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Gold and copper boost Newcrest profit by 16pc

Roger Balch  |  23 Aug 2018Text size  Decrease  Increase  |  
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Newcrest Mining (ASX:NCM) has reported an underlying full-year profit of $459 million, up 16 per cent on 2017, due to higher gold and copper prices. This is despite a fall in production of both these metals.  

The company declared a final dividend of 11 US cents fully franked. 

In results released on 22 August, after the close of that day’s ASX trading, the company said sales revenue rose 2 per cent to $3.56 billion. 

Gold production for the year was down 1 per cent to 2.346 million ounces at a realised price of US$1,308 an ounce, which was up 4 per cent on the previous year. Copper production slipped 7 per cent to 77,975 tonnes and claimed a realised price of US$3.09 a pound, up 27 per cent. 

Newcrest’s statutory result was hit by US$257 million in significant items, including a US$188 million asset impairment at its Telfer gold mine in Western Australia.  

The Telfer impairment resulted from lower ore and higher waste levels than anticipated. Newcrest also wrote down plant and equipment at its Namosi mine in Fiji and Bonikro mine in Cote d’Ivoire, which was sold in December. Full-year results were also impacted by an April 2017 earthquake that hit first-half production at the Cadia gold mine in NSW.  

Morningstar senior equity analyst Mat Hodge says, “The adjusted net profit after tax of $476 million (US$ 369 million) was basically in line with our $483 million (US$374 million) forecast. Cash flow was strong with operating cash flow of US$1.4 billion and free cash flow of US$600 million. The balance sheet is in good shape, with net debt of US$1billion.  

“Attention is now turning to investment – initially with the relatively low-cost expansions of Cadia and Lihir – in keeping with our view of the relatively high quality and long lives of those mines. Newcrest is also well placed financially to develop the Wafi-Golpu mine once approvals come though. We think this will be a third key long-life mine with low operating costs. 

Newcrest’s share price was trading at $20.10 at time of publication compared to Morningstar’s most recent $23.00 fair value estimate for the shares.

 

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Roger Balch is a freelance contributor for Morningstar Australia

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

is a contributor for Morningstar Australia.

© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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