2nd UPDATE: Newcrest CEO Resigns As Gold Miner's Profits Up 148%
February 10 2011 - 7:11PM
Dow Jones News
Newcrest Mining Ltd. (NCM.AU) chief executive Ian Smith
unexpectedly resigned from the world's fifth-largest gold miner
Friday, as the company announced record first-half net profits up
148% to 437.8 million Australian dollars ($439.4 million) in the
period ending December from a year earlier.
Smith, who took over as head of the company in July 2006, said
he was leaving to "pursue other areas of personal interest" and
would be handing over to Greg Robinson, the company's executive
director finance. His resignation surprised many in the market, who
had expected to see Smith enjoy the fruits of his labours after
turning round the company and completing the acquisition of its
smaller rival Lihir Gold Ltd. in September.
The Lihir deal put Newcrest in the first division of global gold
miners behind Barrick Gold Corp. (ABX), Newmont Mining Corp. (NEM),
AngloGold Ashanti Ltd. (AU), and Gold Fields Ltd. (GFI). The
company is also in a sweet spot for global gold miners, with gold
and Newcrest's main by-products copper and silver all around record
prices.
"Obviously (Smith's departure) is a net negative but if you look
at what he's done, from here on it's about delivery of what he's
set up," said Michael Slifirski, an analyst at Credit Suisse in
Melbourne. Another analyst, who asked not to be named, said that
Smith could be eyeing a role at one of Australia's diversified
miners, Rio Tinto PLC (RIO) or BHP Billiton Ltd. (BHP).
"People have speculated in the past about him stepping up to
higher roles and it would make sense," he said.
Smith is a former executive at Rio Tinto and was a senior
resources manager at WMC Resources Ltd., the Australian company
which was taken over by BHP Billiton in 2005 in the company's last
major corporate acquisition.
"He's probably the best CEO in Australia so for people looking
for a best CEO it's an obvious look," said Slifirski.
Smith's ability to execute the Lihir takeover, made at the low
end of an independent expert's valuation for the company, may be a
particular asset at a time when the mining sector is buzzing with
mergers and acquisitions activity.
Rio Tinto has launched a US$3.9 billion takeover offer for
Mozambique-focused coking coal miner Riversdale Mining Ltd.
(RIV.AU) closing Mar. 4, while BHP Billiton has promised to
continue its policy of pursuing major takeover deals despite the
failure of chief executive Marius Kloppers to complete a major
transaction since taking over in 2007.
Chairman Don Mercer said that it was now "the most appropriate
time in the company's on-going development for the transition to
occur" from Smith to a new chief executive.
"Newcrest has been through substantial change over the past five
years and the threats and opportunities facing the company that
were apparent at the start of my tenure have largely been addressed
and outcomes delivered," Smith said in a statement.
A spokeswoman for Newcrest said there was no particular reason
for Smith's departure now. "It's just he's been there for five
years, and all these things have been achieved and addressed," she
said.
Robinson worked in BHP Billiton Ltd.'s (BHP) petroleum and
energy divisions in finance roles before joining Newcrest in 2006,
prior to which he was a director of investment banking at Merrill
Lynch & Co.
The company said the record results were a result of gold
production rising 70% over the previous half-year as a result of
the acquisition of Lihir's mines and increased production from its
mines at Cadia Valley in Australia's New South Wales state,
Gosowong on Indonesia's eastern Maluku island, and Hidden Valley in
Papua New Guinea.
Newcrest said its revenue rose 66% to A$1.97 billion from A$1.19
billion while a first-half dividend of 10 Australian cents per
share, unfranked, was declared, compared to 5 cents at the same
time last year.
The company said that underlying profit, which excludes losses
on restructured hedges and costs associated with acquisitions, rose
96% to A$523.1 million from A$266.6 million.
-By David Fickling, Dow Jones Newswires; 61-2-8272-4692;
david.fickling@dowjones.com
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