NEWCREST has announced approval of the first stage of a two-pronged expansion at its 100pc-owned Cadia Valley operations in central New South Wales.
The estimated total capital costs sits at $865m, $685m for stage one and $180m for stage two.
The first stage comprises commencement of the next cave development (PC2-3), materials handling system upgrades, associated infrastructure and the initial works to increase in the nameplate capacity of the process plant to 33mtpa – with PC2-3 mine targeting first production in FY23.
The second stage, which is in Feasibility Study, is focussed on a further increase in processing capacity to 35mtpa and recovery rate improvement projects targeting completion in late FY22, which is prior to the completion of PC2-3 mine development.
The rate of ore mined from Cadia is expected to vary over time according to draw rates, cave maturity and cave interaction as further caves are developed.
Newcrest managing director and chief executive officer, Sandeep Biswas, said the expansion plan is an improvement on the previous 2018 Pre-Feasibility Study.
“It includes an estimated additional 1.8moz of gold production and 67kt of copper production and an estimated $800m increase in projected free cash flow generation by Cadia over its life,” Mr Biswas said.
“The capital investment has an estimated 21.5pc rate of return and ensures Cadia remains a Tier One asset for many years to come.”
However the actual Internal Rate of Return (IRR), which sits at 21.5pc, will vary according to the copper and gold prices realised.
Newcrest assumes a base gold price of $1250/oz, copper price of $3/lb and AUD/USD exchange rate of 0.75.
The expected financial outcomes from stages one, two (and eventually three) are an Expected Net Present Value (NPV) of $1170m (real).
The expansion will also increase in estimated free cash flow generation of $800m over Life of mine (LOM).
Operations to date
Since the start of 2019, Cadia has achieved record high annual gold and copper production and record low AISC per ounce.
In its 2019 annual report, Newcrest stated that the AISC was $39 per ounce lower than the prior period and reflects lower unit operating costs associated with the higher production volumes and gold grade and the benefits of the weaker Australian dollar, partially offset by lower copper revenue per ounce and higher sustaining capital expenditure.
“Cadia had an outstanding year, producing 913koz of gold and a record low AISC of $132 per ounce,” Mr Biswas said.
Gold production was 52pc higher in the second half of the year, driven by a 39pc increase in the volume of material milled (achieving record mill throughput) and an 11pc increase in gold grade milled.
The higher gold grade in the current period reflected an increased proportion of mill feed being sourced from higher grade ore drawn from PC2, and the fact that in the prior period, lower grade ore from Ridgeway and the Cadia Hill stockpiles was processed while mining activity at Cadia East was constrained after a seismic event in April 2017.
Newcrest has settled and received its insurance claim in relation to the April 2017 seismic event at Cadia for $155m, with $34m of the proceeds attributed to material damage included in site production costs as an offset to the costs incurred to rectify damage to the Cadia Panel Cave.
Separate to the Cadia Expansion Study, Newcrest has also progressed to PFS stage the study pertaining to development of the next cave following PC2-3 (PC1-2).
This PFS for PC1-2 will continue to incorporate the knowledge gained in PC2-3 as well as further advance the introduction of Newcrest’s NextGen Caving techniques.
The PFS for PC1-2 is expected to be completed in calendar year 2021.
Proposed plant expansion
The total amount of capital expenditure associated with the plant expansion is estimated to be about $270m, which includes upgrades to Concentrator circuits 1 and 2, the addition of a coarse ore flotation circuit and ancillary upgrades to equipment.
Of this $270m, $90m has been approved as part of stage one of the Cadia Expansion Project as Concentrator 1 is currently constrained by secondary crushing motor power and SAG motor power.
The goal is to increase Concentrator 1 throughput in stages from 23mtpa up to 25mtpa by conveyor upgrades and installation of a new secondary crushing circuit (which together are expected to increase throughput by 1mtpa).
It also includes replacing the SAG Mill motor to increase power from 20MW to 22MW (expected increase in throughput of 1mtpa) by the second half of FY21 – which would the reduction in milled tonnes in FY21.
The stage two capital of $180m continues to be subject to a feasibility study that is expected to be completed around the middle of calendar year 2020.
The feasibility study recommends increasing the grind size, which allows a further 1mtpa in expected throughput of Concentrator 1 to a total rate of 26mtpa.
Together with the currently installed capacity of Concentrator 2 of 7mtpa, this provides Cadia with 33mtpa of milling capacity from FY27 onwards.
Processing volumes are expected to progressively ramp up to be in the range of 33-35mtpa, subject to ore presentation from the mine which will vary over time according to draw rates, cave maturity and cave interaction as further caves are developed.
Stage 2 capital works will comprise of additional coarse ore flotation capacity be installed on Train 1 and Train 2, complementing the existing circuit on Train three on Concentrator 1.
For Concentrator 2, minor conveyor upgrades, upgrades to pumps, hoppers, pipes and thickeners as well as additional tertiary grinding capacity through new Vertimills and the installation of a large Jameson Cell to provide additional roughing capacity, is expected to increase the throughput from 7mtpa up to 9mtpa and increase recoveries.
Production and recovery improvements
The feasibility study recommended a range of methods to better understand recovery rates at lower grades, including the extended use of Jameson cells, upgrades to the gold gravity circuit, and the installation of additional coarse ore flotation, the expansion of the floatation circuits and increase grinding and crushing capacity.
Based on the study findings, these improvements are expected to deliver a LOM gold recovery of around 80pc, which is 9pc above the rate articulated in the 2018 PFS.
A 1pc benefit in LOM copper recovery is also expected as a result of changes to the processing circuit, with the LOM average copper recovery expected to hit around 85pc.
An additional 1.8moz of gold and 67kt of copper production is anticipated over the LOM.
“Through continued investment in innovation we continue to discover what is possible,” Mr Biswas stated in the company’s 2019 annual report.
“For example, we are pursuing the development of autonomous, semi-autonomous and remote mining solutions to reduce exposure of our personnel in hot mining conditions at Lihir and to the underground operations at Cadia and at Telfer.
“We continue to explore and trial technologies for selective processing, mass sensing and sorting at sites.
“We also use advanced analytics and digital technology such as artificial intelligence and virtual reality to increase safety and performance.”
