Why Deutsche Bank just upgraded Newcrest Mining Limited (ASX:NCM) shares

The share price of Newcrest Mining Limited (ASX: NCM) continues to power ahead as Deutsche Bank upgraded the stock following the miner’s quarterly production report yesterday.

Shares in our ASX-listed largest gold producer jumped another 2.7% to $21.49 in afternoon trade compared with the 0.7% gain on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index.

Today’s gain follows the 5% surge in Newcrest’s share price yesterday when the miner unveiled a 10% increase in gold production to 635,000 ounces (635koz) in the June quarter over the previous three months as its all-in sustaining cost (ASIC) fell $31 per ounce to $795 an ounce.

Deutsche was only anticipating a flat production figure and believes there’s more room for the stock to climb on the back of the strong quarterly update.

“The result was driven by a strong performance at its core assets; Lihir lifted mill throughput to a record 4Mt and production rose 52koz/21% QoQ [quarter-on-quarter] to 307koz; Cadia (156koz) and Telfer (120koz) lifted production 6% QoQ, driven by higher throughput,” said the broker.

“AISC fell 14% QoQ to US$795/oz (-4% vs. DBe) on the back of the strong result.”

There’s further upside for Newcrest in FY19 as well. Deutsche believes the miner can lift production by a further 4% in the current financial year to over 2.4 million ounces of gold while reducing ASIC by 22%.

The broker upgraded the stock to “buy” from “hold” with a price target of $23.50 a share.

But Deutsche wasn’t the only one impressed with the quarterly report. JP Morgan noted that Newcrest had produced 16% more gold in the latest quarter than what it was expecting, and the amount of copper produced for FY18 was ahead of management’s guidance.

“Cadia exceeded 32Mtpa in the month of June while Lihir reached 16Mtpa for the quarter, which gives us comfort that both assets can increase gold output in FY19,” said JP Morgan, which reiterated its “overweight” call on the stock with a $24.50 price target.

However, not everyone is taken with the result. Macquarie Group Ltd (ASX: MQG) still believes the stock’s a sell as it had already factored much of the good production news into its $20 a share price target and thinks investors should wait for management to provide its FY19 production and cost guidance on August 22 (when Newcrest reports its full year profit results) before getting excited.

Nonetheless, it’s hard not to be impressed with Newcrest’s performance. The stock’s rally today stands in sharp contrast to other gold stocks with Evolution Mining Ltd (ASX: EVN) tanking 4% to $2.92, St Barbara Ltd (ASX: SBM) tumbling 9.8% to $4.49 and Northern Star Resources Ltd (ASX: NST) sinking 0.5% to $7.32.

If you are looking for other stocks outside of mining that can outperform the market in FY19, you will want to read this report from the experts at the Motley Fool.

They are very bullish on the outlook for this sector and you can find out what it is for free by following the free link below.

7 of 8 People Are Clueless About This Trillion-Dollar Market

One of our investors has recently returned from a research trip to Silicon Valley... and has a warning for fellow investors:

Because he works for an organization dedicated to spreading great investing ideas, his video report is free today... so you can see it and decide for yourself.

Don't miss your chance click here to learn about this warning and how you might be able to profit!

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.