Tag Archives: Newcrest Mining

Australia’s Newcrest says expects impairment of up to A$2.5 bln

Australia’s Newcrest Mining Ltd warned on Thursday it expects to take post-tax impairments of up A$2.5 billion ($2.36 billion) in fiscal 2014 related to its flagship Lihir gold mine in Papua New Guinea and other mines in Australia and Ivory Coast.

Although an impairment has no impact on cash flow, a reduction in book values in the range of A$1.5 billion to A$2.5 billion is estimated to adversely impact gearing by between three and five percent, Newcrest said.

The latest impairment is in addition to the A$47 million ($44.35 million) after-tax impairment of west African exploration assets included in Newcrest’s first-half results.

Newcrest is scheduled to release its 2014 financial results on Aug. 18.

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Proposed Wafi-Golpu mine faces uncertain future

Harmony lays ground for ‘rapid change’

Allan Seccombe | miningmx

THE climb-down in the gold price during 2013 has had many consequences. For the likes of Harmony Gold, it has led to an adjustment in its capital planning which most strikingly affects its Papua New Guinea project, Golpu, a copper and gold deposit it shares with Australian company Newcrest Mining.

Gone is the big-bang approach to mine development in favour of a cautious, modular approach. Capital is applied in dabs rather than with a broad-brush because since the beginning of 2013, when the gold price began its precipitous $300/oz decline, it became harder to generate cash.

A consequence of the lower gold price is that the structure of gold producing companies has changed. First there were multi-billion dollar write-downs, followed by active management of non-core assets – a development driven by shareholders to a large extent. Consolidation, deconsolidation, corporate activity of all types is now being contemplated by the world’s gold producers.

That’s why Harmony is on its toes.

Its CEO, Graham Briggs, has generally avoided the question of growth by acquisition. Now, however, he is talking about opportunities that may be posed by structural industry change.

“We’ve got a fantastic copper project but investors won’t let us build that project. It will cost too much and they worry about it. Some of these things have to wait for the right investment time,” Briggs said.

Details of the revised study into Golpu, will be published in August. The Wafi portion of the project (it was originally called Wafi-Golpu) has difficult metallurgy and needs further work.

The question management and the board will grapple with in coming months is whether the Papua New Guinea project remains within Harmony or if it is spun out.

“The view is that resources go through lean years but they have excellent years as well and you need to capitalise on those years. Even in a declining commodity price environment shareholders are very demanding and that means companies will change,” Briggs said.

“Harmony has an asset in Papua New Guinea that potentially gives it big growth. How does Harmony evolve out of that? Does it evolve into two separate companies or does it stay as one company?” Briggs said.

“I can see some dramatic changes happening in the whole global gold industry and those, by nature, will affect us,” he said.

Golpu spun out?

The change in CEO at Newcrest may materialise into a revised investment strategy for that company. It may, for instance, weigh the prospect of spinning out Golpu in order to focus on cash returns from the operating assets.

Merger discussions between Barrick Gold and Newmont Mining, two of the world’s largest gold companies could result in assets being cast off into separately-listed entities as they too seek new focus.

In the case of the North Americans, it would be focus on geographical areas, with a desire to having assets in the North and South American time zones.

“There’s going to be more shareholder activism which will drive better returns for shareholders, but it will create companies with specific issues,” Briggs said.

AngloGold Ashanti, Gold Fields and Harmony all grew their international footprints by using their South African mines to fund overseas purchases and growth.

Gold Fields spun out its cash-generating South African mines to create Sibanye Gold, which is carving a niche for itself as a strong dividend payer.

“So now, a company that has growth projects and dividend paying assets may suddenly start splitting in two because there may be investors who have different time horizons,” Briggs said.

“There’s a more selective philosophy from a shareholder perspective where they’ll not just invest in gold but they’ll invest in gold with a specific profile. That’s how I see things evolving and I don’t know where Harmony will be in that,” he said.

Harmony’s executives are visiting bankers to get their views of what the global gold mining industry is doing and how its being driven and evolving.

“We have to interpret this thing to see where Harmony is going,” he said. “You’ll have different money looking for different scenarios.”

“This is a period of rapid change. There will be rapid decisions to be made and we must be prepared for whatever happens,” Briggs said.

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Newcrest says mining on track

lihirisland

PNG Loop

Newcrest Mining Ltd is on track to deliver full year gold production around the top end of the guidance range following production of 551,590 ounces of gold and 21,012 tonnes of copper for the March 2014 quarter with the All-In Sustaining Cost (AISC) of sales being A$988 per ounce (K2236 per ounce).

Gold production for the quarter was 11% lower than the previous quarter, primarily due to lower mill throughput associated with increased maintenance activity, which included a conveyor belt replacement at Ridgeway, a shutdown to complete the Cadia East west crusher tie-in and processing plant maintenance at Lihir.

Managing Director and Chief Executive Officer, Greg Robinson, said: “Newcrest continues to maintain a sharp focus on cost reduction initiatives across the entire business. Our year-to-date All-In Sustaining Cost of A$998 per ounce is A$285(K645) per ounce lower than last financial year which has enabled us to expand our All-In Sustaining Cost operating margin to A$462 per ounce this quarter despite the lower gold price environment.”

He said exploration activities continued during the March 2014 quarter with positive drilling results at Wafi-Golpu and Gosowong.

During this second quarter, the Company announced that it had completed arrangements to extend the tenor of its existing bilateral bank loan facilities providing a smoother and longer average maturity profile with no material change to terms and conditions and no increase in interest cost.

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Fiji: Police probe mine site rape case

Mere Naleba | The Fiji Times

A THREE-member police team visited the Namosi Joint Venture mining site yesterday afternoon to investigate reports of an alleged rape and assault case in the area.

Deputy Police commander southern SSP Selesitino Babakoro said in an interview that a team from Navua left the Navua Police Station around mid-day to tend to a verbal report after receiving a briefing on the alleged assault and rape case.

SSP Babakoro said he could not release any further information as yet because they were yet to receive the report from the investigation team.

“A team from Navua has gone up to Namosi. Once they return, I will be able to confirm and release more information,” he said.

The team that visited the NJV site comprised a crime officer, the Navua station officer and a female corporal based at the Navua Police Station.

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New Ireland cheated by Lihir mine: Chan

Chan: Probe mine

Zonya Goasa | The National aka The Loggers Times

NEW Ireland’s Governor and former Prime Minister Julius Chan is calling for a full audit of the operations at the Lihir Gold Mine.

The mine began production in 1997 and was taken over by Newcrest Mining in 2010.

Sir Julias said the mine was the third largest gold mine in the world since 1997, but the people of New Ireland did not benefit from any projects.

“Something is just not right,” Chan said. “The audit should include the calculation of tax credit scheme at 2% of assessable income prior to 2001.”

He said the province had been cheated out of tax credit scheme income for fifteen years.

“One of the benefits provinces are supposed to receive is projects funded under the tax credit scheme,” he said.

“The national monitors – MRA, the Mining Department and the company are at fault for neglecting the people’s interest.

“As the project impacted area, they should have received tax credits of K10 million to K20 million every year but not even a toea was received.

“Their delays had cost New Ireland K50 million in tax credits from 2010 and 2011 because they could not prepare tender documents and issue contracts on time.

“New Irelands has become victims and should be given what they were promised once the audit is done.”

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PNG miners face ‘serious pressure’

Alison Middleton | PNG Industry News

SERIOUS issues such as project slowdowns, exploration downturns and workforce reductions are looming as a threat to the PNG mining industry, companies have been warned.

This year’s Australia Papua New Guinea Business Forum had the theme of Opportunities Beyond the Boom, yet delegates were painted a stark picture prompted by a drop in commodity prices.

PNG Chamber of Mines and Petroleum executive director Greg Anderson told delegates that serious pressure had been put on PNG-focused mining companies.

“We’ve had a decade of robust times when the industry went through a marked period of growth and we opened two projects,” Anderson said.

“That all finished when commodity prices collapsed in late 2011 when we saw a 30-35% drop in gold and copper.

“This put very serious pressures on our industry [resulting in] project slowdowns, exploration downturns and some workforce reductions.

“The projects have all had to go into serious self-analysis with a major focus on productivity, optimisation and cost reduction with a parallel reduction in taxes, royalties and dividends.”

Anderson said that since the commodities crash, PNG had lost an array of majors including Vale and Newmont, while others such as Barrick Gold and Newcrest Mining had pulled out of exploration joint ventures with junior companies.

“Many of the junior companies are in a very serious stress mode and unable to raise any funds on the market,” he added.

“They are literally dormant and unable to meet their exploration commitments.

“Some of these companies have a share price you can hardly count and their market caps are dreadful.

“Unless these companies are able to raise significant finance in a very short time, there’s no way possible they’ll be able to continue servicing the number of tenements they have – which all have a minimum annual expenditure commitment per block.

“This means we’re going to have a drastic ongoing reduction in the number of tenements.”

Anderson said the chamber was hopeful that the government would make a decision on Ok Tedi’s 11-year mine life extension by September.

And he flagged the Stanley gas condensate project as a very real power option for the North Fly Region which would significantly reduce diesel usage and costs.

Issues with illegal mining at Barrick Gold’s Porgera and significant costs pressures at Newcrest Mining’s Lihir mine were also highlighted at the conference.

On a more positive note, he said the joint venture of Newcrest Mining and Harmony Gold had done a “fabulous job” at Hidden Valley mine, reducing costs from more than $A2000 an ounce to $1200 range.

He also said St Barbara’s Simberi project had also faced very significant cost problems but was hoped to be cash flow positive by December.

Turning to Nautilus Minerals’ Solwara-1 project, Anderson said PNG would be world-leaders in ocean floor mining.

“There has been quite a lot of criticism of this project, but I think it’s something we should be proud of,” he continued.

“It will be with us and we’re going to lead the world. This is good news.”

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Hidden Valley swamped with alluvial miners

Rife in illegal [unauthorized] activities

The National aka The Loggers Times

LOCALS living near the Hidden Valley mine and its tailings storage facility have raised concerns of increased illegal [unauthorized] activities at the mine.

The villagers in the surrounding communities claim that since the deferral of the signing of the Memorandum of Agreement between the developer, Morobe Mining Joint Venture, the State and the Morobe provincial government, there has been increased illegal [unauthorized] activities, including illegal [unauthorized] mine trespassing [access], illegal [unauthorized] mining and increased volume of at the mine site.

“The MoU is already expired, and the settlers are taking advantage and are entering the mining lease area and conducting alluvial mining.

“The locals are concerned that if the company and authorities such as police retaliate, they will attack the innocent villagers if something happens,” a man from Hikananguwe said.

General manager sustainability and external relations David Wissink admitted that MMJV was aware of illegal [unauthorized] trespassers [access] despite warning signs and awareness by community affairs and security personals.

“Trespassers who are caught involved in illegal [unauthorized] activities on the mining lease will be arrested,” he said.

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Wafi Golpu plans shrink massively

S.Africa’s Harmony Gold scales back Papua-New Guinea project

Ed Stoddard | Reuters

* PNG project funding now “well within reach”

* Harmony undertaking independent safety review 

South Africa’s Harmony Gold has scaled back the size and expenditure on building its Papua New Guinea Wafi-Golpu mine, enabling it to raise funding for the project, its chief executive said.

The gold and copper project, a joint venture with Newcrest Mining, sits on deposits with a metal content estimated to be worth $85 billion at current prices. The plans unveiled in 2012 called for spending of almost $6 billion to develop it.

The mining firm is now looking at a “significantly lower capex, something that will be well within our reach to fund”, CEO Graham Briggs told Reuters on Tuesday, after Harmony released its results for the March quarter.

“August is the time when we will be able to release more information on that,” he added.

Harmony has scaled back its original plans as mining investors globally have shied away from big capital expenditures on projects in the face of rising costs and falling prices.

“The timing of big builds and the raising of that sort of money, and debt levels and shareholder views changed our minds, and now we are talking about a significantly smaller mine,” Briggs said.

“In 2012 we were looking at roughly a mine that would be producing somewhere between 20 and 25 million tonnes a year. We are now looking at between 1 and 5 million tonnes a year,” he said.

Harmony said on Tuesday it had a cash balance of over 2 billion rand ($190 million).

That level would have made it difficult for Harmony to raise almost $3 billion to fund its share of Wafi-Golpu in the current environment of investor caution.

Briggs also said the mine’s start-up date would probably move forward now from a previous estimate of 2019.

BACK IN THE BLACK

Harmony also said it had swung back to a quarterly profit despite a fall in production as it benefited from a smaller foreign-exchange loss on a U.S. dollar-denominated loan.

The company said it had begun a safety improvement drive to avoid a repeat of a February accident at its Doornkop mine, where a fire and rock fall killed nine miners.

Briggs said the company was taking “fairly drastic measures” on safety.

“We have independent outsiders doing a complete safety review on all our operations … We have to have a safe mine environment,” he said on a conference call. The review’s outcome will be known in around two months.

South Africa’s gold mines are the deepest and among the most dangerous in the world, but the industry has made strides to improve safety in recent years.

Because of the Doornkop incident and other operational problems, the company’s gold production fell 12 percent in the quarter to 269,000 ounces.

But Harmony cashed in on a higher rand price for gold, which increased 8 percent to 451,000 rand/kg because of a weakening of the domestic currency. This benefits metals producers in South Africa because most of their costs are in rand.

The company reported headline earnings per share of 12 cents for the quarter to the end of March after a loss of 21 cents in the previous three months.

Headline earnings are the main profit measure in South Africa, stripping out various one-off items.

The grade of the ore that Harmony is mining improved by 5 percent to 5.1 grams per tonne in the third consecutive quarter of improvement, a trend that will also flow to its bottom line. ($1 = 10.5157 South African Rand) (Editing by Tom Pfeiffer and Jane Baird)

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Barrick-Newmont tie-up could create new top flight Australia gold producer

Mining Weekly 

Australia could spawn a new mega gold producer if Barrick Gold Corp and Newmont Mining Corp spin off their Asia-Pacific assets, heating up competition with the country’s underperforming market leader Newcrest Mining Ltd.

Barrick and Newmont have been holding friendly merger talks, but remain at odds over how to group mines each company owns in Australia, New Zealand and possibly Papua New Guinea and Indonesia into a separate company, sources close to the talks have said.

If the two companies’ Asia-Pacific mines were grouped together, annual output could exceed 2.3 million ounces, challenging Newcrest as Australia’s biggest gold producer and the world’s fifth largest.

The new entity could also potentially gain a higher rating among investors than it would receive within a combined Barrick-Newmont.

“There’s huge investor appetite for an alternative to Newcrest,” said Eagle Mining Research gold analyst Keith Goode.

“The next stages of growth for Newcrest are seen as either risky, as in the case for their assets in Ivory Coast, or too long term. What the Barrick-Newmont assets in Asia-Pacific offer is immediate production and cash flow, with growth through exploration potential.”

Anglogold Ashanti has also considered spinning off its Tropicana and Sunrise Dam mines in Australia into a separate entity to benefit from investor interest in an alternative to Newcrest, but has yet to act.

Newcrest has held the No. 1 spot on the Australian Stock Exchange since 2010, with total production this year seen at about 2.3-million ounces. Number two is Evolution Mining, a distant second at less than a half-million ounces.

However, the miner’s stock has lost three-quarters of its value over the past three years as it has struggled with high costs, disappointing output at its Lihir mine in Papua New Guinea and a 28% fall in the gold price in 2013.

A sharp drop in half-year profit and a jump in debt also fuelled concerns it may need to tap the market for capital, while it reported an 11% fall in March quarter gold output from the previous quarter on Wednesday, well above the 7% drop forecast by UBS.

Newcrest also said it had cut 208 jobs over the last quarter at its Lihir mine.

ARRAY OF MINES

Australia was the world’s second-biggest gold producer behind China in 2013, with output of 10.5-million ounces, according to ThomsonReuters data, but many of its biggest mines are in the hands of foreign-owned miners.

Newmont owns Australia’s biggest gold mine, Boddington, and is a 50-50 partner with Barrick in the 800 000-ounces-per-year Super Pit lode 700 km (440 miles) away. Other assets include the Jundee and Tanami gold mines in Australia and Waihi in New Zealand. Newmont’s other main asset in the Asia-Pacific region is the Batu Hijau copper and gold mine in Indonesia.

Besides its half-stake in the Super Pit, Barrick could roll its Porgera mine in Papua New Guinea into the fold, bringing with it close to 500,000 ounces.

“If you have an Asia-Pacific-listed demerged asset, you would get strong Asia-Pacific interest and be more competitive for those investment dollars than otherwise in North America,” said Morgans mining analyst James Wilson.

Still, there’s no guarantee a sizeable number of investors would drop Newcrest for a new Barrick-Newmont combination.

“If it was to be listed here (Australia) and it was materially cheaper than Newcrest, then maybe you’d consider it, but I would say from what I’ve seen, Newcrest has the better asset mix than the proposed spin co,” said Darko Kuzmanovic, a portfolio manager at Caledonia Investments. Caledonia does not own Barrick or Newmont shares.

Barrick gained 1.8% to C$19.37 ($17.55)in heavy trade on Tuesday after Goldman Sachs upgraded the stock to a “buy” from “neutral” and investors placed bets on whether it can pull off a bid for Newmont.

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Newcrest Mining Cuts Hundreds of Jobs in Papua New Guinea

Gold Miner Cut 208 Jobs Across Range of Roles at Lihir Site

Rhiannon Hoyle | The Wall Street Journal

firedNewcrest Mining said it cut hundreds of jobs in Papua New Guinea in a push toward austerity. The decision comes after the company launched a raft of cost-cutting projects across its operations last quarter.

The Melbourne-based gold miner, one of the world’s biggest, said it cut 208 jobs across a range of roles at its Lihir site from January to March. Newcrest said it also eliminated another 32 vacant roles at the site, its most expensive to operate.

Newcrest pinned its 11% drop in third-quarter gold production on maintenance work at sites including Lihir and Cadia East in eastern Australia.

Newcrest’s priority is now on bolstering cash flow, “not maximizing production ounces,” said Chief Executive Greg Robinson.

Some of the world’s largest resources companies, including BHP Billiton Ltd. and Anglo American PLC, have been cutting spending, shelving major projects and looking to run existing operations harder after pledging better capital discipline after years of heavy investment in new mines. This has resulted in hefty job cuts across the industry.

Commodity prices from coal to gold slumped as mine supply increased, the U.S. moved to tighten monetary policy and economic growth in China cooled.

Newcrest has curbed spending over the past 18 months, which included closing its Brisbane office in Australia’s Queensland state. This came after a sudden halt to a more-than-decade long bull run for the gold market. Spot gold prices are currently down about 25% from 2013’s highs.

In February, Newcrest reported a slide in first-half net profit—to 40 million Australian dollars (US$37 million) from the A$323 million in the same period a year earlier—as it posted write downs against exploration assets and extra tax charges tied to research and development.

“I think there is more room for us to move,” said Mr. Robinson of the company’s ability to cut costs further, on a call Wednesday with analysts and investors. He said the Lihir mine would be a focus for cash savings and productivity improvements in the period ahead.

It costs the company A$1,344 an ounce to sustain operations at Lihir, compared with A$875 an ounce at its Telfer mine in Australia, and A$381 an ounce at its Cadia Valley site.

Newcrest separately confirmed Mr. Robinson would stand down in early July, and will be replaced by Sandeep Biswas. The former Rio Tinto PLC executive joined Newcrest as chief operating officer in January with the expectation he would take over Mr. Robinson’s role in the latter half of 2014.

Shares in the company were recently up 1.5%, outperforming a 0.5% rise in the broader S&P/ASX 200. While third-quarter gold output fell to 551,590 ounces from 621,125 last quarter, production was still up 7% compared with a year earlier.

The company also stuck to earlier estimates that gold output would reach the higher end of its 2.0-million ounce to 2.3 million-ounce guidance range this fiscal year.

Still, some fund managers are cautious. “Its balance sheet remains quite constrained, burdened by too much debt, and some of its major assets are simply being run for cash generation, which I believe is a very short-term approach,” said Ben Lyons, a Sydney-based portfolio manager at ATI Asset Management, who sold his fund’s holdings in Newcrest about 18 months ago.

In its half-year report in February, Newcrest said its operational cash flow had nearly halved, while debt-to-equity level jumped above 30% from 17% in the same period a year earlier.

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