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

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Theresa May dodges difficult questions about social care and NHS in Andrew Neil interview

Prime Minister was on message but on the back foot.

Theresa May was interviewed for 30 minutes by Andrew Neil on BBC One this evening, and she managed to say next to nothing. Whether you see that as skilful politics or shameless dishonesty, there was very little that came out of this interview. Here’s the little we did learn:

The Prime Minister is assuming victory - even if she says otherwise

Although the Conservative party’s campaign has been based on trying to convince voters that there is a chance Jeremy Corbyn could be Prime Minister (to spook them into voting for May, and against a Corbyn-led coalition – a very unlikely scenario in reality), Theresa May revealed just how strongly her party is assuming victory. For example, when pressed on her plans for funding social care (means-testing the winter fuel allowance, and taxing the elderly on their assets), she could only answer that her government would hold a consultation to iron out the details. No matter how hard she tries to push the message that Corbyn is en route to No 10, if her policies are not policies at all but ideas to be fleshed out once she returns to power, this remains just rhetoric. As Neil asked about the consultations: “Wouldn’t you have done that before you came out with the policy?”

The Tories won’t lower themselves to costing their manifesto

It has always been the case that Labour has to work much harder than the Tories to prove its economic credibility, which is why in the Ed Miliband days it was decided that all policy proposals had to add up. But never have the Tories been so shameless in taking advantage of that political fact. For all the stick its received for being idealistic, Corbyn’s manifesto is more costed than the Tory effort, which May herself admitted during this interview is a set of “principles” rather than policies: “What we set out in our manifesto was a series of principles.” Where is the money going to come from for £8bn extra for the NHS? “Changing the way money is used”, “The strong and growing economy”, and “a variety of sources”, of course! At least Labour could patch together something about corporation tax and cracking down on tax avoidance if asked the same question.

Playing politics

Neil went in hard on May’s u-turn on her plan to fund social care – asking repeatedly why the Tories are now planning on bringing in a cap on how much the elderly have to pay, when originally there was no cap. All May could offer on this was that Corbyn was “playing politics” with the policy, and “scaremongering” about it. This deflection was flawed in a number of ways. First, it provided no explanation of what the policy will now be (what will the cap be? When will we know?), second, if Corbyn has been “scaremongering” it means he must have influenced the policy change, which May denies, and third, all it highlights is that May is herself “playing politics”.

Brexit is always the answer

As May cannot answer a single question about the specifics of policies or spending, Brexit is the perfect topic for her. It is a subject defined by its uncertainty and lack of detail, therefore something she can get on board with. She answered almost every question on every subject broached by Neil by asking who voters want around the Brexit negotiating table after the election – her or Corbyn.

Why are the polls closing? “...I’ve set out my vision for that strength in negotiations and that stronger plan. And the choice is who’s going to be doing those negotiations, me or Jeremy Corbyn.”

Are your policies uncosted? “...I think it is important that the country has certainty over the next five years, has the strong and stable leadership I think it needs, as I’ve just explained, particularly for those Brexit negotiations.”

Where is the extra NHS funding going to come from? “...Crucial to that, is getting the Brexit negotiations right, and that’s why this is so important. That’s why who is sitting around that negotiating table, 11 days after the election it’s going to start…”

Will National Insurance go up? “...Fundamental to that of course is getting the Brexit deal right and getting those negotiations right and having both a strong hand in those negotiations but also the strength of leadership in those negotiations…”

Will you break the immigration target promise for a third time? “...The question that people face is who do they trust to take this country though the Brexit negotiations..?”

But the soundbites must be working

A few seconds in to the interview, May had already used the phrase “strong and stable” and “my team”. While political insiders will groan and mock the repetitive use of such banal phrases, and emphasis on Brexit negotiations, we must remember the “long-term economic plan” slogan of 2015’s Tories. It worked, and clearly behind the scenes, the masterminds of the Conservative campaign believe these soundbites must be working. Theresa May is miles ahead of Jeremy Corbyn on the “who you trust to be Prime Minister” metric, which is why the Tories repeating how “strong and stable” their government would be, and running such a presidential campaign (“my team”, and May versus Corbyn) must be working.

Anoosh Chakelian is senior writer at the New Statesman.

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