Newcrest Mining (NCM)
HOLD

Finishing strong

 11 Aug 2023
Sector: Materials

FY23 RESULT

Need To Know

  • Operationally in-line result. Mid-to-high single digit earnings and dividend beat. Lower costs and D&A the key driver for outperformance.
  • Newmont (NEM) deal continues to progress. Shareholder meeting in Oct 23 & implementation (if passed) in Nov 23. 
  • A strong result. Likely the last one as a standalone entity. Unlikely to see much of a share price reaction given takeover overhang. 

Result Overview:

  • Underlying profit A$778m vs A$664m consensus
  • Free Cash Flow A$404m vs A$145m consensus
  • EPS 87cps vs 74cps consensus (~17% ahead)
  • DPS 55cps vs 45cps consensus (~21% ahead)

Investment View

A strong result for Newcrest albeit not the key focus from the market. The spotlight remains on the Newmont deal which is expected to have its scheme meeting by Oct 23 and to be implemented Nov 23 (if passed). NCM plan to pay out a franked special dividend of USD $1.10 per share prior to the implementation date (the last piece of capital return prior to the transaction).

Operationally Newcrest is performing in-line with expectations. The final dividend beat expectations given the strength in free cash flow. The balance sheet remains in a good position given net debt come in better than consensus expectations. 

NCM's key project, Cadia, displayed strong performance over the period due to the recent SAG mill motor replacement and upgrade (which completed in the prior period). We expect this trend to continue into FY24.

FY24 Production guidance: 

  • Gold: 2,000 - 2,300koz 
  • Copper: 120 - 140kt
  • All-In Sustaining Cost: $2,200 - $2,600m

 FY24 Outlook: Flat on consensus estimates for copper and gold production. Total CAPEX guidance is up ~10% at the midpoint, in-line with market expectations.

Investment View

The NEM takeover price implies a ~4% premium to the current share price when adding in the 2H23 dividend and the planned US$1.1ps special dividend. We expect the NCM share price to trade broadly inline with NEM share until deal completion. We expect the deal to be approved at the October shareholder meeting. 

As the Newmont deal comes to fruition, we reaffirm our Hold rating and restate our preference for NST when looking to gain exposure to Australian gold. 

Figure 1: Fig 1: NCM share price vs NEM implied share price. NCM trades at a ~4% discount to implied, in-line with the average discount since the deal was announced.

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Stock Overview

Share Price

Company Overview

NCM is an Australian mining company that explores, develops, and operates gold and gold/copper mines. They have assets located in NSW, WA, PNG and Canada.

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