Newcrest clear on 'smoking gun'
The review by former ASX chairman Dr Maurice Newman was published on Thursday after being commissioned by Newcrest in the wake of the market disclosure scandal that surrounded the goldminer's June 7 corporate restructure.
The gloomy restructure was preceded by an 18 per cent slump in the Newcrest share price and multiple downgrades by analysts, prompting claims the miner had selectively briefed certain big shareholders before the rest of the market.
But after 10 weeks of investigations, Dr Newman said he could not see any "smoking gun" piece of evidence that would suggest malpractice at Newcrest.
Instead, he delivered a scathing portrayal of the analyst and brokerage community in Australia, suggesting that analysts had been slow to react to a slump in the gold price during April, were often inexperienced and unable to understand material published by Newcrest.
The biggest winner out of the report could be Newcrest's investor relations manager Spencer Cole, who Dr Newman believes could not have known about the bucket of bad news that was contained in the restructure. Mr Cole has been under intense scrutiny in recent months over what was said to analysts in meetings held before the restructure. But Dr Newman noted that Mr Cole's meetings with analysts were scheduled well in advance of the board meetings that produced the restructure.
"I am satisfied that the manager, investor relations, was not in a position to be informed about the asset impairment issues or the dividend deliberations at the time of the analyst meetings, as this information had been quarantined from him," he said.
Dr Newman found several minor instances where Newcrest did not fully follow its own protocols around meetings with the investment community, but generally gave the company a clean bill of health.
"My sense is that the company takes its continuous disclosure obligations very seriously and, by and large, has in place processes to reinforce this."
He made 17 recommendations for Newcrest to consider, most of which were widely accepted notions around how to interact with investors and how to maximise disclosure. Newcrest accepted all of them.
But a defining feature of Dr Newman's report was his lack of exposure to key analysts and brokers involved in the saga, and his lack of access to crucial information and data. Dr Newman conceded he had not fully analysed Newcrest's email system, nor trading data around June 7, nor the written records of the analysts who downgraded the stock in the days prior to the event. He said it was beyond his terms of reference.
An ongoing investigation into the saga by the Australian Securities and Investments Commission also prevented many analysts from speaking to Dr Newman.
ASIC declined to comment on Dr Newman's findings, but Shaw Stockbroking analyst Vincent Pisani said it was clear there was a lack of access to important people and information.
"There were more caveats at the beginning of that report than I have ever seen, but I guess he could only work to the degree that he was allowed to work," he said.
Dr Newman is the head of Opposition Leader Tony Abbott's business advisory council, and shareholder activist Stephen Mayne said the report could therefore become an influential one if the Coalition won government this weekend. He said: "The recommendations are sweeping at a policy level ... him saying this at this point in time elevates the policy discussion to a potential ASX, ASIC and legislative response."
Focus on analysts— Page 26
Frequently Asked Questions about this Article…
According to the in-house review led by Dr Maurice Newman, Newcrest was largely cleared of breaching market disclosure rules. Dr Newman said he could not find a "smoking gun" indicating malpractice, though he did note a few minor instances where the company did not fully follow its own meeting protocols.
Dr Newman highlighted that analysts and the brokerage community were slow to react to a slump in the gold price during April and that multiple analyst downgrades and an 18% fall in Newcrest's share price preceded the restructure. He suggested shortcomings in analyst experience and reaction, rather than clear evidence of selective briefing by Newcrest.
Dr Newman’s 10-week review did not uncover a definitive piece of evidence showing selective briefing of major shareholders. He concluded he could not see any "smoking gun" to suggest such malpractice, while also noting some procedural lapses that were minor.
The report found Spencer Cole likely could not have known about the negative information contained in the restructure. Dr Newman noted Cole’s meetings with analysts were scheduled well before board meetings that produced the restructure and that sensitive information had been quarantined from him.
Yes—Newcrest accepted all 17 recommendations from Dr Newman. Most recommendations were widely accepted best-practice ideas on how to interact with investors and how to maximise market disclosure and continuous disclosure processes.
Yes. The report was described as restricted and lacking scope. Dr Newman acknowledged he did not fully analyse Newcrest’s email system, trading data around June 7, or written records of analysts who downgraded the stock—items that were beyond his terms of reference. An ongoing ASIC investigation also limited access to some analysts.
Yes. The article says an ongoing investigation by ASIC into the saga was underway, and this investigation prevented many analysts from speaking to Dr Newman during his review. ASIC declined to comment on the report’s findings.
The article notes that shareholder activist Stephen Mayne suggested the report’s recommendations are sweeping at a policy level and could influence ASX, ASIC, or legislative responses—particularly if the Coalition won government. However, the report itself was an in-house review and any policy changes would be a separate process.
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