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Here’s why I think the Newcrest share price is in the buy zone 

Newcrest Mining Limited (ASX: NCM) is continuing its strategy of acquiring low cost, long life ore bodies with its recent agreement to purchase GJ Copper-Gold Project from Canadian-listed junior miner Skeena Resources Ltd for AU$8.37 million in cash. 

The project adds more than 43,500 hectares containing 93 contiguous mineral claims to Newcrest’s exploration portfolio. It is in the region of Canada known as the Golden Triangle and is approximately 30 kilometres from the 70% Newcrest-owned Red Chris operation, which was acquired in August 2019.

The mineralisation of various regions within the GJ project indicates it may produce one or more Tier 1 gold assets or at the very least low-cost open pit operations with the capability to combine processing. 

The company’s exploration program includes working with small-cap international miners across a range of joint ventures near the Tanami province and in the Pilbara with early results showing a lot of promise.

Newcrest entered the top 20 ASX-listed companies on 13 December 2019 – a reflection of the miner’s transformation under Sandeep Biswas over the past 5 years. The company has achieved a record low all in sustaining cost (AISC) and very strong growth rates across all of the major performance indicators.

Newcrest has also shown the discipline required to cut its  losses. In June 2018, the company reached an agreement with the Indonesian government over taxes for Gosowong and a reduction of its 75% stake to under 49% in favour of Indonesian companies. 

Noting at the time the negative impact this would have on the value of the asset and cash flow, Newcrest announced on 31 January 2020 it would divest Gosowong for AU$90 million incurring a one-off loss of AU$44 million.

Foolish takeaway

Newcrest is a very well managed gold mining company operating in an environment of high gold prices. The company has achieved its FY20 goal of 5 Tier 1 gold-producing assets and has developed a track record of delivering on management commitments.

It has shown the discipline to cut its losses, actively pursues new low cost production sources, and is continually taking steps to reduce its internal costs. 

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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. 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.

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