Ground Breakers: Newcrest beats forecasts, Evolution hits guidance as top goldies look to accelerate into FY23
Australia’s big three gold miners have all got their June production reports in the books, and the consensus is there’s been a vast improvement across the board.
It’s some solid work, in tough times.
Gold miners’ valuations have been tumbling, with the All Ordinaries Gold Index down 24.24%, year to date.
At the same time, the gold price has fallen into negative territory as global central banks continue to pump their respective cash rates, but so far the spot is only down some 5.4%.
A strengthening US dollar has also been positive for Australian gold miners, with higher relative Australian gold prices to provide a bulwark against inflation.
Is this all a bit unfair?
Sentiment has no doubt played a role, but the truth is we’ve seen multiple examples of gold companies who indulged in the halcyon days of 2019-2020 who are no longer performing to expectations.
Familiar issues have emerged at St Barbara’s (ASX:SBM) Simberi operations in PNG and its lack of foresight in locking up ounces around the Gwalia gold mine and mill mean it could face an embarrassing raid from high powered junior explorer Genesis Minerals (ASX:GMD), costs have steadily crept up across the sector, even before 2022’s mind-boggling inflation figures and forays by ASX miners into North America have proven over-ambitious.
As Northern Star Resources (ASX:NST) boss Stuart Tonkin said during a conference call for its pretty well-received June quarter results yesterday, gold miners will ultimately be judged by investors on their performance:
“It’s not for us to sit here and complain about what we think a fair price should be. Our job is really to run the business as best we can and articulate to the market where we see the best opportunity to keep those returns strong,” he said.
“We should be able to and will operate our business throughout those cycles. Does it mean growth plans get compromised, or does it mean margins get compressed over the longer term? I think we’ve got to not just stick on one set of rails.
“We’ve got to have a plan we’re following but continually assess those environments. I guess the question is what has to change to get the sentiment back? Delivery.”
Newcrest (ASX:NCM) rolled out the best set of numbers of the majors so far, and has given an indication its newest North American foray, the Brucejack mine, could well pay off.
Australia’s biggest gold miner paid a hefty price tag of around US$2.8 billion for the 300,000ozpa mine, but it is paying off early doors.
Brucejack delivered an impressive 90,408oz for Newcrest as it ramped up gold production by 31% QoQ to 637,032oz gold and 38,671t copper across its multinational portfolio.
The giant Cadia block cave in New South Wales delivered 186,766oz of gold and 28,676t copper at record low all in sustaining costs of negative US$124/oz.
Newcrest’s late sprint paid off, meeting FY22 guidance with 1.956Moz of gold produced and 121,000t of copper at an AISC of US$1044/oz.
RBC analyst Alex Barkley said Newcrest’s results came in 5% above consensus.
“Given weak expectations for the entire gold space heading into today’s result, we see this Q4 release as a positive for NCM” he said.
Australia’s No. 3 gold miner Evolution (ASX:EVN) delivered no more bad surprises after a major guidance downgrade last month that hammered the stock to its lowest level in years.
Evolution ramped up gold production 16% to 172,722oz at all in sustaining costs of $1290/oz (US$922/oz) for the June quarter and 640,275oz at $1259/oz (US$914/oz) owing in part to copper credits from its Ernest Henry operations in Queensland, which delivered $435m in net mine cash flow in FY22 at a negative AISC of $1680/oz.
A minor turnaround is continuing at Evolution’s stuttering Red Lake operations in Canada as well, with gold production up 17% QoQ to 38,620oz, tonnes processed up 8% to a record 258,000t and grade increasing 8% to 5.11g/t.
Despite its recent operational flops, Evolution has a healthy $572.4m of cash at bank, leading to questions about whether it could become an acquirer of assets as share prices drop across the sector, as gold fell below the US$1700/oz level overnight.
“I think asset prices have been crunched, I was an acquirer of shares in Evolution when we put out the release that (is) confidence I have in in this company and the future,” Evolution executive chairman Jake Klein said.
“The reality is that we need to do both things. We let ourselves down on the operational delivery last year, we recognise that that’s the ticket to opportunities.
“But yeah, in a stressed market like we’re in where capital availability is low, we do see opportunities emerging and we’d like to be in a position to take advantage of them.
“And noting that we need to ensure that investors have the confidence that our operational predictability and delivery is on track.”
Also looking bright today was Westgold Resources (ASX:WGX), which produced 72,597oz at $1843/oz, finished 2022 with full year gold production of 270,884oz at $1725/oz.
Westgold ended the quarter with $190m in cash and liquid assets after generating $46m in operating cashflow in the June quarter.
New MD Wayne Bramwell said WGX finished FY22 within 1.5% of cost guidance was a “remarkable achievement” in the inflationary environment.
“Our team has pragmatically navigated every challenge of FY22, and their collective efforts see us close the financial year safe, debt free and with a healthy balance sheet,” he said.
“Our business is rapidly evolving. Our larger mines are operating at, or above steady state and operational delivery is becoming more consistent.
“Our exploration team has had early success at Sovereign and the company is now focused upon improving productivity and driving cost efficiencies.”