Newmont Corp. (NYSE:NEM)

An analysis of the financial performance from 2019 to 2023 reveals a significant deterioration in economic value creation. The company transitioned from a state of positive economic profit to substantial value destruction, characterized by a sharp decline in operating profitability and a simultaneous increase in the capital base during the final period.

Net Operating Profit After Taxes (NOPAT)

A severe downward trend is observed in NOPAT, which fell from US$ 3,486 million in 2019 to a deficit of US$ 2,520 million by 2023. The transition into negative operating profit occurred in 2022, indicating that the core operations ceased to generate positive returns after taxes, with the losses accelerating significantly in the most recent fiscal year.

Invested Capital and Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating within a narrow range between 9.76% and 10.45%. Invested capital showed a moderate decline between 2020 and 2022, dropping from US$ 29,461 million to US$ 23,044 million. However, a sharp increase occurred in 2023, with invested capital rising to US$ 36,379 million, representing a substantial expansion of the asset base despite falling profitability.

Economic Profit

Economic profit shifted from a positive US$ 553 million in 2019 to a deep negative of US$ 6,069 million in 2023. This trajectory indicates that the company failed to meet its required return on invested capital starting in 2020. The magnitude of value destruction intensified in 2023, driven by the dual impact of worsening operating losses and a larger capital charge resulting from the increased invested capital base.

The financial data reveals significant fluctuations in profitability over the five-year period ending in 2023. Net income attributable to stockholders showed a positive trend through 2019 and 2020, peaking at approximately $2.8 billion in those years. However, a sharp decline is evident starting in 2021, where net income drops to around $1.2 billion, followed by a transition to negative territory in 2022 and 2023, with losses reaching nearly $0.4 billion and $2.5 billion respectively.

Similarly, the net operating profit after taxes (NOPAT) follows a comparable trajectory. It decreased from $3.5 billion in 2019 to $2.6 billion in 2020, then plummeted to just $274 million in 2021. The subsequent years show further deterioration into negative values, with losses of about $555 million in 2022 and $2.5 billion in 2023.

Profitability Trends

The company experienced robust profitability in 2019 and 2020, but profitability sharply declined starting in 2021, transitioning into losses by 2022 and 2023.

Net Income Analysis

Net income sustained positive values for the first three years analyzed, but the significant drop in 2021 indicates operational or market challenges. The losses in the last two years suggest ongoing issues impacting the bottom line.

NOPAT Analysis

NOPAT mirrored net income movements but showed an earlier and steeper decline, reflecting diminishing operational efficiency or increased expenses relative to operating profit.

Overall

The data suggests increasing financial strain from 2021 onward, with deteriorating profitability and operational performance. The downward trend in both net income and NOPAT highlights potential risks or negative developments affecting financial health.

Income and Mining Tax Expense

The income and mining tax expense exhibited notable fluctuations over the five-year period. Initially, it decreased from 832 million US dollars in 2019 to 704 million in 2020. This decline was followed by a significant increase to 1,098 million in 2021, representing the highest value in the period under review. Subsequently, the expense dropped sharply to 455 million in 2022 before experiencing a moderate rise to 526 million in 2023. Overall, the tax expense shows a volatile pattern with a peak occurring in 2021 and lower values in the later years.

Cash Operating Taxes

Cash operating taxes demonstrated an overall upward trend from 2019 through 2021, increasing from 550 million to 1,262 million US dollars. The growth in this category was consistent and pronounced during these years. However, in 2022, there was a significant decline to 765 million, and this downward trend continued into 2023, with the amount further decreasing to 651 million. This pattern indicates strong growth in cash operating taxes during the initial years, followed by a substantial reduction in the final two years.

Comparative Analysis

Both income and mining tax expense and cash operating taxes peaked in 2021 before declining in the subsequent years. The variations in income and mining tax expense were more pronounced, exhibiting greater volatility, whereas cash operating taxes had a steadier increase prior to the decline. The decline in both categories after 2021 may suggest changes in operational efficiencies, tax policies, or variations in taxable income. The divergence in magnitude of fluctuations between the two items could imply differences in their calculation bases or timing recognition.

The financial data reveals several notable trends in the company's capital structure and financing activities over the five-year period ending December 31, 2023.

Total Reported Debt & Leases

The total reported debt and leases showed a generally declining trend from 2019 through 2022, dropping from $6,909 million in 2019 to $6,248 million in 2022. This reduction suggests the company was actively managing and reducing its debt obligations during this period. However, in 2023, there was a significant increase to $9,541 million, reversing the downward trend and indicating a substantial rise in leverage or new financing activities undertaken in that year.

Total Newmont Stockholders’ Equity

Stockholders’ equity increased from $21,420 million in 2019 to a peak of $23,008 million in 2020, reflecting growth in the equity base. The level then moderately declined in the following two years, reaching $19,354 million in 2022. In 2023, equity rebounded sharply to $29,027 million, exceeding all previous years in the data set. This sharp rise might indicate retained earnings accumulation, equity infusions, or favorable changes in asset valuations leading to an expanded equity base.

Invested Capital

Invested capital initially increased slightly from $28,943 million in 2019 to $29,461 million in 2020, then declined steadily to $23,044 million by the end of 2022. This decreasing trend corresponds with the reductions in both equity and debt earlier noted, possibly reflecting asset sales, depreciation, or less capital deployment during this period. In 2023, invested capital surged to $36,379 million, marking a significant expansion of the capital base, likely linked to the increased debt and equity levels recorded the same year.

Overall, the data indicates a phase of consolidation or capital reduction from 2020 to 2022, characterized by declines in debt, equity, and invested capital. This was followed by a strong growth phase in 2023, with marked increases across all major capital metrics. The simultaneous rise in debt and equity suggests an aggressive capital expansion, possibly to fund new investments or strategic initiatives. This shift in 2023 represents a significant change in the company's financial strategy compared to the prior years.

The financial trajectory from 2019 to 2023 indicates a consistent transition from value creation to significant value destruction. While the period began with a positive economic contribution, there has been a persistent deterioration in the ability to generate returns above the cost of capital, culminating in a substantial deficit by the end of 2023.

Economic Profit Trend

A severe downward trend is observed in economic profit, which shifted from a positive 553 million USD in 2019 to a deficit of 6,069 million USD by 2023. The losses accelerated significantly after 2020, with the deficit widening most aggressively between 2022 and 2023, where the economic loss more than doubled.

Invested Capital Dynamics

Invested capital remained relatively stable between 2019 and 2021, followed by a contraction to 23,044 million USD in 2022. However, a sharp increase occurred in 2023, with invested capital rising to 36,379 million USD. This sudden expansion in the capital base coincided with the largest annual drop in economic profit, suggesting that the additional capital deployed has not yet generated sufficient returns to cover its associated costs.

Economic Spread Ratio Analysis

The economic spread ratio exhibits a continuous and accelerating decline, moving from a positive 1.91% in 2019 to negative 16.68% in 2023. This steady contraction confirms that the gap between the return on invested capital and the cost of capital has widened every year. The transition into negative territory in 2020 marked the onset of shareholder value destruction, a trend that intensified annually throughout the analyzed period.

The correlation between the rising invested capital in 2023 and the deepening negative economic spread suggests an inefficient utilization of assets or a significant increase in the cost of funding that outpaces operational returns. The results indicate a systemic inability to maintain an economic spread above zero over the five-year horizon.

The economic performance of Newmont Corp. from 2019 to 2023 is characterized by a severe and accelerating decline in economic value creation. Despite a general increase in sales during the first half of the period, the company failed to generate returns above its cost of capital, leading to an expanding economic deficit.

Economic Profit Trends

A transition from value creation to value destruction is evident. Economic profit was positive in 2019 at 553 million USD but shifted to a loss of 382 million USD in 2020. This downward trajectory intensified significantly, culminating in a substantial loss of 6,069 million USD by the end of 2023.

Sales Performance

Revenue grew from 9,740 million USD in 2019 to a peak of 12,222 million USD in 2021. Following this peak, sales experienced a slight contraction and stabilization, ending at 11,812 million USD in 2023. The relative stability of sales contrasts sharply with the volatility and decline of economic profit.

Economic Profit Margin

The economic profit margin reflects a critical deterioration in financial efficiency. From a positive margin of 5.68% in 2019, the ratio dropped to -3.32% in 2020 and experienced a steep decline to -21.32% in 2021. The margin continued to erode, reaching -24.59% in 2022 and ending the period at -51.38% in 2023.

The divergence between relatively stable sales and plummeting economic profit suggests that the costs associated with capital and operations grew at a rate far exceeding revenue growth. The sharp collapse of the economic profit margin indicates that the company is operating significantly below its required rate of return, resulting in substantial loss of economic value over the five-year period.