Newcrest Mining’s (NCM) $6 billion plus of write-downs and losses this year saw a board and management clean out yesterday as the company seeks to put behind it years of dud investments, missed production guidance and falling profits.
The country’s biggest gold miner yesterday revealed that four months after reporting the write-downs and a loss for 2012-13, the current chairman Don Mercer will go in December and the CEO will also change next year.
The news saw the shares end up 10c at $10.93.
NCM YTD – A rough year however market likes management exodus
.png)
Current board member Peter Hay will replace Mr Mercer and the company appointed former Rio Tinto executive Sandeep Biswas as chief operating officer and an executive director on the board from next January. He is expected to replace current CEO Greg Robinson in about a year’s time.
Mr Hay has spent just two months on the company’s board – a situation that suggests these changes were planned after the losses and write-downs were announced and the controversy over analyst briefings in early June.
Mr Biswas has most recently run Rio’s struggling aluminium division under the banner of Pacific Aluminium, but with that division now being merged back into Rio (because no one wanted to buy it), Mr Biswas has moved to Newcrest where he will serve at least 6 months as chief operating officer before stepping into the main role.
Newscrest has been battling rising investor unease at a succession of production downgrades that were for a while hidden by the sharp rise in the gold price. Central to these were problems at the Lihir mine in PNG which was bought for just under $10 billion.
As a result of the changes, the AGM later this month should be a quieter affair for the company after some major shareholders had indicated unhappiness with the lack of change at board and management levels in the wake of the write-downs and losses.
The shares have plunged 70% in the past 27 months – and while the falling gold price is responsible for much of the drop this year, the company’s weak operating performance accounts for the majority of the decline.
That was exposed by the plunge in gold prices in April and May which in turn forced the board to review asset values and reveal billions of write-downs, losses, job cuts and other cost savings. The company’s share price fell sharply ahead of that announcement, leading some to wonder if there had been inside dealings or prior warning given to some in the markets.
An internal inquiry conditionally cleared the company (it was conducted by former ASX chairman Maurice Newman) because it couldn’t gain full access to the relevant people and material. An ASIC inquiry continues.
The Australian Shareholders Association has been calling for Mr Mercer to step down given he was chairman when Newcrest did the Lihir takeover in 2010.
Lihir has been at the centre of much of Newcrest’s underperformance over recent years, because the processing plant on site has continually failed to work as hoped. But so has the Hidden Valley mine in PNG where there have been cost blow outs and weak recoveries.
What has also upset some investors was that despite being written down by $3.69 billion this year, Newcrest continued to pay out bonuses this year to staff involved in the Lihir takeover.
Mr Robinson was not chief executive when Newcrest bought Lihir, but he was chief financial officer.
In yesterday’s announcement Mr Mercer said he "had flagged his intentions to retire to his board colleagues last year, and an orderly board succession program had commenced earlier this year, with the appointment of Mr Hay and Mr Philip Aiken as directors.
"Peter Hay is an extremely experienced and capable director,” said Mr Mercer, “whose skills and intellect will help lead Newcrest into the next stage of its development as a major gold producer.
“I have been privileged to lead an extremely dedicated, hard-working and productive Board of Directors over the past seven years at Newcrest, and I have enjoyed my time as Chair,” said Mr Mercer, who has overseen the transition of Newcrest from a mid-tier to major gold producer.
“Working with two chief executives and their executive teams has also been a positive experience, despite the tough global economic conditions. I would like to pay particular tribute to Greg Robinson, who has worked hard to protect the long term future of the Company through this period, and whose strong values are an example to all," Mr Mercer said.
Not a word about the write-downs and losses and the problems at Lihir and how it had undermined Newcrest’s returns in the past two years.
And to show that the company is still on track, despite the distractions on the past few months, Newcrest also announced its basic production and unit cost results for the September quarter.
Newcrest said it will release its September 2013 quarterly report on October 17. "However, it is able to advise that production for the September 2013 Quarter was 586,573 ounces of gold and 19,632 tonnes of copper. The cash cost (after by-product credits) was US$718 per ounce (A$784 per ounce) and the All-In Sustaining Cost was US$1,001 per ounce (A$1,102 per ounce). Guidance for the 2014 financial year remains unchanged," the company said.
Mr Robinson said in the statement that, “This is a production and cost outcome that reflects the investment and operational strategies of the Group, and the hard work of our people to deliver it. This quarter positions Newcrest well to deliver its guidance outcomes for the 2014 financial year."
