Newmont Corporation (NYSE:NEM) has delivered its first autonomous haul truck fleet at Boddington, its Western Australian gold mine. And despite the short-term impact on the mine’s expected gold production – anticipated to be approximately 140 thousand ounces below original guidance estimates of 830 thousand ounces – Newmont is still considered to be an outperformer.
The Boddington mine is Western Australia’s largest gold producer, delivering 670,000 ounces and 56 million pounds of copper in 2020. Newmont has invested $150 million in Boddington’s AHS project which consists of a fleet of 36 trucks, partly to improve productivity and extend mine life but also to increase mine safety.
One of the top ten mining companies
Newmont Corporation has been around a long time. Founded in 1921 and publicly traded since 1925, the company produces gold, copper, silver, zinc and lead. It is ranked no 7 in PwC’s list of top mining companies and is the only gold producer in the S&P 500 Index.
According to Edison Group, an investment research company, of the 12 mines over which Newmont exerts management control, four outperformed (financially) relative to their prior expectations, two performed in line, while six underperformed. In Q2 2021, revenue increased 30% from the prior year quarter to $3,065 million primarily due to higher average realised metal prices and higher sales volumes, and it produced 1.4 million attributable ounces of gold, only marginally less than in Q1. The company generated $993 million of cash from continuing operations and $578 million of free cash flow.
New dividend framework, higher pay out
So far this year, Newmont has returned over $1 billion to shareholders through dividends and share buybacks, and in 2019 and 2020 it returned over $2.7 billion.
Last year, Newmont announced a new dividend framework which increased the dividend by 38% to 55c a share. The new dividend framework provides shareholders with a sustainable base dividend – $1 per share and sustainable at a $1,200 per ounce gold price – and the ability to directly benefit from Newmont’s free cash flow generation at higher gold prices.
The declaration and payment of future quarterly dividends remains at the discretion of the Board of Directors of course, but according to Tom Palmer, Newmont’s CEO, an annualised payout of $2.20 per share means that Newmont currently offers the highest dividend in the gold sector.
Yet still good value
But despite being one of the largest gold producers and commanding a premium rating relative to its peer group on most valuation measures, Newmont Corporation remains materially cheap with respect to its dividend yield says Edison Group. Today’s share price of $54.61 is around 13% less than when we started the year, (its 52-week high is $75.31) and the current dividend yield is just over 4%.
With higher inflation on the cards and some analysts forecasting the gold price to make it over the $2,000 mark by the end of this year, not to mention the 300 ETFs that already have exposure to Newmont, at its current price this stock could be worth a look.
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