Now could be the time to pounce on Newmont Corporation (ASX: NEM) shares if you want exposure to gold.
That's the view of analysts at Goldman Sachs, which believe the ASX 200 gold stock is great value at current levels.
Why is Newmont an ASX 200 gold stock to buy?
According to the note, there are three key reasons why Goldman Sachs thinks that investors should be buying this gold mining giant's shares.
The first is that the company's production and costs outlook is very positive compared to peers. This is thanks to the completion of some major growth projects. It explains:
Despite a re-based CY25; a 3/5yr core production CAGR of ~5%/4% is well above Australian/global peers (c.-2-4%), driven by completion of major growth projects (Ahafo North, Tanami 2, Cadia) and stabilisation/grade improvements at some assets, with medium-term growth from organic developments (Red Chris/ Yanacocha sulphides) and optionality at early stage large scale resources.
It also notes that recent divestments are going to improve its all-in sustaining costs (AISC) as its production grows. Goldman adds:
Non-core divestments improve group gold AISC by ~5-8%, with unit costs/ margins also improving across the broader portfolio despite elevated near-term spending (Cadia tailings, Yanacocha water plants, elevated stripping, etc.). We note NEM's Australian segment will also have the lowest like-for-like AISC vs. large cap Australian peers by ~FY28E.
What else?
Another reason to buy this ASX 200 gold stock is its strong earnings growth outlook. In light of the above, the broker believes that Newmont's earnings will grow quicker than its tier 1 peers and drive a marked improvement in its balance sheet. It said:
This supports a 5yr EBITDA CAGR of ~6% (Tier 1; global peers ~2%), with net cash by early CY27E from net debt of ~US$5.5bn in CY24E (incl. growth spend; ~US$3bn from five divestments in 1Q25 accelerate this ~12 months), supporting increased capital management via growing dividends and an ongoing buy-back (aggregate ~5-6% yield).
Finally, Goldman believes that its shares are undervalued at current levels, which is a third reason to invest. It said:
Despite this backdrop, NEM trades at a discount at ~0.9x NAV or pricing ~US$2,150/oz long-term gold (peers ~1x NAV & ~US$2,210/oz), while on proportional EBITDA, NEM trades at a ~0.5x discount vs. global peers, with near-term FCF yields of c. 10-15% in CY25-29E also attractive and somewhat cushioning further impacts from a softer production outlook at more assets.
Big returns
Goldman has initiated coverage on the company with a buy rating and $76.20 price target.
Based on its current share price of $63.78, this implies potential upside of 19.5% for investors over the next 12 months. In addition, a 2.6% dividend yield is forecast over the next 12 months, boosting the total potential return to approximately 22%.
