Gold miner Newcrest posts higher profit as precious metal’s price soars

The soaring gold price has boosted Newcrest Mining’s full-year earnings and countered a fall in the company’s production levels.

The gold price has come off its recent record highs but is still strong. Picture: David Gray, AFP

Gold miner Newcrest has booked a 15 per cent rise in full-year net profit after a surge in the precious metal’s price more than offset a fall in production.

The company posted earnings for 2019-20 of $US647 million ($A905.7 million) after a 5 per cent lift in revenue, with the realised gold price up 21 per cent at an average of $US1530 an ounce over the period.

The gold price continues to ride high amid global economic turmoil caused by the coronavirus pandemic, last week breaking records at more than $US2060 an ounce, although it has since settled back to above $US1950 an ounce.

Newcrest could have made a bigger profit, given it lost $US82 million to hedging ounces from its huge Telfer mine in Western Australia, which is locked in to 2022-23, meaning it misses out on cash it could have earnt when the price exceeds around $A1900 ($US1356) an ounce on average over that period.

Newcrest produced 2.17 million ounces during the 12 months to June 30, down 13 per cent on last financial year.

Telfer is ageing, so the company seeks to lift output with the nearby Havieron deposit and the Red Chris mine in Canada, its entry into North America, both acquired last year.

“Our ownership of Havieron over the year increased to 40 per cent as we track towards 70 per cent, underpinning the future of Telfer,” chief executive Sandeep Biswas said.

Newcrest CEO Sandeep Biswas says the gold miner’s strong performance has allowed it to lift dividends. Picture: Stuart McEvoy, The Australian

He said the company expected to add new production ounces to its portfolio from these growth options in due course and part of $1.2 billion raised in April would be spent on building declines at Havieron and Red Chris.

Newcrest also plans to expand its Cadia mine in NSW and is studying how to optimise its Lihir operations in Papua New Guinea, which disappointed during the year by producing lower grade ore while geotechnical issues hampered recoveries.

Mr Biswas said the company still planned to proceed with its half-owned Wafi Golpu project in PNG despite sovereign risk concerns after Canadian miner Barrick Gold was forced out of its Porgera mine by the Government.

“So far we’ve received assurances that it will be permitted under existing mining laws, which does mean a 35-year mine life,” he said.

“As long as we get the right fiscal regime, there’s no reason why we wouldn’t go ahead.”

Managing COVID-19 cost the miner around $20 million before tax last financial year and is expected to require up to twice as much in 2020-21.

Newcrest paid a final dividend of 17.5 US cents per share, fully franked, taking its full-year dividend to 25 cents per share, up 14 per cent on 2018-19.