JP Morgan just raised this mining company’s rating to ‘Overweight’ and increased its price target to $43.
Newmont Mining Corp. (NEM)
From Jack Adamo’s Insiders Plus
Newmont Mining Corp. (NEM) reported GAAP net income from continuing operations of $169 million, or $0.32 per share, compared to $159 million, or $0.30 per share in the prior year quarter. Continuing operations exclude Batu Hijau results in Indonesia. Newmont’s share of that property will soon be sold to its partner in that venture.
Net cash from continuing operating activities was $509 million and free cash flow was $240 million, compared to $475 million and $159 million in the prior year quarter.
Newmont produced 1.25 million ounces of gold versus 1.21 million ounces in the prior year’s quarter. Costs applicable to gold sales were $706 per ounce compared to $645 per ounce last year. Copper CAS was $2.14 per pound compared to $1.78. All-in sustaining costs (AISC) were $925 per ounce of gold compared to $879 per ounce. Copper AISC was $2.57 per pound compared to $2.21.
Despite higher expense, I’m very bullish on Newmont. New operations are coming on line and should help earnings immensely going forward. In North America, the Cripple Creek & Victor expansion reached commercial production on time and budget. The expansion includes a new leach pad, recovery plant and mill. In 2016 gold production is expected to be between 350,000 and 400,000 ounces at CAS of between $500 and $550 per ounce and AISC of between $600 and $650 per ounce, with production weighted toward the latter part of the year.
Merian is expected to deliver more than a decade of profitable production and accretive returns. The new mine reached commercial production on October first, completed on time and more than $150 million below budget. Gold production will average between 400,000 and 500,000 ounces annually during the first five years at CAS between $575 and $675 per ounce and AISC of between $650 and $750 per ounce. Newmont has a 75% share in the project.
In addition to the above properties, first production was achieved at Northwest Exodus, while Long Canyon is progressing favorably. In Australia, the Tanami expansion project is also on track to reach full production next year.
Analysts expect Newmont to earn $1.73 this year (adjusted) and $2.00 next year. That’s a current P/E of 20 with about 16% growth next year. That’s a nice price/earnings-to-growth ratio. The company doubled its fourth quarter dividend to $0.05 per share and announced an enhanced gold price-linked dividend policy.
Newmont is a great buy with its relatively low P/E, new production coming on line and a long history of delivering returns to investors. The company is still thriving after two world wars, the outlawing of the ownership of gold by Americans, a worldwide depression and several worldwide near depressions. I’m raising my buy range for the stock. Newmont Mining is a buy up to $38.
Jack Adamo, Jack Adamo’s Insiders Plus, www.jackadamo.com, October 29, 2016