Tuesday, 6th July 2004 (2758 views)

Shares in gold producer Newcrest Mining Ltd rose by almost five per cent after analysts upgraded earnings forecasts to reflect changes to the company's hedge book.

Australia's biggest gold producer recently simplified its hedge position and analysts claim the move will create earnings certainty and make Newcrest more vulnerable to a takeover.

Credit Suisse First Boston analysts Michael Slifirsko and Julian McCormack stated that the brokerage had raised its 2004/05 and 2005/06 earnings forecasts to reflect higher copper hedging at prices above expectations, according to news agency AAP.

In a client note, the experts stated that Newcrest's announcement was an important event because it "provides investors with certainty regarding future earnings" and "increases the company's corporate appeal".

"In our view this (simplification of the hedgebook) substantially de-risks the company both in terms of earnings certainty and in the eyes of the potential buyer," the analsysts concluded.

CSFB has upgraded its 2004/05 forecast net profit after tax (NPAT) by nine per cent to $350 million and its 2005/06 NPAT by 13 per cent to $292 million. Its target price on Newcrest has been upgraded from $14.00 to $17.00.

Goldman Sachs JB Were analyst Ian Preston said the move to simplify the hedgebook was a "distinct positive", while UBS analyst Shaun Giacomo said the hedgebook changes would have a positive impact on sentiment, with investors continuing to favour non-hedged or lightly hedged gold producers.

 

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