Newcrest Share Price is Up — Gold Bottom In? (ASX:NCM)

Newcrest Share Price is Up — Gold Bottom In? (ASX:NCM)

At time of writing, the  Newcrest Mining Ltd [ASX:NCM] share price is up more than 2%, trading at $27.09.

Given its size, NCM shares largely track the gold price as you can see below:

ASX NCM - Newcrest Share Price ChartSource: tradingview.com

We take a quick look at NCM’s latest results and the outlook for NCM shares and gold more generally.

Newcrest results give it a small lift

Here are the highlights from the Newcrest results:

o Gold production of 512kozand copper production of 35kt

o Improved All-In Sustaining Cost (AISC) of $891/oz(2), delivering an AISC margin of 49% or $854/oz

o Cadia records lowest ever reported quarterly AISC of negative $160/oz

o On track to deliver FY21 guidance

o Box cut and surface infrastructure construction progressing well at Red Chris and Havieron

o Newcrest’s initial Mineral Resource estimate for Red Chris released, supporting the potential development of a high margin underground block cave

o Cadia Molybdenum Plant commissioning commenced, with first commercial production expected in September 2021 Quarter

o Lihir Phase 14A Pre-Feasibility Study on track and expected to be released in June 2021 quarter

o Early repayment of the remaining 2022 Corporate Bonds using available cash

o Maturity dates extended on undrawn bilateral bank debt facilities

All of that is positive, even as gold was largely flat on the day.

You can see forecasted earnings below courtesy of MarketScreener:

MarketscreenerSource: marketscreener.com

Revenue to take a jump this year, then even off the analysts say.

That’s a complex call, especially given these numbers are in USD.

But improving margins should hold NCM in good stead.

Here’s an intriguing theory about the outlook for NCM shares…

Outlook for NCM share price

As I’ve said, I’m mildly bullish on gold this year.

That applies to physical gold, the big miners and the gold ETFs.

Smaller gold miners carry more volatility, but in an improving environment for gold they carry more potential upside and risk.

The smaller gold stocks, recent or near-term producers may prove to be the sweet spot given the sustained taste for small-caps combined with an improving gold outlook given the devaluation of fiat taking place.

That being said, check out the VanEck Vectors Gold Miners ETF [ASX:GDX] chart:

ASX GDX - Vaneck Vectors Gold Miners Share Price ChartSource: tradingview.com

Naturally, it’s much the same as the NCM share price chart.

Indeed, GDX holds NCM in its top 10.

NCM is massive, with a current market cap of more than $22 billion.

The theory I mentioned before, is that gold stocks are a sort of triple win at the moment.

On one side, there’s the standard inflation hedge, safe haven, older demographic way of exiting fiat story that will always be there.

Then what if bond yields rise?

That might accelerate the value stock pivot, of which NCM fits into comfortably with its size and significant forecasted earnings of more than $1 billion as you can see in the financial snapshot above.

That’s a pretty neat number if that pivot happens — with a current NCM P/E of around 15.

A low number there could make it attractive to the big movers if they cycle out of growth, despite recent killer earnings from the likes of Google (Alphabet) and Microsoft.

So that’s two wins out of the way, perhaps the most important ones from a fundamental perspective.

Then of course is pure charting/technical analysis.

It’s not a massive rise that’s playing out on the GDX/NCM over the last two months.

But the mini-gold bull is holding up reasonably well — it could be a bit of a reversal or bottoming set up there.

So, there you have it, three wins of varying sizes for the NCM share price.

If you are really into gold stocks, I must stress how important a subscription to The Daily Reckoning Australia is.

It’s a great companion that looks at macro trends affecting gold as well individual stock stories.

Expert analysis, great insights and in-depth market commentary are all part of it.

On the flip side, if you want a quick look at Australia’s looming gold market dominance, be sure to check out that out.

It’s got some handy ABS exploration spend charts in there which shows you how much Australia is starting to pull ahead in the gold race.

Regards,

Lachlann Tierney

For The Daily Reckoning Australia