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Outlook for Newcrest improving

NEWCREST Mining has managed to lower costs across almost all sites in the September quarter, but all-in sustaining cash costs at Hidden Valley and Bonikro remain well above the current spot gold price.
The company also announced this morning that it had secured a bilateral loan facilities of $US450 million ($A471.2 million) with two banks, which mature between 2015 and 2018.

Newcrest said the facilities would provide the company with additional liquidity headroom after making a voluntary amendment to its Australian research and development claims which will result in a $A120 million income tax expense.
Due to the availability of taxation losses, the company expects the cash tax payable in the current financial year to be $70 million.
Last week, Newcrest announced quarterly gold production of 586,573 ounces and copper production of 19,632 tonnes, which was down on the June quarter result, but better than expected as gold production is forecast to improve in the coming quarters.
Cash costs after by-product credits were $A784 an ounce, up on June costs of $762/oz, while all-in sustaining cash costs were $1093/oz, lower than the $1283/oz estimated by the company for FY13.
Newcrest’s goal for FY14 is to be cashflow neutral or positive at a $1450/oz gold price.
“The combination of first quarter production and cost outcomes and expected business performance for the remainder of the 2014 financial year positions Newcrest to be free cashflow neutral or positive at a lower gold price than the previously stated $1450/oz,” Newcrest said.
This is despite a recent drop in the US dollar gold price and a slight recovery of the Australian dollar.
The Australian dollar spot gold price is currently sitting at around $1346.50/oz, though the average gold price for the period was $1442/oz.
Gosowong in Indonesia was the only site in the group where all-in costs did not fall.
The mining of lower-grade stopes resulted in a 23% drop in production to 71,227oz gold, while all-in costs were $973/oz, higher than the FY13 average of $662/oz.
The massive Lihir mine in Papua New Guinea produced 194,713oz gold, down 3%, at all-in costs of $1152/oz, down from $1177/oz in FY13.
At the Telfer operation in Western Australia, gold output dropped 24% to 123,691oz, while copper production of 4485t was also down.
The company made progress on the cost front, with all-in costs of $1296/oz far lower than the FY13 average of $1705/oz.
Despite lower production due to lower grades, Newcrest attributed the lower all-in costs to reduced operating costs and sustaining capital, as well as reduced production stripping per ounce.
Cadia Valley in New South Wales delivered 154,232oz gold and 15,148t copper, with gold production up 10% over the previous quarter due to higher grades from Ridgeway and increased production from Cadia East.
The operation was the standout on the cost front, with all-in costs of $379/oz.
However, the exceptionally low all-in costs at Cadia Valley offset high costs at other operations.
At Hidden Valley, a 50:50 joint venture with Harmony Gold, production improved to 24,926oz gold and 252,996oz silver, up from 23,229oz gold and 191,429oz silver in the June quarter.
All-in cash costs of $1889/oz were lower than the average $2422/oz for FY13, but the company said although improved, they did not reflect the cost reduction plans at the site.
Bonikro in Ivory Coast produced 17,784oz gold at $1715/oz, compared to 22,672oz in the June quarter with FY13 all-in costs of $1765/oz.
Guidance of 2-2.3 million ounces of gold and 75,000-85,000t copper at all-in sustaining costs of around $1200/oz for FY14 remains unchanged.

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