THERE were a few surprises in Newcrest’s quarterly results yesterday, but none more surprising than the fact that all six of its operating mines were profitable.
Shareholders in the gold producer have grown used to hearing that one half of its portfolio is profitable and prospective, while the other half is unprofitable and increasingly unattractive.
The phenomenon was dubbed the “Good Newcrest, Bad Newcrest” syndrome by UBS analyst Jo Battershill, and has usually seen the Cadia East mine in New South Wales and the Gosowong mine in Indonesia held up as the best and most reliable performers.
Just like Australian test cricketer Shane Watson, the Lihir mine in Papua New Guinea has usually been lumped into the ‘’good’’ team more because of its potential rather than proven form, and despite its tendency to break down, appears to certainly a part of the company’s future plans.
Meanwhile the “bad” side of Newcrest has typically included the Telfer mine in Western Australia, Hidden Valley in Papua New Guinea and Bonikro in the Ivory Coast, which have all battled cost blowouts and under-performance in recent years.
During the disastrous 2013 financial year Telfer produced gold at A$1,705 (K3,638.49) per ounce, Bonikro produced at A$1,765 (K3766.53) per ounce, while Hidden Valley was the class dunce at an extraordinary operating cost of A$2,422 (K5168.58) per ounce.
The gold price was admittedly higher back then, but the contrast to the A$1,372 (K2,927.87) per ounce that Newcrest received for its gold in the first-half of this year explains why things had to change at the miner.
Happily for Newcrest and its shareholders, today’s result showed things are changing fast.
Hidden Valley and Bonikro were still the company’s most expensive mines in the December quarter, but they both still managed to keep all in costs below A$1,372 (K2,927.87) per ounce.
Telfer was the big improver with all in costs at A$957 (K2,042.25) per ounce, and running cheaper than both Gosowong (A$1,013 [K2161.75]) and Lihir (A$1,253 [K3673.92]).
Cadia remained the star at A$250 (K533.50) per ounce.
Departing Newcrest boss Greg Robinson said the improvements had been achieved through a regime of “relentless cost capital out’’ and said that theme would continue.
The cost reductions have come from mining the open pit at Telfer in a different way which requires less activity. – Sydney Morning Herald