Newcrest lowers output, wins on costs

The tailings dam wall slump at Cadia and underperformance at Telfer have led ASX-listed gold major Newcrest Mining to cut its full-year production guidance.

Kristie Batten*

Newcrest's Telfer operation

March quarter gold production fell by 6% to 576,000 ounces, while copper output was down by 15.5% to 19,000 tonnes.

Year-to-date production was 1.71 million ounces of gold and 57,864t of copper, down from 1.82Moz of gold and 70,973t for the same quarter of last year.

As a result, Newcrest has lowered full-year guidance to 2.25-2.35Moz of gold and 70,000-75,000t of copper from 2.4-2.7Moz of gold and 80,000-90,000t of copper.

Cadia's guidance has been lowered to 550,000-600,000oz from 680,000-780,000oz due to a four-week suspension in March, though the mine will be back at full production next month.

Telfer's outlook was lowered to 410,000-440,000oz of gold from 440,000-500,000oz of gold after March quarter output dropped by 27% due to lower mill feed grade, fewer tonnes mined and reduced plant availability.

However, the company upgraded guidance for Lihir in Papua New Guinea to 900,000-940,000oz of gold from 880,000-980,000oz after the mill ran at a record rate of 15 million tonnes per annum in the quarter, above nameplate of 14Mtpa.

Gosowong guidance was narrowed to 240,000-260,000oz from 230,000-290,000.

March quarter all-in sustaining costs dropped by US$3 per ounce to $826/oz, and the group AISC margin rose by 12.2% to $515/oz.

Full-year AISC guidance has been reduced by $100 million to $1.95-2.05 billion due to higher copper prices and a favourable exchange rate.

The company recently hedged more of Telfer's longer-dated sales, with 1.06Moz hedged at an average price of A$1822/oz to protect margins after all-in sustaining costs came in at US$1446/oz.

Newcrest managing director and CEO Sandeep Biswas said it had been a challenging quarter due to the March 5 embankment slump at Cadia's northern tailings facility.

"I have been particularly impressed by the efforts of our people at Cadia who have risen to this challenge and are striving to safely restore the operation to normal production," he said.

"At Lihir, we achieved a record annualised throughput rate of 15Mtpa for the quarter - this significantly exceeded our sustainable target milling rate of 14Mtpa and is a great achievement."

During the March quarter, Newcrest agreed to pay $250 million for 27.1% of Lundin Gold, owner of the Fruta del Norte project in Ecuador, and released updated economics for its 50%-owned Wafi-Golpu project.

"Both are Tier 1 asset development opportunities for Newcrest," Biswas said.

Shares in Newcrest rose by 0.6% to A$20.91, the highest level in about six weeks.

*Kristie Batten is editor of www.miningnews.net