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Newcrest Mining share price lower after FY 2020 result

digital asx share price graph against backdrop of gold nuggets
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The Newcrest Mining Limited (ASX: NCM) share price is dropping lower on Friday after the release of its FY 2020 results.

At the time of writing the gold miner’s shares are down over 1% to $34.08.

How did Newcrest perform in FY 2020?

Newcrest had a reasonably solid 12 months and produced 2.2 million ounces of gold at an all-in sustaining cost (AISC) of US$862 per ounce.

While the latter was an increase of 17% on the prior corresponding period, a stronger gold price helped to offset its rising costs. Newcrest reported a 21% lift in its average realised gold price to US$1,530 per ounce, which resulted in an AISC margin of US$668 per ounce.

This led to the gold miner reporting a 5% increase in revenue to US$3,922 million and a 10% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA) to US$1,835 million.

And while Newcrest posted negative cash flow of US$621 million, this was due to major merger and acquisitions activities. If you exclude these, its free cash flow would have been US$670 million. This compares to US$804 million in FY 2019.

Despite its cash outflow, the Newcrest board has determined that a final fully franked dividend of 17.5 U.S. cents per share will be paid to shareholders on 25 September 2020.

Newcrest Managing Director and Chief Executive Officer, Sandeep Biswas, was pleased with the company’s performance in FY 2020.

He said: “FY20 was a year in which we invested in the future. We invested $1.3 billion to acquire Red Chris and increase our exposure to Fruta del Norte and a further ~$400 million to progress our organic growth options and on exploration. We further strengthened our balance sheet to ensure we are well positioned to deliver our near-term growth options of Havieron, Red Chris, and Wafi-Golpu.”

“Newcrest delivered a solid performance for the financial year, producing 2.2 million ounces of gold at an AISC of $862 per ounce. Our free cash flow generation (excluding major M&A activities) remained strong at $670 million and we report statutory and underlying profits of $647 million and $750 million respectively,” he added.

Outlook.

Newcrest has provided guidance for FY 2021, but acknowledges that this depends on their being no COVID-19 disruptions.

The company is guiding to gold production of 1.95 million ounces to 2,15 million ounces, which will be down from 2.2 million in FY 2020. This appears to have underwhelmed investors and put pressure on its shares today.

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Motley Fool contributor James Mickleboro 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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