In a May 11 research note, BMO Capital Markets analyst Jackie Przybylowski reported that the key takeaway from Newmont Corp.'s (NEM:NYSE) recent virtual roundtable for sell-side analysts is the company offers investors "stable and predictable operations and cash flows."
"We continue to believe Newmont will be a go-to investment for predictable, low risk and liquid exposure to the gold sector, which could be topical on growing inflation expectations," Przybylowski wrote.
The analyst explained how the gold producer will be able to achieve these operational and financial ends.
First, Newmont plans to keep annual spending stable by staggering construction of huge and large projects. In doing so, it will maintain enough cash flow to keep paying out a dividend.
Second, the Denver, Colo.-headquartered miner will continue advancing its various projects and currently has a plethora of catalysts on the horizon. These include "full funds decisions" on Ahafo North and Yanacocha sulfides projects; management indicated it believes Peru will continue its supportive stance on mining. Also in the future for Newmont are the ramp-up of the Subika underground mine; operations optimization at Musselwhite, Éléonore and Cerro Negro; and life-of-mine extensions at Porcupine, Éléonore, Cerro Negro and Peñasquito.
Third, Newmont will capitalize on the growth potential in is project pipeline. With the transaction closing expected this month, the company will add GT Gold's roughly US$1 billion project Tatogga project to its portfolio. Tatogga is of a size that Newmont can manage alone. Also, the gold company has the Coffee project in the Yukon that it can advance.
Przybylowski pointed out that Newmont plans to concentrate on furthering its own projects rather than acquiring additional ones (and thus, does not intend to bid to acquire Barrick). However, Newmont will continue to investigate and consider prospective opportunities.
While Newmont's overall strategy may seem "boring," Przybylowski highlights, in actuality it is not because the market "appreciates a disciplined and stable approach to the business." Also, the company has shown it to be effective, as this year it has garnered additional investor interest from generalists. They consider Newmont a "value" and/or "yield" stock, given its greater than 3% dividend expected by year-end 2021.
BMO maintains its Outperform rating and $85 per share target price on Newmont. Because its current share price is about $68.35, the target represents a roughly 28% return.
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