Newmont Corporation — Q1 2023 Form 10-Q Summary
Business context and reporting period
Newmont is a global gold producer with by-product production of copper, silver, lead and zinc. The filing covers the unaudited three months ended March 31, 2023, compared with the three months ended March 31, 2022. Reportable segments were revised in January 2023 to comprise 12 mining operations and Newmont’s 38.5% interest in Nevada Gold Mines, with prior periods recast.
Key financial and operating metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Sales | $2,679 million | $3,023 million | Down 11% |
| Net income attributable to Newmont stockholders | $351 million | $448 million | Down $97 million |
| Continuing-operations net income attributable to stockholders | $339 million | $432 million | Down $93 million |
| Diluted continuing-operations EPS | $0.42 | $0.54 | Down $0.12 |
| Adjusted net income | $320 million | $546 million | Down 41% |
| Adjusted diluted EPS | $0.40 | $0.69 | Down $0.29 |
| Adjusted EBITDA | $990 million | $1,390 million | Down 29% |
| Operating cash flow from continuing operations | $481 million | $689 million | Down 30% |
| Free cash flow | $(45) million | $252 million | Down $297 million |
| Gold production, consolidated | 1.233 million ounces | 1.311 million ounces | Down 6% |
| Gold sold, consolidated | 1.208 million ounces | 1.329 million ounces | Down 9% |
| Gold all-in sustaining cost | $1,376/oz. | $1,156/oz. | Up 19% |
Average realized gold price increased to $1,906 per ounce from $1,892. Realized copper, silver, lead and zinc prices declined. Gold revenue decreased $211 million, while copper revenue increased $11 million; silver, lead and zinc revenue decreased $39 million, $12 million and $93 million, respectively.
Costs applicable to sales increased 3% to $1,482 million despite lower volumes, primarily due to inflation in labor, materials, maintenance and energy, as well as supply-chain pressures. Depreciation and amortization declined 16% to $461 million. The filing does not present a single GAAP operating-margin measure; reported income before income and mining taxes and other items was $539 million, or approximately 20% of sales, versus $628 million, or approximately 21% of sales, in the prior-year quarter.
Liquidity, capital allocation and debt
- Cash and cash equivalents were $2.657 billion at March 31, 2023, down from $2.877 billion at December 31, 2022.
- Time deposits with maturities of more than three months and less than one year were $797 million.
- Total liquidity was $6.454 billion, including $3.0 billion of undrawn revolving-credit capacity.
- Debt was $5.572 billion; lease and other financing obligations were $547 million. Reported net debt was $2.665 billion, up from $2.426 billion at year-end.
- Capital expenditures on a cash basis were $526 million, compared with $437 million in Q1 2022. Development capital included Tanami Expansion 2, Ahafo North, Yanacocha Sulfides and Goldrush.
- Dividends paid were $318 million, or $0.40 per common share. The board declared another $0.40-per-share dividend in April 2023; future dividends remain discretionary.
Material changes versus the prior comparable period
- Lower sales resulted primarily from reduced volumes of all metals except copper and lower realized prices for all metals except gold.
- Peñasquito experienced lower ore grade and mill recovery, reducing gold and by-product production and materially increasing per-ounce costs.
- Tanami production declined following significant rainfall and flooding that closed transportation routes and paused processing for most of February. Newmont is working with insurers regarding the resulting business interruption.
- Attributable production increased at CC&V, Musselwhite, Porcupine, Éléonore, Boddington and Ahafo, but these gains were more than offset by declines at Peñasquito, Merian, Yanacocha, Tanami, Akyem, Nevada Gold Mines and Pueblo Viejo.
- Newmont recorded a $36 million net gain related to exchanging its Maverix investment for Triple Flag shares and subsequently selling the Triple Flag investment. Q1 2022 included a $130 million non-cash pension settlement charge and a $45 million loss on the sale of the La Zanja investment.
- Reclamation and remediation liabilities totaled $7.120 billion at March 31, 2023, including $6.750 billion of reclamation liabilities and $370 million of remediation liabilities.
Outlook, management commentary and risks
The filing does not provide clear consolidated production, cost or earnings guidance in the supplied text. Management expects existing cash, time deposits, revolving-credit availability and operating cash flow to fund operations, capital requirements, debt obligations and other liquidity needs for the foreseeable future.
- The full-funds investment decision for Yanacocha Sulfides remains delayed while management evaluates execution, project and closure options. Yanacocha had approximately $1.065 billion of long-lived assets, including $683 million of assets under construction related to Yanacocha Sulfides. Abandonment or reduced feasibility could result in reserve reductions, impairment charges and accelerated closure costs.
- Inflation, energy and input costs, supply-chain disruption, labor-market uncertainty, commodity-price volatility and banking-system instability could adversely affect margins, cash flow and asset values.
- Yanacocha faces uncertainty regarding compliance with revised Peruvian water-quality requirements, possible fines and penalties, and potentially material increases in water-treatment, tailings-management and closure obligations.
- Ahafo experienced a primary-crusher conveyor failure; the company expects to rebuild the conveyor later in 2023 and expects insurance proceeds to substantially cover the rebuild cost.
- Other material exposures include environmental remediation, mine closure obligations, currency controls in Argentina, and unresolved legal proceedings in Canada, Ghana and other jurisdictions. The filing states that outcomes of certain proceedings cannot reasonably be predicted.
- The company used approximately 49% non-U.S.-dollar currencies for costs applicable to sales. A hypothetical 10% adverse movement in local currencies would increase costs applicable to sales by approximately $68 per ounce.
Important facts for investors to verify
- Whether the Tanami rainfall event and Ahafo conveyor failure affect full-year production, costs, insurance recoveries or capital spending.
- The timing, economics and impairment risk associated with the Yanacocha Sulfides decision, including potential closure and water-treatment obligations.
- Whether cost inflation and higher sustaining capital cause further increases in consolidated AISC, which rose to $1,376 per ounce in Q1.
- The sustainability of free cash flow and the ability to fund $526 million of quarterly capital expenditures while maintaining dividends and reducing net debt.
- Changes in gold and base-metal prices, provisional sales subject to final pricing, foreign exchange rates and their effects on earnings, inventory values and impairment testing.
- The adequacy of the $7.120 billion reclamation and remediation liability and the potential financial effect of unresolved environmental and legal contingencies.
- The filing’s non-GAAP reconciliations, particularly adjusted net income, adjusted EBITDA, free cash flow, net debt and AISC, before using those measures for valuation comparisons.