The efficient performance by Newmont Mining (NEM, Financial) is clearly evident from the results that it posted in the recently reported quarter. With good cash flow generation, the company sees good opportunities for growth in the future. It is also expecting costs at the lower end of its guidance. As a result, Newmont looks well positioned for a better financial performance in the future. The company is undertaking some good initiatives to improve profitability.
Newmont's impressive moves
It is seeing good growth across its mining business. Newmont is pleased with the momentum its Batu Hijau mine is showing. It has seen good production and has exported about 75,000 tons of Copper. This shows the growing demands in the market and with the improving commodity this is expected to further ramp up in the coming days. In addition, Newmont is also engaged in building a strong portfolio. It is now focusing on the core assets and is getting rid of the non-core assets. Under this, it has already announced the sale of its stake in La Herradura contributing $1.3 billion out of asset sales since 2013 which is a good sign and is expected to help the company in a long run.
The production is expected to increase in 2014. It indicates there is a growing demand in the market. Further, the company is expecting to produce around 25,000 to 35,000 ounces of gold which will make it easy for the company to achieve its objective to reach the higher grade phase 6 ore with the start of a new fiscal 2015. This is a good sign for the long term prospects of Newmont.
Optimizing its production
Newmont is also making necessary adjustments in its business. It is making efforts to sell its Midas and Jundee facilities which are non-yielding for it. Besides this, it is also taking some other steps such as extending the asset life and optimizing payloads to further support its adjustments. Moreover, the company is interested in lowering its overhead costs to improve its margins further.
Moving on, Newmont is pleased with the opportunities that it is seeing in New Zealand. It is making good value addition to its Waihi operations through its new Correnso mine. This will also ramp up the production. The first phase is expected to deliver about 150,000 ounces of production per year at competitive cost. This will give a competitive advantage to the company against its peers, also strengthening its position in the market in 2015. On the other hand, the Ahafo mill expansion will offset the impact of lower grade iron ore.
Newmont is focusing on some key aspects to improve its profitability. It is mainly focusing on delivering good operational performance by focusing on continuous cost and efficiency improvement. It is also optimizing its portfolio by divesting non-core assets and developing a next generation Newmont mines.
Conclusion
Moving to the fundamentals, the company is engaged in narrowing its losses and it seems that it is right on track as the forward P/E of 18.48 indicates good growth in earnings. Considering all these aspects, it can be seen that the company is improving, which is why it might be a good investment for the long run.
