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Newcrest Mining Ltd
Symbol NCM
Shares Issued 817,289,692
Close 2021-07-21 C$ 24.15
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Newcrest Mining produces 542,000 oz Au in Q2 2021

2021-07-21 20:18 ET - News Release

Mr. Sandeep Biswas reports

NEWCREST MINING LIMITED - QUARTERLY REPORT FOR THE THREE MONTHS ENDED 30 JUNE 2021

Newcrest Mining Ltd. managing director and chief executive officer Sandeep Biswas said: "Newcrest has safely delivered its group production and cost guidance for the year following a strong fourth quarter. Cadia exceeded the top end of its production guidance range and delivered mine and mill throughput records, showcasing the quality of this world-class asset. Newcrest's all-in sustaining cost of $797/oz for the June quarter was underpinned by record quarterly AISC outcomes for Cadia and Red Chris, translating to an impressive all-in sustaining cost margin of $983/oz.

"We have made significant progress advancing our multiple organic gold and copper growth options during the quarter. At Red Chris and Havieron we commenced decline development works which are the critical path to reaching commercial production. We are also on track to release the outcomes of several of our exciting growth studies through the remainder of the calendar year which we believe will help articulate the future potential of our business.

"Following the localized seismic event at Cadia earlier this month, the prohibition notice has been lifted and we are currently rehabilitating the affected area. As previously disclosed, we do not expect this event to impact gold and copper production in FY22 and our development and expansion works continue uninterrupted," said Mr Biswas.

(Figures are unaudited and in United States dollars except where stated.)

Strong June quarter delivers FY21 guidance and quarterly records

  • Creating a brighter future for people through safe and responsible mining:
    • Goal of net zero carbon emissions by 2050;
    • Industry leading low injury rates underpinned by a 27-per-cent improvement in TRIFR in the June, 2021, quarter.
  • Achieved FY21 production guidance, with Cadia exceeding the top end of its guidance range:
    • Quarterly gold production of 542k oz (thousand ounces) and copper production of 38k t (thousand tonnes);
    • All-in sustaining cost (AISC) of $797/oz in the June quarter;
    • June quarter AISC margin of 55 per cent or $983/oz;
    • Cadia achieved record annualized mined ore and mill throughput rates;
    • Cadia recorded its lowest reported quarterly AISC of negative $377/oz;
    • Red Chris recorded its lowest reported quarterly AISC of $651/oz;
    • FY21 AISC of $905/oz, delivering an AISC margin of 49 per cent or $884/oz for the financial year.
  • Advancing multiple organic growth options:
    • Exploration decline development works progressing well at Red Chris and Havieron;
    • Cadia molybdenum plant first production is expected by the end of September, 2021;
    • Lihir phase 14A prefeasibility study expected to be released by the end of September, 2021;
    • Cadia PC1-2 prefeasibility study expected to be released by the end of September, 2021;
    • Red Chris prefeasibility study expected to be released by the end of September, 2021;
    • Havieron prefeasibility study expected to be released in the second half of CY21.

Overview

Gold production was 6 per cent higher than the prior period driven by a strong performance from Cadia and Telfer. Lihir's gold production was 4 per cent lower in the quarter due to unplanned downtime in the autoclaves, lower head grade and recovery rates, and the overrun of the planned March, 2021, shutdown.

Newcrest's AISC for the June, 2021, quarter of $797/oz was $96/oz lower than the prior period, reflecting the benefit of higher copper sales volumes at Cadia, Telfer and Red Chris, a higher realized copper price and higher gold sales volumes at Telfer and Cadia. These benefits were partially offset by the associated increase in treatment, refining and transportation costs and royalties.

Cadia achieved record annualized mined ore volumes from Cadia East of 38.1 mtpa (million tonnes per annum) and a record annualized mill throughput rate of 34.3 mtpa in the June, 2021, quarter. The higher volumes of ore processed offset the reduction in grade and contributed to an 8-per-cent increase in gold production in the period. Mill throughput also benefited from no major planned shutdown events, higher plant availability and debottlenecking initiatives in Concentrator 1.

Cadia's new quarterly AISC record of negative $377/oz reflects the benefits of higher gold and copper sales volumes and a higher realized copper price. These benefits were only partially offset by associated higher royalty payments and treatment, refining and transportation costs.

On July 2, 2021, a localized seismic event occurred in the Eastern end of Panel Cave 2. No injuries were sustained and all personnel working in the affected area were accounted for and safely returned to surface in accordance with Newcrest's standard operating procedure. Mining operations in all other areas, development activities and above-ground operations all continued uninterrupted. The prohibition notice that was issued by the New South Wales government resources regulator in respect of the event was lifted on July 5, 2021. An improvement notice has been issued and rehabilitation of the affected area is currently under way. Newcrest does not expect this event to impact gold or copper production in FY22.

As foreshadowed in Newcrest's March, 2021, quarterly report, the replacement of the SAG mill motor commenced in early July, 2021, and is expected to take about 19 weeks to complete. Newcrest has implemented a SAG bypass for the duration of the SAG mill motor replacement and Concentrator 1 is operating at about 60 per cent of its normal capacity, which will temporarily reduce gold and copper production and increase AISC/oz during this period.

Newcrest is on track to complete commissioning of the Molybdenum plant (Moly plant) and expects to achieve first production by the end of September, 2021. The Moly plant is expected to deliver an additional revenue stream for Cadia in the form of a molybdenum concentrate which will be recognized as a byproduct credit to AISC.

The Cadia PC1-2 prefeasibility study is expected to be released by the end of September, 2021.

Gold production of 176k oz was 4 per cent lower than the prior period reflecting the impact of unplanned downtime in the autoclaves, lower head grade and recovery rates, and the overrun of the planned March, 2021, shutdown. This was partially offset by the benefit of there being no planned shutdown events in the period, which enabled a 6-per-cent increase in mill throughput. Head grade and recovery were impacted by a higher proportion of lower-grade stockpile feed as access to expit ore in phase 14 was obstructed by high rainfall events.

Scheduled maintenance activities that were planned for September, 2021, have been brought forward and are expected to be completed during a period of unplanned downtime of Autoclave 4. This planned maintenance activity is currently under way, largely offsetting the impact on FY22 gold production associated with the Autoclave 4 downtime.

Lihir's AISC of $1,481/oz was 15 per cent higher than the prior period driven by an increase in stripping activities in phase 15, timing of sustaining capital spend and higher COVID-19-related costs. These impacts were partially offset by marginally higher gold sales volumes.

Technical and risk mitigation studies to support the phase 14A prefeasibility study were substantially progressed during the June, 2021, quarter. Newcrest expects to release the findings of the phase 14A prefeasibility study by the end of September, 2021. Newcrest also expects to complete the Seepage Barrier feasibility study by the end of September, 2021.

Gold production of 126k oz was 19 per cent higher than the prior period driven by higher throughput and recovery, partially offset by lower head grade and a reduction in dump leach ounces. Mill throughput was 20 per cent higher in the June, 2021, quarter reflecting the increased operational run time. The increase in gold recovery is a result of successful sulphur blending strategies together with other recovery improvement initiatives.

Telfer's AISC of $1,203/oz was 19 per cent lower than the prior period primarily driven by higher gold and copper sales volumes and a higher realized copper price. These benefits were partially offset by an increase in sustaining capital expenditure and higher treatment, refining and transportation costs, and royalty payments.

Gold production of 11k oz was in line with the prior period, with higher throughput and recovery offset by lower gold head grade.

Red Chris's AISC of $651/oz is 70 per cent lower than the prior period and is a quarterly record for the site. This record outcome reflects phase 7 stripping costs being of a non-sustaining nature, the benefit of a higher copper price, higher copper sales volumes and the completion of production stripping activities in phase 5. These benefits were partially offset by an increase in sustaining capital expenditure and lower gold sales volumes.

In the period, production stripping costs relating to phase 7 have been classified as non-sustaining in accordance with World Gold Council guidance, reflecting the multiyear nature of the stripping and that the associated ore production phase is expected to be more than five years. These costs will continue to be classified as Non-Sustaining over the expected duration of the phase 7 stripping campaign.

During FY21, Newcrest invested in a number of additional improvement initiatives across the site including a new fleet management system, the replacement of the conventional CAT 793 truck tubs with high performance trays and a new cleaner column that was commissioned in the June, 2021, quarter and is expected to improve recoveries. These initiatives have contributed to elevated full-year AISC expenditures but are expected to help deliver reductions in site unit costs in the longer term.

The latest drilling results for Red Chris are included in the June, 2021, quarterly exploration report which was also released today. An update on the Red Chris block cave studies and associated activity is contained later in this report.

Fruta Del Norte, Ecuador

Newcrest acquired the gold prepay and stream facilities and an offtake agreement in respect of Lundin Gold Inc's Fruta del Norte mine for $460-million in April, 2020.

In the June, 2021, quarter, Newcrest received net pretax cash flows of about $33-million from these financing facilities, and has received a total of about $95-million net pretax cash flows since acquisition of the facilities.

Included within Newcrest's gold production for the June, 2021, quarter is 35k oz relating to Newcrest's 32-per-cent equity interest in Lundin Gold Inc., the owner of the Fruta del Norte mine.

Project development

Red Chris, Canada

Newcrest commenced development of the exploration decline at Red Chris following receipt of regulatory approval at the end of April, 2021. Other achievements include:

  • Box cut excavation has been completed;
  • Exploration decline has advanced 21 metres as at July 14, 2021;
  • Surface earthworks, offices and other infrastructure is in place to support the decline development;
  • Prepermitting activities for the next stages of the early works program are under way.

Newcrest expects to release its Red Chris block cave prefeasibility study by the end of September, 2021.

Havieron, Western Australia

The Havieron project is located 45 kilometres east of Newcrest's Telfer operation and is operated by Newcrest under a joint venture agreement with Greatland Gold PLC.

Newcrest received the required regulatory approvals to commence construction of an exploration decline at Havieron following approval of the water management plan on April 30, 2021.

Construction activities are progressing to plan with achievements as at July 14, 2021, including:

  • Box cut and portal completed in May, 2021;
  • Exploration decline commenced on May 14, 2021, and has advanced 69 metres;
  • Decline contractor has moved to 24-hour operations;
  • All surface support infrastructure is nearing completion.

Works to progress the necessary approvals and permits that are required to commence the development of an operating underground mine and associated infrastructure at the project are continuing.

Newcrest expects to release its Havieron prefeasibility study in the second half of CY21.

The latest drilling results for the Havieron project are included in the June, 2021, quarterly exploration report which was also released today.

Wafi-Golpu, Papua New Guinea

In December, 2020, an environment permit for the Wafi-Golpu project was granted.

As previously advised, subsequent to the grant of the environment permit, the governor of Morobe province and the Morobe provincial government commenced legal proceedings in the National Court in Papua New Guinea seeking judicial review of the decision to issue the environment permit. The participants in the Wafi-Golpu joint venture (including Newcrest) are not defendants to the proceedings. The National Court is yet to determine this judicial review application. At this stage, project and permitting activities can still progress.

Newcrest, together with its Wafi-Golpu joint venture partner Harmony, is currently engaging with the state of Papua New Guinea to progress permitting of the Wafi-Golpu project and has commenced discussions in relation to the special mining lease.

Exploration

COVID-19 update

To date, Newcrest has not experienced any material COVID-19-related disruptions to production or to the supply of goods and services.

The number of COVID-19 cases at Lihir remains at levels that are within the capability of the care and treatment and isolation facilities, with the majority of these cases continuing to be asymptomatic. Newcrest continues to strengthen its COVID-19 controls at Lihir, focusing on containment through extensive contact tracing and isolation procedures. Charter flights with restricted capacity are operating between Papua New Guinea and Australia, as are limited commercial flights between Port Moresby and Brisbane.

There were no material COVID-19-related events impacting gold production at Lihir during the financial year. However, as advised in the March, 2021, quarterly report, the ability to attract labour, travel restrictions, contact tracing and associated isolation requirements has impacted total material mined. Delays have also been experienced on development projects (including phase 14A ground support trials) and shutdown performance due to difficulty in mobilizing and accommodating labour. There remains a risk of COVID-19 impacting production at Lihir and this continues to be closely managed.

There is currently a COVID-19-related lockdown in the Orange district of New South Wales in which the Cadia operation is located. Cadia has escalated the controls under its pandemic response plan in order to manage risks pertaining to the health and safety of its work force and continuing operations.

All Newcrest operations have business continuity plans and contingencies in place which strive to minimize disruptions due to the pandemic and to best position the operations to continue producing. Should any material impacts arise, Newcrest will inform the market in line with its continuous disclosure obligations.

In FY21, Newcrest incurred about $70-million in COVID-19 management costs, of which $53-million related to Lihir. Costs associated with managing COVID-19 risks in FY21 were around $30-million higher than anticipated due to more extensive testing, longer quarantining periods, additional accommodation, rostering and other labour costs, and other preventative actions. Elevated costs related to the pandemic are expected to continue through FY22.

Corporate

Goal of net-zero carbon emissions

As previously announced, Newcrest has set a goal of net-zero carbon emissions by 2050 which relates to its operational (scope 1 and scope 2) emissions. Additionally, Newcrest will continue to work across its value chain to reduce its scope 3 emissions. See release titled "Newcrest sets goal of net zero carbon emissions by 2050" dated May 18, 2021, for further information.

Community support fund

Newcrest's $20-million (Australian) Community Support Fund was established in April, 2020, in response to the COVID-19 pandemic. Since its inception it has supported a variety of initiatives ranging from immediate health assistance to livelihood restoration and economic recovery across Papua New Guinea, Australia, Canada (British Columbia) and Ecuador. Recent initiatives have included:

  • A commitment of about $1.8-million (U.S.) to support vaccine rollout (and additional in-kind logistical support) as part of the UNICEF Australia COVID Vaccination Alliance in Papua New Guinea with a focus on New Ireland province.
  • The establishment of the first intensive care unit (ICU) in the province of Zamora-Chinchipe (Ecuador) which Newcrest completed in partnership with Lundin Gold, SolGold and Ecuadorian authorities. The ICU will provide much needed care in response to the COVID-19 pandemic. In the longer term the ICU is expected to support other critical health needs and emergency response capabilities of the regional Yantzaza Hospital.

Board and executive announcements

In May, 2021, Newcrest announced the impending retirement of Gerard Bond, the company's finance director and chief financial officer. Mr. Bond is the longest serving member of Newcrest's executive committee and board and he will retire on Jan. 3, 2022, after 10 years in the role. The process to select Mr. Bond's successor has commenced.

Jane McAloon was appointed to the board as an independent non-executive director and a member of the human resources and remuneration committee, effective from July 1, 2021.

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