How is Newmont Mining Likely To Grow In The Next 2 Years?

by Trefis Team
Newmont Corporation
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Newmont Mining (NYSE: NEM) has become the world’s largest gold producer (per volume), surpassing the output of its main competitor Barrick since the end of 2017. However, the company’s gold volume output is anticipated to decline going forward which is expected to have a negative impact on the company’s top-line growth in the upcoming years. Based on such circumstances, we expect the company’s top line to grow marginally at a CAGR of 1% over the next two years.

Newmont expects its sales volume to range between 4.9 to 5.4 million ounces per year in 2018 and 2019, which is approximately 3% lower than the company’s attributable gold output in 2017 (assuming mid-points). The long-term output is expected to decline even further to 4.6 and 5.1 million ounces per year through 2022. The company is expected to experience this significant decline in volume largely due to a decline in its reserve base and a fall in its grade quality.

Of Newmont’s total asset base, its Yanacocha mines in South America are expected to decline by an extensive portion. This decline is largely due to the expected lower mill grade and lower leach tons expected at the Yanacocha mines. The previous year had been a good year for the company’s South American operations with the commencement of the commercial production of its Merian mines. However, production volume is likely to decelerate by more than 30% in 2018 due to the reserve exhaustion at Yanacocha. The company reported its South American mines to have a total mine reserve of 6 million ounces in 2017, the lowest in comparison to all its other locations.

On the contrary, the company’s African mines are expected to provide some relief to the company’s top line with the Subika Underground and Ahafo Mill Expansion projects which together are expected to enhance the company’s total output by the range of 550,000 to 650,000 ounces per year for the first five full years of production, starting in 2020. Subika and Ahafo Mill Expansion are expected to commence commercial production by the second half of 2018 and the second half of 2019, respectively and is thus expected to translate into stronger volumes by 2019 itself.

Thus, with a declining gold output, Newmont’s revenues are expected to outperform only through an environment of enhanced gold prices. This has been the case during the first quarter of the year wherein Newmont reported a similar sales volume as last year, but its total revenue grew by almost 8% year-on-year (Y-o-Y). The primary reason for this was the 9% increase in the company’s realized gold price, as the demand for the safe-haven commodity increased with the ongoing trade tension between the U.S. and China and the geopolitical uncertainty surfacing in the Middle East. Thus, Newmont’s growth for the next two years will remain extremely variable depending on the trajectory of gold prices.

Our estimates for Newmont’s two years’ projected growth are elaborated in our interactive dashboard. You can make changes to our assumptions to arrive at your own revenue estimate for the company.


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