High Gold Price Helps Newcrest Navigate Lower Production

By Glenn Dyer | More Articles by Glenn Dyer

Like its larger foreign rival, Barrick, Australia’s largest gold and copper miner, Newcrest, lifted its profit in the year to June by 15%, despite gold output falling 13%.

In the past financial year, Newcrest achieved an average realised gold price of $US1,530 an ounce – well below the current price – at an all-in sustaining cost of $US862 an ounce.

The company posted earnings for 2019-20 of $US647 million ($A905.7 million).

Newcrest produced 2.17 million ounces of gold during the 12 months to June 30, down 13% on last financial year.

Production fell because of problems at the Lihir mine in PNG (where there has now been a COVID-19 outbreak).

Lihir produced lower grade ore while geotechnical issues hampered recoveries.

Revenue rose 5% to $US3.99 billion because the 21% lift in the average gold price to an average of $US1,530 an ounce, despite the slide in production.

That saw gold production rise 2% to $US3.278 billion.

But while the average copper price fell 8% to $US2.57 a pound revenue from the metal jumped 20% to $US778 million because of lower Australian dollar mining costs and a 30% jump in production, especially from the Cadia and Telfer mines in NSW and WA respectively.

Shareholders will receive a 17.5 US cents final dividend, taking the total dividends for the year to 25 US cents. That was up 14% from 2019-20.

Newcrest could have made a bigger profit, given it lost $US82 million to hedging ounces from its huge Telfer mine in Western Australia, which is locked into 2022-23, meaning it misses out on cash it could have earned when the price exceeds around $A1900 ($US1356) an ounce on average over that period.

Telfer is ageing, so the company seeks to lift output with the nearby Havieron deposit and the Red Chris mine in Canada, its entry into North America, both acquired last year.

“Our ownership of Havieron over the year increased to 40 percent as we track towards 70 percent, underpinning the future of Telfer,” CEO Sandeep Biswas said.

Managing COVID-19 cost the miner around $20 million before tax last financial year and is expected to require up to twice as much in 2020-21.

Barrick lifted net profit 84% to $US357 million despite a fall of 15% in output in the year to June.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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