THE DISTILLERY: Newcrest drill-down

Newcrest Mining shares have plummeted 35 per cent since its downgrade on June 7. While much of this is simply a reflection of the falling gold price, business scribes are adamant that in order to clear the air the company had little choice but to get ahead of the corporate regulator and conduct its own investigation into whether continuous disclosure obligations were breached.

From what we’ve heard, the miner is going looking for something it knows isn’t there. Still, it is looking, which signals an objective of some kind at the very least.

The Herald Sun’s Terry McCrann makes the argument that the move is simply to give the miner some kind of shelter from the media “firestorm” that’s been raging since the downgrade on June 7.

“It was a firestorm, driven by the series of seemingly hurried and clearly coincidental investment-bank downgrades of Newcrest that had preceded the writedown – such that the Newcrest share price recorded bigger falls before the writedown, in the wake of the reports from UBS, Citi and Credit Suisse, than after the bad news was publicly released. The clear, all but unanimous and barely qualified thrust of the media commentary has been that the trio of analysts ‘must’ have been selectively pre-briefed; or at the very least, that someone at Newcrest must have let something slip. So doesn't Newcrest asking former ASX chairman Maurice Newman to investigate – Newcrest used the term ‘review’ – its disclosure practices, tacitly admit that there is or might be a problem? No. All it actually admits is that the firestorm has hurt and is continuing to hurt Newcrest and its shareholders.”

The Australian Financial Review’s Matthew Stevens explains how “close listening” of the company’s top ranks hints that it’s pretty confident the independent review will exonerate the miner of wrongdoing. He adds that it’s the only way to clear the air with the corporate regulator unlikely to report on the case for months, perhaps up to 12.

“On the other hand, the only precedent for this sort of review did not go that way at all. In 2008, ANZ Banking Group asked David Crawford to investigate what went wrong with Opes Prime, and promised to announce his findings. The wash-up was a litany of risk management failings and several senior executives losing their jobs.”

Newcrest chairman Don Mercer is of course a former ANZ boss, although he’d be long gone before the Opus Prime debacle exploded. The Australian’s Barry Fitzgerald was similarly taken by the confidence of Mercer that Newcrest hadn’t done anything wrong.

“If the former ANZ stalwart had left it it at that, everyone would have recorded it faithfully. But it also would have been pointed out that the real judgment on the issue would come when ASIC was in a position to rule out action because there had been no breaches or, having found breaches, whether Newcrest would be hit with an infringement notice or feel the heat of the less likely criminal and civil penalty actions at ASIC's disposal. That is still the case, notwithstanding Newcrest's attempt yesterday to clear the air much quicker by having former Australian Securities Exchange chairman Maurice Newman conduct an independent review.”

So why does ASIC take so bloody long to investigate these things? Business Spectator’s Stephen Bartholomeusz has the answer.

“While the Australian Securities and Investment Commission is conducting its own investigation into the spate of broker downgrades that followed meetings with the company, ASIC investigations tend to be protracted affairs because they may lead to legal proceedings and therefore any evidence needs to be very robust and collected under procedures that will withstand any challenge.”

While we’re talking miners, Fairfax’s economics correspondent Peter Martin has got his hands on some new research tracking the remuneration of BHP Billiton’s chief executive over time. Let’s just say that Andrew Mackenzie is doing a lot better than most of his predecessors – particularly pre-1998 – even if he’s earning less than Marius Kloppers did.

In other company news, The Australian Financial Review’s Chanticleer columnist Tony Boyd describes the private label bread contract struck between Goodman Fielders and Coles as a “significant victory” for Goodman boss Chris Delaney.

The Australian’s John Durie says it’s particularly good news for Delaney given the problems with the poultry business were giving investors some cause for concern.

The Australian’s Bryan Frith points out that a sharp fall in Perpetual’s share price has meant that it’s offer for The Trust Company is theoretically worth less than that of rival Equity Trustees.

Elsewhere, Fairfax’s Malcolm Maiden reminds readers that Australian bond markets trade in isolation of other debt markets, such as mortgage debt, unlike in the US where government debt serves as a benchmark. Hence, the big bond market swings are not as significant for Australia.

And finally, Fairfax’s Elizabeth Knight says “there’s probably an element of truth” in the claim that the media is being excessively negative on the Australian economy. However, she adds a string of company downgrades doesn’t make it easy to take a positive view.