Melbourne-based mining company, Newcrest Mining Ltd, which has extensive mining assets in Papua New Guinea, has ended the financial year with a net loss of AUD$5.778 billion (K12.29 billion) for 2012–13.

The Lihir gold mine. Credit: Newcrest

The company reported an underlying profit, excluding write downs, of AUD$451 million (K957 million)—less than half of the $920 million posted last year.

Most of the headline loss—the worst in the company’s history—was the result of a massive AUD$6.22 billion (K 13.28 billion) in write downs for the period related to impairments and asset write downs, including a AUD$272 million (K 580 million) write down of its investment in Evolution Mining Limited, in addition to restructuring costs of AUD$51 million.

The main cause of the write-down was Newcrest’s over-priced acquisition of Lihir Gold in 2010, according to Matthew Hodge, sector head of basic materials and energy at market analyst, Morningstar.

More than AUD$3.49 billion (K7.43 billion) has been wiped from the value of Lihir compared to the AUD$9.5 billion (K 2,000 billion) Newcrest paid for it in 2010.

Newcrest’s Chief Executive Officer Greg Robinson blamed lower than expected production levels and falling gold prices for the profit fall.

As Business Advantage PNG reported last month, Moody’s recently downgraded its credit rating of Newcrest from Baa2 to Baa3 with a negative outlook.

‘Newcrest is now operating in the shadow of the boom. There are pressures from the supply side with the fall in gold prices and pressures from the cost side, particularly with labour’

Robinson says the company’s main focus for 2013–14 will be to make its operations cashflow positive or neutral at gold prices of AUD$1,450 an ounce.

At an analysts’ briefing, Anderson said about 3,900 staff worldwide would be made redundant.

Reputation

Anderson also said his focus this year would be to ‘regain Newcrest’s reputation’.

He told analysts the market had lost trust in Newcrest’s ability to hit production targets, and this would be the focus of his attempts to boost the company’s reputation.

‘There is reputational damage about the other issues … the corrective actions around those will become apparent,’ he said in response to questions about the two inquiries over its disclosure practices.

‘Newcrest is now operating in the shadow of the boom. There are pressures from the supply side with the fall in gold prices and pressures from the cost side, particularly with labour,’ said Hodge.

Goldcorp, Barrick and Anglo Gold and others have also announced big write downs of asset values and much lower profitability, following falls in the price of gold.