Newcrest Mining has cut its gold and copper production forecasts for 2017-18 because of the recent outage at its huge Cadia mine in central Western NSW where mining operations are now forecast to be back to normal by June.
It is the second time in a year that production at Cadia has been disrupted – both times by by small earthquakes. The first was on Good Friday 2017, the second was in early March.
In its March quarter production report, released yesterday Newcrest also said that improving prices for gold and copper, plus a weaker than forecast Aussie dollar would go someway to offsetting the impact of the 15% plus falls forecast for its gold and copper output by June 30.
Newcrest now expects full year gold output to be between 2.25 and 2.35 million ounces, down from its previous estimate of between 2.4 and 2.7 million ounces. At its worst gold production could be down 475,000 ounces or more than 17%.
Copper production is now forecast to be in the range of down to a range of 70,000 to 75,000 tonnes, down from 80,0000 to 90,000 previously. At its worst copper production could be down 22%.
On top of the lost output there’s the opportunity cost missed of taking advantage of higher gold and copper prices, and a drop in costs.
Newcrest said its new guidance included a drop of $US100 million in the aggregate All In Sustaining Cost of operation, a 25% jump in the average realised copper price – $US3.06 a pound against $US2.40 previously, as well higher estimates for June 2018 copper prices, plus a dollar around 78.15 US cents against the previous estimate of 80US cents.
Newcrest saw the impact of the latest Cadia problem in the March quarter gold production figure – 575,791 ounces of gold, down 6% from the previous quarter. The Cadia mine produced 142,970 ounces of gold in the March quarter, a drop of 20% from the 180,223 ounces recorded in the prior quarter.
The company revised its Cadia guidance for 2017-18 to 550 – 600 thousand ounces, from 680 – 780 thousands ounces. That’s a drop of more than 29% at its worst.
Newcrest said earlier this week it will use its Cadia Hill open pit as a tailings storage dam, sacrificing remaining gold and copper reserves, to help it return to full production.
A softer quarter from the Telfer mine failed to offset the impact of the Cadia outage and was a drag on overall production, while the Lihir and Gosowong mines both increased production on the December quarter. Gold production at Telfer in the March quarter fell thanks to lower mill feed grade, lower ore tonnes mines, reduced processing plant availability and wet weather.
The Lihir mine in Papau New Guinea produced 235,626 ounces of gold in the March quarter, up on 209,888 in the December quarter, while the Gosowong mine in Indonesia produced 71,410 ounces in the three months, up from 59,338 ounces.
Newcrest shares took the downgrade in their stride (it had been well telegraphed by the company) and lost 0.1% to close the day on $20.74.