Announcement of Periodic Review: Moody’s announces completion of a periodic review of ratings of Newmont Corporation
Global Credit Research – 21 Aug 2020
New York, August 21, 2020 — Moody’s Investors Service (“Moody’s”) has completed a periodic review of the ratings of Newmont Corporation and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody’s reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody’s practice has been to issue a press release following each periodic review to announce its completion.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Key rating considerations are summarized below.
Newmont Corporation’s Baa2 senior unsecured rating reflects the company’s good mine operating footprint with a number of world class assets and favorable geopolitical profile with production mostly in less politically challenging jurisdictions. The company’s free cash flow generation capability and continued maintenance of an excellent liquidity position also support the rating. Also incorporated is Newmont’s strong production profile with 2020 gold production expectations of 6 million ounces and 1 million ounces of co-product metals including copper, silver, zinc and lead.. The company’s excellent liquidity profile is exemplified by its $3.8 billion cash and equivalents position at June 30, 2020 and $2.9 billion available (after considering letters of credit) under its $3 billion revolving credit facility, which expires in April 2024.
Other considerations include Newmont’s strong reserve position and the increased optionality in project development decisions following the acquisition of Goldcorp in 2019. The company’s discipline in capital expenditures and capital structure are also incorporated in the rating. Newmont continues to focus on optimizing existing operations and reducing costs and anticipates meaningful annual savings in 2021 stemming from synergies, procurement opportunities, productivity improvements and better cost efficiency. Originally targeted at $365 million per year, the run rate is now at a pace to realize $500 million in cash flow improvements in 2021. Constraints include the volatility in gold prices and other commodities exposed to such as copper and silver, as well as the ongoing need to reinvest in the business.
Despite lower volumes in the second quarter of 2020 due to operational downtime at operations in South America and Canada caused by the coronavirus, the company’s performance was strong reflecting the significant increase in gold prices. Average realized prices for the quarter were $1,724/oz, up $407/oz on a sequential quarterly basis. Although some pull back from recent highs could materialize, gold prices are expected to remain strong for the balance of 2020 on alternative and safe haven investment stemming from the global recession and coronavirus concerns. As a consequence, Newmont is expected to maintain very strong debt protection metrics (LTM June debt/EBITDA is around 1.6x). Although gold prices have recently breached $2,000/oz, ratings in the gold sector, including Newmont’s, will continue to include qualitative factors such as financial policy, strategic growth opportunities and timing of implementation and ability to sustain metrics through a number of varying gold price points. Our gold price sensitivity range is $1,100 – $1,400/oz with a mid-point of $1,250/oz.
This document summarizes Moody’s view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.
The principal methodology used for this review was Mining published in September 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
This announcement applies only to EU rated and EU endorsed ratings. Non EU rated and non EU endorsed ratings may be referenced above to the extent necessary, if they are part of the same analytical unit.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
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
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