01—Abstract
Summary
Summary of the 10-K filed February 21, 2014. Cited figures are marked; the original filing is the authoritative source.
Newmont Mining (NEM) closed 2013 as a deeply loss-making year, driven by a $4.35 billiona pre-tax write-down of property, plant and mine development, primarily at Boddington (Australia) and Long Canyon (Nevada), which pushed net loss attributable to Newmont stockholders to $(2.46) billion, or $(4.94) per share, versus net income of $1.81 billion in 2012.
Underlying performance weakened as average realized gold fell 16% to $1,393b/oz and costs applicable to sales rose 12% to $761/oz on stockpile and leach pad write-downs of about $1.2 billion. Adjusted net income fell to $695 million, or $1.40 per share, from $1.85 billion in 2012, and all-in sustaining costs reached $1,104/oz. The balance sheet absorbed the impairments: total assets fell to $24.8 billion from $29.7 billion, Newmont stockholders' equity dropped to $10.1 billion from $13.8 billion, and total debt rose to $6.7 billion.
Management's 2014 guidance calls for lower gold output (5.0-5.4 million ounces consolidated), capex reduced roughly 30% to $1.3c-1.4 billion, and a new dividend policy that lowered annual payout levels. Credit pressure is building: S&P cut the rating to BBB in November 2013 and Moody's placed Newmont on review for possible downgrade in January 2014.
Key operational risks for investors include the Indonesian government's January 2014 copper concentrate export regulations, which conflict with the Batu Hijau Contract of Work and could impair exports and output; the pending 7%d divestiture that would cut Newmont's direct stake in PTNNT; political and community opposition at Conga in Peru; and the Mexican explosives permit suspension at La Herradura. Investors should weigh the strength of the cash-generating asset base against the impairments, rising leverage and ratings pressure.
02—Key points
Key Highlights
- Net loss attributable to Newmont stockholders of $(2,462) million, or $(4.94) per share, compared with net income of $1,809 million ($3.65 per share) in 2012, driven primarily by $4,352 million of write-downs.
- Write-downs of $4,352 million in 2013, mainly Boddington ($2,107 million) and Long Canyon in Nevada ($2,082 million), reflecting lower long-term gold and copper price assumptions ($1,300/oz and $3.00/lb).
- Sales fell 16% to $8,322 million; average realized gold price declined to $1,393/oz from $1,662/oz, while consolidated gold production was 5.5 million ounces.
- Adjusted net income was $695 million ($1.40 per share), down from $1,850 million ($3.73 per share) in 2012.
- Costs applicable to sales rose to $761/oz gold (from $677) and $4.42/lb copper (from $2.34), largely due to stockpile and leach pad write-downs of about $1.2 billion; all-in sustaining costs were $1,104/oz.
- Gold and copper proven and probable reserves declined to 88.4 million ounces and 8,130 million pounds, respectively, from 99.2 million ounces and 9,510 million pounds at year-end 2012.
- Credit ratings under pressure: S&P downgraded Newmont to BBB from BBB+ in November 2013, and Moody's placed the rating on review for possible downgrade in January 2014; total debt was $6,740 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 21, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $8.41B$9.96B | −15.6% |
| R&D Expenses | $222.00M$348.00M | −36.2% |
| Operating Expenses | $12.07B$6.88B | +75.4% |
| Operating Income | -$2.60B$1.88B | −238.2% |
| Net Income | -$2.53B$1.80B | −240.6% |
| EPS (Basic) | $-5.09$3.64 | −239.8% |
| EPS (Diluted) | $-5.09$3.61 | −241.0% |
| Shares Outstanding (Basic) | 498.00M496.00M | +0.4% |
| Shares Outstanding (Diluted) | 498.00M499.00M | −0.2% |
05—Questions
Frequently Asked Questions
Why did Newmont report a large net loss in 2013 despite producing 5.5 million ounces of gold?
The loss was driven by non-cash write-downs of $4,352 million on property, plant and mine development, chiefly at Boddington in Australia and the Long Canyon project in Nevada, after management lowered long-term gold and copper price assumptions. Additional stockpile and leach pad write-downs of roughly $1.2 billion were recorded within costs applicable to sales and amortization. Excluding these and other items, adjusted net income was $695 million, or $1.40 per share.
How are the 2014 expectations different from 2013?
Management guides to consolidated gold production of 5.0 to 5.4 million ounces (4.6 to 4.9 million attributable), costs applicable to sales of about $740 to $790 per ounce, and all-in sustaining costs of about $1,075 to $1,175 per ounce. Consolidated capital expenditures are expected to fall about 30% to $1.3 to $1.4 billion, with roughly 90% allocated to sustaining capital, and the dividend policy was adjusted to a lower annual payout level.
What are the main risks to Batu Hijau and Indonesian operations?
The Indonesian government issued new January 2014 regulations on copper concentrate exports that include potentially restrictive export permit conditions and a significant export duty. Newmont believes these conflict with the 1986 Contract of Work, which grants export rights and protects against new taxes. Other risks include the pending sale of a final 7% stake in PTNNT, which would reduce Newmont's direct interest to 27.56% and could lead to loss of control or deconsolidation, plus labor issues and a collective bargaining agreement renewal in late 2014.
How leveraged is Newmont after the 2013 impairments?
Total debt was $6,740 million at December 31, 2013, against cash of $1,555 million, giving net debt of $5,185 million. Newmont stockholders' equity fell to $10,141 million from $13,773 million. The company said it was in compliance with its debt covenants, including a net debt to total capitalization limit of 62.5%, and it secured a new $575 million amortizing term loan in February 2014 to refinance the convertible notes maturing in July 2014.
Does Newmont hedge its gold and copper production?
No. Newmont's strategy is to sell gold and copper at spot market prices to give shareholders leverage to metal prices, so it does not hedge its commodity sales. It does hedge a portion of Australian dollar operating costs (20% of 2014 forecast Australian costs) and Nevada diesel consumption, and it recorded a provisional pricing mark-to-market loss of $17 million on gold and $11 million on copper in 2013.
06—Continue