Collected Wisdom

This week we look at Newcrest Mining, Independence Group, Western Areas and Evolution Mining.

Summary: Analysts were pleased by December quarter production numbers at Newcrest, but many believe too much rests on the shoulders of the Lihir mine for the company’s success. The positive long-term outlook for nickel prices is a plus for Independence Group, while analysts were happy to see the belt being tightened at Western Areas.

Key take out: Evolution Mining posted record production numbers at its Mt Carlton project in the Dec quarter, and the consensus on the company is a hold.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Newcrest Mining Limited (NCM)

Last time we updated subscribers on popular gold miner Newcrest, it was after the company's announcement of further issues at its Cadia facility. This time the news is more positive and includes the return of the Cadia SAG mill to operation.

On Thursday (January 28), NCM issued an update on its December quarter figures. Gold production for the quarter came in at 620,691 ounces, up 36,946 ounces on the previous quarter. The strong numbers came off the back of the Lihir and Telfer mines, while Cadia lagged due to the loss of the SAG mill for five weeks.

Analysts were pleased with the numbers with most not taken by surprise. The Lihir mine is the focus of many analysts. They believe that too much importance rests on the shoulders our Lihir for Newcrest. Analysts are looking out for news on the life of the mine and keeping an eye on operations there, especially water supply, as Newcrest flagged in the announcement that Papua New Guinea remains under drought conditions.

Newcrest remains a hold with the average price target starting to drift downwards to $12.60. The share price at the time of writing was $13.48.

Investors are generally advised to hold Newcrest Mining Limited at current levels.

Independence Group (IGO)

On Thursday January 28, Independence Group also announced its December quarter production numbers. The production numbers from the diversified minerals company were impressive, with joint venture gold mine Tropicana leading the charge. Tropicana, of which IGO owns 30 per cent, produced 133,742 ounces at an all in cost of $796 per ounce.

The update on the Nova project was encouraging for shareholders. The nickel mine is now 60 per cent complete and remains on budget. It is anticipated to be in production December 2016. This was seen as strong positive to a handful of analysts, who are anticipating nickel prices to rise in 2017.

Despite very weak commodity prices, analysts are still resoundingly in favour of IGO due to its diversified nature and a positive long-term outlook for the nickel price. The current average price target for IGO is $3.08, with the share price at the time of writing sitting at $2.22.

Investors are generally advised to hold Independence Group at current levels.

Western Areas Ltd (WSA)

We’ll stick with the nickel producers and look at Western Areas, as it announced its quarterly figures last week as well. The production numbers from WSA were in line with guidance and analyst expectations.

What was pleasing to analysts was seeing management continue to tighten the belt. Cashflow did take a hit in the December quarter, due to some one-off costs, which included the 4 cent dividend payment and the first payment instalment of its Cosmos Nickel Project.

A small number of analysts fear weaker cashflow will persist, with the low commodity prices while the majority believe the balance sheet is able to sustain the lower prices with some sensible management – this has so far been displayed.     

The consensus view is WSA is a buy with the average price target sitting at $2.52 and the share price at the time of writing sitting at $1.93.

Investors are generally advised to buy Western Areas Ltd at current levels.

Evolution Mining Limited (EVN)      

Gold miner Evolution Mining released its numbers for the December quarter. Management at EVN had good news for shareholders, as they were able to announce an upgrade to guidance.

Production numbers for FY16 increased from between 730,000 - 810,000 ounces to 770,000 - 820,000. All in sustainable costs decreased from $990 - $1,060 per ounce to $970 - $1,020.

The group’s 17 per cent increase in production for the quarter was pleasing, but even more pleasing to all analysts was the performance of Mt Carlton. Mt Carlton produced a record quarter with higher production and lower costs.

The strong cashflow has allowed the gold miner the ability to make debt repayments earlier than anticipated.

With all mines’ cashflow positive for the quarter and the potential for mine life extensions, the consensus on EVN is a hold. The current 12 month price target is $1.50 with the share price at the time of writing $1.435.

Investors are generally advised to hold Evolution Mining Limited at current levels.