Newcrest delivers some good news

Embattled Newcrest Mining has given its investors some much-needed good news by beating its own expectations on quarterly gold production and costs.

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However the positive numbers were offset by the news that Australia’s largest gold producer had conceded ground to the tax office and will take a $120 million hit to resolve a dispute.

The 586,573 ounces of gold it produced in the three months to the end of September puts it on target to beat guidance of 2.0 million to 2.3 million ounces, with the miner also predicting a stronger fiscal second half.

The report follows a tumultuous two weeks in which proxy advisers criticised the company’s failures to meet production targets for several years and advised against re-electing some directors at next week’s AGM.

The events culminated in Newcrest announcing departure dates for chief executive Greg Robinson and chairman Don Mercer.

The gold production was 10 per cent above some analysts’ expectations, nine per cent below the previous June quarter as forecast but 27 per cent above a year ago.

The overall cost of producing gold in the quarter of $A1,093 an ounce was below its 2013 financial year average of $1,283.

It sold the gold at an average $1,442 an ounce and said it could afford the price to be below the $1,450 floor it previously said it needed to break even due to cost and operational improvements.

Mr Robinson said all of the company’s gold mines had performed better than expected during the quarter, excluding Hidden Valley in PNG where costs of $1,889 an ounce remained high.

Morningstar analyst Mathew Hodge said it had been a long time since Newcrest had delivered a good quarterly report and both cost cutting and production were positive.

He also praised it for securing a new $US450 million ($A472.47 million) debt facility for providing more liquidity headroom.

Newcrest said it would voluntarily amend some R&D claims made from 2009 to 2011 in relation to its tax office dispute related to 2005 to 2011.

Ian Smith was the company’s chief executive at the time – which included the controversial $9.5 billion takeover of Lihir Gold – and was replaced by Greg Robinson in 2011.

The full year net tax impact will be $70 million, due to some tax losses and comes on top of its standard tax rate.

Newcrest’s share price was four cents down at $10.16 at 1530 AEDT.

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