Newmont Mining Corporation (NEM - Free Report) has entered into a deal to sell its royalty portfolio to an emerging precious metals royalty and streaming company, Maverix Metals Inc. The strategic partnership will provide Newmont an ongoing exposure to Maverix’s growing portfolio of 27 high-quality royalties and streams, out of which 10 are on producing mines.
Per the agreement, Newmont will receive $17 million in cash, 60 million common shares of Maverix (representing roughly 28% ownership interest) and warrants for an additional 10 million common shares. The transaction is expected to close in second-quarter 2018.
Notably, Newmont’s royalty portfolio consists of 54 precious metals and industrial minerals royalties, including royalties at Premier Gold’s McCoy Cove project in Nevada and TMAC Resources’ Hope Bay mine in Canada.
With regards to this transaction, both parties will ink a shareholder agreement that will entitle Newmont to have a seat on Maverix’s board and pre-emptive rights to take part in future financings of the company to maintain its ownership stake.
Newmont’s shares have moved up 4.6% in the past three months, outperforming the industry’s 3.5% decline.
During first-quarter 2018 earnings call, Newmont stated that it continues to expect attributable gold production in the range of 4.9-5.4 million ounces for 2018 and 2019. The company also kept its all-in sustaining costs (AISC) and costs applicable to sales (CAS) for gold unchanged for 2018 in the range of $965-$1,025 per ounce and $700-$750 per ounce, respectively.
Notably, the company’s projected AISC for 2018 is higher than $924 recorded for full-year 2017. Newmont’s AISC rose 8% to $973 in the first quarter, mainly due to higher per unit CAS, higher exploration costs and increased spending on advanced projects. Increased project spending is expected to keep AISC at elevated levels. As such, the company’s high production costs remain a concern for 2018.
However, Newmont is making notable progress with its growth projects as it continues to invest in growth projects in a calculated manner, including Subika Underground and Ahafo mill expansion in Africa and Twin Underground in North America.
Last year, the company successfully started commercial production at its Tanami expansion project in Australia, which is expected to improve gold production at the mine. Moreover, the Long Canyon mine in Nevada and Merian gold mine in Suriname have also reached commercial production.
Zacks Rank & Stocks to Consider
Newmont currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks worth considering in the basic materials space include The Chemours Company (CC - Free Report) , FMC Corporation (FMC - Free Report) and Westlake Chemical Corporation (WLK - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chemours has an expected long-term earnings growth rate of 15.5%. Its shares have gained 24.4% in a year.
FMC Corp has an expected long-term earnings growth rate of 14.3%. Its shares have moved up 15.8% in a year.
Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied 91.9% in a year.
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