Newcrest will need to stump up $US60m to extend its ownership of Havieron by 5 per cent
Newcrest Mining and Greatland Gold’s Havieron gold play in WA is shaping up as one of the country’s best new gold projects in years.
Newcrest Mining will have to pay $US60m to capture an additional 5 per cent of its emerging Havieron gold project in Western Australia, as the deposit shapes up as a contender for top-tier status.
Newcrest currently owns 70 per cent of Havieron, along with London-listed Greatland Gold, having earned its stake drilling out the deposit under the terms of a joint venture agreement between the two companies.
But the gold major will have to pay cash to take its stake to 75 per cent after the $US60m valuation was set this week in a decision by an independent arbiter.
Although that decision puts a $US1.2bn price tag on Havieron, Greatland Gold boss Shaun Day told the company’s shareholders the unusual process – a product of the original 2019 agreement between the two companies – does not “represent a true market value for Havieron”.
“This included a prescribed process where an adjudicator had a binary choice between the option prices proposed by each of the two parties, and therefore was not permitted to independently determine a different option price,” Mr Day said.
“Furthermore, given the option price was determined as at 15 December, 2021, only geological data available up to that date could be considered.
“The option price does not take into account the subsequent growth drilling and development progress at Havieron since that date.”
The wrangling between the two companies has been running for months as Newcrest prepares an updated feasibility study on the deposit. Mr Day told shareholders Greatland had asked Newcrest to pay a more representative value for the additional stake in March, after Greatland released its own resource estimate for Havieron, tipping the size of the deposit at about 6.5 million ounces of gold and equivalent.
“Newcrest did not engage on this offer,” he said.
Despite the wrangling over value, Newcrest on Thursday said it was on track to complete the feasibility study on the deposit by the end of the year – including a review of likely costs, given the rapid cost inflation afflicting the mining sector.
Newcrest released its June quarter production report on Thursday, showing the company hitting the low end of its annual output guidance for the full financial year.
The company’s mines produced 1.96 million ounces of gold for the year, 137,000 ounces below its output the previous financial year.
Average all-in sustaining costs of $US1044, were also well up on the previous year, and 2 per cent over the top end of the company’s guidance range, which Newcrest attributed to lower-than-expected copper output at its mines.
But the company ended the financial year in a hurry — its June quarter gold output at 637,032 ounces was a 31 per cent improvement on a Covid-19 and weather-affected March quarter.
Newcrest’s ISC for the June quarter was $US896 an ounce — 10 per cent down on the March quarter, “driven by higher gold and copper sales volumes, and lower site operating costs on a dollar-per-ounce basis with higher production”.
“There was also an additional benefit of a weakening Australian dollar against the US dollar on Australian dollar-denominated operating costs,” Newcrest said.
“Market guidance for the 2023 financial year will be released with the full year results on 19 August 2022 and will outline Newcrest’s views of the risk of cost of inflation on AISC and capital expenditure, and the associated mitigation strategies under way.”
RBC Capital Markets analyst Alex Barkley said Newcrest’s strong finish to the year was above market expectations, and the company’s annual output beat consensus estimates.
“We expect the Q4 result will be seen as reassuring, given industry cost and labour pressures,” he said in a client note.
“Given weak expectations for the entire gold space heading into today’s result, we see this June quarter release as a positive for Newcrest.”
Newcrest shares closed up 31c to $19.35 on Thursday.
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