Here's Why Newmont Mining Has 26% Upside, Cash For Organic Growth

Following the Brexit, with UK voting in favor of leaving the EU, investors increasingly moved towards safer options, resulting in a decline in US 10-year treasury yields from 1.74 percent to 1.57 percent, which pushed gold prices higher by about 5 percent on June 14. Goldman Sachs’ Andrew Quail said in a report that their Precious Metals coverage view had been raised from Neutral to Attractive.

The Goldman Sachs Commodities team expects the trajectory of gold prices to be determined by “the intensity and duration” of Brexit-related uncertainties as well as any potential changes in the US growth outlook. The gold price forecast for 2016, 2017 and 2018 have been raised from $1,202 to $1,260, from $1,150 to $1,261 and from $1,150 to $1,250, respectively.

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Newmont Mining

Analyst Andrew Quail maintained a Buy rating for Newmont Mining Corp NEM, while raising the price target from $36 to $47. The analyst expects the company to generate a FCF yield of 5 percent in 2017, which “enhances its ability to fund future organic growth projects to offset any future volume decline.”

Production is expected to commence at Newmont Mining’s largest growth project, Merian, in 2H16. This, along with an update on the sales process at Batu Hijau, is likely to drive “a potential market re-rating,” Quail mentioned.