Miner improves in production

 NEWCREST has improved in its full-year guidance for production, costs and spending. But its strong full-year results were dwarfed by an expected asset impairment of up to A$2.5 billion (K5.59 billion).

The miner said that was mostly related to its Lihir operations, New Ireland.

Newcrest is conducting an annual review of asset carrying values, focusing on the operating cost assumptions for Lihir, exchange rate assumptions on the strong Australian dollar, particularly in relation to Telfer (Western Australia) and an assessment of timing, cost and resource utilisation in relation to Bonikro (Ivory Coast). The valuation of Newcrest’s assets is sensitive to changes in these physical, cost and economic assumptions.  

The review will indicate an impairment of the carrying value of assets in the range of A$1.5 billion-A$2.5 billion after tax which  is in addition to the A$47 million (K107m) write down of the west African exploration assets from the December half- year results.

It comes after A$6.2 billion (K14b) in write-downs in its 2013 financial year results.

Despite that, Newcrest said it had other assets in its portfolio such as Cadia Valley, Gosowong and Wafi-Golpu, which its board believed had a market value much greater than their carrying value. The miner expects the write downs to adversely impact gearing by 3-6%.  

Under the current market and operating conditions, the board remains comfortable with gearing being at this level in the short to medium term given the near term cash flow growth outlook of the Group.  

Newcrest said its board remained focused on applying the free cash flow generated by the company to reduce debt and to progressively return to paying dividends.  

Newcrest has no present intention to undertake an equity raising.