Newcrest Mining: Strong H2 predicted as Cadia ramp up continues

About the author:

Mat Collings
Author name:
By Mat Collings
Job title:
Research Analyst
Date posted:
17 February 2022, 3:30 PM
Sectors Covered:

  • H1 financial results confirmed what the market already knew – lower production (released in January) leads to lower earnings, with free cash flow further reduced by Newcrest Mining's (ASX:NCM) investment in the business.
  • Financials were broadly inline with consensus estimates.
  • NCM declared a fully franked US 7.5cps first half dividend (-50% from PcP) despite negative free cash flow – supported by its full year minimum US 15cps target.
  • We retain an add rating for NCM, with a price target of (login to view).


Half year financial result reporting following operational and production results in January.


Revenue of US$1.71b (-21% on PcP) and EBITDA of US$740m (-35% on PcP) came close to consensus estimates of US$1.79b and US$731m respectively. 

Free cash flow of US$-303m (-169% compared to PcP of US$439m) saw NCM’s first half dividend cut to the minimum target of US 7.5cps rather than the 30-60% of free cash flow the company targets. 

We anticipate the second half dividend will be similar with the ongoing capital investment in the business. 

Annual guidance was maintained (1.8-2.0Moz), though an additional US$15m in Covid-19 related costs has been flagged – mostly at Lihir.

Forecast and valuation update

We have reduced our forecast attributable gold production for NCM from Brucejack for this quarter given the transaction has not yet finalised and updated our cash and debt positions on today’s financial results. 

Our target price for NCM reduces slightly to (login to view) on our sum of the parts NPV valuation, and we retain an add rating on the stock.

Investment view

NCM is well placed to perform going forward. Like the other ASX gold majors, it is in a period of significant capital investment, but NCM’s focus is on driving down operating costs while maintaining metal production near current levels (boosted in the near term by the in progress Brucejack acquisition offsetting Telfer’s decline). 

Given its portfolio of large, long-life mines with geographic spread across Australia, Canada and PNG, and the potential for further growth or extension from current technical studies, NCM offers good gold and copper price exposure with upside potential from studies due during CY22.

Price catalysts

Cadia operations returning to long term production and cost trends following the major maintenance shut down during H1.

Gold and copper price movements in a potentially higher global inflation environment.


The performance of Lihir in H2 will need to be closely watched, with any underperformance having the potential to further damage investor confidence in the operation.

Failure to gain final regulatory approval for the Pretium acquisition from Canadian regulators / courts would cut our production estimates for FY22.

Find out more

Download full research note

You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.

If you would like access or more information, please contact your adviser or nearest Morgans office.

Request a call  Find local branch

Need access to our research?

You are also welcome to start a two-week trial of our online platform, which provides access to detailed market analysis and insights, provided by our award-winning research team

Create trial account 

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

  • Print this page
  • Copy Link