Friction as Palmer says "great time to invest in Newmont"

Shares in Newmont, the world's largest gold producer, are a "generational" opportunity for new investors chief executive Tom Palmer told Mining Journal, while receiving friction from existing shareholders who lament that they are trading at a generational low.

Palmer said it may take time for the market to fully grasp the path ahead for the company following its acquisition of, and the naming of the six assets it will jettison, seeking to recoup some US$2 billion. The adjustments mean Newmont has an asset portfolio of exclusively tier one operations.

"Last week was a big week," said Palmer, referring to the company's 2023 annual results and conference call during which he announced the divestitures and his vision for the future.

"There's clarity around the portfolio, a portfolio of exclusively tier one operations. That's more than half of all the tier one gold mines that exist in the world today. They sit on a reserve and resource base that is second to none in the industry. We are 30% larger than our nearest neighbour and they sit on a copper reserve that is significantly larger. We have an organic project pipeline lining up behind the operating portfolio that we see growing in copper and extending our life in gold. It's a fabulous story that's not been seen before. … It's a wonderful time to invest," he said.

The divestitures of Éléonore, Musselwhite, Porcupine, Cripple Creek & Victor Mine (CC&V), Akyem and Telfer, as well as two non-core projects, including Havieron and Coffee mean Newmont is pulling out of Ontario, Quebec and Colorado, and will see its North American operations centre on British Columbia, Canada, Mexico and its junior partner position in the Nevada Gold Mines joint venture with Barrick Gold in Nevada. 

"We had the opportunity to consolidate in the USA, Canada and Australia. That was an important part of the Newcrest value proposition, with the ability to increase our exposure to copper. These operations are either tier one today or they have a pathway to get to tier one. British Columbia is a tier one district that will be operating for at least a century, and a significant proportion of the metal that will come out of British Columbia will be copper," said Palmer.

Friction

Investors have been slow to warm to the new Newmont vision due to the company's, including a US$2.5 billion loss in 2023, despite gold rising towards record prices, which has seen the company's market capitalisation halve over the past two years despite ingesting another sizeable company. Its share price has fallen by two-thirds to lows not seen since 2019, while its share count has increased by one-third.

Palmer is understood to have received a frosty reception from long-term investors last week at Newmont's annual dinner at the BMO Metals, Mining and Critical Minerals Conference in Florida, USA.

"Every year at BMO, I have some good dialogue and discussion with our shareholders and the highlight of a few days is the dinner we hold every year. We look to have some robust discussion and debate around what's happening in the industry and what's happening with our company. As you move through the different stages of the lifecycle as a business, you're looking to have some robust discussion. We welcome the opportunity to challenge and to understand and listen to our shareholders. The feedback from our shareholders is that our strategy is crystal clear. What we have transformed Newmont into has never been seen before in the gold industry. The opportunity for us to generate significant value sits there out in front of us," said Palmer.

The strategy, based around a portfolio of tier one assets, is the production of 6-7Mozpa of gold for decades, at an all-in sustaining cost (AISC) which it expects to improve from $1444/oz in 2023 to $1050/oz over the next two or three years. The company has given 2024 guidance for the production of 6.9Moz gold at an AISC of $1400/oz, and onwards to 8.3Moz of gold equivalent in 2028, with its AISC to lower to $1200/oz from 2026 and beyond.

"The added feature of this portfolio is 150,000tpa of copper out of the gate and a project pipeline that can grow our exposure over time," said Palmer.

A number of the assets Newmont is looking to divest have only been Newmont assets for a few short years, having come from the, which came with a $4 billion impairment. Palmer said the existing assets are good, but not of the scale the company needs to build its future.

"Each one of them are high-class assets and each of them have great teams. But, they are tier two, which means their production profile is not going to hit our definition, so they won't get the management time and capital within a Newmont portfolio. We are looking at what's best for those assets and this is an opportunity for those assets to be cornerstone assets in another company's portfolio," said Palmer.

The proceeds from those divestments will help the company to pay down a target of $1 billion of its $9 billion in total debt. The company also seeks to maintain $1.3 billion in annual development capital and a cash balance of $3 billion, as well as its $1 per share annual dividend. Beyond that, any additional liquidity will be used in the recently announced $1 billion share buyback programme, some 30 million shares at current prices.

"It is about really, really good value. We have a very competitive yield from that dividend, and the opportunity with any net free cash flow to buy back shares is incredibly good buying. We have said very clearly to the market and to our shareholders that we will be buying back stock," said Palmer.

Shares in Newmont are trading at $29.86, valuing the company at $34.4 billion.