Newmont Mining update Oct. 6th, 2021
This is not a recommendation or proposal to do anything. The data written in this article are best guesses and not guarranteed. It is my private personal opinion. I`m not independing as I own a position of NEM shares.
Newmont Mining became with the merger with Goldcorp the worlds first gold miner with a production of > 6 mio. oz (2019 6.3 mio. oz, 2020 5.9) plus 50.000to copper. The issue NEM had to find out is that Goldcorp reduced capex and exploration to a minimum. It will require NEM till 2022 to bring the Goldcorp mines to its standard (12).
Barrick and NEM formed a JV with their mines in Nevada in July 2019. It is owned 38.5% (Newmont)/61.5% (Barrick), with Barrick as an operator for the eight assets located in Nevada (11). The JV is expected to produce 1.4 M oz of gold attributable to Newmont annually.
Chances & Risks:
The profit of NEM and hence the shareprice is linked to the gold price. The NEM share is a bet on the gold price.
The valuation of NEM is not low. The PE is if NEM makes perhaps 2.8$/share profit (share price 60$) at 21 not low. The declared quarterly dividend of $0.55 per share provides a 3.6% yield at a share price of 60$/yr. The gold production of NEM is expected to stay stable the following years. That means the share price took advantage of the high gold price but did not include the expectation of a further rising gold price.
The production is in most quarters lower than forecasted and expected. It seems that the NEM technical management is not the most efficient one or does not include reserves in their estimates.
Gold is not eatable. The main value of gold is the believe that others believe that gold is very precious. This is not rational but works well since several thousand years. In India and the Middle East marriages are very gold intensive (no 1 gold market). It seems that crypto currencies take over a similar function as gold. But these currencies are young and show a high fluctuation which makes them less attractive. Gold and crypto currencies have the advantage that the ownership can easier be kept private. This is an important motivation in countries were poeple doesn`t know what happens tomorrow or for ex. men in a divorce (Europe, NA). The increasing wealth in india and the excessive creation of new money by important central banks (is perceived as a risk) might induce a rising gold demand and hence gold price.
The main chance and risk for NEM is a fluctuation in the gold price. A gold price increase seems more likely than a decrease. The gold intensive weddings in India and Middle East increase due to demographics, the uncertainties of politics does not decrease. On the supply side the exploration yield of the miners is decreasing.
China is getting more and more in a rivalty with the US independent of the leading politicians. It might happen that the Chinese central bank will decrease its share of USD and replacing it by other currencies and gold. A 1 - 2% shift would mean a big push to the gold price.
The political risk for the NEM production is low as 66% of the gold production is situated in North America/Australia countries with high policitcal stability. In many other gold mining countries there is always a political risk from random tax increases up to disappropriations. In some countries the business practices are not in line with US/European compliance rules.
A share buy back program of 1 bn$ announced.
- Industry’s largest gold Mineral Reserves of 94.2 million ounces
- Measured & Indicated gold Mineral Resources of 69.6 million ounces; Inferred of 31.6 million ounces
- Significant exposure to copper with 6.9 million tonnes in reserves, 8.0 million tonnes in Measured & Indicated resources and 3.9 million tonnes in Inferred resources
- Additional exposure to silver, zinc, and lead mainly at Peñasquito
2021/10/06 has cut full-year production guidance for its Boddington gold mine in Western Australia by 140,000 ounces below the originally set target of 830,000 ounces. (20).
2021/07/17 The Newmont board approved to develop the Ahafo North Project in Ghana. This project is expected to require 750 - 850 M$ capex. It is expected to produce about 300 K oz of gold/yr. at costs of 600 -700$/oz for 13 years. Thats about 5% of the NEM gold production. Ghana is some political risk. It seems that the good profit situation let NEM increase capex and expand its business.
2021/11/03 Newmont Corporation has agreed to acquire Canadian miner GT Gold Corp for $US311 million ($402 million) in a deal that will bolster its copper-gold output. (18)
2020/01/04 Newmont Goldcorp has completed the sale of its 50% stake in Kalgoorlie Consolidated Gold Mines (KCGM) to Australian gold producer Northern Star Resources for $800m. (13)
Some numbers about gold
Total gold production by manhood: about 170.000 tons (2020)
Total global gold holdings: 125 - 155.000 tons (2020)
Global gold production 2020: 3200tons
Total gold holdings Germany: 9000 tons private plus 3362 tons central bank (2020)
Total gold holdings Switzerland: 920 tons private (seems low!) plus 1040 tons SNB (2020)
Gold Demand by Countries 2017
China 984 tons
India 849 tons
US 193 tons
Germany 124 tons
Thailand 90 tons
Saudi Arabia 85 tons
The Global Gold Production in tons 2017 (1)
United States 245
South Africa 145
World total (rounded) 3,150
This is not a recommendation or proposal to do anything. It is my private personal opinion. I`m not independing as I own a position of Newmont Mining shares.
(13) 2020 Jan. 4th https://www.nsenergybusiness.com/news/newmont-kcgm-northern-star/
(9) 2019 Mar. 27 https://www.finanznachrichten.de/nachrichten-2019-03/46303427-newmont-gibt-bedingte-sonderdividende-bekannt-004.htm
(8) 2019 Mar. 13 https://seekingalpha.com/article/4248338-barrick-newmont-reached-interesting-deal
(7) 2019 Mar. 12 https://www.australianmining.com.au/news/barrick-drops-bid-for-newmont-as-companies-enter-jv/
(6) 2019 Mar. 05 https://www.australianmining.com.au/news/newmont-rejects-25bn-barrick-takeover-bid/
(5) 2019 Mar. 04 https://www.australianmining.com.au/news/barrick-launches-25bn-bid-for-newmont/
(4) 2019 Jan https://seekingalpha.com/article/4234186-newmont-strikes-back
(3) 2019 Jan. https://seekingalpha.com/news/3422587-newmont-mining-goldcorp-combine-10b-stock-deal?ifp=0
(2) 2018 dec. https://steelguru.com/mining/newmont-mining-announces-updated-2019-and-longer-term-outlook/528616
(1) 2018 nov. https://minerals.usgs.gov/minerals/pubs/mcs/2018/mcs2018.pdf