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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

, Richard O'Brien, CEO and president of

Newmont Mining

(NEM) - Get Free Report

, 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



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.

O'Brien says the turn of fortune he sees for gold miners doesn't depend on any outlandish predictions. Rather, he cautiously forecasts prices for the metal should stay between $800 and $850 through 2008 barring any unforeseen financial or geopolitical shocks.

He also notes that since the huge run-up in gold prices from around $660 an ounce late in the summer to over $800 recently, there hasn't been any full quarter of earnings reported by any of the major gold miners.

As a result, investors don't know for sure how earnings will pan out.

What O'Brien


know is that much of the historical increase in costs occurred before the rally. And it's likely for that reason that the next couple of quarters could mark a change for the miners.

Still, he predicts 12% to 15% higher expenses across the industry in 2008.

Since taking the reins at Newmont, O'Brien hasn't wasted any time shaking up the sleepy giant. He has removed all the remaining gold hedges that were preventing shareholders from receiving the full upside of any gold rally.

The firm also raised $1.15 billion through a convertible debt offering to give the company the ready cash to invest in its businesses, and it has made moves to spin out its noncore and royalty assets.

Perhaps most importantly, the company made a bid for exploration company

Miramar Mining

( MNG) for $1.5 billion, a move meant to help replenish Newmont's dwindling reserves.