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Newmont Gains 28% YTD: How Should Investors Play the Stock?
ZACKS· 2025-03-21 12:27
Core Viewpoint - Newmont Corporation (NEM) has experienced a 28.3% increase in share price year to date, driven by rising gold prices due to global uncertainties and geopolitical tensions, although it has underperformed the Zacks Mining – Gold industry's 32.9% rise [1] Financial Performance - Newmont reported a liquidity position of $7.7 billion at the end of 2024, with cash and cash equivalents around $3.6 billion [5] - The company generated an operating cash flow of $6.3 billion in 2024, up from approximately $2.8 billion in 2023, with a free cash flow of $2.9 billion [5] - Shareholder returns included $1.1 billion in dividends and $1.2 billion in share repurchases under a $3 billion program in 2024 [5][7] Gold Price Dynamics - Gold prices increased by roughly 27% last year, driven by central bank demand and geopolitical tensions, reaching a record high of $3,057 per ounce recently [6] - Gold prices are up approximately 16% this year, supported by expectations of interest rate cuts and increased central bank purchases [6] Growth Initiatives - Newmont is pursuing growth projects such as the Tanami Expansion 2 in Australia and the Ahafo North expansion in Ghana, which are expected to enhance production capacity [8] - The acquisition of Newcrest Mining Limited has created a robust portfolio, yielding $500 million in annual run-rate synergies [9] Cost Challenges - Newmont faces rising production costs, with gold costs applicable to sales (CAS) increasing by about 7% year over year in 2024 [11] - All-in-sustaining costs (AISC) are projected to rise to $1,630 per ounce in 2025, up from $1,516 per ounce in 2024 [11] Earnings Outlook - Earnings estimates for Newmont have declined over the past 60 days, reflecting negative sentiment in the market [13] - The stock is currently trading at a forward 12-month earnings multiple of 14.88X, which is an 8% discount compared to the industry average of 16.18X [15] Stock Performance - Over the past year, NEM's shares have gained 41.4%, outperforming the S&P 500's rise of 8.9% but underperforming the industry's 50% increase [17]
AEM Trades at Premium Valuation: Buy, Sell or Hold the Stock?
ZACKS· 2025-03-12 13:35
Core Viewpoint - Agnico Eagle Mines Limited (AEM) is experiencing strong performance driven by high gold prices and production, but faces challenges from rising costs and declining earnings estimates for 2025 [2][16][17]. Financial Performance - AEM's shares have increased by 20.9% over the past six months, outperforming the industry and S&P 500 [2] - The company achieved record annual gold production of 3,485,336 ounces in 2024, supported by key projects [9] - Operating cash flow rose approximately 55% year over year to $1,132 million in Q4 2024, with free cash flows increasing around 89% to $570 million [12] - AEM returned about $920 million to shareholders through dividends and repurchases in the previous year [12] Market Position - AEM is trading at a forward price/earnings ratio of 22.24X, significantly above the industry average of 14.59X [1] - The company has maintained a strong liquidity position, increasing its revolving credit facility to $2 billion [12] Growth Projects - Key projects include the Odyssey project, Detour Lake, Hope Bay, Upper Beaver, and San Nicolas, which are expected to enhance production and cash flows [9][11] - The Hope Bay Project has proven and probable mineral reserves of 3.4 million ounces, anticipated to contribute significantly to cash flow [10] Cost Challenges - Total cash costs per ounce of gold increased by roughly 4% year over year, with all-in-sustaining costs (AISC) rising about 7% [16] - AEM forecasts total cash costs for 2025 to be between $915 and $965 per ounce, with AISC between $1,250 and $1,300, indicating continued cost pressures [16] Dividend and Shareholder Returns - AEM offers a dividend yield of 1.7% with a five-year annualized dividend growth rate of 13.3% and a payout ratio of 38%, indicating a sustainable dividend [15] Market Outlook - Gold prices surged approximately 27% in 2024, driven by central bank demand and geopolitical tensions, with expectations for continued support in the current environment [13][14]