Newmont Corporation 2022 Third-Quarter Form 10-Q Summary
Business context and reporting period
Newmont is a global gold producer with operations and assets across North America, South America, Australia, Africa and Nevada. The filing covers the unaudited quarter and nine months ended September 30, 2022, compared primarily with the corresponding 2021 periods. Newmont reported 100% ownership of Yanacocha following acquisitions completed during 2022.
Financial and operating metrics
| Metric | Three months ended Sept. 30, 2022 | Three months ended Sept. 30, 2021 | Nine months ended Sept. 30, 2022 | Nine months ended Sept. 30, 2021 |
|---|---|---|---|---|
| Sales | $2,634 million | $2,895 million | $8,715 million | $8,832 million |
| Net income attributable to Newmont stockholders | $213 million | $3 million | $1,048 million | $1,212 million |
| Continuing operations attributable earnings per diluted share | $0.28 | $(0.01) | $1.30 | $1.46 |
| Adjusted net income | $212 million | $483 million | $1,120 million | $1,747 million |
| Adjusted diluted earnings per share | $0.27 | $0.60 | $1.41 | $2.18 |
| Adjusted EBITDA | $850 million | $1,316 million | $3,389 million | $4,364 million |
| Operating cash flow from continuing operations | Not separately provided for the quarter | Not separately provided for the quarter | $2,188 million | $2,967 million |
| Free cash flow | Not separately provided for the quarter | Not separately provided for the quarter | $703 million | $1,755 million |
| Gold production | 1.428 million ounces | 1.422 million ounces | 4.192 million ounces | 4.274 million ounces |
| Gold all-in sustaining cost per ounce | $1,271 | $1,120 | $1,209 | $1,064 |
Third-quarter gold sales were $2,350 million, while copper, silver, lead and zinc sales were $48 million, $105 million, $26 million and $105 million, respectively. Average realized gold price was $1,691 per ounce in the quarter and $1,806 per ounce for the first nine months.
At September 30, 2022, Newmont had $3,058 million of cash and cash equivalents, $653 million of time deposits, $3,000 million of undrawn revolving-credit capacity and reported liquidity of $6,711 million. Debt was $5,569 million, lease and other financing obligations were $558 million, and management’s non-GAAP net debt was $2,416 million. The company remained in compliance with debt covenants.
Capital expenditures were $1,485 million on a cash basis during the first nine months, compared with $1,212 million in 2021. Dividends paid were $1,310 million, or $1.65 per common share, during the first nine months. The board declared an additional $0.55-per-share dividend in October 2022.
Material changes versus the prior comparable period
- Third-quarter sales declined 9%, primarily because of lower realized gold and other metal prices and lower sales volumes. Nine-month sales declined 1%.
- Costs applicable to sales increased 13% in the quarter and 20% for the first nine months, driven mainly by labor, fuel, energy, materials and supply-chain inflation, inventory write-downs and the Peñasquito profit-sharing agreement.
- Gold production was broadly stable in the quarter but declined 2% for the first nine months. Nevada Gold Mines production declined 13% in the quarter and 6% year to date.
- Gold all-in sustaining costs rose 13% in the quarter and 14% year to date, reflecting inflation, higher sustaining capital and operational factors.
- Adjusted EBITDA fell 35% in the quarter and 22% for the first nine months. Free cash flow declined 60% year to date, reflecting higher operating costs, capital spending and other cash payments.
- Reported third-quarter earnings benefited from the absence of the $571 million Conga mill-assets loss recorded in 2021, lower tax expense and favorable investment fair-value changes. These benefits were partly offset by weaker prices, volumes and higher costs.
- Year-to-date earnings were lower because of inflation, the Peñasquito profit-sharing charge, lower sales volumes, a $130 million non-cash pension settlement loss and the $45 million La Zanja sale loss, partially offset by the prior-year Conga loss and a $125 million Mexican tax settlement benefit.
Guidance, outlook, risks and unusual items
- Newmont delayed the full-funds investment decision for the Yanacocha Sulfides project because of inflation, supply-chain disruption, rising input costs and capital-allocation considerations. The company is evaluating execution alternatives, including potential transition of Yanacocha to full closure.
- Yanacocha had approximately $890 million of long-lived assets at September 30, including approximately $447 million of assets under construction for Yanacocha Sulfides. Abandonment or reduced economic feasibility could lead to reserve revisions, accelerated closure costs or material impairment charges.
- The company expects to record a fourth-quarter 2022 adjustment to the Yanacocha reclamation liability based on updated water-treatment engineering, inflation and supply-chain assumptions. Management stated that the adjustment could be material, but the amount was not yet estimable.
- Total reclamation and remediation liabilities were $6,098 million, including $5,778 million of reclamation liabilities and $320 million of remediation liabilities. The company disclosed that certain environmental liabilities could be as much as 54% higher than accrued.
- Other significant risks include metal-price volatility, cost inflation, labor and supply-chain constraints, foreign-exchange exposure, permitting and environmental compliance, rainfall and water-management risks, potential impairment of long-lived assets and goodwill, and geopolitical and market disruption related to COVID-19 and the Russia-Ukraine conflict.
- The filing disclosed an Australian tax dispute involving approximately $85 million of claimed capital gains tax, which Newmont disputes, and an Argentine transfer-pricing review for which no final assessment had been issued.
- Newmont agreed in September 2022 to sell its MARA interest for $125 million at closing plus a deferred payment; the transaction closed in the fourth quarter and was expected to produce an approximately $60 million gain.
- In October 2022, Newmont entered into A$574 million of forward contracts to hedge anticipated Australian-dollar capital expenditures for Tanami Expansion 2 during 2023 and 2024.
- Management appointed Brian Tabolt as interim CFO effective November 2, 2022, with Joshua Cage serving as interim controller and chief accounting officer.
Most important facts for investors to verify
- Whether inflation and operating pressures continue to increase all-in sustaining costs and reduce free cash flow.
- The revised timing, economics, funding requirements and impairment implications of the Yanacocha Sulfides project.
- The size of the expected fourth-quarter Yanacocha reclamation-liability adjustment and any related non-cash charge.
- Production and cost performance at Nevada Gold Mines, Peñasquito, Yanacocha and other higher-cost operations.
- Current gold, copper, silver, lead and zinc prices, including the impact of provisional pricing on reported revenue.
- Progress and financial exposure related to environmental, water-treatment, reclamation and remediation obligations.
- The outcome and potential cash exposure of the Australian tax dispute, Argentine transfer-pricing review and disclosed legal proceedings.
- Capital spending requirements for Ahafo North, Tanami Expansion 2, Goldrush, Cerro Negro and other development projects relative to available liquidity.