Business Context and Reporting Period
Newmont Corporation is a global gold producer with by-product production of copper, silver, lead and zinc. This unaudited Form 10-Q covers the three and nine months ended September 30, 2023, compared primarily with the same periods in 2022. Newmont reported 12 mining operations and its 38.5% interest in Nevada Gold Mines as reportable segments.
Financial and Operating Metrics
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Sales | $2,493 million | $2,634 million | $7,855 million | $8,715 million |
| Net income attributable to Newmont stockholders | $158 million | $213 million | $664 million | $1,048 million |
| Continuing operations EPS, diluted | $0.20 | $0.28 | $0.82 | $1.30 |
| Adjusted net income | $286 million | $212 million | $872 million | $1,120 million |
| Adjusted diluted EPS | $0.36 | $0.27 | $1.10 | $1.41 |
| Adjusted EBITDA | $933 million | $850 million | $2,833 million | $3,389 million |
| Gold produced | 1.260 million oz. | 1.428 million oz. | 3.696 million oz. | 4.192 million oz. |
| Gold AISC | $1,426/oz. | $1,271/oz. | $1,425/oz. | $1,209/oz. |
Q3 continuing-operations net margin was approximately 6.3%; adjusted net margin was approximately 11.5%; EBITDA margin was approximately 30.5%; and adjusted EBITDA margin was approximately 37.4%. These calculated margins are based on reported sales and may not be directly comparable with mine-level margins.
- Q3 operating cash flow from continuing operations was $2,138 million for the nine-month period, down 2% from $2,188 million in the prior-year period.
- Nine-month free cash flow was $392 million, down from $703 million, reflecting higher capital expenditures of $1,746 million versus $1,485 million.
- Cash and cash equivalents were $3,190 million at September 30, 2023. Total liquidity was $6,190 million, including $3,000 million of undrawn revolving-credit capacity.
- Debt was $5,575 million, and net debt was $2,897 million versus $2,426 million at December 31, 2022.
- Cash dividends paid were $0.40 per share in Q3 and $1.20 per share for the first nine months. The Board declared an additional $0.40 per-share dividend in October 2023.
- Capital expenditures on a cash basis were $604 million in Q3 and $1,746 million for the first nine months.
Material Changes Versus the Prior Comparable Period
- Q3 sales declined 5%, while nine-month sales declined 10%. Gold revenue increased 2% in Q3 but declined 7% year to date because of lower volumes; higher realized gold and copper prices partly offset volume declines.
- Reported continuing-operations income attributable to Newmont stockholders fell $61 million in Q3 and $380 million for the first nine months. The primary driver was the Peñasquito labor strike, which suspended operations and materially reduced gold, silver, lead and zinc production.
- Gold production declined 12% in Q3 and 12% for the first nine months. Gold AISC increased 12% in Q3 and 18% year to date, reflecting lower volumes, inflationary input costs, higher sustaining capital and other operating issues.
- Costs applicable to sales declined 11% in Q3 and 6% year to date, principally because of the Peñasquito shutdown and lower production-related costs. This reduction did not offset lost revenue and higher reclamation charges.
- Reclamation and remediation expense increased to $166 million in Q3 from $53 million and to $298 million for the first nine months from $163 million. Total reclamation and remediation liabilities were $7,218 million at September 30, 2023.
- Adjusted net income increased in Q3, and adjusted EBITDA increased 10%, primarily because the prior-year period included different investment, pension and other unusual items. Year-to-date adjusted net income and adjusted EBITDA declined.
- Income and mining tax expense was $449 million for the first nine months versus $343 million in 2022; the effective tax rate increased to 42% from 26%, with geographic earnings mix and tax adjustments affecting comparability.
Guidance, Outlook, Commentary, Risks and Unusual Items
- The filing does not provide a clear numerical production, cost or earnings guidance update for the full year.
- Peñasquito operations were suspended from June 7 through the third quarter because of a union strike. Newmont reached an agreement with the union on October 13, 2023, and expected operations to resume in Q4. The agreement provides workers approximately 60% of wages during the strike and a potential bonus of two months' wages in Q2 2024 if the mine reports no 2023 profit.
- The Newcrest acquisition was approved by Newmont and Newcrest shareholders and by the Australian court after quarter-end. Implementation was expected in November 2023, with Newmont shareholders receiving a substantial number of new shares. The transaction introduces integration, execution, financing, political, environmental, foreign-exchange and reserve-estimation risks. A reverse break fee of approximately $375 million could be payable in specified circumstances.
- Newmont deferred the full-funds investment decision for the Yanacocha Sulfides project until at least the second half of 2026. Yanacocha had approximately $1,163 million of long-lived assets, including approximately $822 million of assets under construction related to the project. A decision not to proceed could result in reserve changes, accelerated closure activities or impairment charges.
- San Marcos at Cerro Negro reached commercial production on September 30, 2023, the first of six ore bodies in the district expansion.
- Tanami experienced rainfall and flooding, and Ahafo experienced a conveyor failure and SAG mill girth-gear damage. Newmont received $45 million of Tanami and $11 million of Ahafo business-interruption insurance proceeds in Q3; additional Ahafo proceeds were expected in Q4.
- Major continuing risks include metal-price volatility, cost inflation, foreign-exchange exposure, labor disruptions, supply-chain interruptions, mine and processing risks, permitting and political uncertainty, environmental obligations, tailings and water-management requirements, and potential impairments.
- Significant legal and environmental matters include Yanacocha water-treatment and closure requirements, Midnite mine remediation, CC&V water-treatment obligations, and ongoing litigation or regulatory proceedings. The filing states that outcomes of several legal matters cannot reasonably be predicted.
Most Important Facts for Investors to Verify
- Whether Peñasquito resumed operations as expected in Q4 2023 and the resulting production, cost and cash-flow impact.
- Completion timing, accounting treatment, financing effects and integration performance of the Newcrest transaction.
- Updated full-year production, AISC, capital-expenditure and free-cash-flow expectations following the strike and acquisition.
- The size and timing of any additional reclamation, remediation, Yanacocha water-treatment or project-impairment charges.
- Progress and cost outlook for Tanami Expansion 2, Ahafo North, Cerro Negro expansion projects and the deferred Yanacocha Sulfides project.
- Whether higher gold prices can offset rising AISC, lower production volumes and increased sustaining capital requirements.
- Compliance with debt covenants, post-acquisition leverage and the continued availability of the $3,000 million revolving-credit facility.
- The status and potential financial exposure of material environmental, labor, tax and legal contingencies.