Newcrest Mining Limited reports: what you need to know

Shares of Newcrest Mining Limited (ASX: NCM) have continued to rise today after the gold producer released its December quarterly production report. The shares rose 2.8% to $13.90, up from $12.97 at the beginning of the year.

During the quarter, Newcrest produced more than 620,000 ounces of gold, which was mostly driven by increased production at its Lihir and Telfer projects. Pleasingly, the group’s all-in sustaining costs (AISC) also improved by 3.6% during the period to US$757 per ounce, compared to a realised gold price of US$1,100 an ounce during the quarter.

The company also produced 17,518 tonnes of copper during the quarter which was down more than 17% compared to the 21,337 tonnes produced during the September quarter.

Still despite a number of production delays during the first half, Newcrest said it remains on track to achieve full-year guidance of between 2.4 million and 2.6 million ounces of gold. Although production from its Telfer and Hidden Valley projects is expected to be around the bottom end of their ranges, the implications should be offset by Lihir and Bonikro which are tipped to produce at the top end of theirs.

Commenting on the result, the company’s Managing Director and CEO, Sandeep Biswas, said: “We have had a good quarter in which we maintained our strong focus on safe production and delivered an increase in gold production and lowered our All-In Sustaining Cost, despite operational challenges at our two largest mines, Cadia and Lihir.”

Although it’s been a bumpy ride, Australia’s gold shares have performed strongly so far in 2016, especially when compared to the S&P/ASX 200’s (Index: ^AXJO) (ASX: XJO) 6% decline.

Newcrest itself has risen 7.2%, while EVOLUTION FPO (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) have gained 8.4% and 20.5%, respectively. All three have benefited from a rise in the price of gold since the beginning of the year, combined with a fall in the Australian dollar – both of which should help improve their earnings further.

While the gold miners could continue to rise, investors need to acknowledge any rise will largely depend on whether gold prices continue to appreciate. Indeed, predicting future commodity prices is impossible to do with any accuracy, and a heavy fall could result in significant losses for investors exposed to the sector under those circumstances. The reliance on a strong gold price is one of the reasons I’m steering clear of the sector at this point.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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