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Newmont Mining update Oct. 6th, 2021 

NEM

This is not a recommendation or proposal to do anything. The data written in this article are best guesses and not guarranteed. It is my private personal opinion. I`m not independing as I own a position of NEM shares. 

Newmont Mining became with the merger with Goldcorp the worlds first gold miner with a production of > 6 mio. oz (2019 6.3 mio. oz, 2020 5.9) plus 50.000to copper. The issue NEM had to find out is that Goldcorp reduced capex and exploration to a minimum. It will require NEM till 2022 to bring the Goldcorp mines to its standard (12)

Barrick and NEM formed a JV with their mines in Nevada in July 2019. It is owned 38.5% (Newmont)/61.5% (Barrick), with Barrick as an operator for the eight assets located in Nevada (11). The JV is expected to produce 1.4 M oz of gold attributable to Newmont annually. 


Chances & Risks:

The profit of NEM and hence the shareprice is linked to the gold price. The NEM share is a bet on the gold price. 

The valuation of NEM is not low. The PE is if NEM makes perhaps 2.8$/share profit (share price 60$) at 21 not low. The declared quarterly dividend of $0.55 per share provides a 3.6% yield at a share price of 60$/yr. The gold production of NEM is expected to stay stable the following years. That means the share price took advantage of the high gold price but did not include the expectation of a further rising gold price.

The production is in most quarters lower than forecasted and expected. It seems that the NEM technical management is not the most efficient one or does not include reserves in their estimates. 

Gold is not eatable. The main value of gold is the believe that others believe that gold is very precious. This is not rational but works well since several thousand years. In India and the Middle East marriages are very gold intensive (no 1 gold market). It seems that crypto currencies take over a similar function as gold. But these currencies are young and show a high fluctuation which makes them less attractive. Gold and crypto currencies have the advantage that the ownership can easier be kept private. This is an important motivation in countries were poeple doesn`t know what happens tomorrow or for ex. men in a divorce (Europe, NA). The increasing wealth in india and the excessive creation of new money by important central banks (is perceived as a risk) might induce a rising gold demand and hence gold price.  

The main chance and risk for NEM is a fluctuation in the gold price. A gold price increase seems more likely than a decrease. The gold intensive weddings in India and Middle East increase due to demographics, the uncertainties of politics does not decrease. On the supply side the exploration yield of the miners is decreasing.  

China is getting more and more in a rivalty with the US independent of the leading politicians. It might happen that the Chinese central bank will decrease its share of USD and replacing it by other currencies and gold. A 1 - 2% shift would mean a big push to the gold price.  

The political risk for the NEM production is low as 66% of the gold production is situated in North America/Australia countries with high policitcal stability. In many other gold mining countries there is always a political risk from random tax increases up to disappropriations. In some countries the business practices are not in line with US/European compliance rules.  

 A share buy back program of 1 bn$ announced. 

Some Data:

 



 

2020 Reserves              

Newmont’s Measured and Indicated gold Mineral Resource grade decreased to 0.65 grams per tonne compared to 0.70 grams per tonne in the prior year largely from higher grade being converted to reserves. Inferred gold Mineral Resource grade of 0.65 grams per tonne increased compared with 0.63 grams per tonne from 2019 

The average ore grade of proven and probable reserves is 1.03% gold.

  • Industry’s largest gold Mineral Reserves of 94.2 million ounces
  • Measured & Indicated gold Mineral Resources of 69.6 million ounces; Inferred of 31.6 million ounces
  • Significant exposure to copper with 6.9 million tonnes in reserves, 8.0 million tonnes in Measured & Indicated resources and 3.9 million tonnes in Inferred resources
  • Additional exposure to silver, zinc, and lead mainly at Peñasquito


2019 Reserves

In 2019, Newmont reported 100.2 million ounces of gold Mineral Reserves and 95.7 million ounces after adjusting for divestments. Newmont’s gold reserve grade was 1.05 grams per to. 

Measured and Indicated gold Mineral Resources are 74.1 million ounces and Inferred gold Mineral Resources are 29.4 million ounces.

Copper reserves increased to 6.8 million tonnes,  primarily due to the NuevaUnión and Norte Abierto projects. 

Silver reserves made up 652 million ounces  Peñasquito, but also NuevaUnión, Norte Abierto, Cerro Negro and Pueblo Viejos.  It adds 3.4 million tonnes of zinc reserves and 1.5 million tonnes of lead reserves at Peñasquito, and 0.1 million tonnes of molybdenum at NuevaUnión. 

Development Projets in Execution

- Tanami Expansion 2 Australia 

– Gold Goldrush Declines (NGM JV) USA 

– Gold Turquoise Ridge Shaft (NGM JV) USA

Project Pipeline

1-3 years  Yanacocha Sulfides Peru – Gold (~65%) Copper (~35%) Ahafo North Ghana – Gold Pueblo Viejo Expansion JV Dominican Republic – Gold

> 3years:  Galore Creek JV Canada – Gold (~25%) Copper (~75%) Norte Abierto JV Chile – Gold (~65%) Copper (~35%) Nueva Unión JV Chile – Gold (~20%) Copper (~80%) Apensu Underground (Ahafo) Ghana – Gold Akyem Underground Ghana – Gold Oberon (Tanami) Australia – Gold Long Canyon Phase 2 (NGM JV) USA – Gold Coffee Canada – Gold Tanami Expansion 2 Australia – Gold Goldrush Declines (NGM JV) USA – Gold Turquoise Ridge Shaft (NGM JV) USA – Gold CC&V Underground USA – Gold Cerro Negro District Expansions Argentina – Gold Sabajo Extension (Merian) Suriname – Gold Subika Underground Growth (Ahafo),  Tatogga* Canada – Gold (~45%) Copper (~55%) 


News

2021/10/06 has cut full-year production guidance for its Boddington gold mine in Western Australia by 140,000 ounces below the originally set target of 830,000 ounces. (20).  

2021/07/17 The Newmont board approved to develop the Ahafo North Project in Ghana. This project is expected to require 750 - 850 M$ capex. It is expected to produce about 300 K oz of gold/yr. at costs of 600 -700$/oz for 13 years. Thats about 5% of the NEM gold production. Ghana is some political risk. It seems that the good profit situation let NEM increase capex and expand its business.   

2021/11/03 Newmont Corporation has agreed to acquire Canadian miner GT Gold Corp for $US311 million ($402 million) in a deal that will bolster its copper-gold output. (18)

A key driver of the agreement is GT Gold’s Tatogga project in British Columbia, Canada,

2020/01/04 Newmont Goldcorp has completed the sale of its 50% stake in Kalgoorlie Consolidated Gold Mines (KCGM) to Australian gold producer Northern Star Resources for $800m. (13)

Some numbers about gold

Total gold production by manhood: about 170.000 tons (2020)

Total global gold holdings: 125 - 155.000 tons (2020)

Global gold production 2020: 3200tons

Total gold holdings Germany: 9000 tons private plus 3362 tons central bank (2020)

Total gold holdings Switzerland: 920 tons private (seems low!) plus 1040 tons SNB (2020) 


Gold Demand by Countries 2017

China                                984 tons

India                                 849 tons

US                                    193 tons

Germany                           124 tons

Thailand                             90 tons

Saudi Arabia                       85 tons 

 

The Global Gold Production in tons 2017 (1)

United States                              245 

Australia                                     300 

Canada                                       180

China                                          440

Peru                                            155

Russia                                         255

South Africa                                 145

World total (rounded)                 3,150 

 

This is not a recommendation or proposal to do anything. It is my private personal opinion. I`m not independing as I own a position of Newmont Mining shares. 

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Some References

(20) 2021 oct 6 https://www.mining.com/newmont-axes-gold-output-targets-at-boddington/

(19) 2021 July 17 https://www.kitco.com/news/2021-07-15/Newmont-gets-funding-approval-for-the-best-unmined-gold-deposit-in-West-Africa.html

(18) 2021 March 11 https://www.australianmining.com.au/news/newmont-to-scoop-up-gold-miner-for-402m/

(17) 2020 May 20 https://www.miningweekly.com/article/newmont-issues-new-2020-production-and-capex-guidance-2020-05-19

(16) 2020 Feb. 22 https://s2.q4cdn.com/575378270/files/doc_financials/2019/q4/6fde66e4-67c8-48fd-a1c9-a8d8f3e9a805.pdf

(15) 2020 Feb. 17 https://www.australianmining.com.au/news/newmont-achieves-highest-gold-reserves/

(14) 2020 Jan. 10th https://www.zacks.com/stock/news/707987/newmont-nem-unveils-plan-to-hike-annual-dividend-by-79

(13) 2020 Jan. 4th https://www.nsenergybusiness.com/news/newmont-kcgm-northern-star/

(12) 2019 July 26th https://www.reuters.com/article/us-newmont-goldcorp-results/newmont-ceo-says-goldcorp-mines-need-about-three-years-of-development-exploration-work-idUSKCN1UK1II

(11) 2019 July 3rd https://seekingalpha.com/article/4273204-barrick-gold-nevada-joint-venture-newmont-will-produce-1_85m-oz-h2-2019

(10) 2019 April 27 https://www.newmont.com/newsroom/newsroom-details/2019/Newmont-Goldcorp-Announces-Newmonts-First-Quarter-2019-Results/default.aspx

(9) 2019 Mar. 27 https://www.finanznachrichten.de/nachrichten-2019-03/46303427-newmont-gibt-bedingte-sonderdividende-bekannt-004.htm

(8) 2019 Mar. 13 https://seekingalpha.com/article/4248338-barrick-newmont-reached-interesting-deal

(7) 2019 Mar. 12 https://www.australianmining.com.au/news/barrick-drops-bid-for-newmont-as-companies-enter-jv/

(6) 2019 Mar. 05 https://www.australianmining.com.au/news/newmont-rejects-25bn-barrick-takeover-bid/

(5) 2019 Mar. 04 https://www.australianmining.com.au/news/barrick-launches-25bn-bid-for-newmont/

(4) 2019 Jan https://seekingalpha.com/article/4234186-newmont-strikes-back

(3) 2019 Jan. https://seekingalpha.com/news/3422587-newmont-mining-goldcorp-combine-10b-stock-deal?ifp=0

(2) 2018 dec. https://steelguru.com/mining/newmont-mining-announces-updated-2019-and-longer-term-outlook/528616

(1) 2018 nov. https://minerals.usgs.gov/minerals/pubs/mcs/2018/mcs2018.pdf

https://s1.q4cdn.com/259923520/files/doc_presentations/2018/September-Investor-presentation_FINAL_posting.pdf

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