For intrepid precious-metals investors wondering when rising gold and silver prices would finally translate into palpable increases in cash flow, that excruciating wait is over.
Witnessed first in lower-cost rival Goldcorp
Newmont scored $1 billion in net cash flow in the fourth quarter, more than one-third its 2009 total of $2.9 billion. The full-year figure marks a 109% improvement over 2008, but fourth-quarter cash flow leapt a full 323%. A full 40% of Newmont's 2009 net income came in the fourth quarter, though a chunk of that imbalance relates to production from the new Boddington mine in Australia.
Notwithstanding the anticipated production surge from Boddington in the second half, Newmont's cash flow flood is also a function of an expanding operating profit margin on the coattails of gold's new price range. Fellow titan Barrick Gold
As I pointed out in this discussion of IAMGOLD
Back in 2008, when metal prices and all-in production costs converged, physical gold through proxies like the SPDR Gold Trust
I still consider Goldcorp the purest nugget among the larger-cap gold miners, but those favoring Newmont have plenty of cause for excitement. During 2009, Newmont grew gold reserves net of production by 8% to 91.8 million ounces. After increasing cash reserves 639% to an awe-inspiring $3.22 billion, the company is beautifully positioned to fund organic growth while pursuing strategic acquisitions. Thanks to the relative underperformance by miners thus far, I believe that value-laden opportunities for acquisitive growth will turn Newmont's cash flow into shareholder gold.
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