Why has the Newcrest share price leapt 7% in under a week?

Female miner smiling in front of a mining vehicle.Female miner smiling in front of a mining vehicle.

The Newcrest Mining Ltd (ASX: NCM) share price is up 3.6% during the lunch hour on Tuesday.

Shares in the S&P/ASX 200 Index (ASX: XJO) gold miner closed yesterday trading for $24.02 each. They are currently trading for $24.89 apiece.

That puts the Newcrest share price up 7.1% since last Wednesday’s closing bell.

For some context, the ASX 200 is down 4.6% over that same period.

What are ASX 200 investors considering?

First, it’s not just the Newcrest share price that’s outperforming over the past four trading days.

Since last Wednesday’s close, the S&P/ASX All Ordinaries Gold Index (ASX: XGD) has rocketed 7.8%.

That tremendous rally has been driven by a 5.4% boost in the gold price over this short period, with gold currently fetching US$1,911 per troy ounce.

The rally in the yellow metal helping drive the Newcrest share price higher has in turn been fuelled by investor angst over last week’s implosion of United States-based SVB Financial Group (NASDAQ: SIVB). With the market concerned over more potential bank insolvencies, gold is shining brightly thanks to its classic haven status.

What else is helping lift the Newcrest share price?

Atop the fast-rising gold price, the Newcrest share price could be receiving some helpful tailwinds from reports the ASX 200 gold miner has resumed takeover talks with US gold mining giant Newmont.

On 16 February, the Newcrest board unanimously rejected the offer, valued at some $22 billion, saying it didn’t “represent sufficient value” for its shareholders.

According to The Australian Financial Review, Newmont has agreed to the non-disclosure and standstill agreements Newcrest requested as the next step to continuing negotiations.

Last week, Newcrest interim CEO Sherry Duhe wouldn’t be pinned down on what the board would deem a reasonable valuation for the Newcrest share price.

According to Duhe:

There’s not an absolute number out there… We have been very clear, and our board’s been unanimous, in the rejection of both the offers Newmont has made to date.

We have a fantastic company with a really strong balance sheet, we have a pretty unparalleled portfolio out there with very long life assets that are low cost, and increasingly we’ve got a huge amount of copper in the portfolio which is essential for electrification and net zero.

Exploration update

Investors may also be bidding up the Newcrest share price today following an exploration update at its Red Chris project, located in British Columbia, Canada.

Red Chris is a joint venture between Newcrest (70%) and Imperial Metals Corporation (30%). Newcrest is the operator.

According to this morning’s release, successful exploration at Red Chris has expanded the East Ridge Exploration Target delivering additional mining potential.

“The scale of East Ridge and its proximity to our existing infrastructure means it has the potential to play a significant role in the long-term future of Red Chris,” Duhe said. “We believe East Ridge represents a considerable opportunity for Newcrest as we continue to pursue further options to unlock value at Red Chris.”

Newcrest share price snapshot

Buoyed by the strong run this past week, the Newcrest share price – pictured below – is up 21% so far in 2023.

The post Why has the Newcrest share price leapt 7% in under a week? appeared first on The Motley Fool Australia.

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SVB Financial provides credit and banking services to The Motley Fool. Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended SVB Financial. The Motley Fool Australia has recommended SVB Financial. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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