Newcrest Mining Ltd (ASX: NCM) was in the spotlight at yesterday’s Allan Gray Live webinar.
Newcrest CEO Sandeep Biswas joined Allan Gray’s managing director, Simon Mawhinney, for a candid Q&A session.
Below we look at some of the key takeaways Biswas shared about the company he’s presided over for the last 7 years. A company that now counts as largest gold producer listed on the ASX, and amongst the biggest gold miners in the world.
Why has the Newcrest share price been under pressure?
Addressing the pressured Newcrest share price, Biswas said that was partly driven by “its near-term production decline because of declining grades” at some of its mines.
Grades here means the amount of gold the company can extract from any given tonne of material it digs up.
The pressure on the share price, Biswas added is “also coupled with the fact that we’ve never really given the longer-term outlook, but just the 12 months guidance. Now, as of last week, we do have that longer-term outlook out there. And I think that’s really informed the market a lot better about what our future is.”
(You can find Newcrest’s longer-term outlook, released last week, here.)
Gold prices, margins and production profiles
Biswas also highlighted Newcrest’s low all in sustaining costs (AISC) and its industry leading profit margins. Which, at current gold prices above US$1,770 per ounce, he said means, “We make a lot of money.”
But when prices drop… we’ll be there with the best margins in the business. There’s no other gold mining company of scale that has our level of sustaining cost profile. That differentiates us, and it plays to our philosophy of long life plus high margin. Which ultimately, I think, investors will appreciate as less risky to invest in with a better return profile.
Mawhinney then pointed to Newcrest’s pre-feasibility study (PFS) at its Lihir project, which the company says supports gold production growth to 1 million ounces per year commencing in the 2024 financial year.
Asked how confident he is about those production profile figures, given some past operational issues at the project, Biswas replied, “I’m very confident about the profile… It’s one of the few mines in the world where the grade profile, this is the amount of gold per tonne, actually goes up end of the year term.
“A big portion of the increase in gold production from Lihir,” Biswas continued, “is driven not by mining tonnes or mill tonnes, but driven by grade. Which is inherent in the ore body, which we’re very confident about.”
What are Newcrest’s copper plans?
Copper, in high demand for its high conductivity and corrosion resistance as the world moves towards renewable energy, was another focus point of the webinar.
Mawhinney pointed out that, atop the increase in gold production, Newcrest’s PFS studies also indicate its copper production nearly doubling over the next 10 years. “Is that by design?” he…