Newmont Corporation

NEM Details

Golden Independence Announces Q4 Exploration Programme: Newmont Corporation (NYSE: NEM) is a multinational mining company, primarily focused on the production and exploration of gold, copper, silver, zinc, and lead. On 6 October 2020, as per the information published on NASDAQ, the company has announced that Golden Independence has secured drilling contracts under its Independence Gold project in Battle Mountain, Nevada.  The company is permitted to drill 160 holes from over 80 sites. The project is aiming to drill up to 12,000 feet and reverse circulation drilling, along with concurrent resource modelling and permitting for an open-pit heap-leach production scenario.

Quarterly Performance (For the Period ended 30 June 2020): During the second quarter ended 30 June 2020, the company reported a loss of ~US$412 million, increased by ~$411 million on the previous corresponding period, driven by higher gold prices and lower operating & integration costs, partially offset by the sale of Kalgoorlie site. In 2QFY20, the company’s adjusted EBITDA stood at US$984 million, up 45% on the previous year. Also, Cash inflow from operations for the period increased 84% year over year and came in at $1,607 million. At the end of June, the company reported a robust balance sheet with substantial cash and other liquidity of ~$6.7 billion.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: The company is prioritising on global projects to achieve its pre-COVID-19 profit growth. Furthermore, the company is looking forward to have stable production and improved margins to support the broader project portfolio. NEM will release its third-quarter results on 29 October 2020.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company is focused on improving competitive positioning to strengthen the earnings and growth in the future. The stock of NEM gave a return of 21.05% in the past six months but a negative return of 3.56% in the last three months. The stock is trading close to its 52-weeks’ high level. On a technical front, the stock of NEM has a support level of ~$59.73 and a resistance level of ~$68.15.We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target upside of lower double-digit (in % terms). Considering the current trading levels, positive long-term outlook, and valuation, we recommend a ‘Buy’ rating on the stock at the closing price of $61.17, up by 0.58% on 07 October 2020. 

NEM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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