Newcrest Second-Quarter Production Falls, Lags Estimates

Newcrest Mining Ltd., Australia’s largest gold producer, reported a 15 percent decline in output in the second quarter that missed analyst estimates.

Production was 492,906 ounces in the three months ended Dec. 31, from 579,073 ounces a year earlier, the Melbourne-based company said today in a statement. The median estimate of five analysts surveyed by Bloomberg was 509,000 ounces. The company’s cost of production rose 23 percent to A$1,031 ($1,084) an ounce.

Newcrest kept its annual production forecast from August and forecasts it to be at the low end of a range of 2.3 million to 2.5 million ounces. The median estimate in a Bloomberg survey of four analysts before the report was 2.24 million ounces. Newcrest rose 1.8 percent to A$23.98 at the close in Sydney. The S&P/ASX 200 Index added 0.5 percent.

It was “a marginally softer quarter than what might have been, with Gosowong and Hidden Valley under-delivering,” Credit Suisse AG analysts Michael Slifirski and Sam Webb said today in a note to clients, referring to the company’s mines in Indonesia and Papua New Guinea. They had expected Newcrest to report output of 500,000 ounces last quarter.

Production growth will come from its Cadia East expansion in New South Wales and the Lihir project in Papua New Guinea, said Newcrest. The cost of those projects is almost 8 percent higher than forecast due to delays.

Gold producers are expanding mines and boosting output to cope with rising costs and benefit from prices that have increased for 12 consecutive years. Spot gold prices gained 7 percent last year as Asian demand rose and central banks boosted purchases.

“Given the weak start, a significant catch up will be required in the second half” to meet the target, said the Credit Suisse analysts. “The main driver will be the ramp up of Lihir, which is a couple of weeks behind plan.”

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