More than five million ounces of gold has been produced at Telfer since operations recommenced in 2004. Image: Newcrest.
By Elizabeth Fabri
BIDDING farewell to its Hidden Valley and Marsden projects has Newcrest looking to the future, and there is much to celebrate. From increased production at Cadia East, progress at Wafi-Golpu and a potential stake in gold junior SolGold, Newcrest’s sights are set on continued success across its global asset base.
Newcrest Mining produced 2.439 million ounces of gold and 83,000 tonnes of copper in FY16, meeting the group’s production and cost guidance for the third consecutive year.
The gold giant’s managing director and chief executive Sandeep Biswas described the results as “solid” and identified a number of opportunities to advance performance and profitable growth across its portfolio.
“Improved operational and financial performance was driven by a continued focus on safe cash generation, operational discipline and profitable growth,” Mr Biswas said.
“Our Edge improvement program remains ongoing and is a major driver of sustaining the mindset, initiatives and intensity that has been fundamental to our stronger performance over the past few years.”
But it wasn’t smiles year-round for the miner, when two fatalities reported at Hidden Valley and Cadia in the first quarter of FY16 prompted an extensive review into Newcrest’s safety procedures.
“In response, we conducted a comprehensive review with assistance from external experts into what we needed to do differently in order to keep people safe from fatalities and life-altering injuries,” Mr Biswas said.
“The safety review resulted in the establishment of our Safety Transformation Plan, built around three focus areas: strengthening our safety leadership and behaviours (a program we call NewSafe); implementing life-saving critical controls management for every high risk task; and applying robust process safety management systems to our high-energy and toxic processes.
“Not yet twelve months into the delivery of the Safety Transformation Plan, the difference across our operations is evident through the hundreds of positive safety interventions and completion of safety actions and initiatives taking place among teams every day.”
Harmony Gold will become the sole owner of Newcrest’s Hidden Valley JV, including the Hidden Valley mine. Image: Harmony Gold.
A new focus
In September, more than a year after the Hidden Valley fatality, Newcrest signed an agreement to sell its 50 per cent stake in the PNG project to joint partner Harmony Gold Mining at a $10 million loss.
“Having completed the strategic review of Hidden Valley, Newcrest determined that the best outcome was to exit the operation and focus our attention on safe, profitable growth at our other assets,” Mr Biswas said.
The deal came after Newcrest provisioned $US35 million on mine rehabilitation on 30 June, but decided to reverse the decision and shift its focus on the Wafi-Golpu project, also in PNG.
“We look forward to continuing to work with Harmony on the Wafi-Golpu project,” he said.
A month later, Newcrest entered an agreement with Evolution Mining to sell its Marsden copper-gold project in central west NSW.
The deal would see Evolution Mining make an upfront payment of $3 million, and a further $7 million contingent on a decision to mine.
In light of the recent divestments, Newcrest had its eye on a new venture; a stake in Queensland junior SolGold, which owned the Cascabel copper and gold deposit in Ecuador.
The prospective deal would see Newcrest’s spend $22.86 million to acquire 10 per cent interest, in addition to Maxit’s $10.1m investment to obtain 4.43 per cent.
In October, BHP Billiton challenged Newcrest’s offer with a lucrative bid of its own, which the SolGold board rejected, determining it was not in the best interest of shareholders.
“The current US$33 million financing with Maxit and Newcrest is the preferred option at this time as it leaves us in control of this very exciting project at Cascabel,” SolGold executive director Nick Mather said.
On 13 October, SolGold shareholders approved Newcrest’s investment interest, which would go towards SolGold’s world class flagship copper?gold porphyry project in North West Ecuador.
Cadia East ramp up
Closer to home, Newcrest’s $2 billion Cadia Valley Operation (CVO) in NSW achieved sound results, even though its Ridgeway underground mine entered a care and maintenance phase in March.
“Our low-cost Cadia operation achieved a good result considering the main Concentrator 1 SAG mill was offline for five weeks in the first half of the year,” Mr Biswas said.
“The ramp-up of ore production from our Cadia East mine continued successfully, with the higher-grade ore from this asset – the largest underground mine in Australia.”
In FY16, CVO produced 668,773oz of gold and 64,130t of copper, which was expected to increase to between 730,000 and 820,000oz of gold and about 65,000t of copper in FY17.
At Cadia East, the Panel Cave 1 safely exceeded nameplate capacity of 9mt, with an impressive 15.5mt, while Panel Cave 2 production continued to advance.
At the end of the June quarter, production from Panel Cave 2 increased by 125 per cent to 1.6mt, and had fired 126 of the planned 165 drawbells.
“The firing of all drawbells is expected to be completed by the end of FY17,” the company stated in its 2016 Annual Report.
The miner was also further along into its Pre-feasibility study to increase CVO’s throughput capacity from 26mtpa to 32mtpa.
“The study has identified two significant potential enhancements, namely an increase in the grinding level (which could increase recovery) and the capability to expand processing rates beyond 32mtpa,” Newcrest stated.
“An update on the Pre-feasibility Study is expected to be provided at Newcrest’s Investor Day in November 2016 .
“A concept study on increasing capacity of the mine and other infrastructure beyond 32mtpa has also commenced.”
Once completed, Newcrest would require regulatory approvals to increase to its 32mtpa target.
Cadia Valley Operations is located in central NSW, about 250km west of Sydney. Image: Newcrest.
Progress at Telfer
In contrast, Newcrest’s Telfer mine in the East Pilbara region of WA fell short, producing less gold and copper than the previous year.
In FY16, production came in at 462,461oz of gold and 18,940t of copper, compared to 520,309oz of gold and 23,119t of copper in FY15.
“Lower gold and copper production for the current period was primarily the result of lower head grade, driven by lower underground ore production and lower grade open pit material mined, with mill feed volumes supplemented by low grade stockpile material,” the company stated.
“Lower production from underground operations resulted from equipment interaction issues related to infrastructure development to access the lower sub-level cave levels and the Western Flanks.
“The adverse impact of lower grade was partially offset by higher gold recovery rates from the processing plant.”
The flat result came a year after Newcrest called off its proposed sale of the project to focus on Telfer’s growth.
Despite its general policy of not hedging gold production, in March the company hedged a portion of the mine’s gold sales between FY16 and FY19, including 64,714oz of gold at an average price of A$1707/oz.
In May, Newcrest announced it had completed additional hedging of FY18 and FY19 gold sales, with a further 200,000oz of gold sales hedged at an average gold price of $1773/oz.
“With the Australian dollar gold price trading close to 10 year highs we saw this as an appropriate moment to lock in the price on a portion of Telfer’s future production by hedging the Australian dollar gold price,” Newcrest’s finance director and chief financial officer Gerard Bond said at the time.
Newcrest had also completed its Future Options Review at the mine, where Telfer would appoint a contractor to undertake open pit mining and mobile open pit mining equipment maintenance.
Outlook
As of 30 June this year, Newcrest had an estimated Ore Reserves of 69moz of gold with a reserve life extending 28 years, which was expected to grow as Newcrest shifted its attention to its global exploration program and participation in early stage projects.
“Three years of improving efficiencies, driving down our costs, focusing on cash generation, and reducing debt has put us in a strengthened financial position, which in turn supports our pursuit of profitable growth opportunities,” Mr Biswas said.
“Our growth options include our internal, near-term prospects – such as potentially adding more processing capacity to our Cadia plant, further potential increases in throughput and recoveries at Lihir, and progressing the special mining lease application at the attractive Golpu copper-gold deposit in Papua New Guinea.”
Following the sale of Hidden Valley, Newcrest updated its guidance for FY17 to between 2.35moz and 2.60moz of gold and between 80,000 and 90,000t of copper.
“As we look to the future, I am energised by what has been achieved over the past year across our three key transformation pillars – safety, operational performance and people – and by the tremendous potential that remains for Newcrest,” he said.
