Dividends Back At Newcrest

By Glenn Dyer | More Articles by Glenn Dyer

Newcrest Mining (NCM) shareholders will receive a dividend for the first time in more than three years, after the gold miner’s board decided it could afford to balance such a payment with capital commitments and its debt reduction target.

The 7.5 US cents a share payout dividend will be unfranked, and comes after Newcrest reported a 12% fall in profit in the June year, from 2014-15’s outcome.

Newcrest’s full-year underlying profit slipped 24% to $US323 million ($A422 million) as lower gold and copper prices and shutdowns at some of its mines weigh down the results. That though was close to what the market had been expecting.

“Newcrest continues to focus on safety, operational discipline and cash flow generation, and has identified a range of opportunities to improve its performance in FY17 and pursue profitable growth,” Managing director Sandeep Biswas said in the statement to the ASX.

For the year to June 2017, the miner is forecasting gold production in the range of 2.4-2.65 million ounces, and copper production in range of 80,000 and 90,000 tonnes, largely unchanged from 2015-16 and clearly depending on further rises in the gold price (and perhaps copper).

Newcrest’s previous dividend was an interim paid in February 2013, and shareholders have been patiently waiting for Newcrest to get its debt down far enough to resume payouts.

The dividend was dropped as part of the measures the company adopted to get its debt down in the wake of the briefing scandal and $6 billion plus write down of its assets.

Newcrest said its gearing ratio reached 24% on June 30, below debt reduction target of 25%.

Newcrest chief executive Sandeep Biswas said all assets generated free cash flow during the year, enabling the miner to put a big dent in its debt pile by reducing it by 27%.

“The resulting improvement in Newcrest’s target financial metrics, together with Newcrest’s profitability and market conditions, has given the board confidence to announce a final unfranked dividend,” he said in the profit announcement to the market.

Newcrest produced 2.43 million ounces of gold in the year to June 30, which was slightly higher than the previous year.

Copper production was lower than 2014-15’s 96,816 tonnes at 83,070 tonnes. At a briefing later yesterday Newcrest revealed it is finalising plans that could see a 25% plus boost to output at its $2 billion mine at Cadia in mid-western NSW.

In the process, the project will top the Boddington mine in Western Australia as Australia’s biggest gold producer. Newcrest is still working on the costings of upgrade of the Cadia mine, near Orange in NSW.

But analysts say they expect the expansion to get the go head shortly, possibly by November, and at a cost in the hundreds, rather than billions of dollars.

Newcrest has approvals to raise throughput at Cadia by a quarter to 32 million tonnes of ore a year from the present 27 million tonne planning limit. The mine is currently running at around 22 million tonnes.

The Boddington mine is owned by Newmont and will produce between 725,000 and 775,000 ounces of gold this year

A boost to output by a quarter could lift that to around 1 million ounces, putting it well ahead of Boddington, while Newcrest has signalled it is looking to further boost output in coming years.

The shares eased 4% to $24.51.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →