Newmont Corporation: FY2021 Form 10-K 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. It also produces copper, silver, lead and zinc. This Form 10-K covers the fiscal year ended December 31, 2021, with comparisons primarily to fiscal 2020. The filing is an annual report rather than a quarterly filing.
- Newmont reported 5.9 million consolidated gold ounces produced and 5.6 million attributable gold ounces, plus 1.3 million attributable ounces from the 40%-owned Pueblo Viejo mine.
- At December 31, 2021, attributable proven and probable gold reserves were 92.8 million ounces; measured and indicated gold resources were 68.3 million ounces and inferred resources were 33.2 million ounces.
Financial and operating metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Sales | $12,222 million | $11,497 million | +6% |
| Net income attributable to Newmont stockholders | $1,166 million | $2,829 million | -59% |
| Continuing-operations net income attributable to Newmont stockholders | $1,109 million; $1.39 diluted share | $2,666 million; $3.31 diluted share | -$1,557 million |
| Adjusted net income | $2,371 million; $2.96 diluted share | $2,140 million; $2.66 diluted share | +11% |
| Adjusted EBITDA | $5,963 million | $5,537 million | +8% |
| Operating cash flow from continuing operations | $4,266 million | $4,890 million | -13% |
| Free cash flow | $2,613 million | $3,588 million | -27% |
| Costs applicable to sales | $5,435 million | $5,014 million | +8% |
| Gold all-in sustaining cost | $1,062 per ounce | $1,045 per ounce | +2% |
Costs applicable to sales represented approximately 44.5% of sales in 2021 versus approximately 43.6% in 2020. The filing does not present a single GAAP operating margin; profitability was significantly affected by non-operating reclamation charges, asset-sale items and tax expense.
- Gold sales increased 2% to $10,543 million. Copper sales increased 90% to $295 million, silver sales increased 28% to $651 million, lead sales increased 28% to $172 million and zinc sales increased 61% to $561 million.
- Average realized prices were $1,788 per gold ounce, $4.29 per copper pound, $20.19 per silver ounce, $1.00 per lead pound and $1.30 per zinc pound.
- Consolidated gold production increased 1% to 5.884 million ounces. Other-metal equivalent production increased 23% to 1.252 million ounces.
- Capital expenditures were $1,693 million on an accrual basis, including $708 million of development capital and $985 million of sustaining capital. Cash-basis additions to property, plant and mine development were $1,653 million.
Liquidity, debt and shareholder returns
| Metric at December 31 | 2021 | 2020 |
|---|---|---|
| Cash and cash equivalents | $4,992 million | $5,540 million |
| Total debt | $5,652 million | $6,031 million |
| Lease and other financing obligations | $650 million | $671 million |
| Net debt | $1,310 million | $1,162 million |
| Revolving-credit borrowing capacity | $3,000 million | $2,928 million |
| Total liquidity | $7,992 million | $8,468 million |
- No borrowings were outstanding under the $3.0 billion revolving credit facility, and Newmont was in compliance with its debt covenants.
- Debt maturities after the January 2022 redemption of the remaining 2023 Goldcorp notes begin with $87 million in 2023; $5,624 million mature beginning in 2029.
- Cash dividends paid were $1,757 million, or $2.20 per common share. The Board declared a $0.55-per-share fourth-quarter 2021 dividend in February 2022.
- Newmont repurchased approximately $525 million of common stock during 2021 under its $1 billion authorization. The program was extended through December 31, 2022.
Material changes versus the prior comparable period
- Revenue increased primarily because of higher realized prices and higher sales volumes after several sites experienced care-and-maintenance or reduced operations during the COVID-19-affected 2020 period.
- Reported continuing-operations earnings fell sharply despite higher revenue and adjusted earnings. The principal drivers were a $1,846 million reclamation and remediation expense, a $571 million loss on Conga mill assets classified as held for sale, lower asset-sale gains and higher income and mining tax expense of $1,098 million.
- Yanacocha production declined 22% to 264,000 ounces as the mill ramped down, while Peñasquito production increased 30% to 686,000 ounces after 2020 restrictions. NGM attributable production declined 5% to 1.272 million ounces, partly because of a Goldstrike mill mechanical failure.
- Reclamation and remediation liabilities increased to $6,112 million from $4,032 million. The increase principally reflected a $1,597 million increase in the Yanacocha reclamation liability.
- Newmont acquired the remaining 85.1% of GT Gold for total consideration of $378 million, including $326 million of cash and transaction costs.
- Newmont issued $1 billion of 2.60% sustainability-linked senior notes due 2032 and used the proceeds to refinance or redeem nearer-term debt.
Guidance, outlook, commentary and unusual items
- The filing excerpt does not provide a consolidated 2022 production, cost or cash-flow guidance table. Investors should obtain the company’s subsequent 2022 guidance disclosure separately.
- Ahafo North was fully funded in July 2021. Expected capital costs are $750 million to $850 million, with construction completion expected in late 2023 and commercial production expected in 2024. The project is expected to produce 275,000 to 325,000 ounces annually during its first five full years.
- Tanami Expansion 2 is expected to add approximately 150,000 to 200,000 ounces of annual gold production during the first five years beginning in 2024 and reduce operating costs by approximately 10%. Estimated capital costs are $850 million to $950 million.
- Newmont targets reductions of more than 30% in Scope 1 and Scope 2 emissions and 30% in Scope 3 emissions by 2030, with an aspiration of net-zero carbon emissions by 2050. It planned a preliminary $100 million investment with Caterpillar in electrification and autonomous mining systems.
- COVID-19 remained an operating risk. Newmont incurred $87 million of incremental direct COVID-19 costs in 2021, including health, travel, security, employee and community-support costs.
- Yanacocha closure and water-management studies remain in progress. The company expects additional revisions to reclamation obligations could occur as water treatment, tailings, water-balance and post-closure assumptions are refined.
- Yanacocha must seek an extension or updated compliance plan relating to modified Peruvian water-quality requirements. Without regulatory agreement, fines or penalties could arise after January 2024.
- Newmont completed the acquisition of Buenaventura’s 43.65% Yanacocha interest in February 2022 for $300 million in cash, royalties and contingent payments, increasing ownership to 95%. This transaction was not reflected in the December 31, 2021 balance sheet.
- Key continuing risks include metal-price volatility, inflation and energy costs, foreign-exchange restrictions, COVID-19 and workforce disruption, permitting and community opposition, environmental and closure liabilities, tailings and water risks, geopolitical exposure, cyberattacks, joint-venture dependence and potential impairment charges.
Most important facts for investors to verify
- Reconcile GAAP earnings of $1,109 million from continuing operations attributable to Newmont stockholders with adjusted net income of $2,371 million, particularly the Yanacocha reclamation charge and Conga asset loss.
- Review the updated Yanacocha closure studies, water-treatment requirements, regulatory timetable and the financial effect of the 2022 increase to 95% ownership.
- Confirm 2022 production, cost, capital-expenditure and cash-flow guidance, which is not clearly provided in the filing text.
- Assess whether Ahafo North and Tanami Expansion 2 remain within their stated capital budgets and achieve the projected 2024 production timing.
- Monitor gold and base-metal prices, energy and labor costs, foreign-exchange movements and their effect on AISC, cash flow and reserve economics.
- Evaluate the $6,112 million reclamation and remediation liability, $7,252 million of undiscounted reclamation and remediation contractual obligations, and the potential for further increases.
- Review debt maturities, sustainability-linked coupon provisions and the company’s ability to maintain dividends and repurchases while funding development capital.
- Verify the status and potential exposure of the Royal Gold/Holt litigation, Yanacocha tax dispute, Mexican tax matter, Ghana proceedings and other disclosed contingencies.