Wednesday - Jefferies has initiated coverage on Newmont Mining Corp. (NYSE: NYSE:NEM) with a Buy rating, accompanied by a stock price target of $38.00. The firm highlighted the stock's unexpected decline despite Newmont's status as a sector leader and its typical premium as part of the S&P 500 index.
The analyst pointed out that Newmont faced several challenges last year, including a strike at its Penasquito mine, delays in the Yanacocha Sulfides project, a mechanical issue at Ahafo, and a stripping campaign at Boddington. Despite these setbacks, the analyst remains optimistic about the company's future.
Jefferies noted that Newmont has completed two significant gold transactions in the past five years, acquiring Goldcorp and Newcrest, which led to share dilution and affected returns. However, the firm sees the company's core portfolio as strong, with promising growth prospects over the next few years.
The $38.00 price target set by Jefferies is based on a 1.0x price-to-net asset value (P/NAV) multiple and a 6.0x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple for the next twelve months plus one year, with a 70/30 weighting.
The firm believes that Newmont's all-in sustaining costs (AISC) will decrease, margins will grow, and there is potential for upside through the Full Potential program.
In conclusion, Jefferies' coverage initiation reflects confidence in Newmont Mining's asset quality and growth trajectory, despite recent operational challenges and market performance. The firm's analysis suggests that Newmont's stock offers a valuable investment opportunity at the current levels.
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