Newmont Mining's Next Catalyst

Newmont Mining Corp NEM made debt repayments of $499 million in 1Q16, as part of its ongoing debt reduction initiatives. RBC Capital Markets’ Stephen D. Walker upgraded the rating for the company from Sector Perform to Outperform, while raising the price target from $34 to $40.

Newmont Mining’s current stock valuation is highly attractive, with shares trading at a discount to peers, analyst Stephen Walker commented.

Growth Drivers

Walker identified several factors that are expected to act as catalysts in the near future:

• The company’s production levels in 2017 are set to grow with the contribution from the new Merian mine in Suriname and the Long Canyon mine in Nevada. Incremental low cost production is also expected from the Tanami expansion beginning in late 2017; and the ongoing expansion at the CC&V valley.
• Strong free cash flows are expected after the completion of the company’s 2016 capital programs. These cash flows are likely to be used for significant debt repayment and funding of new development projects.
• The sale of Batu Hijau would be a positive catalyst, given the ongoing geopolitical risk and future capital commitments for Newmont Mining’s share of the 3-year, $1b Phase 7 waste-stripping program.
• Improving grades from the Carlin underground production are expected to offset the declining production/higher costs from Yanacocha and the forecasted step-down in production from Batu Hijau in 2018

The company’s debt-to-total cap of 29 percent is sufficient to maintain the investment grade credit rating, Walker added.