The Gold Report - Mon, Dec 11, 2017

Gold Major to Increase Dividend by 50% in 2018

BMO Capital Markets reported on this miner's outlook for 2018 and beyond.


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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