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Coverage Launch: $81 Trefis Price Estimate for Newmont Mining

Newmont Mining ( NEM ) is primarily a gold producer with significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Newmont Mining competes with other international gold producers like Barrick Gold Corporation ( ABX ), AngloGold Ashanti Ltd. ( AU ) and Goldcorp Inc. ( GG )

Launch of Coverage on Newmont Mining; $80.90 Price Estimate

We recently launched coverage on Newmont Mining with an $80.90 price estimate for the company's stock. Our number stands roughly 35% above market price.

See our full analysis and $80.90 price estimate for Newmont Mining

We've broken down our analysis of Newmont Mining into two main business segments:

  1. Gold
  2. Copper

The gold division is further divided into four main regional operating divisions, based upon Newmont Mining's reporting structure

  1. North American Mines
  2. South American Mines
  3. Asia Pacific Mines
  4. African Mines

Newmont's North American segment primarily features Nevada, La Herradura in Mexico and Hope Bay in Canada. The South American segment features Yanacocha and Conga in Peru. The firm's Asia Pacific segment consists mainly of Batu Hijau in Indonesia, Boddington in Australia and other smaller operations in Australia and New Zealand. The African segment includes Ahafo and Akyem in Ghana.

Newmont Mining's copper production primarily comes from its Batu Hijau operations in Indonesia and Boddington operations in Australia.

Gold as an Asset Class

The economic turmoil of 2008 and 2009 shifted the focus of investors to safer investment vehicles like gold, which is perceived to be a good investment during times of economic upheaval. While gold may not always have been the best performer, the past decade, particularly the past couple years, have made this commodity a special one for many investors. Gold ETF's and mutual funds are becoming increasingly popular.

Emerging countries like India and China have become two of the largest consumers of gold. Demand for gold in India nearly doubled during the first half of 2010 vs. 2009 levels. Expectations for 2010 further suggested 430 tons of gold consumed in China.

In the past, gold prices have trended well with rising inflation. The massive monetary easing that occurred during the financial crisis of 2008/2009 could spur inflation down the road, encouraging central banks to add to their gold reserves as a means of avoiding currency devaluation.

Gold Division is Newmont Mining's Primary Source of Value

Gold mining is the most important division for Newmont Mining in terms of revenues and profits. In 2009, the company had consolidated gold sales of 6.5 million ounces (5.3 million equity ounces). This followed Newmont's 6.2 million ounces (5.2 million equity ounces) in 2008 and 6.1 million ounces (5.3 million equity ounces) in 2007. For 2009, 2008 and 2007 approximately 83%, 88% and 78%, respectively, of the firm's net revenues were attributable to gold. Gold sales for 2010 are expected to be around 5.3 million ounces, generating net revenues of $7.1 billion for the company.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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