The Newcrest Mining Limited (ASX: NCM) share price has had a really tough time in 2022. Over the last six months, it's down by 41%. Ouch.
Considering it's one of the ASX's biggest gold miners, that's a painful drop.
Things are not turning out well for investors in gold miners this year. It's strange because two factors are happening which are meant to help gold and gold miners shine.
Inflation is high, and gold is typically thought of as an inflation hedge. Gold is also seen as a defensive asset class that can provide stability while 'risky' assets like shares and property suffer. Both of those things are happening, yet Newcrest is languishing.
When looking at all of the returns this year within the S&P/ASX 200 Index (ASX: XJO), collectively, gold miners have not done well. The ASX 200 index itself is down 15% this year, while the Newcrest Mining share price is down 35%.
Time to jump on the gold miner?
Expert Elio D'Amato from Spotee Connect certainly doesn't think the Newcrest share price is an opportunity.
On The Bull, he rated the business as a sell. He explained:
The US dollar is expected to remain stronger for longer, so the gold bulls may have to wait for eagerly anticipated inflation trades.
Gold production guidance of between 2,100,000 ounces and 2,400,000 ounces in fiscal year 2023 is weaker than we expected. All in sustaining costs of between US$930 an ounce and $US1,070 an ounce is higher than we anticipated. Other stocks appeal more at this time.
In its FY22 result, Newcrest gave that guidance and also explained what was included in that all-in-sustaining cost (AISC) expenditure.
Newcrest said the cost guidance includes approximately 6% to 8% of inflationary impacts to operating costs, 12 months of costs relating to Brucejack and the impact on costs of increased mining and throughput rates at Cadia and Lihir.
The miner also stated:
Continued pressure on capital costs is expected due to competition for labour from infrastructure projects together with the acute inflationary pressures experienced globally across a range of input costs such as energy and steel, which has been factored into the FY23 guidance.
Newcrest uses multiple levers to manage operating and capital cost pressures in the current inflationary environment and continues to evaluate cost estimates as it progresses its feasibility studies.
This guidance comes after an 8% drop in revenue and a 27% decline in earnings per share (EPS) in FY22.
However, perhaps unsurprisingly, management is confident about the future. The leadership pointed to its global organic growth portfolio, with Cadia, Red Chris, Havieron and Lihir all expected to reach key study milestones throughout FY23.
It was also noted that the business has a "substantial and increasing exposure to copper", which was described as a critical metal of the future with a "positive long-term outlook that will allow" the company to participate in the decarbonisation global shift.
Newcrest share price snapshot
Over the past month, Newcrest shares have fallen 9%. They are also down 31% over the past 12 months.
