Topic: Mining Stocks

Gold mining giant spurs growth to meet ambitious production goals

This senior gold stock continues to pursue initiatives to achieve its long-term production goals.

The company expects to produce 5% of the world’s mined gold by 2024. It is expanding operations and building new mines on its existing properties, and as well as buying new properties; recently it entered into a joint venture with Canada’s Teck Resources. In the meantime, the company no longer links its dividend to the price of gold and raised the payout earlier this year.

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NEWMONT MINING CORP. (New York symbol NEM; is one of the world’s largest gold and copper producers. The company’s mines are in North America, South America, Australia and Africa.

Over the last six years, Newmont sold $2.8 billion in non-core assets, bought the Cripple Creek & Victor mine in Colorado, built three new mines and undertook nine mine expansions. Most recently, the company completed the expansion of its Twin Creeks mine in Nevada, which should add 30,000 to 40,000 ounces of gold per year.

Altogether, those moves have added over 2 million ounces of gold to Newmont’s annual output. By 2024, the company expects its annual share of mined gold to reach 5%, compared to the 4.4% in 2015.

In May 2018 Newmont agreed to form a strategic alliance with Vancouver-based Maverix Metals Inc. (Toronto venture exchange symbol MMX).

Under the terms of that deal, Newmont transferred 50 royalty rights to Maverix. Those rights entitle the holder to a portion of the revenue, or the physical metals, from a variety of gold and other mines.

In exchange, Newmont received 60 million Maverix common shares (28% of the total outstanding) and warrants to purchase an additional 10 million common shares.

Newmont is also using acquisitions to expand. It recently agreed to buy 50% of the Galore Creek gold/copper deposit in B.C. for $275 million; Teck Resources Ltd. (Toronto symbol TECK.B) owns the other 50%. They are now studying the feasibility of building a mine.

Mining Stocks: Earnings per share well above the consensus estimate

Newmont produced 1.29 million ounces of gold in the three months ended September 30, 2018. That’s down 3.1% from the 1.33 million ounces the company produced a year earlier. The drop is partly due to lower production from the surface mines at Carlin in Nevada. In addition, mining has been temporarily suspended in Carlin’s Gold Quarry pit following ground movement at the site.

That suspension is the main reason the company has narrowed the range of its probable gold production for the full year in 2018. It now expects to produce between 4.9 million and 5.2 million ounces, down from its previous high estimate of 5.4 million ounces.

If you exclude unusual items, Newmont’s earnings in the quarter were down 4.9%, to $0.33 a share (or a total of $175 million) from $0.35 a share (or $184 million) a year earlier. Still, that was well above the consensus estimate of $0.22 a share.

Revenue declined 8.6%, to $1.73 billion from $1.88 billion. That fell short of the consensus estimate of $1.79 billion. The decline was attributed to lower gold prices as well as lower production.

Newmont should earn $1.18 a share for 2018, and the stock trades at 27.0 times that forecast.

This year, Newmont moved away from paying a dividend linked with gold. With the March 2018 payment, the company increased its quarterly dividend by 86.7%, to $0.14 a share from $0.075. The current annual rate of $0.56 yields 1.8%.

Recommendation in Wall Street Stock Forecaster: Newmont is a buy for investors who want to own a gold stock.

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