NEWCREST has been beaten up by the market after posting a miserable September-quarter production effort.
NEWCREST has been beaten up by the market after posting a miserable September-quarter production effort.
The below-expectations effort came on top of a four-day slide in the gold price, prompting investors to send Newcrest shares $2.30, or 6.4 per cent, lower to $33.45.
It is not the sort of treatment that Newcrest is used to, priding itself as it has in recent years on not springing negative surprises on the market.
But the 16 per cent slump in September-quarter production to 587,296 ounces of gold from the 700,124 ounces produced in the preceding June quarter was as much as 100,000 ounces of gold short of some market estimates, even if the maintenance and weather issues behind the fall should have been well known in the market.
The saving grace for Newcrest was that the September quarter was a bumper one in terms of average gold prices.
The group's average realised gold price of $A1623 an ounce delivered a 19 per cent increase in gross cash margins on production of $A1029 an ounce. Recent weakness in the US dollar gold price, and renewed strength in the local dollar, has since seen the local gold price fall below $A1600 an ounce.
The US gold price had lost $US56, or 3.3 per cent, by the opening of trade on the local market yesterday. So the Newcrest share price would have been under pressure anyway. Other gold stocks were also beaten up. OceanaGold fell 8.4 per cent to $2.18, Alacer was off 2.8 per cent at $9.91 and St Barbara fell 4 per cent to $2.11.
Newcrest's quarterly cash cost of production was $A594 an ounce, up from $A542 an ounce previously. The group's Cadia Valley operations in NSW were again the star performers (cash costs of $A281 an ounce). But the group's former flagship mine, the Telfer mine in Western Australia, was uncomfortably high at $A827 an ounce, as was the Hidden Valley operation in Papua New Guinea at $A898 an ounce.
Despite the shocker first quarter, Newcrest has maintained its guidance that full-year production would be 2.77-2.92 million ounces, suggesting it plans to make up the lost ground in coming quarters.
BARRY FitzGERALD
Frequently Asked Questions about this Article…
Why did Newcrest shares fall after its September‑quarter report?
Newcrest shares fell after the company reported a below‑expectations September quarter — production slumped 16% — and the gold price had a four‑day slide. The stock dropped $2.30 (6.4%) to $33.45, with the US gold price also down US$56 (3.3%) by local market open, putting additional pressure on the share price.
How much did Newcrest’s gold production decline in the September quarter?
Newcrest’s September‑quarter production fell 16% to 587,296 ounces, down from 700,124 ounces in the June quarter — roughly 100,000 ounces short of some market estimates.
What were Newcrest’s quarterly cash costs and which mines were the most and least cost‑efficient?
Newcrest’s quarterly cash cost of production was A$594 an ounce (up from A$542). Cadia Valley in NSW was the lowest‑cost operation at A$281 an ounce, while Telfer in WA was higher at A$827 an ounce and Hidden Valley in Papua New Guinea was A$898 an ounce.
Did Newcrest change its full‑year production guidance after the weak quarter?
No. Despite the weak first quarter, Newcrest maintained its full‑year production guidance of 2.77–2.92 million ounces, signalling it plans to make up the lost production in coming quarters.
How did the gold price influence Newcrest’s margins in the September quarter?
Newcrest’s average realised gold price in the September quarter was A$1,623 an ounce, which helped produce a 19% increase in gross cash margins to A$1,029 an ounce. However, recent weakness in the US dollar gold price and strength in the local dollar has since pushed the local gold price below A$1,600 an ounce.
Were other gold stocks affected when Newcrest reported the weak quarter?
Yes. The market sell‑off hit several gold stocks: OceanaGold fell 8.4% to $2.18, Alacer was down 2.8% to $9.91, and St Barbara fell 4% to $2.11.
What were the main reasons given for Newcrest’s September‑quarter production shortfall?
The article cites maintenance and weather issues as the main causes of the production shortfall, and notes these issues should have been largely known in the market.
What was the immediate market reaction to Newcrest’s results and gold price movements?
The immediate reaction combined the weak production result with a falling gold price: Newcrest shares dropped $2.30 (6.4%) to $33.45, and the US gold price decline also put broader pressure on other gold stocks.
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