Newcrest maintains guidance despite offshore troubles

Newcrest Mining had trouble in Indonesia and Papua New Guinea but left its full-year guidance intact.

Newcrest Mining managing director Sandeep Biswas. Picture: Colin Murty

Newcrest Mining had government trouble in Indonesia and operational glitches at Papua New Guinea in the December quarter, but has left its full-year guidance intact thanks to strong results from its Cadia Mine near Orange.

The nation’s biggest goldminer yesterday delivered improved overall quarterly production and costs for the three months to the end of December.

But it missed analysts’ expectations because of a grinding mill failure at the big Lihir Island Mine and a fall in production from the Gosowong Mine, where Indonesia has said it wants to boost its equity participation and the fiscal regime the mine operates under.  Melbourne-based Newcrest said second-quarter gold production rose 17 per cent from the previous quarter to 612,695 ounces, while all-in sustaining cost, the industry benchmark, fell 8 per cent to $US829 an ounce.

While it was an improvement, UBS had been expecting gold production of 618,000 ounces and costs of $US785 an ounce.

Full-year guidance was left at between 2.4 million and 2.7 million ounces of gold.

“Newcrest has delivered a significantly improved quarter with all but one of our operations producing more ounces than the previous quarter,” chief executive Sandeep Biswas said.

“I am particularly pleased with Cadia’s strong quarter-on-quarter production increase and record low quarterly AISC per ounce.”

Yesterday, Newcrest shares fell 42c, or 1.8 per cent, to $22.59.

At Gosowong, where production fell 13 per cent from the previous quarter to 59,338 ounces, Newcrest revealed its annual work and budget plan (RKAB) had not yet been approved for 2018.

“Discussions with the government of Indonesia have indicated that the existing contract of work may need to be amended before the RKAB is approved,” Newcrest said.

“Negotiations are ongoing and extend to the fiscal regime that applies to Gosowong and increased Indonesian equity participation in Gosowong.”

A sahre price for Newcrest

Newcrest owns 75 per cent of Gosowong and the government’s PT Aneka Tambang owns the rest.

The Indonesian government recently toughened foreign divestment laws, forcing more foreign companies to sell their interests down to below 49 per cent. A dispute over ownership and the contract of work with Freeport-McMoRan’s Grasberg mine has cut production there and led Indonesia to strike up talks with Rio Tinto to buy Rio’s 40 per cent future interest in the mine.

At Lihir, production rose 3 per cent to 209,888 ounces but mill throughput fell 9 per cent because of semi-autonomous grinding mill failure.

“This SAG motor failure affected Lihir’s ability to meet its sustainable 14 million tonnes per annum annualised mill throughput target by end December 2017, which is now expected to be achieved early in the 2018 calendar year,” Newcrest said.

RBC analyst Paul Hissey said it was a solid quarter.

“Newcrest appears to be performing well operationally, with Cadia and Lihir nearing capacity and expansions on the horizon,” Mr Hissey said.

At Cadia, gold production rose 50 per cent to 180,223 ounces as production was boosted from both of the operation’s panel caves.

Evolution Mining, the nation’s second-biggest goldminer, released a strong second-quarter production report yesterday that was in line with expectations.

December-quarter gold production slipped 16 per cent to 186,488 ounces, in line with previous guidance of between 180,000 and 190,000 ounces.

All-in sustaining costs of $784 an ounce, down from $786 the previous quarter, missed UBS expectations of $749 an ounce. Shares rose 1c to $2.77 yesterday.