Ann: Newcrest Production Update , page-16

certainly hasn't been profitable to be positive all the way down from high thirties GHT, yes Gold fell and as I tried to point out all the way, NCM is an unhedged price taker together with mounting debt and poor cashflow

hi Legume,,,good analysis on production plans but I don't find it relevant to the current balance sheet and financial performance,,production is within guidance, ok maybe some are going to say wow they are going to make their guidance, but I thought we were hoping for 2.3 M anyway

The same figure they started with a year ago but below the 2.5 M they started with in 2012 but debt has increased dramatically over that time as margins have decreased,,,,,,

costs savings to achieve margins as you point out are from changes to the plan, to reduce costs via stockpiles with no cash costs and parking up 50PC of the mining assets at lihir in first QTR....they needed to do this urgently because of the liabilities that have been built up to facilitate these production levels,,,obviously good headline but not sustainable for a miner long term,,,if they didn't have such an enormous debt load and be a price taker and the price of POG AUD was trending up along with margins it would be a different story imo,,,,but that is not the case for NCM, year guidance for costs has been maintained,,,,,,,if cost guidance comes in at 1200usd over the year then NCM will have to smash that target now that debt is approaching 5BLN USD prior to AUD "retranslation"...........imagine if the ave price through the year was higher at 1400 aud, and costs average 1200usd,,,,,thats hardly a good margin or position

You might be right about them hitting their own guidance,,,but look at the production in the past for example at Lihir,,,dropping, qtr on Qtr and Qtr, main result of increase was telfer which was expected to increase this QTR with the hoist fixed, but its a high cost operation compared to the rest of the suite and notwithstanding that fix, the unit increases should in preference to cashflow/ margin be coming from the low costs mines........no miner can mine stockpiles and slash sustaining capex forever,,,end of the day I learnt along time ago to look at what NCM does not whats it gunna do,,,and the main Lihir and Cadia are down,,,the profitable engine room of the business

production number can be higher but if things are so good,,why the need for 650M in additional debt borrowing facilities in four months,,,,,,,,,thats because cashflow is poor because of prices,,,and they would need a significant increase in production to cover their own budgets at 1450

wigits produced increasing, at the same time debt to finance ongoing production increasing,NCm wants to be in the position like FMG,,,they are radically increasing dividend returns and reducing USD debt due to strong cashflows,,they are paying off debt early simply because its in USD and when the AUD falls, the debt increases significantly, often negating the positive effects of an increased supply response

NCM is dead opposite, increasing production slightly , reducing costs via stockpile mining and capex slashing and borrowing more to pay off old debt and to finance ongoing production,,,,,, that is not a good position to be in imv

in the end that imo is not sustainable for any business going forward that is a price taker and miner with truckloads of unhedged USD debt with AUD falling, commodity,,,NCM needs to smash its own guidance just to maintain the ever increasing debt load if the price falls or if AUD falls further,,,,,,,,,,,,earnings just going to the financiers not equity holders in this circumtance

Im just looking at the issue in a simple way,,,NCM has increased its production last QTR, but it needed to increase its debt / borrowings to facilitate that production increase by another 450M USd on top of its 4172BLN USD net debt last reported,,,and now in the first two weeks of this year,,another 200M was required..........

If the price of gold explodes, it will be able to stop accruing more debt, and depending on the price of POG AUD and net margin reduce debt,,,,,,,,but we know 100PC this is not the the case for NCM at the moment as they keep requiring to increasing their facilities,,,,,obviously the group margins are not producing enough to fix this situation atm.......and until it does, I don't think its a buy at all because of the clear financial risks the business faces......

And if the rise in POG AUD its not enough ATM to stop them needing two :headroom" increases in 4 months approx,,,,then the situation just gets worse IF the Gold price rise expected by most doesn't eventuate...

I think they borrowed the additional 450M last QTR when the AUD was at 95.5 in Oct,,,,,,,,,,,assuming that is now spent as they just needed another 200M USD in facilities,,,,if you retranslate that 450M USD debt into current terms at say 88cent AUD,thats now another 511M AUD,,,half a billion AUD on the liability side ...wow.........that production figure isn't going to dent that debt.... this is why FMG io is rushing to pay off their USD debt

sorry for the rant,,just thinking out loud as I wait for this hire car to get fixed

Your up on the production plan side clearly,,can you tell me about stockpiles,,how long can NCM keep mining its stockpiles to reduce its headline costs before it has to go back to normalised mining which based on history are much higher ?

Thanks