Newcrest Mining FY20 Results (ASX: NCM)

Newcrest Mining FY20 Results (ASX: NCM)

Newcrest Mining (ASX: NCM) has reported its full-year results for FY20. We take a look at the company’s headline figures, key commentary and guidance outlook, plus review the share market’s reaction across the trading day


Headline result

Newcrest Mining has reported gold production of 2.2 million ounces, with underlying profit coming in at US$750 million, up 34% on the prior corresponding period.

The miner was able to achieve operating cashflow of US$1.5 billion as a result of an average realised gold price of US$1530/oz for the year.

Management has declared a final dividend of US$0.175 per share, fully-franked, with the stock set to trade ex-dividend Friday, August 21. A dividend reinvestment plan will also be operating for shareholders. This brings full-year dividends for the company to US$0.25 per share.

Newcrest shares eased 0.9% in the wake of the results.


Key commentary

While underlying profit rose by US$189 million to US$750 million, statutory profit was US$647 million, which reflects the impact of US$103 million in significant items. This represents the company’s write-down of assets relating to the divestment of Gosowong, M&A transaction and integration costs, as well as one-off financing costs related to early repayment of corporate bonds.

Underlying profits were driven by higher realised gold prices, lower depreciation, favourable forex movements and higher copper production at its Cadia and Telfer projects. There was some mitigation of these tailwinds as a result of lower gold sales, lower gold production, lower realised copper prices, losses on investments, higher operating costs at Cadia and Lihir, plus increased tax expenses.

With the company’s All-In Sustaining Cost (AISC) for the year being US$862/oz, Newcrest Mining was able to generate an AISC margin of US$668/oz. In turn, NCM achieved free cash flow before M&A activity of US$670 million. Once the M&A activity is taken into consideration, free cash flow was negative US$621 million. The M&A activity relates to the miner’s 70% ownership and operation of the Red Chris Mine, which combined with an increased exposure to the Fruta del Norte mine in Ecuador, set it back US$1.3 billion.

It is now the fifth consecutive year in which Newcrest Mining has increased its full-year dividend payments to shareholders, with the recent proceeds assured by elevated gold prices and what management has described as the strength of the company’s balance sheet. This was also helped by a $1.2 billion raise earlier this year. Finally, the company continues to reduce underlying injury rates and also operate with zero fatalities and life-changing injuries.


Guidance outlook

Newcrest has set group production guidance for gold at 1950-2150 moz, while forecasting 135-155 kt for copper. The bulk of this is set to come from Cadia and Lihir. No provisions have been set aside for COVID-19 related disruptions to production levels.

In terms of the company’s forecast AISC, management expect US$1.8-1.95 billion across the Group, including total capital expenditure of between US$1.06-1.24 billion. Some provisions have been set aside within this expenditure budget for additional costs associated with managing the business in the current pandemic environment.


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