Newmont Corporation is the world’s largest gold mining company. Newmont operates gold mines in North America, South America, Asia/Pacific, and Africa. Newmont has the following proven reserves as of 2019: Gold ($1,200/oz.), 95.7 mill. oz.; copper, ($2.75/lb.) 6.8 mill. tons; silver ($16.00/oz.), 652 mill. oz.; base metals (zinc, lead, moly) 5.0 mill. tons. With the expected rise in inflation, precious and base metals may act as a good hedge in one’s portfolio. This week, I fundamentally analyze Newmont’s stock. I review NEM’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account 2020’s free cash flow of $3,580 million figure, a 3% growth rate of FCF (growth for the next 10 years), 10% discount rate, 2% long term growth rate (growth from 10 year mark to perpetuity), 806 million shares outstanding, and $5,480 million of long term debt, the DCF analysis yields us an intrinsic value of $52.17 per share. If we drop the discount rate from 10% to 9%, the intrinsic value comes to $60.88 per share. Using the current stock price of about $59 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 6.9% if we hold this security through 2045.
Timestamp
0:00 Introduction
0:33 Operating Segments
2:47 Key Ratios Analysis
13:21 Discounted Cash Flow Analysis / Intrinsic Value
15:36 Expected Rate of Return Calculation
16:38 Summary / Conclusion
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References:
Newmont’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Newmont Corporation, based in Greenwood Village, Colorado, United States, is the world’s largest gold mining company. Incorporated in 1921, it has ownership of gold mines in Nevada, Colorado, Ontario, Quebec, Mexico, the Dominican Republic, Australia, Ghana, Argentina, Peru, and Suriname.
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