Get “Paid To Wait” With Newmont Mining
At $1,600, gold is a bargain.
The euro is set to burn (or at least depreciate), the Fed’s “QE-infinity” policy is continuing full steam and meanwhile big miners are struggling to keep costs under control.
Add it all up and the value of the “once and future money” looks set to rise again.
Today I want to continue our most recent discussion on gold. In particular, we’ll check in with Byron King on a few oft-asked gold questions – plus, we’ll get insight from Dan Amoss on one low-risk gold miner that’s set to pay out…
Yesterday I left you with my nine month forecast for gold.
In short, I believe we’re going to see a bounce from $1,600 – to as high as $1,800 in the next three months. After all, when the fundamentals listed above (Cyprus, the fed, miner output, etc) meet the gold’s historical support at $1,600 – the smart money is betting on a rise in gold.
But don’t just take my word for it.
Recently I sat down with Byron King and asked him a couple of the most-asked questions I hear in the gold space. When asked where he sees the price of gold in 2013, here’s what Byron had to say:
(Click the image above to play Byron’s video)
In short, Byron sees a lot of the same writing on the wall. “Prudent investors” he says, “ought to be using this chance, with gold in the doldrums, to accumulate the physical metal.”
As Byron sees it there’s no substitute for the real hold-in-your-hand metal. If anything the Cypriot bank crisis shows us that gold in the hand is worth more than your euros in the bank!
That said, for those of us looking to invest in mining shares as well, there are opportunities brewing in the mining sector, too.
Will “big gold” miners get their costs under control in 2013? Here’s what Mr. King has to say:
(Click the image above to play Byron’s video)
Big gold is concentrating on capital discipline – and surely there will be winners in this scenario. The efficient big gold guys along with some of the smaller “buyout” opportunities – could both be in line for a turnaround.
“The shareholder returns are out there” Byron says. “2013 and moving into 2014” he concludes, “will be, perhaps, that year we’ve been waiting for when we finally make some serious money in the mining shares.”
How can you separate the big gold winners from the big gold losers?
For one low-risk miner ready to payout, I’ve got another opinion for you. Read below for Dan Amoss’ darling of the bunch, below:
Low Risk And A Big Dividend
Newmont Mining Corp. (NEM: NYSE) is one of the largest gold mining companies in the world, with 99 million ounces of gold and 9.5 billion pounds of copper reserves. In a market full of cheap gold mining stocks, Newmont offers investors steady production, predictable cash flow and a big dividend.
With a gold-linked dividend policy, Newmont’s yield is high and rising: Annualizing the first-quarter 2013 dividend of $0.425 per share results in a 4.1% yield.
The stock is well off its highs, and relative to gold prices is trading 75% below its 2006 high (see the green line in the chart). With expectations this low, the risk has been wrung out of the stock.
Newmont’s well-diversified mines are performing in line with expectations. Over the past four years, production and operating cost estimates have come in line with guidance.
Newmont’s board is committed to maintaining operational discipline. It just promoted the chief operating officer, Gary Goldberg, to CEO. Goldberg had a 30-year career at mining giant Rio Tinto Minerals, including the CEO role. Goldberg is laser-focused on keeping operating costs low.
Newmont was a pioneer in the trend away from mindless production growth and toward high free cash flow; since April 2011, it has returned $1.3 billion in cash. With a flat production profile and flat total costs per ounce in the coming years, free cash flow should be enormous.
Morgan Stanley projects about $8 per share in annualized cash flow in the 2014-15 time frame, assuming just $1,800 gold prices.
If 2014-15 gold prices are closer to $2,000 per ounce, cash flows and the dividend could easily wind up 50% higher. With Newmont, you’re paying record-low valuations for exposure to future gold prices — and getting paid to wait.
With each passing day $1,600 gold is looking like more of a bargain. Both physical gold and mining shares are a good way to play the situation.
Physical gold gives you that “get out of Cyprus free” card, while mining shares give you a solid turnaround play – and some, like Newmont, pay you to wait!
That’s all I have for today – but look for a continued beating of the drum for precious metals – I think we’re in undervalued territory here.
Keep your boots muddy,
Original article posted on Daily Resource Hunter