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Newcrest Mining Ltd HY20 results - Share price down 2% on disappointing production results

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Newcrest Mining Ltd (ASX: NCM) is the largest gold producer listed on the ASX and one of the worlds largest gold mining companies. Newcrest has 5 current mining operations, namely the Cadia operation in NSW, Australia, the Telfer operation in WA, Australia, the Lihir operation in Aniolam Island, PNG, the Gosowong operation in Halmahera Island, Indonesia, and the Red Chris operation in British Columbia, Canada. Newcrest’s market capitalisation is A$22 billion.




What are the key features of Newcrest’s HY20 results?

  • Cash flow from operating activities for HY20 is US$448 million, down 3% compared with the corresponding period.
  • Statutory profit for HY20 is US$236 million, in line with the previous period.
  • Underlying profit for HY20 is US$280 million, up 18% compared with the previous period.
  • Gold production for HY20 is 1.1 million ounces, down 12% compared with the previous period.
  • Group All-In Sustaining Costs (ASIC) for HY20 is US$880/oz, 18% higher compared with the corresponding period.
  • Interim dividend of US7.5 cents (fully franked).


What are the main drivers of this result?

Performance from business operations are as follows:

  • The Cadia operation produced 441,452 ounces, down 9% than the previous period.
    • The main reason for production being down at the Cadia operation was due to extended downtime of the Concentrator 1 SAG mill following the identification of a preventative maintenance opportunity.
  • The Lihir operation produced 381,000 ounces, down 12% than the previous period.
    • Gold head grade was 16% lower than the prior period primarily due to a larger proportion of lower grade stockpile material processed and the current area being mined in Phase 14 yielding lower volumes and lower grade ore. Also, planned maintenance for the relines to Autoclaves 2 and 4 impacted production.
  • The Telfer operation produced 182,000 ounces, down 15% from the previous period.
    • Production was due to mill throughput being lower due to the change in mill operating strategy to a reduced rate utilising approximately 1.4 of the two trains capacity.
  • The Gosowong operation produced 76,000 ounces, down 26% from the previous period.
    • Production was primarily down due to lower head grade at both Toguraci and Kencana mines.
  • The Red Chris operation produced 11,000 ounces.
    • Newcrest announced on 16 August 2019, they acquired a 70% joint-venture interest in and operatorship of the Red Chris mine and surrounding tenements in British Columbia.


What is the outlook for Newcrest?

FY20 guidance is as follows:

  • Total gold production for FY20 is in the range of 2,375 koz – 2,535 koz
  • ASIC for FY20 is estimated in the range of US$1,835 million – US$1,965 million.

Newcrest management notes that guidance for gold production in FY20 is expected to be in the lower range. This is mainly attributed to the Telfer and Lihir operations gold production guidance estimated to fall in the lower end of their production guidance ranges. 


What is the market reaction for Newcrest HY20 result?

The market reaction to Newcrest HY20 result is slightly negative. Newcrest is down 2% and is currently trading at A$28.95. Newcrest has a forward P/E ratio in the mid-twenties and an annual dividend yield of around 1.2%.


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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