SBM, BMO, NEM, LSG are better bets I reckon.Investors dump...

SBM, BMO, NEM, LSG are better bets I reckon.


Investors dump Newcrest as miner douses profit, takeover expectations
Robert Clow, Mining
July 08, 2006
FLAGGING gold miner Newcrest yesterday admitted that net profit for the new financial year would fail to meet market expectations, sending its shares tumbling by more than 5 per cent.

In a moment of supreme market irony, the profit warning was in part intended to douse speculation that Newcrest was poised to announce that it was in takeover talks or considering a capital raising. Instead, the company's poorer than expected financial performance may make it more vulnerable to potential predators.

Analysts at investment bank Goldman Sachs JB Were triggered a flurry of rumours on Thursday when they announced that they had suspended research on Newcrest. The news was seen as a sign that GSJBW's corporate advisory arm might have been appointed to advise on a takeover.

Newcrest shares jumped 45c to $22.20 on Thursday after GSJBW analyst Ian Preston said he was suspending coverage of the stock.

The poor performance of Newcrest's Telfer mine and its $7 billion market capitalisation - relatively small compared to foreign giants - have made company look like a potential takeover target.

But an announcement from Newcrest yesterday morning clarified that the suspension came about as the result of a meeting between GSJBW analysts and Newcrest management.

During the course of a discussion that focused on depreciation, the GSJBW analysts apparently became convinced that Newcrest was endorsing their earnings forecasts. "In indicating at that meeting that the company was comfortable with GSJBW's work it has given GSJBW an impression that the company was endorsing the accuracy of their revised profit forecast which was not intended and implies a precision which the company was not in a position to provide," Newcrest told the Australian Stock Exchange.

At issue were the principles of continuous disclosure. Corporations law forbids any company to provide information to analysts that is not available to the market as a whole. The regulators encourage continuous and fair disclosure as a way of improving efficiency in the market, but GSJBW's disclosure confused the market, spurring on takeover speculation.

The stock fell $1.25 to $20.95 as investors digested the company's guidance.

After the Newcrest announcement, GSJBW said that it had resumed coverage of Newcrest and that its rating of "hold" was under review.

Newcrest confirmed its 2005-06 profit outlook in its statement to the exchange yesterday, but the market was disappointed by its 2006-07 guidance. Analysts had forecast that Newcrest would double its 2006 profit of $125 million to $135 million (excluding a $215 million one-off gain from the sale of its share of the Boddington joint venture), but the company yesterday said that was probably too optimistic.

"At this early stage the company anticipates that net profit after tax for 2006-07 will exceed that of 2005-06 but at current commodity prices will not approach double the 2005-06 anticipated outcome which some analysts are indicating," said Newcrest's statement.

Matthew Stevens - Page 35