Newcrest Mining Ltd. (ASX:NCM, Financial) closed 3.57% higher at 24.34 Australian dollars ($17.44) per share on the Australian Securities Exchange on Jan. 30. The stock was boosted by production results for second-quarter 2019, which were released before the opening bell. The quarter ended Dec. 31.
Gold production increased 19% to 654,849 ounces and copper production increased 8% to 26,847 tons from the previous quarter, which ended Sept. 30. The results were driven by record production at Cadia Valley Operations in New South Wales and strong operations recorded at the Lihir gold deposit in Papua New Guinea.
The miner's other producing assets, Telfer gold and copper mine in Western Australia and the Gosowong gold and silver mine in Indonesia, also performed well during the quarter.Â
Thus, the Australian operator reported an improved all-in sustaining cost margin of $515 per ounce of gold sold, reflecting a 17% increase from the previous quarter. This was due to the all-in sustaining cost per ounce of metal sold decreasing 7% to $720 as a result of increased throughput and overall improvement in the head grade of the material processed.Â
Considering these positive operating results, Newcrest Mining should be appealing to investors who are increasing their exposure to rising gold prices through investments in publicly traded producers. This miner is also outperforming the industry.
As a matter of fact, shares of Newcrest Mining have beaten the Van Eck Vectors Gold Miners (GDX, Financial) exchange-traded fund in each subperiod over the past five years through Jan. 30. The market is rewarding the miner for its higher profitability compared to industry peers.Â
The miner delivered an earnings before interest, taxes, depreciation and amortization margin of approximately 43.3% versus an industry median of nearly 24% over the past 12 months through the third quarter of 2018. Over the same period, shares of Newcrest Mining declined 8.6% on falling commodity prices, but still outperformed the index, which lost 19.5%.
The yellow metal is now uptrending. One ounce was trading around $1,307.55 at close on Tuesday on the London Bullion market, reflecting a 2% increase from the beginning of 2019 and 3% growth from the cumulative average of $1,268.49 for full-year 2018. Shareholders of Newcrest Mining will benefit as gold accounts for about 85% of the company’s total revenue, while copper makes up the remaining 15%.
The price of the red metal is also rising. Copper futures rose 1.6% to $2.73 per pound over the past year through Tuesday and soared 3.57% since the beginning of the year. The company is also producing some silver, but its contribution to total sales is small. The miner produced 291,281 ounces of silver, which was up from 209,854 ounces produced in the first quarter.
Before buying shares of Newcrest Mining, investors should wait for a significant weakness since the average price target of AU$22.93 is lower than Wednesday's closing price of AU$24.34. In addition, analysts recommend holding shares.
There is a chance the share price will retreat to levels significantly below the average price target after production results are released for the upcoming quarter as they will likely be affected by an expected reduction in the mill throughput at Cadia Valley. Newcrest Mining plans to stop concentrators and the materials handling system for maintenance. The results will be disclosed to the public sometime in April.
The Yahoo Finance graph shows that following Wednesday’s jump, the share price is now above the 200, 100 and 50-day simple moving average lines. The stock has climbed 8.5% and outperformed the Van Eck Vectors Gold Miners ETF by 9.2% for the 52 weeks through Jan. 30. The 52-week range is AU$18.58 to AU$24.48. The market capitalization is AU$18.05 billion.
Newcrest Mining is trading with a price-book ratio of 1.8 and an EV-to-EBITDA ratio of 12.25. The industry median for the price-book ratio is 1.74 and the median EV-to-EBITDA ratio is 9.3. The 14-day relative strength index is 70, suggesting the stock is overbought. The stock is granting a forward dividend yield of 1.28% as of Jan. 30.
Disclosure: I have no positions in any securities mentioned in this article.
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