Newcrest slammed on gold cut
Shares in Newcrest Mining slumped to their lowest in 4 years after the company revealed it would 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 problems at the Lihir mine in Papua New Guinea would see it miss its 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 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 even that wide guidance will be missed, with Lihir now tipped to produce between 620,000 and 680,000 ounces by June 30.
Repairs could take up to seven weeks. The company said difficulty accessing high-grade gold at its Gosowong mine in Indonesia had also contributed to the downgrade.
Production across Newcrest's six operating gold mines was supposed to be between 2.3 million and 2.5 million ounces this financial year but will now come in between 2 million and 2.15 million ounces. That means it will produce less gold this year than the 2.28 million ounces produced last year.
Given the gold price has fallen 11 per cent over the past six months, Newcrest may now struggle to match last year's record profit of $1.12 billion.
IG markets analyst Evan Lucas said it was another let-down. "If you like gold, buy the metal, not Newcrest," he said. "It has been a serial disappointment stock."
Newcrest announced several changes to its executive structure yesterday but indicated they were not linked to the problems at Lihir.
Chief operating officer Greg Jackson will now focus on "special projects", allowing the two general managers, Brett Fletcher and Peter Smith, to report direct to Mr Robinson.
Despite its problems, Newcrest offers huge growth potential and expects to be producing up to 3.5 million ounces by 2017. Its shares closed $1.82 lower at $20.05.