comparability of the above measures is merited. Given its policy of proportionately consolidating its interest in NGM and that it owns 100% interests in the majority of its remaining mining operations (with the exception of Merian), estimates of cash flow in particular are also close to estimates of cash flow attributable to shareholders (Newmont estimates that 99.8% of free cash flow was attributable to the company in FY21). This is in contrast to a number of its peers, where earnings and cash flow from assets not 100%-owned tend to be fully consolidated and therefore may not so easily approximate cash flow attributable to shareholders, making direct comparison using these measures either difficult or, potentially, misleading.
Historical valuation
Based on Newmont’s average historical P/E ratio of 23.9x current year earnings over the past nine years, from FY13 to FY21, and its average historical yield of 1.7% over the same timeframe (excluding special dividends), a summary of our updated valuation of the company over 12 measures of value over the next three years is as follows:
Exhibit 9: Newmont valuation summary (US$/share in years shown)
Basis of valuation |
FY22e |
FY23e |
FY24e |
|
Historical |
Share price implied by Edison EPS forecast (US$/share) |
43.74 |
50.15 |
56.44 |
Historical |
Share price implied by Edison DPS forecast (US$/share) |
127.02 |
127.02 |
92.38 |
Historical |
Share price implied by consensus EPS forecast (US$/share) |
54.19 |
53.47 |
55.14 |
Historical |
Share price implied by consensus DPS forecast (US$/share) |
125.28 |
117.78 |
104.50 |
Average (US$/share) |
87.56 |
87.10 |
77.11 |
Source: Edison Investment Research (underlying consensus data: Refinitiv, 11 October 2022)
Exhibit 10: Financial summary
Accounts: US GAAP, year-end: December, US$m |
|
|
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
2025e |
INCOME STATEMENT |
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
7,253 |
9,740 |
11,497 |
12,222 |
11,793 |
11,959 |
12,329 |
11,954 |
Cost of sales |
|
|
(4,093) |
(5,195) |
(5,014) |
(5,435) |
(6,311) |
(5,674) |
(5,829) |
(5,838) |
Gross profit |
|
|
3,160 |
4,545 |
6,483 |
6,787 |
5,483 |
6,285 |
6,500 |
6,115 |
SG&A (expenses) |
|
|
(244) |
(313) |
(269) |
(259) |
(267) |
(260) |
(260) |
(260) |
R&D costs |
|
|
(350) |
(415) |
(309) |
(363) |
(448) |
(450) |
0 |
0 |
Other income/(expense) |
|
|
(406) |
(253) |
(831) |
(2,101) |
(457) |
(257) |
(80) |
(80) |
Exceptionals and adjustments |
|
(424) |
2,220 |
214 |
(2,258) |
(296) |
0 |
0 |
0 |
|
Depreciation and amortisation |
|
(1,215) |
(1,960) |
(2,300) |
(2,323) |
(2,323) |
(2,521) |
(3,186) |
(3,399) |
|
Reported EBIT |
|
945 |
3,994 |
3,451 |
1,382 |
1,988 |
2,797 |
2,974 |
2,376 |
|
Finance income/(expense) |
|
(207) |
(301) |
(308) |
(274) |
(200) |
(132) |
(78) |
7 |
|
Other income/(expense) |
|
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
Exceptionals and adjustments |
|
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
Reported PBT |
|
|
738 |
3,693 |
3,143 |
1,108 |
1,788 |
2,665 |
2,896 |
2,383 |
Income tax expense (includes exceptionals) |
|
|
(419) |
(737) |
(515) |
(932) |
(370) |
(957) |
(946) |
(841) |
Reported net income |
|
|
380 |
2,884 |
2,791 |
233 |
1,441 |
1,708 |
1,950 |
1,543 |
Basic average number of shares, m |
|
|
533 |
735 |
804 |
799 |
794 |
794 |
794 |
794 |
Basic EPS (US$/share) |
|
|
0.64 |
3.82 |
3.52 |
1.46 |
1.74 |
2.10 |
2.36 |
1.86 |
Adjusted EBITDA |
|
|
2,584 |
3,734 |
5,537 |
5,963 |
4,588 |
5,318 |
6,160 |
5,775 |
Adjusted EBIT |
|
|
1,369 |
1,774 |
3,237 |
3,640 |
2,266 |
2,797 |
2,974 |
2,376 |
Adjusted PBT |
|
|
1,162 |
1,473 |
2,929 |
3,366 |
2,066 |
2,665 |
2,896 |
2,383 |
Adjusted EPS (US$) |
|
|
1.35 |
1.32 |
2.66 |
2.97 |
1.83 |
2.10 |
2.36 |
1.86 |
Adjusted diluted EPS (US$) |
|
|
1.34 |
1.32 |
2.66 |
2.96 |
1.82 |
2.09 |
2.35 |
1.85 |
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
12,258 |
25,276 |
24,281 |
24,124 |
23,742 |
22,571 |
20,884 |
19,116 |
Goodwill |
|
|
58 |
2,674 |
2,771 |
2,771 |
2,771 |
2,771 |
2,771 |
2,771 |
Other non-current assets |
|
|
3,122 |
5,752 |
5,812 |
5,973 |
5,973 |
5,973 |
5,973 |
5,973 |
Total non-current assets |
|
|
15,438 |
33,702 |
32,864 |
32,868 |
32,486 |
31,315 |
29,628 |
27,860 |
Cash and equivalents |
|
|
3,397 |
2,243 |
5,540 |
4,992 |
4,018 |
4,615 |
6,793 |
8,719 |
Inventories |
|
|
630 |
1,014 |
963 |
930 |
1,102 |
1,118 |
1,152 |
1,117 |
Trade and other receivables |
|
|
254 |
373 |
449 |
337 |
355 |
360 |
372 |
360 |
Other current assets |
|
|
996 |
2,642 |
1,553 |
1,437 |
1,461 |
1,461 |
1,461 |
1,461 |
Total current assets |
|
|
5,277 |
6,272 |
8,505 |
7,696 |
6,937 |
7,554 |
9,778 |
11,658 |
Non-current loans and borrowings |
|
|
3,608 |
6,734 |
6,045 |
6,109 |
5,617 |
5,203 |
5,203 |
5,203 |
Other non-current liabilities |
|
|
3,808 |
8,438 |
8,076 |
9,940 |
9,951 |
9,945 |
9,834 |
9,722 |
Total non-current liabilities |
|
|
7,416 |
15,172 |
14,121 |
16,049 |
15,568 |
15,148 |
15,037 |
14,925 |
Trade and other payables |
|
|
303 |
539 |
493 |
518 |
569 |
511 |
525 |
526 |
Current loans and borrowings |
|
|
653 |
100 |
657 |
193 |
193 |
193 |
193 |
193 |
Other current liabilities |
|
|
831 |
1,746 |
2,219 |
1,943 |
1,943 |
1,943 |
1,943 |
1,943 |
Total current liabilities |
|
|
1,787 |
2,385 |
3,369 |
2,654 |
2,705 |
2,647 |
2,661 |
2,662 |
Equity attributable to company |
|
|
10,502 |
21,420 |
23,008 |
22,022 |
21,657 |
21,578 |
22,185 |
22,394 |
Non-controlling interest |
|
|
1,010 |
997 |
871 |
(161) |
(507) |
(505) |
(477) |
(464) |
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
380 |
2,884 |
2,791 |
233 |
1,441 |
1,708 |
1,950 |
1,543 |
Taxation expenses |
|
|
386 |
832 |
704 |
1,098 |
488 |
1,105 |
1,065 |
908 |
Net finance expenses |
|
|
207 |
301 |
308 |
274 |
200 |
132 |
78 |
(7) |
Depreciation and amortisation |
|
|
1,215 |
1,960 |
2,300 |
2,323 |
2,323 |
2,521 |
3,186 |
3,399 |
Share based payments |
|
|
76 |
97 |
72 |
72 |
0 |
0 |
0 |
0 |
Other adjustments |
|
|
749 |
(2,131) |
(654) |
2,277 |
179 |
187 |
80 |
80 |
Movements in working capital |
|
|
(743) |
(309) |
295 |
(541) |
(332) |
(270) |
(224) |
(144) |
Interest paid / received |
|
|
(207) |
(301) |
(308) |
(274) |
(200) |
(132) |
(78) |
7 |
Income taxes paid |
|
|
(236) |
(498) |
(926) |
(1,207) |
(488) |
(1,105) |
(1,065) |
(908) |
Cash from operations (CFO) |
|
|
1,827 |
2,866 |
4,882 |
4,279 |
3,611 |
4,145 |
4,993 |
4,877 |
Capex |
|
|
(1,032) |
(1,463) |
(1,302) |
(1,653) |
(1,941) |
(1,350) |
(1,499) |
(1,631) |
Acquisitions & disposals net |
|
|
(98) |
224 |
1,463 |
(50) |
(368) |
0 |
0 |
0 |
Other investing activities |
|
|
(47) |
41 |
65 |
(15) |
0 |
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(1,177) |
(1,226) |
91 |
(1,868) |
(2,309) |
(1,350) |
(1,499) |
(1,631) |
Net proceeds from issue of shares |
|
|
(98) |
(479) |
(521) |
(525) |
0 |
0 |
0 |
0 |
Movements in debt |
|
|
0 |
(1,186) |
(175) |
(390) |
(492) |
(414) |
0 |
0 |
Dividends paid |
|
|
(301) |
(889) |
(834) |
(1,757) |
(1,822) |
(1,788) |
(1,320) |
(1,324) |
Other financing activities |
|
|
(56) |
(223) |
(150) |
(286) |
38 |
4 |
4 |
4 |
Cash from financing activities (CFF) |
|
|
(455) |
(2,777) |
(1,680) |
(2,958) |
(2,276) |
(2,198) |
(1,316) |
(1,321) |
Currency translation differences and other |
|
|
(4) |
(3) |
6 |
(8) |
0 |
0 |
0 |
0 |
Increase/(decrease) in cash and equivalents |
|
|
191 |
(1,140) |
3,299 |
(555) |
(974) |
597 |
2,178 |
1,926 |
Cash and equivalents at end of period |
|
|
3,489 |
2,349 |
5,648 |
5,093 |
4,119 |
4,716 |
6,894 |
8,820 |
Net (debt)/cash |
|
|
(864) |
(4,591) |
(1,162) |
(1,310) |
(1,792) |
(781) |
1,397 |
3,323 |
Movement in net (debt)/cash over period |
|
|
(864) |
(3,727) |
3,429 |
(148) |
(482) |
1,011 |
2,178 |
1,926 |
Source: Company sources, Edison Investment Research.
|
|
Heliad Equity Partners (HEP) posted a 35% decrease in net asset value (NAV) per share during Q222, driven mostly by the 51% stock price decrease of flatexDEGIRO (FTK) (alongside the sell-off across listed online brokers), which now makes up roughly half of HEP’s portfolio. Meanwhile, revaluation of private holdings had a minor impact on HEP’s NAV, with only FINN and Klarna closing new funding rounds in Q222. We note that HEP’s management expects the weighted average revenue of its new investments since 2021 to grow 3.6x in 2022 vs the prior year. Management also highlighted that advanced talks on new funding rounds of some holdings may bring HEP’s NAV per share to c €10 (up c 20% from end-June 2022), while the current HEP share price is c 53% lower.
Get access to the very latest content matched to your personal investment style.