The Newmont Corporation CDI (ASX: NEM) share price is down 28% from its 52-week peak in October. When a large company falls this significantly, it's worth digging into why and whether it represents a buying opportunity.
The ASX gold share suffered an 8% drop in November after the business gave weaker outlook commentary in the 2024 third quarter update, according to the fund manager Blackwattle, which holds the business in its mid-cap quality fund. Blackwattle describes Newmont as the largest, lowest-cost and most diversified gold miner globally.
Blackwattle noted in its latest monthly commentary that Newmont reduced its 2025 outlook on the back of "softer production and increased investment for the legacy Newcrest portfolio."
Why are Newmont shares attractive in this environment?
What's attractive about a business that's going through this pain and disappointing the market?
Firstly, the fund manager noted that the ASX gold share continues to progress with asset sales, achieving US$3.9 billion, compared to the initial guidance of US$2 billion. Owners of Newmont shares are benefiting from the US$2 billion increase of the on-market share buyback as well as the progress of the "significant organic growth capex [capital expenditure] phase".
Blackwattle believes the investing that the ASX gold share is doing will "deliver a high-quality, lower cost, diversified asset base in 2026-2027."
The fund manager then explained:
We continue to see material upside for NEM as an 'enduring high-quality' business and view NEM as the highest quality gold miner globally. We expect NEM to execute on numerous multiyear internal levers to maintain and improve the business quality including organic production expansion, operating cost reductions, portfolio high grading through asset sales, material debt reduction & further capital returns.
How is the fund manager seeing the market?
Blackwattle has tried to build a portfolio of high-quality growth businesses and more defensive, value-orientated stocks to help it outperform through most phases of the market cycle. Newmont shares were classified as a defensive option, though they have suffered.
The fund manager also noted there is a lot of uncertainty with the second Trump presidency, US fiscal and debt issues, stubborn global inflation, ongoing economic weakness in China and the EU, and geopolitical risks in the Middle East. Despite that, share markets are at all-time highs, though the bond market has shown more volatility.
Blackwattle suggested:
This mixed environment tends to be rewarding for high quality companies as earnings certainty becomes a rarer commodity. We believe our portfolio companies are well placed into this dynamic.
