Gold Producers – Buying Opportunity if the Reports Disappoint

Evgeny Kogan
Updated: Feb 20, 2019, 07:32 GMT+00:00

On February 21, Newmont (NEM US) - an international gold-mining company will publish a financial report for the 4th quarter of 2018.

GOLD US Newmont Barrick Gold

As a matter of fact, Newmont is one of the world’s leading gold producers. After combining with Goldcorp, the volume of the company’s production will be about 7 million ounces. The Competition Bureau of Canada recently approved the deal, which is expected to be completed in the second quarter of this year.

Newmont NEM US ratios

While Newmont is getting ready to publish reports, let us discuss the market expectations. The quarterly report forecasts a slight increase in revenue and EBITDA and a decrease in net profit and EPS. If we compare changes from year on year, we can expect a more substantial decline. I believe that this is primarily due to the decline in gold production. Let us analyze how things will actually go. Guessing whether the market will hit the spot or not is quite a thankless job.

On the whole, I have a positive opinion on Newmont and Barrick Gold (GOLD US) and regard them as defensive assets. In terms of multipliers, they look about the same (Barrick is slightly more expensive). The difference is that the beta coefficient of Newmont is positive, while Barrick has a negative beta coefficient. Therefore, Barrick has had my preference for all seasons since it works better against the market.

Getting back to Newmont, I have to say that I don’t actually expect anything bad from the reports. If the results are lower than predicted (without force majeure), and the asset prices fall down, it will obviously be a good buying opportunity for a quality asset at a discount price, especially against the background of rising prices of gold. I expect that at this level some will enter the position, and those who already did, will increase it.

Anyway, let us wish good luck to everybody!

The article was written by Evgeny Kogan, Ph.D., investment banker, the author of the telegram-channel Bitkogan.

About the Author

Evgeny Kogancontributor

Evgeny is an investment banker and the author of the telegram-channel Bitkogan. He holds Ph.D. in Economics and received a qualification of an Investment Advisor and studied Derivative Financial Instruments at the Bar-Ilan University (Israel) and Tel Aviv University (Israel), respectively.

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