GOLD major Newcrest Mining plans to close its Brisbane office at the end of September and cut costs across its operations due to the deterioration of the gold price.
Newcrest has reduced exploration activities and 20 per cent of corporate costs to deal with the price decline, in a move to focus on cash over growth.
“Newcrest reconfirms its focus going forward will be on maximising free cash flow by reducing operating costs, corporate costs and capital expenditure,” a company statement said.
Instead of spending a planned $1.5 billion during the 2014 financial year, Newcrest will spend about $1 billion and writedown assets to the value of between $5 billion and $6 billion.
Spending would also be reduced in areas such as projects, studies and exploration, with the latter already slashed by nearly half to about $85 million.
The company would also increase stockpile utilisation at its Lihir operation in Papua New Guinea and reduce the open pit material movements.
Newcrest managing director and chief executive Greg Robinson said the company’s long-term strategy was still the top priority.
“Our focus on gold, long life, low cost operations mainly in Australia and the Asia Pacific region remains firmly in place,” he said.
“The Newcrest board and management have completed a substantial review of the business for the 2014 financial year, taking into account the large fall in gold prices, the continued high exchange rate and cost environment.”
The company expected to produce between 2 million ounces and 2.3moz in the 2014 financial year, a 4 per cent rise year-on-year.
Furthermore, Newcrest announced it was withholding a final dividend for the 2013 financial year in order to “maintain a strong balance sheet and continued investment in the high return Cadia East Panel Cave 2 development” in Cadia Valley, NSW.
However, law firm Maurice Blackburn looks set to launch a class action with investor backing after discovering the miner spent about $50 million just days before the writedowns were announced.
First Eagle Investment Management increased its stake in Newcrest to 7.3 per cent following on-market share purchases, bringing its stake in the company to $669 million. Shares were continually bought until the day the company announced the writedowns.
Maurice Blackburn discovered that several broking houses downgraded their rating for Newcrest days before the announcement, hinting at selective investor briefings. Newcrest employs more than 19,000 people across Australia and the Asia Pacific.