With gold that seems to have decisively broken through the price of $1,275.00 per troy ounce on the London Bullion market, the yellow metal closed an up-trending week No. 46 (up $6.4 per troy ounce or plus 0.5%) at $1,284.35 per ounce on Friday, Nov. 17. With the existence of certain macro factors that are positive to the bullion – above all the tension between U.S. and North Korea – it is the right time to get exposure to metal through investing in its producers.
One of these gold producers that is on the tail of those gold stocks that will benefit the most from a rising commodity could be Newcrest Mining Limited (NCM.AX).
Newcrest Mining is an Australian based metal mining company that, through its properties located in Australia (Cadia and Telfer mines), in Papua New Guinea (Lihir mine), Indonesia (Gosowong mine) and in Ivory Coast (Bonikro mine), produces and sells gold and concentrates of gold and copper.
The miner is publicly traded on the Australian Securities Exchange and is currently trading at 23.68 Australian Dollars (hereafter AUD) with a market capitalization of AUD 18.142 billion, a price-book (P/B) ratio of 2.43 and an EV to Ebitda ratio of 12.64.
According to the 52-week range, which is AUD16.35 to AUD25.33, and to the 50 and 100 simple moving average lines, Newcrest Mining seems to be not cheap according to its current market value. However, this mining company presents some catalysts that may boost the stock’s value in the first quarter of calendar 2018.
Source: Google Finance
These catalysts are represented by the Cadia mine, one of the company's producing assets in the Australian state of New South Wales and by the production of the entire group thatm according to the company’s CEO, Sandeep Biswas, is going to increase in the coming quarters.
Following the successful completion of remediation and upgrade work that the company did at Cadia after a seismic event hit the Australian mine on April 14, Newcrest Mining reinitiated in September the production of the metal from the panel caves, which are at the east side of the mine.
Cadia’s operations are therefore back to normal and this already resulted, said Biswas, “in Cadia significantly increasing production” at the end of the first quarter of fiscal 2018 (120,514 ounces), which ended September 30, 2017, compared to the fourth quarter of fiscal 2017 (76,552 ounces), which ended June 30, 2017. Cadia mine usually accounts for 25-30% of the group’s total production of gold.
In addition, the production for the entire group, added Biswas, is expected by the management of the Australian miner to increase over the coming quarters.
For full fiscal 2018, Newcrest Mining expects gold production for the entire group of 2.4 million ounces to 2.7 million ounces.
The gold stock is up-trending and has gained nearly 17% year to date. With an RSI (14) of 76.45 the stock seems to be a whisper away from overbought levels; therefore, some retracements in the share price may be in the air.
Source: Google Finance
I would establish a position or increase an existing one in Newcrest Mining to enjoy the next ride on this gold stock that is set on the gears of an up-trending commodity price and the company’s production.
Disclosure: I have no positions in Newcrest Mining Limited.
