Newcrest share price: Q1 production results unpacked

Q1 production results in focus

Australia’s largest gold miner Newcrest Mining (NCM) has handed down a Q1 production report in line with recent guidance and asked investors to back a $1.1 billion cap raise to fund growth projects.

The miner announced Q1 gold production of 519,000 ounces, which was 6% lower than the previous quarter but in line with recent guidance in what chief executive Sandeep Biswas described as ‘unprecedented times’.

‘With the support of our host communities and governments in the jurisdictions in which we operate and the safe practices of our people, we have been able to continue production,’ Biswas told shareholders.

Gold production slipped for the quarter due to lower output at the miner’s Cadia and Telfer sites in Australia, and the divestment of the Gosowong gold-silver mine in Indonesia. This more than offset increased production at PNG’s Lihir and Canada’s Red Chris.

Newcrest’s AISC (All-In Sustaining Cost) for the quarter was $827 per ounce, down $37 from the previous quarter.

‘The 4% reduction was primarily driven by higher grade and throughput at Lihir, the benefit of the weaker Australian dollar favourably impacting costs, lower levels of sustaining capital expenditure and the timing of sales at Cadia and Lihir,’ the report said.

Encouragingly, the miner said production in Q2 was likely to exceed Q1, thanks to lower levels of planned shutdowns across Newcrest’s portfolio. Also, as it headed into a capital raise, Newcrest’s balance sheet looked to be in good health. According to its latest results, gearing was sitting at 15% as of the end of December.

Newcrest share price: a capital raise to fund growth

The Australian miner has proposed to raise $1 billion via a fully-underwritten institutional placement, plus another $100 million from retail investors from a non-underwritten share purchase plan.

The 39.1 million new shares represent approximately 5.1% of Newcrest’s issued capital. The placement price of $25.60 represents a 7.0% discount on Newcrest’s last traded price and an 8.9% discount on the 5-day volume weighted average price.

Newcrest said it would look to accelerate the return it receives from its existing investment in the Ecuador's Fruta Del Norte mine by spending $460 million acquiring financial instruments linked to the asset.

The miner also said it wanted more funds to boost returns from last year's US$806.5 million acquisition of a controlling stake in Red Chris.

At the time of publishing, the company’s shares remain in a trading halt, while it completes the transaction. Newcrest's share price last traded hands at $27.54 per share.

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