Already at 40-month lows, shares in Australia’s biggest goldminer Newcrest Mining plummeted further on Tuesday when it cut production forecasts.
The company cut predictions for gold and copper production for 2012 after carrying out a major review of its operations.
Newcrest shares closed at $26.60, its lowest level since early December 2008.
It fell by $1 or 3.62 per cent on Tuesday.
The company said on Tuesday gold production for the 2012 financial year would be reduced to 2.25-2.35 million ounces from 2.43-2.55 million ounces.
It also lowered its forecast for copper production to 70,000-75,000 tonnes from 75,000-80,000 tonnes.
It blamed higher costs, ranging from labour to energy, a fall in productivity, and the impacts of the strong Australian dollar.
High rainfall at Newcrest’s Cadia Valley operation during the March quarter had hampered production there.
However the Lihir mine it acquired is yet to hit its anticipated rate of 65,000-75,000 ounces a month.
Newcrest now expects production to continue at a rate of 50,000-60,000 ounces a month for the rest of the financial year.
Newcrest had significantly underperformed both the market and the gold price, as production issues have seen confidence destroyed and short sellers have come out to play,” said IG Markets strategist Stan Shamu.
The problems and downgrade raised doubts about the quality of the Lihir acquisition, City Index’s chief market analyst Peter Esho said.
“Acquisitions are always difficult and Lihir had a history of burning cash but the hope was that the worst was behind it and Newcrest would bring about better days,” he said.
“The lower production numbers combined with a falling gold price is likely to hurt earnings estimates which will no doubt be under pressure today.”
He predicted a ramp up in consolidation among profitable gold juniors this year with the market needing exposure that can rival Newcrest.
Newcrest said the impacts of the industry and operating conditions had become more significant over the past 12 months and particularly in the last quarter.
“The resulting short-term production performance has been unacceptable to the board and management,” it said in a statement.
Newcrest said it had increased its capital expenditure to $2.4 billion from $2.2 billion, while its guidance on total cash costs pre by-product credits remained unchanged at $2.1-$2.2 billion.
Newcrest’s updated forecasts came as it released its third quarter results.
Gold production for the March quarter was 532,237 ounces, down from 579,073 ounces in the December quarter.
Quarterly copper production fell to 18,072 tonnes from 18,171 tonnes.
