Despite a rise in the price of gold yesterday Newcrest Mining Ltd, Australia’s largest independent gold producer, saw its share price fall $1.01 or more than 3% to $30 as it revealed it had been forced to spend more than the $1.5 billion originally estimated to complete the closeout of its hedgebook.
But Newcrest said the $1.67 billion spend to close out the existing four million ounces in the company’s hedgebook was more than offset by increased revenue (from the rising price of gold in recent months).
Gold prices rose past $US946 overnight Wednesday, before easing in Asian trading.
Newcrest says it didn’t need to draw on any debt facilities, as originally forecast for the closeout (of the hedgebook last year), which was completed at the end of June at an average price of $868 per ounce.
Newcrest led the way for several other gold producers including, Lihir Gold and Newmont Mining Corp, to close their hedgebook’s to gain greater exposure to the rising price of the metal.
The local spot gold price climbed from about $US653 an ounce a year ago to over $US1,000 an ounce in March before falling to around $US865 an ounce a month ago, and then rebounding to yesterday’s level.
Newcrest expects to producer about 1.8 million ounces of gold from its operations in Australia and Indonesia in the 2007/08 financial year.
Its huge Telfer mine had been hit by the West Australian gas crisis, but the company late last week said that it reached an agreement to obtain enough energy to maintain output at full pace.
"Newcrest has reached an arrangement for interim gas supply from North West Shelf sufficient for full production until the end of September, if required.
“This will substantially reduce Telfer’s reliance on diesel for power generation," Newcrest told the ASX last Friday.
"Supply of other key consumables is sufficient to sustain production.
"There are increased costs associated with the interim arrangements.
“The combination of additional maintenance and energy costs during June will add approximately $15 million to costs. During July and August increased costs will add approximately $25 million against plan.
"Gold production in June has been impacted by 20,000 to 25,000ozs plus associated copper resulting in full year production at Telfer of approximately 590,000ozs in the 2007/08 financial year.
“Telfer gold production is expected to be in the range of 700,000 to 750,000ozs for the 2008/09 financial year," the company said.
Newcrest says it is keeping its insurers updated on developments with the gas supplies and the impact of the crisis.
