Friday, July 25, 2014

Australia's Newcrest braces shareholders for up to A$2.5b impairment

Sydney (Reuters) -  Australia's Newcrest Mining Ltd on Thursday braced shareholders for up to A$2.5 billion in fiscal 2014 after-tax impairments as it struggles to lower mining costs while bullion prices show little sign of rising.
The latest charge is in addition to a A$47 million impairment included in Newcrest's first-half results.
These follow A$6.229 billion in impairments and writedowns the Australian bourse's largest-listed gold miner took in fiscal 2013, leading to a A$5.78 billion loss for the year.
Newcrest stock fell 6 percent on Thursday to A$10.73, 14 percent below its 2014 peak of $12.50 in early April
UBS maintained its "sell" rating on the stock despite higher-than expected gold production of 2.4 million ounces in fiscal 2014, also reported by the company on Thursday.
"We believe it is the simple function of size and liquidity that keeps Newcrest Mining as the 'go-to' gold stock in Australia for many investors and not a function of asset portfolio quality," UBS said in a client note.
Managing Director Sandeep Biswas said a final decision was yet to be made but the impairment was likely be between A$1.5 billion and $2.5 billion.
Depending on the size, the impairment will lift Newcrest's net debt by between three and six percent from roughly 29 percent now, he said.
The impairment will not impact cash flow for the miner, though a reduction in book values of between A$1.5 billion to A$2.5 billion was under review by the company's board, Biswas said.
Newcrest's Lihir gold mine, located in a long-dormant volcano in Papua New Guinea, faces the biggest deterrent to a turn around for the company despite billions of dollars in capital outlays over the last several years, Biswas said.
"Lihir's cost perfomance was disappointing relative to the improvements made at our other sites," Biswas said.
The need for fresh charges -- also related to performance at mines in Western Australiaand Ivory Coast -- were unlikely to trigger any asset sales to raise cash, Biswas said.
"The first order of business is to see the value of these assets in our stock price," Biswas said.
Nor would the company turn to an equity raising for fresh capital, according to Biswas.
"Our focus is to get our all-in sustaining costs down such that the more margin you have compared to the gold price, the more buffer you have in times of price volatility," Biswas said. "And of course you make more money when the price goes up."
Biswas said Newcrest sold its gold for an average A$1,382 ($1,300) an ounce in the final quarter, providing a margin of A$469 ($440) an ounce.
Australia & New Zealand Bank is forecasting an average gold price of $1,220 an ounce over the current quarter, equating to A$1,151 based on the current foreign exchange rate. ($1=1.0597 Australian Dollars) (Reporting by James Regan; Editing by Richard Pullin)

No comments:

Post a Comment