Newcrest Mining Limited (ASX: NCM) announced this morning that it is likely to make a $260 million after tax accounting reduction in the value of two of its assets.

Newcrest is Australia’s largest gold miner, with a market capitalisation of around $16 billion according to Google Finance. 

Newcrest is still in the process of completing its 2018 financial year report, but the Board of Newcrest believes it likely that a non-cash write-down of $260 million after tax will occur comprising:

  • $190 million after tax at Telfer given lower levels of ore mined, higher levels of waste, lower gold recoveries, higher closure costs and higher operating costs than previously predicted
  • $70 million after tax at Namosi where potential project configurations may make retaining previous study costs inappropriate

What Does It All Mean, Basil?

These likely adjustments will be non-cash, reported as significant items on the financial statements and not included as underlying profit. However, cash was originally spent on these assets — so it’s a real cost.

The company reminded investors that it has already announced other significant items totalling a net $6 million for other write-downs and gains in the FY18 result.

Newcrest revealed it expects its free cash flow to be around $600 million in FY18, including cash proceeds of a net $48 million for Bonikro. Most of that money was used to pay down $460 million of net debt.

The FY18 report is expected to be released on 22 August 2018. Investors will be hoping it beats expectations set in the half year result.

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