The scope of Australia’s corporate watchdog’s investigations into gold miner Newcrest are expected to widen after claims the miner conducted an analyst briefing resulting in her downgrade of the company’s valuation weeks before others were brought into the loop.
ASIC is currently investigating the company’s disclosure rules surrounding market-sensitive information, in particular what the company told analysts immediately before its June 7 release which included $6 billion in writedowns and production downgrades.
The Australian today reports that Newcrest briefed one analyst from broking firm Evans & Partners more than 15 days before the release, resulting in the analyst downgrading the company from a "neutral" to "negative" recommendation.
Evans & Partners analyst Cathy Moises told The Australian the downgrade which was published in a research note on May 20 was a result of a "one-on-one meeting" with the miner.
The key factors fuelling the recommendation were delayed development at the PNG Lihir gold mine, Wafi-Golpu setbacks, and downgraded forecast gold production of 2.3 million ounces next financial year.
It is unknown if Moises approached the miner or if it was the other way around.
A number of analysts, including Morgan Stanley, Deutsche bank and UBS, downgraded the stock between June 3 and June 6, prior to the company’s ASX announcement on June 7 on the back of similar information, resulting in sharp share price falls.
Newcrest has to date denied breaching disclosure laws by selectively briefing analysts with market-sensitive information, saying it "treats its disclosure obligations seriously and engages with the investment community in a manner consistent with those obligations".
The miner’s poor handling of the downgrade has got some investors calling for heads to roll.
"Given the developments around the timing of the downgrade, the clarion call is for the entire Newcrest board to fall on its sword," Kimber Capital fund manager Kim Slater said.
"The current board has demonstrated its lack of ability over the past three years in managing what should have been an outstanding gold producer."
Slater also took aim at former chief executive Ian Smith who led the company during its Lihir acquisition.
"The only acquisition that comes close in terms of value destruction is Rio Tinto, with Alcan, and heads rolled over that," he said.
The troubled gold miner has already slashed jobs and moved to close its Brisbane office as it implements a raft of cost cutting measures to improve cash flow.