Shareholders in Newcrest Mining (NCM) will have to wait until to August to see if they will get any rewards from the gold and copper miner’s improved operational performance and the surge in the global gold price.
Most of the gains in gold in the past year have occurred in the first six weeks of 2016 with Comex futures prices up around 17%.
Newcrest shares have leapt by 24% so far in 2016 – including yesterday’s mild fall of 0.5% in the wake of news of a 55% slide in interim profit for 2015-16.
In fact Newcrest shares have surged by more than 50% since last December, on the back of the stronger gold price, but not copper which continues to fall. They ended yesterday at $16.21, lagging the stronger 78 point, 1.6% rise in the ASX 200.
NCM 1Y – Are better times priced in at Newcrest?
Because Newcrest now accounts in US dollars, it has missed the slide in the value of the Aussie dollar on the revenue side which helped OZ Minerals (OZL) to boost earnings for all of 2015, and pay a higher dividend.
The company though benefited on the costs side with its local currency costs falling relative to the US dollar in the half – the benefit was more than $150 million in lower costs.
The weak copper and gold prices in the six months to December were behind the slide in profit and the decision by the board to extend the company’s dividend drought into a third year. But gold prices started turning up in December and have continued into 2016.
But that came too late to help Newcrest which yesterday reported a statutory profit of $US81 million ($A114.1 million) for the six months to December 31, which was well below last year’s $US180 million and slightly below market forecasts
Revenue fell 13% to US$1.55 billion from the $US1.78 billion in the last half of calendar 2014.
Newcrest CEO Sandeep Biswas commented in yesterday’s report that Newcrest delivered a strong financial result in a lower gold and copper price environment.
"We continue to further strengthen the balance sheet by safely maximising cash flow from operations, maintaining strong capital discipline and repaying debt,” said Mr Biswas.
"Newcrest’s improving financial position provides a platform for future growth. Today Newcrest released updates on studies which highlight the value in its assets, being the Lihir Pit Optimisation Prefeasibility Study and Wafi-Golpu Stage One Feasibility Study and Stage Two Prefeasibility Study.
“Lihir and Cadia continue to provide near term growth, Wafi-Golpu is an attractive project for the medium term, and our global exploration program and participation in early stage projects are designed to support our longer term growth,” said Mr Biswas.
Sales revenue fell 6% to $US1,333 million, "largely due to a 10% reduction in the average realised gold price (USD 1,113 per ounce in the current period compared to USD 1,238 per ounce),” the company said yesterday.
"The gold price impact was partly offset by a 3% increase in gold sales volumes, primarily due to higher ore feed grades and higher milling rates at Lihir and Bonikro, as well as continued ramp up at Cadia East offsetting the impact of declining ore grade at Ridgeway and processing plant issues at Cadia (including the SAG mill outage in the current period).
"Production and associated sales volumes in the current period were also adversely impacted by fatality related suspensions at Cadia and Hidden Valley and lower ore volume and feed grades at Telfer in the current period.
"Copper revenue of $US199 million was 41% lower than the corresponding prior period, due to 26% reduction in the average realised copper price ($US 2.29 per pound in the current period compared to $US3.08 per pound) and a 23% decrease in copper sales volumes to 39,494 tonnes (post capitalisation). Drivers of the lower gold sales volumes at Cadia and Telfer also resulted in the lower copper sales volumes.
"Silver revenue of $US14 million was 33% lower than the corresponding prior period, with 10% lower average realised prices and 24% lower sales volumes.
“Operating costs of $US969 million were $US141 million or 13% lower than the corresponding prior period. The decrease in operating costs includes a foreign exchange benefit of approximately $US156 million as a result of the weakening of the Company’s main operating currencies against the US dollar,” the company said.
