Newcrest Mining expects to spend $4.08bn over 10 years on pipeline projects following release of feasibility studies

The gold miner is spending up big over the next decade to take its internal growth plans to reality.

Newcrest Mining says it expects to spend $US3bn ($4.1bn) over the next decade to turn its internal growth pipeline to reality, with the gold major saying it can fund the growth from its internal cash flow.

The gold major released pre-feasibility studies on a number of its key growth projects on Tuesday, saying its internal pipeline of projects in WA, North America and PNG could halve its annual production costs by the end of the decade, with the company likely to maintain a 2 million ounce a year production profile along the way.

Newcrest released the results of pre-feasibility studies on its Havieron joint venture project in WA, a study into the construction of a block cave operation at its Red Chris mine in Canada and the result of studies to finally turn its Lihir gold mine into the million ounce a year project promised when the operation was acquired a decade ago.

Managing director Sandeep Biswas said studies show “compelling” rates of return from each of the projects, along with material improvements in operating margins and cash flow.

“These projects target a 37 per cent increase in copper output and a reduction in our already low all-in Sustaining cost per ounce by more than 50 per cent over the next decade, with the majority of new investment in Tier 1 jurisdictions,” he said.

“We intend to fund and deliver each project through internal cash flow and prudent use of our strong balance sheet, and our dividend policy remains unchanged.”

Speaking to reporters on Tuesday, Mr Biswas conceded that Newcrest’s outlook included rising construction costs across its suite of projects, particularly in Australia, but said he expected cost pressures in Australia to ease as international borders reopened.

Expansions of Cadia NSW and a new mine at Newcrest’s Havieron joint venture in WA are Newcrest’s key Australian projects, but Mr Biswas noted that both will use existing processing infrastructure, which he said would limit the impact of escalating costs in the mining sector.

“They‘re not as exposed to the sort of capital escalation costs you see on infrastructure projects and surface works. It’s still going to be there, but I think we’re well positioned to handle it,” he said.

Newcrest said the early-stage studies show the miner could be producing 175,000 tonnes of copper a year by 2030, with the company still updating its work at the projects in the hope of refining its modelling.

Its figures also include the results of a feasibility study into the expansion of its flagship Cadia mine in NSW released in August.

Taken together the four projects would deliver 600,000 ounces of gold a year, at a total capital cost of about $US3bn.

Newcrest said the study into a revision of the mine plan at its Lihir operation in PNG could finally turn the mine into the steady million ounce a year producer envisioned when the gold major acquired the former Rio mine in a $10bn cash and scrip merger with Lihir Gold in 2010.

The takeover nearly brought Newcrest undone, with the mine’s complex processing plant never quite living up to expectations.

Newcrest said on Tuesday that advances in mining techniques mean it should be able to cut back the existing pit wall at the mine, set in an extinct volcano, to allow it cheap access to higher grade gold deeper within the deposit.

The pre-feasibility study put a cost of $US179m on the mine and said the higher grades available through the move should increase gold output from 2024, without the need to increase throughput through Lihir’s mill.

The study on Havieron, previously flagged by Mr Biswas as one of Australia’s most exciting new gold deposits, suggests a mine to tap the deposit could produce about 160,000 ounces of gold a year using the Telfer mill to process an average ore grade of 3.72 grams a tonne – although Newcrest noted its current figures exclude the potential for a mine life extension at Telfer, and possible expansions of its plans at Havieron.

Newcrest’s partner at Havieron, UK-listed Greatland Gold, said on Tuesday that the pre-feasibility study should just be seen as the first stage of a far larger project.

With the completion of the study, Greatland will need to fund its 30 per cent of exploration and development costs going forward.

But Greatland boss Shaun Day said the $397m capital cost of the mine – of which Greatland would need to fund $US73m – was easily affordable for the company, given the quality of the project.

“The Stage 1 study indicates a very modest capex hurdle for Greatland and thereafter the generation of cash flow,” he said.

“This provides the opportunity for Greatland to reinvest this cash flow into Havieron such that the Company can self-fund the full potential of Havieron. This capital profile is ideal for Greatland as a mid-cap miner.”

Newcrest shares closed up 2c, or 0.1 per cent on Tuesday at $23.92.