Newcrest warns of Namosi delay

ACCESS issues may delay a final feasibility study decision on Newcrest Mining’s proposed Namosi copper-gold development in Fiji until the third quarter, while disruptions at its three core operations have prompted a downgrade of its gold production guidance for 2011-12.
Newcrest warns of Namosi delay Newcrest warns of Namosi delay Newcrest warns of Namosi delay Newcrest warns of Namosi delay Newcrest warns of Namosi delay

Australia's largest locally owned gold miner has reduced its gold guidance by around 6% to 2.43-2.55 million ounces following production disruptions at Cadia Valley in New South Wales and Lihir in Papua New Guinea, as well as lower grades and recoveries at its Telfer mine in Western Australia.

Its original guidance for copper volumes, group operating costs and capital expenditure is maintained at between 75,000-85,000 tonnes of copper with capital expenditure of up to $2.2 billion.

As for its large 69.94%-owned Namosi joint venture, which is located 30km west of the capital Suva, Newcrest said drilling had been slower than expected due to landowner access issues.

The JV contains the Waisoi deposit, ranked as one of the world's biggest undeveloped copper-gold deposits and last estimated by Newcrest to contain total resources of 7.9 million tonnes of copper and 7.7Moz of gold, as well as other copper-gold targets which are being evaluated.

In a presentation as part of a UK road show late last year, Newcrest managing director and chief executive Greg Robinson said the company was targeting production from Namosi sometime in the 2015 financial year.

Local newspaper The Fiji Times this month reported the country's Prime Minister Commodore Voreqe Bainimarama would oversee talks and negotiations related to Namosi, which is expected to have an initial investment of $1 billion, with a similar annual turnover.

In a Ministry of Information statement, Bainimarama announced he would take over the responsibility of talks and negotiations on the mine, while an environment impact assessment and economic impact analyses were still being conducted.

Lands and Mineral Resources Permanent Secretary Filimone Kau told The Fiji Times infrastructure development was expected to start in June.

There were no real surprises in Newcrest's latest quarterly, with gold production of 579,073oz which was down slightly on the 587,296oz produced in the September quarter, as were copper volumes which reached 18,171t versus 19,228t in the previous three-month period.

Total costs after by-product credits were higher on $A835 per ounce compared to $805/oz in the September quarter, while cash costs of $606/oz were higher than the $594/oz achieved in the previous quarter and reflected reduced by-product credits associated with a lower copper price.

Importantly, the gross cash margin increased slightly to $1042/oz thanks to a higher realised gold price of $1648/oz.

On the corporate front, its secondary listing on the Toronto Stock Exchange is expected to be completed by the end of the current quarter.

To help a portion of its major growth projects and to repay existing unsecured debt, Newcrest also raised $US1 billion ($A949 million) through the issue of corporate bonds in the US.

The gold miner's major expansion projects at Cadia and Lihir continue to track to schedule, with the start of power supply from the new Lihir power plant while the major Cadia East project tie-ins have been finalised.

Cadia Valley is expected to deliver up to 800,000oz of gold and 90,000t of copper annually when Cadia East comes online, while the Lihir upgrade is expected to grow volumes to 1.3 million ounces per annum.

Looking at each operation in more detail, Cadia Valley volumes were down due to a ground slip in the Cadia Hill open pit in November which blocked ramp access and prevented heavy vehicle access in the bottom of the pit, resulting in the treatment of lower grade stockpiles.

An alternative access ramp has since been established and mining is expected to resume later this month.

A total of 118,203oz of gold and 10,731t of copper was produced at cash costs of $407/oz in the latest three-month period, compared to corresponding numbers of 150,277oz of gold and 11,763t of copper at cash costs of $281/oz in the September quarter.

Ridgeway kicked in 109,716oz at an average head grade of 1.35 grams per tonne, while a further

2412oz grading 0.58gpt was sourced from Cadia East.

The latter $A1.9 billion development continued to schedule and is more than 65% complete and due to ramp up this year.

Higher mill throughput and increased metal recoveries partly offset lower grades at Lihir for the quarter, after rain prevented access to high-grade areas in the Lienietz pit.

A total of 107,500oz of gold was produced at a head grade of 3.51gpt versus 134,685oz in the September quarter at net cash costs of $554/oz and total costs of $702/oz.

Meanwhile, the $US1.3 billion upgrade of the Lihir plant to 1Moz continued to plan.

It is 70% complete and due for completion by the end of this year.

The key milestone scheduled for the current quarter is the commissioning of the new primary crushing circuit which will be followed by the commissioning of the milling circuit, new oxygen plant and autoclaves during the next six months.

Lower feed grades and recoveries were a factor at the Telfer mine in the quarter but volumes remained pretty much on par with the September quarter results.

Production is expected to be sustained at between 500,000-600,000oz for the next 10 years at cash costs of $US650-750/oz, with the O'Callaghans tungsten development due to come online in 2015.

A total of 135,427oz of gold and 7440t of copper at a cash cost of $A800/oz was achieved in the latest quarter versus 137,229oz of gold and 7465t of copper at a cash cost of $827/oz in the previous three-month period.

Record mill throughput at its 82.5%-owned Gosowong operation in Indonesia resulted in production of 107,500oz of gold at cash costs of $404/oz compared to 79,798oz at cash costs of $508/oz in the September quarter.

The site churns out around 400,000ozpa at cash costs of $US350-400/oz.

In PNG, its 50%-owned Hidden Valley mine produced 26,234oz of gold and 274,951oz of silver at cash costs of $A1090/oz, versus 25,461oz of gold and 220,241oz of silver at costs of $898/oz in the September three-month period.

The objective of Newcrest is to stabilise production at Hidden Valley at around 300,000ozpa at cash costs of $US500-600/oz.

Also in PNG, the prefeasibility study on its proposed 50%-owned Wafi-Golpu development continued to schedule and it is due to be handed down in the first half.

A seventh drill rig is onsite.

Bonikro on the Ivory Coast pretty much tracked September's results, kicking in 23,771oz of gold at cash costs of $A968/oz versus 22,740oz at costs of $897/oz previously.

Newcrest is targeting production growth at Bonikro to rates of 250,000ozpa at cash costs of $US500-600/oz, with a mill expansion to more than double capacity to 5 million tonnes per annum from 2Mtpa.

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