Why you should add Newmont shares to your portfolio
The world's largest gold miner, Newmont (NYSE: NEM) has some of the best margins of any company, currently producing gold at a cost of US$1650 per ounce, versus a current gold price of about US$3400.
A sustained price in the US$3000+, which entrenches NEM as a very high margin business, alongside some more predictable operational outcomes should see the required yield drop.
At 6% this would be around 20% higher than today or put another way the current price assumes 6% yield at $2900 gold price.
What does Newmont do?
Founded in 1921, Newmont is the world's leading gold company and a producer of copper, silver, zinc and lead.
The company's portfolio of assets, prospects and talent is anchored in jurisdictions in Africa, Australia, Latin America & Caribbean, North America, and Papua New Guinea. Newmont is the only gold producer listed in the S&P 500 Index and has been publicly traded since 1925.
Strategy and outlook
Their Q1 2025 earnings were well on track to deliver on longer term strategic priorities including maintaining financial flexibility with cash above $3.0 billion target, strong portfolio investment including Cadia tailings investment in New South Wales of about $1.3 billion in 2025.
They have a stable and predictable annualised common dividend and have exercised $2.0 billion of share buybacks to date from a $3.0 billion authorised program.
They are a leader for the gold sector in sustainability, with demonstrable social and environmental targets.
Returns
Q1 reported that they remain on track to deliver on full-year commitments with 1.5Moz of gold and 35kt of copper from full portfolio and a record first quarter free cash flow of $1.2 billion.
Net income and cash flow were higher than expected, which was driven by non-operational things like capex, exploration, tax payments and SG&A which given no change to annual guidance implies this is normal quarterly fluctuations.
Based on an average gold price of $3200, we would expect free cash flow of around $4.6 billion for the full year.
Net debt to EBITA is low at 0.3, meaning they are now in a position to return all cash to shareholders which is approx. 7.5% at current prices.
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