01—Abstract
Summary
Summary of the 10-K filed February 20, 2015. Cited figures are marked; the original filing is the authoritative source.
Newmont Mining (NEM) closed 2014 with a challenging year: sales fell 13% to $7,292 milliona, and the company posted a net loss attributable to Newmont stockholders of $(2,534) million in 2013 and net income of $1.02 per share in 2014 (down from a 2013 loss).
The 2014 result was driven by lower average realized gold ($1,258b/oz, down 10%) and copper ($2.65/lb, down 11%) prices, a 14% decline in consolidated gold ounces sold to 5.24 million, and the divestiture of Midas, Jundee and La Herradura. Improved cost discipline helped: gold costs applicable to sales fell 9% to $706/oz, and the company reported all-in sustaining costs of $1,002/oz for gold. Net cash from continuing operations was $1,451 million, and capital expenditures were $1,110 million.
Net debt fell to $4,243 millionc from $5,185 million, helped by asset sale proceeds of $661 million, and the company held $2,403 million in cash against a $3,000 million undrawn revolver. The filing highlights material risks. Batu Hijau (Indonesia) was shut in June 2014 after export restrictions, and it operates under a six-month export permit expiring in mid-March 2015 while the Contract of Work is renegotiated.
Conga (Peru) remains suspended in its full development form, and Merian (Suriname) was fully funded in 2014 with production expected in late 2016. Credit ratings were lowered during 2014 (S&P to BBB with negative outlook; Moody's to Baa2 negative). The company also recorded a $4,352 milliond write-down in 2013, concentrated at Boddington and Long Canyon, and continues to carry a $2,817 million deferred tax valuation allowance.
The dividend was cut to $0.225 per share for 2014 from $1.225 in 2013, now tied to a gold-price-linked, non-binding policy. For investors, the central question is whether cost reductions and project development can offset lower gold prices and the Indonesia and Peru political risks. Reserves of 82.2 million attributable gold ounces and 7.93 billion pounds of copper provide a long reserve life, but the sensitivity to gold price is significant: at a $1,200/oz price, reserves would decline roughly 13%.
02—Key points
Key Highlights
- Sales declined 13% to $7,292 million in 2014, driven by a 10% drop in realized gold price to $1,258/oz and a 14% decline in gold ounces sold.
- Gold costs applicable to sales fell 9% to $706/oz and all-in sustaining costs were $1,002/oz, reflecting Full Potential cost programs and lower direct operating costs.
- Net income attributable to Newmont stockholders was $1.02 per share in 2014 versus a $(5.09) loss per share in 2013, which included a $4,352 million write-down.
- Batu Hijau in Indonesia was shut in June 2014 over export restrictions; a six-month export permit expires in mid-March 2015 and the Contract of Work remains under renegotiation.
- Net debt fell to $4,243 million from $5,185 million, supported by $661 million in asset sale proceeds (La Herradura, Jundee, Midas) and $2,403 million in cash at year-end.
- Credit ratings were downgraded in 2014 (S&P to BBB with negative outlook; Moody's to Baa2 with negative outlook), raising the cost of future borrowing.
- The 2014 dividend was $0.225 per share versus $1.225 in 2013, and dividends are now a non-binding policy linked to the gold price.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 20, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $6.82B$8.41B | −19.0% |
| R&D Expenses | $159.00M$222.00M | −28.4% |
| Operating Expenses | $5.83B$12.07B | −51.7% |
| Operating Income | $650.00M-$2.60B | +125.0% |
| Net Income | $508.00M-$2.53B | +120.0% |
| EPS (Basic) | $1.02$-5.09 | +120.0% |
| EPS (Diluted) | $1.02$-5.09 | +120.0% |
| Shares Outstanding (Basic) | 499.00M498.00M | +0.2% |
| Shares Outstanding (Diluted) | 499.00M498.00M | +0.2% |
05—Questions
Frequently Asked Questions
How did Newmont's profitability change in 2014?
Net income attributable to Newmont stockholders was $1.02 per share in 2014, compared with a loss of $5.09 per share in 2013 that included large write-downs. Adjusted net income was $1.09 per share. Sales fell 13% to $7,292 million, but lower costs partially offset the impact of lower prices.
What is the main risk to Batu Hijau's operations?
Batu Hijau was shut down in June 2014 after Indonesia restricted copper concentrate exports. A September 2014 Memorandum of Understanding allowed a six-month export permit that expires in mid-March 2015, and negotiations to amend the Contract of Work are ongoing. Failure to renew the permit or reach an agreement could materially reduce output and earnings from this operation.
Does Newmont hedge its gold and copper production?
No. Newmont's strategy is to sell gold and copper at spot prices to give shareholders direct leverage to metal prices. It does hedge certain input costs, including a portion of Australian dollar operating expenses and Nevada diesel consumption, and it uses derivatives to manage some interest rate exposure.
How much gold and copper does Newmont have in reserve?
At December 31, 2014, Newmont reported attributable proven and probable reserves of 82.2 million ounces of gold and 7,930 million pounds of copper, plus 144 million ounces of silver. Gold reserves were calculated at a $1,300/oz price, and the filing estimates reserves would fall about 13% at $1,200/oz gold.
06—Continue