January 15

Newmont Corporation (NEM): Gold standard

Newmont Corporation is a gold miner and also produces copper, silver, zinc and lead. The company’s portfolio of assets, prospects and talent is anchored in favourable mining jurisdictions in North America, South America, Australia, and Africa. Newmont, which recently acquired Australia’s Newcrest Mining, is the only gold producer listed in the US equity benchmark, the S&P 500 Index. We recently initiated coverage of Newmont’s Australian-listed Chess Depositary Interests (CDIs) with a fair value estimate of $82 per CDI after updating our forecasts to incorporate the acquisition of Newcrest and the latter’s financials at end of September 2023. Newmont remain materially undervalued in our view, trading at a 33% discount to fair value. We think this is partly due to concerns over rising real interest rates, which increase the opportunity cost to hold gold. Another likely reason is Newmont’s currently elevated unit cash costs.

Newmont’s sales for the first nine months of 2023 disappointed, diluting margins, but we expect sales will increase and margins improve. The acquisition of Newcrest extends Newmont’s lead over Barrick Gold as the world’s largest gold miner by sales. We forecast Newmont to increase attributable gold sales to around 8.8 million ounces in 2027, up from roughly 7.3 million in 2023, pro forma for Newcrest, on an annualised basis. In aggregate, the company sits around the middle of the cost curve, but we do expect some improvement. Newmont has flagged US$500 million ($735 million) in annual cost savings and benefits from the Newcrest acquisition, but it is also targeting around US$2 billion in proceeds from selling what it views as the combined group’s less attractive assets. We also expect the company will reconsider mine plans and development options at various assets once the acquisition has been bedded down.


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