Can Newmont Goldcorp Stock Deliver More Upside?

Newmont Goldcorp [stock_market_widget type="inline" template="generic" color="default" assets="NEM" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has shot through the roof in recent weeks thanks to the uptick in gold prices. It is likely that it could keep going north thanks to some of the impressive operational steps taken by the company, as well as the favourable end-market environment.

Let’s take a look at the reasons why Newmont Goldcorp remains a solid pick going forward.

Expect an Improvement in the Production Profile

Newmont Goldcorp had struck a joint venture with Barrick Gold in Nevada earlier this year, and that partnership will soon start delivering results. The two companies recently announced that the joint venture will deliver between 1.8 million ounces and 1.9 million ounces of gold in the second half of the year.

The Nevada mining complex had delivered 4.1 million ounces of gold last year.

The two companies also threw light on the estimated cost profile of the gold produced at the mine. The Nevada JV is expected to deliver gold production at cost of sales between $940 an ounce and $970 an ounce, according to Barrick. All-in sustaining costs for the year are expected between $920 an ounce and $950 an ounce.

By comparison, Newmont Goldcorp’s cost applicable to sales of gold in the previous quarter came in at $701 an ounce. So investors might feel disappointed at first given that the Nevada JV’s cost profile will be higher this year. But investors shouldn’t miss the bigger picture.

The total cost savings from the joint operation is expected to come in at $5 billion over a 20-year period. Barrick, on the other hand, has pointed out that the cost savings from the mine will come in at $500 million a year over the first five years before falling thereafter.

However, this is not the only reason why Newmont Goldcorp can do well this year. I have already mentioned that gold prices are on the rise, and there’s a lot of evidence suggesting that might be the case.

Higher Gold Prices in the Cards

Gold is hovering around $1,400 an ounce and it is expected to shoot higher. A survey of 17 Wall Street analysts conducted by Kitco tells us that 10 of them believe gold will go higher. Moreover, 54% of the 591 respondents in a Main Street survey are of the opinion that gold is headed higher.

Quoting analyst Phil Flynn of Price Group Futures, Kitco reported:

Gold is golden,” said Phil Flynn, senior market analyst with Price Group Futures. “Not only have we broken out from a year-long trading range to the upside, the path of lower rates around the [world] is going to keep the market strong. Add it a spattering of geopolitical risk factors and the yellow metal is poised to move higher.

As such, a combination of higher gold prices and a drop in costs going forward should ensure that Newmont Goldcorp enjoys stronger profitability. Yahoo Finance analysts also estimate the same, expecting the company’s bottom line growth to pick up next year. Newmont Goldcorp remains a solid bet.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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