Newcrest Mining Ltd (ASX: NCM) is the largest gold producer listed on the ASX and one of the worlds largest gold mining companies. Newcrest has 5 current mining operations, namely the Cadia operation in NSW, Australia, the Telfer operation in WA, Australia, the Lihir operation in Aniolam Island, PNG, the Gosowong operation in Halmahera Island, Indonesia, and the Red Chris operation in British Columbia, Canada. Newcrest’s market capitalisation is A$21 billion.

What is Newcrest capital raising plan?

Newcrest management announced today (30 April 2020) a A$1.1 billion capital raising. This capital raising plan consists of two sections. The first section is a A$1 billion fully underwritten institutional placement (the Institutional Placement); and A$100 million non-underwritten Share Purchase Plan (the SPP).

The Institutional Placement will comprise an issue of approximately 39.1 million new fully paid ordinary Newcrest shares (New Shares), being approximately 5.1% of Newcrest’s existing issued capital, to certain eligible institutional investors to raise approximately A$1.0 billion at an issue price of A$25.60 per New Share (Placement Price).

The placement price represents a 7.0% discount to the closing price of Newcrest shares of A$27.54 and an 8.9% discount to the 5-day volume weighted average price (VWAP) of Newcrest shares of A$28.10.

This capital raising is intended to bolster Newcrest balance sheet to provide enough liquidity to operate in this challenging environment.

What are the key points of Newcrest quarterly activities report?

Newcrest March quarter gold production is 519koz and March quarter copper production is 35kt at a group all-in sustaining cost (ASIC) of $827 per ounce. Newcrest group ASIC margin for the March quarter is $724 per ounce.

Regarding Newcrest operations, the Cadia operation gold production was down 19% compared with the prior quarter. This was primarily driven by lower throughput and lower head grade. The Lihir operation gold production was up 14% compared with the prior quarter. This was primarily due to higher mill throughput and marginally higher grade. The Telfer operation gold production was down 6% compared with the prior quarter. This was primarily due to a reduction in mill throughput and recovery. The Red Chris operation gold production increased by 43% compared with the prior quarter. This is primarily due to a 56% increase in gold grade and a 21% improvement in gold recovery.

What is the outlook for Newcrest?

Newcrest FY20 guidance remains unchanged as of this report. Total gold production for FY20 is in the range of 2,375 koz – 2,535 koz.

The short-term and long-term outlook for Newcrest is positive. Newcrest is benefiting from a weak A$ and a rising gold price. This could increase revenue in the short-term for Newcrest.

What is the market reaction?

The market reaction to Newcrest announcement’s today is neutral, this is because Newcrest is currently in a trading halt. Newcrest forward P/E is in the mid-teens, with an annual dividend yield of around 1%.


 

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April 30, 2020