This Gold Mining CEO Says His Company's Stock is a 'Once-In-A-Generation Buy,' Seeks to Bounce Back from 5-Year Low

Newmont Corp. was already the largest producer of gold by a significant margin in 2022. Since then, it's acquired Australian competitor Newcrest in a $15 billion deal to solidify its leading position with what the company calls a "robust copper optionality." 

Newmont is so large that its production is around twice its next-closest competitor, Barrick Gold Corp. GOLD.

But lately, shareholders have not been rewarded for its rapid growth, signaling a lack of confidence from investors as its stock price hovers near a five-year low.

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While its stock soared from the pandemic into mid-2022, it's fallen over 63% from peak to trough since then.

Some analysts believe its recent acquisition and integration of Newcrest is contributing to its recent disappointing financial performance.

Morningstar, for example, points out that "bigger is not always better in gold mining" and that Newmont's massive operations spanning over five continents naturally increase complexity in controlling costs.

John Ing, a veteran gold watcher, shared a similar sentiment, telling Bloomberg in October that "sometimes with these acquisitions, you buy other people’s problems." 

However, Newmont CEO Tom Palmer remains optimistic, sharing in a recent interview with Bloomberg that Newmont's stock is "a once-in-a-generation buy for anyone who’s thinking of putting a few dollars into gold equity."

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It's worth noting that there have been no insider buys in the past five years according to SecForm4.com, a data aggregation provider of insider transactions. However, Newmont has a $1 billion share repurchase program as part of its capital allocation strategy along with a $1 per share annualized base dividend. 

Investment bank Jefferies is a believer in the stock. It initiated a buy rating with a target price of $38 per share, a substantial premium to the roughly $31 per share the stock trades at today.

Jeffries cites what are hopefully one-off challenges as causes for the decline in Newmont's share price, such as a mining strike, project delays and a mechanical issue.

Investors seeking exposure to gold without owning a mining stock can buy a gold exchange-traded fund (ETF), such as the SPDR Gold Trust GLD.

Over the past year, the SPDR Gold Trust has risen about 11%, significantly outpacing Newmont. Given that Newmont is a price taker of a commodity rising in value, investors hope they can get their operational issues behind them to realize the upside Jefferies expects.

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