Where sentiment and reality diverge, Fools know to seek opportunity.

Today, the collective sentiment surrounding gold seems to be a combination of panic and disgust, neither of which has any basis in reality. Every bull market experiences corrections and periods of consolidation, and this correction remains less severe than the one that began in May 2006, when the price of gold fell by more than 20%. We all know where the price of gold has gone since then.

Newmont Mining (NYSE: NEM) also seems to have been an object of sentiment. It released stellar earnings yesterday just as gold was dropping below $900 per ounce. It's not every day you witness shares declining after a company reports an earnings increase of 444% and blowing away analyst estimates by 50%. There lies the measure of sentiment -- and that disconnect, for investors, should smell like opportunity.

Newmont brazenly removed all its gold hedges last year, joining fellow megaminer Goldcorp (NYSE: GG) in its bullish outlook. The move paid off in spades when the company recorded an average realized price of $933 per ounce, a 44% increase from the year prior. Sharply higher prices also translated into a jaw-dropping 119% increase in operating margin, to $537 per ounce, as the company managed to keep production costs below $400 per ounce.

When I last wrote about Peruvian miner Buenaventura (NYSE: BVN), I said the world-class deposit at Yanacocha was a critical operation for both Newmont and its Peruvian partner. While Newmont did not raise its modest production forecast of about 900,000 ounces of gold in 2008, first-quarter production came in slightly above expectations and below budget.

More importantly, a new gold mill at Yanacocha will start commercial production in the second quarter, and is expected to improve gold recovery rates by 50% and silver recovery rates by 300%.

While I recommend intermediate and select junior producers at this stage of the bull market for gold, Newmont has certainly impressed me with this quarterly result. We still must keep an eye on ore grades at some of the company's more mature projects.

But with the handcuffs of hedging removed from the books, and gold forecast to continue its historic run, Newmont appears set to climb new heights.