Newmont’s Enhanced Liquidity Position Enables The Company To Return Cash To Its Shareholders

by Trefis Team
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Newmont Mining
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Newmont Mining (NYSE: NEM) has consistently been focusing on reducing its level of debt and returning cash to its shareholders. These two objectives have remained a top priority for the company and we believe that the success of the company’s debt reduction strategy has placed it in a more advantageous position to meet its cash return objective. The company’s current ratio, which measures the ability of the company to meet its short-term obligations, has been improving over the years and per our forecast, we estimate this number to be even stronger going forward. This would increase the company’s liquidity and thus enable them to distribute more cash returns to its shareholders.

We believe that the expected improvement in liquidity in 2018 is to be a direct result of the company’s significant debt reduction over the years. Newmont has reduced its net debt by 83% since 2013. More recently, the company’s short-term debt has been reduced from $566 million in 2016 to $4 million in 2017. Additionally, the company does not have any near-term debt maturity until the fourth quarter of 2019 which provides the company with extensive liquidity for 2018. Repayment of debt has also reduced the company’s expected interest expenses, consequently resulting in even higher cash availability.

As per our analysis, the current ratio of the company for 2018 is likely to stand at ~4.54, a 25% improvement over its 2017 level. As mentioned earlier, the company is likely to benefit from significant improvement in its cash balance which we have forecast at ~$4.5 billion, a 38% increase from the 2017 level. In case you have a different perspective, you can modify our inputs for calculating the company’s current ratio and arrive at your own estimate using our interactive dashboard.

High liquidity is expected to be prevalent despite the lower production and higher cost guidance released by the company for 2018. This highlights the company’s efficient strategic planning over the years. Thus, with the availability of abundant liquidity, we expect the company to continue to remain one of the industry’s most favored distributors of cash, most likely surpassing its industry-leading dividend yield of 1.5%.

 

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