Newmont Corporation — Q3 2021 Form 10-Q Summary
Business context and reporting period
Newmont is a global gold producer with significant operations in North America, South America, Australia, Africa and Nevada. The filing covers the unaudited quarter and nine months ended September 30, 2021, compared primarily with the corresponding 2020 periods. Newmont produced gold and by-product metals including copper, silver, lead and zinc.
Financial and operating metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Sales | $2,895 million | $3,170 million | $8,832 million | $8,116 million |
| Net income attributable to Newmont stockholders | $3 million | $839 million | $1,212 million | $2,005 million |
| Continuing-operations net income attributable to stockholders | $(8) million | $611 million | $1,170 million | $1,860 million |
| Diluted EPS from continuing operations | $(0.01) | $0.76 | $1.46 | $2.31 |
| Adjusted net income | $483 million | $697 million | $1,747 million | $1,284 million |
| Adjusted diluted EPS | $0.60 | $0.86 | $2.18 | $1.59 |
| Adjusted EBITDA | $1,316 million | $1,663 million | $4,364 million | $3,765 million |
| Operating cash flow from continuing operations | Not separately provided for the quarter | Not separately provided for the quarter | $2,967 million | $3,204 million |
| Free cash flow | Not separately provided for the quarter | Not separately provided for the quarter | $1,755 million | $2,300 million |
| Gold produced | 1.422 million oz. | 1.521 million oz. | 4.274 million oz. | 4.236 million oz. |
| Gold all-in sustaining cost | $1,120/oz. | $1,020/oz. | $1,064/oz. | $1,046/oz. |
Q3 2021 sales declined 9%, while nine-month sales increased 9%. Gold represented $2,516 million of Q3 sales and $7,628 million for the nine-month period. Q3 realized gold price was $1,778 per ounce versus $1,913, while nine-month realized gold price was $1,783 versus $1,745. Copper, silver, lead and zinc sales increased year over year for both reported periods, primarily because of higher prices and stronger volumes at Peñasquito and Boddington.
Q3 reported loss from continuing operations attributable to stockholders was driven by a $571 million loss on Conga mill assets held for sale, lower gold prices and sales volumes, unrealized investment losses, higher operating costs, and higher reclamation and remediation expense. Q3 continuing-operations net margin attributable to stockholders was approximately negative 0.3%, compared with approximately 19.3% in the prior-year quarter. The nine-month comparable margin was approximately 13.2% versus 22.9%.
At September 30, 2021, cash and cash equivalents were $4,636 million, total liquidity was $7,636 million, net debt was $1,502 million and consolidated debt was $5,482 million. The $3,000 million revolving credit facility had no borrowings outstanding. Nine-month capital expenditures were $1,212 million, compared with $904 million in 2020.
Material changes versus the prior comparable period
- Q3 gold production fell 7% and gold sales fell 5%, reflecting lower output at Nevada Gold Mines, CC&V, Tanami and Boddington. Nevada production was affected by a Goldstrike mill failure that was repaired by September.
- Nine-month gold production increased 1%, but gold all-in sustaining costs increased to $1,064 per ounce from $1,046 per ounce.
- Costs applicable to sales increased 8% in Q3 and 6% for nine months. Reclamation and remediation expense rose to $117 million in Q3 from $38 million and to $220 million for nine months from $116 million.
- Cash flow from continuing operations declined 7% for nine months, while free cash flow declined 24%, primarily reflecting higher capital spending and tax payments.
- Debt declined from $6,031 million at December 31, 2020 to $5,482 million at September 30, 2021. Newmont redeemed the $550 million 2021 Senior Notes in April.
- Dividends paid increased to $1,321 million for nine months from $514 million. The third-quarter dividend was $0.55 per share, and $248 million of share repurchases had been executed under the $1 billion program through September 30.
Guidance, outlook, commentary and unusual items
- All operating sites were fully operational at September 30, 2021. Cerro Negro returned to full capacity in September, and Tanami returned to full capacity by the end of July after a COVID-19-related care-and-maintenance period.
- The Board fully funded Ahafo North in July 2021. Estimated capital cost is $750 million to $850 million, with construction completion expected in the second half of 2023 and commercial production in early 2024. Production is expected to be 275,000 to 325,000 ounces annually during the first five 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 cost is $850 million to $950 million, with commercial production expected in the first half of 2024.
- An October 2021 Nevada Gold Mines asset exchange with i-80 Gold closed after quarter-end. Newmont expects to recognize a significant gain in Q4 2021, although the valuation and accounting were still in process at filing.
- The Conga mill assets were reclassified as held for sale for expected proceeds of $68 million, resulting in a $571 million loss. Remaining Conga assets were approximately $900 million, and Newmont continued to evaluate the project.
- COVID-19-specific costs were $24 million in Q3 and $66 million for nine months. The company’s $20 million Global Community Support Fund had distributed approximately $14 million through September 30, 2021.
- Yanacocha closure studies could increase the reclamation obligation by up to approximately $1.6 billion, primarily for water-treatment construction and operating costs. Newmont expected to record an adjustment in Q4 2021, but the amount remained subject to further studies, regulatory review and revised estimates.
Risks and contingencies
- Results remain highly sensitive to gold, copper, silver, lead and zinc prices, foreign exchange rates, operating costs, recoveries, grades and production volumes.
- COVID-19 could again disrupt operations, labor availability, transportation, supply chains, refining, smelting or site access.
- Environmental and reclamation liabilities may increase materially. The Yanacocha water-quality compliance timeline, closure plan and potential reclamation adjustment are particularly significant.
- Peru presents political, regulatory and community-opposition risks affecting Yanacocha and Conga, including potential changes to mining concessions, taxes, royalties, permitting and environmental requirements.
- Newmont disclosed legal and tax matters including the Holt royalty litigation, Mexican tax reassessments, Ghanaian constitutional claims, Canadian litigation and Yanacocha-related disputes. The filing states that outcomes for several matters cannot be reasonably predicted.
- At September 30, 2021, reclamation and remediation liabilities totaled approximately $3.9 billion, excluding potential increases from the Yanacocha studies.
Most important facts for investors to verify
- Whether the expected Yanacocha reclamation adjustment is recorded in Q4 2021 and its final amount.
- Final accounting and gain recognized from the post-quarter-end Nevada Gold Mines asset exchange.
- Updated production, cost and capital guidance for 2021 and progress against Ahafo North and Tanami Expansion 2 budgets and schedules.
- Whether gold prices and production volumes support dividends, repurchases and planned development spending.
- Trends in gold all-in sustaining costs, particularly at Yanacocha, Tanami, Africa and other higher-cost operations.
- Developments in Peru’s regulatory and political environment, COVID-19 impacts, and the material legal and tax contingencies disclosed in Note 21.