SYDNEY--Newcrest Mining Ltd. (NCM.AU) reported the biggest
annual loss in its history, after a sharp fall in the price of gold
forced it to write down the value of its mines and investments by
6.23 billion Australian dollars (U$5.73 billion).
Melbourne-based Newcrest also scrapped its final dividend as it
looked to conserve cash at a time when mining costs are rising and
investors are losing faith in gold as a so-called safe-haven asset,
especially after the U.S. Federal Reserve signaled it could start
to wind down its fiscal stimulus as soon as next month.
Newcrest, which owns mines in Australia, Papua New Guinea,
Indonesia and Ivory Coast, reported a net loss of A$5.78 billion
for the year through June compared with a profit of A$1.12 billion
a year earlier. On an underlying basis, which strips out one-off
items like impairment charges against assets, profits of A$451
million were ahead of the A$434.6 million median of six analysts'
forecasts compiled by The Wall Street Journal.
Once the darlings of stock markets around the world, gold miners
have been driven on to the back foot by a 20% slump in the price of
the precious metal since the start of the year. The sudden halt to
a decadelong bull-run in the gold market has led many mining
companies to slash spending, close mines, lay off workers and scale
back executive pay.
"Newcrest's financial results reflect a substantially different
operating environment to the prior year," Chief Executive Greg
Robinson said.
Driving this shift is a change in mood among investors toward
risky assets. With the developed world appearing on the cusp of a
recovery, many investors are seeking higher returns from currencies
or equities that they had previously shunned when Europe was
struggling to get on top of the debt woes and the U.S. was
loosening monetary policy.
Newcrest is the world's fourth-largest gold miner by market
value behind Goldcorp Inc. (GG), Barrick Gold Corp. (ABX) and
Newmont Mining Corp. (NEM). It is the largest in Australia, where
total production of the precious metal is only outpaced in volume
terms by China.
In addition to falling prices, Newcrest's earnings were hit by
disruptions at several of its mines. Annual gold production fell 8%
to 2.11 million troy ounces. Lihir in Papua New Guinea--where
Newcrest has been mining lower-grade ore--was disrupted by an
electrical fault at an oxygen plant, and separately by a dispute
with a group of local landowners. At Gosowong, one of the company's
mines in Indonesia, heavy rain hurt efforts to target thicker seams
of gold.
Newcrest said it expects to produce 2.0 million-2.3 million
ounces of gold in the current fiscal year, and 75,000-85,000 metric
tons of copper.
The Lihir mine--acquired through Newcrest's A$9.5 billion
takeover of Australia-listed rival Lihir Gold Ltd. in
2010--accounted for more than half of the company's writedowns.
Impairment charges were also taken against three other mines, along
with its 33% stake in Evolution Mining Ltd. (EVN.AU).
Other miners, including Rio Tinto PLC (RIO), have also taken
impairment charges on assets bought when commodity prices
peaked.
Evolution Mining and gold-and-copper producer OZ Minerals Ltd.
(OZL.AU) last month warned of a combined hit to their bottom lines
of up to A$640 million. Each blamed the looming writedowns on sharp
falls in prices of commodities like gold--Australia's third-biggest
export.
Newcrest didn't say when it was likely to reinstate its
dividend. It is continuing to focus on slashing costs, targeting a
20% cut in spending on exploring for gold deposits and early work
on new mining projects. The company has also axed hundreds of
workers and closed one of its Australian offices.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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