It’s no wonder the Newcrest share price went for a nice run yesterday – no it wasn’t a rise in the gold price, though copper did hit new 8-year highs.
It was a new dividend payout policy that saw the new yearly minimum payout met equalled in the interim payout of 15 US cents a share for the six months to December 31.
In fact with the new, higher payout policy the 15 US cent interim is double the 2019-20 interim, helping explain why the shares rose more than 5% to $26.64 at one stage before they settled back to close up 4% at $26.22.
That means the company is certain to lift total dividend for the year to with gold prices still solid (though nowhere near record levels as they were for much of the December half) but copper at levels last seen in late 2012 and early 2013 at more than $US3.77 a pound (on Comex in New York).
The surge in gold and copper prices in the closing months of the December half plus a solid production performance in the final quarter (especially from the Lihir mine in PNG) saw Newcrest more than double its half-year profit.
The company reported a 27% increase in revenue to $US2.17 billion with profits up 134% to $US553 million.
Its realised gold price was up 26% in the half year to $US1.826 an ounce – compared to the current Comex futures price of $US1,843 an ounce.
Its realised copper price jumped 17% to $US3.12 a pound – indicating a substantial boost this half is on the cards with most analysts expecting the current global copper shortage will continue into late 2021.
Newcrest also said it expects full-year gold production to be towards the upper end of its previously stated guidance range of 1.95 and 2.15 million ounces.
Newcrest also announced that it has work on the box cut for the exploration decline at its Red Chris mine in British Columbia, Canada, following receipt of the necessary regulatory approvals.
The Newcrest Board approved $C135 million ($US137.6 million) of funding for the construction of the exploration decline and associated infrastructure and permitting costs, which is expected to commence following the completion of the box-cut.
The company is carrying out similar work on its Havieron project in WA (at a cost of around $A168 million with Greatland Gold of the UK.
The news on the new dividend policy though is why the shares rose.
Newcrest has boosted its payout limit to between 30% and 60% of net profit from the previous 10% to 30%.
“The board has approved a new dividend policy that retains the minimum dividend of 15 cents per share per annum but more than doubles the target percentage of free cash flow to be paid in dividends to 30-60%,” CEO Sandeep Biswas explained in Thursday’s statement.
“This change in policy allows shareholders to benefit from the stronger free cash flows that result from higher gold prices and is supported by Newcrest’s robust balance sheet with its minimal near-term debt obligations,” he said.
Directors explained in the release that the board had approved a new dividend policy because of the company’s better financial position, “with minimal near-term debt obligations and with financial policy metrics all very comfortably within targets, as well as its high free cash flow generation during a period of high gold prices”
“Newcrest looks to pay ordinary dividends that are sustainable over time having regard to its cash flow generation, its reinvestment options in the business and external growth opportunities, its financial policy metrics and its balance sheet strength.
“Newcrest targets a total annual dividend payout of 30-60% of free cash flow generated for the financial year, with the annual total dividends being at least US$ 15 cents per share on a full year basis.
The declaration of any future dividend remains at the discretion of the Newcrest Board, having regard to circumstances prevailing at that time.
