aul trucks are seen at the Newcrest Mining Cadia gold mine, AustraliaHO
A major gold miner is hiring an outsider and slashing jobs after writing off billions of dollars from an ill-timed acquisition and watching its shares plunge.
Sound like Barrick Gold Corp.? Actually, the company is Newcrest Mining Ltd., Australia's biggest gold miner.
The major gold miner, worth just $7.1-billion today after plummeting 60 per cent from a valuation near $23-billion in October, announced plans late Monday to cut 150 jobs at its Lihir gold mine in Papua New Guinea.
The move comes after the miner already announced plans to slash 250 jobs and to close an office in Brisbane.
The culprit: this year's 24-per-cent plunge in gold prices. Just like Barrick, Newcrest overextended itself and now the falling bullion price is having a drastic effect on cash flow. Earlier this month Newcrest decided to write off $6-billion (Australian), much of it stemming from the $9.7-billion acquisition of Lihir Gold Ltd. three years ago.
Barrick wrote off $4.2-billion (Canadian) earlier this year, the vast majority of it stemming from its $7.3-billion acquisition of Equinox Minerals Ltd. in 2011.
The two major gold miners share another similarity: both are bringing in, or looking to bring in, independents. At Barrick, certain members of the miner's board of directors are working with major shareholders to add more independents, after shareholders revolted against the $17-million signing bonus paid to new co-chairman John Thornton.
At Newcrest, outsider Maurice Newman, the former chairman of the Australian Securities Exchange, has been hired to analyze the company's investor relations procedures. Earlier this month equity analysts who cover Newcrest downgraded the stock right before the company announced its massive writedown. Now there are questions as to whether they got insider information before the news was publicly announced.
So both miners are clearly troubled. The good news for Newcrest, if you can call it that, is that its shares are only at a 10-year low. Barrick's haven't seen these levels in 21 years.
But they aren't the only ones hurting. Bloomberg News recently calculated that gold mining writedowns now amount to $17-billion (U.S.).
(Tim Kiladze is a Globe and Mail Capital Markets Reporter. Come and meet the Streetwise team at noon at the Royal Bank Plaza concourse in Toronto on Wednesday and Thursday. Ask your questions @streetwiseglobe )
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Tim Kiladze