Analysis Of Financial Statements Of Newcrest Mining, AngloGold Ashanti, And Northern Star Resources

Equity and liabilities

Newcrest Mining Ltd is among the largest gold mining entities. They deliver the superior return safely to the shareholders through recognising, developing and operating the copper and gold mines. Further, the company is committed to wards maintaining the safe environment for the people through developing and maintaining the mines in sustainable way in compliance with the environmental standards and creating the long term relationship with the communities under which they operate their business. Vision of the entity is to be the miner of choice for the people, stakeholders, suppliers, partners and host communities (Newcrest Mining Limited 2019).

AngloGold Ashanti Ltd from South Africa is globally diversified entity with world class portfolio of the projects and operations. It has 3 projects and 14 mines in 10 countries. Mission of the company is to create value for the employees, shareholders, social and business partners through responsibly and safely mining, exploring, marketing and mining of the products. Though the primary focus of the company is goal, it pursues the value creating opportunities for other minerals where the company can leverage the existing assets, experience and skills for improving the value delivery (AngloGold Ashanti 2019).

 Northern Star Resources Limited is the global-scale and high grade underground for gold mines and the company is firmly focussed for maximising the returns for the shareholders. It continues investing for creating the strong asset base through the aggressive exploration and strategic acquisition for extending the lives of mine through the world class operations (Nsrltd.com 2019). 

Newcrest Mining Ltd – listed equity items for the company are mentioned below –

• Issued capital – issued capital is the share capital issued to shareholders. Share capital is the part of authorised capital that can be issued as per the articles of the entity.
• Accumulated losses – accumulated losses is the negative balance in the retained earnings. The accumulated loss is generated when cumulative losses have been experienced by the entity and payment of dividend exceeds cumulative profits amounts (Reid and Myddelton 2017).
• Reserves – reserves are the profit portion that is earned through normal operation of the company that is set aside for future purposes. Revenue reserves are segregated into specific reserves and general reserves.
• Non-controlling interest – it is the equity portion in the subsidiary that is not attributable t parent entity that has controlling interest that is more than 50% but less than 100% and is consolidated into the financial result of the subsidiary with own (Sarfaty 2015).

Changes in equity are as follows – 

Reserves amount of the company has been changed due to changes in the amount of Foreign Currency Translation Reserve.

AngloGold Ashanti Ltd – listed equity items for the company are mentioned below –

• Share capital and premium – fund accumulated through issuance of the share in exchange for cash or for any other thing is regarded as share capital. If the entity decides issuing the share at the price that is higher as compared to the nominal value or the face value the share is issued at the premium. This is quite normal practice for the entities with strong financial position (Melloni, Lai and Stacchezzini 2018).
• Accumulated losses – discussed in Newcrest Mining Ltd
• Non – controlling interest – discussed in Newcrest Mining Ltd

Changes in equity are as follows – 

Amount for share capital has been changed due to issuance of ordinary share.

Northern Star Resources Ltd – listed equity items for the company are mentioned below –

• Share capital – discussed in AngloGold Ashanti Ltd
• Reserves – discussed in Newcrest Mining Ltd
• Retained earnings – it is the part of business profits that is arrived through income statement where the net profit is also used under balance sheet as well as cash flow statement. It is not distributed for dividend and is reserved for the purpose of re-investment (Sethi 2016).
• Changes in equity are as follows – 

Retained earnings amount has been increased due to increase in the amount of net profit. 

Newcrest Mining Ltd – listed liability items for the company are mentioned below –

• Trade and other payable – it is the amount of bill raised to the entity by the suppliers for the delivered goods or provided services in ordinary course of the business.
• Borrowing – it is the arrangement of fund through banks, financial institutions. Generally the borrowings are repaid with the interest and repayment is made based on the term of payments (Watson 2015).
• Provisions – it is the amount that is kept side to meet the projected liability that is uncertain. Amount kept aside as provision are kept for using to fulfil the future obligations.
• Current tax liability – current tax obligation is most straightforward as it represents the tax obligation of the business associated with to current period’ taxable earnings.
• Deferred tax liabilities – DTL is the tax assessed or that is due for current period but payment for which has not been made. It is generated through timing difference in the paid tax and accrued tax (Laux 2013).

Changes in liability are as follows – 

Amount of non-current borrowings have been changed due to payment of old borrowings. Deferred tax liability has been changed due to charges to income for temporary differences on fixed assets.

(i) Equity items

AngloGold Ashanti Ltd – listed liability items for the company are mentioned below –

• Borrowing – discussed in Newcrest Mining Ltd
• Environmental rehabilitation and other provisions – it includes the provisions for decommissioning, provisions for restoration.
• Provision for pension and post-retirement benefits – it includes the defined benefit plans that is made for pension, medical schemes, provident fund that covers almost all the employees
• Trade and other payables and deferred taxes – discussed in Newcrest Mining Ltd
• Deferred taxation – discussed in Newcrest Mining Ltd

Changes in liability are as follows – 

Amount of current borrowings have been changed due to payment of old borrowings and raising new borrowings. Deferred tax amount has been changed due to charges to income for temporary differences on fixed assets.

Northern Star Resources Ltd – listed liability items for the company are mentioned below –

• Trade and other payables – discussed in Newcrest Mining Ltd
• Borrowings – discussed in Newcrest Mining Ltd
• Current tax liabilities – discussed in Newcrest Mining Ltd
• Provisions – discussed in Newcrest Mining Ltd
• Deferred tax liabilities – discussed in Newcrest Mining Ltd

Changes in liability are as follows – 

Amount of trade payables have been changed due to payment of old payables and generation of new payables. Amount of current borrowings have been changed due to payment of old borrowings and raising new borrowings. Deferred tax amount has been changed due to charges to income for temporary differences on fixed assets.

Debt –equity amount – 

Debt-equity percentage – 

Debt equity comparison is carried out to analyse the company’s solvency position. If the company has high debt component it represents that the company’s solvency position is in threat as high debt portion will increase its leverage. On the other hand, higher level of equity represents the stable position of the company as lower percentage of debt will not threaten the company towards insolvency. From the above it is recognised that the Newcrest Mining Ltd and Northern Star Resources Ltd has low proportion of debt that is 33% to 35%. On the other hand, debt component of AngloGold Ashanti Ltd is 62.54% that is significantly high as compared to other 2 entities. Hence, the leverage position of AngloGold Ashanti Ltd is high. 

Cash flow statement of selected entities represent the aggregate data regarding the cash inflows of the entity received from the operating activities, investing activities and financing activities. Details of each item are as follows –

• Cash from operating activities – this section represents the cash generating ability of the entity from the core activities. It includes the net income, adjustments for non-cash expenses and changes in the working capital.
• Cash from investing activities – this section represents the aggregate changes in the cash flow position of the company resulted from the investment gain and losses and changes resulted from amount spent for capital asset like plant and property (Pavlovi? and Bogdanovi? 2013).
• Cash from financing activities – this section accounts for the external activities that allows the entity to raise capital. Apart from that, the financing activities include repayment made to investors, changing or adding up, loans and issuing stocks.

Changes for the items of cash flows statement –

• Newcrest Mining Ltd – cash used for investing activities has been increased from $ 427 million to $ 728 million. The increased amount was contributed towards payment for the investment and selling of the subsidiary. Cash used towards financing activities has been reduced from $ 959 million to $ 300 million. The reduction was due to payment made towards bilateral bank debt has been reduced to $ 320 million in 2017 as compared to $ 3,110 million of 2016.
• AngloGold Ashanti Ltd – cash used for investing activities has been increased from $ 702 million to $ 862 million. The increased amount was contributed towards projected capital and acquiring investment. Cash used towards financing activities has been reduced from $ 763 million to $ 148 million. The reduction was due to payment made towards borrowing has been reduced to $ 767 million in 2017 as compared to $ 1,333 million of 2016.
• Northern Star Resources Ltd – cash used for investing activities has been increased from $ 189723 thousand to $ 204,388 thousand. The increased amount was contributed towards payment of plant, property and equipment and disposal of the business. Cash used towards financing activities has been increased from $ 45,714 thousand to $ 66,623 thousand. The increase was due to payment made to shareholders as dividends.

Newcrest Mining Ltd – 

Cash generated through operating activities do not have any particular trend. Net cash used also do not have any particular trend. However, the cash used for financing activities of the entity are in reducing trend (Warren and Jones 2018).

AngloGold Ashanti Ltd – 

Cash generated through operating activities do not have any particular trend. However, the cash used for financing activities of the entity are in reducing trend and cash used for investing activities are in increasing trend.

Northern Star Resources Ltd – 

Cash generated through operating activities do not have any particular trend. However, the cash used for financing activities as well as cash used for investing activities of the entity are in increasing trend (Chang et al. 2014).

(ii) Liability items

Looking for the insights of all the 3 companies regarding the pattern of cash flows it can be commented upon that all the companies are generating cash through operating activities. Further, all the companies are using cash for financing activities as well as investing activities and not generating any cash from there.

Newcrest Mining Ltd – items reported in the OCI statement are –

• Items those are likely to be reclassified in profit and loss statement – it includes the cash flow hedges, investments that is net gain from financial assets available for sale that is transferred to income statement on disposal of the investment. It further includes the foreign currency translation where the exchange losses or gains from translation of the foreign operations after adjusting the hedge amount (Jordan and Clark 2014).

AngloGold Ashanti Ltd – items reported in the OCI statement are –

• Items those are likely to be reclassified in profit and loss statement – it includes

Northern Star Resources Ltd – items reported in the OCI statement are –

• Items those are likely to be reclassified in profit and loss statement – it includes the exchange differences on the translation of the foreign operations, net gains or loss on the financial assets those are available for sale, release on the disposal of the available for the sale financial assets.

Some of the items those are included in the other comprehensive income statements cannot be reported under the income statement as they are of extra-ordinary nature. For instance, cash flow hedges, investments those are held for sale, financial assets held for sale, exchange difference from exchange translation and tax recognition if included in the profit and loss statement it will either overstate or understate the profit or loss in the profit and loss statement. Hence, the items included in the OCI are not included in the profit and loss statement.

Looking into the OCI statement of all 3 entities selected above it can be commented that the OCI income of Newcrest Minerals Ltd have been increased from $ 194 million to $ 534 million. In case of AngloGold Ashanti Ltd OCI statement represents that the income from 2016 amounting to $ 267 million has reached to loss amounting to $ 17 million in 2017. The loss was due to the loss reported in the profit and loss statement of the company for the year 2017. Further, in case of North Star the OCI for the year 2017 has increased to $ 1,580 thousand as compared to $ 773 thousands for 2016. The increase was due to changes in fair value of financial asset available for sale (Khan and Bradbury 2016). 

Various items like cash flow hedges, investments those are held for sale, financial assets held for sale, exchange difference from exchange translation and tax recognition those are included in OCI determines manager’s ability with regard to planning and estimation of the values of the liabilities as well as assets. These items are of great importance as it can benefits the entity while meeting the future obligation. Therefore, it is a crucial item that must be used for analysing the performance of the manager (Weygandt, Kimmel and Kieso 2015).

Newcrest Mining Ltd – $ 164 million

(iii) Comparative analysis of debt and equity position

AngloGold Ashanti Ltd – $ 108 million

Northern Star Resources Ltd – $ 79,607,000

Effective tax rate is calculated as –

Effective tax rate = Income tax expense / Earning before tax

Newcrest Mining Ltd – $ 164 million / $ – 63 million = 260.32%

AngloGold Ashanti Ltd – $ 108 million / $ 483 million = 22.36%

Northern Star Resources Ltd – $ 79,607,000 / 268,504,000 = 29.65%

Newcrest Mining Ltd – the entity did not report any amount under deferred tax assets. However, deferred tax liabilities amounted to $ 1087 million in

AngloGold Ashanti Ltd – deferred tax assets amounted to $ 4 million in 2017 and deferred tax liabilities amounted to $ 363 million in 2017

Northern Star Resources Ltd – the entity did not report any amount under deferred tax assets. However, deferred tax liabilities amounted to $ 49,346 thousand in 2017 (Titman, Keown and Martin 2017).

DTA or DTL reported by the company for reporting the temporary timing difference in that is generated through timing difference in the paid tax and accrued tax. However, the company records the DTA or DTL only when the company is certain that the future profit will be available with the company for adjusting the temporary differences (Narotzki 2017).

Newcrest Mining Ltd – deferred tax liabilities amounted to $ 1087 million in 2017 as compared to $ 948 million in 2016.

AngloGold Ashanti Ltd – deferred tax assets amounted to $ 4 million in 2017 as well as 2016 both. Deferred tax liabilities amounted to $ 363 million in 2017 as compared to $ 496 million in 2016.

Northern Star Resources Ltd –deferred tax liabilities amounted to $ 49,346 thousand in 2017 as compared to $ 36,569 thousand in 2016.

Cash tax of the entity is calculated through adjusting the changes in the deferred tax assets and deferred tax liabilities with the book tax. Book tax is the tax expenses reported by the company under the profit and loss statement of the entity (Waddock 2017). Cash taxes of the companies selected above are as follows – 

Cash tax rate is computed through dividing the amount of cash tax by the amount of EBITDA that is amount of earnings before interest, tax and amortisation. Details for the cash tax rate for the selected entities are as below – 

It can be stated from the above table that as the book tax for AngloGold Ashanti Ltd is in negative the cash tax rate is not applicable. Further, it can be identified that the cash tax rate for Newcrest Mining Ltd is highest at 53.33% and the cash tax rate for Northern Star Resources Ltd (Marshall 2016).

Cash flow statement

There is difference among the cash tax rate and book tax rate as the book tax is the rate that is recorded in entity’s financial statement. On the other hand, Cash tax rate is the rate at which the entity pays tax to federal government. This amount is computed on income reported in tax return filed by the entity.  Hence, there is a difference in cash tax rate and book tax rate (Maaloul and Zéghal 2015).

Conclusion 

From the above interpretation ad details provided it can be concluded that various items of financial items reported in financial items like equities, liabilities, cash flows, taxes and other comprehensive income statement. All the items have been properly reported by all the companies in their financial statements. Other comprehensive statement includes the items those cannot be reported in the income statement. Further, the cash flow statement of all the entities are segregated into operating activities segment, investing activities segment and financing activities segment. 

Reference

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Newcrest Mining Limited, 2019 . [online] https://www.adenergy.com.au/, Newcrest.com.au. Available at: https://www.newcrest.com.au/ [Accessed 29 Jan. 2019].

Nsrltd.com. 2019. Northern Star . [online] Available at: https://www.nsrltd.com/ [Accessed 29 Jan. 2019].

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