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Newmont Mining Corporation (NYSE:NEM) released an update Friday, including a dividend payment. It was not well received by the investment community: The stock price fell 7.36% on massive turnover of 19.1 million shares, which is twice the daily volume.

NEM Chart 24 Feb 2011.JPG

We will start with a quick look at the chart where we can see the golden crossover of the 50 DMA crossing over the 200 DMA in a downward direction, this is usually a rather negative sign for stocks. The technical indicators have also turned negative and are heading south.

Gold prices also took a bit of a pounding after hours which didn't help the situation.

Newmont Mining announced Friday that net income increased 76% to $2.3 billion ($4.63 per share) in 2010, compared to $1.3 billion ($2.66 per share) in the prior year. Operating cash flow was a record $3.2 billion for 2010, compared to $2.9 billion in 2009. Adjusted net income(1) rose 39% to a record $1.9 billion ($3.85 per share) from $1.4 billion ($2.79 per share) in 2009, while the Company’s gold operating margin (2) increased by 30% to $737 per ounce in 2010, from $566 per ounce in 2009.

2010 Highlights:

  • Attributable gold and copper production of 5.4 million ounces and 327 million pounds, respectively, with gold production slightly higher and copper production approximately 44% higher than in 2009

  • Record revenue of $9.5 billion, an increase of 24% from 2009

  • Average realized gold and copper price of $1,222 per ounce and $3.43 per pound, respectively

  • Gold operating margin increase (3) of 30%, compared with an average realized gold price increase of 25%

  • Consolidated costs applicable to sales for gold and copper of $485 per ounce and $0.80 per pound, respectively; and Cash and cash equivalents of more than $4 billion on December 31, 2010

Q4 2010 Highlights:

  • Attributable gold and copper production of 1.4 million ounces and 74 million pounds, respectively

  • Average realized gold and copper price of $1,366 per ounce and $4.52 per pound, respectively; and Costs applicable to sales for gold and copper of $512 per ounce and $0.95 per pound, respectively

President and CEO Richard O’Brien stated:

I am pleased to report that we generated record operating cash flow for the second year in a row, with our gold operating margin growing by 30% to $737 per ounce on an average realized gold price of $1,222 in 2010.

As a whole, our operations performed according to our plans, producing 5.4 million attributable ounces of gold in 2010. We continue to advance our Conga Project in Peru, which contains over 6 million attributable ounces of gold and 1.6 billion attributable pounds of copper reserves. Similarly, we continued to advance with our Akyem Project in Ghana, which contains over 7 million attributable ounces of gold reserves. Advancing these two world-class mining projects, as well as continuing our drilling programs at Hope Bay in Canada, remain some of our top priorities in 2011.

Click to enlarge:

NEM 5 Year table 24 Feb 2011.JPG

We can only conclude that after five years of rising gold prices, this stock has performed poorly. It is still under the $60.00 level that it attained five years ago. Management needs to explain such a poor performance along with the tiny dividend, which at $0.60 per year is a return of 1%. This dividend, together with no growth in the price of the stock, leaves a lot to be desired.

This one is not for us.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Source: Reasons to Pass on Newmont Mining Corporation

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