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With gold on a run, is the Newcrest Mining share price a buy?

asx share price higher represented by stacks of gold coins growing higher
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The gold price is up more than 20% this year alone. Starting the year around US$1,500 and currently trading closer to US$1,860 (at the time of writing), there’s no doubt gold is doing very well. Despite a slump during the March ASX crash, it bounced strongly and has not looked back.

So, with the gold price now eyeing US$1,900, in my view it’s time to look at ASX gold shares and take advantage of this rising tide. 

Is the Newcrest Mining share price a ‘solid gold’ buy?

One ASX share I’m looking at for a ‘solid gold’ play right now is Newcrest Mining Limited (ASX: NCM). Even though the Newcrest Mining share price is currently up more than 60% from its March lows (at the time of writing), it’s still selling at around a 10% discount to it previous highs of around $38.00.

With the gold price continuing to rise, this 10% discount on Newcrest’s previous highs is an attractive proposition, in my view.

Operations

Newcrest is Australia’s largest ASX gold producer and is headquartered in Melbourne. The miner currently has 4 operations and 1 advanced project across Australia, Papua New Guinea and Canada.

Newcrest indicates that its reserve and resource base is strong, with estimates of current gold reserves able to sustain a minimum of 25 years at current production rates. This indicates a solid runway ahead for investors.

Performance

Newcrest’s share price returns are interesting if you plot them over a longer timeline. While its year-to-date share price growth is up around 15%, if we plot a 5-year return, the numbers stand at around 180%. As a point of reference and to ensure transparency, it should be noted that if we go back 10 years, the Newcrest share price is only up by 5%.

Interestingly, Newcrest shares peaked at an all-time high in November 2010 of around $43.00. Personally, I like to know what the previous all-time high was, as this gives us a soft target for future growth. The Newcrest Mining share price is trading at $34.78 (at the time of writing), so it is comforting to know there’s room to grow, even if it’s only a return to previous highs.

Recent reporting

Just this morning, Newcrest released its quarterly report with positive results. Some of the key details from the report include:

  • Achieving FY20 guidance
  • Gold production up 7% on previous quarter
  • Refinancing of debt to lower costs
  • Completion of a successful equity raise to support growth
  • Copper production up 15% on previous quarter
  • Priority of remaining COVID-19 free at Newcrest’s operations

The company’s quarterly report for the period ended September 2020 is due to be released in late October and the annual general meeting is scheduled for November. Based on the results we have seen from this most recent quarterly report, I am feeling positive about continued growth in both operations and the Newcrest share price.

Dividends

Newcrest has paid dividends twice a year for the last decade. Whilst the dividend yield is quite low (around 0.9%), it has certainly been reliable. The most recent dividend was paid on 27 March 2020 at 7.5 US cents. Newcrest switched its dividend currency from AUD to USD in 2015 and is currently paying all dividends in US dollars.

Foolish takeaway

Newcrest Mining isn’t the only gold stock on the ASX, but it is the largest ASX gold producer and has a solid track record.

The company’s goal of remaining COVID-19 free at its operations is an important one, as this can throw a spanner in the works of even the best companies. In its quarterly report Newcrest confirmed that, to date, it has not had a single case of COVID-19 across its workforce. Keeping it that way is critical.

With the Newcrest Mining share price trading at a 10% discount to its previous highs, its strong recovery from March lows and positive recent reports, I’m bullish on Newcrest shares. Add to this the strong gold price of late and in my opinion Newcrest is one stock to strongly consider adding to your portfolio.

Where to invest $1,000 right now

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Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

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Glenn Leese
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