Up and Down Wall Street

Newmont Mining is certainly not unknown to Barron’s readers: Rhonda Brammer has written a couple of stylish and penetrating features on the company the past few years. The latest, in the July 3 issue, described the remarkable awakening of gold after its 20-year slumber and, in some detail, recounted the noteworthy strides Newmont has been making in turning itself into the planet’s premier producer of the yellow metal and, for that matter, a first-rate company by any standard.

She pointed out that Newmont was the only pure-play gold stock in the S&P 500. With a market cap of $23 billion, it enjoys admirable size and liquidity, has a global portfolio of first-rate properties and has been steadily discovering more gold than it mines. That’s no small consideration for a market where supply seems destined to be tight.

Without blinking some unexpected headaches — a drought in Ghana that forced Newmont to sharply reduce its mining there, expropriation in Uzbekistan (getting kicked out of that loony country strikes us as a badge of honor) — that proved a drag on this year’s performance as well as on the stock, Rhonda’s piece was a highly persuasive argument for Newmont’s shares as an investment.

What prompts us to take a quick look at Newmont is that gold, down from a peak of $715 an ounce in May, is hanging in there a few bucks below $600 but is distinctly not a hot topic these days in Wall Street. Further, Newmont’s stock, which has ranged in the past 12 months from slightly under 40 to a hair under 63, has been mired for a fair stretch in the low 40s.

Yet the company boasts, among its various and sundry attributes, an exceptionally sturdy balance sheet, buttressed by an investment portfolio that’s a true thing of beauty and generates oodles of lovely cash, and a classy management, which, incidentally, promises that any future surprises will be on the upside.

As it happens, while in the midst of working up this note on Newmont, we received an e-mail from Darren Pollock, who’s with a West Coast investment advisory dubbed Cheviot Value Management. Mr. Pollock obviously knows his way around a financial statement and has a seasoned investment eye. And, this won’t surprise you, we imagine, he’s high on Newmont.

Not the least of the attractions he cites is that the stock is selling a good piece below what its business is worth. More specifically, he reckons the company’s true net asset value is 20% to 50% greater than its share price. He also points out that the stock is now selling where it sold back in 2003. Yet the price of gold has risen since then by a full 50%.

In her July article, when Newmont was changing hands around 50, Rhonda ventured that the stock in the fullness of time might well climb to 75-80. Despite its recent laggardly action, that still seem to us quite reasonable. The breakout year for the company’s mine production shapes up as 2008. But sometime before that year rolls around, we have a hunch the stock will discount Newmont’s improving prospects in earnest.

And, as Mr. Pollock points out, also much in its favor is that a majority of the analysts who follow Newmont rate it as a Hold or Sell. What more can you ask?