New York, October 29, 2020 -- Moody's Investors Service, ("Moody's") upgraded
Newmont Corporation's (Newmont) senior unsecured ratings to Baa1
from Baa2 and its shelf ratings for senior unsecured debt to (P)Baa1 from
(P)Baa2. The outlook is stable.
"The ratings upgrade acknowledges Newmont's strong operating
performance capability through a range of gold price points, discipline
it its capital allocation policies, focus on liability management
and good pipeline of projects that will lead to the company's ability
to maintain production levels and reduce costs" said Carol Cowan,
Moody's Senior Vice President and lead analyst for Newmont.
Cowan added that "the company's ability to be free cash flow
generative and excellent liquidity position support the upgrade".
Upgrades:
..Issuer: Newmont Corporation
....Senior Unsecured Shelf, Upgraded
to (P)Baa1 from (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Baa1 from Baa2
Outlook Actions:
..Issuer: Newmont Corporation
....Outlook, Remains Stable
RATINGS RATIONALE
Newmont's Baa1 senior unsecured ratings consider the company's
a) good asset diversification, b) production profile in less politically
challenging jurisdictions, c) strong production and competitive
cost profile and d) demonstrated ability to be free cash flow generation
across various gold price scenarios. Also considered is the company's
ability to reinvest in its business in recent years, bring on line
new mines to maintain its production profile and at the same time deleverage.
Newmont continues to have a good pipeline of projects with the Tanami
(Australia) expansion expected to add approximately 150,000/200,000
ounces beginning in 2023 for a five year period. A further consideration
is the company's solid liquidity position.
Although performance in the first half of 2020 was negatively impacted
by the coronavirus and requirements in various jurisdictions to idle production,
as well as the costs associated with these actions, the second half
of 2020 will evidence a good rebound as production has increased to pre
coronavirus levels and expenses associated with placing mines on care
and maintenance and other coronavirus related expenses are eliminated
or reduced. Additionally, gold prices remain at historic
highs given global economic and political concerns as well as flight to
safety by risk adverse investors and this will contribute to strong performance
and free cash flow generation in the second half of 2020, particularly
on the recovery in sales volumes. While we expect gold prices to
reduce as these influencing factors recede and investors become more risk
tolerant, Newmont's discipline in its mine execution plans,
competitive cost position and balanced capital allocation approach between
investment, debt reduction, and returns to shareholders is
expected to result in the company continuing to exhibit solid debt protection
measures with debt EBITDA (including Moody's standard adjustments)
remaining below 2x even in a $1,250/oz scenario and the cash
position remaining excellent.
On a sequential basis, despite an approximate 16% decline
in gold and gold equivalent ounces in the second quarter 2020, Newmont
delivered a solid performance with EBITDA of $1.16 billion
($1.3 billion adjusted) on lower costs due to mines on care
and maintenance (Cerro Negro, Yanacocha in Peru and Eleonore in
Canada) as well as certain issues at other mines) and higher realized
gold prices ($1,724/oz compared with $1,591/oz).
Newmont remained moderately free cash flow generative. Although
costs for the second half of 2020 are expected to increase on the resumption
of full production (company's outlook is for costs applicable to
sales of $760/oz) the higher production levels and continued strength
in gold prices will result in solid performance. On an assumed
7 million gold and GEO production profile, average gold prices in
2020 of roughly $1,725/oz, EBITDA is expected to be
around $6 billion, leverage, as measured by the debt/EBITDA
ratio of 1.1x and continued substantive cash balances. Our
base case assumes production in 2021 and 2020 of roughly 7.5MM/ozs
at $1,400/oz with leverage remaining acceptable at 1.3x
- 1.4x, strong free cash flow generation and a substantive
cash position. Performance will also benefit from the anticipated
$500 million in synergies and cost savings rate to be achieved
in 2021 ($430 million in 2019) arising from the Barrick Gold Corporation
acquisition, the creation on the Nevada Joint Venture (Newmont 38.5%,
Barrick Gold Corporation 61.5%), and other portfolio
streamlining activities undertaken.
The rating is supported by Newmont's excellent liquidity position
as exemplified by its cash position of $3.8 billion at June
30, 2020, bolstered by proceeds from asset sales as the company
continues to realign its asset portfolio in line with its strategic objectives,
and $3 billion in availability under its unused revolving credit
facility expiring in April 2024. Additionally, Newmont's
debt maturity profile is more manageable following the refinancing in
the first quarter that reduced the 2022 and 2023 debt maturity towers.
Given the company's liquidity position, we expect the 2021
debt maturity to be repaid from existing cash availability contributing
to further deleveraging. Considering Newmont's solid cash
position and expected free cash flow generation in the second half of
2020, the potential for further shareholder returns cannot be ruled
out. However, we expect that the company will remain disciplined
in its decisions.
The stable outlook reflects Newmont's ability to maintain production on
a competitive all-in cost basis, continue to be free cash
flow generative, and remain disciplined in its capital allocation
as well as levels of debt in the capital structure. The outlook
also anticipates that the company will maintain a liquidity position well
in excess of ongoing liquidity requirements, continue to maintain
a strong balance sheet and debt protection metrics appropriate for a Baa1
rating.
As a mining company, Newmont faces numerous environmental risks
across the totality of its operations with regulations varying significantly
from country to country and region to region. Environmental regulations
are expected to become increasingly complex and stringent and result in
increased costs. As a founding member of the International Council
on Mining and Metals (ICMM), Newmont has implemented the ICMM's
10 principles and has put in place a number of targets for accountability
and transparency across the ESG spectrum including related to sustainability
such as water, energy and climate change. All strategies
are reviewed annually by the company and its board and the company has
articulated its targets publicly as well as performance against such targets.
The company projects that it is on track to reduce greenhouse gas emissions
intensity by 16.5% by the end of 2020. It also met
its target to reduce freshwater consumption by 5%. In recognition
of the lack of reduction in mining fatalities, the company has decided
to move away from the total recordable injury frequency rate (TRIFR) to
determine bonuses and short-term incentives. Instead,
the company will be measured by critical control verifications by leaders
in the field targeting key risk areas and times, implementation
of fatigue risk reduction action plans, potentially fatal event
frequency rates and repeat critical control failures and potentially fatal
events.
From a governance perspective, Newmont is expected to continue to
evidence discipline as to the level of debt in its capital structure and
capital investments and maintain financial flexibility given the volatility
in gold prices. The company over the last several years has been
focused on debt reduction and cash flow generation and has been able to
bring on new mines on time and on budget without incurring debt.
Although Newmont initiated in December 2019 a $1 billion share
repurchase program ($506 million repurchased as of year-end)
and increased its dividend to $1.00 per common share,
such can be accommodated within the scope of the company's liquidity
and operating cash generating capacity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Newmont's ratings could be upgraded if the company is able to sustain
production at a minimum of 7 million gold ounces and GEO at competitive
costs, and maintains its disciplined approach to capital allocation
as it relates to capital investments, deleveraging and shareholder
returns. The ability to sustain leverage, as measured by
the debt/EBITDA ratio, at no more than 1.5x through downward
price throughs, (CFO-dividends)/debt of at least 50%
and maintain a strong cash balance would also support an upgrade.
Ratings could be downgraded if the company's operating profile were
to deteriorate materially from a production and cost basis or the liquidity
position contract. Ratings could be downgraded should the company
sustain leverage above 2.5x, (CFO-dividends)/debt
be sustained below 40%, or performance turn consistently
negative free cash flow.
Newmont Corporation ranks as one of the top gold producers globally.
The company also has copper and other metals as a by-product.
In 2019, Newmont's revenues were roughly derived as follows:
North American operations (excluding Nevada Joint Venture) 21%,
Nevada Joint Venture 22%, Australia 22%, South
America 20% and Africa 15%. In addition, the
company has important development properties/growth projects in the US,
Suriname and Ghana as well as in other countries. For the 12 months
ending June 30, 2020, the company generated revenues of approximately
$10.6 billion.
The principal methodology used in these ratings was Mining published in
September 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1089739.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Carol Cowan
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Glenn B. Eckert
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
