After two long, arduous years, gold and copper miner Newcrest Mining Limited (ASX: NCM) could finally be on track to showing investors it is worthy of their money.
To give you the edge, here is your guide on what to expect from the big miner in 2015:
A strong foundation
Newcrest Mining is a long-life, low-cost gold miner and a good option for long-term investors who want to add diversity to their portfolio. Heading into 2015 the miner will be supported by a strong foundation after years of write-downs and underperformance.
A management overhaul in 2014, including new Managing Director and Chief Executive Officer Sandeep Biswas, has slimmed down the company down, ready to fight afresh in the new, lower, gold price environment.
Newcrest has made steady progress reducing costs and capital expenditure to improve margins. In the financial year 2014 (FY14) average All-In Sustaining Costs (AISC) were $976 per ounce; 24% lower than 2013 and making Newcrest one of the ASX's lowest-cost producers. (We should note that the miner depends heavily on copper credits to achieve that price, so could be impacted if copper prices fall heavily).
Outlook for 2015
Mr Biswas makes has made it clear he is not satisfied with Newcrest's financial performance and for 2015 the company's key priorities are to focus on "operating discipline", cash generation and profitable growth.
Newcrest is targeting total gold production of 2.2 – 2.4 million ounces in 2015, but one key focus going forward is the Lihir gold mine in Papua New Guinea (PNG). The mine has been a continuing problem-child for Newcrest requiring write downs of $5.7 billion (after tax) over the last two years, leaving a book value of just $5.4 billion.
The mine produces around 30% of Newcrest's gold and with another 30 years of life expectancy there is significant upside potential to Newcrest.
Should you buy?
Newcrest Mining appears on track for a strong year if it can maintain margins against the volatile gold price and a small holding could help to diversify your portfolio in 2015. But with a big chunk of debt still on the balance sheet and gearing at 33.8%, don't expect a dividend anytime soon; management's near-term priority is to reduce the current level of debt.
