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Following discussions with management and subsequent news of slippage on their new Australian mine, we have sold out of the stock across all funds. Not only is the company struggling to stand still in terms of expanding its production base, but its cash cost of production is at the high end versus other holdings Agnico Eagle and Goldcorp. Slippage on its Australian expansion does not fill us with confidence. Its high cash cost results in substantial operational gearing to the gold price. On our revised earnings forecast, coupled with a gold price of US$750/oz in 2010, we now view the stock as full valued.
Newmont Mining is the largest pure gold miner in the world. Originally focussed on the Western U.S., it has expanded significantly both in terms of production and exploration "across five continents" (according to their somewhat puffed-up releases). Over the last three years the group has been particularly aggressive in Australia, buying out one of the largest mining companies, Normandy Resources, after a corporate tussle. Although not particularly sensitive to gold price movements, as overall production costs are below $220 per oz., there are sufficient exploration, expansion and development programmes in train to give a sustainable increase in gold production of around 10-15% p.a.: coupled with our expectation of a further significant rise in the gold price in 2004, this should result in 20% plus annual profits growth over the next two years.
| Sedol |
Type |
Price |
Date |
| 2636607 |
Sell |
USD 40.147 |
19/09/2008 |
| 2636607 |
Buy |
USD 43.725 |
20/03/2007 |
| 2636607 |
Buy |
USD 52.227 |
18/05/2006 |
| 2636607 |
Buy |
USD 42.630 |
24/01/2005 |
| 2636607 |
Buy |
USD 48.30 |
04/11/2004 |
| 2636607 |
Buy |
USD 42.429 |
21/09/2004 |
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