At long last, there’s a bit of good news for Newmont Mining (NEM). The firm has secured a new 6-month license from the Indonesian government to allow it to export copper again. The push to receive the license has been months in the making for Newmont.
Headwinds for Newmont
Indonesia has been been engaged in a long battle with its foreign multinational partners for a greater piece of the pie from its rich natural resource deposits. This development has not been limited to Newmont, but the major U.S. gold and copper miner certainly finds itself at the center of this effort.
Finally, the country’s mining ministry has recommended that Newmont’s license by renewed. The Indonesian Coal and Minerals Director, Bambang Gatot, indicated that company will be permitted to export 419,757 tonnes of copper concentrate over the life of the 6-month license.
Newmont’s division in Indonesia, Newmont Nusa Tenggara (NNT), may also be up for sale in the near future, ceding control back to local interests. The country’s state miners as well as a well-known Indonesian venture capitalist are the two most interested parties. Estimates are that the sale price for the NNT mining operation could be driven up as high as $2 billion.
2016 has been a boon for Newmont Mining, as the company has seen its shares surge 87% so far this year. The prospects continue to look good for the major miner thanks to stronger precious metal prices and renewed industrial demand for copper.
Headaches for Kinross
Another big player in the mining sector has not had such smooth sailing. Kinross Gold (KGC) is dealing with fresh problems at its Tasiast mine, located in the West African nation of Mauritania. Disgruntled mineworkers are taking action, embarking on a strike that includes all of the mine’s unionized workers. Playing the optimist, Kinross is open to negotiations and doesn’t believe the labor dispute will interrupt the planned expansion of the mine.
Gobbling Up Juniors
Given the shift in precious metals mining from years of a bear market to far more bullish conditions in the span of just a few days from December to January, there’s unsurprisingly been quite a bit of shakeup between firms that are either acquiring or selling off new assets. However, the newest trend has been for major firms to simply absorb promising junior miners.
This consolidation has disappointed many who invested in these junior miners for mere pennies in the hopes that the stock may prove to be a “ten-bagger” that sees its shares increase tenfold. The conversion of these shares into the shares of larger miners like Goldcorp (GG) or Barrick Gold (ABX) means there is less upside for the newfound shareholders. Nonetheless, there is an argument to be made that this not only helps the sector as a whole—a “rising tide lifts all boats” phenomenon—but also could contribute to lower risk in the junior mining stocks as they shore up their finances.
The opinions and forecasts herein are provided solely for informational purposes, and should not be construed as an offer, solicitation, or recommendation to buy or sell any product.