In an ideal world, debt reduction could be a high priority. Unfortunately, growth at any cost appears to be a part of the zeitgeist within the 2020s, especially on Wall Street. Nevertheless, Newmont (NYSE:NEM), the world’s biggest gold miner, is bucking the trend and setting a great example by taking a financially disciplined approach.
Naturally, investing in NEM stock requires a bullish stance on gold and, to a lesser degree, copper. If you happen to anticipate a good demand-versus-supply balance for these minerals though, then it is smart to speculate in a blue-chip producer like Newmont.
Alarmingly, Newmont stock has declined from $85 in April 2022 to the low $30s recently. Nevertheless, should you truly consider within the buy-low-sell-high mentality, then there’s a possibility here to mine for profits as Newmont strives to chop costs and maintain an honest dividend in 2024.
A smaller giant
Sometimes smaller is best, especially when an organization like Newmont seeks to exhibit financial discipline. It’s a difficult tightrope walk for Newmont to concurrently reduce its expenditures while also returning substantial value to its shareholders. Yet, the corporate appears to be fully committed to this approach.
Newmont’s belt-tightening road map includes “[n]ear-term debt reduction of $1 billion to roughly $8 billion.” That’s a slightly big selection, so investors should monitor Newmont’s progress in the approaching quarters to see whether the ultimate debt-reduction result is definitely closer to $1 billion or $8 billion.
The corporate had $8.874 billion of debt at the tip of 2023, versus $5.571 billion of debt at the tip of 2022. Clearly, it’s imperative that Newmont reverse this trend as soon as possible.
A central a part of the corporate’s debt-reduction plan is “divestment proceeds from sale of non-core assets.” Specifically, Newmont intends to sell six non-core mineral assets and two non-core projects.
As well as, the corporate plans to scale back its workforce within the wake of its acquisition of Newcrest Mining last 12 months.
“An enormous a part of our commitment is to deliver $100 million of free money flow by bringing Newmont and Newcrest together… [T]here is a discount in headcount with a view to achieve those synergies,” Newmont CEO Tom Palmer clarified to Reuters.
Together with all of that, Newmont has supposedly “[i]dentified a further $500 million of cost and productivity improvements over and above initial synergy commitments,” and is committed to a “[d]isciplined development capital spend of roughly $1.3 billion each year.”
One can only hope that Newmont will follow that plan regardless of the inevitable fluctuations in the fee of getting gold and copper out of the bottom.
Newmont stays a resource behemoth, having counted 135.9 million ounces of gold reserves and 30.1 billion kilos of copper reserves at the tip of last 12 months. The corporate also had smaller quantities of silver, zinc, lead and molybdenum.
Has Newmont’s massive mineral base resulted in a profitable profile though? It did within the fourth quarter of 2023 as the corporate reported adjusted earnings of fifty cents per share.
This demonstrates improvement over Newmont’s earnings of 36 cents per share within the prior quarter and 44 cents per share within the year-earlier quarter. Moreover, Newmont’s Q4 2023 result beat the analysts’ consensus estimate of 44 cents per share.
Turning to the top-line results, Newmont generated revenue of $3.957 billion within the fourth quarter, up 23.7% in comparison with the $3.2 billion in revenue from the year-earlier quarter. Furthermore, this result easily exceeded Wall Street’s call for $3.1714 billion in quarterly revenue.
Mind you, all of this took place during a time when the gold price couldn’t break above $2,100 for any substantial length of time. If you happen to’re bullish on gold, then you definitely might anticipate a ramp-up in Newmont’s already impressive revenue growth.
Finally, even while Newmont is devoted to reining in its expenditures, it continues to return capital to its loyal shareholders. Specifically, the corporate declared a hard and fast annualized dividend payout of $1 per share together with a “$1 billion share repurchase program to be executed over the subsequent 24 months.”
Newmont’s dividend isn’t gigantic on a percentage basis, but gold bullion pays no dividend in any respect. Thus, should you’re out there for a diversified-minerals miner which will prove to be a model of fiscal discipline in 2024, consider putting a number of shares of NEM stock in your portfolio.