I am lucky enough to own an ASX 200 share that has tripled in value over just the past two-and-a-half years. I did not buy this stock with the expectation that I would see much of a significant gain, and indeed, it has come as a bit of a surprise. So perhaps I should sell it. Let's discuss that prospect.
This ASX 200 winner is none other than Newmont Corporation (ASX: NEM). Newmont is the largest gold miner listed on the ASX. I was issued Newmont shares back in November of 2023 as a result of the acquisition of Newcrest Mining. Newcrest was an Australian gold producer before Newmont, a US-listed gold heavyweight, swallowed it up. It replaced Newcrest's shares on the ASX with its own secondary listing.
Originally, my Newcrest position was an insurance bet of sorts. Normally, I don't go for mining or energy companies as I believe their potential as long-term wealth compounders is inherently limited by their reliance on external and volatile commodities markets. But I put that conviction aside for this relatively small position in Newcrest, now Newmont. That was due to concerns that I had that the global economic order was facing some structural issues, and that gold (at least at 2021 prices) was an effective hedge, or insurance policy, against these issues.
Perhaps unfortunately, this has since been proven prudent. Gold has hopped on a rocket ship over the past year or two, no other way to put it. This is probably due to a number of factors, including the erratic economic and foreign policy of the Trump Administration, rising geopolitical tensions, inflation, ballooning government debts, and frenzied buying from central banks eager to diversify away from the US dollar.
Newmont's phenomenal run
As recently as 2023, gold was under US$2,000 an ounce. Just this week, that same ounce has hit a new record high of over US$4,700. This has resulted in my Newmont shares rising from the $60 each that I received them at to the $179.50 price at the time of writing.
Like most gold miners, Newmont's costs of extracting a single ounce of gold are relatively fixed. This means that any increase in the price of gold can help Newmont's profits accelerate on an exponential scale. To illustrate, let's say it costs Newmont US$1,500 to extract an ounce of gold. If the gold price rises from US$2,000 to US$3,000, it has jumped 50%. But Newmont's profit margin from extracting that ounce rockets 200%.
That's basically why my investment in Newmont has tripled since 2023.
Time to sell this ASX 200 share?
With most of my investments, I typically adopt a 'let your winners run' mentality. That's why my portfolio still has most of its best performers within it, including Alphabet, Meta Platforms, Wesfarmers Ltd (ASX: WES), and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), and probably will for the foreseeable future.
Newmont is different, though. As we touched on above, I don't hold this position as a long-term wealth builder, but as an insurance policy. I'm not going to try and time a sell when I think gold prices have topped out. But I will continue to hold it as long as global geopolitical and economic tensions continue to sit at this historically elevated level.
