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« Politics of Hate | Main | Newmont takes out the Fronteer Gold Incorporation »
Monday
Feb072011

Newmont Mining Corporation: A readers question

NEM Chart 08 Feb 2011.JPG


The following question has been tabled by one of our readers regarding Newmont Mining Corporation (NEM)

OK, so now that FRG is part of NEM, shouldn’t we be looking for appreciation in the Newmont price? I don’t own any right now, so would like to know what is the general consensus. Any of us buying yet.
Also, what about a short term option play? What do you say Gold-Prices? Thanks folks.



We commence with a quick look at the above chart where we can see that from 2006 until today Newmont has made no progress in terms of its stock price, despite gold and silver moving much higher. The dividend has recently been increased to $0.15 per quarter, say $0.60 per annum, which equates to around 1% per year of the stock price. A dividend of $0.10 had been a consistent payment for sometime, however its less than the inflation rate in most countries, so in effect its a negative return. The growth in the stock price is flat or non-existent over the last five years as the above chart shows.

Newmont Mining Corporation (Newmont) is a gold producing company with assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. It is also engaged in the production of copper, principally through its Batu Hijau operation in Indonesia and Boddington operation in Australia. At December 31, 2009, Newmont had proven and probable gold reserves of 91.8 million equity ounces and an aggregate land position of approximately 33,400 square miles (86,500 square kilometers). In June 2009, the Company completed the acquisition of the remaining 33.33% interest in Boddington from AngloGold Ashanti Australia Limited (AngloGold). The Company’s operating segments include North America, South America, Asia Pacific and Africa. The North America segment consists primarily of Nevada, La Herradura in Mexico and Hope Bay in Canada. The South America segment consists primarily of Yanacocha and Conga in Peru. The Asia Pacific segment consists primarily of Batu Hijau in Indonesia, Boddington in Australia and other smaller operations in Australia/New Zealand. The Africa segment consists primarily of Ahafo and Akyem in Ghana.

Newmont Mining Corporation has a market capitalization of $28.18 with 493 million shares outstanding, a 52 week low of $43.11 and a 52 week high of $65.50. The P/E ratio is a very modest 14.01 and the dividend has been increased from $0.10 to $0.15.

Now take a look at the size of this company, it has a market capitalization of $28.18 billion, so it will need to make an awful lot of acquisitions just to replenish the existing reserves and another incremental jump to increase market share. The acquisition of the Fronteer Gold Incorporation (FRG) is a good one for Newmont, in our humble opinion, however, one swallow does not make a summer.

As a conservative, safe, gold play Newmont might fit your criteria but not our criteria where we look for investments that have a good possibility of doubling in a year to eighteen months. To take the risk of placing ones hard earned cash into a gold producer requires a decent return either through capital appreciation or dividends. As we see it Newmont offers neither.

Thompson Reuters have NEM as positive, Standard and Poors give it 4 stars and Market Edge Second Opinion have it as 'Avoid' so there you have it. Its your cash and your decision as to where you place it, but please do some comparative analysis before you take the leap. We wish Newmont well but its just not for us at the moment.




......................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


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Reader Comments (2)

There are so many good solid juniors out there...why would you consider a range bound major. Top of my list is International Tower Hill with 12 million oz. and only a matter of time before Newmont comes shopping....Del

February 8, 2011 | Unregistered CommenterDel Funk

Thanks Gold Prices for a thorough report putting the Newmont picture into focus. Also, for the reader comment. This would be a good case of haste makes waste on my part, and advice on your part to look before you leap. Thanks again.
John

February 8, 2011 | Unregistered CommenterJohn Ell

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