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 sellside analysts is that 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 mega and large projects. In doing so, it will maintain enough cash flow to keep paying out a dividend.
Second, the Denver-based 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 its project pipeline. With the transaction closing expected this month, the company will add GT Gold's roughly US$1 billion 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; however, it will continue to investigate and consider prospective opportunities. "Newmont does not plan to bid to acquire Barrick on the July expiry of the standstill agreement," the analyst wrote.
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. Its current share price is about US$70.78.
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Disclosures from BMO Capital Markets, Newmont Corporation, May 11, 2021
IMPORTANT DISCLOSURES
Analyst's Certification
I, Jackie Przybylowski, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to Glencore and Teck Resources within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Glencore and Teck Resources within the past 12 months.
Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to Glencore and Teck Resources within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Glencore and Teck Resources within the past 12 months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Newmont Corporation, Yamana Gold, Glencore, Barrick Gold and Teck Resources.
Disclosure 6A: Glencore and Teck Resources is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
Disclosure 6C: Newmont Corporation, Yamana Gold, Glencore, Barrick Gold and Teck Resources are clients (or were clients) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Barrick Gold.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Barrick Gold and Teck Resources.
Disclosure 9B: BMO Capital Markets makes a market in Newmont Corporation, Yamana Gold, Barrick Gold and Teck Resources in United States.
Disclosure 19: BMO Nesbitt Burns Inc. ("BMO NBI") is acting as financial advisor to GT Gold Corp. ("GT Gold") (TSX: GTT), in connection with GT Gold entering into a binding agreement, pursuant to which Newmont has agreed to acquire all of the outstanding shares of GT Gold that Newmont does not already own for C$3.25 per share in cash. BMO NBI will be paid a fee upon completion. BMO NBI follows information control procedures which prevent its research analysts who are issuing research from having access to non-public information received by BMO NBI's investment banking personnel in connection with the transaction. Accordingly, it is possible that individual employees at BMO NBI may have material nonpublic information or opinions which are not included in, and may not be consistent with, the information and advice in this research report.
Disclosure 22: Teck Resources has a security with subordinate voting shares.
