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Date : 07/06/2022

Why is the Gold price rising, and how is it benefiting Newcrest Mining Ltd (ASX: NCM)?

Newcrest Mining Ltd. (ASX: NCM) is amongst the leading Gold and gold-copper concentrate exploration, mining, development, and selling companies. NCM is an ASX-listed Company and has a presence beyond Australia. The company was founded in 1921 and is headquartered in Melbourne, Victoria, Australia.

Recently, the ASX gold explorer reported that it had got approval from Canada’s Investment Canada Act to acquire Pretium Resources. The merger of Newcrest and Pretium will establish the largest gold producer in British Columbia’s Tier 1 jurisdiction, running the Brucejack and Red Chris mines. Adding a massive, long-lived, and low-cost mine to Newcrest’s Tier 1 asset portfolio will enhance Newcrest’s annual gold production to far above 2 million ounces.

Yesterday, the gold prices rose, and NCM stock gained in the market due to this sudden change.

NCM: 1H22 Key Financials

It’s been a roller coaster ride for the NCM stock this year. But in the last six months, its stock is gaining. NCM is currently trading at $25.27 and has gained 4.1% in the last six months. Although due to yesterday’s gold prices spike, its stock has gained around 1% in the intraday trading session.

ncm asx

  1. NCM’s revenue in the first half of 2022 was around $1.7 billion, losing around 21% y-o-y.
  2. The company recorded an NPAT of around $298 million, losing around 46% y-o-y.
  3. Its earnings per share were around $0.18.
  4. The company announced a net profit margin of around 17.3%.
  5. Its operating income was close to approximately $363 million.
  6. As of the first half of 2022, the company had around $1.23 billion in cash equivalents.
  7. The company’s strong balance sheet reflects that it is well within financial policy targets, with net debt of $469 million, a leverage ratio of 0.2 times, and a gearing ratio of 4.5% on 31 December 2021.
  8. Significant liquidity on 31 December 2021 with $3.2 billion in cash and committed undrawn bank facilities.
  9. The sale of the royalty asset portfolio generated $37.5 million.

The reason behind Gold’s rally?

According to a recent report by CNBC, the price of Gold increased in the United States overnight due to a decrease in the value of the United States dollar and lower treasury yields. This is the explanation for the rise in gold prices.

On Tuesday, the price of gold in spot markets rose 0.7 percent to $1,866.39 an ounce, while gold futures in the United States rose 1 percent to $1,885.60 an ounce.

Even though gold futures have fallen since then to $1,862 at the time of writing, this is still the highest level seen since May of 9th.

NCM: 2022 Guidance

  1. Newcrest Mining is expecting a statutory profit and underlying profit of $298 million in fiscal 2022.
  2. According to its recent financial report, they expect an All-In Sustaining Cost (AISC) of $1,194/oz delivering an AISC margin of $502/oz. in fiscal 2022.
  3. The company expects steady cash flows from operating activities of around $423 million.

Conclusion

The current change in the gold prices has benefited gold stocks listed on the ASX. NCM was amongst the gold stock that showed a positive trend and was seen in the greens. The company has been impacted due to Covid-19 restrictions, due to which its production has been affected. There were other financial issues like negative cash flows, higher concentrate freight costs due to the global tightness and challenges in the sea freight market, and the unfavourable impact on operating costs from the strengthening of the Australian dollar against the US dollar. But over the past six months, NCM stock has been regaining, and the current gold price increase is convincing enough for the investors to trust the stock of Newcrest mining.

 

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