Newmont Mining Corp (NYSE: NEM) has demonstrated a strong, consistent track record of operational execution over the past couple of year, Goldman Sachs’ Andrew Quail said. The analyst upgraded the rating for the company from Neutral to Buy, while raising the price target from $23.30 to $36. The new price target reflects 13 percent upside.
Analyst Andrew Quail mentioned that there are positive catalysts coming up and that Newmont Mining appears poised to generate growth, backed by its recent investments including Merian and Long Canyon.
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The EPS estimates for 2016, 2017 and 2018 have been raised from $0.63 to $1.29, from $0.10 to $1.45 and from $0.36 to $1.26, respectively, to reflect higher gold prices. Quail commented that the company was “highly levered to higher gold prices,” explaining that every $100 increase in gold prices would boost EPS by 47 percent.
Upcoming Catalysts
- Merian organic growth – Newmont Mining has moved passed the capex hump, and Merian is expected to add +500koz or about 10 percent of low-cost production annually, starting in 2017. The project is 70 percent complete and is tracking on time and within budget.
- Sale in Indonesia – “NEM has publicly indicated its willingness to sell its interest in Batu-Hijau. Given the large capex bill of about $1.5bn needed to undertake Phase 7, we believe any consideration received could increase the company’s financial flexibility and remove a current share price overhang,” the analyst wrote.
- Brownfield growth opportunities – The company has a solid portfolio of “highly prospective bolt-on organic opportunities,” Quail mentioned, citing the major ones as the projects in Africa, the Afaho mill expansion and the Subika upgrade. He added, “We expect an update on these projects in the next six months, and any construction commitment would be a positive, in our view, given that the assets are the lowest cost across the company.”
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