Newcrest Mining Limited

By Jason Fittler

Newcrest is Australia's largest gold producer and a top five global gold company by output.

It owns a portfolio of assets including the World Class Cadia Valley mine in NSW. Other mines include Lihir Island (PNG), Gosowong (Indonesia), Telfer (WA) and 50% of the Morobe JV (PNG), which includes Wafi- Golpu & Hidden Valley.

Current reserves are 80 million oz and resources are 148 Million oz. Copper by-products ensure cash costs are competitive and are forecast by the company to reduce as Cadia East and Lihir ramp up.

Newcrest has reported an interim profit of $200m, down 11% but ahead of expectations of $136m. This was due to revenue being 3% above our estimate.

More importantly, free cash flow of $268m was in-line with the $255m expected. No dividend was declared, as expected.

During the period, Newcrest repaid US$220m from the company's bilateral facilities and ended the half-year with net debt of A$4.3 billion and gearing of 33.9%, which compares to our forecast gearing of 31.5%.

The company finished the half with cash of A$128m, and with undrawn debt has a balance sheet liquidity of A$2.2bn.

This is a positive takeaway for the company and should the company be able to communicate a coherent strategy for Lihir, then our net present value could be increased significantly.

An improved mine plan could deliver an increase to our net present value of $1-2 per share.

The negatives for the company are, Newcrest not being able to deliver a mine plan for Lihir, around $4 per share value for the asset could be at risk.

For more information about Newcrest Mining Limited please contact us on 07 4771 4577.