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Why Newmont Mining Corporation's Stock Advanced "Only" 29.4% in February

By Reuben Brewer – Mar 14, 2016 at 11:45AM

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Newmont investors got a nice boost in February, but that advance lagged behind other miners.

Image source: Newmont Mining.

What: Newmont Mining Corporation's (NEM -1.50%) stock went up almost 30% last month. That's a heady advance, to be sure, but it wasn't nearly as dramatic as what some other miners experienced. Here's why Newmont was "left behind."

So what: It shouldn't come as a surprise that a gold miner like Newmont saw a nice price bump as gold prices pushed higher. Rising precious-metals prices were, without a doubt, the reason for Newmont's advance. But despite a nearly 30% move, Newmont was left behind by miners such as Coeur Mining, (CDE -3.88%) and Freeport-McMoRan (FCX -1.39%), which rose around 75% and 65%, respectively. Why?

The answer lies in survival. Although Newmont has been hit hard by falling gold and silver prices, it ended 2015 with all-in sustaining costs of roughly $900 an ounce for gold. That's comfortably below the price that gold was fetching even before the recent rally. So Newmont was feeling the pressure of low precious-metals prices, but it was managing the period relatively well.

The same can't be said for a marginal miner like Coeur. This miner uses silver as its base metric for all-in sustaining costs, which were about $15.50 per silver equivalent ounce last year. That was above where silver started and ended in February, though the price did get above that price at one point in the middle of the month. Newmont is simply better positioned overall, meaning that a precious-metals rally will actually benefit marginal miners more because it could be the difference between survival or, well ...

Copper and gold miner Freeport-McMoRan highlights another reason for Newmont's less dramatic rise. Freeport overextended itself by investing in oil while that commodity was flying high. Now that oil has cratered, too, Freeport is in survival mode. But rising prices for gold and copper should make it easier for Freeport to get past its big mistake. Newmont doesn't appear to have a skeleton like that in its closet.

Now what: If you're watching the precious-metals space, Newmont is a good company to be looking at -- particularly for conservative investors. Sure, the fireworks are more exciting at more troubled companies, but the risks are notably amplified.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold,. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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