Newcrest gold output tops expectations in fourth quarter

Newcrest’s Cadia operations put in a record final quarter to round out a good year for the gold major.

Steam flows from the geothermal activity at Newcrest’s Lihir mine in PNG.

Newcrest Mining’s Cadia operations put in a record final quarter to round out a good year for the Australian gold major, with output up and average production costs across its mines at record lows, the company says.

Newcrest’s Australian, Papua New Guinea and Indonesian operations produced 2.5 million ounces of gold last financial year, up 6 per cent on the previous year, with all-in-sustaining costs (AISC) falling 12 per cent to $US738 ($1,058) an ounce.

The gold major’s operations came home in a rush in the final quarter, producing 661,414 ounces of gold, at an average AISC of $US720/oz, down $US18/oz on the March period.

The strong quarter was driven by Newcrest’s flagship Cadia mine, which delivered record production of 241,000 ounces for the period.

While the severe drought afflicting regional NSW continues to weigh on the company’s mind, it said it does not expect water restrictions to impact Cadia’s production in the current financial year.

Output also surged at Newcrest’s once-troubled Lihir mine in PNG, lifting 10 per cent in the period to 261,284 ounces — well above the level to turn the million-ounce-a-year dream into reality, if sustained. Lihir produced 932,784 ounces last financial year, let down by a poor first quarter performance.

Production fell from Telfer, in Western Australia, and Indonesia’s Gosowong mines on the back of falling grades at both mines. Telfer produced 116,321 ounces in the period, down 4 per cent, and Gosowong output fell 4.5 per cent to 42,908 ounces.

Newcrest flagged a positive outlook for its exploration projects in a separate announcement this morning, saying the first drill results from its Havieron project — near Telfer, in WA’s Patersons project — had confirmed the presence of higher-grade copper and gold mineralisation, with best hits from recent drilling including a 17 metre width grading 21 grams a tonne gold and 0.4 per cent copper.

Newcrest is farming into Havieron, held by Greatland Gold, agreeing to spend $US65 million on exploration to recapture 70 per cent of tenements it once owned outright.

The company said it has added a third drilling rig at the project as it tries to firm up an economic discovery that could breathe new life into its ageing Telfer operations.

Analysts welcomed the Newcrest quarterly production report, with RBC Capital Markets analyst Paul Hissey saying the company had beaten his estimates.

“This appears a strong quarter to round out the 2019 financial year, with record production at Cadia comfortably exceeding our estimates. Costs at Cadia were, however, higher than we forecast, with Lihir making the more significant contribution to the cost beat,” he said.

“The drill results from the Greatland Gold JV look interesting, with high grades and material thickness suggesting better-than-anomalous levels of mineralisation (albeit at depth) nearby the Telfer operation.”

Newcrest shares closed down 23c to $33.79.

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