Why Newcrest Mining Dropped 6% Today

Newcrest Mining Ltd [ASX:NCM] dropped 6.4% to a low a $23.53 this morning. The stock is still up close to 17% year-to-date. But, has the gold miner taken a turn for the worse?

What happened to Newcrest Mining operations?

NCM announced this morning that a large seismic event occurred in the Cadia mine on 14 April. There were no injuries. But all workers at the Cadia East underground mine were moved to refuge chambers and safe areas.

While this is great news for NCM workers, it’s not-so-great news for its operations. NCM has stopped operations, and is assessing whether the event has caused any damage to the mine. The Australian Financial Review reports:

Newcrest Mining’s ability to meet its full year gold production guidance is under a cloud after a “large seismic event” on Good Friday caused disruption and some damage to the company’s flagship Cadia mine.

What now for the NCM share price?

NCM said in a statement:

Cadia is not expected to meet its production guidance for the 2017 financial year. It is too early to be definitive about the impact on the group’s production guidance for the 2017 financial year.

But I suspect that if the price of gold picks up, so too will Newcrest’s share price. Not meeting their 2017 guidance is likely to only be a temporary setback. If you’re a shareholder, this might not be a strong enough reason to sell your holdings.

However, if you’re looking to become a shareholder, you might have missed the boat on NCM. The stock is trading at a price-to-earnings ratio of 31-times earnings. Unless the price of gold shoots up, shares of NCM probably won’t run up in the short-term. Instead, look for other investments and keep an eye on NCM.


Härje Ronngard,

Junior Analyst, Money Morning

PS: The price of gold isn’t what it used to be. You could have a speculative punt and buy a gold miner, hopping the price of gold shoots up. But understand you are speculating, not investing.

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