June 7, 2013 / 12:51 AM / in 5 years

UPDATE 2-Newcrest warns on profits; says no leak to brokers

* Profit warning follows string of broker downgrades

* Australian Securities Exchange monitoring situation

* Newcrest to take up to $6 billion asset writedown

* Trims production growth forecast for 2014

* Shares slump to nine-year low (Recasts with company saying no advance release of information, adds markets concerns and regulator comment)

By Sonali Paul

MELBOURNE, June 7 (Reuters) - Australia’s biggest gold miner Newcrest Mining Ltd said it had not briefed analysts in advance about a profit warning released on Friday, after several brokers had cut their outlooks and slapped sell ratings on the stock earlier in the week.

Newcrest said on Friday it plans to slash up to $6 billion in asset values, axe costs, and cut planned expansions, as it scrambles to protect cash flow after the worst slide in gold prices in 30 years.

The warning sent Newcrest’s shares down 14 percent to a nine-year low at one point, adding to a 12 percent slide over the previous two sessions after UBS, Credit Suisse, Citi, Deutsche Bank and Morgan Stanley all downgraded their outlooks on the miner.

Broker Bell Potter Securities said in a Friday morning note that the string of broker downgrades ahead of Newcrest’s market update raised “genuine concerns” for any small investors who bought Newcrest shares over the past few days.

“It could be concluded that NCM trading in the last few days was not a fully informed market,” Bell Potter managing director Charlie Aitken said in the note to advisers.

The Australian Securities Exchange, which is responsible for making sure companies keep the market fully informed about issues affecting their share prices, said if it had concerns it would send an “aware letter” to a company.

“ASX is monitoring the situation very closely,” ASX spokesman Matthew Gibbs said in an email to Reuters. He did not say if the ASX had sent an aware letter to Newcrest.

The Australian Securities and Investments Commission, the country’s corporate watchdog, was also in contact with ASX over the issue, a commission spokesman said.

“Many in the market find this extraordinary that in the last 24 hours, 3 brokers have suddenly downgraded the stock, 2 to a sell and 1 to neutral - but what amazes everyone is that there has been no new info out from the company,” Goldman Sachs broker Richard Coppleson wrote in a widely read afternoon market report on Thursday.

Newcrest denied it had given information to analysts that was not generally available in the market.

“We don’t do selective briefings,” Newcrest spokeswoman Kerrina Watson said, adding that Friday’s market update followed a long-scheduled two-day board meeting that finished earlier in the day.

“The general theme of cashflow generation has been our mantra for some time,” Watson said. “Much of the same information that’s in analyst reports is in the public domain.”

Morgan Stanley declined to comment on its analyst’s note. Deutsche Bank had no immediate comment, and UBS, Citi and Credit Suisse were not immediately available for comment.


Newcrest’s moves were not completely out of the blue, as it said recently it wanted to focus on preserving free cash flow following the sharp decline in gold prices.

It is joining a long list of miners that have been forced to slice projects and costs following a boom in which they splashed out on expensive acquisitions and projects, and tapped lower grades of ore, in a bid to capture soaring metals demand.

Newcrest said it will cut capital spending in the 2014 financial year to $1 billion instead of $1.5 billion, nearly halve its exploration spending to $85 million, and slash corporate costs.

Newcrest said it expected production in 2014 to rise about 4 percent to 2-2.3 million ounces, after cutting output at its highest cost operations. The miner was previously targetting growth of 5-10 percent a year.

It also plans to write down $5 billion to $6 billion in asset values, wiping out goodwill and reflecting lower grade operations, which will hike gearing to around double its target rate of 15 percent. Newcrest said it did not expect to pay a dividend for the six months to June 2013.

Rating agency Moody’s Investors Service said it had put Newcrest’s Baa2 rating on review for a possible downgrade.

Even as gold prices hit record levels, gold miners lagged the gains as investors punished them for making acquisitions at the top of the market and letting costs get out of control.

Miners have been hammered even more as gold prices have fallen, with the gold mining index down 45 percent this year against a 2.8 percent rise in the broader market.

Newcrest has lost nearly three-quarters of its value since Nov. 2010, far outpacing a fall in the gold price, which is down around 27 percent since peaking in late 2011. The stock closed on Friday down 7.1 percent at A$12.41.

$1 = 1.0495 Australian dollars Additional reporting by Maggie Lu Yueyang in SYDNEY; Editing by Richard Pullin

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