Morningstar

Morningstar, Inc.

Equity Bottom-Up

Newcrest is a large, long-life gold miner, long established as a low-cost producer. Cash costs rose in 2013 with the higher Australian dollar and Papua New Guinea kina, severe industry inflation, and poor productivity. Expansion of the key Lihir and Cadia Valley operations, the end of the mining boom and the lower Australian dollar returned the company to the lowest quartile of the cost curve. Reserve life of more than 20 years is one of the longest of the global gold majors, implying…

No-moat-rated Newcrest shares have rallied strongly, particularly in the last couple of months. In October 2018, the shares were below AUD 20 but now sit around AUD 28, a more than 40% gain in eight months. We’ve liked Newcrest qualitatively for some time. This positive view is based on the upside we see from Cadia and Lihir driven by low-cost, incremental expansions, and productivity gains. The long reserve and resource life, which is superior to global gold mining peers, is also a key…

<p>Scepticism is warranted when it comes to the mining industry and acquisitions as meaningful capital has at times been destroyed, particularly through the recent China boom. However, we’re reasonably comfortable with Newcrest’s proposed acquisition of 70% of the Red Chris mine. The company will pay USD 807 million to Canadian listed Imperial Metals for the interest. Importantly, Newcrest will be the operator and the interest well be held directly at the mine level. Imperial Metals is financially…</p>

<p>No-moat-rated Newcrest’s first-half fiscal 2019 adjusted net profit after tax doubled to USD 237 million versus a year ago. The result looked slightly stronger than our USD 226 million forecast, but the difference was just unrealised foreign exchange gains. Stripping out these gains, net profit was as expected. A strong improvement in production volumes at Cadia and lower unit costs at Lihir underpinned the higher profit. Gold output was up 6% and copper 33%, while group all-in-sustaining costs…</p>

Australia

Newcrest Mining Limited is a gold mining, exploration and production company. The Company is geographically focused in Australia, the Pacific region and Asia. Newcrest Mining operates projects within six provinces in four countries, focusing on the Cadia East and Lihir MOPU expansion projects and the Wafi Golpu and Namosi greenfield projects.

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