Newcrest Mining: Copper strength drives costs down
About the author:
- Author name:
- By Mat Collings
- Job title:
- Former Morgans Analyst
- Date posted:
- 23 July 2021, 9:00 AM
- Sectors Covered:
- Q4 production of 542koz of gold (+6% QoQ) and 39kt of copper (+10% QoQ) at US$797/oz AISC (-11% QoQ).
- Higher copper prices and production reduced AISC, with Cadia and Telfer having strong quarters.
- Annual production hit the mid-point of guidance for gold and copper.
- Newcrest has a number of catalysts in the current quarter but will also be impacted by a partial Cadia shutdown which will see a sharp increase in reported costs
- We maintain an ADD rating at a revised price target of (login to view).
Event: Newcrest reports Q4 production
Strong Q4 sees Newcrest Mining (ASX:NCM) hit FY21 guidance for copper and gold.
AISC improves 11% QoQ, driven by higher copper production and price, strong gold production, and the reclassification of capital spending at Red Chris.
FY21 AISC of $905/oz.
While Lihir fell short with unplanned downtime, lower head grade and decreased recovery, Cadia and Telfer enjoyed strong production which lifted the group’s results.
A sharp reduction in reported AISC at Red Chris is the result of capital works at the operation now being classified as growth rather than sustaining spend, with most other factors remaining steady at the Canadian operation.
Forecast and valuation update
Our revenue forecasts for FY22 and FY23 have lifted on the back of updates to our copper price deck
A summary of the impact is presented on Page 4.
Copper revenue is growing in importance for NCM, and likely to become more important over the next 12 months as gold grades at Cadia begin to decline.
NCM’s high quality asset base, growth projects and natural hedge through copper credits mean it remains a stable way to gain gold exposure on the ASX.
Multiple upcoming catalysts in the September quarter, with feasibility studies for Lihir, Cadia and Red Chris all flagged by the company, with a Havieron study due by year end.
A major shutdown at Cadia in the current quarter remains a short-term risk, with production anticipated to be reduced by ~30% which will have a material impact on NCM’s headline production and cost numbers when Q1 is reported in October
Recent gold price volatility, along with currency risk for NCM’s global asset base, must also be considered.
Find out more
We go into further detail in our full research note, commenting on gold price and sentiment and providing an in-depth analysis of the performance of 17 ASX-listed gold producers.
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