NCM is so very cheap and further falls in the USD and rises in the gold price may extract a bid from the North american's prior to the September commissioning of Telfer.
See Australia's Newcrest Overlooked In Gold Stock Premium
Tuesday August 10, 3:44 AM EDT
MELBOURNE (Dow Jones)--Australia's biggest gold producer Newcrest Mining Ltd. (NCM.AU) said Tuesday it is missing out on the share valuations enjoyed by some of the world's biggest gold miners.
U.S.-listed majors including Newmont Mining Corp. (NEM), AngloGold Ashanti Ltd. (AU) and Placer Dome Inc. (PDG) have been rewarded with "wonderful premiums" in the short term following acquisition sprees, despite some having downward trends in production profiles, Newcrest Chief Executive Tony Palmer said.
"There is also a disturbing upward trend in the cost of production of these major producers, with the average cost of producing an ounce of gold rising by as much as US$50/ounce over the last two years," Palmer said in a speech to the Committee for Economic Development of Australia.
"To me, this is an indication that the consolidation process was not driven by what might be termed normal business reason - things like synergies might have offered a more competitive cost of production - but rather the pursuit of growth for growth's sake," he said.
Palmer's comments come as the company reiterated its end-September start-up date for its A$1.2 billion Telfer gold project in Western Australia.
Based on a 24-year life, Telfer is forecast to produce on average 800,000 ounces of gold and 28,000 metric tons of copper each year - more than doubling Newcrest's existing production profile.
Surging interest in U.S. gold stocks in recent years has seen some Wall Street-listed majors "rewarded in the short term with wonderful premiums for their fundamental values," he said.
Underpinning this has been concern over the health of the U.S dollar, with investors looking to gold equities as a hedge against the weakening currency.
"While Newcrest does not enjoy the gold premium of stocks listed on the NYSE, we have in fact outperformed every single one of those six major producers in terms of total shareholder return over a one-, three-, five- and 10-year timespan," Palmer said.
If Newcrest attracted similar sorts of premiums the "stock price would more than double", he added.
One of the key reasons behind the lack of premium is a tendency for Australian investors to be more cautious in valuing mining stocks.
Newcrest has been one of the best performing of Australia's major companies, with shares in the group jumping 57% over the past year, outperforming the benchmark S&P/ASX 200 index's 11% gain.
Some analysts also think that with the start-up of the Telfer mine, Newcrest will attract takeover attention from U.S.-listed majors, particularly Newmont.
Shares in Newcrest on Tuesday fell 3 cents to A$14.22.
-By Eric Johnston; Dow Jones Newswires; 61-3-9614-2663; eric.johnston@ dowjones.com
