Newcrest lifts dividend after more than doubling half-year net profit
Newcrest Mining has increased its dividend payout rate after more than doubling its half-year net profit.
Newcrest Mining has increased its dividend payout rate after more than doubling its half-year net profit, as investor pressure grows on miners for payouts as traditional dividend stocks lag during the pandemic.
Newcrest declared an interim dividend of US15c a share on Thursday, returning $US122m to shareholders on the back of a $US533m ($688m) net profit, up $US317m from the first half of the previous financial year, and close to a record for the company in US dollar terms.
The company booked revenue of $US2.17bn, and recorded December-half cashflow of $US439m as the strong gold price lifted its results, finishing 2020 with net debt of only $US330m — $US3.4bn lower than its net debt levels of June 2014.
Chief executive Sandeep Biswas said Newcrest’s low debt levels and strong operating cashflow meant Newcrest was in a position to lift returns to shareholders, with the company planning to more than double the target rates of return.
The gold major previously had a policy of paying a minimum US15c a share in dividends annually, and targeted a return of 10- 30 per cent of its annual free cashflow.
Newcrest will retain the US15c minimum, but will lift its payout ratio to 30-60 per cent of annual cashflow in the future, with Mr Biswas saying it would help Newcrest shareholders benefit from the strong gold price.
“Obviously there’s a desire for people to get dividends given where the economy has been recently and the drying up of dividends in other sectors, or certainly the reduction,” Mr Biswas said on Thursday.
“But we’ve been working hard to get Newcrest to the position we’re in over the last five years or so. We’ve generated $US4bn in cash, we progressed all of our growth initiatives, we’ve deleveraged the balance sheet, so we’re in a very strong position to increase our returns to shareholders.”
But while promising investors a bigger share of its profits, Newcrest is also likely to need to increase its capital spending in the next few years, as it accelerates work at growth projects in Australia and Canada.
On Thursday, Newcrest pulled the trigger on $C135m ($137.4m) worth of funding for the development of an exploration decline at its Red Chris mine in British Columbia, the first step towards the likely construction of a massive block cave mine at the copper and gold project.
Last month Newcrest’s board ticked off on $146m worth of funding for an exploration decline on the Havieron discovery near Telfer in Western Australia, as the miner accelerates development of a new mine to feed the plant at the ageing Telfer operation.
And Newcrest is also edging closer to development of a new mine in Papua New Guinea, after receiving environmental permits for its Wafi-Golpu project in December, with Mr Biswas saying talks with the PNG government over the grant of a special mining lease were likely to accelerate in coming months.
This week the government of Prime Minister James Marape signed an agreement for the development of an LNG project with partners Total, ExxonMobil and Oil Search.
Mr Biswas said the deal was a positive sign for resource companies wanting to do business in PNG, and also offered a potential new fuel source for both Wafi-Golpu and its Lihir operations in the country.
He said sign-off on the LNG deal was also likely to free up PNG government resources for talks over Wafi-Golpu.
“I’m hoping and anticipating that, now all the agreements are in place for the LNG project, the government will turn its mind now to Golpu,” he said.
“I do know they’re very keen to see the project up and running, it’s one of their strategic priorities.
“Let’s wait and see, but I’m hoping this will mean that discussions on Golpu can recommence.”
Newcrest shares closed up $1.02 at $26.22 on Thursday.
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