JPMorgan upgrades NEM.US to "Overweight" on production guidance and asset sale plan

JPMorgan analyst upgraded the rating of Newmont Corporation (NEM.US) from "Neutral" to "Overweight", citing catalysts such as Newmont's updated production guidance and positive asset sale plans. The analyst believes Newmont's revised gold and copper production targets, as well as the latest developments at its major operations, point to a more optimistic outlook.

Specifically, JPMorgan said the upgrade not only reflected an adjustment in Newmont's valuation methodology, but also involved a revised target price of AUD72.50, slightly below the previous AUD74.00. The valuation combines a discounted cash flow model (10% weighting) and an earnings multiple model (90% weighting), which reflects the preferences of the US investor group, as most of Newmont's trading activity is currently taking place in the US.

JPMorgan's reevaluation of Newmont was conducted following a site visit to its Australian operations in Taman and Cadia. At Taman, the second phase of the expansion is expected to come online in the second half of 2027, with ongoing exploration and efficiency upgrades currently underway. Meanwhile, at Cadia, Newmont is working to strengthen its relationship with the community and regulatory agencies to secure approval for its ongoing operations beyond 2050.

At the same time, JPMorgan noted that Newmont has set new medium-term production targets of 6 million ounces of gold and 150,000 tonnes of copper per year, and specifically mentioned a downward revision in production expectations for the Lihir and Brucejack projects in fiscal 2025, which also implied a downward revision in production expectations for the company's other segments.

In addition, Newmont's divestment of the Marcella Wilson mine has yielded significant results, with a transaction value of USD810 million, far exceeding the USD485 million expectation, providing an immediate financial boost for the company. JPMorgan expects Newmont to further sell assets by March 2025, which could serve as a short-term catalyst for the stock.

Despite a 20% decline in the discounted cash flow valuation, JPMorgan still emphasized that Newmont's stock price has 12% upside potential under the new valuation framework, which will largely depend on the one-year EV/EBITDA multiple.

Overall, JPMorgan's positive outlook and rating upgrade for Newmont reflect its confidence in the company's future performance and growth potential.

As of Tuesday's close, Newmont's stock price rose nearly 2% to USD43.18.