The shares of Newmont Corporation (NYSE: NEM) have lost 20% in value since mid-April as gold prices declined from $2,000/ounce in March to $1,800 at present. While other commodities, including copper and iron, have also reported a decline over concerns of lower demand due to China’s lower factory output, a strong U.S. dollar has been a deterrent to precious metals. The Russia-Ukraine war is causing key changes in geopolitical strategies of many countries – leading to new trade relations and energy security pacts. Thus, Trefis believes that growing uncertainties surrounding this shift is likely to propel gold prices until global macroeconomic stability is attained. Trefis highlights the historical trends in Newmont’s revenues across key operating segments in an interactive dashboard analysis.
Will demand for precious metals grow in 2022 and 2023?
In 2021, Newmont reported 5.9 million ounces of gold sales at an average price of $1,788/ounce. Uncertainty surrounding macroeconomic recovery coupled with high benchmark oil prices led to a surge in commodity prices – assisting the company’s top and bottom line in recent quarters. After observing a peak of $2,200/ounce in 2020, the precious metal registered a correction in recent months as the U.S. dollar strengthened. Thus, the company reported a 6% (y-o-y) topline growth along-with a 12% (y-o-y) reduction in operating cash flow in 2021. Gold and other mineral sales account for 85% and 15% of total revenues, respectively. Per the World Bank’s commodity market outlook, gold prices are projected to decline from $1,880/ounce in 2022 to $1,650/ounce in 2023. Similarly, prices of copper, silver, lead, and zinc are also projected to decline in the coming years.
Stock has outperformed broader markets
NEM stock declined from levels of around $52 in February 2020 (pre-crisis peak) to levels of around $40 in March 2020 (as the markets bottomed out), implying NEM stock lost just 23% from its approximate pre-crisis peak. It observed a strong rally post the broader market sell-off and has gained 28% from the pre-crisis level. In comparison, the S&P 500 Index has gained 21% in value since pre-pandemic levels.
|S&P 500 Return||-1%||-14%||83%|
|Trefis Multi-Strategy Portfolio||0%||-19%||219%|
 Month-to-date and year-to-date as of 6/2/2022
 Cumulative total returns since the end of 2016