On Dec 31, 2014, Zacks Investment Research upgraded steel producer, Newmont Mining Corporation (NEM), to a Zacks Rank #2 (Buy).
Why the Upgrade?
Shares of Newmont gained 3.6% yesterday, finally closing at a price of $19.26, mainly driven by a rise in gold prices. A weak dollar, increase in physical demand due to to the holiday season and upcoming Lunar Year celebrations in China, uncertainty over the Greek elections have lifted the price of the precious metal from the low levels witnessed lately.
The mining company had delivered strong third-quarter 2014 results. Earning per share as reported were 50 cents, a 14% improvement year over year, which beat the Zacks Consensus Estimate of 18 cents.
Newmont’s Turf Vent Shaft project at Nevada is all set to commence commercial production in late 2015 and is expected to add 100,000–150,000 ounces of annual production. For the Merian project, the government of Suriname decided to exercise its option to participate in the project.
The Merian gold mine is expected to start production late in 2016, pending receipt of the Right of Exploitation from the government of Suriname. During Merian’s first five years of operation, Newmont expects average annual production of between 400,000 and 500,000 attributable ounces of gold at estimated average costs applicable to sales of between $650 and $750 per ounce, and average all-in sustaining costs in the range of $750–$850 per ounce.
Newmont continues to invest in growth projects in a calculated manner, and expects to produce between 6–7 million ounces annually by 2017. The company is ramping up production capacity at the Boddington project in Australia and expects average annual gold sales of about 1 million ounces for the first 5 years of operation.
Newmont is making significant progress with its cost and efficiency improvement programs. Successful cost-reduction initiatives will allow the company to generate positive free cash flow and help it to mitigate the unfavorable impact of lower commodity prices. The company reaffirmed its expectation for attributable gold production for 2014 of 4.7–5 million ounces.
Other Stocks to Consider
Other companies in the gold mining industry worth a look include Rio Alto Mining Limited (RIOM), Rubicon Minerals Corporation (RBY) and Allied Nevada Gold Corp. (ANV). While Rio Alto Mining and Rubicon Minerals sport a Zacks Rank #1 (Strong Buy), Allied Nevada Gold carries a Zacks Rank #2.
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