Mixed messages have hit the miner's shares, writes Peter Ker.
Most Australians were asleep in bed when Newcrest chief Greg Robinson revealed the clearest signs that the gold miner was about to change direction in a dramatic way. It was mid-May, and Robinson had flown into Barcelona to present to a closed conference of large, institutional investors.
There were no ordinary punters in this crowd, just the sort of professional traders that dominate the company's share register.
A major slump in gold prices had forced Newcrest to announce a review of its operations less than a month earlier on April 23.
But when Mr Robinson strode the stage in Barcelona, he hardened his rhetoric on several important points.
The review of high-cost gold production that was announced in April had become "stop high-cost ounces". An assessment of new capital spending had become "no new capital in current price and cost environment".
Fast forward three weeks to the infamous 72 hours in June, when a swath of analysts from big investment banks suddenly downgraded the stock. Their missives emerged without comment from Newcrest, at the same time as the share price sank by close to 15 per cent. Many market observers found the timing suspicious, particularly when Newcrest broke its silence with a bucket of bad news on June 7.
The creation of that timely market consensus is still the topic of inquiries by market regulators, but what's clear is that several of those analysts named the Barcelona speech as the event that prompted them to change their view of Newcrest's future.
"Recent presentations have outlined a major change in strategy under way at Newcrest, with the focus shifting to returns and cash generation at the expense of production growth," wrote Citi analyst Daniel Seeney on June 5.
"At the recent Global Metals conference in Barcelona, Newcrest began to articulate a revised strategy of focusing on maximised free cash flows, with consequences for higher cost ounces and further major expansion plans."
UBS analyst Jo Battershill also named the Barcelona speech as the day that Newcrest moved the goalposts.
"During the Newcrest investor day hosted in early October 2012, management stated a [gold production] growth target of 5-10 per cent per annum over the five-year plan. The starting point for the growth was the 2.29 million ounces of production reported in financial year 2012,"he wrote on June 4.
"At recent investor presentations, including the [Bank of America Merrill Lynch] conference in Barcelona, Newcrest management has re-iterated its forecast growth at 5-10 per cent per annum over the next few years. However, it now appears as if the starting point is the financial year 2013 production number, likely to come in around 2.05Moz."
That realisation helped Battershill realise that gold production, revenues and other measures were likely to be lower in the future. The stock was duly downgraded to a sell.
While slides from the Barcelona speech were published on Newcrest's website, it was never published to the ASX announcements platform, despite it containing information that appears to have influenced investors.
When asked why it did not release the slides to the ASX, Newcrest insisted it contained no market sensitive information.
"The Barcelona presentation only had information that was already in the public domain, mainly via the March quarterly release and presentation which was made 23 April and was lodged with the ASX," a company spokeswoman said.
"Barcelona contained no new strategies, no new numbers and no new detail."
Why the market failed to respond sooner to the Barcelona speech also remains a mystery.
analysts did not reveal their downgrades until more than a fortnight later in the days leading up to June 7.
There were exceptions; Evans and Partners analyst Cathy Moises downgraded her valuation of Newcrest on May 20 after meeting executives from the company.
RBC did not downgrade its estimates at all.
Much of the controversy in recent days has focused on whether Newcrest met with analysts in the days prior to June 7, when the share price started to tank.
One email between fund managers, published by The Australian Financial Review, suggests such meetings did take place; "Met with mgmt [management] to gain siting on potential FY2014 production outlook. Bottom line ... FY2014 production downgrades."
But the identity of those involved in the alleged meeting remain unconfirmed.
Despite intense focus on whether Newcrest met with analysts prior to June 7, Newcrest has never denied holding meetings during that time.
Such meetings are not illegal, so long as market-sensitive information is not shared.
Newcrest has denied offering "selective briefings", which in essence means the company has denied releasing market-sensitive information to preferred analysts.
The precise nature of Newcrest's defence highlights the careful line that investor relations professionals tread on a daily basis.
Australasian Investor Relations Association spokesman Ian Matheson did not want to comment on the way Newcrest handled the events of June 7, but he said the local industry generally performed well.
"It's sometimes said that an Investor Relations person is the keeper of confidential information for the company, and also the conscience of the company internally for what is in the public domain and what's not," he said.
"We do believe that the rules around disclosure are clear and work well."
Australia's disclosure rules cut both ways, and companies can find themselves in hot water if the market is too surprised when information is announced.
Speaking at a disclosure debate before the Newcrest controversy broke, Herbert Smith Freehills lawyer Quentin Digby noted that companies did have to monitor expectations.
"You just cannot afford to surprise the market on results day. It's now at the point where if you release your results on a scheduled results day and there is a significant movement in the market price, then you are almost requesting a "when did you become aware" letter from ASX and realistically the ASIC will be very interested in that as well," he said.
ASIC is looking to the Newcrest saga, and has reportedly sought meetings with analysts involved.
Improper conduct will be hard to prove, but even if Newcrest is cleared by ASIC, some observers reckon Newcrest won't be able to avoid other types of punishment, some of which is already being handed out on the stock market.
Newcrest shares have fallen on eight of the past nine trading days, and only two of those falls can be directly linked to the gold price.
As reported earlier this week, Shaw Stockbroking analyst Vincent Pisani believes concerns over Newcrest's disclosure record is "absolutely" contributing to the sell-down.
"If there is going to be any suspicion of wrongdoing, a lot of fund managers would think if they hold the stock knowing full well that there could be an inquiry, then they've got to justify that to their trustees," he said.
"People are conservative and say, 'I'm going to take a loss and at least I can justify it because there may be an inquiry'."
WHAT WAS SAID AND WHEN
Newcrest starts review of business after gold price slump.
CEO presents to institutional brokers in Barcelona, steps up rhetoric about change of strategy
Merrill Lynch downgrades Newcrest
UBS downgrades Newcrest to sell and names Barcelona talk as key reference point.
Credit Suisse analyst predicts impairments, dividend cuts. Citi analyst says recent Barcelona talk revealed major change in strategy at Newcrest.
Businessday reports Newcrest will close its Brisbane office and axe jobs within days.
Board announces cuts to dividends, production, jobs, spending and reveals impairments.