NEM - Newmont to sell mines after Newcrest acquisition: will NEM stock rise?
2023-11-08 09:19:22 ET
Denver-based mining giant Newmont Corporation (NYSE: NEM) has completed its acquisition of Australia’s largest gold miner, Newcrest Mining Ltd., in a historic $19.5 billion all-stock transaction.
This significant move has created waves in the mining industry, with Newmont now turning its attention to optimizing its asset portfolio and fueling further growth.
Newcrest acquisition elevates Newmont’s status
The acquisition, which marks the most substantial deal in the history of the gold industry, has propelled Newmont to a new level. This strategic acquisition not only adds five gold mines to its existing portfolio but also positions the company as a significant player in the copper industry.
Newmont’s global gold production is expected to surge by approximately 31%, reaching an impressive 8 million ounces annually.
Furthermore, the company anticipates doubling its annual copper output to 300,000 tons.
Prioritizing new mining projects
With the acquisition complete, Newmont now embarks on the next phase of its strategy. The company aims to prioritize a longer list of potential new mining projects, leveraging the newfound assets and capabilities from the Newcrest acquisition.
By strategically selecting and developing these projects, Newmont is poised to enhance its global presence and further strengthen its position as a major player in the mining industry.
Plans to raise funds through mine sales
In a move to optimize its portfolio and allocate resources effectively, Newmont intends to raise $2 billion in cash through mine sales and project divestments. This process will allow the company to align its assets with its overall strategy and ensure a consistent allocation of cash for reinvestment.
The divestment of certain assets, such as Newmont’s Cripple Creek & Victor mine in Colorado, is being considered as part of this strategy.
This comes at a time when the gold industry faces challenges like stagnating output and rising input costs, and Newmont seeks to address these challenges while expanding its business.
Newmont has faced its share of hurdles, including a strike at its Penasquito mine in Mexico, which led to lower-than-expected earnings in the latest quarter.
Newmont (NEM) stock price forecast
With all those developments, the question on investors’ minds now is whether Newmont’s strategic moves, including the acquisition of Newcrest and the subsequent mine sales, will have a positive impact on NEM stock which has dropped -11.63 (-24.08%) over the past 6 months.
Newmont (NEM) share price jumped to a high of $39.29 on Friday, November 3, 2023, buoyed by the news of the Newcrest Mining Limited acquisition which was completed on Monday, November 6, 2023. The stock price has, however, dropped since and the stock was trading at $36.66 at press time.
Over the past 52 weeks, the price of NEM stock has been trading within a range of between $34.81 and $55.41.
Despite the challenges facing the gold mining industry, Newmont registered a total revenue of $2.49 billion in its Q3 results, which was a 20.81% increase compared to the previous year. It made a net income of 157 million, a 110.55% increase compared to the previous year. The Earnings per Share (EPS) as per the Q3 results was $0.20, reflecting a 25.91% increase compared to the previous year.
The above points to a very strong performance for the company especially seeing that it registered a net profit margin of 6.30%, which was a 22.78% increase compared to the previous year.
But while the company’s performance has improved compared to last year’s numbers, the total revenue has decreased by 7.84% since the previous quarter, partly due to the sinking gold price . The industry will be watching closely as Newmont charts its course forward and capitalizes on this transformative acquisition.
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