The Newmont Corp (ASX: NEM) share price has soared since 28 February, when the gold price stood at US$2,030 per ounce.
With bullion having rocketed to US$2,386 per ounce since then, shares in the S&P/ASX 200 Index (ASX: XJO) gold stock have leapt 30%.
The gold price has been enjoying strong support on numerous fronts. Bullion, which pays no interest itself, has been rising on expectations of central bank rate cuts. Gold's safe haven role has also been on display recently, with rising demand for the yellow metal amid soaring geopolitical tensions.
While the surging gold price has sent the Newmont share price sharply higher over the past six weeks, shares in the ASX 200 gold miner remain down 1% from market close on 27 October.
27 October, as you may recall, was Newmont's first day of trading on the ASX. This followed on the American mining giant's successful takeover of Aussie gold stock Newcrest Mining. Newmont is now dual-listed on the NYSE and ASX.
Here's why Firetrail believes that at current levels the Newmont share price represents "an attractive opportunity".
Newmont share price has significant potential upside
Newmont counts among the top three overweight holdings in the Firetrail Australian High Conviction Fund, which previously owned Newcrest.
Commenting on the miner's outlook now that it's incorporated Newcrest, Firetrail said:
The combination of the two businesses cements Newmont's position as the world's largest gold miner, now responsible for 13% of global production. Newmont owns 20 mining assets that are well-diversified, mainly across low-risk geographies…
We expect Newmont's production to tilt further towards low-risk jurisdictions over the coming years.
Investors bid down the Newmont share price amid production issues over the past half year, with forecasts of 8.4 million ounces of gold production in 2024 cut by almost 20%.
But Firetrail believes these production issues are just a short-term hiccup.
"Newmont is a position we have been adding to following some short-term disappointment," the fund manager said.
According to Firetrail:
The performance of Newmont has been disappointing since the announcement of the Newcrest deal. However, we believe the market has incorrectly extrapolated some short-term issues into the share price. In our view the current depressed share price presents an attractive opportunity for our investors.
Looking ahead
Looking at what could impact the Newmont share price in 2025 and beyond, Firetrail said, "We do not believe any of the issues permanently impair the value of any of the affected assets."
The fund manager added, "We estimate that around half of the production issues have already been fixed."
As for the growth outlook:
We forecast total Newmont gold production to progressively recover over 2024-27. This not only drives revenue growth of 6% per annum (at constant commodity prices) but will also logically lead to reductions in unit costs as assets return to efficient levels of operation.
And the Newmont share price could get a lift from some multi-billion asset sales currently in the pipeline.
"Asset sales on the way Newmont has identified six non-core assets that it is seeking to sell across North America, Australia and Africa," Firetrail noted.
The fund manager estimates those assets could rake in at least US$2.5 billion.
