Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Newmont Corporation: Material Outperformance Begets Material Upgrade

By Edison Stock MarketsAug 02, 2021 10:38
uk.investing.com/analysis/newmont-corporation-material-outperformance-begets-material-upgrade-200490299
Newmont Corporation: Material Outperformance Begets Material Upgrade
By Edison   |  Aug 02, 2021 10:38
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Newmont’s financial results for Q221 materially exceeded our expectations for the third quarter in succession, driven by a 3.8% (or US$111m) positive variance in revenues (of which 2.4% could be attributed to the gold price) and a 2.8% (US$61m) further positive variance in the form of lower costs. Of the 12 mines over which Newmont exerts management control, four outperformed (financially) relative to our prior expectations, two performed in line and six underperformed, although not, on occasion, without commendable management efforts to mitigate negative outcomes in the face of unscheduled challenges (eg the need to put Tanami into care and maintenance for two weeks, at short notice, after a case of COVID-19 was detected there). In the wake of its results, coupled with increases to our estimates for Q3 and Q420, we have upgraded our forecasts for adjusted net EPS for Newmont (NYSE:NEM) for FY21 by 18.4%.

EPS Forecast
EPS Forecast

Q221 Results Review
Q221 Results Review

Share Price Performance

Share Price Performance
Share Price Performance

Results follow Ahafo North approval

Newmont’s results follow its board’s sanctioning of the development of the Ahafo North project in Ghana earlier in July. The project will add 275–325koz pa to production at an all-in sustaining cost of US$600–700/oz for the first five years of production (CY24–28) at a capital cost of US$750–850m. Construction is scheduled to be completed in H223 and commercial production in early FY24.

Cost pressures

In addition to its financial results, Newmont also reported some signs of modest cost pressure within the industry. While these are expected to have little or no effect on Newmont’s performance for the remainder of FY21, we have now built a 5% increase in (nominal) costs into our financial models for all of its mines from FY22.

Valuation: 19.3% premium to share price

Despite increasing our basic adjusted EPS forecast for FY21 by 18.4%, our FY21 valuation of Newmont remains broadly unchanged at US$72.05/share (vs US$72.92/share previously), as the increase has coincided with a general de-rating of the gold mining sector in FY21, coupled with a decrease in inflation expectations in the wider US economy that has therefore resulted in increased implied (real) hurdle rates (see Exhibits 5 and 7). This valuation 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. However, it remains cheap relative to historical valuation measures, which continue to imply a share price close to US$100/share.

Click on the PDF below to read the full report:

Newmont Corporation: Material Outperformance Begets Material Upgrade
 

Related Articles

Edison Group
EMIS Group: Commercialising Recent Investment By Edison Group - Sep 14, 2021

EMIS Group (LON:EMISG) reported H121 results ahead of board expectations and is on track to meet the company’s FY21 expectations. After a period of investment to develop the...

Newmont Corporation: Material Outperformance Begets Material Upgrade

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
David Warren
David Warren Aug 03, 2021 10:35
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Quality share
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email