Newcrest clears air on Goldman research blue
An embarrassing misunderstanding rather than work on a $7 billion takeover bid has been revealed as the real reason for Goldman Sachs JBWere’s temporary suspension of research on Australia’s biggest goldminer, Melbourne-based Newcrest Mining.
The misunderstanding was detailed in a ”clarification” statement issued by Newcrest yesterday morning after it was encouraged to do so by the Australian Stock Exchange.
Goldman told the investment world on Thursday that it was suspending research coverage of Newcrest due to ”legal and compliance” reasons. The broker’s move triggered speculation that it was working on a takeover bid for Newcrest, a perennial favourite one day to be absorbed by one of the world’s growth-hungry gold giants.
Without any further comment from either Goldman or Newcrest, shares in Newcrest were left on Thursday to trade on the back of the speculation and closed the day 2 per cent higher at $22.20. But the stock fell with a thud yesterday, falling $1.25 a share to $20.95 in response to Newcrest’s clarifying statement.
It turns out that Goldman analysts called on the company ”” at a time and date that was not disclosed but which could be of interest to corporate regulators ”” to discuss their profit projections for the company for the 2007 June year. The analysts quickly realised that the depreciation charges they were using were too low, making their profit projections too high by a factor of 50 per cent.
Asked yesterday why it did not issue the clarification on Thursday, Newcrest made no apology. Executive general manager finance, Jeff Smith, said it was down to logistics.
”We weren’t expecting Goldmans to do what they did. So it’s not as if we had plenty of warning. There was no reticence on our part, it was just the logistics of doing it,” he said.
Mr Smith said it would be reasonable to assume that Newcrest would be reviewing the way it goes about private meetings with analysts.
He said a number of other analysts had already come down with their 2007 profit expectations and Goldman was simply ”catching up”.
Mr Smith said to his knowledge the company had not been approached by the Australian Securities & Investments Commission to provide a timeline of the meeting.
Newcrest said it had ”given Goldman an impression that the company was endorsing the accuracy of their revised profit forecast which was not intended and implies a precision which the company was not in a position to provide”.
Newcrest then confirmed that its 2006 profit would be in the range of $125 million to $135 million and while its 2007 result would be higher, it would be nowhere near the $341 million Goldman had previously tipped. Firmer profit guidance is expected once the new managing director, Ian Smith, takes up his position on July 14 ”” a month earlier than previously stated.
BARRY FITZGERALD www.thewest.com.au