AngloGold Ashanti Limited

New York Stock Exchange | Aug 14, 2020, 10:46 AM EDT

AU:US $ 28.48
0.08 (0.2817%)
Day Low: 28.16
Day High: 28.74
Newmont's (NEM) Stock up 41% in 6 Months: What's Driving It?

Shares of Newmont Corporation NEM are outperforming the industry of late. The stock has surged 40.9% in the past six months against the industry’s 2.8% decline. It has also topped the S&P 500’s 3.8% decline.

Newmont has a market cap of around $48.9 billion. Average volume of shares traded in the past three months was around 9,501.4K. The company has an expected earnings per share growth rate of 80.3% for 2020.

Let’s analyze the factors that are contributing to the stock’s rally.

Driving Factors

Focus on key growth projects, disciplined capital allocation strategy and higher gold prices are contributing to the company’s share price rally.

Newmont is likely to benefit from the progress of its key growth projects, including Tanami Expansion in Australia as well as Subika Underground and Ahafo mill expansion in Africa.

The company’s Africa operations witnessed 1.1 million ounces of attributable gold production in 2019 at an all-in sustaining cost of less than $800 per ounce. This was mainly driven by the successful completion of Ahafo’s expansion projects. The mine is expected to add annual gold production of 75,000-100,000 ounces per year from 2020 to 2024. First-quarter attributable production in the North America and South America soared 364% and 27% year over year, respectively.

In the first quarter, Newmont successfully completed the sale of its Ontario, Canada-based Red Lake complex to Evolution Mining Limited for cash proceeds of $375 million. The divestment is likely to support its capital allocation priorities. It will also strengthen Newmont’s investment-grade balance sheet as well as enable investment in high-return projects and returning excess cash to shareholders.

Also, gold has been the bright spot so far this year as fears over the coronavirus pandemic has made it the most attractive safe-haven asset. A slump in crude oil prices, low interest rate environment and geopolitical tensions are triggering demand for gold.  

Gold futures for August delivery inched up 1.1% and closed at $1,800.50 an ounce on Jun 30. Notably, this marks the highest for a most-active contract since November 2011. With this the yellow metal has registered a gain of 12.6% in second-quarter 2020 — the best quarterly advance in four years.

Meanwhile, Newmont’s average realized price of gold climbed 22% year over year in the first quarter and boosted margins. Higher gold prices are expected to continue driving earnings in the near term amid market volatility as well as economic uncertainties.

Zacks Rank & Key Picks

Newmont currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sandstorm Gold Ltd SAND, Harmony Gold Mining Company Limited HMY and AngloGold Ashanti Limited AU, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sandstorm Gold has an expected earnings growth rate of 55.6% for 2020. The company’s shares have surged 68.3% in the past year.

Harmony Gold has an expected earnings growth rate of 264.3% for fiscal 2020. Its shares have returned 100.7% in the past year.

AngloGold has an expected earnings growth rate of 109.9% for 2020. The company’s shares have surged 62.3% in the past year.

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