We have maintained our Neutral recommendation on
Newmont Mining Corporation
) following our assessment of its mixed fourth-quarter 2012
results. Adjusted earnings trumped the Zacks Consensus Estimate
while sales miss the same.
The gold mining giant turned to a profit on a reported basis in
the fourth quarter, reported on Feb 21. The year-ago quarter's
bottom line was hit by a sizable impairment charge. Attributable
gold production fell in the reported quarter due to lower
production across North and South America.
Newmont is an un-hedged gold producer and, as such, it is well
positioned to gain from rising gold prices. Demand for the yellow
metal remains healthy. The prevailing macroeconomic uncertainty
is expected to support gold demand as investors look to avoid
risky investments, which bodes well for gold miners like Newmont.
The company's unique gold price-linked dividend policy represents
another bright aspect. Newmont has increased its quarterly
dividend by 21% to 42.5 cents per share for the first quarter of
2013. Its current dividend yield (of around 4%) is the highest
among its peers, backed by its strong liquidity position.
Moreover, Newmont continues to invest in growth projects in a
calculated manner. Its remains optimistic about its Long Canyon
project in Nevada and expect production between 200,000 and
300,000 ounces a year from the site in the first five years. The
company has also made a significant progress with respect to the
Akyem project in Ghana with production expected to commence in
However, Newmont may continue to face headwinds due to increasing
mining and non-mining costs. In the fourth quarter, cost
applicable to sales went up 20% from last year to $720 per ounce
of gold. In addition, copper costs shot up 65% year over year.
Moreover, lower ore grades are affecting production in the
company's Asia Pacific operation. Its production remains
challenged at the Batu Hijau mine in Indonesia.
Other Stocks to Consider
Other companies in the gold mining industry having favorable
Zacks Rank are
Seabridge Gold, Inc.
Sandstorm Gold Ltd.
). All of them carry a Zacks Rank #2 (Buy).
BANRO CORP (BAA): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis
SEABRIDGE GOLD (SA): Free Stock Analysis
SANDSTORM GOLD (SAND): Get Free Report
To read this article on Zacks.com click here.