By Jack Adamo, Insiders Plus

I expect gold to have a strong rally very soon. All three components I track in the Commitments Of Traders Report are the most bullish I've seen since before the market crashed in 2008.

Readings at these levels have preceded gains of 8%-11% in bullion over the following 10 weeks with noticeably bigger gains in the mining stocks, whose earnings are leveraged to the price of gold. These readings have not been wrong once in the 10 years I've been tracking them.

Newmont Mining (NEM) posted results that were so-so. Net earnings per share for the year were up nearly 400%, however, that was due to a large asset write-off last year.

Without the write-off, operating income was down 24% year-over-year, due to a large increase in costs on top of a 4.7% decrease in revenues.

The good news is that the fourth quarter showed a huge improvement, giving room for optimism going forward. Net earnings per share moved to a profit in the $1.35 range, compared to a loss of more than double that last year, again due to last year's asset write-off.

Excluding write-offs, fourth quarter earnings per share fell slightly to $1.11 from $1.14. Considering the industry-wide escalation of operating costs, that's a decent result.

Mining is an inherently lumpy business anyway. You just can't tell what's going to come out of the ground year-to-year, or how hard you'll have to work to get it. All you can do is buy your assets well and operate your facilities with the highest possible efficiency.

Newmont recently installed a new CEO to focus on fiscal discipline and cost containment. Buying properties at high prices has caused quite a few big write-downs of assets at the miners. It is time to get more out of the properties the companies already own. Newmont has made additional management changes to press this agenda.

Analysts expect operating earnings to increase 20% in 2013 and 20% in 2014, based on lord knows what. However, operating margins fell for the last two years to this year's low of 32%.

That is probably partly due to difficult drilling and lower grades of ore mined. If Newmont can get back to its norm (and the industry norm) around 40%, that could push earnings even higher than estimates.

I'm not saying I expect that, but as I said, mining is inherently lumpy and these things tend to revert to the mean. With the new management focusing on cost containment, the odds of that increase.

The company raised its dividend 40% to $1.40 per share, and the stock yields 3.2% at its current price. The 37% payout ratio is modest and leaves room for further growth. Newmont is 43% off its high and is selling at just 11-times trailing earnings. I think it's a great buy at its current price.

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