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Newmont’s Execution Efforts Led to Outperformance vs. Peers

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Newmont’s outperformance

Newmont Mining’s (NEM) stock price has fallen 11% year-to-date on an absolute basis, but it has relatively outperformed its peers in the gold sector. The VanEck Vectors Gold Miners ETF (GDX) has fallen 28.4%, and the SPDR Gold Shares (GLD), which tracks the spot price of gold, has fallen 8.1%.

Newmont’s peers Barrick Gold (ABX), Goldcorp (GG), and Agnico Eagle Mines (AEM) have fallen 36.8%, 33.0%, and 15%, respectively. This outperformance is mainly due to the strengthening of Newmont’s balance sheet as a result of non-core asset sales and unit cost reduction.

Newmont has generated free cash flow for the last five quarters in a relatively weak commodity price environment.

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Taking steps in the right direction

Newmont is taking the right steps. It expects production to grow at a moderate pace, thanks to its organic growth opportunities and the Cripple Creek & Victor mine acquisition we looked at previously in this series.

Newmont’s gold AISC (all-in sustaining costs) is 14% lower year-over-year. Ongoing portfolio rationalization efforts should lead to even leaner assets.

Near-term catalysts

Newmont shares have limited near-term growth catalysts now. Its debt load is still quite high, though, so any further steps toward reducing this could be positive for the stock.

Investors who don’t want to pick up individual companies can invest in gold miners through the VanEck Vectors Gold Miners ETF (GDX), which invests in senior and intermediate gold miners. Newmont forms 6.4% of its holdings. The SPDR Gold Shares (GLD), on the other hand, provides exposure to spot gold prices.

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