The events last week at Newcrest Mining will be centre stage today as investors wait for any sign that the market regulator ASIC is going to do more than just talk about the events of last week that saw the company’s shares plunge 21%, including on Friday when the company cut its final dividend, announced more cost cutting and plans to cut its asset values by up to $6 billion.
Brokers, fund managers and ordinary investors were infuriated at how a number of analysts all changed their outlook on the stock during the week, effectively downgrading it, while the shares were falling by 3% to 6% a day. This happened well before Friday’s statement from the company.
The gold price won’t be a help for the country’s biggest gold miner – it lost $US1 on Friday and was not solid overnight, wavering around $US1,385 an ounce.
ASIC will be investigating the events surrounding Newcrest’s release of its statement last Friday. Don’t hold your hopes expecting anything dramatic, or speedy.
As pointed out in an earlier writing, Newcrest has destroyed millions of dollars since 2010 and the takeover of Lihir Gold. Newcrest’s market value at the close on Friday of $9.4 billion is now smaller than the $10 billion spent on the Lihir deal (in cash and shares).
On Friday Newcrest issued a statement outlining plans to shrink the business, and confirming another production downgrade for the year (is that the 4th?)
The shares ended at $12.35 on Friday after touching an all time low of $11.40 during the day’s slide.
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That took the loss for the week to 21% since 10.22 am on Tuesday when the shares started falling. Some $2.6 billion in value was lost in the slide last week.
Staff numbers will be cut, with between $50 million and $75 million of redundancies to be carried out in the next three weeks or so (by June 30).
Newcrest’s Brisbane office closed as part of a 20% cost cut. No dividend to be paid for the year to June 30, 2013.
Newcrest’s $6 billion write off will be fleshed out when the company reveals its 2012-13 results in August.
It won’t be pretty because it will be spread across all of the company’s six mines, indicating there are deeper problems in the company’s operational set up.
An estimated $3.6 billion will be written off Lihir.
Elsewhere on the market, it should be a solid start for the week with the share price futures index jumping 58 points overnight Friday to 4798 after the US reported moderate jobs growth in May.
The Aussie dollar ended a touch under 95 USc – looking weak, but not tumbling as it did at times during last week.
The Australian economy – specifically the health of the jobs market dominates the holiday-shortened week ahead of us.
The May jobs report will be issued Thursday and most economists are looking for a worsening of the number of jobless and a rise in the unemployment rate.
The AMP’s chief economist, Dr Shane Oliver sees a rise of 25,000 in the number of jobs lost and a rise in the unemployment rate from 5.5% to 5.7%. He says the May report will probably see a reversal of the strong 50,000 gain in April which surprised the market.
Other estimates see a smaller number of jobs lost, and a rise in the unemployment rate as well.
As well as the jobless number we will also see the release of housing finance data for April and the NAB’s months survey of business confidence and conditions (tomorrow).
On Wednesday the monthly report on consumer sentiment survey is due for release. As well the ABS is due to release lending finance data on Wednesday.
Dr Oliver says housing finance data may show an easing for April. Some estimates suggest it could be around 1%.
The Bank of Japan meets tomorrow and is unlikely to announce further easing given that its current huge reflation program is still working its way through.
Dr Oliver says it may reiterate its commitment to achieving stronger growth and inflation and indicate it stands ready to do more in order to help sooth jittery investors though.
In the US, May retail sales (on Thursday) with a small rise of 0.3% expected, industrial production to rise, consumer sentiment to remain strong and producer price inflation and import prices to have remained benign (all out Friday).
