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Newcrest Mining share price shaky following earnings release

The Newcrest Mining Limited (ASX: NCM) share price has fluctuated in early trade this morning following the release of the miner’s 1H20 results announcement.

Newcrest Mining shares started the day up 0.27% but have since dropped back and are down 0.68% at the time of writing.

What did Newcrest announce?

Newcrest reported statutory profit of $236 million for the period ending 31 December 2019, in line with the prior period. This statutory profit includes significant items (after non-controlling interests) of $44 million which represents the write-down of Gosowong.

Underlying profit was $280 million, which was up 18% on the prior corresponding period (pcp). Newcrest attributed this gain to a higher realised gold price, the favourable impact on Australian operations from the weakening of the Australian dollar against the US dollar, and a lower depreciation expense.

These benefits were partially offset by lower production at all sites (with the exception of Red Chris), a lower realised copper price, the company’s improved profitability increasing its income tax expense and the pursuit of growth resulting in an increase in corporate costs and exploration expenditure.

Newcrest’s gold production came in 1.1 million ounces, which was a decline of 12% on pcp.

Group all-in sustaining cost (AISC) was reported as $880/oz, up by 18%, while Newcrest’s AISC margin was $566/oz, up by 18% on pcp.

Newcrest’s cash flow from operating activities was $448 million, a decline of 3%, while free cash flow was negative $729 million, although it was positive by $106 million before taking into account the acquisition of Red Chris and additional investment in Lundin Gold. Newcrest commented that, as with past years, it expects its second half free cash flow to be significantly stronger than the first half.

The Newcrest board declared a US 7.5 cent fully franked dividend per share, which will be paid on 27 March 2020.

Operational update

During the half year Newcrest completed the acquisition of 70% of Red Chris, a mine with a potential Tier 1 orebody in Canada, and increased its investment in Lundin Gold, the owner of Fruta del Norte, a Tier 1 mine in Ecuador. It also delivered some strong drill results at the Havieron and Red Chris sites.

At Lihir and Telfer, Newcrest reported that it applied updated operating and maintenance strategies to optimise equipment uptime and utilisation.

Newcrest also approved the execution of the first of 2 stages of the expansion of its Cadia mine. It also noted that recent developments in relation to the State of PNG to progress Wafi-Golpu were encouraging.

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