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Analyst Blog

Newmont Mining Corporation (NEM - Free Report) said that its Long Canyon mine located 100 miles from its existing Nevada complex poured first gold on Nov 8 and the company anticipates declaring commercial production next week. The operation was completed two months before schedule for just below $225 million which was about $50 million or 18% below budget.

During the first phase, Newmont will produce between 100,000 and 150,000 ounces of gold annually over an eight-year mine life at some of the lowest costs in its portfolio. Costs applicable to sales are anticipated to be in the range of $400 and $500 per ounce and all-in sustaining costs are projected to average between $500 and $600 per ounce.

Newmont took a phased approach by lowering initial development capital, which helped to generate a 26% rate of return and reduce the payback period to just over four years. The project was further optimized by utilizing refurbished equipment instead of new, building a leach facility instead of a mill, as well as leveraging the established infrastructure, expertise and stakeholder relationships in Nevada, the company noted.

Newmont has grown the resource base at Long Canyon by 30% in two years. Newmont geologists have increased the mineralized strike by 70% to a length of over 5 kilometers and oxide mineralization remains open in all directions. Long Canyon is among the four profitable operations the company has added to its portfolio over the last three years.

Newmont’s adjusted earnings for third-quarter 2016 were in line with the Zacks Consensus Estimate.  Revenues rose by double digits year over year, but missed expectations. Newmont continues to invest in growth projects that are expected to boost its production performance. The company is also making significant progress with its cost and efficiency improvement programs, which is allowing it to generate positive free cash flow. However, Newmont is exposed to a volatile pricing environment and challenges in the copper market.

Zacks Rank

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

Some better-ranked companies in the basic materials space include Coeur Mining, Inc. (CDE - Free Report) and Innophos Holdings Inc (IPHS - Free Report) both sporting a Zacks Rank #1 (Strong Buy) and  Fission Uranium Corp. (FCUUF - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Coeur Mining has an expected earnings growth rate of 135.4% for the current year.

Innophos has an expected earnings growth of 51.4% for the current year.
Fission Uranium has an expected earnings growth rate of 25% for the current year.

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