Newcrest Mining Is Slightly Down on Production
- By Alberto Abaterusso
Newcrest Mining Limited (NCM.AX) fell 1.83% fell to $18.28 per share after the release of second-quarter results for fiscal 2018, which ended Dec. 30.
Overall, Newcrest Mining reported an improvement in operations compared to the previous quarter. Evidently, the market needs time to process the information and factor it into the market value of the miner.
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The intrinsic value of NCM:AX
The production of the yellow metal increased by 17.2% to 613,000 ounces in the second quarter. The production of copper increased, as well. Newcrest Mining produced 22,000 tons of the red metal. This was a 33.8% increase.
Newcrest Mining is an Australian-based metal mining company that, through its properties in Australia (Cadia and Telfer mines), in Papua New Guinea (Lihir mine) and Indonesia (Gosowong mine), produces and sells gold and concentrates of gold and copper. The company also had operations at Bonikro in Ivory Coast, however, during the quarter Newcrest inked an agreement for an $81 million worth divestment of the Ivorian asset.
Sandeep Biswas, the Managing Director and CEO of Newcrest Mining, commented on the quarterly operating results:
"Newcrest has delivered a significantly improved quarter with all but one of our operations producing more ounces than the previous quarter. I am particularly pleased with Cadia's strong quarter-on-quarter production increase and record low quarterly AISC per ounce. Lihir experienced some production disruptions in the quarter that moderated its rate of improvement, though it still managed an increase in quarterly production." Source: Newcrest Mining's News Release.
In addition, the miner also reported a decline in the all-in sustaining cost to $829 per ounce of metal sold and an increase in the margin to $459 per ounce. Newcrest Mining realized a 1.2% lower price to $1,288 than the previous quarter. The margin improvement was also attributed to Cadia where, with an AISC of $129 per ounce, Newcrest Mining attained a record low, the company reports.
For the 52-weeks through Jan. 30, the Australian-based metal mining company earned 5.31% and outperformed the VanEck Vectors Gold Miners by 3.02%:
Source: Yahoo Finance
The stock is now trading above the 200-SMA line and on par with the 100-SMA line. The close share price is about 1.9% below the average price that sits on the 50-SMA line.
Source: Yahoo Finance
Newcrest Mining has a 52-week range of AU$19.26 to AU$25.33. Therefore, the stock is $2.74 per share below its 52-week high.
The publicly-traded Australian gold and copper producer is trading its book value at 2.32 times versus an industry median of 2.01. The EV-to-EBITDA ratio is 12.71 times versus an industry median of 10.14.
The EBITDA margin is 43.9% versus an industry median EBiTDA margin of 22.8% over a period when gold averaged $1,274 per ounce on the London Bullion Market.
Therefore, this miner is characterized by having highly profitable operations and this should be factored in over the following weeks if commodities continue being supportive.
The Relative Strength Indicator (14-days period) is 45.10.
A new target of 15mpta in mill throughput, which the company hopes it can sustain at Lihir in Papua New Guinea should, should also trigger a further appreciation of the stock. Newcrest is working to accomplish this objective before the end of fiscal 2019.
Sandeep Biswas said: "Newcrest remains on track for production from continuing operations to be stronger in the second half of FY18".
For full fiscal 2018, the company predicts a gold production of 2.4 million to 2.7 million ounces and a copper production of 80.000 to 90,000 tons.
The chart below illustrates the trend in the company's production of gold and copper over the last five fiscal years.
The stock has a recommendation rating of 3.1. Six analysts out of 15 are for a hold recommendation, three for a buy and four of them foresee Newcrest Mining will underperform the market over the coming weeks of trading.
(Disclosure: I have no positions in any security mentioned in this article.)
This article first appeared on GuruFocus.
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The intrinsic value of NCM:AX
