Morningstar | Higher Gold Price and Strong Operating Performance Sees Newcrest Shares now Overvalued
Newcrest is a large, long-life gold miner, long established as a low-cost producer. Cash costs rose in 2013 with the higher Australian dollar and Papua New Guinea kina, severe industry inflation, and poor productivity. Expansion of the key Lihir and Cadia Valley operations, the end of the mining boom and the lower Australian dollar returned the company to the lowest quartile of the cost curve. Reserve life of more than 20 years is one of the longest of the global gold majors, implying better-than-industry-average growth prospects, potential for incremental improvements and options to extend life. Exploration success historically fuelled production growth and sound returns, but the 2010 Lihir acquisition was a mis-step. Management's subsequent focus on Lihir and Cadia has driven meaningful improvement to production and unit costs.Newcrest Mining is engaged in the exploration, mine development, mine operations and the sale of gold and gold/copper concentrate. As of June 30 2016, Co.'s reportable operating segments were: Cadia, Australia; Telfer, Australia; Lihir, Papua New Guinea (PNG); Gosowong, Indonesia; Hidden Valley Joint Venture (JV) (50% interest), PNG; Bonikro, COte d'Ivoire; and Exploration and Other, which mainly comprises projects in the exploration, evaluation and feasibility phase and includes Wafi-Golpu JV (50% interest) in PNG, Namosi JV (70.67% interest) in Fiji, O'Callaghans in Australia and Co.'s global greenfields exploration portfolio.
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