Newmont To Sell Stake In Indonesian Assets To Reduce Debt

Newmont Mining Corporation (NYSE:NEM) and PT Amman Mineral Internasional (PT AMI) have entered into a binding share sale and purchase agreement. The agreement is for the sale of Newmont’s interest in PT Newmont Nusa Tenggara (PTNNT), which operates the Batu Hijau copper and gold mine in Indonesia.

Newmont will sell its 48.5% stake in PTNNT for $1.3 billion. While $920 million from this will be paid in cash at the closing of the deal, the remaining $403 million is tied to the metal price upside and development of the Elang copper reserve. Nusa Tenggara Mining Corporation, majority owned by Sumitomo Corporation, has also agreed to sell its stake to PT AMI.

Newmont has taken this decision to lower its debt and create shareholder value by funding highest margin projects. The deal is expected to conclude in the third quarter post regulatory approvals and fulfillment of other conditions.

Some of the conditions to be considered include the government’s consent over the transfer of PTNNT shares, a valid export license at the time of closing, simultaneous conclusion of PT Multi Daerah Bersaing’s (PTMDB) sale of its 24% stake to buyers, the decision regarding certain tax-related concerns, and the lack of any material event that could negatively impact the future value of Batu Hijau.

PT AMI has a significant presence in the oil, mining as well as finance industry in Indonesia. Newmont’s management is confident in the ability of the PT AMI team to operate the mine successfully with the help of the Batu Hijau team’s expertise.

Shares of Newmont rose 4.1% in the trading session on Thursday, closing the day 3.8% higher at $39.12.

Newmont recorded adjusted earnings of 34 cents per share in first-quarter 2016, down 26.1% year over year due to low realized prices of gold and copper. However, revenues increased 3% from the prior-year quarter to $2,032 million. Both figures beat the Zacks Consensus Estimate. At the end of the reported quarter, the company had cash and cash equivalents of $2,461 million and debt of $5,369 million, both lower by roughly 5.3% and 13.7%, respectively, year over year.

Newmont saw higher production of gold as well as copper in the first quarter. Newmont sees attributable copper production in the range of 120,000–160,000 tons in 2016 and 2017.

Newmont currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the mining space include B2Gold Corp. (NYSE:BTG) and Sandstorm Gold Ltd. (NYSE:SAND) , both sporting a Zacks Rank #1 (Strong Buy), and IAMGOLD Corp. (TO:IAG) , holding a Zacks Rank #2 (Buy).