By Rhiannon Hoyle
SYDNEY-- Newcrest Mining Ltd. said it cut hundreds of jobs in
Papua New Guinea in a push toward austerity. The decision comes
after the company launched a raft of cost-cutting projects across
its operations last quarter.
The Melbourne-based gold miner, one of the world's biggest, said
it cut 208 jobs across a range of roles at its Lihir site from
January to March. Newcrest said it also eliminated another 32
vacant roles at the site, its most expensive to operate.
Newcrest pinned its 11% drop in third-quarter gold production on
maintenance work at sites including Lihir and Cadia East in eastern
Australia.
Newcrest's priority is now on bolstering cash flow, "not
maximizing production ounces," said Chief Executive Greg
Robinson.
Some of the world's largest resources companies, including BHP
Billiton Ltd. and Anglo American PLC, have been cutting spending,
shelving major projects and looking to run existing operations
harder after pledging better capital discipline after years of
heavy investment in new mines. This has resulted in hefty job cuts
across the industry.
Commodity prices from coal to gold slumped as mine supply
increased, the U.S. moved to tighten monetary policy and economic
growth in China cooled.
Newcrest has curbed spending over the past 18 months, which
included closing its Brisbane office in Australia's Queensland
state. This came after a sudden halt to a more-than-decadelong bull
run for the gold market. Spot gold prices are currently down about
25% from 2013's highs.
In February, Newcrest reported a slide in first-half net
profit--to 40 million Australian dollars (US$37 million) from the
A$323 million in the same period a year earlier--as it posted write
downs against exploration assets and extra tax charges tied to
research and development.
"I think there is more room for us to move," said Mr. Robinson
of the company's ability to cut costs further, on a call last
Wednesday with analysts and investors. He said the Lihir mine would
be a focus for cash savings and productivity improvements in the
period ahead.
It costs the company A$1,344 an ounce to sustain operations at
Lihir, compared with A$875 an ounce at its Telfer mine in
Australia, and A$381 an ounce at its Cadia Valley site.
Newcrest separately confirmed Mr. Robinson would stand down in
early July, and will be replaced by Sandeep Biswas. The former Rio
Tinto PLC executive joined Newcrest as chief operating officer in
January with the expectation he would take over Mr. Robinson's role
in the latter half of 2014.
Shares in the company were recently up 1.5%, outperforming a
0.5% rise in the broader S&P/ASX 200. While third-quarter gold
output fell to 551,590 ounces from 621,125 last quarter, production
was still up 7% compared with a year earlier.
The company also stuck to earlier estimates that gold output
would reach the higher end of its 2.0-million ounce to 2.3
million-ounce guidance range this fiscal year.
Still, some fund managers are cautious. "Its balance sheet
remains quite constrained, burdened by too much debt, and some of
its major assets are simply being run for cash generation, which I
believe is a very short-term approach," said Ben Lyons, a
Sydney-based portfolio manager at ATI Asset Management, who sold
his fund's holdings in Newcrest about 18 months ago.
In its half-year report in February, Newcrest said its
operational cash flow had nearly halved, while debt-to-equity level
jumped above 30% from 17% in the same period a year earlier.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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