Newmont Mining Corp. (NEM, Financial) fell 1.4% on the heels of financial results released by the U.S. miner for the entire year of 2017 and its last quarter.
Quarterly results were not bad. Also, in some ways, it was also generally expected that Newmont Mining wouldn’t have gone much beyond analysts' predictions on its quarterly earnings.
The recent fall in the price of gold may have played a role in yesterday's negative sign. The bullion lost $24.1 per troy ounce on the London market or minus 1.8% over the last five days of trading.
Furthermore, the U.S. dollar appreciated 1.5% over the same span of time, reversing a downtrend that was lasting since the second week of February. As of Feb. 22, the U.S. dollar is exchanged with approximately euro 81.3 cents versus an 80.12 cents rate of one week ago.
Bullion and U.S. dollar have probably been influenced by the release of the minutes from the January meeting of the Federal Reserve. The U.S. Central Bank minutes show the likelihood of further hikes in the interest rates this year. This has pushed yields on the 10-year U.S. Treasury note to 2.957% rate on Feb. 21, a four-year high. The Yield Curve of the 10-year U.S. Treasury note is currently at 2.78% versus a 2.48% of February 2017.
But, let’s have a look at Newmont Mining’s fourth quarter of fiscal 2017 results on earnings and revenues. The U.S. gold producer beat consensus on adjusted earnings by 2 cents per diluted share of the company. The adjusted net profit was 40 cents per diluted share in the fourth quarter of 2017 or $216 million. This was a 60% increase from one year ago.
Newmont Mining also beat consensus on quarterly revenue by $30 million. The U.S. miner reported an 8.4% year over year growth in the amount of invoiced gold customers to $1.94 billion, thanks to increased gold sales volumes (1.351 billion ounces; +2% year over year) and higher average realized gold prices ($1,270 an ounce; +6% year over year). Compared to one year ago, the company also realized a higher price from the sale of one pound of copper in fourth-quarter 2017: $3.20 per pound versus $2.49 per pound in the prior-year quarter.
Higher throughput and grade of ore processed by the miner at Merian (Suriname) and Tanami (Australia) boosted fourth-quarter gold production to 1.3 million ounces. This was a 1.4% increase on a year over year basis. A full quarter of gold production in Nevada at Long Canyon was also supportive. A lower grade of mineral processed and a decrease in gold recovery rate at Cripple Creek & Victor Mine in U.S., plus harder ore encountered during operations at Akyem (Ghana) and a lower grade of ore treated at Boddington (Australia) didn’t scratch operations too much.
On a year over year basis, the all-in sustaining cost (AISC) increased by 5.4% to $968 per ounce of gold sold in the quarter due to “increased sustaining capital and higher advanced projects and exploration costs,” Newmont Mining Corp reports.
About the entire year of fiscal 2017, Newmont Mining produced 5.3 million ounces of gold (+8% year over year) at an AISC of $924 per ounce of metal sold (+1% from 2016). The yearly production of gold was on par with the company’s guidance.
The following two charts illustrate Newmont Mining Corp’s production of gold and copper over the last six fiscal years:
Chart 1. The annual production of attributable gold from 2012 to 2017:
Chart 2. The annual production of attributable copper from 2012 to 2017:
In addition, Newmont Mining guides a higher amount of funds to be used as capex in full fiscal 2018 at a $1.2 billion to $1.3 billion range from a previous forecast of $900 million to $1 billion. The biggest producer of gold in the U.S. has also estimated that the production of the yellow metal for full fiscal 2018 will approximate the 4.9 million to 5.4 million ounces range. The same production range is also predicted for full fiscal 2019.
President and CEO Gary J. Goldberg, Newmont Mining’s President and Chief Executive Officer, said the adjusted Ebitda improved by 12% to a total amount of $2.7 billion while the free cash flow grew 88% equaling $1.5 billion. Both growths were built thanks to a lower cost production sustained by the company at its newer mines and an improvement in the ongoing productivity athwart the entire portfolio.
Goldberg said that Newmont Mining has “the means to invest in five new projects, raise the dividend by 87 percent and increase investment in exploration.” The investment "paid off as we added 6.4 million ounces of gold to our reserve base, offsetting depletion for the first time in five years.”
Newmont Mining Corp. (NEM, Financial) is trading at $37.63 per share with a market capitalization of $20.07 billion.
Newmont Mining Corp. stock has a price-book (P/B) ratio of 1.72 times (versus an industry average that according to GuruFocus is 2.05 times) and an EV-to-Ebitda ratio of 8.45 times. The industry median is 10.18 times.
Thursday’s fall dragged Newmont Mining near the 100-SMA line ($37.53). Even though the U.S. gold stock is still trading plainly above the 200-SMA line and over the midst of a $31.42 to $42.04 per share 52-week range, the security offers a more convenient entry point than a few days ago.
Source: Yahoo Finance
The RSI (14-days) is 44.06 of a 20 to 80 range. The recommendation rating is 2.3 out of a total of 5. The average price target is $43.31 versus a current $37.63 per share.
(Disclosure: I have no position in any stock mentioned in this article.)
