Why Newmont Mining Rallied in February
Shares of gold miner Newmont Mining(NYSE: NEM) rallied 15.7% in February, according to data from S&P Global Market Intelligence.
Newmont is the largest mining company in the world that primarily mines gold, while it also generates ancillary revenue from byproducts copper, zinc, silver, lead, and other metals.
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But as Newmont is primarily a gold producer, the stock is heavily levered to gold prices. Gold prices rose during February, bolstering shares, while Newmont also delivered fourth-quarter earnings above consensus. Moreover, a dispute with its JV partner on a certain project actually helped bolster investor sentiment on top of all that.
Newmont delivers, and reins in Barrick
At the beginning of the month, Newmont made an announcement regarding its joint venture with Barrick Mining(NYSE: B) that boosted shares. On February 5, Barrick announced that it intended to spin off its North American mining assets into a separate company and sell a portion of that new company in an IPO.
Newmont co-owns one of the mines within the new company, holding a 38.5% stake in Barrick's Nevada Gold Mine (NGM). Following the announcement, Newmont issued a press release stating that any transaction affecting the JV must respect the protections for Newmont contained in those provisions. Newmont in particular wants Barrick to improve operations at NGM, which has seen a "degradation in performance and subsequent asset value over the past six years."
It appears Newmont believes an IPO may not attract as high of a price as it otherwise would if the NGM were performing better, and it seems that Newmont wants Barrick to improve operations at that mine before the transaction.
Newmont went on to deliver fourth-quarter earnings later in the month, with both revenue and adjusted earnings per share beating consensus estimates by a wide margin. Revenue of $6.81 billion was up 20.5%, beating expectations by $560 million, while adjusted EPS came in at $2.52, up 80%, beating expectations by $0.49.
Newmont achieved these beats thanks to higher-than-expected production at its Cadia and Yanachocha mines, as well as an ongoing corporate cost-reduction program.
And of course, Newmont's performance was also bolstered by rising gold prices, which rose roughly 5% during February. That was the seventh straight monthly rise, and likely due to anticipation of war with Iran, since gold is sometimes viewed as a hedge against global instability. U.S. warships began assembling in the area during February, and war eventually broke out on Feb. 28.
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