Moody’s Investors Service has downgraded Newcrest Mining to Baa3 on expectations that the firm will have up to 3 times more debt than earnings in the coming financial year.
The downgrade from Baa2 was sparked by Newcrest’s June 7 announcement that it expected to write down $5-6 billion of assets in 2012-13.
Newcrest is currently embroiled in an ASIC investigation and potential class-action lawsuits over alleged insider trading prior to the June 7 announcement.
Last week, the miner also lowered its 2013-14 production guidance and scrapped post-2014 forecasts, stating that its “long-term production profile is very much dependent on market conditions“.
“These production disappointments come at a time of increased volatility and sharp declines in gold price, which at previously elevated levels helped insulate some of the company’s past operating issues,” Moody’s stated today.
Moody’s stated that Newcrest faced a challenging 12-18 months, but its gold production volume although reduced was “still solid”, and it had a “very large base” of gold reserves and copper byproducts.
It said its outlook was currently negative but could revert to stable if Newcrest’s cost-cutting initiatives were successful.
Newcrest is trading at about $12.20, close to where it was before the June 7 announcement.
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