Newcrest Mining Ltd. - NCM (ASX)

Newcrest Mining Ltd. - NCM (ASX) is one of the world’s top five gold mining companies by reserves and market capitalisation. Newcrest operates mines in four countries, and has a global workforce exceeding 19,000.

On June 8, 2013 the company released News

"The Newcrest Board and Management have completed a review of the Company’s business plan and 2014 financial year budget. This review has impacted 2014 financial year guidance (production, capital expenditure, operating costs and cashflow) and is also expected to impact the 2013 statutory accounts (asset carrying values and final dividend for the 2013 financial year). The accounting outcomes contained in this release will be finalised in conjunction with the completion of the 2013 financial statements in August 2013, however they are not expected to change materially from the estimates presented below.

The 2014 budget has been developed in the context of the current market environment and outlook, including a recent sharp deterioration in the gold price (the largest in 30 years), the ongoing strength of Newcrest’s operating currencies relative to the US$, and an elevated operating cost environment.

Newcrest reconfirms its focus going forward will be on maximising free cashflow by reducing operating costs, corporate costs and capital expenditure. Free cashflow (after $1 billion of capital expenditure) is budgeted to be neutral in the 2014 financial year at current metal prices and exchange rates. The Company is projected to be free cashflow positive in the years thereafter at current metal prices and exchange rates, and the Company will apply these funds to reduce debt and return cash to shareholders.

In response to the change in market conditions, Newcrest has taken and will continue to progress a range of actions to maximise free cashflow over the next three years. These actions include:

• cutting discretionary spend on projects and studies;
• a significant reduction in exploration activities;
• a continuous “cost out” program across all operations;
• increasing stockpile utilisation at Lihir and reducing open pit material movements generally; and
• suspending production of higher cost ounces across all operations.
Corporate office and support functions will be further rationalised, resulting in a reduction of at least 20% in corporate costs and the closure of the Brisbane office.