Newcrest cops hammering after another missed target
Shares in Newcrest Mining have slumped to their lowest price in 4½ years, after the company revealed it would once again fail to meet its gold production promises.
In what has become a depressingly familiar story for Newcrest shareholders, the nation's biggest listed gold producer confirmed that problems at the Lihir mine in Papua New Guinea would again prevent the company from meeting its production targets.
Thursday's production downgrade was the fourth in less than two years and follows harsh criticism of the gold sector's record from the man who controls the biggest shareholding in Newcrest: BlackRock's Evy Hambro.
"When we are misled on volume aspirations and misled in costs we can't tolerate that in terms of the way we invest our money," he said in December.
Investors responded to the downgrade by wiping almost $1.4 billion off the value of the company, which is now plumbing the sort of share price depths not seen since November 2008, despite the global gold price having doubled since then.
Such a failure to meet guidance seemed unlikely this year after Newcrest offered an unusually wide guidance range for Lihir of "between 700,000 and 900,000" ounces of gold.
When announcing that guidance in July, Newcrest chief executive Greg Robinson said it had been made "deliberately very broad" to allow for possible hiccups at Lihir, as the final aspects of the upgraded processing plant were installed.
But the latest round of problems at Lihir - linked to the shutdown of an autoclave - have ensured that even that wide guidance will be missed, with Lihir now tipped to produce between 620,000 ounces and 680,000 ounces by June 30.
Repairs could take up to seven weeks and the company said difficulty accessing high-grade gold at its Gosowong mine in Indonesia combined to force the downgrade.
Production across Newcrest's six operating gold mines was supposed to be between 2.3 million ounces and 2.5 million ounces this financial year but will now come in between 2 million ounces and 2.15 million ounces.
Given the gold price has fallen 11 per cent over the past six months, Newcrest may struggle to match last year's record profit of $1.12 billion.
IG markets analyst Evan Lucas said it was another disappointment from Newcrest.
"If you like gold, buy the metal, not Newcrest. It has been a serial disappointment stock," he said.
Newcrest paid $9.5 billion for Lihir in 2010 but has defended its due diligence on the acquisition, saying it knew that there would be issues to sort out at the Papua New Guinea mine.
On Thursday, Newcrest announced chief operating officer Greg Jackson will now focus on "special projects", allowing the company's two general managers, Brett Fletcher and Peter Smith, to report directly to Mr Robinson.
Despite its problems, Newcrest offers huge growth potential across its mines in Australia, Papua New Guinea, Ivory Coast, Fiji and Indonesia and expects to be producing as much as 3.5 million ounces by 2017
Newcrest shares closed $1.82 lower at $20.05.