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
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Theresa May could live to regret not putting Article 50 to a vote sooner

Today's Morning Call.

Theresa May will reveal her plan to Parliament, Downing Street has confirmed. They will seek to amend Labour's motion on Article 50 adding a note of support for the principle of triggering Article 50 by March 2017, in a bid to flush out the diehard Remainers.

Has the PM retreated under heavy fire or pulled off a clever gambit to take the wind out of Labour's sails while keeping her Brexit deal close to her chest? 

Well, as ever, you pays your money and you makes your choice. "May forced to reveal Brexit plan to head off Tory revolt" is the Guardian's splash. "PM caves in on plans for Brexit" is the i's take. "May goes into battle for Brexit" is the Telegraph's, while Ukip's Pravda aka the Express goes for "MPs to vote on EU exit today".

Who's right? Well, it's a bit of both. That the government has only conceded to reveal "a plan" might mean further banalities on a par with the PM's one-liner yesterday that she was seeking a "red white and blue Brexit" ie a special British deal. And they've been aided by a rare error by Labour's new star signing Keir Starmer. Hindsight is 20:20, but if he'd demanded a full-blown white paper the government would be in a trickier spot now. 

But make no mistake: the PM didn't want to be here. It's worth noting that if she had submitted Article 50 to a parliamentary vote at the start of the parliamentary year, when Labour's frontbench was still cobbled together from scotch-tape and Paul Flynn and the only opposition MP seemed to be Nicky Morgan, she'd have passed it by now - or, better still for the Tory party, she'd be in possession of a perfect excuse to reestablish the Conservative majority in the House of Lords. May's caution made her PM while her more reckless colleagues detonated - but she may have cause to regret her caution over the coming months and years.

PANNICK! AT THE SUPREME COURT

David Pannick, Gina Miller's barrister, has told the Supreme Court that it would be "quite extraordinary" if the government's case were upheld, as it would mean ministers could use prerogative powers to reduce a swathe of rights without parliamentary appeal. The case hinges on the question of whether or not triggering Article 50 represents a loss of rights, something only the legislature can do.  Jane Croft has the details in the FT 

SOMETHING OF A GAMBLE

Ministers are contemplating doing a deal with Nicola Sturgeon that would allow her to hold a second independence referendum, but only after Brexit is completed, Lindsay McIntosh reports in the Times. The right to hold a referendum is a reserved power. 

A BURKISH MOVE

Angela Merkel told a cheering crowd at the CDU conference that, where possible, the full-face veil should be banned in Germany. Although the remarks are being widely reported in the British press as a "U-Turn", Merkel has previously said the face veil is incompatible with integration and has called from them to be banned "where possible". In a boost for the Chancellor, Merkel was re-elected as party chairman with 89.5 per cent of the vote. Stefan Wagstyl has the story in the FT.

SOMEWHERE A CLOCK IS TICKING

Michael Barnier, the EU's chief Brexit negotiator, has reminded the United Kingdom that they will have just 15 to 18 months to negotiate the terms of exit when Article 50 is triggered, as the remaining time will be needed for the deal to secure legislative appeal.

LEN'S LAST STAND?

Len McCluskey has quit as general secretary of Unite in order to run for a third term, triggering a power struggle with big consequences for the Labour party. Though he starts as the frontrunner, he is more vulnerable now than he was in 2013. I write on his chances and possible opposition here.

AND NOW FOR SOMETHING COMPLETELY DIFFERENT

Emad asks if One Night Stand provides the most compelling account of sex and relationships in video games yet.

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Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.