The Match Out: Stocks dip, Newcrest details a better growth outlook

James Gerrish

Market Matters

A lacklustre session for the ASX today saw the market climb initially. That didn’t last long, but the sell-off was hardly aggressive. Healthcare bounced and so did the supermarkets, highlighting the “risk-off” nature of the session.

  • The ASX 200 fell -19pts /-0.26% to 7,280 today

  • Healthcare bounced (0.87%) supported by CSL Limited (ASX: CSL) while staples were the only other sector to finish higher. IT was the weakest link down -1.46%

  • The Australian dollar traded near a four-week high helped by an overnight rise in commodity prices. The A$73.56c at our close

  • A conference call with Newcrest (ASX: NCM) this morning saw management articulate a more positive growth strategy, particularly around Lihir – as covered by Harry below. NCM finished flat after being up around 2% early.

  • Westpac (ASX: WBC) announced a big write-down today, around $1.3 billion on asset values and additional provisions for customer remediation which reduced their capital by 15 basis points. Still, its capital position remains strong.
  • Some of the cheap/inexpensive mining services stocks have started to move. Emeco (ASX: EHL) +7% today, NRW Holdings (ASX: NWH) was flat today but has edged higher in the past week. This is a ‘value’ part of the market. We own NWH.

  • AMP (ASX: AMP) is also arguably in the value camp, they rallied +2.26% today and have been moving higher for the past week or so, today it was the announcement of two new starters headlined by Patrick Snowball as Chairman designate. Patrick used to run Suncorp, I always thought he was a good operator. There is value in AMP’s business and as nauseating as it may be to consider it, we are.

  • I read an interesting research note today about a stock we’re currently doing some work on. Written by analyst Michael Clark, he summed up the current environment around commodities very well. The world will need a lot more copper, nickel and aluminium if it is going to decarbonise. Yet, as China and Europe are discovering, how is it possible to produce the volume of metals required to decarbonise when decarbonisation adds to the strain on existing power availability? The metals-power paradox….Mike Henry of BHP acknowledged it at a conference last week, Elon Musk discussed the need for investment in nickel at Tesla’s AGM last week, and the US is looking to add nickel to its list of critical minerals. While we must always keep views in check and I’m always conscious that the remedy for high prices is high prices themselves, there are changing dynamics playing out in many parts of the commodity space hence why some very credible investors are calling a new commodity cycle.
  • This morning’s report was dedicated to the commodity space, reinforcing our views around the companies we own – I thought it was a good note – Available here
  • The COVID bump seems to be over for Ansell (ASX: ANN), the maker of protective gear hitting 52-week lows today at $32.11, down 27% from its high.
  • Alumina (ASX: AWC) +4.19% on the other hand was strong as supply constraints continue to support the underlying commodity, Aluminium trading at a 13-year high – we own the stock in both the Growth and Income portfolios.
  • Gold was up a touch to US$1,762

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  • Iron Ore Futures down a touch in Asia, off 0.84%

  • Asian markets were all lower today – China -1.44%, Hong Kong -1.24% and Japan -0.84%
  • US Futures are trading down around 0.35%

ASX 200 chart

Newcrest Mining (ASX: NCM) $23.92

NCM +0.08%: the gold miner was out with updates across four of its growth projects as the company looks to grow production and cut costs. A study on PNG mine Lihir has paved the way to grow production to over 1Moz a year from FY24 onwards, for at least 10 years, on a relatively small investment for $179 million. A pre-feasibility study has been completed on West Australian joint venture project Havieron. The project is estimated to produce 160koz a year at just $US743/oz for nine years with upside in the resource. The Canadian asset Red Chris has also taken a step towards becoming reality with an initial reserve estimate of over 8Mt of gold and over 2Mt of copper to see them through an initial mine life of 31 years, though the first production isn’t likely until the end of the decade. There was also an update out of their key Cadia asset, all in all, Newcrest touting a halving in All-In Sustaining Costs/oz over the next decade with significant growth to come – particularly from FY25 onwards – with relatively low capital requirements. It was a positive announcement, though it will be sometime before we will see the impact on sales.

MM remains bullish and long NCM

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Newcrest Mining (NCM)

Broker moves

  • Warrego Energy Cut to Hold at Canaccord; PT 22 Australian cents

  • Ansell Cut to Underperform at Macquarie; PT A$32

  • Elders Rated New Buy at PAC Partners; PT A$15.1

  • REA Group Cut to Hold at Jefferies; PT A$174.

Major movers today 

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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