Newcrest Mining shares enjoyed a nice little run-up yesterday after the country’s major gold miner revealed no troubles in the three months to September.
The shares ended up 2.9% to $21.30 as the wider market again sagged in lackluster conditions.
The Comex gold price was a touch easier at around $US1,235 an ounce, so it was the better than expected rise in gold production that probably buoyed sentiment – the weaker value of the Australian dollar doesn’t really have that much impact on Newcrest, like BHP and Rio, Woodside and Santos, as it does its accounts in US dollars and reports in the same currency.
The weaker Aussie dollar though does help in translation to greenbacks when it comes to local mining and other business costs.
Newcrest said production in the quarter was 5% higher than in the September 2017 quarter at 548,000 ounces but compared to the final quarter of 2017-18 ending June 30, gold production was down 14%, thanks to lower production at Lihir, Telfer, and Gosowong, partially offset by an increase in production at Cadia.
Copper production of 25,000 tonnes, was 49% and 24% up on the September 2017 and June 2018 quarters respectively.
Gold prices have risen in recent weeks to move well over $US1,200 an ounce – it’s up 3.1% in the last month and now only down 0.3% in the past three months (and still down 7% for the year so far).
Copper prices peaked in early June at four and a half year highs around $US3.36 a pound on Comex and are now around $US2.76 a pound – down 17%.
Newcrest’s strong copper rise in copper production (thanks to the Cadia mine’s recovery) will go a long way to offsetting the negative impact of that price fall.
“The June 2018 Quarterly Report flagged Lihir’s production in the September 2018 quarter would be impacted by a series of planned shutdowns. Cadia’s production increased in the current quarter, noting that in the prior quarter Cadia’s production was impacted by the Northern Tailings Storage Facility (NTSF) embankment slump.
Newcrest’s All In Sustaining Cost f(AISC) or gold for the September quarter was $778 per ounce “improved 2% ($17) on the prior quarter and 13% ($120) on the corresponding prior period, primarily due to the increased sales contribution from the low-cost Cadia operation.” Group AISC margin of $441/oz, up $35 on September 2017 quarter, down $66 on June 2018 quarter
The company said its guidance for 2018-19 remains unchanged, with the continued expectation that gold production in the first half of the financial year will be lower than the second half due to there being fewer planned shutdown events scheduled in the second half of the year.
Newcrest’s free cash flow is also expected to be substantially lower in the first half of the financial year, reflecting the production impacts from these shutdowns as well as the usual draw on working capital in the first half of the financial year.
Newcrest Managing Director and Chief Executive Officer, Sandeep Biswas, said in yesterday’s statement “During our first quarter of FY19 Cadia’s operating and financial performance continued to improve, with higher production and a lower AISC per ounce, both year-on-year and quarter-on-quarter. Gold production for the Group was higher than the corresponding first quarter of FY18 but was lower than the prior quarter, as expected given the number of planned major plant shutdowns during the period.
“Pleasingly, we had a lower AISC per ounce for the quarter compared to both the prior year period as well as the prior quarter. We expect gold production to increase over the remainder of the financial year,” he said.