Newcrest Mining profit plunges 52%

Australia’s largest listed gold miner, Newcrest Mining (ASX: NCM), today released its annual result for the 2013 financial year and as many had anticipated, it wasn’t pretty. Earnings before interest and tax (EBIT) for the year were down 52% from $1.59 billion in 2012 to $756 million.

The damage

The impact of lower gold prices and lower gold production contributed to a 15%, or $641 million, drop in sales revenue to $3.775 billion. Gold production came in 8% below the company’s previously issued guidance at 2.11 million ounces and the average gold price received per ounce for the year was 4% lower at $1550 per ounce.

The impact of more than $6.2 billion in impairments and write-downs announced by Newcrest last week means the company will declare a statutory loss for the year of $5.778 billion, down 600% on the year prior.

Costs, which will be a huge focus for gold miners this year, were up 6% in 2013. Two standout increases were the 12% increase in employee costs and a 31% jump in energy costs. The increased energy usage came on the back of higher throughput, primarily from the Lihir mine according to Newcrest.

Looking forward

Looking forward, management is hoping to drive Newcrest out of its current slump and continue to strengthen operations. This will involve continued focus on lower costs and capital expenditure.

For the 2014 financial year the company’s aim is to maintain a free cash flow neutral or positive situation at an assumed gold price of A$1,450 per ounce, about the price gold is trading at on the Perth Mint today.

Gold production is expected to be between 2.0 and 2.3 million ounces in 2014, with the company noting it would be too speculative to offer any guidance beyond that.

Foolish takeaway

The results were well received by the market, with Newcrest’s share price jumping 4.6%. It will be a long road to recovery for the company which has seen its share price hammered down 55% over the last year compared to the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), which has risen 18%.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.

More reading

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

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!