Like people, every company on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is different.
They have different strengths; different weaknesses, and all have their own story to tell. Gold miner Newcrest Mining Limited (ASX: NCM) has certainly faced its share of challenges in the last few years with plunging gold prices. As the company's performance starts to improve, here are six things only Newcrest investors will truly understand:
1. Having an itch for inflation
Newcrest investors will understand the subtle itch for inflation which has been so weak over the last two years the word has almost gone out of vogue with economists. U.S. consumer spending rose just 0.3% in March over the prior year and that is no good for the price of gold – a traditional hedge against inflation.
2. Secretly hoping the U.S. economy tanks
While they won't like to admit it, somewhere inside every Newcrest investor is the secret hope that the U.S. economy hits a bump and skids off course. Just a little bit. The sudden jump in volatility would send investors scrambling towards gold and gold miners like Newcrest and Northern Star Resources Ltd (ASX: NST), driving share prices up.
3. Knowing why Newcrest is the best long-term gold miner
New, significant, gold discoveries are becoming increasingly rare and Newcrest commands one of the longest reserve lives of big global gold miners. Based on full year production for FY13 Newcrest has a reserve life of slightly over 30 years. Investors know this gives the company more slack to ride out economic cycles and periods of gold price volatility.
4. Why Newcrest is a low-cost leader
Newcrest may not always be numero uno, but the company's huge scale and production efficiencies keeps it a regular among the top lowest cost ASX listed miners. With average All-In Sustaining Costs (AISCs) of $946 for the recent March quarter, Newcrest again showed its dominance.
5. The feeling of constant disappointment with the Lihir gold mine
Despite Newcrest's low-cost position, only investors will understand the constant disappointment that the company's Lihir gold mine in Papa New Guinea brings.
A $3.49 billion write down in 2013, followed by a $2.65 billion impairment charge in 2014 and yet the mine, which accounted for around 29% of production in the March quarter, continues to operate at lower margins and costs 47% above the group average.
6. The perils of high debt
After a hard couple of years it was great to see Newcrest announce a solid first half result with positive free-cash flows. Unfortunately the company's large debt pile and gearing position had priority over the free-cash in place of a dividend to investors.
