Newmont Mining (NEM) Plummets on Friday

NEW YORK (TheStreet) -- Newmont Mining (NEM) plummeted on Friday, falling 10.6% to $21.54 by midafternoon.

A day earlier, the Denver-based business announced it had achieved 2013 production targets and provided its 2014 outlook.

Over the fourth quarter, the miner achieved attributable gold production of 1.5 million ounces, resulting in full-year attributable production of 5.1 million ounces, at the top end of its guidance range of 4.8 to 5.1 million ounces.

Copper production came in at the high end of guidance, as well. Over the fourth quarter, attributable copper production of 38 million pounds resulted in full-year attributable copper production of 144 million pounds, in line with the guidance range of 135 to 145 million pounds.

"We significantly improved costs and efficiency while achieving exceptional safety performance in 2013," said CEO Gary Goldberg in a statement.

To the year ahead, Newmont said it projects gold and copper production projects to stabilize and continued reduction of costs and capital expenditures.

Newmont expects consolidated 2014 gold and copper production of approximately 5 to 5.3 million ounces and 160 to 175 thousand tonnes, respectively. Over 2014, the company will apply a gold price assumption of $1,300 an ounce, down from $1,400 an ounce as a result of all asset impairment testing and 2013 reserves calculation.

TheStreet Ratings team rates NEWMONT MINING CORP as a Sell with a ratings score of D+. The team has this to say about their recommendation:

"We rate NEWMONT MINING CORP (NEM) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, NEWMONT MINING CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has decreased to $440.00 million or 23.34% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • NEM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.77%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that NEM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.63 is low and demonstrates weak liquidity.
  • NEM, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues fell by 20.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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