Newcrest at 40-month low despite gold riseBY: BARRY FITZGERALD...

Newcrest at 40-month low despite gold rise
BY: BARRY FITZGERALD From: The Australian April 24, 2012 12:00AM

SHARES in Newcrest Mining, Australia's biggest listed gold producer, have sunk to 40-month lows despite the continued strength in gold prices.

The share price could come under further pressure today with the release of the group's March quarter production report.

The market is expecting operational issues at the Lihir mine in Papua New Guinea and the impact of heavy rain at Hidden Valley in PNG and the Cadia mine in NSW to have taken a toll, raising doubts about the group meeting previous production guidance for the full year of 2.43 million to 2.55 million ounces of gold.

Newcrest shares slumped 45c or 1.6 per cent to $27.60 yesterday. The company has lost 27 per cent of its value since June last year.

Meanwhile, the gold price has risen by 9 per cent to $US1640 ($1588) an ounce.

Newcrest is not alone among the global gold heavyweights in having its share price savaged.

The disconnect between the price of bullion and the share prices of the big gold producers has been put down to increased investor interest in holding physical gold, and fears that the decade-long rise in gold prices has made the yellow metal ripe for a correction.

Part of Newcrest's $7.5 billion drop in value since June last year is due to its recent propensity to miss production targets.

Credit Suisse said in a research note yesterday it was expecting Newcrest to post March quarter production of about 584,000 ounces, but the broker said there was a "clear risk to the downside" in its estimates, given the previously announced production issues at Lihir, the heavy rain reducing Hidden Valley production and more heavy rain expected to cut Cadia output.

"We continue to see great risk to 2012 (financial year) guidance of 2.43-2.55 million ounces of gold production," the broker said. It expects production this year of 2.39 million ounces.

"Failure to meet current 2012 financial production guidance will add to already significant market disappointment on continued production misses and downgrades," Credit Suisse said.

The broker has nevertheless set a price target on the stock of $42.50 a share. Forecast profit for the year at $1.2bn would be up from $1.05bn previously.