Newmont's Cash Flow Boosts Buyback Capacity Amid Rising Costs

Newmont, the world's largest gold producer, reported second-quarter earnings that were broadly in line with expectations. The company generated $2.2 billion in quarterly free cash flow and $5.5 billion in the first half of the year, with full-year free cash flow expected to exceed $11 billion.

Gold production declined 13 per cent from a year earlier, while costs per ounce rose 14 per cent amid higher royalties and oil prices. Newmont has repurchased about 100 million shares, representing roughly nine per cent of its outstanding shares, over the past two years.

Martin Pradier, materials analyst at Veritas Investment Research, is bullish on Newmont's prospects. He noted that the company's cash flow is 'fantastic' and that it's trading at a low valuation, with a price-to-earnings ratio of about nine times.

However, there are some challenges ahead for the company. Pradier mentioned that costs are expected to get worse in the second half of the year due to delayed oil price increases. Additionally, Newmont and Barrick's joint venture, Nevada Gold Mines, is facing disagreements over their proposed initial public offering (IPO), which could lead to litigation.