Newcrest Mining Limited (ASX: NCM)

Breakthrough of tailings material at Cadia: Down 4.5% on March 12, 2018, Newcrest has been hit by the developments at its NSW goldmine Cadia. NCM has reported for a limited breakthrough of tailing material identified at the Cadia northern tailings dam embankment. Newcrest is monitoring the impact carefully and no environmental damage has been reported up till now. No injuries were reported, and the Company believes that there is no ensuing threat to personal safety. Some cracks were identified in the dam wall during a regular inspection after an area of embankment slumped. As a precaution, Newcrest stopped depositing the tailings into both dams. To allow site management to focus on the evaluation of the event and on remediation plans, Newcrest progressively suspended all mining and processing operations at Cadia from 10 March 2018. The NSW regulators were immediately notified, and Newcrest will work closely with them until the review is completed. The exact reason has not been reported but there is a speculation that it was another seismic event. Since the breakthrough occurred, Newcrest has been actively involved in engaging local landholders and residents downstream in the tailing facility. This event has been flagged to adversely impact the guidance for FY18 while it is too early to evaluate and provide an opinion about the extent of impact. Currently, the group is focussing on safety of Company’s people, community and to comply with the environmental highest standards. We give an “Expensive” recommendation at the current market price of $26.60
 

Image of Tailings Dams at Cadia (Source: Company Reports)
 

McGrath Limited (ASX: MEA)

Development of a new Strategy: Shares of property group, McGrath Limited were down 2.3% before trading flat on March 12, 2018. McGrath Limited provided the market with a not so encouraging trading update while the Company has appointed its new CEO and conducted an initial review of the company’s accounts and operations which identified that the projected profit momentum from trading and other financial drivers was not currently consistent with the previous guidance. Based on unaudited management accounts year to date, the Company has generated an underlying EBITDA of $720,000 for the eight months ending on 28 February 2018. Based on this historical performance and on the current run rate, McGrath expects to generate an underlying EBITDA in the range of $5.0-$5.5 million for the financial year ending 30 June 2018 (about 50% down from the earlier guidance of between $10.6 million and $11.6 million as announced in January) at the back of reduced sales volumes. The cost cutting program which was placed last year has started to generate the financial benefits which has led to an upliftment in the Group’s performance and it expects to continue till the end of the financial year. A refocussed strategy plan is being developed by the Board so that the company can grow in future. It includes key initiatives like implementation of the right corporate office structure to generate further efficiencies and a better support system for the network. Second is recruiting new franchisees and agents with high quality into the Group’s network. Third is continuous rollout of industry leading training and development and systems to consolidate McGrath’s position as the property sector’s leading provider of customer service. The stock price has declined by 40.69 per cent in the past six months and we believe the stock is “Expensive” at the current market price of $0.43, given the challenges the group has witnessed since 2017.
 

Revenue by segment (Source: Company Reports)

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