Are Tides Turning For Newmont Corporation Stock?

NEM: Newmont Mining logo
Newmont Mining

The shares of Newmont Corporation (NYSE: NEM) have skyrocketed to the highs of $83 since early January, assisted by surging commodity prices including gold and copper. The company is the largest producer of gold in the United States. Notably, gold and other mineral sales account for 85% and 15% of total revenues, respectively – indicating the company’s huge dependence on commodity cycles. In 2011, gold prices reached all-time highs of $2,300/ounce – similar to the trends observed this year. Given the strength in gold futures contracts expiring in 2023, investors have been optimistic on NEM stock. Trefis highlights the historical trends in revenues in an interactive dashboard analysis on Newmont’s revenues.

Newmont’s revenues have trended fairly in-line with gold prices, increasing at an annual rate of 14% from $7.3 billion in 2017 to $12.2 billion in 2021, despite a relatively flat production rate from 5.7 Moz (million ounces) in 2017 to 5.9 Moz in 2021. The company is a leading gold producer with a sizable asset base in the United States, Mexico, Canada, Australia, and Ghana.  Per annual filings, the company has 92.8 Moz of proven and probable gold reserves and an aggregate land position of 24,300 square miles. With the uptick in gold prices, the company’s net margins have observed improvement in recent years to trend above the 20% range. Moreover, the company has been consistently paying dividends along-with debt repayments in the past three years.

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Demand Outlook For Gold and Copper

In 2020, investments in precious metals increased as central banks reduced interest rates to historic lows in the U.S. and Europe due to a decline in macroeconomic activity. Despite strong investment demand and heightened uncertainty throughout the pandemic, the collective ETF gold holdings declined by 173 tonnes in 2021 as reported by the World Gold Council. However, central banks continued to purchase gold for the twelfth consecutive year which strengthened gold’s position as a valuable reserve asset. Moreover, copper’s diverse use across multiple industries such as construction, electrical, consumer products, industrial machinery, and transportation makes its demand a proxy for world economic growth. The copper futures price for contracts expiring in December 2023, December 2024, and December 2025 stands at $10,000 per ton ($5 per pound) – indicating growing demand in the coming years.

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 Returns Apr 2022
MTD [1]
YTD [1]
Total [2]
 NEM Return 4% 34% 143%
 S&P 500 Return -2% -6% 99%
 Trefis Multi-Strategy Portfolio -1% -9% 258%

[1] Month-to-date and year-to-date as of 4/20/2022
[2] Cumulative total returns since the end of 2016

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