Newcrest Mining Ltd. (ASX:NCM) has informed its shareholders that operations from two extraction drives at Cadia mine’s Panel Cave 1 have been resumed following successful completion of remediation and upgrade work that the company did after a seismic event hit the Australian mine on April 14.
Cadia is one of the company's producing assets in the Australian state of New South Wales.
Therefore, the production can partially restart at Panel Cave 1 since remediation and working are still in progress at other parts of the cave. The completion of this work before the entire Panel Cave 1 at Cadia can be considered back to normal is forecasted by Newcrest Mining for the end of this fiscal.
Concerning the Panel Cave 2, this is already back to normal operation since mid-July after a process that involved the digging up of 480,000 tonnes of mineral while observing the level of seismic response was conducted and successfully completed.
If the increase in the level of Newcrest Mining’s output of metal produced at Cadia mine’s Cave Panel 2 has been going on since mid-July, normal production rates at Cadia East are instead expected to be recovered before the end of the third quarter of fiscal 2018. At that time Newcrest Mining will provide its shareholders with a revised guidance on production and costs.
With the first quarter of fiscal 2018 to close in two weeks, investors are of course concerned about Newcrest Mining’s production levels, revenue and earnings since Cadia usually contributes to the company’s total production of gold for something like 25% to 30% and total production of copper for 80%.
The seismic event at Cadia may not position Newcrest Mining well to take advantage from rising commodities. At this point, missing expectations in the company’s revenue and earnings for the second quarter of fiscal 2018 are also likely because we have to wait until the next calendar year to have the whole mine running at normal operating rates.
Newcrest Mining is trading around 22.44 Australian dollars ($17.93) per share, up 10 cents or plus 0.45% from the previous trading day with a market capitalization of 17.184 billion Australian dollars, a price-book (P/B) ratio of 2.31, a price-sales (P/S) ratio of 4.94 and a price-earnings (P/E) ratio of 56.10.
The average analyst target price is 17.83 Australian dollars per share, which ranges between a low of 10.99 Australian dollars and a high of 24 Australian dollars. The recommendation rating is 3.1 out of 5.
Recent analysts' recommendation on Newcrest Mining has likely been influenced by the seismic event in April, fearing it will have an impact on the company's production and financials for the next quarters. As a matter of fact the recommendation rating fell to 3.1 from 2.9 five months ago.
Disclosure: I have no positions in Newcrest Mining.
