So is miner Newcrest on somebody’s radar or is the market really glad there were no surprises in this result?
Though confusing because of some financial restructuring in the latest half, the result seems to be of better quality than a number of previous reports.
Or did the NCM share price really jump around six per cent, or $1.36 to end at $23.91 on the back of a small move in gold prices around the (admittedly high) $US689 an ounce level?
That jump is likely to be reversed after the big fall in world markets overnight.
On the surface the gold and copper miner reported a 50 per cent fall in first half earnings, on lower copper sales volumes.
Net profit for the six months to December 31 was $37 million, down from $74.2 million in the same period last year.
But the company, which restructured its unwieldy hedge book late last year to try and boost income from gold sales, said that excluding the financial impact of the hedging restructure, net profit rose five per cent to $84 million.
“The major factors influencing earnings were higher achieved gold and copper prices offset to some extent by lower copper volumes and increases in mine and realisation costs,” Newcrest said in a statement commenting on the results.
Revenue was four per cent higher at $720 million with “Higher gold sales volumes from Telfer and Gosowong and improved achieved gold and copper prices were partially offset by lower copper sales volumes.
“Pressure on key input costs impacted profitability as did higher price participation costs due to higher spot copper prices.”
Newcrest said the prior period (the first half of 2006) benefited from copper pricing finalisation on prior year shipments by $27.3 million and higher other net income by $11 million.
The company said in its statement that
1. Net profit after tax and minority interest was $37.0M, 50% below the first half of FY 2006.
2. Net profit after tax before hedge restructure of $84.0M increased by 5% compared to the first half of FY 2006. The major factors influencing earnings were higher achieved gold and copper prices offset to some extent by lower copper volumes and increases in mine and realisation costs.
3. The prior period benefited from concentrate sale finalisations on prior year shipments being higher by $27.3M and higher other net income by $11.0M.
4. Cash flow from operations increased to $186.0M ($44.2M) due to higher achieved prices.
5. Investment in growth continued with capital expenditure of $140.9M ($246.7M). Two major development projects, Telfer Underground and Kencana, were completed. The final capital cost to complete the Telfer project is $1.472 billion in line with previous guidance. Kencana was completed on time for a final capital cost of US$52M. The three growth projects at Cadia Valley are on schedule and budget.
Key Operational Points
1. Increased production from Telfer with the commissioning of the underground on 1 November 2006.
2. Increased gold production from Gosowong with the first full period of Kencana underground and completion of the Toguraci open pit.
3. Lower production from Cadia Valley Operations with the planned mining of lower grades at Cadia Hill and Ridgeway.
4. Higher commodity prices combined with lower gold and copper hedging levels increased EBIT before hedge restructure by $146.8M. The higher achieved gold price of $647/oz ($569/oz) contributed $60.2M to EBIT. The hedge book restructure completed in November 2006 decreased the proportion of gold sales hedged to 64%, compared to 92% in the previous corresponding period. The average spot price received increased 29% to $812/oz ($629/oz).
Increased copper revenue contributed an additional $86.6M to EBIT. A 38% increase in achieved copper price to $2.53/Ib ($1.83/Ib) was the result of lower hedging levels of 38% compared to 85% in the corresponding period. The spot copper price received increased 38% to $3.75/Ib ($2.72/Ib).
Finalisation of prior year concentrate sales and silver revenue reduced EBIT before hedge restructure by $22.5M. The prior period benefited from favourable pricing adjustments on prior year concentrate shipments of $27.6M compared to $0.3M in the current period and increased silver revenue from $4.8M to $10.5M due to higher spot prices.
At 31 December 2006 there were 32,602 tonnes of copper sales provisionally priced at the 31 December 2006 closing spot price of $3.60/Ib. The final price received for these sales is dependent on the prevailing spot commodity price when the quotation price period expires during the second half of FY 2006/07.
