Newmont

Barrick's second-quarter adjusted NPAT is up 70% on a year ago, to USD 1.4 billion or USD 0.82 per share. The stronger gold price and slightly higher sales volumes more than offset increased unit costs. But shares fell 6% as it also settled its dispute with Newmont over Nevada Gold Mines, or NGM.

Why it matters: Newmont alleged Barrick had mismanaged their Nevada joint venture. While we aren't privy to the details, the dispute may have helped Newmont to reduce the price to buy a share of Barrick's attractive Fourmile deposit, which is now included in NGM. The share price decline—in contrast to the 4% rise in no-moat Newmont shares—is likely due to the market ascribing blue sky to Fourmile given the very positive sentiment in gold and impressive high-grade resource found so far. Barrick is on track. First-half sales volumes and unit costs broadly align with our unchanged full-year estimates. Volumes are likely rising in the second half. Guidance is reiterated except for reduced capital expenditure on its Reko Diq project in Pakistan as it reviews the development.

The bottom line: Spot gold is materially above long-term consensus of about USD 3,600, let alone our lower estimate for midcycle cost support at about USD 2,050. This difference likely drives the 40% premium at which shares trade to our unchanged USD 29 fair value for no-moat Barrick. Fourmile is potentially a large, low-cost, long-life mine that would likely be very profitable at the current gold price of about USD 4,400 per ounce. However, a prefeasibility study is still being worked on—due in 2029—with first production likely in 2030 at the earliest. We assume it will be developed given exploration results to date.

Coming up: Barrick's intention to demerge and spin off its stakes in NGM and Pueblo Viejo likely gave Newmont leverage. With Newmont now consenting to the IPO, North American Barrick will likely list by the end of 2026. We expect Barrick to sell a 10% to 15% stake in it at the IPO.

Barrick CEO Mark Hill will assume leadership of the new company. Given elevated prices and sentiment in the gold space, we think it is a better time to be selling gold mines rather than buying them and, all things equal, are likely to support the proposed IPO. Barrick shareholders, however, are unlikely to have a say in the matter.

The settlement involves Fourmile being contributed to NGM earlier than expected, with Newmont's 100%-owned Fiberline and Mike deposits in Nevada also contributed early and Newmont paying Barrick USD 2 billion. It appears to be a reasonable resolution between the two companies.

We expect production from NGM and Pueblo Viejo of around 1.9 million ounces (Barrick's share) or 3.1 million ounces at 100% (that is, for North American Barrick) in 2026, rising to about 4.3 million ounces at 100% midcycle. This is driven by Pueblo Viejo and Goldrush (at NGM) ramping up to full capacity, the development of the Ren deposit at NGM in 2028 and, later on, Fourmile coming online. In turn, this will likely see some improvement in unit costs, helped by Ren and Fourmile being able to utilize existing NGM infrastructure.

North American Barrick will likely be the second-largest gold miner in the world behind Newmont. We expect it to have lower sovereign risk and a lower cost of capital than Barrick currently, given the majority of its production will be in Nevada.

We reduce our fair value estimate for Newmont to USD 67 per share, from USD 72, driven by lower gold prices.

We now assume gold averages around USD 4,400 per ounce from 2026 to 2028 based on the futures curve, down from about USD 4,900. However, our assumed midcycle price remains about USD 2,050 per ounce from 2030. This is based on our estimate of the long run marginal cost of production.

Cuing off the futures curve, our assumed average copper price from 2026 to 2028 remains about USD 6.00 per pound. Based on our estimate of the long run marginal cost of production, we assume a midcycle price of about USD 3.80 per pound from 2030.

We also assume silver averages about USD 60 per ounce from 2027 based on spot, reverting to around USD 37 per ounce midcycle from 2030, 1/55th of our assumed midcycle gold price.

We assume zinc and lead average about USD 1.60 and USD 0.85 per pound, respectively, from 2027 based on spot.

Cash flow is discounted at a weighted average cost of capital of 8.6%, based on a long-term capital structure comprising 25% debt and 75% equity. We assume a 10.3% long-term cost of equity, reflecting gold's lack of systematic risk and correlation to GDP, with the company's higher exposure to sovereign risk meaning we think shareholders require additional return commensurate with this risk. We apply a 5.4% pretax cost of debt, reflecting what we expect Newmont’s long-term cost of debt will be in a normalized interest-rate environment. Our implied terminal multiple of 8 times enterprise value/EBITDA is similar to the average we apply to other senior gold mining companies under our coverage.

As a commodity producer, Newmont is a price-taker and needs low-cost mines with long lives and a low installed capital base to support the longer-term excess returns needed to justify an economic moat.

We assign a no-moat rating to Newmont. It is placed around the middle of the curve for the gold industry's all-in sustaining costs. Due to the flatness of the industry cost curve, only miners in the lowest quartile tend to enjoy a material operating cost advantage. And that would need to be paired with an efficiently invested capital base and long reserve life to warrant a moat. Newmont’s costs are not low enough to justify a moat, so we don’t think Newmont exhibits a low-cost advantage.

Newmont’s adjusted return on invested capital is similar to its weighted average cost of capital. We have included around USD 8.3 billion in asset and intangibles write-downs on the basis that the impairments relate to assets developed or acquired in the ordinary course of business and so should be included when calculating ROIC, as they are a normal part of doing business as a gold miner. Newmont’s large invested capital base makes it unlikely that the firm will continue to generate economic returns in excess of its cost of capital, even if its operating costs were to materially fall. However, if the company were able to move into the lowest quartile of the cost curve, we would consider revisiting its moat rating.

The company averaged ROIC in the 10 years ended Dec. 31, 2025, of about 8%, while ROIC also averaged around 9.5% in the five years ended Dec. 31, 2025. We estimate that Newmont will generate a ROIC midcycle in 2030 similar to its WACC of about 8.5%. As such, we don’t assign a moat to Newmont.

In terms of commodity prices used for our forecasts, our respective midcycle assumptions for gold and copper are about USD 2,050 per ounce and USD 3.80 per pound from 2030, based on our estimate of the marginal costs of production. We also assume silver prices of about USD 37 per ounce midcycle from 2030, being 1/55 of our assumed midcycle gold price. We assume zinc and lead average about USD 1.60 and USD 0.85 per pound, respectively, from 2027 based on spot.

Newmont is the world’s largest gold miner, with copper and other byproducts providing some diversification, representing around 15% of forecast midcycle revenue from 2030.

The Nevada joint venture with Barrick is the largest gold producing area in the world, and will likely see even higher production in coming years.

Gold companies tend not to follow general economic cycles. They can also provide a hedge to inflation risk.

Bigger is not always better in gold mining. Newmont's operations span four continents, increasing complexity and difficulty managing the assets.

Newmont's unit cash costs are around the industry average, meaning it is more affected by falling gold prices than its lower-cost competitors.

Gold is subject to the whims of investors, who can move as a herd and affect the gold price.