This is one of the largest mining companies, as well as a solid buy for more conservative accounts and a top pick at Deutsche Bank. Newmont Mining Corp. (NYSE: NEM) is a leading gold and copper producer. It employs approximately 29,000 employees and contractors, with the majority working at managed operations in the United States, Australia, Ghana, Peru, Indonesia and Suriname.
Newmont is the only gold producer listed in the S&P 500 index, and it was named the mining industry leader by the Dow Jones Sustainability World Index in 2015. The company is an industry leader in value creation, supported by its leading technical, environmental, social and safety performance. Newmont was founded in 1921 and has been publicly traded since 1925.
The company announced recently that “first gold” has been poured at its new mine, called the Merian gold mine in Suriname in South America. Newmont reported Merian contains gold reserves of 5.1 million ounces and that annual production is expected to average between 400,000 and 500,000 ounces of gold at competitive costs during the first five full years of production.
Merrill Lynch noted after the most recent earnings report:
Newmont reported third quarter 2016 adjusted earnings-per-share of $0.51 that beat due to better results from discontinued operations (i.e. Batu Hijau) It was announced that the gold price-linked dividend will be enhanced, adjusting annual payout levels upward.
Newmont investors receive a tiny 0.3% dividend. Merrill Lynch raised its price target to $42, while the consensus target is $39.88. The shares were last seen at $37.47
This a solid stock for investors looking for a gold presence with somewhat less risk. Royal Gold Inc. (NASDAQ: RGLD) is a precious metals royalty and stream company engaged in the acquisition and management of precious metal royalties, streams and similar production-based interests. The company owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development stage projects.
The company maintains a solid asset base of long-life royalties operated by some of the best gold mining companies in the world. Royal Gold announced earlier this fall the acquisition of a 3.75% net value royalty (NVR) on the Crossroads deposit for $70 million. Starting in fiscal 2019, the NVR is expected to add $8 million of annual revenue to the company.
The 2017 forecast for the company was lowered back in January, and Merrill Lynch feels the stock is very undervalued when compared to sector peers. The forecast is 38% revenue growth by 2019 for estimated earnings. The analysts also think the company’s rising cash-flow can be used for acquisitions and growing the dividend.
The $92.50 Merrill Lynch price target compares with the consensus target of $84.21. Shares traded early on Wednesday at $71.35.
Another way for investors to buy gold and mitigate some risk is to buy the SPDR Gold Shares (NYSE: GLD). The trust seeks to reflect the price performance of gold bullion by holding gold bars and issuing shares backed by their holdings of physical metal.
Proper asset allocation should always include a single-digit percentage holding of precious metal like gold and silver. Not only do they hedge over the long term, they can really help if the market does go in to correction or bear market mode, as they tend to trade inverse to the markets.