Newcrest mining cashing up

THE market has been left to ponder the merger and acquisition ambitions of Newcrest's new managing director, Greg Robinson, after the leading gold company said it would pull in $US1 billion from a long-term bond issue.

That was because the lightly geared Newcrest does not need the funds, even if it is planning to spend as much as $9 billion in the next five years increasing its gold production by 50 per cent to 4 million ounces from existing ''in-house'' growth opportunities.

Newcrest is spending $2.2 billion on its Cadia East project in New South Wales and $700 million on the expansion of the Lihir mine in Papua New Guinea. Those two projects provide most of the planned growth in the next five years.

Beyond that, the half-owned Wafi-Golpu project in PNG is being banked on to underwrite a major push beyond 4 million ounces of gold a year. South Africa's Harmony owns the other half of Wafi-Golpu and the market suspects Newcrest wants to make the project all its own.

Newcrest's heavy capital expenditure program is expected to be funded by operating cash flow thanks to bumper gold prices and strong prices for the group's byproduct production of copper.

Newcrest's statement to the ASX said the bond issue would be used to repay existing unsecured debts as well as fund a ''portion of Newcrest's major growth projects''.

Mr Robinson was quoted as saying Newcrest had simply taken advantage of its ability to raise some ''very competitive long-term capital'', which would ''further diversify Newcrest's sources of funding''. Newcrest also has a $US2 billion shorter-term debt facility with its eight relationship banks.

Short of Newcrest following up its successful takeover of Lihir Gold with another acquisition, analysts said the bond issue would heighten Newcrest's ability to increase dividend payments and accelerate development projects - all while maintaining a preferred ceiling on its gearing levels of 15 per cent.

Mr Robinson was last month forced to defend Newcrest's dividend record after criticism on gold company payouts by its biggest shareholder and the world's biggest mining fund manager, BlackRock.

BlackRock had earlier argued that gold producers' low payout ratios were one of the reasons why gold stocks had lagged behind the surge in gold prices.

Mr Robinson said Newcrest was already at the higher end of dividend payers in the gold sector.

''We are roughly at a 1.5 per cent yield with that normal [30? a share] and special dividend [20? a share] that we paid - and that would be in amongst the top in the gold industry,'' Mr Robinson said last month.