Bulletin
Investor Alert

New York Markets Open in:

Jan. 27, 2022, 7:55 p.m. EST

Newcrest Quarterly Report - December 2021

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Newcrest Mining Ltd. (NCM)

or Cancel Already have a watchlist? Log In

Melbourne, Australia, Jan 27, 2022 (Newsfile Corp via COMTEX) -- Significant operating and growth milestones achieved

  • Improved operating performance and ongoing focus on productivity improvements [1]

  • Agreement entered to acquire Pretium Resources, owner of the Tier 1 Brucejack mine in British Columbia [5]

  • Advancing Newcrest's global organic growth portfolio

Melbourne, Australia--(Newsfile Corp. - January 27, 2022) - Newcrest (asx:NCM) /zigman2/quotes/200289815/delayed CA:NCM +4.41% (pngx:NCM) Managing Director and Chief Executive Officer, Sandeep Biswas, said, "We maintained a strong operational focus on maintenance and productivity improvements during the quarter. It was a tremendous achievement for our team to safely complete the replacement and upgrade of the SAG mill motor at Cadia, which is now operating at full capacity. It was also pleasing to receive approval to increase the permitted processing capacity at Cadia from 32Mtpa to 35Mtpa during the period. Across all our operations, we are well positioned for a strong second half and remain on track to meet our FY22 guidance."

"Following the announcement early in the quarter of the significant progress made advancing our growth projects at Red Chris, Havieron and Lihir, we were very excited to take another step forward in our profitable growth journey with the agreement to acquire Pretium Resources signed in November 2021. Brucejack is an asset we have been watching and evaluating for a number of years, and we are delighted that an orebody of its grade, quality and significant potential, will become part of our already exceptional asset portfolio. We expect the acquisition to deliver immediate production, earnings and cash flow growth to Newcrest and our balance sheet will remain strong and well positioned as we progress our exciting organic growth projects at Cadia, Havieron, Lihir and Red Chris."

"We look forward to completing the transaction in the March 2022 quarter and applying our exploration and innovation expertise to unlock further value for our shareholders," said Mr Biswas.

Overview

Gold production was 10% higher than the prior period [9]  mainly driven by higher mill throughput rates at Cadia, Lihir and Telfer. Cadia's mill capacity increased in the December 2021 quarter, with completion of the replacement and upgrade of the SAG mill motor in November 2021 resulting in higher gold production during the period. Mill throughput rates were also higher at Lihir and Telfer with a reduction in planned and unplanned shutdown activities compared to the September 2021 quarter.

Newcrest remains on track to deliver its full year production guidance following completion of major planned maintenance in the September 2021 quarter and the completion of the Cadia SAG mill motor project at Cadia [4] . Lihir's performance is expected to further improve in the second half through increased mining rates of higher grade ore from Phase 14, increasing high and medium grade ore from Phase 15 and lower plant maintenance, however, it is expected to deliver at the lower end of its production guidance range for FY22 [4] .

Newcrest's AISC for the December 2021 quarter of $1,127/oz [2] was [] 11% lower than the prior period, reflecting higher gold and copper sales volumes, a higher realised copper price, lower sustaining capital and production stripping expenditure as well as the benefit of a weakening Australian dollar against the US dollar on Australian dollar denominated operating costs. These benefits were partially offset by associated higher royalty payments and treatment, refining and transportation costs.

Injury rates were lower than the prior period reflecting a strong focus on visible felt safety leadership during the quarter.


  Metric Dec
2021 Qtr
Sep
2021 Qtr
YTD
FY22
YTD
FY21
FY22 Guidance [10]
Group [2]  - gold  oz 436,085 396,214 832,298 1,038,566 1,800 - 2,000koz

- copper  t 26,418 24,527 50,945 69,320 125 - 130kt

- silver  oz 187,677 174,555 362,232 445,181
Cadia  - gold  oz 115,362 109,005 224,368 390,592 540 - 610koz

- copper  t 18,207 15,213 33,420 51,972 85 - 95kt
Lihir  - gold  oz 163,937 141,089 305,026 377,510 700 - 800koz
Telfer  - gold  oz 112,726 100,993 213,719 185,307 390 - 440koz

- copper  t 3,536 3,838 7,375 4,826 ~15kt
Red Chris [11]   - gold  oz 9,527 10,674 20,201 24,012 40 - 42koz

- copper  t 4,675 5,475 10,150 12,521 23 - 25kt
Fruta del Norte [2] [,] [12]   - gold  oz 34,533 34,452 68,985 61,146 120 - 135koz

 





Fatalities   Number 0 0 0 0
TRIFR [13]   mhrs 3.1 3.8 3.5 2.2
All-In Sustaining Cost [2]   $/oz 1,127 1,269 [14] 1,194 [14] 972 [15]
All-In Cost [16]   $/oz 1,865 1,949 1,905 1,310
All-In Sustaining Cost margin [3]   $/oz 588 406 502 842
Realised gold price [17]   $/oz 1,743 1,722 1,733 1,826
Realised copper price [17]   $/lb 4.37 4.24 4.31 3.12
Realised copper price [17]   $/t 9,634 9,348 9,502 6,878
Average exchange rate   AUD:USD 0.7285 0.7354 0.7319 0.7225
Average exchange rate   PGK:USD 0.2849 0.2846 0.2848 0.2862
Average exchange rate   CAD:USD 0.7934 0.7944 0.7939 0.7585

 

All figures are shown at 100%, except for Red Chris which is shown at Newcrest's 70% share and Fruta del Norte which is shown at Newcrest's 32% attributable share through its 32% equity interest in Lundin Gold Inc.

Operations

Cadia, Australia

Highlights   Metric Dec
2021 Qtr
Sep
2021 Qtr
YTD
FY22
YTD
FY21
FY22
Guidance [10]
TRIFR [13]   mhrs 6.7 9.2 8.5 5.5
Total production  - gold  oz 115,362 109,005 224,368 390,592 540 - 610koz

- copper  t 18,207 15,213 33,420 51,972 85 - 95kt
Head Grade  - gold  g/t 0.83 0.82 0.82 0.98

- copper  % 0.38 0.35 0.37 0.39
Sales  - gold  oz 119,314 105,541 224,854 389,329

- copper  t 18,226 14,886 33,112 51,073
All-In Sustaining Cost   $/oz (19) 203 85 54
All-In Sustaining Cost margin [19]   $/oz 1,762 1,519 1,648 1,772

 

Cadia's TRIFR of 6.7 recordable injuries per million hours was an improvement on the prior period. Visible felt safety leadership supported by NewSafe and the Critical Control Management (CCM) program has been an ongoing focus at Cadia throughout the December 2021 quarter to improve injury rates and safety performance.

Cadia's gold production of 115koz was 6% higher than the prior period driven by higher mill throughput, reflecting the completion of the planned SAG mill motor replacement and upgrade that commenced in the September 2021 quarter. These works were completed in November 2021, allowing the SAG mill to return to full capacity in December 2021. This was partially offset by lower recovery, primarily driven by higher throughput rates and a slow ramp up of flotation circuits in December.

Following the previously announced localised seismic event in July 2021, remediation of Panel Cave 2 East was successfully completed in the period, allowing the mine to ramp back up to full production.

Cadia's AISC of negative $19/oz was lower than the prior period, driven by higher gold and copper sales volumes, a higher realised copper price and the benefit of a weakening Australian dollar against the US dollar on operating costs. These benefits were partially offset by associated higher royalty payments and treatment, refining and transportation costs.

Commissioning of the Molybdenum Plant is continuing with the milestone of producing a filtered moly concentrate achieved. The focus now is on ramping up plant throughput and improving concentrate quality. The Moly Plant will deliver an additional revenue stream for Cadia in the form of a molybdenum concentrate which will be recognised as a by-product credit to AISC.

In December 2021, Cadia received approval from the New South Wales Department of Planning, Industry & Environment for a modification to increase its permitted processing capacity from 32Mtpa to 35Mtpa [8] . The modification also provides approval for Newcrest to repair the slumped section of the Northern Tailings Storage Facility (NTSF) and revise the footprint of the NTSF and Southern Tailings Storage Facility to allow for a change from upstream to a centreline lift design. The centreline lift design will meet the requirements of the Global Industry Standard on Tailings Management (GISTM) jointly published by International Council on Mining & Metals (ICMM), United Nations environment programme, and the Principles for Responsible Investment.

See release titled " Cadia receives approval to increase processing capacity " dated 14 December 2021 for further information.

Lihir, Papua New Guinea

Highlights   Metric Dec
2021 Qtr
Sep
2021 Qtr
YTD
FY22
YTD
FY21
FY22
Guidance [10]
TRIFR [13]   mhrs 0.6 0.8 0.7 0.2
Production  - gold  oz 163,937 141,089 305,026 377,510 700 - 800koz
Head Grade  - gold g/t 2.17 2.32 2.24 2.30
Sales  - gold  oz 161,877 135,582 297,459 381,139
All-In Sustaining Cost   $/oz 1,679 1,986 1,819 1,352
All-In Sustaining Cost margin [19]   $/oz 64 (264) (86) 474

 

Gold production of 164koz was 16% higher than the prior period, largely driven by higher mill throughput rates in the December 2021 quarter. This followed completion of the planned major maintenance shutdowns, including the replacement of the brick lining in Autoclave 4, in the prior period. This was partially offset by lower head grade and recovery which were impacted by a higher proportion of lower grade stockpile feed, with access to higher grade ore from Phase 14 limited during the period due to heavy rainfall. Lower grades were also realised from Phase 15 due to mining at the upper edges of the orebody. Phase 15 grades are expected to increase as mining progresses.

The impact on mining following significant rain events has been reduced following the successful implementation of additional pumping capacity in Phase 14 in January 2022. The combination of higher grade ore from increased mining rates from Phase 14, increasing high and medium grade ore from Phase 15 and lower plant maintenance, is expected to deliver higher gold production through the second half of FY22 [4] . Lihir is expected to deliver at the lower end of its production guidance range for FY22 [4] .

Lihir's AISC of $1,679/oz was a 15% improvement on the prior period driven primarily by higher gold sales volumes, lower site operating costs due to less planned maintenance than the prior period and lower production stripping. Improvement in AISC in the second half is expected with increasing grade and gold production.

The number of COVID-19 cases at Lihir increased during the period as PNG experienced its second outbreak, before returning to low levels. Whilst Lihir has maintained operations throughout the pandemic, the production performance has been impacted by reduced manning levels. These impacts are related to Government restrictions on travel, absenteeism, isolation requirements and logistical challenges. COVID-19 management has contributed to additional operating costs year to date. Impacts have also been experienced with capital projects due to delays to mobilisation of project contractors.

Newcrest continues to maintain strong COVID-19 controls at Lihir, focusing on containment through testing, contact tracing, isolation procedures and continuation of the vaccine rollout. There remains a risk of COVID-19 further impacting production at Lihir and this continues to be closely managed. Elevated costs related to the pandemic are expected to continue through FY22.

As previously announced, the Lihir Phase 14A Pre-Feasibility Study was approved in October 2021, 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 [18] , which will also benefit landowners, all Lihirians and PNG. Phase 14A will increase Lihir's Ore Reserves, bring forward gold production and improve operational flexibility by establishing an additional independent ore source [4] .

Significant activities completed in the December 2021 quarter in relation to Phase 14A 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 [4] .

Lihir - Material Movements

Ore Source Metric Dec
2021 Qtr
Sep
2021 Qtr
YTD
FY22
YTD
FY21
Ex-pit crushed tonnes kt 1,273 604 1,877 3,154
Ex-pit to stockpile kt 610 1,037 1,647 2,225
Waste kt 7,058 8,601 15,659 11,063
Total Ex-pit kt 8,942 10,242 19,184 16,440
Stockpile reclaim kt 1,881 1,781 3,662 3,957
Stockpile relocation kt 2,240 2,831 5,071 6,190
Total Other kt 4,121 4,612 8,734 10,147
Total Material Moved kt 13,063 14,854 27,917 26,587

 

Lihir - Processing

Equipment Metric Dec
2021 Qtr
Sep
2021 Qtr
YTD
FY22
YTD
FY21
Crushing kt 3,154 2,450 5,604 7,109
Milling kt 3,241 2,584 5,825 6,946
Flotation kt 2,541 2,107 4,649 5,615
Total Autoclave kt 1,814 1,354 3,168 3,590

 

Telfer, Australia

Highlights   Metric Dec
2021 Qtr
Sep
2021 Qtr
YTD
FY22
YTD
FY21
FY22
Guidance [10]
TRIFR [13]   mhrs 5.0 6.7 5.9 3.6
Production  - gold  oz 112,726 100,993 213,719 185,307 390 - 440koz

- copper  t 3,536 3,838 7,375 4,826 ~15kt
Head Grade  - gold  g/t 0.79 0.76 0.78 0.90

- copper  % 0.09 0.10 0.10 0.09
Sales  - gold  oz 107,787 97,653 205,440 173,089

- copper  t 3,376 3,858 7,234 4,463
All-In Sustaining Cost   $/oz 1,353 1,358 1,355 1,676
All-In Sustaining Cost margin [19]   $/oz 390 364 378 150

 

Gold production of 113koz was 12% higher than the prior period driven by higher gold head grade and mill throughput, partially offset by lower recovery.

Higher gold grades were driven by an improvement in open pit grades, partially offset by lower underground feed grades. Mill throughput was higher than the prior period following completion of the planned maintenance shutdowns in the September 2021 quarter. Recoveries were lower than the prior period due to a higher proportion of open pit material processed and higher sulphur grades.

Telfer's AISC of $1,353/oz was lower than the prior period, with higher gold sales volumes, a higher realised copper price, lower sustaining capital expenditure and the benefit of a weakening Australian dollar against the US dollar on operating costs, partially offset by the ramp up of production stripping in West Dome Stage 5 and lower copper sales volumes.

Red Chris, Canada

Highlights [11]   Metric Dec
2021 Qtr
Sep
2021 Qtr
YTD
FY22
YTD
FY21
FY22
Guidance [10]
TRIFR [13]   mhrs 10.0 8.9 9.4 6.7
Production  - gold  oz 9,527 10,674 20,201 24,012 40 - 42koz

- copper  t 4,675 5,475 10,150 12,521 23 - 25kt
Head Grade  - gold  g/t 0.33 0.34 0.33 0.41

- copper  % 0.39 0.39 0.39 0.46
Sales  - gold  oz 8,933 11,306 20,240 24,475

- copper  t 4,213 5,817 10,029 12,714
All-In Sustaining Cost   $/oz 1,622 1,071 1,314 2,961
All-In Sustaining Cost margin [19]   $/oz 121 651 419 (1,135)

 

Gold production of 9.5koz was 11% lower than the prior period due to lower mill throughput, with the processing of clay rich ores early in the reporting period impacting primary crusher availability, as well as weather-related grid power disruptions experienced across the site. This was partially offset by higher gold recoveries, reflecting the benefit of increased cleaner capacity.

Red Chris' AISC of $1,622/oz was 51% higher than the prior period, driven by lower gold and copper sales volumes and higher site operating costs, partially offset by lower sustaining capital expenditure and the benefit of a higher realised copper price.

Drilling continues to expand the footprint and continuity of the higher grade mineralisation at East Ridge, which is outside of Newcrest's initial Mineral Resource estimate. The latest drilling results for Red Chris are included in the December 2021 Quarterly Exploration Report which was also released today.

Fruta Del Norte, Ecuador

Newcrest acquired the gold prepay and stream facilities and an offtake agreement in respect of Lundin Gold Inc's Fruta del Norte mine for $460 million in April 2020.

In the December 2021 quarter, Newcrest received net pre-tax cash flows of ~$35 million from these financing facilities, and has received a total of ~$160 million net pre-tax cash flows since acquisition of the facilities.

Included within Newcrest's gold production for the December 2021 quarter is 35koz relating to Newcrest's 32% equity interest in Lundin Gold Inc, the owner of the Fruta del Norte mine.

Project Development

Red Chris, Canada

Newcrest continued the development of the Block Cave during the period with the exploration decline now progressed to 765 metres as at 25 January 2022.

Key supporting infrastructure has been established, including underground heating, workshop, warehouse and changeroom, with engagement underway for the Feasibility Study key contracts.

The latest drilling results at Red Chris are included in the December 2021 Quarterly Exploration Report which was also released today.

Havieron, Western Australia

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.

As highlighted in the September 2021 Quarterly Report, following the delivery of the Pre-Feasibility Study on
12 October 2021, Newcrest is entitled to an additional 10% interest in the Havieron Project, which would bring Newcrest's cumulative interest to 70%, and provides the option to acquire an additional 5% joint venture interest at fair market value. Newcrest commenced the process to determine the fair market value for the 5% interest in accordance with the JVA during the period.

The development of the exploration decline experienced poor ground conditions during the quarter with 277 metres complete as at 25 January 2022. Preparation and mobilisation of the blind sink equipment for the first ventilation shaft is nearing completion. 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 [20] .

Growth drilling continues to identify 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 latest drilling results for the Havieron Project are included in the December 2021 Quarterly Exploration Report which was also released today.

Wafi-Golpu, Papua New Guinea

Newcrest and its joint venture partner Harmony continue to work with the PNG Government to progress permitting of the Wafi-Golpu Project and obtain a Special Mining Lease. This included engagement with the PNG Government during the quarter regarding potential terms of a Mining Development Contract, which is required for a Special Mining Lease.

As previously advised, the Governor of Morobe Province and the Morobe Provincial Government commenced legal proceedings in the National Court in Port Moresby seeking judicial review of the decision to issue the Environment Permit which was granted in December 2020. On 10 September 2021, the National Court made an interim order staying the Environment Permit pending the determination of the judicial review. However, on 15 September 2021 the State obtained leave from the Supreme Court to appeal that National Court stay order. The judicial review proceeding is now on hold until the State's appeal against the stay order is decided by the Supreme Court. These events have not impacted project and permitting activities, which continue.

Exploration

See the separately released "Quarterly Exploration Report" for the December 2021 quarter.

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.

The number of COVID-19 cases at Lihir increased during the period as PNG experienced its second outbreak, before returning to low levels. Whilst Lihir has maintained operations throughout the pandemic, the production performance has been impacted by reduced manning levels. These impacts are related to Government restrictions on travel, absenteeism, isolation requirements and logistical challenges. COVID-19 management has contributed to additional operating costs year to date. Impacts have also been experienced with capital projects due to delays to mobilisation of project contractors.

Newcrest continues to maintain strong COVID-19 controls at Lihir, focusing on containment through testing, contact tracing, isolation procedures and continuation of the vaccine rollout. There remains a risk of COVID-19 further impacting production at Lihir and this continues to be closely managed. Elevated costs related to the pandemic are expected to continue through FY22.

COVID-19 cases have also been recorded at Cadia and Red Chris with the onset of the Omicron wave. Both sites have escalated the controls under their Pandemic Response Plan in order to manage risks pertaining to the health and safety of the workforce and ongoing operations, with no material impact to operations experienced.

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.

The production guidance numbers for FY22 assume no COVID-19 related interruptions. However, the AISC guidance expenditure for FY22 includes an estimate of additional costs associated with managing the business in a COVID-19 context of approximately $35 to $45 million.

Corporate

Acquisition of Pretium Resources

On 9 November 2021, Newcrest announced that it had entered into an agreement to acquire all of the issued and outstanding common shares of Pretium Resources Inc. (Pretivm) that it does not already own, by way of a Canadian Plan of Arrangement (the Plan).

Pretivm is the owner of the Brucejack operation in the highly prospective Golden Triangle region of British Columbia, Canada. Brucejack began commercial production in July 2017 and is one of the highest-grade operating gold mines in the world. The benefits for Newcrest to acquire Pretivm include:

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

  • Immediate increase in Newcrest's gold production by >300koz pa (~15%) to well above 2Moz pa [4] [,] [6] [,] [7]

  • Accretive to Newcrest's EBITDA and cash flow

  • Immediate operational and financial diversification from 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

See release titled " Newcrest agrees to acquire Pretium Resources " dated 9 November 2021 for further information.

On 20 January 2022 (Vancouver time), Pretivm shareholders and option holders (Securityholders) voted overwhelmingly in favour of the Plan at the Pretivm Securityholders meeting. See release titled " Pretivm Securityholders approve acquisition by Newcrest " dated 21 January 2022 for further information.

The Plan has also been approved by the Supreme Court of British Columbia and Newcrest has received clearance from the State Administration of Market Regulation (SAMR) pursuant to the Anti Monopoly Law of China.

Completion of the transaction remains subject to final approval by the Toronto Stock Exchange and approval under the Investment Canada Act. Newcrest expects the transaction to be completed during the March 2022 quarter [5] .

Sale of Royalty portfolio

/zigman2/quotes/200289815/delayed
CA : Canada: Toronto
$ 19.40
+0.82 +4.41%
Volume: 13,291
Dec. 7, 2022 4:00p
P/E Ratio
14.84
Dividend Yield
0.00%
Market Cap
$16.77 billion
Rev. per Employee
N/A
loading...
1 2
This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.