Newcrest Mining reports slow December quarter, says it can still meet annual guidance

Newcrest Mining shares took a hit on Friday as it missed analysts' expectations about its gold production but the company says it will pick up the pace.

Newcrest managing director Sandeep Biswas. He says Newcrest is on track to meet its annual production guidance of 1.8 to 2 million ounces of gold, and is well positioned for a strong second half. Picture: Stuart McEvoy / The Australian

Newcrest Mining says it is on track to hit full-year production guidance after booking improved output from its gold mines in the December quarter.

But Newcrest shares were down sharply on Friday after the company’s output fell below market expectations, closing down $1.56, or 6.8 per cent, at $21.40.

Australia’s biggest gold miner produced 436,085 ounces of gold in the December quarter, up 10 per cent from the September period when output at the company’s flagship Cadia mine was slowed by expansion work.

Newcrest also produced 26,418 tonnes of copper in the quarter, with the sharply rising price for the commodity helping lower its average all-in-sustaining costs for the period to $US1127 an ounce, down 11 per cent.

But Macquarie analysts said Cadia’s return to full production had been slower than expected by the market, with the mine’s output of 115,362 ounces of gold and 18.207 tonnes of copper about 20 per cent below estimates.

“The weaker result was due to lower average grades for both gold and copper and lower mill throughput. Newcrest has reiterated guidance for Cadia with a stronger second half expected, post the commissioning of the new SAG mill,” Macquarie analysts said.

Managing director Sandeep Biswas said Newcrest was on track to meet its annual production guidance of 1.8 to 2 million ounces of gold, saying the company was now well positioned for a strong second half.

Its mines will need to pick up the pace significantly to meet that guidance, with Newcrest producing only 832,298 ounces in the first fiscal half – close to 1 million ounces short of the bottom end of its guidance range.

And, despite an improved performance from its Lihir mine in Papua New Guinea, Newcrest said it now expects the mine to deliver at the lower end of its annual guidance of 700,000 to 800,000 ounces, after producing only 305,026 ounces in the first half – almost 20 per cent below its output in the last six months of 2020.

Ord Minnett analysts said Newcrest had missed their production expectations by 11 per cent, with a strong performance from the company’s Telfer mine in WA undermined by a slower than expected return to full output levels at Cadia and the impact of poor weather and Covid-19 concerns at Lihir.

“Expect modest earnings downgrades on lower production and higher costs,” Ord Minnett said.

Newcrest’s growth projects were buoyed by exploration work, with its quarterly report noting high grade hits at its Havieron project in WA suggesting “the significant potential for further resources growth”.

Newcrest said it had begun talks with joint venture partner Greatland Gold to buy another 5 per cent of Havieron, to take its stake to 75 per cent.