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A New Day for Newmont: Gold Producer Makes Game-Changing Announcements


Newmont Mining has gotten no respect for anything it's done, but now it's a gold stock that will have production growth, a bit of yield, and still be very reasonably priced.

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial).

Yesterday, Newmont Mining (NEM) held its analyst day and made a couple of important announcements, one being that it expected production to grow from 5 million to 7 million ounces over the course of the next five years or so, and the other that it would boost its dividend 20 cents for every $100 increase in the price of gold. At today's gold price that means it will pay a divided of about a dollar, which is a yield of approximately 1.7%. But for those folks who are willing to own the stock over time, a $2,000 gold price would create about a 3.5% running yield on a purchase you made today.

I think this is something of a game-changer for Newmont. The company has gotten no respect for anything it has done and the valuation has been reasonable, if not cheap. Now you have a gold stock that will have production growth, a bit of yield, and is still very reasonably priced. In my opinion, the market has been overpaying for growth because folks don't believe the price of gold in the future will be higher. Thus, a company like Newmont, which has had no growth, has been penalized.

A New Day for Newmont

Somewhere down the road, the market will get it into its head that the gold price will not only be where it is today, but somewhat higher, and a company like Newmont could get a large re-rating. However, now that it also has production growth, it should see a re-rating as a consequence of that news. We will have to wait and see if the market agrees with my analysis, but I believe this is an important development as far as Newmont is concerned.

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Position in NEM.

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