Newmont's Capex Cuts Fuel Record FCF, but Valuation Overhang Persists

What happened

Newmont reported a 17% drop in Q3 2025 capital expenditure, driving free cash flow more than double to a record $1.6 billion, as highlighted in a recent Zacks article. This aligns with management's ongoing portfolio optimization and cost discipline efforts documented in SEC filings. However, the stock has soared approximately 132% over the past year, now trading about 178% above a conservative FCF-based DCF estimate of $35.25 per share. The DeepValue report underscores persistent risks, including sensitivity to gold and copper prices, execution challenges at major projects like Ahafo North, and a looming CEO transition amid legal and ESG uncertainties. Consequently, while operational improvements are evident, the equity remains richly valued, pricing in near-perfect outcomes with minimal margin of safety.

Implication

The capex reduction and FCF surge validate Newmont's operational efficiency but are largely absorbed by the stock's 132% rally, reflecting high market expectations. To sustain current prices, Newmont must deliver on complex projects like Tanami Expansion 2 and Cadia Panel Caves while navigating gold price volatility and integration risks from the Newcrest acquisition. Balance sheet strength offers some downside cushion, yet the 178% premium to DCF implies significant vulnerability to metals price corrections or execution setbacks. Monitoring items include quarterly FCF durability, progress on asset divestments, and strategic signals from the incoming CEO to assess capital discipline. Overall, this is a high-quality franchise best held selectively or watched for a more attractive entry point, rather than aggressively added at current levels.

Thesis delta

The news reinforces the existing WAIT recommendation by confirming improved FCF from capex discipline, but it does not shift the core thesis of overvaluation. Investors should continue to await evidence of sustained cash flow durability or a valuation pullback, as the stock's premium remains unjustified given persistent execution and commodity risks.