Investors not bothered by $US270m asset writedown flagged by Newcrest
Summary: Investors in Australia's biggest gold miner, Newcrest Mining, have shaken off news of a non-cash writedown of Newcrest assets of $US260 million to $US270 million, with shares in the gold miner closing 2.1 per cent higher on Thursday.....
News from Newcrest that it was expecting to report strong free cash flow for fiscal 2018 of about $US600 million when it reports full year results in less than a fortnight appeared to offset the writedowns.
A Newcrest announcement on debt could also have pleased the market, as the miner indicated it expected its net debt to be $US1.04 billion at the end of June 2018, which is $US459 million lower than at the same time last year.
The non-cash writedown related mainly to Newcrest's ageing Telfer copper and gold operation in the East Pilbara. Newcrest said the carrying value of Telfer was likely to be written down by about $US190 million, after tax.
Namosi, a Newcrest gold/copper project in Fiji, is expected to be written down by about $US70 million after tax, the miner said.
At Telfer, Newcrest said the latest life of mine plan indicated lower levels of ore mined and higher levels of waste from the West Dome open pit mine, and lower gold recoveries.
Newcrest has also attributed some of the writedown to "higher estimated closure costs and higher operating costs than previously forecast" at Telfer. And it warned of "a reduction in the value attributed to a potential future block cave".
Telfer, which is about 400 kilometres south east of Port Hedland, is Newcrest's only gold mining operation in Western Australia, one of the company's foundations assets and is heading towards the end of its life. It accounts for about 10-15 per cent of Newcrest's annual gold production.
A company spokesman told "The Age" that over recent months, as mining at Telfer moved into ore that was metallurgically different, the miner was "digging up more ore, and getting less gold at the end of it. So it cost us more money."
The spokesman said the adjusted carrying value for Telfer would be announced when Newcrest reports its full year results on August 22.
On Namosi, Newcrest said it had reassessed "the appropriateness to continue to carry forward previous study costs".
Newcrest said the writedowns would be reported as significant items and would not affect its underlying profit. The gold miner has a market capitalisation of about $16.5 billion.
Shares in Newcrest rose 45 cents (2.1 per cent) on Thursday to close at $21.45.