Takeover for Newmont?

Posted Mar 29th 2007 8:30AM by Steven Halpern
Filed under: Newsletters, Barrick Gold (ABX), Newmont Mining (NEM)

"My sources indicate that the world's largest gold company, Barrick Gold Corp. (NYSE: ABX), may make a play for the world's second largest, Newmont Mining Corp. (NYSE: NEM)," suggests Mark Skousen, a 25 year veteran of the advisory industry.

Importantly, takeover speculation is just an added attraction in his assessment. The editor of The Hedge Fund Trader explains, "Even if Barrick doesn't, Newmont still belongs in your hedge portfolio."

For one, he calls Newmont is the bluest of blue chip gold companies, pointing to proven and probable reserves of 95 million ounces, with operations in the U.S., Canada, Australia and Mexico.

Further, he notes, the company does not hedge its gold production either, which allows investors to benefit fully from a rise in the price of gold.

In addition, he says, "Newmont's earnings are superb." He notes that the gold mining company's net income jumped more than three-fold in the fourth quarter of 2006, with profits of $223 million on revenue of $1.46 billion.

Says Skousen, "Bear in mind, this surge in earnings came in the wake of lower, not higher, production. Gold sales dipped to 2 million ounces in fourth quarter 2006 from 2.4 million ounces for the same quarter a year ago. But Newmont's average selling price rose 31% to $619 an ounce from $472 an ounce from a year ago."

Meanwhile, the stock Newmont has pulled back to the mid-$40 range, after trading up to nearly $60 last spring. Looking ahead, he notes, "The longer-term trend in gold is upwards and higher average gold prices will lead to still higher profits at Newmont."

As for the takeover "kicker" he explains, "Newmont used to be the world's biggest gold producer, but Barrick took over the top spot when it acquired Placer Dome a year ago. Barrick intends to continue growing through acquisitions. And, Newmont would be the biggest acquisition target of them all."

Skousen notes that both companies have been reluctant to comment on a potential deal. But if it does happen, as he speculates it will, it would be the biggest ever. The advisor concludes, "In short, we could make a bundle here."

For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.

Tags: mark skousen, nem, newmont mining, NewmontMining

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Reader Comments (Page 1 of 1)

5-18-2007 @ 9:43PM

alvin golub said...

abx only takes over companies to have properties to develop. They did't take over homestake for their old mines (they closed the fantastic Homestake mine)but for the argentine property that will produce 2 million oz .they sold many Placer properties but are developing the Nevada properties. Newmont has nothing great that they would want to develop right now.

every one should have 2 to 5% in gold. Buy barrick and Newmont.

5-18-2007 @ 9:23PM

alvin golub said...

ABX only tkes over companies that make large gold finds that Barrick wants to develop. They took over Homestake for their Argentine property which will produce 2 million ozs a year, they took over placer for cortez and they did this with lac and sutton. Newmont is one of the best golds but they dont have an enormous find wich is underveloped.