Newmont CEO Upbeat on Mining Profits

After years of underperformance, the major gold miners could be set for a big rally soon even if the price of the metal stays relatively flat, according to the head of the largest U.S. gold mining firm.

Speaking exclusively with TheStreet.com, Richard O'Brien, CEO and president of Newmont Mining(NEM Quote), acknowledged the sluggishness of some large gold stocks relative to the underlying price for gold in recent years.

But, he said, the time might now be right to consider shares of mining companies once again. The reason: Profits at gold miners could be set for a huge pop.

"Cash flow and earnings from the stocks could be much more significant than they have been over the past few years," O'Brien says. "Gold the metal has [recently] outperformed gold stocks. But when will that reverse itself? This might be the time to revaluate."

Newmont, which is expected to produce up to 5.4 million ounces in 2007, is the world's second-biggest gold miner behind Toronto-based Barrick Gold(ABX Quote).

O'Brien took over running Newmont after the prior two leaders, CEO Wayne Murdy and President Pierre Lassonde, stepped aside earlier this year. While the value of Newmont's shares stand just about where they did two years ago, the price of gold has soared around 60% in the same period.

Costs of production rising faster than revenue have been largely to blame for Newmont's woes.

Traditionally, gold mining stocks have performed better than the metal in a rising market. However, over the past couple of years that relationship has started to break down for some companies as low-grade ores and climbing costs have dogged earnings growth.