Newmont Mining Corp (NYSE:NEM) Facing A Possible Downgrade By Moody’s

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Dallas, Texas 01/30/2014 (FINANCIALSTRENDS) – Newmont Mining Corp (NYSE:NEM), the $12.38 million market capped gold mining firm got a rude jolt at the hands of Moody’s Investors Service on 24th January, when the rating agency red flagged the senior unsecured notes offer, collectively worth close to $ 5 billion being made by the mining firm. Moody’s has let it be known that it is reviewing the same for a potential downgrade. These five categories of unsecured notes carry a maturity date between 1st October 2019 and 15th March 2042 come with a Baa 1 rating. The mining firm’s overall rating also will be reviewed for a possible downgrade from its current standing of “Stable”.

In its follow up note which accompanied this update on Newmont Mining Corp (NYSE:NEM), Moody’s Investors Service has explained its rational for the review by citing potential dip in the earnings, followed by dip in cash flow, negatively impacting the financial health of the firm. It has also red flagged the deceasing comfort the mining firm enjoys towards its debt protection, given the steady depreciation of gold prices to 3 year low of $1200 per ounce of gold. It is instructive to note here that Moody’s own bench mark price index for gold is $1100 per ounce of gold.

At these conservative price points, the rating agency feels that the debt to earnings ratio for Newmont Mining Corp (NYSE:NEM) would go up beyond the healthy 3.5 X times that serves as a bench mark for gold firms and its earnings before interest payment / interest paid out ration would balloon up to more than 1.5 X times.  In conclusion, the note points out that , “In the current gold price environment, Newmont exhibits a relatively high, although reduced, all in sustaining cost position of $993/gold ounce based upon third quarter 2013 performance.”

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