“All the gold in California is in a bank in the middle of Beverly Hills, in somebody else’s name”. Those are words to an old Gatlin Brothers song and hopefully is not 100% correct. There has been a lot of speculation lately on the price of gold and silver really taking off based on higher inflation and a general increase in the cost of all commodities. Also, some analysts’ expectations of interest rates leveling off or even decreasing later in 2023 would bring the dollar down compared to other currencies and commodities, which would make the value of gold and silver increase.
Newmont Corporation (NEM)is a mining company that engages in the production and exploration of gold, silver, copper, zinc and lead. Newmont has operation in the United States, Canada, Mexico, South America, Australia and Ghana. They are based in Denver, Colorado and as of December 2021, have proven gold reserves of 92.8 million ounces. Newmont pays an annual dividend of $2.20 which gives it an annual dividend yield of 4.66% based on the recent price of $47.20.
The value of Newmont fluctuates with the price of gold, silver and other metals, but gold affects it the most. The future gold price has a wide range of forecasts. Coin Price Forecast has gold going to $2000 by the end of 2023 (currently at $1830 per troy ounce) then $2500 by 2028 and up to $3000 by 2030. On the other hand, the World Bank in October 2022 forecast a decline in average gold prices to $1700 in 2023, and $1650 in 2024 because of their assumption of a continued rise in interest rates and the stronger dollar.
For Newmont Corp, they make money on the difference between what it costs them to mine the gold and what they can sell it for. For 2022, they estimate the all-in cost to acquire their gold was $1050 per ounce. They project this to improve long term to between $920 and $1020 per ounce. They were expected to produce 6.2 million ounces of gold in 2022. Even with this, NEM has missed earnings estimates for the last 3 quarters. As the price of gold has come down, it has squeezed their margins somewhat and reduced the company’s net profit.
Newmont has traded in a wide range in the past year, with a high price of $86.37 and a low price of $37.45. Depending on which forecast you believe, you may want to buy into Newmont while the price is down, or you may want to just wait on the next opportunity. If you are a gold bug and believe the price of gold is going higher, Newmont pays you a nice 4.66% dividend to wait for the stock price to go up. They have a 5-year dividend growth rate of 54.5%; however, the dividend has not increased since March 2021. Yahoo Finance has a 1-year price target of $63.74 for Newmont.
As always do your own due diligence before investing. Full disclosure, I do own shares of Newmont Corporation. Sources include Schwab, Seeking Alpha, Coin Price Forecast, and the World Bank.
(Intentional Investing is a weekly column written by Kyle Smith from Floyd County, TX, based upon his investment knowledge and does not represent the views or opinions of the Floyd County Record. You can reach Mr. Smith via email at insureddividends@gmail.com)
