Newcrest owner Newmont’s future reset with Telfer sale; Cadia, Tanami focus

The gold mining giant is promising more investor returns as it sells off its Telfer mine and Havieron asset in WA, and focuses on the expansion of Cadia in NSW and Tanami in NT.

Newmont has put the its Telfer mine and Havieron project in WA on the market as part of a $US2bn ($3.5bn) cash generation exercise to winnow down its global portfolio, as a fresh problem takes blowouts at its Tanami expansion project to about $US1bn.

Newmont has only just returned Telfer to production after spotting sinkholes and leaking in a tailings wall dam late last year, and the company warned on Friday it could face additional production interruptions as it works through an assessment of the condition of the ageing gold mine’s other tailings facilities.

That issue may be one to be considered by a new owner, however, with Newmont boss Tom Palmer telling shareholders the company hopes to close a sale of the project sometime this year.

Mr Palmer said the gold giant believes Telfer can still thrive in the hands of a new owner, particularly with the development of the nearby Havieron prospect to extend its life, but the ageing operation will never again become a top-tier asset capable of producing more than 500,000 ounces a year at the bottom of the global cost curve.

The selldown also involves the divestment of other non-core assets including three Canadian mines, two US sites and one Ghana project – all of which fit into the same category as Telfer.

“We know from experience that if you try and keep those assets in your portfolio, they won’t get management bandwidth – or, if they do, a tier one operation doesn’t get the benefit of that focus. And they won’t get capital,” he said.

“So Telfer, with the Havieron project, in the hands of somebody where it’s a major asset for them, I think will do very nicely. Can I see it at 500,000 gold equivalent ounces or more? No, but it’ll be a very nice contributor in someone’s portfolio and I think it’ll benefit from that.”

The sale is aimed at “focusing management efforts on a portfolio of Tier 1 assets and emerging Tier 1 assets” the group, which has 20 operating mines across the world following its $US15bn takeover of Australian giant Newcrest late last year.

Newmont told shareholders on Friday its winnowed portfolio is expected to produce 6.7 million ounces a year by 2028 with the completion of its block caves at the Cadia mine in NSW, the expansion of its Tanami mine in the Northern Territory and development of the Ahafo North project in Ghana, Africa. 2024 guidance is for 6.9 million gold ounces for the full Newmont portfolio.

But the Tanami expansion remains a major thorn in Newmont’s side, with the company announcing a further blowout in the cost of building a 1.5km deep shaft to service the mine’s future underground production.

Newmont ticked off on the shaft in 2019, tipping a $US700m to $800m construction cost and saying it expected the expansion to be delivering gold into the Tanami mill by 2023.

The gold major now says it expects to spend $US1.7bn to $1.8bn, with commercial production targeted for the second half of 2027.

Mr Palmer said the Covid-19 pandemic was the major cause of the additional cost, but the most recent blowout – which took project costs from $1.2bn to $1.3bn to current projections – was due to the discovery of difficult ground at the bottom of the deep shaft, which has forced a rethink about how the company can safely line the shaft.

“So it will take an extra year or two, but in the overall scheme of things this shaft is going to operate for decades to efficiently bring ore from depth and Tanami to the surface,” he said.

“We’ve got some short-term pain for long-term benefit from this shaft working for many, many years to come.”

Newmont said on Friday it has identified an additional $US500m in cost and productivity improvements over and above initial synergy commitments, and booked a $US2.5bn loss for FY23, driven by $US1.9bn in impairment charges, $US1.5bn in reclamation charges and $US464m in Newcrest transaction and integration costs.

Excluding these costs, adjusted net income was $US1.4bn, or $US1.61 per share and adjusted earnings before interest, taxes, depreciation and amortisation totalled $US4.2bn for the full year.

The group outlined a continued focus on return of capital to shareholders through a fixed dividend of $US1 per share annualised, including buybacks.

A $US1bn share buyback will be executed over the next 24 months with excess free cash flow and proceeds from asset divestitures.

A final dividend of US25c will also be paid on March 28. Audited results will be filed on February 27, the company said.

Newmont shares traded on the ASX were down $3.81, or 7.5 per cent, to $46.93 at 1500 AEDT.