Newcrest Mining Limited 

NCM Details

Enters Agreement with Tilt Renewables to Reduce Greenhouse Gas Emissions: Newcrest Mining Limited (ASX: NCM) is a leading gold producer in Australia with operating mines in Australia, Canada, and Papua New Guinea. As on 17^th December 2020, the market capitalisation of the company stood at ~$21.98 billion. On 15^th December 2020, NCM entered into an offtake agreement with Tilt Renewables Limited to ensure electricity supply for a 15-year period from TLT’s Rye Park Wind Farm (RPWF) in New South Wales. The agreement also aims to reduce greenhouse gas emissions by NCM by 30% till 2030. The commercial operations will begin in January 2024. NCM is expected to contract for 55% (~400MW) of the planned output planned from the Wind Farm. 

Q1FY21 Result Highlights: For September 2020 quarter, the gold production of the Group stood at 503koz, 12% lower than the previous period for all operations. This decline was due to lower throughput rates for Cadia, Telfer, and Red Chris projects due to planned shutdown events. The Group’s All-in Sustaining Costs (AISC) for Q1FY21 was US$980 per ounce, up by US$102 per ounce on pcp, driven by the impact of a strengthening Australian dollar and Canadian dollar on the operating costs of Cadia, Telfer and Red Chris. The copper production amounted to 35kt for September 2020 quarter. In October 2020, the company got listed on Toronto Stock Exchange (TSX), in line with its growth strategy.

Q1FY21 Production Summary (Source: Company Reports)

NCM Withdrew Interest from West Tanami Gold Project: The company has recently withdrawn from Selby, Watts, and Lewis Joint Ventures and announced that it will no longer hold residual interest in West Tanami Gold project. As on 14^th December 2020, Encounter Resources Limited has taken back full control over the project.  

Outlook: The company expects production to be higher in the December 2020 quarter and is on track to meet its FY21 production guidance. For FY21, the company expects its total gold production to be between 1,950koz – 2,150koz and copper production between 135kt and 155kt.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of NCM gave a negative return of 17.31% in the past three months and a negative return of 9.12% in the past six months. The stock is currently inclined towards its to its 52-weeks’ low level of $20.7, offering a decent opportunity for accumulation. The stock of NCM has a support level of ~$25.306 and a resistance level of ~$31.235. We have valued the stock using the Price to Earnings multiple based illustrative relative valuation method and have arrived at a target price with an upside of low double-digit (in % terms). For the purpose, we have taken peers like Northern Star Resources Ltd (ASX: NST), Evolution Mining Ltd (ASX: EVN), IGO Ltd (ASX: IGO), etc. Considering the decent performance in Q1FY21, expected production growth in Q2FY21, FY21 guidance, current trading levels, and valuation, we give a ‘Buy’ recommendation on the stock at the current market price of $27.08, up by 0.556% on 17^th December 2020.

NCM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Westgold Resources Limited

 WGX Details

Resumed Operations at Big Bell Mine:  Westgold Resources Limited (ASX: WGX) is involved in the exploration, development, and mining of gold. As on 17^th December 2020, the market capitalisation of the company stood at ~$21.98 billion. In an update provided on 17 December 2020, the company confirmed that WA Department of Mines, Industry Regulation and Safety (DMIRS) has completed preliminary investigations of its Big Bell underground mine and has cleared the site to resume operations. Over the coming weeks, the company expects its operations to return to normal.

September 2020 Quarter Update: During Q1FY21, the company’s exploration activities were focussed on underground diamond drilling to extend the key underground mines as well as some new near surface-targets for continued open-pit min. Over the quarter, the company witnessed only minor impacts from COVID-19 pandemic. For Q1FY21, the company reported gold production and gold sales of 60,797 oz and 60,030oz, respectively. The revenue generated for the quarter amounted to $145 million. Notably, the company’s cash cost of sales stood at A$1,202/oz over the quarter, lower than the guidance of $1,300 - $1,360/oz.

Outlook: For FY21, the company expects its total gold production to be in the range of 270-300k oz. The cash cost of sales is expected to be between $1,200-$1,300/oz and AISC to be in the range of $1,460-$1,560/oz.

Forward Guidance (Source: Company Reports)

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of WGX gave a positive return of 14.34% in the past three months and a positive return of 39.5% in the past six months. The stock of WGX has a support level of ~$2.689 and a resistance level of ~$2.971. We have valued the stock using the Price to Earnings multiple based illustrative relative valuation method and have arrived at a target price with an upside on high single-digit (in % terms). For the purpose, we have taken peers like Gold Road Resources Ltd (ASX: GOR), Perseus Mining Ltd (ASX: PRU), Regis Resources Ltd (ASX: RRL), etc. Considering the company’s decent performance in Q1FY21, FY21 guidance, resumption of operations at Big Bell mine, and valuation, we give a ‘Hold’ recommendation on the stock at the current market price of $2.79, up by 6.285% on 17^th December 2020, owing to the update regarding the resumption of operations at Big Bell mine.

WGX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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