Shares in Australia’s largest gold miner Newcrest Mining Limited (ASX: NCM) have risen from a 52-week low of $6.96 to just under $12 since December last year, gaining many new shareholders along the way.
For those new owners, as well as existing ones, here are three important points to know for what lies ahead:
1. The point of positive cashflows
Newcrest has made strong headway slashing overheads and operating costs in the last six months and it can now claim to be amongst the lowest cost gold producers on the ASX for the December 2013 quarter.
Newcrest is aiming to be cashflow positive at a gold price of $1,450 per ounce, which at the current exchange rate is equal to US$1,296. At the time of writing gold is sitting snug at US$1,347 per ounce.
2. Gearing is at 30.5%
Newcrest does, however, still have a big chunk of debt on its balance sheet. Net finance costs for the first half of the 2014 financial year were almost two times higher than the comparable six months in 2013 at $88 million, up from $30 million.
At 31 December 2013, Newcrest’s gearing (the ratio of debt to total capital) sat at 30.5%. By comparison Northern Star Resources Ltd (ASX: NST) has a debt to total capital ratio of just 9.24%. Newcrest’s long-term gearing target is around 15% which feels like a long way off and it could pose a risk to the company’s credit rating if the price of gold falls.
3. A big management over-haul
Since December last year Newcrest has undertaken a wave of management changes which will refresh the company going forward. December saw the retirement of long-standing chairman Don Mercer, while CEO Greg Robinson is set to be succeeded by Sandeep Biswas later this year.
New executive general managers were also revealed for international operations and Australian operations & projects, as well as a new general counsel & company secretary, Francesca Lee, who came from OZ Minerals Limited (ASX: OZL).
There can be a lot of information to come to terms with for both new and existing company shareholders. Knowing the debt position, the management and the cash flow objectives will help you better understand what Newcrest Mining is up against in the year ahead.
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Returns as of 6th October 2020
Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.