Newcrest joins job-cutting crew
UPDATE 3.05pm: Shares in Newcrest Mining slumped after the gold miner announced it would slash about 100 jobs and close its Brisbane office because of the recent gold price rout.
Over the past 24 hours, more than $780 million has been wiped off the value of Newcrest's shares as the company blames the biggest gold price fall in 30 years on its decision to cut corporate costs by 20 per cent.
Shares in the company plummeted $1.01, or 7.6 per cent, to close at $12.35 today as investors focused on $5 billion to $6 billion in writedowns, rather than the cost cutting.
The company shares have been on a steady decline since hitting a 52-week peak of $29.97 in September last year.
Newcrest, which is grappling with weaker cash flows, said the strength of the Australian dollar and higher costs were also factors in the decision to shut its corporate support office in Brisbane.
In March, the gold miner cut 150 jobs, mostly from its Brisbane and Melbourne offices.
Today’s announcement takes the company's total job cuts for 2013 to around 250.
A Newcrest spokeswoman said the Brisbane office would shut its doors in September, but she was unable to say why it was selected.
“The Brisbane office has over 100 people in it and some of those roles will transfer to Melbourne,” the spokeswoman told AAP.
She said there were no plans to shed roles at the company's Perth office, the smallest of its three Australian corporate hubs.
In a statement Newcrest said its 2014 budget had been developed in the context of the current market environment and outlook, including the largest deterioration in the gold price in 30 years.
The spot price of gold is currently sitting just above $US1400 an ounce after reaching $US1888 in August 2011.
Several brokers downgraded their production forecasts for Newcrest yesterday.
As well as shrinking its corporate activities, Newcrest will significantly reduce its exploration activities.
Capital expenditure forecasts for 2013/14 have been reduced by $500 million to $1 billion.
Gold production in 2013/14 is expected to be between 2 and 2.3 million ounces, which is about four per cent higher than in 2012/13.
The cost of Newcrest's corporate restructure will be up to $75 million, which will also be included in the 2012/13 accounts.
CMC Markets chief strategist Michael McCarthy said the writedowns had added fuel to the fire after Newcrest's three downgrades to guidance over the past 12 months.
“Newcrest's habit of overpromising and underdelivering means that the credibility around this statement is low,” he said.
“Closing offices and cutting costs doesn't give investors much hope that there's any way out of this current mess.”
He said the company had no plans to deal with the lower gold price and currency such as altering its hedging policies.
With Newcrest's cost of production estimated to be around $US1100 to $US1200 per ounce, it appeared that management had crossed its fingers in relation to the gold price.
“If this downward trend continues, pretty soon there'll be threats to the viability of their whole operations,” he said.
Newcrest's main assets are the Cadia Valley operations in the NSW central west and the Lihir mine in Papua New Guinea. However the company also operates the Telfer gold mine in the East Pilbara region.
