Newscrest Mining announce first loss in over a decade: gold's in trouble

Net loss of US$5.77 bn

The largest gold miner in Australia has reported a net loss of US$5.77 bn for the 2013 financial year, thanks to a massive $6.22 billion writedown in the value of its assets. Gold prices have fallen by nearly 30 per cent since January to a low in June of $1,180 per troy ounce, forcing Newscrest to curtail gold production at its most expensive mines and reassess the value of its assets.

Without the writedowns, underlying earnings stood at $451m, down from $1.11 bn last year, showing just what trouble gold miners are in globally. Adding to the company’s woes, Moody’s ratings agency downgraded Newscrest to Baa3, the lowest investment grade, and said the company could yet be in line for a further cut.

Production stood at 2.1m ounces for the year to June, 8 per cent lower than last year, thanks in part to the tumbling gold price, and to a series of disruptions at its mines in Australia, Indonesia, Ivory Coast and Papua New Guinea. The company is forecasting only a marginal increase to 2.3m ounces for 2014 and refused to forecast production beyond next year, citing market volatility.

Although the wheels have now clearly come off the wagon for Newscrest, the company’s financial health may not have been as good as it has appeared in the past either, with critics accusing the company of selectively briefing analysts as a number of investigations into its financial reporting have been launched.

Indonesian and Australian tax authorities have both placed the company under review, with the Australian investigation looking at six years of financial reports between 2005 and 2011. The Australian Securities and Investments Commission have also begun an investigation after investors appeared to anticipate a major corporate restructure on 7th June.

Newscrest’s trials and tribulations reflect the troubles the global mining industry currently finds itself in, with Barrick Gold last week announcing a second-quarter net loss of $8.56 bn, thanks to $8.7 bn in after-tax impairment charges driven by the declining gold price. The largest slice of the charge came from the Pascua-Lama project on the border of Chile and Argentina, which accounted for $5.1 bn. President and CEO Jamie Sokalsky said: “We are disappointed with the impairment charges for Pascua-Lama and other assets, but we are confident that these assets, some with mine lives in excess of 25 years, will generate substantially more economic benefits over time.”

It appears the market shares his optimism with the gold price rallying by $17 to $1,330 an ounce yesterday. This helped gold miners’ share prices to post a modest recovery, with Newscrest ending the day 7.2 per cent up. Whether this gain is a temporary blip or a long term recovery in the lustre of the gold market remains to be seen.

The largest gold miner in Australia has reported a net loss of US$5.77 bn. Photograph: Getty Images

Mark Brierley is a group editor at Global Trade Media

Photo: Getty
Show Hide image

Labour's unstoppable force meets its immovable object

Team Corbyn are confident. But so are their opponents.

If you come at the king, you best not miss. And boy, have they come at him: over 40 resignations from the opposition frontbench and a motion of no confidence in Jeremy Corbyn’s leadership that both loyalists and rebels expect to pass easily.

What happens next? The ruling executive of Momentum, the organising force behind Jeremy Corbyn’s supporters in the party grassroots, met Corbyn in his office late last night. It would be overstating it to say that the mood was jubilant but Corbyn and his allies are confident of victory in the struggle for supremacy. “Game on,” texted one senior figure. “He won’t stand down,” another told me, “He feels he owes it to the membership to let them decide.”

Within Team Corbyn, they remain convinced that the shadow cabinet “are going to war without an army”, in the words of one insider. Others are already looking forward to the policy conference of Labour and Britain’s largest trade union, Unite, where there is a chance the union may adopt a policy of supporting mandatory reselection of Labour MPs.

Are they right? Having called and spoken to party members, it is certainly clear that Corbyn’s standing among the membership is not quite as high as it once was.

But members are unclear what they want next – several mentioned Keir Starmer, although my instinct that is largely because, as one member conceded, he is still very much a “blank slate” on which the hopes of the party’s electorate can be projected. What most want is someone who would retain much of the politics but with greater competence – the Vice News documentary seems to have done more damage than the referendum on the whole – and without the thirty years in politics for the right-wing press to pick over. The difficulty is that it is hard to see a politician in the parliamentary Labour party answering to that description or even close to it. While for the rebels, finding a winner is no longer the priority, surviving a snap election in October is, loyalists in the PLP and the grassroots are either unconvinced that the result will be heavy defeat, or unconvinced that any of the replacements would do better.

The difficulty for Corbyn’s critics is, rather like Labour under Ed Miliband, although they might be the repository for people’s irritation and uncertainty, there are few making a positive choice to vote for any of the available candidates. My instinct is, if Corbyn is on the ballot, the polls might show a tighter picture, he might have a tougher time on the campaign trail that he did last time, and he might have a closer fight as far as constituency nominations were concerned, but he would ultimately win, and win easily.

That’s before you get into Momentum’s ability to expand the electorate further.  Although appearing at last night’s rally was criticised by some journalists and cost Corbyn’s team at least one frontbencher, who, while keen to avoid prolonging the fighting, didn’t want to endorse the attacks on his colleagues in the parliamentary party, ultimately the petitions in support of Corbyn and the impromptu rally have given them more data to go out and recruit people to vote in the next leadership election, more than making up for any loss of support within the party-as-it-is.

But – and it’s a big “but” – I’m not convinced that Corbyn will make it to the ballot.

The party’s legal advice, from the party’s lawyers, GRM Law, is that Corbyn will have to secure 50 nominations to make the ballot, just as any challenger will. My feeling, with MPs of all parties convinced that there will be an election in October as soon as the new Conservative leader is in place, is that pressure from activists to nominate Corbyn will be less fruitful than it was in 2015. (That said, Labour MPs are skittish.) 

The Labour leadership themselves have obtained legal advice showing the reverse from Doughty Chambers. But whichever way the NEC rules, neither side will be able to take it to the courts. Most legal professionals estimate that Labour, like a trade union or a private members’ club, is exempt. “You accept the rules of the club when you join the club,” and that’s the end of it. My impression is that the judiciary would be reluctant to get involved.

The difficulty with predicting what happens next is it brings two of Labour’s iron laws into direct conflict: Labour never gets rid of its leader, and Tom Watson always wins. And I don’t think anyone is sure which of those laws is going to end up broken.

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.