Newmont Corporation Form 10-Q Summary
Business context and reporting period
Newmont is a global gold producer with operations and investments in gold, copper, silver, lead and zinc across the United States, Canada, Mexico, the Dominican Republic, Peru, Suriname, Argentina, Australia and Ghana. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2023, compared primarily with the corresponding 2022 periods.
Financial and operating metrics
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Sales | $2,683 million | $3,058 million | $5,362 million | $6,081 million |
| Net income attributable to Newmont stockholders | $155 million | $387 million | $506 million | $835 million |
| Continuing-operations EPS, diluted | $0.19 | $0.48 | $0.62 | $1.02 |
| Adjusted net income | $266 million | $362 million | $586 million | $908 million |
| Adjusted EPS, diluted | $0.33 | $0.46 | $0.74 | $1.14 |
| Adjusted EBITDA | $910 million | $1,149 million | $1,900 million | $2,539 million |
| Operating cash flow from continuing operations | Not separately provided for the quarter | Not separately provided for the quarter | $1,137 million | $1,722 million |
| Free cash flow | Not separately provided for the quarter | Not separately provided for the quarter | $(5) million | $766 million |
| Gold production, consolidated | 1.203 million ounces | 1.453 million ounces | 2.436 million ounces | 2.764 million ounces |
| Gold AISC | $1,472 per ounce | $1,199 per ounce | $1,424 per ounce | $1,179 per ounce |
Calculated Q2 2023 net margin was approximately 5.8%, compared with approximately 12.7% in Q2 2022. Adjusted EBITDA margin was approximately 33.9%, compared with approximately 37.6% in the prior-year quarter. Costs applicable to sales were $1,543 million, or approximately 57.5% of sales, versus $1,708 million, or approximately 55.9%, in Q2 2022.
Average realized gold price increased to $1,965 per ounce from $1,836, while gold sold declined to 1.211 million ounces from 1.482 million. Copper revenue increased 8% in the quarter, while silver, lead and zinc revenue declined 11%, 14% and 29%, respectively.
At June 30, 2023, cash and cash equivalents were $2,829 million, time deposits with maturities of more than three months were $374 million, and total liquidity was $6,203 million, including $3,000 million of undrawn revolving-credit capacity. Debt was $5,574 million, lease and other financing obligations were $537 million, and reported net debt was $2,908 million. Capital expenditures were $1,142 million for the first six months, compared with $956 million in the prior-year period. The declared dividend was $0.40 per share for Q2 and July 2023.
Material changes versus the prior comparable period
- Q2 sales decreased 12%, and six-month sales decreased 12%, primarily because of lower gold volumes and lower volumes of most other metals.
- Q2 continuing-operations net income attributable to Newmont stockholders fell $226 million to $153 million; the six-month decline was $319 million to $492 million.
- Gold production decreased 17% in Q2 and 12% for the six-month period. Key factors included the Peñasquito strike, lower Akyem production, the Tanami rainfall and flooding event, and operational or sequencing issues at other mines.
- Gold AISC increased 23% in Q2 and 21% for the six-month period, reflecting lower volumes, higher sustaining capital, maintenance, energy and inflation-related costs.
- Operating cash flow from continuing operations fell 34% for the six months, while free cash flow declined from $766 million to negative $5 million, primarily because of lower sales volumes, inflationary operating costs, inventory buildup and higher capital spending.
- Income and mining tax expense increased to $163 million in Q2 from $33 million and to $376 million for six months from $247 million. The 2022 period benefited from a $125 million Mexico tax settlement benefit.
- The company incurred $21 million of Newcrest transaction-related costs in Q2 and $21 million for the six-month period.
Guidance, outlook, commentary and risks
- The filing does not provide a clear consolidated production, cost or cash-flow guidance figure. Management expects continued volatility from metal prices, inflation, foreign exchange, supply-chain conditions, labor markets and geopolitical developments.
- Peñasquito operations were suspended on June 7, 2023, following a union strike. Operations had not resumed as of the filing date, and the dispute could cause continued production and financial disruption.
- Éléonore was temporarily evacuated and shut down because of Canadian wildfires; management expected full resumption during Q3 2023. Ahafo also experienced conveyor and SAG mill issues requiring remediation and potentially affecting throughput.
- Management deferred the full-funds investment decision for the Yanacocha Sulfides project to the second half of 2026. The project may be redesigned, deferred further or abandoned; potential consequences include reserve revisions, accelerated closure activities and impairment of approximately $744 million of assets under construction within approximately $1.11 billion of Yanacocha long-lived assets.
- Newmont agreed to acquire Newcrest in a stock transaction, with Newcrest shareholders to receive 0.400 Newmont share per Newcrest share and a special dividend of up to $1.10 per Newcrest share. Closing was expected in Q4 2023, subject to shareholder, court and regulatory approvals. A termination fee of approximately $375 million could apply in specified circumstances.
- Reclamation and remediation liabilities totaled $7,115 million at June 30, 2023. The company identified significant uncertainty around Yanacocha water treatment and closure costs, CC&V remediation, the Midnite/Dawn sites and other historical properties.
- Other risks include commodity-price sensitivity, foreign-currency exposure, environmental and permitting requirements, political and regulatory changes in operating jurisdictions, legal proceedings, mine safety, labor relations and potential impairment of long-lived assets, inventories, goodwill and deferred tax assets.
Important facts for investors to verify
- Whether and when Peñasquito resumes operations, the terms of any labor settlement, and the effect on full-year production and cost expectations.
- Updated production, AISC, capital-spending and cash-flow guidance, which is not clearly stated in this filing.
- Progress and final approvals for the Newcrest transaction, expected share issuance, integration costs, synergies and potential termination exposure.
- The updated economic assessment and impairment implications of the delayed Yanacocha Sulfides project.
- Whether the $7.1 billion reclamation and remediation liability adequately reflects evolving water-treatment, closure and historical-site obligations.
- Recovery from the Tanami weather event and Ahafo equipment issues, including insurance proceeds and business-interruption claims.
- Commodity prices, foreign-exchange movements and inflation, including the filing’s estimate that a hypothetical 10% adverse movement in relevant local currencies would increase costs applicable to sales by approximately $66 per ounce.