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Newmont Mining Asset Optimization Efforts Encourage Analysts

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Newmont’s share price performance

Newmont Mining’s (NEM) share price has risen by 21.7% year-to-date, or YTD. In the same time period, gold prices have risen by just 0.3%. The company’s 1Q15 were a solid beat on analyst expectations.

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Recently, Credit Suisse and RBC upgraded recommendations on Newmont. RBC upgraded Newmont to “outperform” from “perform,” setting a target price of $30. Credit Suisse reinstated coverage on Newmont with an “outperform” rating and a target price of $30 on June 22, 2015. Both of these firms are optimistic about Newmont’s recent asset optimization, including its purchase of the CC&V (Cripple Creek & Victor) mine and the sale of its Waihi operations.

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Series overview

Newmont Mining’s stated strategy is portfolio optimization. On one hand, it’s disposing of high-cost, non-core assets, and on the other hand, it’s acquiring low-cost assets with long mine lives in safer jurisdictions.

In this series, we’ll analyze various steps taken by Newmont toward asset optimization, including the purchase of the CC&V mine from AngloGold Ashanti (AU) and the sale of its Waihi operations in New Zealand. We’ll also discuss why Newmont’s share price has outperformed the gold miners index, gold prices, and all of its gold peers YTD. Can this outperformance continue?

About Newmont

Newmont is the world’s second-largest gold producer. It’s the only gold company included in the S&P 500 Index and on the Fortune 500 list. Newmont explores for and acquires gold and copper properties. It has operations in the US, Australia, Peru, Indonesia, Ghana, New Zealand, and Mexico.

Newmont has the second-largest gold reserves in the world, totaling 82.2 million ounces. In comparison, Barrick Gold (ABX) has 93 million ounces and Goldcorp (GG) has 49.6 million ounces in gold reserves.

Investors can access the gold industry through gold-backed ETFs such as the SPDR Gold Trust (GLD) and the VanEck Vectors Gold Miners ETF (GDX). ABX, NEM, and GG make up 20.2% of GDX’s holdings.

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