Newcrest Mining Ltd., the worst performer of Australia’s 20 largest companies this year, fell to its lowest in eight years after Credit Suisse Group AG cut its rating amid concern it will lower output and halt expansions.
Australia’s biggest gold producer fell 6.9 percent to close at A$13.36 in Sydney, the lowest since June 3, 2005. Australia’s benchmark S&P/ASX 200 Index declined 1.1 percent. Newcrest has lost 48 percent of its value in the past year.
Lower production and a falling gold price mean Newcrest is expected to report a 50 percent drop in earnings in the year ending June 30, according to the mean of 12 analyst estimates compiled by Bloomberg. Gold fell into a bear market in April, when it slid to a two-year low.
“Current operating plans, capital projects, exploration commitments and last year’s five-year production forecast is not sustainable,” Michael Slifirski, an analyst at Credit Suisse, wrote in a note to clients today, cutting the stock to underperform from outperform. Newcrest should delay plans to raise production by investing in its Lihir mine in Papua New Guinea, he said.
Citigroup Inc. and UBS AG have also downgraded the miner to sell, citing concerns over costs and expected production cuts. Bank of America Merrill Lynch analysts led by Stephen Gorenstein said in a note to clients June 4 that Newcrest could cut production by 10 percent in 2014.
Of Newcrest’s six producing operations, Western Australia’s Telfer, Bonikro in the Ivory Coast, and the Hidden Valley joint venture with Harmony Gold Mining Co. in Papua New Guinea are currently unprofitable, Gorenstein wrote in the note.
“Management needs to make some very, very hard decisions and fast, otherwise you’ll continue to see the share price falling,” Evan Lucas, a Melbourne-based markets strategist at IG Markets Ltd., a provider of trading services, said today by phone.