Seeking More Gold at Newmont

Newmont Mining Corp. (NEM - Analyst Report) is one of the world's largest unhedged gold producers. Gold prices are skyrocketing due to higher demand, U.S. trade/budget/currency issues and global instability. Declining grades are pushing up mining costs prompting the company to cut costs. As a result, we rate the shares a Hold, with a target of $47.50 due to high valuation and declining mine quality, despite the improving fundamentals. This is 22.1x our 2008 estimate.

Gold could average $1000/oz in 2008 due to dollar weakness, global instability, U.S. trade/budget deficits and low interest rates. Being an unhedged gold producer, the company reaps immediate benefits from these trends. The cost-cutting initiatives are primarily focused on energy. Commercial production at the Nevada plant is expected to begin in the second quarter, which will reduce Nevada's costs applicable to sales by approximately $25 per ounce.

Newmont expects the start-up of its Boddington mill in Australia in late 2008 or early 2009. The company completed 99% of the construction of Yanacocha gold mill in Peru by the end of the first quarter of 2008.

Newmont has also acquired a controlling interest in Miramar Mining Corporation that controls the Hope Bay Project. Recently, the company entered into three joint ventures with Kisa Gold mining to explore gold deposits in Alaska. It has also formed a strategic alliance with Cardero Resource Corp., to explore for a variety of gold deposit types in Argentina. Further, Newmont plans to enter into a joint venture with New Jersey Mining Company for gold deposits in Idaho.

The company has earmarked between $220 $230 million for exploration and is planning to mine between 5.1 million 5.4 million oz of gold in 2008.

Read the full analyst report on NEM