Proven & Probable Reserves
- 98.8 million ounces
- $1785 per ounce
- $176.36 billion
- 9.7 billion pounds
- $3.90 per pound
- $37.83 billion
Based on these numbers, NEM's reserves are valued at $214.19 billion. However, this is not the number that should be used to calculate what NEM is worth. Rather, we need to subtract the costs involved in mining the metals. The best way to account for NEM's expenses involved in mining is by looking at NEM's margins.
NEM's operating margins currently stand at 41.8%. By applying this number to the reserve ratio ($214.19 billion) we find that NEM's reserves are really worth about $89.5 billion after mining costs. However, this is still not the final value of NEM. We still need to account for expenses such as taxes and interest payments on debt. The net profit margin will accomplish this.
NEM's net profit margin currently stands at 21.75%. By applying this number to the reserve valuation ($214.19 billion) we find that NEM is worth a minimum of $46.5 billion based on asset valuation.
There are currently 488 million shares outstanding for NEM. By dividing the $46.5 billion by 488 million, we find that the valuation for NEM should be about $94 per share.
NEM is undervalued based on the current valuation of its assets. In addition to this compelling value based on its assets, NEM offers investors solid 2.25% dividend yield. The combination of NEM's dividend and valuation stack up well against peers. For example, the Market Vectors Gold Miners Index ETF (NYSEARCA:GDX), has a dividend yield of just 0.26%. Major competitors such as Barrick Gold Corp (NYSE:ABX) (asset valuation), Hecla Mining Co (NYSE:HL) (asset valuation), and Goldcorp (NYSE:GG) (asset valuation) are all attractively priced based on their assets, but none of these miners offer a dividend as high as NEM. ABX currently yields 1.2%, HL currently yields 0.93%, and GG yields 1.08%. The combination of a strong dividend and valuable assets makes NEM a compelling buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.