Grade: C — Some Red Flags, Investigate
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-19, FY ended December 31, 2025) + Yahoo Finance
Auditor: Ernst & Young LLP (PCAOB ID 42) — Unqualified opinion; PricewaterhouseCoopers LLP (PCAOB ID 271) — for Nevada Gold Mines (13% of assets)
One-line verdict: Newmont delivered a record-breaking year — net income surged to $7.1 billion, free cash flow reached $7.3 billion, and cash on hand of $8.2 billion exceeds total debt of $5.6 billion. The sole red flag is a 23.1% inventory surge while cost of applicable sales declined 8.1%, which in a gold mining context likely reflects ore stockpile accumulation from divested sites or ramp-up of new projects. Gross margin expanded 15 percentage points to 53.2%, driven by higher average realized gold prices. The M-Score is clean at -2.71 and the Z-Score of 3.94 sits well in the safe zone. This is a company riding a gold price boom with clean books and fortress-level liquidity.
| Metric | Result |
|---|---|
| :x: Red Flags | **1** (Inventory vs COGS) |
| :warning: Watch Items | **1** (Gross margin swing +15pp) |
| Checks Completed | **17/18** (1 N/A: impairment data) |
| Beneish M-Score | **-2.71** (clean) |
| Altman Z-Score | **3.94** (safe zone) |
| Auditor | Ernst & Young LLP — Unqualified opinion |
The Gold Price Windfall
Newmont is the world's largest gold mining company. The 10-K reports consolidated gold production of 5,530 thousand ounces sold, including attributable production of 5,889 thousand ounces across operations and joint ventures (including Pueblo Viejo at 40% and Fruta del Norte).
The financial story of FY2025 is overwhelmingly about gold prices. Per the filing's results highlights, the dramatic improvement in profitability was "largely due to higher average realized gold prices partially offset by the impact from divestitures." The Newcrest Mining acquisition, completed in November 2023, is now fully integrated.
The company reported "adjusted net income (loss) of $7,634 or $6.89 per diluted share, an increase of $3.41 per diluted share from the prior year."
Profitability: Explosive Growth
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|---|
| Revenue | $11.9B | $11.8B | $18.7B | $22.7B | +21.3% |
| Net Income | -$429M | -$2.5B | $3.3B | $7.1B | Massive swing |
| Gross Margin | 27.4% | 25.4% | 38.2% | 53.2% | +15pp |
| Net Margin | -3.6% | -21.1% | 17.9% | 31.3% | Record high |
| ROE | -2.2% | -8.6% | 11.2% | 20.9% | Excellent |
FY2025 revenue of $22.7B and net income of $7.1B represent all-time highs. The revenue jump from $18.7B to $22.7B (+21%) came primarily from higher gold prices, partially offset by the impact of divestitures — NEM sold several non-core assets during the year. The increase was also "partially offset by the increase in Income and mining tax benefit (expense) and Impairment charges, primarily at Yanacocha."
Cash Flow: Printing Money
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Operating Cash Flow | $2.8B | $6.3B | $10.3B |
| Net Income | -$2.5B | $3.3B | $7.1B |
| CFFO / NI | -1.11 | 1.90 | 1.46 |
| CapEx | $2.7B | $3.4B | $3.0B |
| Free Cash Flow | $88M | $2.9B | $7.3B |
Free cash flow of $7.3B represents 103% of net income — an exceptionally clean conversion. Operating cash flow of $10.3B provided ample coverage for $3.0B in capital expenditures. Per the filing, dividends paid were $1.00 per share (regular), and dividends declared were $1.01 per share.
The company reduced total debt from $9.0B (FY2024) to $5.6B (FY2025) while building cash from $3.6B to $8.2B. Net cash position is now +$2.7B — rare for a gold miner.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | :white_check_mark: | DSO 17 days, -3 days YoY |
| A2 | AR vs Revenue Growth | :white_check_mark: | AR +1.0% vs revenue +21.3% |
| A3 | Revenue vs CFFO | :white_check_mark: | Revenue +21.3%, CFFO +62.4% |
All revenue quality metrics are strong. Cash flow growth far outpaced revenue growth. Receivables were essentially flat while revenue surged — reflecting cash-heavy gold sales.
Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory vs COGS | :x: | Inventory +23.1% vs COGS -8.1% |
| B2 | CapEx vs Revenue | :white_check_mark: | CapEx -10.8% vs revenue +21.3% |
| B3 | SG&A Ratio | :white_check_mark: | SG&A/Gross Profit = 3.2%, excellent |
| B4 | Gross Margin | :warning: | Margin swung +15.0pp (38.2% to 53.2%) |
B1 is the sole red flag. In gold mining, "inventory" includes ore stockpiles and ore on leach pads — these are intermediate stages of production, not finished goods sitting unsold. The 23.1% increase while COGS declined 8.1% likely reflects: (a) higher-grade ore being stockpiled for future processing, (b) leach pad inventory accumulating at heap-leach operations, or (c) divestitures reducing COGS (sold sites no longer incur costs) while inventory from retained sites grows. This is a mining-specific accounting pattern, not the classic manufacturing inventory warning.
B4 watch. A 15 percentage point gross margin swing is enormous, but it's driven by gold prices, not by cost manipulation. The GMI (Gross Margin Index) in the M-Score at 0.719 actually indicates margins improved, which the model considers benign.
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs Net Income | :white_check_mark: | CFFO/NI = 1.46, profits backed by cash |
| C2 | Free Cash Flow | :white_check_mark: | FCF $7.3B, FCF/NI = 1.03 |
| C3 | Accruals Ratio | :white_check_mark: | -5.7%, low accruals |
| C4 | Cash vs Debt | :white_check_mark: | Cash $8.2B covers debt $5.6B |
Cash flow quality is pristine. Cash exceeds total debt. Free cash flow exceeds net income. Accruals are negative (cash earnings exceed reported earnings).
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | :white_check_mark: | $2.7B = 8% of equity |
| D2 | Leverage | :white_check_mark: | Debt/EBITDA = 0.4x, minimal |
| D3 | Soft Asset Growth | :white_check_mark: | Other assets +17.8% vs revenue +21.3% |
| D4 | Asset Impairment | — | No write-off data available |
Leverage at 0.4x Debt/EBITDA is essentially debt-free. Interest coverage at 48.1x means debt service is trivial relative to earnings.
Acquisition Risk
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Serial Acquirer FCF | :white_check_mark: | FCF after acquisitions positive |
| E2 | Goodwill Surge | :white_check_mark: | Goodwill unchanged YoY |
No acquisition-related concerns. The Newcrest integration appears complete.
Manipulation Score
| # | Check | Result | Detail |
|---|---|---|---|
| F1 | Beneish M-Score | :white_check_mark: | -2.71 (clean) |
The SGAI at 0.712 reflects improving operating leverage. All components are benign.
Key Risks from the 10-K
1. Gold Price Dependency
Virtually all of Newmont's profitability improvement derives from higher gold prices. A return to 2022-2023 price levels would collapse margins from 53% back toward the mid-20s. The filing acknowledges "sensitivity of cash flows to gold, copper, silver, lead, zinc and other metal prices" as a key risk factor.
2. Yanacocha Impairment Charges
The filing notes impairment charges "primarily at Yanacocha" — Newmont's long-running Peruvian gold mine that has faced declining grades and environmental challenges. The Conga project in Peru also remains controversial.
3. Reclamation and Remediation Obligations
The filing excludes "Depreciation and amortization and Reclamation and remediation" from certain operating metrics. These are significant long-term liabilities for a mining company, representing future cash outflows for environmental cleanup at depleted mines. As mines are exhausted and divested, these obligations crystalize.
4. Dual Auditor Complexity
Ernst & Young audits the parent; PricewaterhouseCoopers audits Nevada Gold Mines LLC, "whose financial statements reflect total assets constituting 13% of consolidated assets." This dual-auditor structure adds complexity and relies on the parent auditor's reliance on the subsidiary auditor's report.
5. Divestiture Impact
Newmont completed multiple divestitures in FY2024-2025, reducing its mine portfolio. While this generated cash and simplified the portfolio, the "impact from divestitures" on revenue and production volumes creates noise in year-over-year comparisons and could mask underlying operational trends.
Summary
Grade: C. One red flag on inventory, but overwhelmingly strong financials elsewhere.
Newmont's FY2025 numbers are exceptional: $7.3B free cash flow, net cash positive balance sheet, 53.2% gross margin, CFFO/NI of 1.46, and 0.4x leverage. The M-Score is clean, the Z-Score is safe, and the auditor issued an unqualified opinion.
The inventory flag (B1) is the sole blemish and is likely a mining-industry-specific artifact rather than a genuine concern — ore stockpiles and leach pad inventory behave differently from manufacturing inventory. The larger risk is strategic: these numbers are entirely dependent on gold prices remaining elevated. When gold corrects, Newmont's margins will compress dramatically, and the inventory stockpile question will become more urgent.
**Disclaimer**: This report is based on Newmont's FY2025 10-K filed with SEC EDGAR on February 19, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: Ernst & Young LLP (Unqualified opinion); PricewaterhouseCoopers LLP (for Nevada Gold Mines)
Fiscal year ended: December 31, 2025