Newmont Corp.

Investing in diamond exploration stocks is risky. It’s a long way between the exploration phase and the commercial production phase when they begin to produce diamonds for sale and possibly start making money. There’s often a long lag between signs of progress, and share prices can drift down in the meantime. Sometimes news is negative, and share prices fall sharply. Still, here are three promising diamond exploration stocks. All have speculative appeal, but they are buys only for highly aggressive investors. SHORE GOLD $5.86 (Toronto symbol SGF; SI Rating: Start-up) (306-664-2202; www.shoregold.com; Shares outstanding: 177.2 million; Market cap: $1.0 billion) owns 100% of the Star diamond project in the Fort a la Corne area of northern Saskatchewan, an area that hosts one of the most extensive kimberlite fields in the world. The Star project contains a diamond-bearing kimberlite, estimated in the 500 million tonne range. Bulk sampling has already returned high carat-grades of diamonds....

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....

ALCOA INC. $35.99, New York symbol AA, aims to sell or spin-off its consumer aluminum products business, best known for Reynolds Wrap, by the end of 2007. It will also sell two of its smaller automotive parts operations. These businesses account for 16% of Alcoa’s total revenue, but only 3% of its earnings. These operations have less profit potential than Alcoa’s core aluminum production operations, so selling them makes sense. This will make Alcoa more sensitive to world aluminum markets, but aluminum demand and prices will probably remain high for at least the next several years. Alcoa is a buy....