Newcrest Records Impressive 1H Result

Newcrest Mining (NCM) has posted a 16% jump in half-year underlying earnings, boosted by higher gold prices, but said it was under pressure from rising costs and lower copper prices. The company’s first half profit has lifted to $154 million from a loss in the prior corresponding period, and said it was in a strong position in a weak economy. The profit was up from an $8.1 million loss in the first half of fiscal 2008. The headline profit was in line with guidance given earlier this month for between $147 million and $157 million and underlying profit of $241.6 million was also in line with guidance for between $235 million and $245 million.

The miner said continued pressure on input costs coupled with a depreciation of the A$/US$ exchange rate had an unfavourable impact on costs during the current period. “The company expects input costs to decline over the next 12 months as the benefit of falling input costs has a lagged effect”, Newcrest said. “This decline should at least offset the impact of currency depreciation”. Sales revenue increased 15.2 per cent to $1,294.2 million, compared to $1,123.4 million in the previous year as a result of a 28 per cent increase in the gold price received and a five per cent increase in copper sales volumes.

Newcrest said this had been offset partially by a 13 per cent fall in the copper price received.
Newcrest said input cost pressures combined with lower copper prices had affected cash costs adversely during the period. Newcrest said it expects input costs to decline over calendar 2009 as the benefit of falling input prices has a somewhat lagged impact. As well, the company will continue to pursue cost reduction initiatives at the Telfer and Gosowong sites to achieve its financial year 2009 cost guidance.

Newcrest added that significant progress was made on the two development projects at Ridgeway Deeps and Hidden Valley. "Both are on schedule for production in the middle of 2009," the miner said. Newcrest said it expected gearing levels to be in the range of 5% to10% by financial year-end. The company did not declare any interim dividend.