Record profits for Newcrest amid CEO’s retirement

Ian Smith has unexpectedly announced plans to step down as mining chief of Newcrest mining, as the company records a record first-half net profit of $437.8 million.

Smith is widely regarded as the best mining chief in Australia, and stunned the industry with his February 11 announcement.

Upon the news, Newcrest shares fell 1.4 per cent to $37.16.

Smith will still advise Newcrest until the end of the year.

He plans to step down in June, after five years at the company, and unprecedented success in transforming the mining giant’s profits.

The rise underlying first-half net profit is a 149 per cent rise, and slightly above expectations.

Smith will be replaced by his deputy, finance director Greg Robinson, who cam from BHP Billiton Petroleum.

No reason was given by Smith, a former Rio Tinto executive, for his decision to resign.

He only said the time was right, and indicated he would not be looking to become chief executive at another miner.

“This is a natural timing for transition in the company,” Smith said.

“A lot of the harder areas and some of the opportunities that were apparent in Newcrest in July 2006, when I first joined, have been wrestled and nailed.”

“I’ve always said that the natural life cycle of a CEO is four to seven years – I think there is some merit if you don’t stay too long at a company because over time you fall in love with those things you’ve created or put in place duding your tenure and that has a natural influence on how you view new initiatives and new ideas.”

As chairman of the Minerals Council of Australia, Smith was an active player in the fight against Kevin Rudd’s mining tax.

When he joined Newcrest, the company was regularly falling short on guidance and was experiencing problems at the Telfer gold-copper mine in the Pilbara.

The production has since become more predictable, with Telfer performing well and expansions like the Cadia East mine in NSW amongst the success.

Newcrest completed the $10 billion scrip takeover of Lihir Gold last year and became the world’s third-biggest miner with a market value if $28.4 billion.

Smith has also become very popular with shareholders and analysts, changed the culture at the company  fixed its balance sheet, and successfully used the rising gold process to its advantage.

These kinds of improvements will be difficult for his successor to follow.

"Ian Smith’s shoes are going to be big ones to fill — he has a fantastic standing in the market, probably second to none," said Pengana fund manager Tim Schroeders, who holds Newcrest shares.

"His successor has been chosen wisely, but no matter who it was going to be, there is always going to be some doubt."

A strategic review is set for April at the company, when Smith is still head of the company.

Robinson said the review will not bring major changes, and he plans to continue with the same delivery-focused strategy and management group built by himself and Smith.


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