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Feb. 16, 2022, 6:35 p.m. EST

Newcrest Mining Limited Announces HY Results FY22

Half Year Results FY22

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Melbourne, Australia, Feb 16, 2022 (Newsfile Corp via COMTEX) -- (figures are in US$ except where stated) Newcrest advances profitable growth agenda [1] [,] [2] [,] [3] [,] [4] [,] [5]

  • Creating a brighter future for people through safe and responsible mining

  • More than six years fatality free

  • Development of the Group Net Zero Emissions Roadmap is currently in progress

  • Rollout of Respect@Work program continues under a dedicated project team

  • On track to deliver Group FY22 guidance [6]

  • Statutory profit and Underlying profit of $298 million [7] [,] [8]

  • All-In Sustaining Cost (AISC) of $1,194/oz [8] [,] [9] delivering an AISC margin of $502/oz [8] [,] [10]

  • Cash flows from operating activities of $423 million

  • Advancing Newcrest's global organic growth portfolio

  • Newcrest Board approved the Cadia PC1-2, Red Chris Block Cave, Havieron Stage 1 and Lihir Phase 14A Pre-Feasibility Studies to the Feasibility Stage with works advancing on all projects

  • Approval received for Cadia to increase its permitted processing capacity to 35Mtpa [11]

  • West Dome Stage 5 cutback underway, supporting the continuity of operations at Telfer

  • Major increases across Mineral Resources and Ore Reserves separately announced today, including an increase in gold Ore Reserves by 10% to 54 million ounces [12] [,] [13]

  • Newcrest to acquire Pretium Resources Inc., owner of the Brucejack mine in British Columbia [14]

  • Addition of a Tier 1 large scale, long life, low cost mine to Newcrest's unrivalled portfolio of assets

  • Immediate increase in Newcrest's gold production by 300koz pa to well above 2Moz [6] [,] [12] [,] [15] [,] [16]

  • Accretive to Newcrest's EBITDA and cash flow

  • Immediate operational and financial diversification in a Tier 1 jurisdiction

  • Growth in a region where Newcrest already operates and has strong existing relationships

  • Significant near mine and district-scale exploration opportunity with exciting potential to realise resource and reserve growth

  • Transaction approved by Pretivm securityholders, with completion expected in the March 2022 quarter [14]

  • Strong balance sheet and delivering strong shareholder returns

  • Strong balance sheet well within financial policy targets, with net debt of $469 million, leverage ratio of 0.2 times and a gearing ratio of 4.5% at 31 December 2021

  • Significant liquidity at 31 December 2021 with $3.2 billion in cash and committed undrawn bank facilities

  • Sale of royalty asset portfolio generated $37.5 million

  • Total dividends paid in the current period of US 40 cents per share

  • Fully franked interim dividend of US 7.5 cents per share

Melbourne, Australia--(Newsfile Corp. - February 16, 2022) - Newcrest Mining Limited (asx:NCM) /zigman2/quotes/200289815/delayed CA:NCM +0.69% (pngx:NCM) Newcrest Managing Director and Chief Executive Officer, Sandeep Biswas, said, "We have taken a big step forward in our profitable growth agenda during the first half of FY22. The depth and quality of our global organic growth portfolio was demonstrated through the announcement of the findings of the Cadia PC1-2, Red Chris Block Cave, Havieron Stage 1 and Lihir Phase 14A Pre-Feasibility Studies. Each of these studies indicate excellent rates of return and we are projecting a material growth in our operating margin and cash flow over the next decade. Progressing each one of these studies makes compelling financial sense and we are excited by the significant potential beyond the base case projections."

"Strategic, value-adding M&A has been a feature of our growth in recent years and we are also looking forward to completing the Pretium Resources transaction this quarter and adding the world class Brucejack mine to our unrivalled portfolio of assets. The addition of Brucejack will drive a material increase in Mineral Resources, Ore Reserves, annual gold production and cash flows, enhancing the quality of our portfolio for many years to come. We will have exposure to six Tier 1 orebodies, five of which will be operating and, pleasingly, we will continue to maintain our long reserve life advantage compared to our peers."

"The transaction will enable Newcrest to expand in one of the premium gold districts in the world and increase our production to well over two million ounces of gold per year until at least 2030. We are confident that our long life, high margin production will be delivered at an extremely competitive All-In-Sustaining Cost."

"The outlook for the commodities that we mine is strong, and we have additional opportunities to further enhance our gold and copper production profile. Our team continues to pursue the potential for further open pit and underground opportunities to extend the life of Telfer, the development of Wafi-Golpu and potentially Namosi, all of which represent upside opportunity to our current base case projections."

"We have also progressed plans to expand Cadia during the period, Red Chris and Havieron continue to deliver exceptional drilling results, and we are already working with the Pretivm team to drive further shareholder value at Brucejack. We also safely delivered the replacement and upgrade of the SAG mill motor at Cadia, which is now operating at full capacity, setting us up for a strong second half of FY22 and beyond for Cadia."

"Safety remained our top priority with zero fatalities recorded, we progressed our sustainability agenda and continued to deliver initiatives as part of our ambition to build an inclusive workplace culture, where all our people can thrive and excel, including through the rollout of our Respect@Work program. Our balance sheet remains strong and we are well positioned to both support our growth projects and deliver shareholder returns during this growth phase."

"Following a solid start to the financial year, Newcrest is well placed to deliver a strong second half, to continue to pursue profitable growth, and to progress our Forging an Even Stronger Newcrest plan," said Mr Biswas.

Summary of Operating and Financial Results

      For the 6 months ended 31 December

Endnote UoM 2021 2020 Change Change %
TRIFR 17 mhrs 3.5 2.2 1.3 59%
Group production - gold 9 oz 832,298 1,038,566 (206,268) (20%)
Group production - copper
t 50,945 69,320 (18,375) (27%)
Revenue
$m 1,715 2,172 (457) (21%)
EBITDA 8 $m 740 1,146 (406) (35%)
EBIT 8 $m 448 826 (378) (46%)
Statutory profit 7 $m 298 553 (255) (46%)
Underlying profit 8 $m 298 553 (255) (46%)
Cash flows from operating activities
$m 423 992 (569) (57%)
Free cash flow 8 $m (303) 439 (742) (169%)
EBITDA margin 8 % 43.1 52.8 (9.7) (18%)
EBIT margin 8 % 26.1 38.0 (11.9) (31%)
All-In Sustaining Cost 8,9,18 $/oz 1,194 972 222 23%
All-In Sustaining Cost margin 8,10 $/oz 502 842 (340) (40%)
Realised gold price 19 $/oz 1,733 1,826 (93) (5%)
Realised copper price 19 $/lb 4.31 3.12 1.19 38%
Average exchange rate
AUD:USD 0.7319 0.7225 0.0094 1%
Average exchange rate
PGK:USD 0.2848 0.2862 (0.0014) (0%)
Average exchange rate
CAD:USD 0.7939 0.7585 0.0354 5%
Closing exchange rate
AUD:USD 0.7256 0.7702 (0.0446) (6%)
Earnings per share (basic)
US$ cents 36.4 67.7 (31.3) (46%)
Earnings per share (diluted)
US$ cents 36.3 67.5 (31.2) (46%)
Dividends paid per share
US$ cents 40.0 17.5 22.5 129%

 


Endnote UoM As at
31 Dec 2021
As at
30 Jun 2021
Change Change %
Cash and cash equivalents
$m 1,231 1,873 (642) (34%)
Net debt or (net cash)
$m 469 (176) 645 366%
Gearing
% 4.5 (1.8) 6.3 350%
Total equity
$m 9,982 10,124 (142) (1%)

 

Refer to the Company's "ASX Appendix 4D and Financial Report" released on 17 February 2022, and the Management Discussion and Analysis in particular, for more detail on the Company's financial results.

Dividend Policy

Newcrest looks to pay ordinary dividends that are sustainable over time having regard to its cash flow generation, its reinvestment options in the business and external growth opportunities, its financial policy metrics and its balance sheet strength. Newcrest targets a total annual dividend payout of 30-60% of free cash flow generated for the financial year, with the annual total dividends being at least US15 cents per share on a full year basis.

Having regard to the abovementioned considerations, the Newcrest Board has determined that an interim fully franked dividend of US 7.5 cents per share will be paid on Thursday, 31 March 2022.

The record date for entitlement is Monday, 28 February 2022.

The financial impact of the interim dividend amounting to $61 million, based on Newcrest's existing issued capital at 31 December 2021, has not been recognised in the Consolidated Financial Statements for the half year. The Company's Dividend Reinvestment Plan remains in place.

The declaration of any future dividend remains at the discretion of the Newcrest Board, having regard to circumstances prevailing at that time.

COVID-19 Update

To date, Newcrest has not experienced any material COVID-19 related disruptions to production or to the supply of goods and services. Some project activities have experienced a level of disruption with efforts being made to minimise their impact on the overall cost and schedule. The operating cost of managing COVID-19 risks in the current period was approximately $32 million (of which $27 million was related to Lihir), which included additional costs related to flights, transport, rosters, leave, screening and testing.

Newcrest now expects that the total cost of managing COVID-19 for the 2022 financial year will be in the order of $50-60 million, up from the $35-45 million estimated at the start of the financial year. The increase in COVID related costs is driven by Lihir and reflects the impacts of Government restrictions on travel, absenteeism, isolation requirements and logistical challenges.

There remains a risk of COVID-19 disruptions across all operations and this continues to be closely managed. All of Newcrest's operations have business continuity plans and contingencies in place which seek to minimise disruptions to the operations in the event that a significant number of operational employees and/or contractors contract the virus. It is expected that these plans will enable operations to effectively manage the COVID-19 risk to production schedules and if there are any material impacts, Newcrest will inform the market in line with its continuous disclosure obligations.

Summary of Half Year Financial Results

Statutory profit and Underlying profit were both $298 million in the current period.

Underlying profit of $298 million was lower than the prior period primarily due to the planned replacement and upgrade of the Cadia SAG mill motor (completed in November 2021), and lower production at Lihir due to the expected decline in grade as the mine plan transitioned into Phase 15, heavy rainfall limiting access to high grade ore (additional pumping has been installed) and major maintenance activity.

The current period reflected lower gold and copper sales volumes (driven by lower production), a lower realised gold price, higher concentrate freight costs due to the global tightness and challenges in the sea freight market, and the unfavourable impact on operating costs from the strengthening of the Australian dollar against the US dollar. Operating costs were also impacted by labour and consumable cost pressures due to rising demand, constrained supply and underlying commodity price increases. Newcrest continues to collaborate with its suppliers to identify ways to manage these cost pressures.

This was partially offset by a higher realised copper price, lower income tax expense as a result of the Company's decreased profitability in the current period, lower overall operating costs due to the lower sales volumes, lower gold price and volume linked costs such as royalties, a lower depreciation expense, and an increase in Newcrest's share of profits from its associates.

Underlying profit


For the 6 months ended 31 December
US$m 2021 2020 Change Change %
Gold revenue 1,296 1,768 (472) (27%)
Copper revenue 479 469 10 2%
Silver revenue 8 12 (4) (33%)
Less: treatment and refining deductions (68) (77) 9 12%
Total revenue 1,715 2,172 (457) (21%)
Operating costs (986) (1,029) 43 4%
Depreciation and amortisation (283) (309) 26 8%
Total cost of sales (1,269) (1,338) 69 5%
Corporate administration expenses (61) (62) 1 2%
Exploration expenses (34) (36) 2 6%
Share of profit of associates 21 4 17 425%
Other income 76 86 (10) (12%)
Net finance costs (35) (40) 5 13%
Income tax expense (115) (233) 118 51%
Underlying profit 298 553 (255) (46%)

 



Figure 1

To view an enhanced version of Figure 1, please visit:
https://orders.newsfilecorp.com/files/7614/114043_a62b23be047058e4_001full.jpg

Free cash flow

Free cash flow of negative $303 million was lower than the prior period, primarily due to the lower earnings (EBITDA), unfavourable net working capital movements and increased investment in major capital projects at Cadia, Red Chris, Havieron and Lihir that underpin the expected future growth of Newcrest. This was partially offset by lower interest payments due to debt refinancing and the early repayment of corporate bonds in prior periods.

In the current period, Newcrest received net pre-tax cash flows of $68 million from the Fruta del Norte financing facilities (acquired in April 2020 for $460 million). This is reflected within the cash flow statement as $38 million in operating cash flow (interest payments received) and $30 million in investing cash flow (primarily principal repayments received).

  For the 6 months ended 31 December 
US$m 2021 2020 Change Change %
Cash flows from operating activities 423 992 (569) (57%)
    Production stripping and sustaining capital expenditure (289) (264) (25) (9%)
    Major project capital expenditure (non-sustaining) (426) (251) (175) (70%)
Total capital expenditure (715) (515) (200) (39%)
    Reclassification of capital leases 6 5 1 20%
    Exploration and evaluation expenditure (57) (63) 6 10%
    Net receipts from Fruta del Norte finance facilities 30 14 16 114%
    Proceeds from sale of property, plant and equipment - 7 (7) (100%)
Free cash flow (before M&A activity) [8] (313) 440 (753) (171%)
    Proceeds from sale of royalty portfolio 32 - 32 -
    Payment for purchase of put option (19) - (19) -
    Payments for investment in associates (3) (1) (2) (200%)
Free cash flow (303) 439 (742) (169%)

 

Balance Sheet

US$m At
31 Dec 2021
At
30 Jun 2021
Change Change %
Assets



Cash and cash equivalents 1,231 1,873 (642) (34%)
Trade and other receivables 326 289 37 13%
Inventories 1,516 1,505 11 1%
Other financial assets 646 641 5 1%
Current tax assets 5 3 2 67%
Property, plant and equipment 10,070 9,788 282 3%
Goodwill 18 19 (1) (5%)
Other intangible assets 39 32 7 22%
Deferred tax assets 50 54 (4) (7%)
Investment in associates 462 442 20 5%
Other assets 83 68 15 22%
Total assets 14,446 14,714 (268) (2%)
Liabilities



Trade and other payables (523) (577) 54 9%
Current tax liability (45) (107) 62 58%
Borrowings (1,635) (1,635) - 0%
Lease liabilities (65) (62) (3) (5%)
Other financial liabilities (97) (110) 13 12%
Provisions (707) (735) 28 4%
Deferred tax liabilities (1,392) (1,364) (28) (2%)
Total liabilities (4,464) (4,590) 126 3%
Net assets 9,982 10,124 (142) (1%)
Equity  



Equity attributable to owners of the parent 9,982 10,124 (142) (1%)
Total equity 9,982 10,124 (142) (1%)

 

Review of Operations [20]

   For the 6 months ended 31 December 2021

UoM Cadia Lihir Telfer Red
Chris
Fruta del Norte [9] Other Group
Operating







Production







    Gold koz 224 305 214 20 69 - 833
    Copper kt 33 - 7 10 - - 51
    Silver koz 192 11 96 62 - - 362
Sales







    Gold koz 225 297 205 20 70 - 818
    Copper kt 33 - 7 10 - - 50
    Silver koz 190 11 96 63 - - 360
Financial







Revenue $m 687 533 372 123 - - 1,715
EBITDA $m 452 125 102 50 - 11 740
EBIT $m 376 2 44 24 - 2 448
Net assets $m 3,391 4,160 (24) 1,046 - 1,409 9,982
Operating cash flow $m 427 129 51 43 - (227) 423
Investing cash flow $m (387) (162) (40) (108) - (29) (726)
Free cash flow* $m 40 (33) 11 (65) - (256) (303)
AISC $m 19 541 278 27 56 56 977

$/oz 85 1,819 1,355 1,314 802 - 1,194
AISC Margin [10] $/oz 1,648 (86) 378 419 - - 502

 

* Free cash flow for 'Other' includes an inflow from other investing activities of $40 million (comprising proceeds from the sale of the royalties portfolio of $32 million, net receipts from Fruta del Norte finance facilities of $30 million, purchase of a put option of $19 million, and $3 million relating to further investments in Lundin Gold), income tax paid of $138 million, net interest paid of $1 million, exploration expenditure of $39 million, corporate costs of $45 million, other capital expenditure of $33 million, and net working capital outflows of $40 million.

Refer to the Company's "ASX Appendix 4D and Financial Report" released on 17 February 2022, and the Management Discussion and Analysis in particular, for an operational overview for the period.

Guidance [3] [,] [6] [,] [20] [,] [21] []

Newcrest remains on track to deliver its full year Group production guidance following completion of major planned maintenance in the September 2021 quarter and the completion of the SAG mill motor project at Cadia. Lihir's performance is expected to further improve in the second half through access to higher grade ore from Phase 14, increasing high and medium grade ore from Phase 15 and lower plant maintenance, however, Lihir is expected to deliver at the lower end of its production guidance range for FY22.

Group AISC guidance for FY22 remains unchanged, however costs associated with managing COVID-19 are now expected to be in the order of $50-60 million, up from the $35-45 million estimated at the start of the financial year. The increase in COVD related costs is driven by Lihir and reflects the impacts of Government restrictions on travel, absenteeism, isolation requirements and logistical challenges.

Guidance for the 12 months ending 30 June 2022


Cadia Lihir Telfer Red Chris Fruta del Norte [(] [a] [)] Havieron Other Group
Production
Gold - koz 540 - 610 700 - 800 390 - 440 40 - 42 120 - 135

1,800 - 2,000
Copper - kt 85 - 95
~15 23 - 25


125 - 130
All-In-Sustaining Cost (AISC) - Includes production stripping (sustaining) and sustaining capital
AISC - $m (100) - 30 1,070 - 1,160 600 - 680 (25) - 15 100 - 104
135 - 145 1,840 - 2,040
Capital Expenditure ($m)
- Production stripping (sustaining)
140 - 150 25 - 35



165 - 175
- Production stripping
(non-sustaining)



50 - 70


50 - 70
- Sustaining capital 160 - 180 150 - 170 50 - 60 65 - 70

15 - 20 440 - 490
- Major projects
(non-sustaining)
580 - 650 105 - 135
110 - 130
65 - 85 6 - 8 [(] [b] [)] 890 - 990
Total Capital Expenditure 740 - 830 395 - 455 75 - 95 225 - 270
65 - 85 21 - 28 1,545 - 1,725
Exploration and Depreciation ($m)
Exploration expenditure 150 - 160
Depreciation and amortisation (including depreciation of production stripping) 700 - 750

 

  1. The Fruta del Norte guidance represents Newcrest's 32% interest in the annualised production and AISC for Fruta del Norte based on Lundin Gold's market release on 8 December 2020. This release estimated gold production for the 2021 calendar year to be in the range of 380koz to 420koz at an AISC of $770/oz to $830/oz.

  2. Other major project expenditure (non-sustaining) includes non-sustaining capital in relation to Wafi-Golpu.

Global organic growth portfolio advances

In the current period, the Newcrest Board approved the progression of the Cadia PC1-2, Red Chris Block Cave, Havieron Stage 1 and Lihir Phase 14A Pre-Feasibility Studies (PFS) to the Feasibility Stage with works advancing on all projects. The projections generated by each of the PFS studies indicate compelling rates of return, a material improvement in Newcrest's operating margin and cash flow, and a significant reduction in Newcrest's AISC per ounce. Newcrest intends to fund all four projects through its internal cash flow generation and prudent use of its strong balance sheet.

In addition, the Newcrest Board approved total expenditure of $182 million [22] for the West Dome Stage 5 cutback at Telfer in August 2021.

Red Chris

Red Chris is a joint venture between Newcrest (70%) and Imperial Metals Corporation (30%). Newcrest acquired its interest in, and operatorship of, Red Chris on 15 August 2019.

In October 2021, the Newcrest Board endorsed the Red Chris Block Cave PFS and approved its progression to the Feasibility Stage. The Study confirms Newcrest's original investment thesis of unlocking the underground portion of this Tier 1 deposit by leveraging Newcrest's industry-leading block caving expertise and developing the asset to become a mainstay of Newcrest's portfolio for decades to come. The Feasibility Study is expected to be completed in the second half of FY23 [23] .

As noted in the Study, there are significant opportunities to enhance these results including, but not limited to, the 'early mining' of the high grade pods in the East Zone and the emerging opportunity associated with the discovery of the East Ridge Zone, which is outside of Newcrest's initial Mineral Resource estimate, and other exploration results [24] .

Newcrest continued its significant drilling campaign at Red Chris during the period with eight rigs currently operational. The development of the exploration decline and support infrastructure also advanced during the period with the decline having progressed to 765 metres as at 25 January 2022.

Havieron Project

The Havieron Project is located 45km east of Newcrest's Telfer operation and is operated by Newcrest under a Joint Venture Agreement (JVA) with Greatland Gold plc (Greatland).

The findings of the Havieron PFS Stage 1 were released in October 2021 and the Newcrest Board approved the progression of the Study to the Feasibility Stage. Following delivery of the PFS, Newcrest is entitled to a 70% joint venture interest in the Havieron Project. Newcrest has an option to acquire an additional 5% joint venture interest for fair value, exercisable during the 12 months from 12 December 2021. In December 2021, Newcrest provided notice to Greatland to begin the process under the JVA to seek to agree the option price for the additional 5%.

As noted in the Study, significant upside opportunities are being evaluated. The deposit is still open in multiple directions with the potential to increase the scale and life of the project, as well as presenting the opportunity to adopt alternative, lower cost, mining methods [24] . The Feasibility Study is expected to be completed in the December 2022 quarter [23] .

Newcrest continued to progress its extensive drilling program at Havieron during the period with eight drill rigs in operation. Growth drilling continues to extend the high-grade mineralisation outside of the initial Inferred Mineral Resource estimate, including high grade extensions to the South East Crescent Zone at depth, as well as high grade crescent style mineralisation within extensions of the Eastern Breccia.

The development of the exploration decline also continued during the period with 277 metres complete as at 25 January 2022, with progress impacted by highly variable and more challenging ground conditions than expected. Recent additional geotechnical investigation has also highlighted the potential for ground conditions to have an impact on development going forward. Work is currently ongoing to understand the impact on project schedule as well as to assess options to recover some of these delays. First ore continues to be expected in FY24 [23] and further updates will be provided once this work is complete. Opportunities continue to be pursued for mine life extensions in both the open pit and underground at Telfer, with the objective of continued utilisation of the Telfer plant as Havieron and other potential feed sources are introduced in the future [24] .

Blind boring of the first ventilation shaft has commenced. Key contracts for the Feasibility Study have been awarded and works to progress the necessary approvals and permits that are required to commence the development of an operating underground mine and associated infrastructure at the Project are ongoing [25] .

Lihir Phase 14A Pre-Feasibility Study

In October 2021, the Newcrest Board approved the Lihir Phase 14A PFS enabling the commencement of the Feasibility Study and Early Works Program. Phase 14A accelerates the realisation of Newcrest's aspiration for Lihir to be a 1 million ounce plus per annum producer from FY24 [26] , which will also benefit landowners, all Lihirians and Papua New Guinea. Phase 14A has increased Lihir's Ore Reserves and will bring forward higher grades to improve gold production and operational flexibility by establishing an additional independent ore source [23] .

Significant activities completed in the December 2021 quarter included trial ground support anchor drilling and installation, completion of access to commence drainage works and the procurement of mobile fleet equipment. Results from the ground support trials have been positive and have been incorporated into civil engineering designs. The Feasibility Study is expected to be completed in the fourth quarter of FY22 [23] .

Cadia PC1-2 Pre-Feasibility Study

/zigman2/quotes/200289815/delayed
CA : Canada: Toronto
$ 18.87
+0.13 +0.69%
Volume: 25,681
Nov. 25, 2022 4:00p
P/E Ratio
14.43
Dividend Yield
0.00%
Market Cap
$16.08 billion
Rev. per Employee
N/A
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