Newcrest Mining believes its flagship Cadia mine in New South Wales will resume full operations before September 30, as the company continues to spend on repairing damage caused by a small earthquake on Good Friday in April.
Newcrest shares rose more than 1% yesterday despite the wider market weakness. The shares ended at $19.76 (up 0.9%), still well under the $25 they were trading at before the Easter quake send them down 20% (helped by a sharp slide in world gold prices).
Investors liked Friday’s rise in world gold prices and the fact that the company met production guidance, despite the problems at the Cadia mine in NSW.
The seismic event caused significant disruption at the mine, but did not stop Newcrest from meeting its full-year gold production target for the year to June 30.
That was down a couple of per cent from 2015-16, but much better than many investors thought possible in April and May in the wake of the damage caused by the Easter disturbance. Newcrest said it lifted copper production in the year by 1% to 84,000 tonnes.
Newcrest said yesterday it produced 2.38 million ounces in 2016-17 which was within the guidance range of between 2.35 million and 2.6 million ounces.
Helping make up for the Cadia shortfall was a solid year for Newcrest’s headache – its Lihir mine in Papua New Guinea which delivered record gold output for the June 30 year.
“Lihir’s performance this quarter represented a record for quarterly mill throughput rate and gold production, which is testament to the hard work and relentless drive for improvement that we strive for across all our sites,” Newcrest CEO Sandeep Biswas said in yesterday’s report to the ASX.
“Given the disruption to production at Cadia due to the seismic event, the overall performance this quarter was remarkable and demonstrates the resilience of Newcrest’s assets,” he added.
Gold production fell 7.8% in the June quarter after the quake at the Cadia mine saw Newcrest suspend part of its mining operation there. Cadia’s gold production fell 54.6% lower in the June quarter from the March quarter, as the mine was restricted to processing already mined ore and other material.
In contrast, gold production at Lihir in PNG jumped 20.3% in the June quarter due to higher milling throughput and higher head grade, partially offset by lower recovery rates.
Now shareholders will focus on the outlook for Cadia, which has been Newcrest’s biggest revenue generator in recent years.
Production has resumed in Cadia’s panel cave 2, but much of the damage occurred in panel cave 1 which Newcrest said would take longer to resume.
"Commencement of mining from panel cave 1 level remains on track to occur in the September 2017 quarter," the company said.
But New South Wales government safety regulators will have to give their blessing before Cadia can restart, with a prohibition notice currently in force over sections of the mine.
Newcrest produced its gold at an all-in sustaining cost of $US787 per ounce, up 3.3% on 2015-16. the company said its all-in sustaining cost margin jumped 17.8% to $US476 an ounce for the year June. Could shareholders be looking at a fat profit rise and lift in dividend?
Newcrest paid its first dividend in the shape of the final of 7.5 US cents for 2015-16 a year ago and backed it up with a similar payout as the interim for 2016-17.