MELBOURNE, Feb 27 Asia Pulse - Newcrest Mining Ltd (ASX:NEM) today said it was benefiting from the rising Australian dollar which could add tens of millions of dollars to its annual result.
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The gold miner said it was pleased with its reduced first half net profit of A$15.93 million (US$9.66 million), down from A$17.95 million (US$10.89 million) previously.
Newcrest shares tumbled this morning, losing 15 cents or 2.5 per cent to A$5.90 (US$3.58) at 1130 AEDT.
Investor relations manager Peter Reeve said the company was on target to meet full year internal forecasts.
However he said the targets were private and would not be released.
Mr Reeve said as well as benefiting from its low cost production, the company was well positioned for the current monetary climate.
Newcrest was just under 100 per cent hedged for the second half of 2002/03 and fully hedged for 2003/04 so there would be no impact from fluctuating gold prices.
But the strong hedging meant the company was very sensitive to change in the Australian dollar, he said.
"As the Australian dollar increases we make very significant gains.
"In the June quarterly last year we showed that for the full year, last year (2001/02) the FX hedging cost us A$108 (US$65.51) an ounce and we made 700,000 ounces so that was essentially A$70 million (US$42.46 million).
"If the Australian dollar gets up to 64 cents none of the FX hedging will be triggered in so we won't have any FX issues."
While the complex hedge book made prediction difficult, a rise in the exchange rate from 55 US cents to 64 US cents could add tens of millions of dollars to Newcrest's bottom line, he said.
"If the exchange had been at 64 (US cents) in the 2002 year it would have added something like A$30 million (US$18.2 million).
"I would assume it would be a similar number to that A$30 million (US$18.2 million) this year."
Newcrest increased gold production in the first half of 2002/03 compared to the previous corresponding period, but sales were down.
This and the A$55 million (US$33.36 million) funding for preliminary work at Newcrest's massive Telfer development in Western Australia pushed down the final profit.
The company expects to spend another A$180 million (US$109.19 million) on the Telfer project in the second half but remained comfortable with meeting its forecast full year result, Mr Reeve said.
Debt facilities had been delayed but were now settled and the Telfer development was now "on the way".
First production was expected in September or October next year.
Mr Reeve said the first half result was affected by a delayed shipment scheduled for late December but which did not leave until January 2.
That A$5.5 million (US$3.34 million) shipment will be included in the second half result.
"If we had booked that A$5.5 million (US$3.34 million) the real profit would have been A$21.4 million (US$12.98 million), and that was above market expectation," Mr Reeve said.
NCM Price at posting:
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