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BMO Weighs In On Newmont Mining's Batu Hijau Sale

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BMO Weighs In On Newmont Mining's Batu Hijau Sale

BMO Capital Markets views Newmont Mining Corp (NYSE: NEM)'s recently announced sale of stake in the Indonesian mine as a positive development as it de-levers the risk profile of Newmont.

Newmont agreed to sell its 48.5 percent stake in the operator of the Batu Hijau copper and gold mine in Indonesia to PT Amman Mineral Internasional for $1.3 billion.

"[T]he sale of Batu Hijau removes a number of uncertainties related to operating in Indonesia and the capital requirements related to Phase 7 expansion set against prevailing low copper prices," analyst Andrew Kaip wrote in a note.

"In the context of BMO Analysis, NEM will receive a further $76 million in contingent payments by 2021," Kaip added.

Related Link: Credit Suisse Says Buy Gold, Sell Copper

Post Batu Hijau, Kaip estimates EPS to drop on average 9 percent and sees CFPS and EBITDA falling by 13 percent. As such, the analyst now expects EPS of $1.47 for 2016 and $1.79 for 2017. The Street expects earnings of $1.35 a share for 2016 and $1.71 a share for 2017.

However, Kaip expects Newmont to be in a comparable net cash position by 2025, with or without Batu Hijau, given lower capital requirements.

Kaip reiterated his Outperform rating and $45 price target on the stock, which is currently up 2.02 percent to $39.91.

Latest Ratings for NEM

DateFirmActionFromTo
Aug 2020UBSMaintainsNeutral
Jul 2020BarclaysMaintainsEqual-Weight
Jun 2020Deutsche BankMaintainsBuy

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