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Newcrest Mining

Tuesday 16th August 2011

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Goldman Sachs has cut Newcrest (NCM.AU) to Hold from Buy, while lowering its price target to A$48 from A$52 because the fiscal 2011 results and outlook statements have resulted in material downgrades.

"We still favor exposure to Newcrest for risk diversification," says the broker. "However, we now have a lower EPS forecast for fiscal 2012 than fiscal 2011. Whilst we like the fundamental outlook, we do not believe that the market will look beyond this fall in fiscal 2012 to the real production growth from fiscal 2013 and thus do not see Newcrest outperforming the market during that period."

Goldman Sachs says NCM’s net profit of A$908 million compared to its A$913.6 million expectation, and it was buoyed by a 20 cent special dividend, while cash flow and net debt were slightly worse than expected.

NCM has completed the acquisition of Lihir Gold and while the Papua New Guinea gold assets of Lihir raise the operational risk NCM is still the premier gold stock on the ASX. NCM expects to exceed the original goal of $85 million in cost savings a year from the Lihir acquisition with the balance to focus on maintenance, stores, inventories and mining.

Contact IRG on 0800 437 8489

**A disclosure statement is available, on request and free of charge.

Recommendation sourced from the IRESS software trading platform


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