by Genia Turanova, editor Leeb Income PerformanceNewmont Mining
currently sells at its lowest valuation in four years despite the fact
that the price of its main product, gold, has nearly doubled since then.
Moreover, its valuation is lower than that of the overall
market — and its yield is higher. In fact, it is the highest-yielding
stock in the sector, with a yield of 2.8 percent, significantly above
the average for the category.
If you want to compare apples to apples, here's the deal:
stock is trading at less than 10 times estimated next year earnings,
which is only 10 percent more expensive than the average valuation for
the gold mining sector (which, admittedly, has become very cheap in the
past 6-12 months).
Its introduction of a gold-linked dividend in April 2011 (each quarter's
dividend is indexed to the average price of the gold Newmont sells in
that quarter with additional step-up provisions) was an innovative move
that may result in a higher dividend down the road.
1921, Newmont Mining is the largest US-based gold miner and the only
direct gold play that is an S&P 500 component.
well-diversifed gold producer, with significant assets or operations in
the United States, Australia, Peru, Indonesia, Ghana, Canada, New
Zealand and Mexico.
As of year-end 2011, Newmont had proven and
probable reserves of attributable 98.8 million ounces of gold, and its
cash cost is $650 per ounce of gold.
As for its gold
price-linked dividend, for the second quarter of 2012 it was 35 cents
per share, based on the average gold price of $1,684 per ounce. This
dividend was 75 percent higher than what Newmont paid a year ago.
term, cost controls and production growth are the two necessary
conditions needed to maintain and grow the dividend, but we believe,
with Newmont's target of 3.2 million ounces of pipeline potential can be
sustained and even raised. For industry-beating yields and gold-price
leverage, buy Newmont Mining.