Newcrest Mining Full Year Result: NCM underlying profit misses expectations

Australia’s largest listed gold producer, Newcrest Mining Limited (NCM) posted a slightly weaker than expected full year underlying profit result. Net profit fell 7% to US$308 million. Underlying profit did increase by 22% boosted by an average lift in US$ per ounce of gold. The lift in price was offset by softer gold production of 2.38 million ounces, across the group, which was down 2%. 

The result was impacted by lower total output from its Flagship Cadia mine in NSW which was hit by a magnitude 4.3 earthquake on the 14th of April 2017. The Cadia operation suspension, due to the quake, cut expected gold recovery which experienced a 1% fall. Gold production was up only 11% and copper production up 17%. Newcrest’s All-In Sustaining Cost (AISC) per ounce was US$787, in line with the company’s guidance. 

NCM’s average realised gold price of US$1,263/oz. was up 8%, with Cadia’s average prices just a tad higher. Newcrest still expects big things from the Cadia mine saying it expects the Cadia mill targeting an increase to 30mtpa by June 2018 through process improvement and the completed establishment of the Panel Cave 2 footprint. 

Lihir posted record annual gold production, an increase in the gold price and increase in underlying cash costs, despite higher volumes or ore extracted. Telfer had a challenging year due to higher than expected rainfall in the March quarter, impeding access to ore sources and causing lower production over the year. The Wafi-Golpu Joint Venture continues to progress with activity in line with the forward work plans. 

Today, the company said it expects "Gold production and free cash flow to be higher in the second half of the financial year as Cadia East ore production ramps up and there are fewer planned shutdown events." This is despite production likely be lower in the September quarter, compared to the June quarter as a result of a higher level of planned shutdown activity being undertaken. NCM now expects gold production for FY18 to be 2.4-2.7 million/oz. with copper output largely unchanged at 80-90,000 tonnes. 

Today, Newcrest said it will pay a second half dividend of US$0.075 on 27 October 2017. The new dividend policy is targeting a dividend payout of at least 10-30% of that financial year’s free cash flow. 

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