So discussions have been held between ABX and NEM. Wall Street Journal suggested that talk between the two companies were conducted this week, but have broken off for now. Gold miner mergers are on the not too distant horizon.
Obviously, a merger would probably benefit both companies.
The recent parliamentary elections in Indonesia, last Wednesday, indicate through polling data that no political party won the required 25% vote that is required to field a Presidential candidate in the upcoming Presidential election (July 2014). What this means is that a coalition between parties is needed. Why is this important?
Deals are going to happen. Perhaps, the ore export tax will be part of the deal making process. Although I have limited knowledge of Indonesia politics; I do think that the Democratic Party-Struggle (PDI-P) leader Joko "Jokowi" Widodo is a strong advocate to fully implement the high ore tax on miners that don't build smelters within the country. So, depending on which competing party the PDI-P ties in with there may be some concessions forthcoming on the tax. Bottom line, no party made a clear cut victory in the election and thus compromise in the name of the game going into the July Presidential election.
I'll be curious if the election is discussed in any detail during the next Newmont earnings conference call. The call is scheduled for 25 April 2014.
Resolution of the tax situation is a big deal.
Indonesia mines ministry seeks cut in export tax for Freeport, Newmont • 8:13 AM
•Indonesia's mining ministry is recommending a sharp cut in the export tax imposed on Freeport McMoRan (FCX) and Newmont Mining (NEM), according to a senior government official, but the proposal still appears to fall short of the companies' request.
•Mining officials want the finance ministry to lower the export tax to no more than 10% for FCX and NEM from the surprise 25% imposed in January that has halted copper shipments, but the firms have agreed only to pay 5% to go toward building a smelter.
•Meanwhile, FCX has made unspecified cuts to its ~30K workforce at the Grasberg mine in Indonesia, as the tax dispute with the government drags on.
The government has also approved a target to increase copper concentrate sales from Newmont's Batu Hijau mine in Sumbawa by 66 percent to 527,136 tonnes this year compared to realised 2013 sales of 316,851 tonnes.
Good news developing out of Indonesia...
Of this amount the target includes export sales of 403,036 tonnes compared to realised export sales of 236,932 tonnes in 2013.
Southeast Asia's largest economy is pushing to increase added value to the minerals it produces and introduced tough new rules this year that force miners to refine metals domestically, including an escalating tax on exports.
Freeport and Newmont have halted copper concentrate shipments since January, refusing to pay the export tax that they say breaches their contracts.
Indonesia is keen for the two firms to resume exports because of the potential loss in their contributions to state revenue. Both companies gained certification as registered exporters this week, bringing them closer to this goal.
"This has to be quick," Sukhyar told Reuters on Thursday, referring to the final steps the government needed to take for the two companies to begin exporting again after the January stoppage.
"Their concentrate needs to be shipped out. It's a pity if it's not," he said adding that exports could restart in April.
Freeport's total contributions to Indonesia in the form of taxes, royalties and dividends since 1992 had reached $15.2 billion last year, with approximately $500 million in 2013 alone, the company noted in an emailed statement received on Friday.
Freeport also said that while no dividends were paid in 2013 because of low commodity prices, a resumption of exports would mean an increase in these contributions as well as taxes and royalties.
Newmont share prices have slumped nearly 30 percent since September, partly because of uncertainty in Indonesia.
Indonesia appears to back pedal on the controversial export tax. Perhaps as soon as this Friday the rules will be diluted or even removed. This issue should it be resolved will lift the NEM share price on a PAR basis to the other miners.
Combine the potential of the export tax resolution along with the current gold price appreciation. Full speed ahead.
True, you're right...unfine doesn't cut it.
Yet, the current yield and percent dictated by the new guideline policy is better than what my bank is offering...so fine is fine.
I'm fine with the dividend declaration and latest guideline for future distributions. This outcome is actually better than what I expected; which had been the possible cessation of the dividend or a deeper cut in yield.
The latest out of Indonesia is that six companies have been granted ore export licenses. Freeport was not included; the question is did NEM make the list? Should be one of the big topics during the CC.
I repeat, these analysts get paid for their research? Haha.
It sure appears that NEM is more on target for the price of $1300 gold to calculate reserves than the analyst community. I realize it's only February but the price curve is definitely favoring the NEM management view.
No new info on the Indonesia export ban and tax. An update will be given at the earnings CC, if not sooner.
I'd say NEM management has definitively put down the share dilution concern.
I'm no longer convinced that a dividend cut or cessation is to happen. ABX committed to continuing their distribution; seems that NEM also will do same. Cash has been added to the coffers with recent non-core asset sales.
Moody's potential debt downgrade had been attributable to price of gold below $1100. The non-core asset sales help the balance sheet administer the debt burden. No downgrade.
Nevada properties production remains an issue.
Should get more visibility into further cost containment actions during the earnings CC.
Worker unrest remains a concern.
All-in-all the propaganda from the analysts are being ameliorated.
NO they did not report earnings. They held a CC to convey production and cost numbers last week.
Earnings to be released on 20 February 2014.
You are uninformed.
It's simple, just sell.
All the recent downgrades would've had much more credibility if they were released prior to the Newmont production and cost CC. Imagine these folk get paid to provide an analysis after the fact.
Besides, the opinion for the downgrades were all over the map.
1. Reserves calculated at $1300 instead of $1100.
2. Indonesia ore export ban and heavy export tax.
3. Potential share dilution.
4. Dividend cut.
5. Potential Moody's debt downgrade.
6. Nevada gold extraction forecast below target.
7. Ore extraction costs above peers.
8. Worker unrest at several projects.
There are many more that I didn't list. Some of these items hold water for me; for example, I do believe the dividend will be suspended or cut again upon the earnings release data. But others seem nothing more than a Straw Man point; for example, both the Newmont costs being above their peers and the share dilution. NEM said during the CC there is room for further cost containment at several projects and it is right around the corner. The CEO in a post CC interview declared there is no pending "acquisition" or debt pay down situation that would necessitate a secondary share offering.
My point is that spit balls are being thrown against the wall to see if they stick. Again, these analysts get paid for this trash?
Most of these excuses were well known and advertised ahead of the CC. Nothing new came from the call, other than the next quarter actual forecast--which was actually pretty good.
Recommendations and price targets came down; but where are the updated earnings forecast for the completed quarter? I assume they came down too, yet no word on the magnitude of drop.
If you haven't already sold then why not?
For me, the opportunity to sell has ended already.
There is an update released that indicates that there is no "acquisition" in the queue and that equity would not be used to pay down debt. Further, that there till are some non core assets to get rid of.
Furthermore, the Indonesia ore mining will continue for at least the next two months at current levels while the issue on exports and their taxes continue to be discussed with the Government.
True...that path has the thesis that you've presented.
What is puzzling to me is what is NEM management thinking? I mean sure I grasp the concept of buying straw hats in winter...but...NEM also addressed the concern of a Moody's debt downgrade; and suggested that recent divestiture of non-core oil sand assets along with a revisit of the dividend policy should assuage Moody's to keep the debt rating as Investment Grade. Until NEM resolves all the issues on their table, why in the heck consider acquisitions and the equity dilution that ensues?
Still listening to the CC...but a couple of concerns have been raised.
Indonesia political issues need to be resolved. NEM, along with Freeport, are continuing to hold dialogue with the Government. Understandingly, NEM would prefer to avoid going the arbitration route to resolve the new export tax (Is this for Copper only or is Gold included?) imposed by the Indonesian Government--legal process could take forever and outcome would be questionable based on selected arbiter. NEM currently is arguing that the Work Contracts allow for the export of concentrate and should not be liable for the export tax.
Another concern was the dividend and debt and potential equity dilution--Moody's may want to lower the debt rating. Apparently Moody's want to use $1100 an ounce, but NEM is currently at $1300 for 2014 [$1200 an ounce for longer term projection]. It was somewhat implied that the dividend is currently under evaluation and will be addressed concurrent with the February earnings release [not surprising the dividend could be cut or suspended]. NEM seems to want to make an acquisition and would use stock in lieu of cash to consummate a deal--dilution of shares. So any deal must show immediate worth to the bottom line; else existing shareholders get hosed.
Lastly for me, was the all up sustaining costs. Although NEM has reduced costs quite a bit, it seems the sustainment costs are somewhat higher than it's mining peers. Management suggested there is further cost reductions under consideration.
Not sure what to make of the CC...not great but not bad. I need to read the transcripts a few times to fully evaluate things.
Downgrade by RBC to underweight.
NEM Conference call begins in 20 minutes; maybe something is to be disclosed?
Very good report...the quarter ore results were at the high end of prior forecast. Guidance for the current quarter was real good. I'd suggest that earnings when released in late February will beat the low estimates from the Sell Side analysts.
Still time to cover that short.
Sure, tomorrow is when NEM will report production and sales preliminary data...you're correct.
The Earnings release won't occur until late February.
Is this normal practice regarding Newmont? That is, is there always a production release and then subsequent earnings release? Is the reserve price normally amended along with the production and sales information? If so, then perhaps the value of reserves is expected to be revised downward tomorrow? Is the dividend payout release normally a part of the production and sales press release?
Exactly, I can't find any rational basis for the divergence?
Usually there is something obvious; perhaps just an aberration. I remain long shares. I'd think by the end of the day the reason will surface; else, NEM will nudge back in tandem with the group.