Why the Street Is Wrong About Newmont at Eighteen Times Earnings

Gold miners carry reputational baggage. The 2012-2015 era saw Newmont and its peers write down billions in overpaid acquisitions, slash dividends, and watch their shares crater while gold itself held up relatively well. The lesson the market learned was straightforward: gold gives you the commodity exposure, miners give you the commodity exposure plus management risk.

That lesson was correct — in 2015. It no longer applies. Newmont's all-in sustaining costs have dropped from over $1,200 per ounce to below $1,050. The Newcrest acquisition, which sceptics treated as another cycle-top M&A disaster, has delivered synergies ahead of schedule. The asset base now spans five continents with 96 million ounces in reserves.

Start with free cash flow. Newmont generated $7.3 billion in FCF in 2025, up from $3.0 billion in 2024 and a paltry $100 million in 2023. That is a 24x increase in two years. On a $124 billion market cap, the FCF yield is 5.9%. The S&P 500 average FCF yield sits around 3.5%.

Profit margins hit 31.3% — extraordinary for a mining company and well above the gold mining peer average of 18-22%. Operating margins at 58.1% reflect the operational leverage of higher gold prices flowing through a fixed cost base. Every $100 increase in gold prices adds roughly $600-700 million in annual EBITDA at current production levels.

The 17.8x trailing PE looks expensive against the mining sector average of 12-14x. But strip out the 2023 write-downs that depressed the trailing earnings base, and the normalised PE drops to 14x. On forward earnings, it trades at 14.9x — barely a premium to diversified miners with half the margin profile.

Jim Cramer recently discussed owning gold as portfolio insurance. He is not wrong about the thesis, but he is buying the wrong instrument. Newmont gives you gold exposure with 31% profit margins and a growing dividend. The commodity itself gives you zero yield.

At $114 per share, Newmont trades at 5.6x EV/EBITDA. The five-year average for senior gold miners is 7.2x. Applying the historical average to Newmont's current EBITDA implies a share price of $155-165 — 40% above today's level.

The PEG ratio of 2.78 looks stretched until you consider that the "G" in PEG is based on consensus estimates that assume gold prices revert to $2,000 per ounce. Gold is currently above $2,500. If you re-run the PEG calculation with gold at $2,300 — a conservative assumption well below spot — the PEG drops to 1.4x. At spot gold prices, it falls below 1.0x.

The dividend yield of 0.89% appears thin, but Newmont has signalled its intention to return more capital through buybacks. With $7.3 billion in FCF, the company could retire 6% of its float annually at current prices while maintaining the dividend. Management has been cagey about the buyback timeline, which is the one thing keeping us from pounding the table even harder.