plan that cost 4.6bln in the end - gone

I think there is way to much expectation on the new guy, he is the Sandmaaaaaan, not Superman, isn't going to waive a wand and get the company debt paid off and dividends reinstated any time soon, not with this continued low POG AUD prices imo.

In years gone by existing capital agreed to gregooooos plan, in short greeeeeegoooooooos plan was (was actually Smiths plan, checked by greggo,,smitho left on completion and grego took over to execute the plan that he confirmed to smith)

Anyway the plan was


Take the share register and double it
take a company producing 674219 oz/qtr at a cost of 440/oz
take a company with rising dividend growth
take a company with rising positive cashflows
take a company with EPS growth
take a company with NET cash and NO debt
take a company with low cost long life mines
take a company with a very good credit rating


and

turn it into a company with even more reserves and mine life
turn existing operations into a far bigger company producing far far more ounces PA
turn it into a company with lower production costs than when it started (488/oz)
a company with more EPS, more EPS growth and even higher shareholder returns
and to do that all from existing cashflow

So basically, take this

And build this from cashflow

The new guy gets handed
a business that is producing less than when greeegoo started per QTr
A business that produces at more than double the original costs of production,
A business with a very low credit rating
a debt built up by greeeeeego of 4.6Bln debt sitting there.
A business with EPS way way way than when it started out
A company which after all the spending on development isn't even on the first line of its plan

What is interesting is that he (the sandmaaaaaaan) has thrown the production plan out the window, he has spelled it out in the last QTr report,,pretty clearly, infact he has tried to prepare you for flat or lower production imo.
but no one seems to care,,off we go 21 times forward estimates, its boom time,,,,

from the last QTRLY report - KEY points

"Newcrests operational priority remains on maximising free cashflow, NOT MAXIMISING PRODUCTION OUNCES"

So the 50PC production over 5 years - GONE, FAILED, not ever going to happen

The cost of this failure, existing capital gets a 4.6Bln debt and a production profile that isn't even on the first level of its plan

(those executives should pay every single bonus back,and given the state of the books being handed over fail to qualify for future bonuses,,,and if they do qualify for bonuses, then every board member or committee member involved in drafting such bonus ruled should be fired,,,imo)

Anyhooooooo, the report also spells that out

CAdia, after all this development costs by Greeegoooo, will produce LESS in 2015 than this year and that cadia will produce in 2016 what it does now

Lihir, next year, production FLAT,,,no annual growth after gregoooooo ploughed billions into it basically, existing capital spent 9.5BLn plus a couple of billion in repairs, fixes and upgrades,,,end result production is going to be basically flat next year...basically he is just going draw down on its stockpile for a year beacause margins are very at 1450aud pog.....ncm basically has in the end bought a stockpile with little margin for over 10BLN spent.......Lihir is overvalued on the books clearly, last report had average price of 1450, and sandmaaaaan thinks at that price, margins are so small and vunerable,,better just stop normal mining, fire the workforce and process the stockpile


ANyhoo, the new guy is doing a good job clearly, still firing, holding back sustaining capex to maximise immediate cashflow as greeeegos debt restricts normal mining operations

But he still needs to deal with the debt incurred for trying to build a business that was supposed to be producing 3400-3600M Oz of gold this year and is only producing 2.3M,

ITs going to take him years to chip away at this debt load, years before he can start paying dividends,,,,if you want dividends then he has has to reduce debt by more than 50PC to bring the gearing to "acceptable" levels according to the board.......how many years is that going to take?Many, many year at these current gold prices I suggest.

Less if gold explodes of course, but sandmaaaaan is unhedged, he can get production maximised,,but he doesn't control the low prices currently on offer for what has been a long time............his abilities wont save the earnings if pog falls any further

If he writes down lihir in value to something more realistic given the pog aud price and the fact that the asset is currently just processing ore stockpile, then he must pay even more debt off as the gearing under NCM own formulae will rise to prudently pay dividends.......falls 100 bux and there isn't really even much point in processing the stockpile

I think you are going to get flat production going forward,
more writedowns and a dividend suspended indefinitely whilst he works to control the debt, not some rapidly expanding production profile because he is a production expert, not a reinstatement of dividend next week or next year

its trading way above its sector metrics and on high basic forward multiples, with no yield and a high debt to equity ratio for a price taker, its trading as if the new guy has no challenges and as if the newcrest has pricing power in the gold market,,which BTW is 5aud0 below last QTr average price achieved

I like the Sandmaaaaaan, but im not prepared to by any shares at these prices considering I know it will take years and years with these current prices for yield to go from ZERO to anything positive, I know the Sandmaaaaan aint superman, he cannot turn this company into a stella growth company overnight. Underlying profit after all this cutting, is still estimated to be lower than last year...........that is not a growth company, obviously at these prices people are expecting him to deliver an immediate turn around....you might be seriously disappointed

after going from cash on hand to net debt of over 4.6Bln and removing the dividend to survive, after all that, people are cheering the Top end of guidance 2.3M,,,thats crazi, 2.3M which isn't even on the first level of the plan,


clearly everyone must expect a huge EPS turnaround from last year given the stock price
clearly no writedowns in sight
clearly a big paydown on debt
clearly expecting gold will not fall any further
so dividen in the near future

I continue to suggest some caution,,,,flash technical traders playing around the 200DMA wont be there forever

So Im going to continue to sell into any strength on the basis that it may have a new CEO,but the new CEO wont pay me if im long with gold prices and production where they are,,, and whilst ever the new guy has to operate the business in safe mode by holding back normal sustaining capex which is required for good solid and reliable forward production...


see how it goes over time ayy, target if the pog aud average fails to clmib and sustain itself or falls,,given the strain of legacy debt, flat and lower production ,7.50........14.5 forward earnings, with a new CEO, no div, big debts and an uncertain gold market which is still falling and down 200aud over tha least two years,,,,,sounds more than fair to me for the risks

tooooooooooooot toooooooooooooot :)

(That's what im doing,,you do what you want)