Newmont (NEM) Closes Divestment of Red Lake Complex for $375M

Zacks Equity Research

Newmont Corporation NEM successfully completed the sale of its Ontario, Canada-based Red Lake complex to Evolution Mining Limited. The company received cash proceeds of $375 million from the deal and is entitled to future contingent payments of up to an additional $100 million related to the discovery of new resources.

The transaction provides Newmont an ongoing exposure to future exploration opportunities while it is focused on its globally diversified portfolio of 12 managed operations and two joint ventures, including 8 world-class assets.

Per the terms of the earlier-mentioned contingent payment, Evolution will pay $20 million to Newmont for each 1 million ounces of new gold resources added to the existing Red Lake resource base over a period of 15 years. Further, the contingent payment is applicable to the first 5 million ounces of new resources.

Considering the divestment of its interests in Continental and KCGM, Newmont generated total cash proceeds of more than $1.4 billion. The company attained its divestiture target of $1-$1.5 billion in less than a year.

Newmont expects the divestment of asset to support the continuation of its capital allocation priorities. It is also expected to strengthen the company’s investment grade balance sheet and enable investing in highest return projects as well as returning excess cash to shareholders.

Newmont’s shares have gained 29.7% in the past year against the industry’s decline of 30.3%.



Zacks Rank & Other Key Picks

Newmont currently carries a Zacks Rank #2 (Buy).

Few other top-ranked stocks in the basic materials space are Franco-Nevada Corporation FNV, Novagold Resources Inc. NG and Barrick Gold Corporation GOLD, all currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Franco-Nevada has an expected earnings growth rate of 37.6% for 2020. Its shares have returned 38.2% in the past year.    

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 84.6% in the past year.

Barrick has an expected earnings growth rate of 43.1% for 2020. The company’s shares have gained 40.2% in the past year.

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