Newcrest First-Half Profit Slides 88% on Gold Price, Taxes

Newcrest Mining Ltd., Australia’s biggest gold producer, said first-half profit fell 88 percent after bullion dropped and its tax payments rose.

Net income was A$40 million ($36 million) in the six months ended Dec. 31, from A$323 million a year earlier, the Melbourne-based company said today in a statement. Underlying profit fell to A$207 million, beating the A$149 million average estimate of four analysts compiled by Bloomberg.

Newcrest, which declined as other gold stocks rose in Sydney, won’t pay a first-half dividend and is seeking to boost cost savings after profits were crimped by a A$70 million tax charge and a A$47 million one-time charge on exploration assets in West Africa. It booked a record loss in fiscal 2013 on a A$6.2 billion writedown.

“These are fairly disappointing earnings,” said Stan Shamu, a Melbourne-based market strategist at IG Ltd. “There’s also confusion over whether or not this recent run up in gold is sustainable.”

Newcrest has advanced 42 percent this year after gold rebounded 8 percent due to turmoil in emerging markets and signs of slowing improvement in the U.S. jobs market. It closed 1.9 percent lower at A$11.05, while the benchmark rose 0.9 percent. Spot gold traded at $1,305.78 an ounce at 4:11 p.m. in Sydney.

Newcrest joins producers including Barrick Gold Corp. and Goldcorp Inc. in reducing costs to adapt to last year’s biggest fall in gold prices in three decades. The company said its all-in sustaining costs - an industry measurement of the cost of producing gold and maintaining that production - fell 28 percent in the year to December.

Seeking Thrift

“We are looking to be as thrifty as we can,” said Chief Executive Officer Greg Robinson, who is set to be replaced by Chief Operating Officer Sandeep Biswas this year, on a conference call.

Newcrest isn’t planning to sell assets even as peers divest higher cost operations, Robinson said. Barrick, the world’s largest producer, has agreed to sell almost $1 billion of assets over the past six months.

“For a seller, it’s a very low price environment to be thinking about rationalizing portfolios,” Robinson said, ruling out the immediate sale of the company’s 33 percent stake in Evolution Mining Ltd.

Strong Demand

Gold’s advance this year follows strong physical demand for the metal and an end to speculation over the pace and timing of reductions to debt purchases by the U.S. Federal Reserve, according to Robinson. “The gold price has moved beyond that decision,” he said. “Those two factors have led to the rally that we’ve seen in the gold price and, being a gold company, we remain relatively optimistic about gold.”

Federal Reserve Chairman Janet Yellen pledged Feb. 11 to maintain policy for gradually scaling back debt purchases.

Newcrest’s gold reserves were cut to 78 million ounces as of Dec. 31, from 87.3 million ounces a year earlier, after a review that took into account lower prices and foreign exchange movements, it said in a separate statement.

Before it's here, it's on the Bloomberg Terminal.