If you are hoping to start a long position or acquiring more shares of Newmont Mining Corp.(NEM, Financial), I recommend that you wait a few more days to reap the greatest reward.
Don't get me wrong. I believe Newmont Mining is one of the best options among U.S.-publicly traded gold mining companies. However, I estimate that it will take about a week for the market to process the authorization of Newmont Mining’ board of directors to increase the fourth quarter dividend by nearly three times the prior-year quarter dividend to 14 cents (U.S. Dollars) per ordinary share. The company is also expected on Thursday to release a fourth-quarter earnings report.
Investors may want to make an investment in Newmont Mining Corp for the following reasons:
- Milking more than 70% of its total production from reserves hosted in the U.S. and Australia. These two countries are characterized by a friendly jurisdiction to mining activities. For full fiscal 2017, Newmont Mining is expected to have produced approximately 5.25 million of attributable gold and about 50,000 tons of copper.
- A portfolio of activities including mineral projects, which I expect will continue to generate primary returns for shareholders.
- A large base of fixed costs. This means that each increase in the yellow metal price will be dropped to the company’s bottom line straight away.
Unless you decide to buy shares right now, you need to know that at the current share price of $38.39, which is only 24 cents above its 50-SMA line, the New York Stock Exchange is giving you the possibility to lock in a 12% stock appreciation or thereabouts, to be realized within the coming 52 weeks of trading.
Source of the chart: Yahoo Finance
In addition, Newmont Mining is trading abundantly beyond the 200-SMA line ($36.39 per share) and above the 100-SMA line ($37.54).
Newmont Mining is not at its lowest as shown by the 52-week range of $31.42 to $42.04 record of valuations. Also, an EV-to-Ebitda (ttm) of 14.96 times is nearly 47% higher than the industry median.
The company also is expected on Thursday to announce fourth quarter earnings. The emergence of one of two situations will depend on the all-in sustain cost (AISC) that Newmont Mining Corporation has incurred during the quarter.The price that the U.S. gold producer may have realized for the sale of one ounce of gold is easily predictable. The bullion has averaged $1,274.28 a troy ounce on the London Market.
If Newmont Mining Corp will disclose an AISC of about $950 per ounce of metal (the high limit of the guidance on AISC for full fiscal 2017), odds are that the miner will not meet consensus on earnings or will exceed it with a meaningless variation.
Like it was for the third quarter earnings announcement, with gold at $1,277.84 an ounce and an AISC of $943 an ounce, Newmont Mining beat the estimate of 33 cents per share by only 2 cents (6.10% positive surprise on the EPS). This scenario may trigger a depreciation of the stock opening a window for executing a buying approach for the biggest gold producer in the U.S.
If the AISC will either fall in the lower half of the guidance range or will even be a whisper away of $900 per ounce (the guidance’s low limit), chances are the miner will have exceeded consensus. This scenario prompts a positive surprise, which should trigger a stock appreciation. However, even in this best scenario, I don’t think the beat will go beyond a 20% positive surprise since analysts have raised their estimates on EPS to 38 cents.
In the second quarter (the AISC was $884 an ounce) the beat produced a nearly 77% positive surprise, but the estimate EPS was at 26 cents, much lower than for the fourth quarter.
You have until March 8 to become a shareholder in order to receive the benefit of the 14 cents quarterly dividend per share or to have your weight in the company’s shareholders meetings enhanced. The ex-dividend date is scheduled for March 7. The quarterly dividend will be paid on March 22.
If held constant, this quarterly distribution of the company’s free cash flow forwards a 1.43% yield.
Since gold is predicted to average abundantly above $ 1,300 an ounce this year, there are many chances that Newmont Mining will maintain the current quarterly dividend over 2018 or even increase it further as the dividend determination is linked to the bullion price. Should this occur, we will see further jumps in the price of the stock during the year.
Newmont Mining Corporation is one of the largest gold mining companies in the world and the biggest gold producer in U.S.
(Disclosure: I have no positions in any security mentioned in this article.)
