Newcrest admits analyst briefings as gold price bounces

The price of gold stopped falling over the weekend, rising to just above $1,200 per ounce after dipping below that level late last week. The metal found some support from buyers and speculators eager to get a bargain compared to the price over the last two years, which has been as high as US$,1900.

Gold companies and investors will be breathing a sigh of relief while the trading maxim of ‘a dead cat bounce’ will spring to mind for many, a cliché which refers to a slight gain after a significant fall in price. It will also be positive news for gold miners like BHP Billiton (ASX: BHP) and Anglogold Ashanti (ASX: AGG), which have found their share prices beaten down since the price of gold started falling.

It’s unlikely that the rise will do much to ease the woes of Newcrest Mining (ASX: NCM), which last week admitted it held selective analyst briefings prior to the company’s announcement of job losses, spending cuts and up to $6 billion in write downs against the value of its mines at the start of June.

Newcrest Mining Chief Executive Greg Robinson is quoted in the Sydney Morning Herald saying: “There were briefings, there were discussions with analysts as our investor relations group do on a regular basis”.

However Mr. Robinson denied the company had disclosed any information not already publically available, continuing: “from our point of view we don’t think they’ve done anything incorrect, we think they’ve done the job they are meant to do”.

As several commentators have pointed out recently, analyst briefings can be tricky for companies who need to give analysts a clear understanding of business risks to allow them to sufficiently evaluate the business. However, they must not divulge any information that is not already publically available.

Whatever was said at the briefings, the outcome was the subsequent downgrade in analyst recommendations on Newcrest. If no extra information was revealed, it suggests management did a good job of emphasising pre-existing industry concerns like how high costs and the falling gold price would impact Newcrest’s performance.

Foolish takeaway

Newcrest has launched an investigation into the briefings and has committed to take any appropriate action if it is revealed there was wrongdoing. In the meantime all eyes will be on the price of gold to see if the falls have finally hit a bottom.

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Motley Fool contributor Regan Pearson does not own shares in any companies mentioned in this article.

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