Newcrest Mining (NCM) Update

Submitted by Craig Strzelecki on 4 April, 2007 - 19:00

Newcrest Mining (NCM) have a maintained Neutral stock recommendation and a $23 share price target following an update by market analyst Macquarie Research Equities. NCM has once again been unfortunate, this time with seasonally heavy rainfall at its Telfar operations in the Pilbara region, Western Australia. NCM has announced Telfer's mining and concentrate transportation has now been suspended for at least 1 week. On Wednesday the 28th March, Newcrest (NCM) announced that the open pit and underground operations at Telfer has been temporarily suspended, and the road to Port Hedland has been closed, all due to heavy rain. The Mill is still continuing, however it is processing relatively low grade stock piles. The analyst understands as of Tuesday evening the 3rd April the road still remains closed, underground operations remain suspended and that only waste stripping has recommenced in the pit. They highlight the 3 negatives due to the heavy rain: (1) A halt to mining; (2) Lower grade material being processed; (3) NCM is unable to send concentrate to Port Hedland, with likely congestion when it does reach the port. They analyst have quantified these events and have made these adjustments. Production for 2007, will be lower by 40koz to 630koz (NCM guidance: 675 – 700koz). They have also lowered 2007 copper production by 2.7kt to 29kt (NCM guidance: 32kt). The seasonal heavy rain is a fact of life at Telfer and will continue to be going forward. Nonetheless the analyst senses that the market remains somewhat sensitive to Telfer production downgrades. Telfer has always been a problematic operation and in the analyst's view, the market should not be overly focused on Telfer's operating issues simply because it is in profitable production at a time of strong copper and gold prices. Investors are also increasingly having regard for the excellent story unfolding at Cadia East and Kencana in terms of potential reserve and production growth in the medium term. The key catalyst for this stock is still consistent production performance at Telfer and the heightened global M&A activity in the gold sector.

Newcrest Mining Limited is listed on the Australian Stock Exchange (ASX) under stock code NCM. You can view their investor website here. NCM was listed on the ASX on 4 June, 1987 as Newmont Mining. Newcrest Mining Limited was formed in 1990 from the merger of Newmont Australia Limited and BHP Gold Limited. Newcrest and its predecessors have a strong history of successfully exploring, developing and operating gold mines, predominately in Australia. Ian Smith is the CEO of Newcrest Mining and Don Mercer the Chairman. Current operations are: Ridgeway, Cadia Valley, Telfer, Toguraci and Cracow. They have current explorations in the Cadia District, Gosowong, Telfer District, Cracow and Ashburton, WA. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade NCM. Check your charts and good luck with your share trading!