Patience Pays off for Newcrest Investors – NCM Share Price Up

What happened to the Newcrest share price?

With shares in Newcrest Mining Ltd [ASX:NCM] almost touching $39 this past week, long-term investors must be patting themselves on the back.

With a strengthening gold price, and a laser-like focus on streamlining operations, long-term Newcrest CEO, Sandeep Biswas, delivered a stellar result this week. It was Newcrest’s biggest profit result since 2012.

Why did Newcrest shares fall?

You only have to go back to 2015 to see how far Newcrest has come. Back then, Newcrest shares were struggling to stay above $10, with management busy fighting on many fronts.

An ill-timed purchase of Lihir Gold at the then top of the market saddled Newcrest with a bucket load of debt. While Lihir’s huge potential was well known, extracting the high-grade ore had often proved troublesome.

Turning Lihir around took plenty of management’s time — and created plenty of headaches. However, Lihir is now rewarding Newcrest’s management for its patience. Newcrest’s latest result shows the fourth consecutive year that Lihir generated free cash flow exceeding $300 million.

In fact, Newcrest reported a 34% increase in free cash flow across all operations (to $804 million), with all operations cash flow positive.

Net debt now stands at just $395 million — a long way below its peak. Newcrest also reported its lowest all-in sustaining cost (AISC), at $738 per ounce.

What next for Newcrest?

Recently Newcrest announced its 70% acquisition of the Red Chris mine in Canada. It believes it can turn this into what it refers to as a Tier One operation.

It also continues to reap further rewards from its ever-productive and reliable Cadia mine, just outside of Orange.t ult shows ento as Canada. It believes it can turn this into a Tier one ve year that Lihir generated free cash flow exceeding Plus, there are other promising drilling results coming out of some of Newcrest’s other mines.

The big thing with any gold producer, of course, is the gold price. A falling Aussie dollar, and a rising US dollar gold price, have helped boost Newcrest’s returns. If the price of gold runs out of steam, so too likely will the Newcrest share price.

However, if the gold price can continue on its upward trajectory, Newcrest and its shareholders, could be well poised to capture further gains.

Matt Hibbard,
For Money Morning

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Money Morning Australia