Why Newmont Mining Is Well Positioned To Ride Out A Downturn In Gold Prices
The Federal Reserve is expected to hike interest rates at the Federal Open Market Committee (FOMC) meeting later this month, which has adversely impacted gold prices. [1] In addition, the outcome of last month’s presidential elections has also acted as a dampener on gold prices, with President-elect Trump’s policies expected to boost economic growth in the U.S. The prices of gold, which is considered a safe-haven asset from an investment point of view, are negatively impacted by rising economic growth and interest rates. Given the unfavorable pricing environment, we expect gold prices to decline next year from 2016 levels. Newmont Mining is fairly well placed to weather a decline in gold prices this time around, after taking measures to lower operating costs and indebtedness during the last downturn in prices. The company sold off a number of high-cost assets, instituted measures to improve the efficiency of its operations, and took steps to lower its debt burden in response to the decline in gold prices over the course of 2013-2015. This is reflected in the improvements in the company-wide all-in sustaining costs (AISC) metric and Net Debt to EBITDA ratio, as illustrated below.
Given the improvements in its operating and financial metrics, Newmont Mining is far better placed to operate in a period of subdued gold prices, as compared to the situation two years ago.
Have more questions about Newmont Mining? See the links below.
- What Is Newmont Mining’s Revenue And EBITDA Breakdown?
- What Is Newmont Mining’s Fundamental Value Based On Expected 2015 Results?
- How Has Newmont Mining’s Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Did Newmont Mining’s Revenue & EBITDA Decline In The Last 5 Years?
- By What Percentage Can Newmont Mining’s Revenue & EBITDA Grow In The Next 3 Years?
- How Will Newmont Mining’s Revenue Composition Change by 2020?
- Newmont Mining: A Look Back At The Year 2015
- Why The Commencement Of Production At The Merian Mine Will Boost The Fortunes Of Newmont’s South American Gold Mining Operations
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Notes:- Fed expected to tee up December interest-rate hike, Market Watch [↩]