Newcrest not up for more at Havieron

WAFI-GOLPU joint venture partner Newcrest Mining will not exercise an option to acquire an additional 5% of the multimillion-ounce Havieron deposit in Western Australia’s Paterson Province from minority partner Greatland Gold.
Newcrest not up for more at Havieron Newcrest not up for more at Havieron Newcrest not up for more at Havieron Newcrest not up for more at Havieron Newcrest not up for more at Havieron

Sandeep Biswas

Last month, an independent valuer determined a price of US$60 million for Newcrest to move to 75% of the project.
It had 28 days to decide and today announced it would not proceed, with managing director Sandeep Biswas saying that compared to the $65 million spent to earn 70%, the cost of the additional 5% did not meet the company's hurdle rate.
"If you look at our regional investment out there, and other areas where we're deploying capital and the rate of returns we're seeing on those, together with our obligation to return funds to our shareholders where we can, we've determined that just didn't meet the criteria that we're looking for," Biswas told reporters this morning.
Biswas said the company was comfortable with its 70% stake.
Newcrest updated its resource estimate for Havieron today, adding 1 million ounces and 40,000 tonnes of copper to 2.9Moz of gold and 140,000t of copper in measured and indicated resources and 900,000oz of inferred resources to 2.6Moz.
A feasibility study is due in the December quarter.
"Our enthusiasm for the project will be dictated by the financial outcomes as it comes out of the feasibility study," Biswas said.
"We're very disciplined in our approach to capital management … we have a capital allocation criteria and if something doesn't fit that criteria, we've got to be pretty hardnosed about whether we invest that money or not because we've got so many other alternative options where to deploy our capital, including shareholder returns."
Greatland CEO Shaun Day told the company was "delighted" to retain its 30% stake.
"This was the best outcome available for the company and its shareholders and delivers an uplift in value in the medium to long term," he said.
"We respect the Newcrest decision - they're a global major with over 35 years of experience in the Paterson Province. They're an excellent joint venture partner and provide Havieron the benefit of leveraging that existing infrastructure down the road at Telfer."
Day revealed Greatland had previously offered Newcrest $85 million to buy back 5% of the project from Newcrest.
"And in that context, this is a particularly tremendous outcome for Greatland," he said.
Day welcomed Newcrest's updated resource, which aligns with Greatland's own estimate of 5.5Moz of gold and 218,000t of copper, released earlier this year.
The decline is advancing at Havieron after "really tough" ground conditions were experienced in FY22.
Biswas said development rates were improving, which was expected to continue through FY23.
The schedule for first ore is being reviewed and is expected to be released with the study.
Newcrest posted a full-year statutory and underlying profit of $872 million, ahead of consensus forecasts.
Cashflow from operations was $1.68 billion, while free cashflow before merger and acquisition activity was $229 million, including $88 million from just four months of ownership of the Brucejack mine in British Columbia.
The company finished the year with net debt of $1.3 billion, a leverage ratio of 0.6 times and gearing of 10.2%.
Newcrest declared a final dividend of 20c per share, above its minimum payout ratio.
The company has set guidance for FY23 of 2.1-2.4Moz of gold and 135,000-155,000t of copper, compared to FY22 production of 1.95Moz of gold and 120,650t of copper.
All-in sustaining costs are forecast to be $2.1-2.4 billion, which incorporates 6.8% of inflationary impacts.
Chief financial officer Sherry Duhe said costs remained unpredictable and the company was looking at a number of levers, including traditional approaches and digital enablers.
"We remain seriously focused on minimising cost pressures," she said.
Capital expenditure guidance for FY23 is $1.42-1.63 billion.
"Given industry-wide cost pressures and softer guidance across the sector; we consider Newcrest's FY23 guidance as a relative positive," RBC Capital Markets analyst Alex Barkley said.
"This reasonable guidance is particularly reassuring given idiosyncratic uncertainties across Newcrest's mines heading into FY23."
Newcrest shares rose 3.3% to $A19.29 on release of the announcement.