The Needle on Recent Gold Rush: NCM, NST

  • May 01, 2020 AEST
  • Team Kalkine
The Needle on Recent Gold Rush: NCM, NST

Gold, considered as a hedge against “uncertainty or market risk”, has always been one of the hottest commodities for both traders and retail buyers. Recently, gold prices reached a 7-year peak level, primarily due to high demand as a shelter from the health and economic shock, COVID-19. As coronavirus is spreading at an exponential pace across major countries, globally, gold continues to gain traction amongst investors.

In the midst of this unprecedented crisis, gold is as relevant as ever. Moreover, in the coming years, it is expected to continue playing a critical role in the portfolios of many investors.

Must Read: Should You Go For ASX Gold Miners To Hedge Your Portfolio This Season?

In this backdrop, let us discuss two ASX-listed gold companies - Newcrest Mining Limited and Northern Star Resources, which have recently released significant market updates.

Newcrest Mining Limited (ASX: NCM)    

Headquartered in Melbourne and aiming to be the Miner of Choice™, NCM is one of the world’s largest gold mining companies, engaged in finding, developing and operating gold and copper mines. Besides owning and operating a portfolio of predominantly low-cost, long-life mines in Australia, Canada and Papua New Guinea, the Company has a strong pipeline of greenfields and brownfields exploration projects.

Institutional Placement Completed to Aid Fruta del Norte Transaction

On 1 May 2020, the Company announced to have completed a fully underwritten institutional placement to raise $1.0 billion, with strong interest from existing shareholders and new investors. Under the placement, NCM will issue ~39.1 million new fully paid ordinary shares, being ~5.1% of its existing issued capital, to institutional investors at a price of $25.60 per new share.

Proceeds would be directed towards:

  • Acquisition of Fruta del Norte financing facilities;
  • Fund other future organic growth options such as declines at Havieron and Red Chris.

 

 

New shares as part of the placement are anticipated to settle on 5 May 2020, with their issue and trading likely to commence on 6 May 2020.

The Company is also undertaking a share purchase plan (SPP), which is due to open on 7 May 2020 and close on 27 May 2020. NCM is targeting to raise up to $100 million via the SPP, with the proceeds planned to be used for general corporate purposes and working capital requirements.

Q3 Gold Production in line with Expectations

For the three-month period to 31 March 2020, Newcrest Mining reported gold production of 519koz at AISC $827/oz, down 6% from the previous quarter. The production level, which was in line with the Company guidance, reflected lower grade ore feed to the mill and planned maintenance shuts of both concentrators. The production decline can be attributed to lower production at Cadia, Telfer and the divestment of Gosowong that more than offset the higher production at Lihir and Red Chris.

AISC margin per ounce was noted at $742/oz, representing an increase of 25% on a quarter-on-quarter basis.

 

Source: NCM reports

 

Meanwhile, the Company has implemented an extensive program of preventative actions, owing to which it has not expected a positive case of COVID-19 at operations, projects or corporate offices.

Outlook

  • For the June 2020 quarter, gold production is expected to be higher than that achieved in the March quarter.
  • Strong growth pipeline with Cadia Expansion, Wafi-Golpu, Red Chris block cave and Havieron
  • Guidance for FY2020 remains unchanged, with gold production expected in the range of 2,100 to 2,200koz.

 

On 1 May 2020 (AEST 02:34 PM), NCM was trading downward by 8.642% to $25.160. The last one-month return of the stock stood at 1.36%, while its annual dividend yield was noted at 1.19% and the Company’s market cap at $21.18 billion.

Northern Star Resources (ASX: NST)

NST is engaged in gold and other mineral production and exploration activities. The Company boasts Tier-1 world-class projects in its portfolio of low-cost, high-grade underground gold mines located in Australia and North America.

March Quarter Production Reflects COVID-19 Measures

At the end of April 2020, Northern Star Resources released its activities report for three months to 31 March 2020.

Total Gold Sales for March Quarter – 239,031oz at an AISC of $1,590/oz

Total Gold Production -          

  • Jundee Gold Operations - 75,099oz mined and 52,629oz sold at an AISC $1,389/oz
  • KCGM Gold Operations (50%) - 41,662 oz mined and 60,204 oz sold at an AISC $1,453/oz
  • Kalgoorlie Gold Operations - 77,067oz mined and 77,425oz sold at an AISC $1,619/oz
  • Pogo Gold Operations: - 56,571oz mined and 48,773oz sold at an AISC $1,904/oz

 

COVID-19 Measures to Support Operations in Short & Medium Terms   

For the first quarter, production and costs reflected the prudent and responsible measures the Company implemented early in response to COVID-19 to protect the health and safety of staff and communities.

Given the new operating environment and initiatives undertaken to offset the impacts where possible, the new operating system, though not a perfect operational platform at the moment, is manageable and enables the Company to continue operating profitably in the short and medium terms.

Financial Position Remains Strong in Terms of Net Cashflow and Balance Sheet

The Company invested approximately $66 million in growth capital and exploration, consequently, underlying free cash flow stood at $89 million for the March quarter.

At the end of March 2020, cash, bullion and investments for Northern Star Resources stood at $551 million, highlighting withdrawal of $200 million from the corporate credit revolver facility and the KCGM acquisition completion.  

Corporate debt stood at $ 700 million.

NST deferred payment of $55 million interim dividend to 27 October 2020. Moreover, the full-year dividend is expected to be paid on the normal timeline, subject to production continuing at all the Company’s operations.

 

 

On 1 May 2020 (AEST 03:29 PM), NST was trading downward by 7.193% to trade at $11.870. The stock has delivered a return of 31.99% in the last six months with annual dividend yield of 1.17% and the Company’s market cap at $9.47 billion.

Interesting Read: Volatility the Pulse of the Market: A Reading of Gold Pulse Across Multiple Time Frame

 


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