3rd UPDATE: Newcrest CEO Resigns As Gold Miner's Profit Soars

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 profit up 148% on the year to 437.8 million Australian dollars ($439.4 million).

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 labors after turning round the company and completing the acquisition of its smaller rival, Lihir Gold Ltd., in September.

"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 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 and Newcrest Chairman Don Mercer said the completion of the Lihir takeover marked a natural transition point for the company's executive team.

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.

"The natural life of a CEO is four to seven years, and I think there is some merit in not staying too long in a company, because over time you do fall in love with the things that have been created or put in place in your tenure," Smith told a media call after the results announcement. "This is not flagging that the company is about to go through a 90- or 180-degree change, but Greg will bring a certain change of emphasis."

Smith is a former executive at Rio Tinto and was a senior resources manager at WMC Resources Ltd., the Australian company that was taken over by BHP Billiton in 2005 in the company's last major corporate acquisition, sparking the speculation that Smith may be looking at a role at either company.

"He's probably the best CEO in Australia, so for people looking for a best CEO it's an obvious look," said Credit Suisse's Slifirski.

Paul Xiradis, chief executive of investment fund Ausbil Dexia, a top shareholder of both Rio and BHP's Australian listings with A$14 billion of funds under management, said Smith would be welcomed in any new role.

"He's a very highly regarded professional," he said. "He changed the DNA within Newcrest and will be sorely missed there, and by the same token if he moves elsewhere he'll be a good contribution."

However, Smith said he would be looking primarily at non-executive positions in the short term. "I can assure you that as of today I have nothing in mind specifically. My wife is probably the most nervous person; she's telling me I've got to fill up my day, and I intend to do that," he said.

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 March 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.

Robinson, who will take over from Smith, 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.

Newcrest said its record first-half results were a result of gold production rising 70% over the previous half-year thanks to 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 revenue rose 66% to A$1.97 billion from A$1.19 billion. A first-half dividend of 10 Australian cents per share was declared--without the franking credits used in Australia to shave investors' tax bills--compared to 5 cents at the same time last year.

The company said 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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