Gold and copper boost Newcrest profit by 16pc
Higher gold and copper prices buoyed Newcrest's profit 16pc. The miner has announced a final dividend of 11 US cents per share.
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
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