Last week, leading gold producer Newmont Mining
Investors who want exposure to gold can simply buy and store the physical metal, or they can invest in shares of a fund that does this for them, such as the streetTRACKS Gold Trust
In an effort to be conservative, Newmont was depriving investors of that basic leverage requirement. On the former CEO's watch, the market cap quadrupled while the gold price more than doubled.
That seems inadequate, and it compares unfavorably to the value created by large competitors Goldcorp
Newmont announced that it's eliminating not only its hedges, but its merchant banking segment as well. This unit does not address the company's most pressing issues of lowering operating costs and reversing production declines. It's history, and so is any chance of the company reporting a decent quarter. The writedown of goodwill assets is going to contribute to an ugly earnings-per-share figure. If you deem these steps to be prudent, rather than a risky gambit to regain favor with investors, then you may get a nice buying opportunity when results are announced in a few weeks. I, for one, will be shopping elsewhere.
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