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Newmont initiates asset sales post Newcrest takeover

With the completion of the Newcrest takeover, Newmont (ASX:NEM), the world’s leading gold producer, is set to divest seven mines and two projects, aiming to generate $US2 billion ($3.05 billion) in cash.

The Denver-based company announced its intention to divest three Canadian gold mines — Éléonore, Musselwhite, and Porcupine — along with Cripple Creek & Victor in the US, Akyem in Ghana, and the Telfer mine of Newcrest in WA, along with the nearby Havieron project, a joint venture with London-based Greatland Gold.

The asset sales and job cuts were revealed alongside the company’s fourth-quarter and 2023 results, the first incorporating Newcrest’s assets and personnel.

Typically, asset sales after a takeover elicit a positive market response. However, in this case, Newmont shares fell over 7%, primarily due to a significant $US1.2 billion impairment charge related to its Penasquito mine in Mexico and a 2024 gold production forecast that fell short of some market expectations.

Despite producing 5.5 million ounces of gold in 2023, a 6.9% drop from 2022, the company faced challenges including $1.5 billion in reclamation charges and $464 million in Newcrest transaction and integration costs, resulting in a fourth-quarter statutory loss and a 2023 statutory loss of $US1.5 billion.

Newmont CEO Tom Palmer emphasized the commitment to delivering $100 million of free cash flow by consolidating Newmont and Newcrest. This includes a reduction in headcount to achieve synergies, with the company targeting near-term debt reduction of $US1 billion, partly facilitated by divestments. The company also aims for an additional $US500 million in cost and productivity improvements.

The Newcrest takeover, executed by issuing more shares, prompted a dividend cut from $US1.60 to $1 per share, further affecting share prices.

Despite expectations of increased gold production in 2024, analysts speculate that Newmont’s forecast may be conservative, considering Newcrest’s 2.1 million ounces of gold production in 2022-23. However, some attribute the lower forecast to account for lost output from the mines for sale.

Newmont capitalized on surging gold prices in the fourth quarter, with revenues jumping 23.7% to $US3,957 million. Attributable gold production increased by 6.7%, averaging $US2,004 per ounce. However, for the year, net sales declined due to the output slide, leading to a decrease in adjusted EBITDA and adjusted net profit.

Overall, Newmont’s performance in 2023 was hampered by the output decline, despite favorable gold prices.