Newcrest Mining HY20 Results (ASX: NCM)

Newcrest Mining HY20 Results (ASX: NCM)

Newcrest Mining (ASX: NCM) has reported its first-half 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 statutory profit of $236m, in line with the prior period, and underlying profit of $280m, which is 18% higher than the first-half of FY19.

Gold production decreased by 12% to 1.1 million ounces, with the company’s All-In Sustaining Cost (AISC) increasing 18% to $880/oz.

An interim dividend of US$0.075 per share, fully franked, has been declared. The ex-dividend date will be 20th February, 2020, with the record date being the 21st February, 2020.

Although Newcrest Mining’s underlying profit topped expectations in some quarters, a $44m write-down and an interim dividend at the bottom-end of its guidance range appeared to stunt investor appetite. NCM shares traded in negative territory for the entire session, finishing 1.7% lower at $29.04.


Key commentary

While statutory profit was consistent with the prior comparable period at $236m, underlying profit actually increased by 18% to reach $280m. The difference is attributable to a $44m write-down in the Gosowong project after its classification as “held for sale”. The underlying result was underpinned by rising gold prices, lower depreciation expenses and favourable currency movements.

An 18% rise in the Group All-In Sustaining Cost to $880/oz was met by a corresponding increase in AISC Margin, which climbed 18% to $566/oz. EBITDA was $756m.

Cash flow from operating activities fell by 3% to $448m, while free cash flow was also under pressure on account of heavy investment and acquisition activity. Nonetheless, the result was negative $729m. Newcrest’s investment during HY20 is in anticipation of future growth, with the company acquiring 70% of a Tier One orebody in Canada (Red Chris), where drilling results have already proved encouraging to management, while also upping its stake in Lundin Gold. As mentioned, this expenditure weighed on free cash flow, which would have otherwise been $106m for the half. Seasonality also played a role, with the first-half recognised as a weaker period for free cash flow.

Production levels at Cadia, Telfer and Lihir were down 9%, 15% and 12% respectively, with the latter transitioning to a shutdown that is expected to improve reliability and utilisation from FY21. EBIT at these projects still increased due to the surge in the price of gold.


Guidance outlook

Newcrest has maintained its group gold and copper production guidance figures for FY20. The company recently announced, however, gold production would be towards the bottom-end of the range it provided, largely because of the subdued output at Telfer and Lihir. Cadia and Red Chris are expected to come in at the top-end of their respective production targets, providing some upside.

Depreciation and Amortisation expenses for FY20 are forecast to be lower at $630-680m, versus the previously communicated range of $725-775m.

Exploration guidance has been revised higher by $25m to $115-125m due to “positive exploration results” at Havieron.


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