Newmont Says Every $100 Gold Gain Adds $350 Million to Cash Flow

What Are Newmont Mining's Acquisitions Plans?
  • `I'm very comfortable with our debt structure': CEO Goldberg
  • Company is still bullish on gold prices in long term

This year’s tear higher for gold is improving prospects for miners’ debt reduction.

For Newmont Mining Corp., the world’s second-biggest producer of the metal, every $100 gain per ounce of bullion adds $350 million to the company’s free-cash flow, after taxes, Chief Executive Officer Gary Goldberg said in an interview Monday. 

The price gains will help Greenwood Village, Colorado-based Newmont continue to improve its balance sheet, he said, while attending an industry conference in Hollywood, Florida. The company’s net-debt is now about 1.4 times its earnings before interest, taxes, depreciation and amortization, and Newmont plans to lower that ratio to 1 over the next two to three years, he said.

Gold’s 16 percent gain in 2016 to about $1,233 an ounce has made it the best-performing major asset. That’s been a boon to mining companies. 

Newmont has jumped 44 percent since the end of December, and the stock is on pace for its best quarter since 2002. It’s a turnaround from the past few years when bullion’s slump into a bear market sent the shares down for a fifth consecutive annual decline in 2015, the worst streak since comparable data begins in 1981.

“I’m very comfortable with our debt structure overall,” Goldberg said. “We’re still bullish long term for gold.”

Gold advanced 10 percent since the end of January on Comex in New York, poised for the biggest February gain since futures trading data began in 1975. Turmoil across global equity and currency markets has sparked demand for a haven.

At the same time, there is increasing doubt that the Federal Reserve will move as quickly as it planned to raise rates because the expansion may weaken. That increases the allure of bullion as a store of value. Prices fell in the previous three years, reaching a five-year low in December as Fed officials increased borrowing costs for the first time in almost a decade.

“As long as real interest rates stay down below 3 percent a year, that’s generally good for gold,” Goldberg said. At “$1,200 or $1,300 an ounce, we still see it as a good price where we can deliver good free-cash flow and dividends back to shareholders."

While larger rival Barrick Gold Corp. has been selling assets, Newmont has responded to a prolonged slump in gold prices by continuing to expand. In June, the company agreed to buy the Cripple Creek & Victor mine in Colorado for $820 million and in October it announced plans to expand its Tanami operations in Australia.

Buying more assets would depend “on the value of the opportunity, if it makes sense long term,” Goldberg said in an interview on Bloomberg Television.

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