Newcrest (NCM) has lowered its 2017-18 production guidance for the Cadia gold mine in NSW due to damage from last month’s earthquake, but says production should start in the September quarter, news that will relieve some shareholders who were fearing a longer shutdown.
The company is having to spend more than $20 million making the Cadia mining areas safer and stronger. With the value of lost production, the Cadia quake and fix up and hit to production could end up costing Newcrest more than $US100 million in 2016-17 and 2017-18.
Newcrest told the ASX on Friday it expects to restart production from both underground panel caves in the first quarter of 2017-18, subject to permission from NSW government authorities.
The Cadia mine – Newcrest’s biggest and lowest-cost operation – was struck by a magnitude 4.3 earthquake on Good Friday last month, resulting in operations being suspended.
The mine is still subject to a prohibition notice from NSW authorities.
Newcrest has not specified the likely production hit in the current financial year, but said last month Cadia would not meet its guidance of 730,000 to 820,000 ounces.
The company now expects 2017-18 production to also be lower than that level at between 650,000 and 750,000 ounces. At current prices that could cost Newcrest between $US80 and $US 90 million.
Newcrest said damage to the underground mine infrastructure was minimal, with the majority of rehabilitation work being undertaken to increase ground support capacity.
It estimated the cost of rehabilitation and upgrades at about $25 million.
At the moment Newcrest says is processing surface stockpiles in the interim period, while it plans to temporarily recommission the nearby Ridgeway mine by June. Cadia accounts for about 70% of earnings for Australia’s largest gold miner.