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."
Investment focus— Page 24
Frequently Asked Questions about this Article…
Dr Maurice Newman’s in‑house review largely cleared Newcrest Mining of breaching market disclosure rules over the June 7 corporate restructure. He did not find a single “smoking gun” indicating deliberate malpractice, though he identified some minor lapses in following internal protocols.
The review was commissioned after a market disclosure scandal that followed Newcrest’s June 7 corporate restructure. The restructure was preceded by an 18% slump in Newcrest’s share price and several analyst downgrades, prompting questions about whether some large shareholders or analysts had been selectively briefed.
No. After 10 weeks of investigation Dr Newman said he could not find a “smoking gun” piece of evidence pointing to selective briefing or insider wrongdoing. He concluded Newcrest generally took continuous disclosure obligations seriously, despite noting some procedural shortcomings.
Dr Newman suggested Spencer Cole, Newcrest’s investor relations manager, could not have known about the major bad news in the restructure because that information had been quarantined from him. The report implies Cole was not in a position to be informed about asset impairment or dividend deliberations at the time of analyst meetings.
Dr Newman delivered a scathing assessment of the analyst and brokerage community, saying many analysts were slow to react to a gold price slump in April, were often inexperienced, and sometimes failed to understand material published by Newcrest. He suggested this contributed to market confusion ahead of the restructure.
Dr Newman made 17 recommendations focused on improving how Newcrest interacts with investors and maximises disclosure. Newcrest accepted all 17 recommendations, which were described as widely accepted notions around investor communications and disclosure processes.
Yes. The review was described as restricted in scope: Dr Newman did not fully analyse Newcrest’s email system, trading data around June 7, or written records of analysts who downgraded the stock, and he had limited access to key analysts and brokers—partly because an ASIC investigation prevented some people from speaking to him.
Yes. ASIC has an ongoing investigation into the disclosure saga. ASIC declined to comment on Dr Newman’s findings, and the regulator’s investigation restricted the review by limiting access to some analysts and information.
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