Tag Archives: Newcrest Mining

ANU dumps Newcrest but pockets substantial payments from Rio Tinto and BHP

The Australian National University has announced it is dumping its shareholding in seven companies including Newcrest Mining, owner of both the Lihir and Hidden Valley mines in PNG,  as part of its socially responsible investment program.

But in a completely contradictory disclosure, ANU’s Annual Report reveals it has accepted donations of more than $2 million from BHP Billiton and Rio Tinto. BHP is responsible for the destruction of the Fly river system in PNG, one of the world’s worst mining disasters, and Rio Tinto is accused of supporting war crimes during a conflict on Bougainville sparked by its Panguna mine and in which around 15,000 people died.

screen_shot_2014-04-15_at_09.19.50The Annual Report commends its donors for their  ‘immense generosity’ and says

The entire ANU community is thankful for their support.

In contrast the Council of the University has agreed to a proposal to commence divestment of stocks in seven companies following an independent review of ANU domestic equities.

The university says the review was commissioned as part of its Socially Responsible Investment Policy in which Environmental, Social and Governance Ratings were provided on ANU-held domestic stocks.

As a result of the ratings, the University is to divest its holdings in Iluka Resources, Independence Group, Newcrest Mining, Sandfire Resources, Oil Search, Santos and Sirius Resources.

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Newcrest’s troubled Lihir mine hit by airline dispute

lihirisland

PNG’s Air Niugini suspends Lihir services over insurance dispute

ch-aviation

Air Niugini (PX) has indefinitely suspended scheduled flights to and from Lihir, located about 900km north east of Port Moresby in the country’s New Ireland Province. In a statement, the carrier said the suspension “is due to certain insurance issues that need to be resolved between the airport owner, New Crest Mining Ltd, its insurance company and Air Niugini.”

Lihir is home to the Lihir Gold Mine, operated by Newcrest Mining Ltd. The mine holds one of the largest gold resources (40 million ounces) in the world.

“Air Niugini will resume operations once these issues are resolved and New Crest gives approval,” it said.

Prior to its suspension, Air Niugini had connected the island with Kavieng and Rabaul. Rival Airlines of PNG (CG, Port Moresby) has reportedly continued with its operations with flights from Lihir to Kavieng, Rabaul Tokua and Port Moresby.

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Newcrest boss base salary a cool K5 million a year!

Rich rewards: Newcrest boss Sandeep Biswas will receive a base salary of $2.3 million a year, 22 per cent higher than the median pay for his peers.

Maurice Newman rated ‘less helpful than harmful’ as Newcrest whacked over governance and pay

Peter Ker | Sydney Morning Herald

The mining company's remuneration report has come under scrutiny. Photo: Bloomberg

The mining company’s remuneration report has come under scrutiny. Photo: Bloomberg

Newcrest Mining’s decision to hire Maurice Newman AC to review last year’s disclosure scandal has been labelled “less helpful than harmful” by proxy advisers, which have also recommended shareholders vote against the re-election of two directors at the goldmining company.

In an advisory note published before Newcrest’s annual meeting of shareholders later this month, CGI Glass Lewis also highlighted the unusually generous base salary that had been awarded to new chief executive Sandeep Biswas, which after allowing for currency conversion, has at times seen him earn more in guaranteed pay than the bosses of bigger companies like Rio Tinto and BHP Billiton.

Rich rewards: Newcrest boss Sandeep Biswas will receive a base salary of $2.3 million a year, 22 per cent higher than the median pay for his peers.

Rich rewards: Newcrest boss Sandeep Biswas will receive a base salary of $2.3 million a year, 22 per cent higher than the median pay for his peers.

Mr Biswas will take home a guaranteed base salary of $2.3 million a year, compared with the $US1.7 million base earned by BHP’s Andrew Mackenzie, the $1.94 million that Rio’s Sam Walsh will earn and the $2 million that Fortescue’s Nev Power will take home before incentives.

CGI said it would not recommend a rejection of Newcrest’s remuneration report, but it urged the miner to explain why Mr Biswas was earning a base salary that was 22 per cent higher than the median pay for bosses of peer companies.

“CGI Glass Lewis views high fixed remuneration with scepticism … we question the company’s CEO fixed-remuneration benchmarking process, given that it has produced an outcome that is in line with CEO pay levels at the two largest mining companies listed in Australia, which are multiples larger than [Newcrest],” the advisers wrote.

CGI urged Newcrest to explain why Mr Biswas would enjoy a base salary that was 15 per cent higher than that of his predecessor, Greg Robinson, and a “potential total remuneration” that was 60 per cent higher than Mr Robinson’s.

But the strongest words were reserved for the disclosure scandal, and specifically the decision to hire to Dr Newman, who is now the head of Prime Minister Tony Abbott’s business advisory panel, to conduct an “independent” investigation into the saga.

Dr Newman found no serious examples of misconduct, only for the Australian Securities and Investments Commission later to allege that two contraventions of the continuous disclosure regulations had occurred in June 2013, when Newcrest employees sought to guide analysts towards an imminent round of impairments and restructurings at the company.

“Dr Newman’s conclusion, in which he largely absolved the company of wrongdoing and seemed to place the blame at the feet of the analyst community, was less helpful than harmful,” said CGI in its report.

The proxy adviser, whose recommendations will be considered by Newcrest shareholders before they vote at this month’s annual meeting, said ASIC’s findings suggested the goldminer’s “policies and procedures were not sufficiently robust, nor was the board’s oversight of such, so as to ensure compliance with the company’s continuous disclosure obligations”.

“We believe the inadvertent nature of the offence should not excuse the board from responsibility for the breaches … it is our view that all directors who were on the board at the time of the contravention should be held accountable.”

Dr Newman said it was a pity that the proxy advisers didn’t value his contribution, and he said Newcrest hired him out of a genuine desire to do the right thing.

“The company was very keen to find whether it had an endemic problem, as it happened ASIC took something like 12 months to complete, so if you have a genuine problem and it’s difficult to determine, it makes sense to act quickly,” he said on Thursday.

A spokesperson for the Newcrest chair Peter Hay said the company had determined what it believed was an appropriate package to “drive improvements” in company performance.

“The total package was determined with reference to the market at the time,” the spokesperson said, adding that it was benchmarked against a group of gold, energy, industrial and materials companies.

CGI has duly recommended that shareholders vote against returning two of Newcrest’s independent directors – Lady Winifred Kamit and Richard Knight – to the board when they come up for re-election at the meeting.

Lady Winifred is a lawyer with extensive experience in Papua New Guinea, and was on the board of Lihir Gold until Newcrest acquired the company and its troublesome eponymous mine in PNG.

Mr Knight has been involved in the mining industry for more than 40 years, and has been involved with several Rio Tinto subsidiaries and was a director of OZ Minerals.

Both independent directors were unanimously recommended for re-election by the board of Newcrest.

The annual meeting will be held at the Pullman Hotel in Melbourne’s Albert Park on October 31.

Newcrest shares rose 1¢ to $9.99 on Thursday.

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Wafi-Golpu costs come down

Barry FitzGerald | The Australian

SOUTH Africa’s Harmony Gold has tipped that the cost for stage one of the Wafi-Golpu gold and copper project in Papua New Guinea would be “dramatically less’’ than the $US4.8 billion suggested in the original preliminary feasibility study into the project’s development.

Wafi-Golpu is a 50:50 joint venture between Melbourne-based Newcrest and Harmony, with the pair planning to release an updated pre-feasibility study on the project before the end of the year. The original PFS, released in 2012, spooked investors because of the size of investment required to get the project into production.

Apart from the upfront cost of $US4.8bn, the original PFS pointed to life-of-mine capital costs of more than $US9bn.

Speaking at the Denver Gold Forum this week, Harmony chief executive Graham Briggs said the new PFS was almost done. “It will go through a gate-keeping process and then we will be able to talk about the capital, but it will be far more achievable,’’ he said of the first-stage development.

Once it was released, it would be clear that funding the development by the companies — both of which have come under balance sheet pressure from last year’s collapse in the gold price — will not be an issue.

Wafi is a 7.2 million ounce gold resource that sits adjacent to the Golpu deposit, a world-class resource of 20.3m ounces of gold and 9m tonnes of copper.

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NJV undertakes environmental impact assessment at Waisoi project

namosi

Watisoni Butabua | Fiji Village

The Namosi Joint Venture is currently undertaking an environmental impact assessment at the Waisoi project.

The Waisoi Project is a copper and gold project.

Country Manager of Namosi Joint Venture Greg Morris said this is to assess the potential social and environmental impacts of a mine at Waisoi.

Morris said they are working and making the Waisoi project one that can deliver sustainable benefits to all including Fiji and the host community.

He said they will work with the government, the landowners and villages to achieve that objective.

The Namosi Joint Venture is exploring for the mineral resources in the Namosi and Naitasiri province which covers an area of approximately 724 square kilometres.

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Solomon mine bondholders count losses not riches

David Yong, Benjamin Purvis and David Stringer | Bloomberg

Locals walk through the Gold Ridge mine in 2003

Locals walk through the Gold Ridge mine in 2003. Photographer: Torsten Blackwood/AFP via Getty Images 

The unraveling of a two-year old gold-mining venture in Solomon Islands, a Pacific Ocean nation named for the biblical king known for his wisdom and wealth, is burning bondholders.

Australia’s St Barbara Ltd., which is seeking an exit from the Gold Ridge operation it acquired in 2012 in a $545 million takeover, has seen the value of its notes tumble to 79.75 cents on the dollar last week. More pain may loom: Standard & Poor’s pegs their value at just 30 cents to 50 cents on the dollar in the event of default.

The odds of that happening are rising after defaults by compatriot miners Mirabela Nickel Ltd. and Midwest Vanadium Pty. in the past year. Metal producers globally are in retreat from a decade-long $616 billion investment spree in mines as supply gluts and muted Chinese demand weigh on prices.

“We are in an environment where commodity prices are generally not supporting top-line growth,” Ric Ronge, a money manager in Melbourne at Pengana Capital Ltd., said by phone on Aug. 27. His firm oversees about A$1.2 billion ($1.1 billion) of assets. “Some companies that are very leveraged have likely been treading on solvency issues.”

Miners have cut staff, slashed budgets and shut operations as gold slumped 28 percent in 2013, the biggest annual decline in more than three decades. Producers including the biggest gold miner Barrick Gold Corp. and Newcrest Mining Ltd. recorded at least $26 billion in writedowns last year.

Returns Lag

Bonds sold by global mining and metal producers have returned 3.6 percent this year and offered 511 basis points over Treasuries as of Aug. 29, according to the Bank of America Merrill Lynch U.S. High Yield Metals & Mining Index. That’s less than the 6.9 percent return for global corporate bonds, which have a yield premium of 109 basis points.

Solomon Islands, which is three hours away by charter flight from Brisbane, is part of an archipelago named by Spanish navigator Alvaro de Mendana after the Israelite King Solomon, whose reign is described in the Bible as a period of great prosperity. The nation experienced unrest in the late 1990s and early 2000s prompting intervention by Australia, New Zealand and other neighboring countries to restore order.

Gold Ridge

Tropical Cyclone Ita flooded an access road to the Gold Ridge mine in April, halting production. When staff returned in June to assess damage, hundreds of illegal miners had set up encampments, forcing Melbourne-based St Barbara to evacuate workers from the site. The Australian producer is negotiating with the Solomon Islands government to transfer control after booking pretax impairments of about A$280 million against the mine in the past two years, according to filings.

“There’s a possibility, which is well advanced, of a win-win where the government can secure the future of the asset and we can leave with a clean exit with limited liabilities,” Chief Executive Officer Bob Vassie said in a phone interview Aug. 29. “That’s what we are shooting for.”

The company’s $250 million of 8.875 percent notes due April 2018 fell to 79.75 cents on the dollar last month from 99.49 cents when they were issued in March 2013, according to Bloomberg prices. The yield has risen to 16.52 percent, or 15.3 percentage points more than Treasuries.

Highest Risk

St Barbara is rated Caa1 by Moody’s Investors Service, a grade it reserves for borrowers deemed to be in “poor standing.” (SBM) It has the highest risk of default among Australia’s junk-rated miners based on measures of liquidity, analyst Saranga Ranasinghe said by phone on Aug. 28.

In a default, the bonds may have a recovery value of 30 to 50 percent, S&P estimated in March, and the company’s going-concern value may be as little as A$175 million to A$200 million. That hasn’t changed, analyst Brenda Wardlaw said by phone on Aug. 28.

St Barbara’s cash fell 32 percent to A$79 million as of June 30 from a year earlier, according to its financial statement released Aug. 27. Its debt includes a $75 million loan at 8.5 percent interest from RK Mine Finance, payable over 33 months from end-February 2015. The lender has priority to claims over bondholders, according to S&P.

The miner’s plight in the Pacific underscores the weak performance in Australia’s junk-rated miners. They returned 1.8 percent this year in the Bank of America’s Metals & Mining Index, while Canadian producers gained 9.9 percent.

Demand Drops

“A lot of that aggressive scramble for yield that took investors into junk-rated paper seems to have petered out a few months ago,” said Michael Bush, head of credit research at National Australia Bank Ltd. “Risk tolerance has narrowed and people are being a lot more discerning.”

St Barbara’s two mines in Western Australia produced profits in the year ended June 2014, accounting for 75 percent of revenue of A$533.8 million, according to a Aug. 27 statement. High costs at the company’s Pacific operations, which include Gold Ridge and the Simberi mine in Papua New Guinea, dragged the producer to a net loss of A$500.8 million in the period, it said.

“A lot of the acquisitions in the gold sector were made when prices were very high,” S&P’s Melbourne-based Wardlaw said. “It’s been difficult to get an adequate return now that prices have been lowered for a period of time.”

Cash Flow

The company is seeking to raise output at its Simberi mine to improve cash flow, Vassie said. “It’s on the right path to deliver cash and we have a very strong cash generating asset at Leonora” in Western Australia, he said by phone from Melbourne. “That gives us the confidence that we have stabilized the company, we haven’t defaulted on any payments and the big bond item is due only in 2018,” he said.

Building cash flow is “critical” before debt repayment kicks in, Rob Craigie, an analyst in Melbourne at Baillieu Holst, said by phone on Aug. 27. That hinges on the operating performance at its mines in Western Australia and Papua New Guinea, gold prices and capital expenditure, he said.

The Gold Ridge mine poured its first gold in August 1998 and was shuttered after two years. Then-owner Delta Gold Ltd. exited in June 2000, after which workshops and stores were vandalized. Allied Gold Ltd. bought the mine in 2009 before the company was taken over by St Barbara in September 2012.

Investors may see more defaults in the industry as the cost of capital remains high for miners with weak balance sheets, Pengana Capital’s Ronge said.

“We aren’t expecting a strong across-the-board rally in commodities over the next six to 12 months,” he said. “It really comes down to their ability to control costs and restructure their debt.”

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Call to focus outside mining on Lihir

The National aka The Loggers Times

A COMMUNITY leader on Lihir Island, in New Ireland, says the leaders should now be focused on sustaining the economy after the mine closes.

polyp_cartoon_Trickle_Down_EconomicsLihir Island hosts one of the world’s largest and richest mining projects in being developed by Newcrest Mining Limited.

Lihir Sustainable Development Programme chairman Ben Misren told Public Enterprises and Investments Minister Ben Micah, Lihir leaders and the business community that the economy experienced on the island would soon be gone.

“The one we are fighting for is the ongoing economy after mine closure,” he said. Misren was speaking during the opening of a new poultry layout facility in Lihir on Monday by Micah.

Present were business project partners Mainland Holdings, suppliers of Niugini Tablebirds.

“Today, you are witnessing one of those projects that (will continue) after the mine closure,” he said.

“We, as Lihirians, should work together to build a non-mining economy that will sustain the livelihood of our people, our children and the future leaders of this island.

“Mining will go tomorrow. What is left then is something that is indicated by one such project.”

Micah paid tribute to Mainland Holdings board chairman William Lamur and Colin Vale of the Anitua Group of Companies “for their sleepless nights” and the thoughts of “ever making it work”.

“It is not easier than what it is now. It was a nightmare. We thought we were gonna go down,” Micah said.

Misren assured the crowd that there were more such projects coming up, including an extension to the piggery to include an abattoir and meat birds for the poultry project.

“Our biggest task as Lihirians is to ensure we control, manage and own these projects.”

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