Newmont Mining (NEM) climbed Monday, buoyed by a positive Barron’s report that said shares of the mining firm could rise to $34, approximately 55% above last week’s trading price, as the firm has sold assets and cut costs to reduce its break-even gold production price.
As the price of gold slumped more than 30% over the past few years to around $1,200 an ounce, Newmont Mining shares followed the negative trend and dropped precipitously, the report said. However, the company is likely to emerge a winner even if the price drops further, thanks to CEO Gary Goldberg’s cost-cutting initiative.
Since becoming CEO in March 2013, Goldberg has sold $1.4 billion of non-core assets, shifted spending to higher-margin mines and brought some contracted services in-house, measures which helped lower the break-even gold production cost by 15% since 2012 to around $1,002 an ounce, Barron’s said.
Last year, the mining company cut $524 million in annual costs, and its net debt is currently around 25% of total capital, making it less indebted than rivals such as Barrick Gold (ABX), the report said. The company also produced positive free cash flow in 2014, unlike its competitors, and is forecast to continue to post positive free cash flow for several years, Barron’s added. NEM recently traded above the midpoint of the 52-week range of $17.60 to $27.40.
