Newcrest Mining Ltd (ASX: NCM) was in the spotlight at yesterday's Allan Gray Live webinar.
Newcrest CEO Sandeep Biswas joined Allan Gray's managing director, Simon Mawhinney, for a candid Q&A session.
Below we look at some of the key takeaways Biswas shared about the company he's presided over for the last 7 years. A company that now counts as largest gold producer listed on the ASX, and amongst the biggest gold miners in the world.
Why has the Newcrest share price been under pressure?
Addressing the pressured Newcrest share price, Biswas said that was partly driven by "its near-term production decline because of declining grades" at some of its mines.
Grades here means the amount of gold the company can extract from any given tonne of material it digs up.
The pressure on the share price, Biswas added is "also coupled with the fact that we've never really given the longer-term outlook, but just the 12 months guidance. Now, as of last week, we do have that longer-term outlook out there. And I think that's really informed the market a lot better about what our future is."
(You can find Newcrest's longer-term outlook, released last week, here.)
Gold prices, margins and production profiles
Biswas also highlighted Newcrest's low all in sustaining costs (AISC) and its industry leading profit margins. Which, at current gold prices above US$1,770 per ounce, he said means, "We make a lot of money."
Biswas continued:
But when prices drop… we'll be there with the best margins in the business. There's no other gold mining company of scale that has our level of sustaining cost profile. That differentiates us, and it plays to our philosophy of long life plus high margin. Which ultimately, I think, investors will appreciate as less risky to invest in with a better return profile.
Mawhinney then pointed to Newcrest's pre-feasibility study (PFS) at its Lihir project, which the company says supports gold production growth to 1 million ounces per year commencing in the 2024 financial year.
Asked how confident he is about those production profile figures, given some past operational issues at the project, Biswas replied, "I'm very confident about the profile… It's one of the few mines in the world where the grade profile, this is the amount of gold per tonne, actually goes up end of the year term.
"A big portion of the increase in gold production from Lihir," Biswas continued, "is driven not by mining tonnes or mill tonnes, but driven by grade. Which is inherent in the ore body, which we're very confident about."
What are Newcrest's copper plans?
Copper, in high demand for its high conductivity and corrosion resistance as the world moves towards renewable energy, was another focus point of the webinar.
Mawhinney pointed out that, atop the increase in gold production, Newcrest's PFS studies also indicate its copper production nearly doubling over the next 10 years. "Is that by design?" he asked.
According to Biswas, the ramp up in forecast copper production isn't really by design, but more related to Newcrest's industry leading technological knowhow:
Because of our ability with mining bulk underground ore bodies, we explore deeper than most other companies. Because a lot of companies who explore deeply, if they found something, they couldn't do anything about it. Whereas we can. That in itself leads you to look also for copper gold porphyry and gold copper porphyry deposits…
We haven't gone out to search for copper specifically, it just happens to come with the geology of these particular assets. And it's great exposure. The green credentials of copper… If you look at copper today it's about 5 bucks per pound. Of all the metals, [it has] the brightest future of them all.
"We also have a copper deposit in Fiji, which we haven't turned minds to for quite some time," Biswas added. "Because at $3 [per pound] copper it doesn't give us the double-digit returns. But at $4 or $5 copper, I think that's also going to be a fantastic opportunity."
ESG credentials
In today's world corporations' environmental, social and governance (ESG) credentials are under intense scrutiny.
And big gold miners like Newcrest are no exception.
Addressing his company's ESG commitments, Biswas said:
Our new vision incorporates, more than ever before, the goals we've got to achieve in the broader ESG dimension. Obviously green house gas is a big focus for us. We had already made a commitment to reduce green house gas emissions intensity by 30% by 2030… I think we're well placed to get to that target…
We're also committed to net zero by 2050. Which is meaningful for us because our mines will actually be running in 2050… We've got a full-time task force working on mapping how we might get there. Through technology in the first instance. Partnering with others as to how these technologies may develop in that time frame, so we can start deploying them into our businesses.
Will Newcrest enter the crypto space?
With Bitcoin (CRYPO: BTC) again dominating headlines as it toys with setting new all-time highs, Mawhinney quipped, "Gold seems to be so yesteryear. Any bolt-ons on crypto for Newcrest?"
The short answer there was, "No."
Biswas elaborated, "I think there's a realisation now that they are very different. Gold is physical. If the internet goes down you still have your gold bar. You can touch it… change its form. And it does have some uses, more and more in electronics and medicines, and jewellery, obviously."
His recommendation?
"If you have a Bitcoin or crypto portfolio, put a good chunk of gold in there, because it actually reduces your volatility. So, they may ultimately be more complimentary than working against each other."
