A Dec. 6 BMO Capital research note indicated that Newmont Mining Corp. (NEM:NYSE) intends to increase its dividend by 50% in 2018. "The company is targeting a sustainable dividend through gold cycles and one that removes the gold price link," noted analyst Andrew Kaip. The change still needs approval, but "the Board of Directors were at the investor day, and their presence suggests it is a fait accompli."
Regarding the forward-looking numbers Newmont announced, Kaip wrote, "The top end of 2018 and 2019 production guidance [was] slightly below our expectations but in line longer term. All-in sustaining costs (AISCs) for the company were in line with our estimates, with a capital outlook that was better than expected."
When comparing new to previous estimates, the financial forecast for Newmont Mining over the next several years is "improved," Kaip concluded.
As for production, Newmont forecast 4.9–5.4 million ounces (4.9–5.4 Moz) for 2018 and 2019, which is up from its previously predicted 4.7–5.2 Moz. "Attributable production, below our estimate for 5.6 Moz, had slightly tempered expectations across the segments relative to our forecasts," Kaip noted. Estimated production through 2022 is 4.6–5.1 Moz.
In terms of costs, Newmont guidance indicated "improved" AISCs of $965–1,025 per ounce ($965–1,025/oz) over its previous estimate of $950–1,050/oz, said Kaip. For 2019 and beyond, the company expects lower AISCs at $870–970/oz.
With respect to capital, the company reiterated expected total capital of $900–1,000 million ($900–1,000M) and sustaining capital of $600–700M. In 2019, total capital is anticipated to decrease to $730–830M, with sustaining capital remaining the same. Longer term, both types of capital are expected to decrease, total capital at $580–680M and sustaining capital at $550–650M.
BMO Capital has an Outperform rating and a $45 per share target price on Newmont, whose stock is currently trading at around $36.20 per share.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from BMO Capital Markets, Newmont Mining, Dec. 6, 2017
Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures:
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Newmont Mining.
Disclosure 6C: Newmont Mining is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 9: BMO Capital Markets makes a market in Newmont Mining.
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of Newmont Mining.
Disclosure 17: Newmont Mining has paid or reimbursed some or all of the BMO Nesbitt Burns Inc. analysts travel expenses.
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