Jefferies Concerned With Near-Term Headwinds For Newmont Mining, Downgrades Stock

Jefferies analysts Christopher LaFemina, Patricia Hove, and Timothy Ward, were concerned about Newmont Mining Corp NEM's headwinds in the near-term. That included possible interest rate hike, lack of favorable catalysts, and valuation after strong stock performance for the year-to-date. As a result, the brokerage downgraded the stock to Hold from Buy and slashed its price objective to $33.00 from $38.00 on the company's stock.

However, the three analysts have constructive longer-term view though they were less positive on Newmont Mining shares, as well as, other gold miners for now. The analysts justified their earlier Buy call citing the bullish view on the yellow metal. However, the threat of interest rate hike in June or July increases the negative sentiments in the shorter-term.

Jefferies said that valuation of the company's shares were fair with the current gold price of $1,213 per ounce. The analysts believe the company doesn't offer any significant organic growth and there didn't consider the stock to be attractive on valuations unless the precious metal price witnesses uptrend.

The analysts indicated, "We do not expect positive catalysts for Newmont this year. Fed rate hike is an imminent headwind: Global currency wars should be supportive of the gold price even in a rate tightening/strong US$ cycle, and safe haven demand for gold should be strong due to elevated macro risks. However, in the shorter-term, we expect US interest rate increases to be negative for the price of gold, negative for prices of other mined commodities, and negative for mining share prices in general."

The brokerage has not changed its gold price forecast of $1,200/oz for 2016-2017. However, the analysts reduced their price target on Newmont to reflect downside risk to this forecast.