Options Trade – Newmont Mining Corp (NYSE:NEM) Calls 
Tuesday, August 12, 2014

**OPTIONS TRADE: Buy the NEM Jan 2015 25.000 call (NEM150117C00025000) at or under $2.70, good for the day. Place a protective stop limit at $1.05 and a pre-determined sell at $5.00.

by Ian Harvey

August 12, 2014

Introduction

Newmont Mining Corp (NYSE: NEM), primarily one of the largest gold and copper producers in the world with operations and/or assets in the United States, Australia, Peru, Indonesia, Ghana, New Zealand and Mexico, and thus a traditional hedge against a declining stock market.

Standard & Poor’s sees good things coming out of Newmont, including earnings estimates of 76 cents per share, up from a loss of $5.06 in 2013. S&P recently revised its 2015 earnings estimate to $1.54, up 2 cents. Looking back, second-quarter earnings beat S&P’s estimate by 3 cents.

Also, last Thursday saw NEM exhibit a “golden cross” -- a long-term buy signal that occurs when the 50-day moving average penetrates the 200-day moving average.

Technical Details

NEM topped at over $55 in August 2013. Following a decline and a break in June above its 200-day moving average, the stock now appears to be attracting enough buyers to provide the energy needed to complete a break above Wednesday’s high of $26.54.

Newmont Mining Corp has a 1-year low of $20.79 and a 1-year high of $34.27. The company’s market cap is $12.569 billion.

Earnings

Newmont Mining Corp last posted its quarterly earnings results on Tuesday, July 29th. The company reported $0.20 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.19 by $0.01. Analysts expect that Newmont Mining Corp will post $0.80 EPS for the current fiscal year.

The company also recently announced a quarterly dividend, which is scheduled for Friday, September 26th. Stockholders of record on Thursday, September 11th will be paid a dividend of $0.025 per share. This represents a $0.10 annualized dividend and a dividend yield of 0.40%. The ex-dividend date is Tuesday, September 9th.

Hedge Fund Support

Kopernik Global Investors is a hedge fund managed by David Iben, and in its last 13F filing, Kopernik disclosed ownership of more than $181 million in stock, mainly from basic materials companies (65.9% of its total equity portfolio).

The second largest position in Kopernik’s portfolio, Newmont Mining Corp, was added during the first quarter of 2014. This $12.66 billion market cap, gold and copper production and exploration company saw the fund acquire 931,583 shares over the first quarter. The position is currently worth $23.42 million, after having gained 5.18% since March 31, 2014, and 9.25%, year-to-date.

Analysts Opinions

Stock analysts at RBC Capital raised their target price on shares of Newmont Mining Corp from $27.00 to $29.00 in a report issued on Thursday, 31ST July, 2014. RBC Capital’s price target suggests a potential upside of 15.08% from the company’s current price.

The company has been the subject of a number of other research reports:-

• Analysts at Credit Suisse raised their price target on shares of Newmont Mining Corp from $25.00 to $26.00 in a research note on Thursday, July 17th. They now have a “neutral” rating on the stock.

• Separately, analysts at Deutsche Bank reiterated a “hold” rating on shares of Newmont Mining Corp in a research note on Monday, July 7th. They now have a $24.00 price target on the stock, up previously from $23.00.

• Finally, analysts at Zacks upgraded shares of Newmont Mining Corp from an “underperform” rating to a “neutral” rating in a research note on Monday, May 26th. They now have a $25.00 price target on the stock.

Two analysts have rated the stock with a sell rating, ten have given a hold rating and two have assigned a buy rating to the company’s stock. Newmont Mining Corp presently has an average rating of “Hold” and a consensus price target of $27.54.

Conclusion

The initial trading objective for NEM is $32 (22% higher), but with gold now in an uptrend, NEM could double from the current price, making this options trade very profitable.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the NEM Jan 2015 25.000 call (NEM150117C00025000) at or under $2.70, good for the day. Place a protective stop limit at $1.05 and a pre-determined sell at $5.00.



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