If the stock market act is any guide (and it was last week), then the selling wave that has overwhelmed Newcrest Mining seems to be ending.
The shares fell by just over 1% or 13c to $11.90, after hitting a new multi-new low of $11.81. The shares edged higher in afternoon trading.
The fall was smaller than we saw on Tuesday and last week and came as the company replied to a detailed query from the ASX about the events of last week.
The ASX query was dated June 7 last Friday which shows the exchange was onto the apparent example of informed trading in Newcrest shares.
The company’s shares fell 22% from Tuesday morning to last Friday as three different analysts downgraded the company’s outlook.
That culminated in the statement on Friday where the company revealed more job cuts, the closing of its Brisbane office and big writedowns in the value of its assets – some $6 billion.
The shares fell 15% before Friday’s board meeting and then statement.
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And shareholders were told there would be no dividend. That detailed statement and the earlier analysts’ downgrades produced cries of outrage in the market from brokers and traders and calls for ASIC to investigate, which it apparently has started doing so.
The first port of call for ASIC will be the letter from the ASX and Newcrest’s replied to the questions.
In it Newcrest said it issued its profit warning as soon as the board had approved its 2014 budget on Friday morning. It said it didn’t breach any regulations and updated the market as soon as it could.
"Newcrest first became aware of the information at the conclusion of the board’s annual business plan review and budget approval process on the morning of Friday, 7 June," Newcrest said in a statement .
The information could not have been released earlier as there was no certainty the new budget would be approved by the Newcrest board, it said.
"Newcrest notes some public commentary raising questions about possible selective briefing of analysts in recent weeks.
"Newcrest treats its disclosure obligations seriously and engages with the investment community in a manner consistent with these obligations.
"Newcrest considered that a trading halt was neither required nor appropriate in the circumstances," Newcrest said in its response to the ASX.
"The sharp deterioration in the gold price (the largest in 30 years) in April 2013, the ongoing strength of Newcrest’s operating currencies relative to the US$, the elevated operating cost environment, compression in valuation multiples and other market factors were major drivers in reaching the final interdependent decisions made by the Board.
"These decisions relate to Newcrest’s 2014 financial year production levels, exploration and capital expenditure, cost reduction actions and cashflow; and they also impact expected asset carrying values at 30 June 2013 and the likely final dividend in relation to the 2013 financial year.
"The Board also approved the 2014 financial year capital for the further development of the Cadia East Panel Cave 2 project, an important operation for the Company’s long term future.
"During the period 5 to 6 June 2013, it was by no means clear to Newcrest that it would be in a position to release an announcement containing the relevant information within a short timeframe.
"While the board was at the relevant time meeting to consider those documents, there was no certainty that the budget would be approved, particularly in light of the recent significant fall in the gold price.
"If the board had instead referred the business plan and budget back to management for further consideration and amendment, Newcrest would not have been in a position to issue an announcement for some time,” the company said.
