Metals Prices Are Rising, But Is Newmont Mining a Golden Opportunity?

Gold, Money

Newmont Mining Corporation (NYSE:NEM), is one of the world’s largest gold mining companies. It acquires, explores for, and produces not only gold, but also copper and silver deposits. The company’s assets and operations are located in the United States, Australia, Peru, Indonesia, Ghana, New Zealand, Mexico, and Suriname. As of December 31, 2013, it had proven probable gold reserves of approximately 88.4 million ounces and an aggregate land position of approximately 24,000 square miles. It was long one of my favorite plays in the gold mining space for its capital appreciation and its high dividend.

As the price of gold and silver has plummeted in the last two years, so has Newmont’s share price and dividend yield. However, with gold now back over $1300 an ounce, it seems like the stock is setting up to breakout, having risen 10 percent this week. To understand if the stock is a buy going forward, an analysis of its recent performance is necessary.

First, the company managed to achieve reported net income attributable to shareholders from continuing operations of $117 million, or $0.23 per basic share, and adjusted net incomeof $108 million, or $0.22 per basic share. Further, they Generated revenue of $1.8 billion compared with $2.2 billion in 2013 (due to depressed gold prices.) They also generated cash from continuing operations of $183 million. What the company has strived for is cutting costs. The company managed to generate cost savings of $82 million in gold all-in sustaining costs, which equates to $1,034 per ounce, down 8 percent from the prior year quarter. Realized costs applicable to sales were $751 per ounce of gold and $2.71 per pound of copper, a decrease of 1 percent and an increase of 19 percent, respectively, over first-quarter last year.