Barry Fitzgerald July 8, 2006 AdvertisementAdvertisement
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 work on Australia's biggest goldminer, Melbourne-based Newcrest Mining.
The misunderstanding — one that it could be argued cost Thursday's buyers of Newcrest stock more than 5 per cent of their money — was detailed in a "clarification" statement that Newcrest issued yesterday morning after encouragement from the Australian Stock Exchange.
Much to Newcrest's surprise, 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 favourite to be absorbed by one of the world's growth-hungry gold giants.
Without 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, or 5.6 per cent, to $20.95 in response to Newcrest's clarifying statement.
It turns out that Goldman analysts called on Newcrest — at a time and date that was not disclosed — to discuss profit projections 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 executive general manager finance, Jeff Smith, said: "We weren't expecting Goldmans to do what they did. There was no reticence on our part, it was just the logistics of doing it."
Mr Smith said Newcrest would be reviewing the way it went about private meetings with analysts. He said that to his knowledge the company had not been approached by the Australian Securities and Investments Commission over its meeting with the Goldman analysts.
Newcrest confirmed its 2006 profit would be in the range of $125-$135 million, nowhere the $341 million that Goldman had previously been tipping.
NCM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
