Shares of Newcrest Mining Limited (ASX: NCM) have surged more than 4% higher today after the company, which is Australia's largest gold miner, released its full-year earnings results.
So What: For the 12 months ended 30 June 2015, Newcrest produced 2.423 million ounces of gold, up 1% on the 2014 financial year (FY14), which was around the middle of its guidance range.
The miner swung back to profitability with its full-year earnings exceeding the market's forecasts of $498 million, according to The Wall Street Journal, recording a statutory profit of $546 million compared to the $2.22 billion loss posted for FY14. Notably, the FY14 result was marred by more than $2.6 billion in impairment and restructure costs.
Meanwhile, the group's underlying net profit (which excludes one-off costs and benefits) was $515 million, a 19% improvement year-on-year, with revenue surging 8% to roughly $4.34 billion and in-line with analyst expectations.
The company said that its latest result can be attributed to its comprehensive, company-wide improvement program referred to as 'Edge' which has so far delivered $390 million of cash benefits, as well as a rise in contribution from the ramp-up of higher margin production at its Cadia East project.
A weaker Australian dollar also aided the company's results and had a positive impact on its all-in sustaining cost (AISC). The group's AISC fell 12% year-on-year to US$789 an ounce (AU$941) which compares to the AISCs of rivals EVOLUTION FPO (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) of around US$868 an ounce (AU$1,036) and US$893 an ounce (AU$1,065) for the 2015 financial year, respectively.
The miner also cut down its debts, reducing net debt by 22%. All of Newcrest's debt is USD-denominated and stood at US $2.89 billion (AU $3.76 billion) as at the end of the period. Indeed, with gold prices hovering near a multi-year low at US$1,115 an ounce, a lower production cost and lower debt levels are vital to ensure the long-term health of the company.
The miner said total capital expenditure is expected to be in the range of $700 million to $825 million over the coming year while it also expects to produce between 2.4 million and 2.6 million ounces of gold, and between 80,000 and 90,000 tonnes of copper. That compares to the around 96,000 tonnes of copper produced in FY15.
Now What: Newcrest is Australia's largest gold miner and is one of the world's lowest-cost producers. Despite this, the miner is still heavily leveraged to gold and copper prices and, with both expected to fall further in the future, investors would be wise to avoid Newcrest altogether, for now at least.
