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Newmont's (NEM) Shares Rise 15% in 3 Months: Here's Why

Zacks Equity Research

Shares of Newmont Corporation NEM are outperforming the industry of late. The stock gained 14.7% in the past three months compared with its industry’s 6.8% rise. It has also topped the S&P 500’s 2.3% decline.

Newmont has a market cap of roughly $46.9 billion. Average volume of shares traded in the past three months was around 9,860.5K. The company has an expected earnings per share growth rate of 81.8% for 2020.

Let’s analyze the factors that are contributing to the stock’s rally.

Higher gold prices along with the company’s focus on key growth projects and disciplined capital allocation strategy are among the factors driving its shares.

Newmont is likely to benefit from the progress of its key growth projects, including Tanami Expansion in Australia as well as Subika Underground and Ahafo mill expansion in Africa.

The company’s Africa operations witnessed 1.1 million ounces of attributable gold production in 2019 at an all-in sustaining cost of less than $800 per ounce. This was mainly driven by the successful completion of Ahafo’s expansion projects. The mine is expected to add annual gold production of 75,000-100,000 ounces per year from 2020 to 2024.

In first-quarter 2020, Newmont successfully completed the sale of its Ontario, Canada-based Red Lake complex to Evolution Mining Limited for cash proceeds of $375 million. The divestment is likely to support its capital allocation priorities. This is also expected to strengthen Newmont’s investment-grade balance sheet and enable investment in highest-return projects along with returning excess cash to shareholders.

Also, gold has been the bright spot this year as fears over the coronavirus pandemic has made it the most attractive safe-haven asset. Slump in crude oil prices, low interest rate environment and geopolitical tensions have also triggered demand for gold. In March 2020, prices of gold broke above the $1,700 an ounce level for the first time in seven years on the virus crisis and a sharp decline in oil prices triggered by Saudi Arabia's price war with Russia. Gold prices also recently surged past the $1,750 an ounce level, driven by U.S-China tensions, the civil unrest in the Unites States and a weaker U.S. dollar.

Meanwhile, Newmont’s average realized price of gold soared 22% year over year in first-quarter 2020 and boosted margins. Higher gold prices are expected to continue driving earnings in the near term amid market volatility and economic uncertainties.

Newmont Corporation Price and Consensus


Newmont Corporation Price and Consensus
Newmont Corporation Price and Consensus

Newmont Corporation price-consensus-chart | Newmont Corporation Quote

Zacks Rank & Other Key Picks

Newmont currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are The Scotts Miracle-Gro Company SMG, Royal Gold, Inc. RGLD and Franco-Nevada Corporation FNV, all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for fiscal 2020. The company’s shares have surged 57.2% in the past year.

Royal Gold has an expected earnings growth rate of 67.6% for fiscal 2020. Its shares have returned 44.5% in the past year.

Franco-Nevada has an expected earnings growth rate of 20.3% for 2020. The company’s shares have surged 74.3% in the past year.

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Newmont Corporation (NEM) : Free Stock Analysis Report
FrancoNevada Corporation (FNV) : Free Stock Analysis Report
The Scotts MiracleGro Company (SMG) : Free Stock Analysis Report
Royal Gold, Inc. (RGLD) : Free Stock Analysis Report
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