Twelve months is a long-time on the stock market and no more so than for investors in Newcrest Mining Limited (ASX: NCM).
One year ago the $8 billion gold mining giant’s share price was around $17.50 and the gold price was near US$1450 per ounce. Fast forward to today and Newcrest’s share price has slumped to $10.30, representing a fall of about 41%, while the gold price is at US$1295 per ounce.
As bad as a 41% fall appears, it’s actually nowhere near as dire as things were in December 2013 when Newcrest’s share price sank to a decade low of $6.96, at which point the stock was down 60%!
Newcrest’s fall from grace was largely in response to a huge multi-billion dollar write-down in the carrying value of its assets. The size of the write-downs came as a shock to investors and naturally they responded by selling however the bounce back from its lows suggests the selling was overdone.
Are there more gains in store?
With the stock price now having climbed around 40% from those December lows, arguably a big opportunity to profit from the sell-off has already been missed. The question for investors now is – could there still be further gains in store?
While ultimately Newcrest’s fortunes are beholden to the gold price there are a number of reasons to be positive on the company’s outlook.
These positives include: gold reserves of 78 million ounces – making it the third largest gold miner based on reserves; a 33 year reserve life – giving it the longest reserves of all the majors; and an all-in sustaining cost under US$900 per ounce – one of the lowest rates compared with its peers.