With gold trading $150 an ounce higher than it was a year ago, this industry giant is about to take over as the number one gold producer in the world.
The company has pursued a three-pronged strategy—expanding existing operations, selling off non-core assets and pursuing exploration projects around the world. And its decision to stop linking its dividend to the price of gold will result in a 50% dividend increase.
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NEWMONT MINING (symbol NEM on New York; www.newmont.com) is one of the world’s largest gold and copper producers. The company’s mines are in North America, South America, Australia and Africa.
Newmont is poised to take over as the world’s biggest gold producer. It just announced a 2018 production forecast of 4.9 million to 5.4 million ounces. That exceeds Barrick Gold Corp.’s (symbol ABX on Toronto) 2018 production estimate of 4.8 million to 5.3 million. That amount excludes the impact of Barrick’s sale of 50% of a mine in Argentina.
In addition to growing existing operations in the Americas, Africa and Australia, Newmont continues to pursue exploration projects around the world, including in Canada’s Yukon, Colombia, Peru, Ethiopia, Australia and the Guiana Shield in Northeast South America.
It has also bought the Cripple Creek & Victor mine in Colorado, built three new mines and expanded nine others. Taken together, this has added more than two million ounces to its gold production.
Most recently, the company expanded its Tanami gold mine in Australia. The expansion should add 80,000 ounces to the company’s annual output of 5.2 million ounces. It will also lower the mine’s operating costs per ounce and extend its life by three years.
In the last five years, Newmont has sold $2.8 billion of what it sees as non-core assets. As a result, it expects its 2018 operating costs per ounce to range between $700 and $750. Newmont also expects those costs to decline in 2019 to between $620 and $720 an ounce.
Mining Stocks: New dividend policy results in 50% increase
Newmont’s overall revenue declined 34.5%, from $9.3 billion in 2012 to $6.1 billion in 2015. That was the result of selling off less profitable mines. Revenue improved 10.3% to $6.7 billion in 2016 due to the opening of new mines. Earnings fell 83.0%, from $3.71 a share (or a total of $1.85 billion) in 2012 to $0.63 a share (or $327 million) in 2015. Earnings then jumped 84.1%, to $1.16 a share (or $619 million), in 2016.
In the three months ended September 30, 2017, revenue rose 4.9%, to $1.88 billion from $1.79 billion a year earlier. Earnings gained 16.4%, to $213 million from $183 million.
With more shares outstanding, earnings per share rose 11.4%, to $0.39 from $0.35.
By 2024, Newmont anticipates that its global share of mined gold production will be 5%, compared to 4.4% in 2015.
This year, the company plans to move away from paying a dividend linked to the price of gold. This will result in at least a 50% dividend increase. The stock currently yields 0.8%.
We think investors should keep gold to a reasonable part of their overall portfolios, say 5% or less for a conservative investor.
Recommendation in Wall Street Stock Forecaster: Newmont is a buy, but only for investors who want to own a gold stock.
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