gold prices

MOLSON COORS BREWING CO. $55.05, New York symbol TAP, has agreed to merge its operations in the United States and Puerto Rico with those of rival brewer SAB Miller PLC. Each will have 50% voting interest in this new venture, called MillerCoors, but Miller will have a 58% economic interest while Molson Coors will have 42%. This new joint venture will account for about 27% of the beer market in the United States. That should help it compete with Anheuser-Busch (see below), which accounts for about half of U.S. beer sales. Assuming regulators approve, the new company should begin operations in 2008. Like the earlier merger of Molson and Coors, the main attraction of this plan is cost savings. Molson Coors expects to save $500 million a year by sharing its distribution networks and other assets with Miller. To put that in context, Molson Coors earned $184.3 million or $1.02 a share in the second quarter of 2007....

APPLE INC. $132.30, Nasdaq symbol AAPL, rose to a new all-time high following the successful launch of the iPhone. The new product uses an estimated $266 worth of parts, which suggest it will produce a gross profit of roughly $250 per unit. Apple aims to sell 10 million iPhones in the first year, which works out to an aggregate profit of $2.5 billion. The company earned just $2.0 billion or $2.27 a share in the fiscal year ended September 30, 2006. However, Apple is unlikely to dominate the mobile phone market in the same way its iPod quickly captured a big part of the music player market. If Apple fails to meet its iPhone sales target, the stock could fall sharply. Apple is still a hold....

NEWMONT MINING $39 (New York symbol NEM; SI Rating: Average) is one of the largest gold producers in the world with major operations in the United States, Canada, Peru, Australia, Indonesia and Ghana. It also produces other metals, including copper, silver and zinc. The company expects to produce around 7 million ounces of gold this year. Like most mining companies, Newmont is facing higher costs for labor, energy and materials. Commodity prices have eased lately, so these costs should stabilize in 2007. Newmont now trades at a reasonable (for a gold stock) 19.7 times the $1.98 a share it will probably earn in 2007, and at 12.6 times its forecasted cash flow of $3.10 a share. The $0.40 dividend yields 1.0%....

NEWMONT MINING CORP. $47 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 422.5 million; Market cap: $19.9 billion; WSSF Rating: Average) is one of the world’s largest gold mining companies, with major operations in the United States, Canada, Peru, Australia, Indonesia and Ghana. It also produces other metals, including copper, silver and zinc. Gold prices got as high as $725 an ounce in May 2006, but moved down to about $570 a month later. Gold will probably average $650 this year. Newmont prefers to sell its gold at the spot price instead of through hedging contracts. While that increases its price risk, the company offsets this by expanding or cutting production....

NEWMONT MINING $45 (New York symbol NEM; SI Rating: Average) is the largest gold producer in the world with mines on five continents. North America and Australia account for about 70% of its annual production. It also mines copper and other base metals. The company expects to produce around 7 million ounces of gold this year. Newmont earned $236 million in the three months ended September 30, 2006, up 188.8% from $125 million. (All figures in U.S. funds.) Earnings per share rose 89.3%, to $0.53 from $0.28. Revenues fell slightly to $1.10 billion from $1.15 billion. Newmont’s long-term debt is reasonable at $1.8 billion or 20% of shareholders’ equity, and it has $1.33 billion ($3.16 a share) in cash and equivalents. The stock trades for 14.8 times the $3.05 a share in cash flow that it is likely to report in 2007....

NEWMONT MINING CORP. $58 (New York symbol NEM; WSSF Rating: Average) earned $0.47 a share from continuing operations in the three months ended March 31, 2006, up sharply from $0.19 a year earlier. If you disregard a one-time tax benefit, Newmont would have earned $0.36 a share in the latest quarter. Revenue rose 21.7%, to $1.15 billion from $945 million, as gold prices rose 31%. Newmont will probably sell between 6.1 million ounces and 6.25 million ounces of gold in 2006, down from an earlier forecast of 6.26 million, mostly due to geologic instability at its mine in Indonesia. However, rising gold prices should more than make up for any loss in revenue. Higher gold prices will also offset rising operating costs. Newmont’s cost per ounce is likely to rise from $236 in 2005 to between $280 and $295 this year. The stock trades at a high 39.7 times its likely 2006 profit of $1.46 a share. Gold enthusiasts routinely pay multiples in that range, and Newmont’s policy of not hedging its sales should help it take full advantage of rising gold prices....