Newcrest Mining riding the gold bull

Australia’s largest gold producer, Newcrest Mining, remains optimistic about future gold price developments. Yesterday the mining giant reported its financial results for the last twelve months to June 30, with CEO Greg Robinson reporting record-breaking profits, which rose by 63% to $908 million in comparison with the same period from last year. According to Mr Robinson, several factors contributed to Newcrest’s excellent results.

Increasing gold production and the successful integration of Lihir Gold’s mining operations were crucial factors in this success, while rising gold prices were also key. The gold price has moved up by about $575 per ounce within only twelve months, and recently reached a nominal peak at over $1,800 per troy ounce. CEO Robinson remains bullish on his projections for the medium-term development of the gold price. In his view, the yellow metal’s price will be well supported by escalating global debt problems and associated complicated political issues.

Newcrest Mining plans to increase its gold production by another 50% by 2015-16. The $10 billion takeover of Lihir Gold is expected to lead too significant improvements in Newcrest’s future profitability. The company intends to boost its annual gold output to four million ounces in the next five years. Newcrest’s gold production hit 2.527 million ounces in the fiscal year 2010/2011, and the company is planning to increase its output to 2.925 million ounces in the next 12 months. In order to achieve these goals, the company will invest about $9 billion in both existing and new gold projects.

Louis James, chief metals strategist at Casey Research and editor of Casey's International Speculator, told The Gold Report in an interview that he remains very bullish on gold as well. He bases his opinion on the fact that governments around the world are faced with intractable fiscal problems, and that they have no easy way out. Even if a strong price correction is around the corner – after the enormous rally of the gold price to up to $1,800 per ounce – this development would likely be an excellent buying opportunity.

According to James, there is no end in sight for the gold bull market. On the contrary, gold’s long-term uptrend is fully intact. Investors should take the bull by the horn and use price corrections – even in case of distinctive declines – to purchase the yellow metal or to reenter the market. Since no one is able to foresee the best entry point into a market, people should split their capital to buy gold in tranches. James points out that this dollar cost averaging should help to lower the personal entry price and minimise risk.