Stock pick: Firetrail Investments

Australia’s largest gold miner Newcrest Mining (ASX: NCM) is our top pick for 3 reasons:

1. Massive underperformance vs gold mining peers in the past year:
   1. NCM has underperformed major gold peers by 50-100% over the past year such as Barrick and Newmont
   2. What could explain such underperformance?
      1. NCM has had production problems with Lihir but much of that appears to be fixable and in FY21 we see a return to more normal production levels
   3. The level of underperformance seems unwarranted, especially for the quality of Newcrest assets
2. Newcrest has three very real, high returning growth opportunities:
   1. Red Chris (Canada) – recently acquired Red Chris has shown very promising drill results including a very high-grade gold pod that could contain >1 million ounces of gold (around ½ a year of Newcrest production)
   2. Haverion (West Australia) – a large discovery is taking shape in the Pilbara. Returns for this deposit are likely to be very high considering NCM owned Telfer infrastructure is just 45km away.
   3. Wafi Golpu (PNG) – an exciting copper gold deposit that has been just around the corner for a decade. The PNG Government looks close to approving a special mining licence and it is a shovel ready project.
3. Gold is a great portfolio diversifier. With several risks on the horizon like trade wars, currency wars and potential inflationary policy, we believe gold has a strong place in portfolios

This information has been prepared and provided by Firetrail Investments. To the extent that includes any financial product advice, the advice is of a general nature only and does not take into account any individual’s objectives, financial situation or particular needs. Before making an investment decision an individual should assess whether it meets their own needs and consult a financial advisor. This stock pick was published on 22 May 2020 and is subject to change.