Could the Newcrest Mining Limited (ASX: NCM) share price rise to $32 before the end of the calendar year?
One broker thinks that the Newcrest Mining share price could rise to $32 over the next 12 months. That is where the broker calculates a price target, where analysts think the share price will be in 12 months. So, not necessarily where the broker thinks the business will be by the end of the year.
Credit Suisse has a price target of $32 on the gold miner.
Why is Credit Suisse confident on the Newcrest Mining share price?
The broker is attracted to the potential of Newcrest Mining to lift its production over the coming years, whilst simultaneously reducing its expenses.
Newcrest Mining said in a presentation a couple of weeks ago that the pre-feasibility study (PFS) for the Red Chris asset showed it has potential to become a world class, long life mine. It also said it can have substantial low-cost gold and copper production growth in a tier 1 jurisdiction. It also said there would be negative cost for gold production from the Block Cave after accounting for copper credits.
The initial ore reserve estimate is 8.1 million ounces of gold and 2.2 million tonnes of copper.
Other details from the presentation
Newcrest said in a presentation that the indicative base case copper production profile to 2030 is going to grow by 37%. It's expected to reach more than 175kt per annum in FY30. Management said that copper growth advances Newcrest's ESG (environmental, social and governance) objectives and allows participation in decarbonisation opportunities.
Regarding gold, by 2030 Newcrest Mining said it has a "strong" base case gold production of approximately 2 million ounces per annum, assuming execution of the PFS projections, but before any potential expansions or upside.
All four organic growth options for Newcrest – Cadia, Red Chris, Havieron and Lihir – have PFS that are estimated to deliver an internal rate of return of 16% or higher. It also projected that the group all-in sustaining cost (AISC) could fall by more than 50% from current levels by FY30. This could help increase the Newcrest Mining share price over time.
Newcrest also said that there is significant upside potential, with "growth optionality beyond stage 1 project parameters as well as exploration upside".
The intention of Newcrest Mining is to fund all four projects through operating cash flow and existing liquidity.
The first production of gold and copper at Red Chris Block Cave is expected to be FY27 and for Havieron in the second half of FY24. The Lihir Phase 14A is expecting first ore in the fourth quarter of FY22.
What is the Credit Suisse valuation on the Newcrest Mining share price?
Based on the projected numbers, Newcrest Mining shares are valued at 22x FY22's estimated earnings and 20x FY23's estimated earnings.
If the broker is right about Newcrest Mining's price target, then its shares could go up by almost 30% in the year ahead.
The broker also thinks that the gold miner could pay an annual dividend of around 20 cents per share in FY22.
