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Alberto Abaterusso
Alberto Abaterusso
Articles (1669) 

Newcrest Mining Falls After Posting Full-Year Results

Australian miner records strong profit, free cash flow growth

August 17, 2019 | About:

Shares of Newcrest Mining Ltd (ASX:NCM) fell 1.39% to 36.26 Australian dollars ($24.57) on Aug. 16 despite posting strong financial results for full fiscal 2019.

The Australian miner recorded 20% year-over-year growth in annual profit to $561 million on revenue of $3.74 billion, up 5% from full fiscal 2018.

Moreover, earnings before interest, taxes, depreciation and amortization increased 6.7% to $1.6 billion and free cash flow grew 34% to $804 million. All operations produced positive free cash flow in 2019.

Newcrest Mining improved several financial ratios, indicating enhanced creditworthiness and solvency. The most important achievements were a 62% reduction in net debt to $395 million and a 35% increase in the interest coverage ratio to 24.2.

Thus, the miner plans to return to shareholders no less than 14.5 cents per share in the form of an annual dividend, representing approximately 10% to 30% of the total free cash flow it can generate in 12 months.

On Sept. 26, Newcrest Mining will pay a dividend of 14.5 cents per share to shareholders of record as of Aug. 23, bringing the total dividend for 2019 to 22 cents per share, which generates a 0.90% dividend yield compared to the industry median of 2.38% as of Aug. 16.

The total recordable injury frequency rate dropped 3%, supporting operations to deliver 2,487,739 ounces of produced gold, up 6%, and 105,867 tons of produced copper, up 36%, enduring an all-in sustaining cost of $738 per ounce, which was the lowest ever reported on an annual basis. The record low of annual AISC resulted from fixed costs spread over a larger throughput base.

Newcrest Mining mined the metal from the Cadia and Telfer deposits in Australia, the Lihir deposit in Papua New Guinea and the Indonesian mineral reserves located at Gosowong.

For fiscal 2020, the miner guided for unchanged gold production of 2.35 million to 2.5 million ounces. Copper production is forecasted to range between 110,000 and 120,000 tons.

Total funds to use as capital expenditures are anticipated to be slightly higher than in 2019 to a range of $680 million to $780 million. The company anticipates the precious metal will be mined at an AISC of $1.75 billion to $1.85 billion.

Wall Street issued an underweight recommendation rating for shares of Newcrest Mining, indicating the stock is expected to underperform within 52 weeks. The average target price is AU$29.32 per share, reflecting nearly 19.1% downside from Friday’s closing price.

The stock has a market capitalization of AU$27.86 billion and a 52-week range of AU$18.58 to AU$38.87.

The stock is not at its cheapest as the share price is above the 200-, 100- and 50-day simple moving average lines.

Further, the price-book ratio is 2.47 versus the industry median of 1.47 and the enterprise value-EBITDA ratio is 11.90 compared to the industry median of 8.35.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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