Gold price impact
During the first half of 2016, Newmont Mining (NEM) more than doubled on the back of rising gold prices, its higher leverage to gold prices, and its efforts to control debt and costs. After 1H16, like most of the other gold stocks, Newmont also fell sharply amid the gold sell-off. The concerns regarding a Fed rate hike grew stronger, marring the investment appeal for gold. Trump’s election win added fuel to the fire and the stocks slipped even further. The latest blow to gold and miners came in the form of a Fed rate hike of 0.25% on December 14, 2016. The Fed’s outlook for three more hikes next year doesn’t bode well either.
As of December 14, 2016, Newmont has risen 72% year-to-date (or YTD), which is a significant outperformance. The VanEck Vectors Gold Miners ETF (GDX) has risen 41% in the same time period. In its peer group, only Barrick Gold (ABX) has outperformed Newmont with a YTD gain of 90%. Goldcorp (GG), Yamana Gold (AUY), and Kinross Gold (KGC) have risen 5%, 48%, and 70%, respectively.
Overall, investors have been optimistic about Newmont. The company doubled its dividend in the fourth quarter to $0.05. In its 3Q16 results, the company also promised an enhanced gold-price-linked dividend policy. In addition, it has completed two big growth projects in 2016 ahead of schedule and below budget. Its continued focus on debt reduction has also resonated with investors. In this series, we’ll discuss what other factors could impact 4Q16 and beyond.