Shares of Australia’s Newcrest Mining Surge on Profit Beat, Strong Guidance

© Reuters.

By Ambar Warrick

AiVIF.com-- Shares of Australia’s largest gold producer, Newcrest Mining Ltd (ASX:NCM), surged on Friday as it logged a higher-than-expected profit despite rising costs and weaker production at its Lihir and Cadia projects. 

Shares of the gold miner rose 3.5% to 19.320 Australian dollars in morning trade, recovering from a near four-year low.

Newcrest said underlying profit for the year to June 30 was $872 million, down from $1.16 billion from last year, but above expectations of $861.2 million, according to Reuters data. Revenue fell 8% to $4.21 billion.

The beat was largely spurred by Newcrest realizing slightly stronger gold prices for the year, as increased safe haven demand through the first half of 2022 pushed up prices of the yellow metal. The miner also forecast much stronger gold production for 2023, between 2.1 to 2.4 million ounces, compared to 1.9 million ounces in fiscal 2022. 

A rise in copper prices also benefited Newcrest. The miner forecast stronger copper production for fiscal 2023, between 135 to 155 thousand tonnes, compared to 121 thousand tonnes in 2022. 

But while Newcrest performed better than expected for the year, its earnings were severely impacted by higher costs and weaker production at its key Lihir and Cadia projects. The miner halved its dividend from last year to 20 cents a share.

Maintenance work at both projects saw Newcrest’s gold production fall 7% from 2021. But production is now set to improve with both facilities operating at full capacity.

Gold prices have seen wild swings this year, from rallying to as high as $2080 an ounce during the onset of the Russia-Ukraine crisis, to now trending below $1,800 as the U.S. Federal Reserve began hiking interest rates.

Newcrest and other gold miners are particularly sensitive to prices of the yellow metal, given that it impacts their margins.