Australia’s biggest gold producer, Newcrest Mining, has announced a 63 per cent jump in its full-year profit.
Newcrest Mining?Ltd., the world’s third-largest gold miner by market value, said its net profit rose to 908 million Australian dollars ($940.1 million), as production jumped on its acquisition of Lihir Gold Ltd. and the price of gold soared.
The average price of the company’s gold sales over the past financial year was $US1,360 an ounce, up from $US1,106 the year before, with copper prices also significantly higher in US dollar terms.
However, the appreciation of the Australian dollar offset some of the metal price increases.
“The world economic and political issues are supporting a very strong gold price going forward,” Chief Executive Greg Robinson said in a conference call. He didn’t provide a specific price forecast.
The company’s record profit also comes despite weather-related disruptions to some of its operations at the start of the year.
Copper production decreased from 86,816 to 75,631 tonnes, caused partly by rain disruptions at a key mine.
Gold production increased 43 per cent to just over 2.5 million ounces.
The surging gold price, which averaged A$1,409 per troy ounce over the company’s fourth quarter ended June 30 and has since hit successive records up to $1,814.89 per ounce, helped lift earnings at the Melbourne-based company from A$556.9 million the previous year.
On the underlying basis preferred by equity analysts, which excludes one-off and accounting items, net profit came to A$1.06 billion in the financial year, the company said in preliminary annual results. Analysts had suggested an average figure of A$1.05 billion.
The earnings also emphasized the difficulties that global gold miners are having in raising their production, a factor that has ensured that global output has stayed close to flat in recent years, while the price of the yellow metal has more than doubled. The performance of Newcrest’s second-biggest mine?the remote Telfer pit in Western Australia, which accounted for 621,291 troy ounces of gold in 2011?disappointed, with costs rising 9.8% on the year and production falling 10% as the site hit poorer-quality ores.
Overall production costs jumped 65%, owing to the integration of the Lihir assets and the commissioning of its Hidden Valley mine in Papua New Guinea. Excluding those factors, costs rose 7.4%, “with increasing energy prices and wage inflation applying cost pressures across the business,” Newcrest said.
Drop in gold index
Mr. Robinson said the company was downgrading the importance of higher-cost mines to its medium-term forecast, including Telfer and Hidden Valley, as a result of their higher costs. Shares in Sydney fell 1.4% on the result to A$40.17 midafternoon Monday in Sydney, ahead of the 0.7% drop in the S&P/ASX Gold index, in spite of the miner declaring a surprise 20 Australian cents special dividend on top of a 20 cents final dividend. A 20 cent final dividend was declared at the full-year result last year and analysts had expected 22.2 cents, according to a Dow Jones Newswires poll of five brokers.
The company is the world’s sixth-largest gold miner by output, according to Deutsche Bank, but its low costs and location largely outside perceived higher-risk African countries means it trails only Barrick Gold Corp. and Newmont Mining Corp. in terms of market capitalization. Over the 2010 year, production costs came to A$493/oz.
The company said it would consider a second listing on theTorontostock exchange within the next six months. “It’s about putting ourselves in the major gold market of North America against our competitors more directly,” Mr. Robinson said.
Newcrest declared a final unfranked dividend of 20 cents per share and a special unfranked dividend of 20 cents per share.
Added to the February interim dividend of 10 cents per share, the total dividend for the year is 50 cents.
This represents double the total dividend paid last financial year.
“In the 2013 year, we have an expectation that we will start to frank our dividends as our tax losses roll off,” Mr Robinson said.
Newcrest shares were down 33 cents, or 0.81 per cent, at $40.40.
Picturing the outlook for 2012, the company has said that gold production in the 2012 financial year is expected to increase to a range of 2.775 ? 2.925 million ounces, and copper production is estimated to increase from the 2011 level of 75.6 thousand tonnes to 75 ? 85 thousand tonnes.
Newcrest is Australia’s largest gold producer and one of the world’s top ten mining companies by production, reserves and market capitalization. Headquartered in Melbourne, the company has around 5,100 employees and long term contractors.
Price increase ripples
The recent increase in gold prices has left much of an impact on all dealing with this metal.
Despite higher prices ? up about 26 percent in the second quarter, according to the World Gold Council, an industry group ? demand for gold jewelry is holding steady.
Eager shoppers in India and China, the world’s biggest gold-jewelry buyers, remain buyers, the group said in a report.
U.S. shoppers are turning away from gold jewelry as prices rise and unemployment remains high. Demand at home fell 10 percent in the first three months of the year, according to the World Gold Council. And prices have risen by about $300 an ounce since the end of March.
Gold may keep climbing. The Federal Reserve said Tuesday that it would keep interest rates at a record low for at least two years. The lower rates could further erode the dollar’s value as a safe haven and enhance gold’s appeal.
For the first time the price of gold last week spiked above $1,800 an ounce.
Sources: WSJ, abc, ninemsn, newcrest, emirates 24|7