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BELL POTTER REVIEWS

Key Call: Newcrest Mining Limited – Solid Result

Newcrest Mining Limited (NCM.AX - A$29.73) Buy Target A$34.00

Event: Full year result marginally ahead. Reserves updated
The NCM full year profit result of $483m was 4% above our forecast of $464m and 3% ahead of consensus. A 15¢ unfranked final dividend was also declared (UBSe 0¢). Cashflow generation was strong with EBITDA of $1,039m and margins of 41%. Net debt at the end of the period was $84m for gearing of 2%. Production guidance for FY10e was as expected and gold reserves were increased by 7% over the year to 42.8Moz with increases at Cadia East and Ridgeway Deeps.

Impact: Minimal changes from FY10e guidance
Production guidance for FY10e of 1.81-1.91Moz and 83-87kt Cu was provided. Our forecast of 1.85Moz and 84kt Cu has subsequently remained unchanged. Based on the site cost guidance provided our forecast cash costs for FY10e are US$360/oz, little changed from the FY09 actuals. The increase to reserves at Ridgeway Deeps has extended our modelled mine life by 4-years.

Action: Upgraded to Buy due to recent share price fall
We have upgraded NCM to a Buy, primarily due to the recent fall in the share price. However, the fact that NCM continues to meet is guidance predictions and it owns in our view some of the most prospective gold projects in Australia, Indonesia and PNG, we are confident additional value should be created through continued exploration and NCM’s fastidious approach to project development.


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