What Are The Major Revenue Sources For Newmont Mining?
Newmont Mining (NYSE: NEM) is the only gold producer to be listed on the S&P 500 index as well as Fortune 500. However, the company has had a bumpy 2018 so far, declining roughly by 27% from its 52-week high, largely because of a decline in its production output and lower investment demand for gold. The lower output is in line with the company’s overall lower output guidance for the year, depicting a more mature portfolio of reserves and the resultant lower grades of ore. Newmont has rationalized its business in response to a subdued gold pricing environment and has divested $1.7 billion worth of non-core assets in the last 5 years. In this note, we will discuss major revenue sources for Newmont.
We currently have a price estimate of $37 per share for the company, which is notably higher than its market price. View our interactive dashboard – Newmont’s Revenue Break-up and modify key drivers to visualize the impact on its valuation.
Newmont derives a majority of its revenue from its North American and Australian operations. Based on our estimates, the company’s total revenues are expected to be 7.57 billion in 2018, with total shipments in the range of 4.9-5.4 million ounces.
North America (~40%) – Newmont has a strong presence in Nevada, with shipments totaling nearly 2.21 million ounces in 2017. We expect these shipments to decline by 2% in 2018 due to production of lower grades of gold. However, the average pricing per ounce is likely to be slightly higher than last year, translating into flat revenues. According to our estimates, North American mines will add revenues of around $2.80 billion in 2018.
Asia-Pacific (~30%) – The company operates through three mines in Australia – Boddington, Kalgoorlie, and Tanami. The Kalgoorlie mine, referred to as ‘Super Pit’, has produced more than 50 million ounces in 30 years. KCGM (Kalgoorlie Consolidated Gold Mines) manages the Kalgoorlie mine on behalf of Newmont and has a joint venture partnership with Barrick Gold Australia. The Boddington mine is wholly owned by the company. Further, the company is expanding its Tanami mine in the Northern Territory of Australia. The combined production of these mines was 1.57 million ounces in 2017 and it is expected to grow to 1.60 million ounces in 2018.
Africa (~15%) – Newmont has two mines in this region – Ahafo mine and Akyem mine. Both these mines are in Ghana and have adequate reserves to sustain a significant increase from the current rates of production.
South American Gold Mines (~13%) – The Company has two mines in this region – Yanacocha mine in Peru and Merian mine in Suriname. Yanacocha is South America’s largest gold mine. Newmont owns 51.35% interest in Yanacocha mine and 75% stake in Merian mine. Both these mines combined are expected to generate $957 million revenues this year.
In addition, Newmont also derives 4.5% of its revenues from its copper mines. Copper is produced at the Boddington mine in Australia and the company’s Phoenix mine in the US.
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