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NCM - Newcrest Mining

Discussion in 'Stocks I-P' started by Profitseeker, Oct 19, 2005.

  1. Profitseeker

    Profitseeker

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    Ouch! Oh Dear! Should prove to be a good buying opportunity today for the long term. I'm not panicking and selling.
     
  2. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: Newcrest Mining (NCM)

    Yep, very disappointing report today, costs are up significantly, production rates not helping and outlook is cloudy and flat with the perennial problems at Telfer still not out of the way. This really looks like a lame duck waiting to be picked off by a better team that can extract full value, like WMC in a way, world class assets from reports but not the best performer. I see this going lower, the breakout to new highs appears to be failing, the only thing that's helping it is the pog which has that positive sentiment attached to it.

    I hope holders who employ stops have them at the forefront of their minds.
     
  3. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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  4. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: Newcrest Mining (NCM)

    This is a relatively mild report, I've seen worse, just when you think it's all ok with Telfer things get worse.

     
  5. Profitseeker

    Profitseeker

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    Re: Newcrest Mining (NCM)

    It looks like the stock will open up again today though. Is everyone buying back in because of the rumoured take over move or is it just a natural bounce. I'm thinking that it is the takeover thing. I don't believe anyone would make a takeover bid till Telfer is sorted. Thinking about selling out and waiting for an opportunity to renter.
     
  6. Profitseeker

    Profitseeker

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    Re: Newcrest Mining (NCM)

    Directors are buying. Could be a good sign.
     
  7. Profitseeker

    Profitseeker

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    Re: Newcrest Mining (NCM)

    :cautious: WOW. What is going on? This can not just be the gold price? Can it?
     
  8. Profitseeker

    Profitseeker

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    Re: Newcrest Mining (NCM)

    This is going to open like a rocket!
     
  9. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: Newcrest Mining (NCM)

    If everyone thinks that then a better management team from a predator co may think otherwise.
     
  10. Profitseeker

    Profitseeker

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    Re: Newcrest Mining (NCM)

    Last 10 Trades Help

    The last 10 trades* of the security you selected are detailed below.

    ASX Code: (Search for ASX Code)

    All Ordinaries ASX Time Market Status Legend
    4781.7 0.6 09:43 pm, 12 January 2006 SEATS is closed Rise Fall


    Newcrest Mining Limited (NCM)
    Date Time Price ($) Quantity Value ($) Conditions
    12-01-2006 04:34 PM $24.920 24521 $611,063.320 Portfolio Special Crossing
    12-01-2006 04:29 PM $25.589 2490 $63,716.610 Portfolio Special Crossing
    12-01-2006 04:26 PM $25.600 19344 $495,206.400 Portfolio Special Crossing
    12-01-2006 04:21 PM $25.132 220000 $5,529,040.000 Special Block Crossing or Special Crossing in Loan Securities
    12-01-2006 04:15 PM $24.920 5000 $124,600.000
    12-01-2006 04:15 PM $24.920 4000 $99,680.000
    12-01-2006 04:15 PM $24.920 3000 $74,760.000
    12-01-2006 04:15 PM $24.920 750 $18,690.000
    12-01-2006 04:15 PM $24.920 600 $14,952.000
    12-01-2006 04:15 PM $24.920 2500 $62,300.000


    * Any trades that have been cancelled will not be displayed as such.



    © Copyright 2005. Westpac Securities Limited (ABN 39 087 924 221).
    For assistance call 13 13 31.
     
  11. Profitseeker

    Profitseeker

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    Re: Newcrest Mining (NCM)

    Am I reading the above right? DId somone buy 5 million dollar worth of shares in one hit?
     
  12. The Barbarian Investor

    The Barbarian Investor

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    Re: Newcrest Mining (NCM)

    What do you like about Newcrest profitseeker?
     
  13. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    This co seems to have hit a snag, all the gold stocks are rising but it's still going sideways. Why? IMO it's the hedging which is really crippling it and the problems at Telfer (some poor grades reported recently, then there were the fires before that), I don't think the current boss is very media/broker friendly either so maybe when he retires next month the replacement will get things going properly and fix the labour shortages etc.

    Bottom line appears to be the hedging that is stifling the sp, does anyone know when the effect of it all will end? Can they proactively 'dehedge' or do you just have to wait for their contracts to expire? I don't know how they do it. LHG was having similar issues but it seems to be behind them, now look at the sp. A similar turnaround for NCM should see it race up imo, no wonder it's a takeover target, imagine the value that could be added to a co that has a world class resource at Telfer. I've been considering NCM as a long term proposition but I think LHG would be a better bet atm- only issue is the sovereign risk for the latter.

    Do any of the fundamentals ppl out there have any view on this? My TA view is it's in some sort of wedge or triangle, no sign of impending breakout from the volume but overall trend is bullish, I'd like to see upward movement of high volume through $24 in the next week or so.
     
  14. bvbfan

    bvbfan

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    They could unwind their hedges but I estimate that it would cost $1-2billion

    When I last looked in 2001 they were $400million or so underwater with the hedgebook at $300/oz
     
  15. Profitseeker

    Profitseeker

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    Re: Newcrest Mining (NCM)

    Liked. I sold out in April but have been thining about reentering in weakness. Not because I do not like them long term but because there are so many other good opportunites around. I am also very confused about what state their hedge book is actually in. The fact that management has not released an annoucement about it suggests that it can not be pretty. However they remain a take over target and I think next year their hedging position gets better. If the price of gold is still high the share price could really take off then in a catch up situation.
     
  16. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: Newcrest Mining (NCM)

    Here's an article based on the quarterly report, sounds worse than I thought, so many negatives it's not funny. I'm sure there are better management teams out there, all you hear are excuses. So basically the higher the gold price the more they lose out in profits, I hope they dump the hedging on the next major pullback in gold, should be due in a few weeks at this rate.
     
  17. Profitseeker

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    Thanks Richkid. That confirms what i thought.
     
  18. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Here is a more favourable view of NCM's hedging, sans the benefit of the hindsight we now enjoy re the pog. Although if they hadn't stuffed around with bringing Telfer into production under budget it would all be much better.

     

    Attached Files:

  19. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Also see this for a discussion of why NCM's hedging was so complex in the past, from CFO magazine, 1Mar06
    The right side of the law:
    Looking at complex financing deals with a lawyer's insight has proved a winner for one corporate treasurer.

    http://www.cfoweb.com.au/freearticle.aspx?relId=16931

    .... Its failure in 2001 was the catalyst for Chamberlain's return to the mining industry, this time at gold miner Newcrest.

    Newcrest CFO Geoff Smith had identified the hedge book as a major problem. "In the mid to late 1990s, gold companies entered into exotic derivatives, and Newcrest ended up with a 'Noah's Ark' of hedge instruments," Chamberlain says. "It started with the practice of selling calls to finance other derivatives, which was manageable at a time of stable gold prices and currency exchange rates in the late 1990s."

    By 2001, Newcrest had amassed a hedge book with almost 20 counterparties and about 2400 transactions using between 30 and 40 different types of exchange.

    "As the gold price became volatile, the company accounts started to reflect that uncertainty. Newcrest was carrying a lot of risk that was hard to explain to the equity markets. The approach to hedging risk was inconsistent and the whole arrangement was preoccupying far too much of top management's time."

    The "unusual" result was that Newcrest performed better when the gold price fell rather than when it rose. "It took quite a while to go through the masses of documentation and modelling," Chamberlain says. "Then it was a question of deciding if we needed to do anything about [this state of affairs]. After a long and arduous series of board and management meetings, it was agreed that we had to simplify the hedge book. We looked for a partner and chose investment banker Goldman Sachs, one of the few with the modelling capability and appetite to take on the credit risk involved.

    "It took nine months to put that project together, whereby all the exotic transactions were overlaid and thereby neutralised and in exchange we took on 'plain-vanilla' transactions."

    The revamp involved hedging more than 8 million ounces of physical gold against 6.5 million ounces inherent in the under-lying transactions.

    "We had to buy 1.5 million ounces of gold to cover the physical underlying change against the existing positions, but we were able to do this without disturbing the market. We had a kicker in that the equity markets pushed up our share price by about a dollar after we completed the simplification," Chamberlain says.

    He notes that explaining the company's hedge positions previously accounted for almost two pages of Newcrest's annual report. This can now be done in just a few lines.

    "In hindsight, it was important for us to have gone through that process. Approaching the debt markets with a simple hedge book helped us dramatically in restructuring our existing borrowings both through a US private placement and simple bank debt."

    One of these restructuring deals was a "quasi-project finance" arrangement with a syndicate of seven banks, backed by a number of financial and operational restrictions. Chamberlain notes that this has since been further restructured into a much simpler borrowing arrangement.

    "My role [at Newcrest] is treasury and financial analysis, so perhaps I have a bit more room to move than many other corporate treasurers. The treasury is getting more involved in the operational sides of the business, particularly cash management and capital management," he says.
     
  20. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    A new face, one of the RIO inner sanctum so this guy must be a big name.... and maybe a new era, let's be frank, it can hardly get any worse now can it?

     
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