Copper has moved to centre stage for Australia’s biggest gold miner and smaller copper producer, Newcrest Mining.
Quietly, the company on Tuesday revealed its future direction and shape as it pushed four major projects towards feasibility stage studies in 2022 designed to slash costs, lift copper output and sustain its production of gold.
Newcrest said its board has approved feasibility studies for planned projects at the Red Chris mine in Canada, the Havieron deposit in Western Australia (with Greatland gold of London), its Lihir mine in Papua New Guinea, and its Cadia operation in central western NSW (where the greenlight was given earlier in the year).
These four prioects are now either the mainstays, or will be the pillars for its future growth (especially the newer Red Chris in Canada where Newcrest has spent a lot of time and money getting to understand the various ore bodies – and finding new ones.
No dollar cost estimates were provided yesterday and Newcrest said it plans to fund the projects from cash flow and existing liquidity, and its dividend policy remains unchanged.
Therefore no plans to ask shareholders to contribute even though some analysts say the eventual cost could top $2 billion over the next few years.
Telfer in WA is an older foundation asset for Newcrest that the Havieron project looks like breathing new life into, along with a string of promising new finds elsewhere in the Eastern Pilbara (such as Rio Tinto’s Winu).
Newcrest said the projects could also support gold production around 2 million troy ounces a year until at least fiscal year 2030, which would be maintaining 2021’s 2.1 million ounces.
The projects would see Newcrest boost copper output to more than 175,000 tonnes by 2030, up an increase of 37% on 2021’s record 142,700 tonnes
Newcrest said prefeasibility studies, or PFS, on the four projects estimated an internal rate of return of 16% or higher.
A PFS at the Lihir operation estimated a US$179-million investment could have a rate of return around 37% and support production above one million ounces a year for at least a decade from the June 30,2024 fiscal year, Newcrest said on Tuesday.
The projects could contribute to a more-than 50% cut in Newcrest’s so-called all-in sustaining costs, which measure the full cost of operating a gold mine, by the end of this decade, the company estimated.
“The projections generated by the PFS studies for these projects indicate compelling rates of return and a material improvement in operating margin and cash flow,” said Newcrest CEO, Sandeep Biswas said in a statement.
He highlighted the projected lift in copper production as a positive, saying Newcrest views the industrial metal as having a strong growth outlook as the world shifts to a lower carbon economy.
“The projected growth profile of our copper production is particularly exciting and would allow us not just to advance our own sustainability objectives, but to participate in the potential opportunities presented by a global shift to decarbonization,” Mr. Biswas said in a statement on Tuesday.
According to Newcrest, the Havieron joint venture project (where Newcrest is already spending millions of dollars on access facilities and another $246 million is being spent at nearby Telfer that will allow ore from Havieron to be processed at Telfer) between Newcrest and Greatland Gold will deliver an estimated internal rate of return of 16% with a just four-year payback period.
“Notably, the Study assumes that Havieron is the sole ore feed for the Telfer plant and does not assume any potential upside from the extension of Telfer’s mine life beyond FY24. We continue to assess the potential for further open pit and underground opportunities at Telfer to extend its life and supplement production from Havieron in FY24 and beyond,” said Mr Biswas.
The benefit of existing processing capacity at Telfer and ongoing definitional drilling highlights the clear potential for a larger scale operation that will be further assessed during the feasibility stage.
The Havieron project is due to begin production in 2024. According to Newcrest, the completion of the PFS has given the company an additional 10% interest in Havieron, bringing its ownership to 70%. The gold miner has approved the start of a feasibility study for Havieron.
This is based on estimated average gold production of 160,000 ounces a year at an all-in sustaining cost of $US743 ($A1101) an ounce across an initial nine-year mine life.
“It is an incredible achievement that, within two years of starting the Havieron drilling program, we have been able to deliver this significant project milestone and demonstrate financial returns that comfortably exceed our hurdle rate, even in this first stage,” Mr Biswas said.
Our extensive drilling program continues to assess the extent of the South East Crescent zone and further test the Northern and Eastern Breccia for mineralisation which may be suitable for bulk mining methods.”
The company’s block cave PFS for the Red Chris gold mine in Canada was also released which Newcrest said it has confirmed tier one potential for the site. Mr Biswas said the company is also looking at growing its copper output.
“While Newcrest is primarily a gold company, we will continue to have a substantial and increasing exposure to copper, a commodity we believe has a compelling growth outlook.
“The projected growth profile of our copper production is particularly exciting and would allow us not just to advance our own sustainability objectives, but to participate in the potential opportunities presented by a global shift to decarbonisation,” he said.
”The Red Chris Block Cave Pre-Feasibility Study confirms Red Chris’s potential to be a long life, low cost mine capable of producing a total of 5.3Moz of gold and 1.7Mt of copper at very attractive cash margins. The study highlights the quality of the deposit with a C$2.3 billion NPV and 17% IRR, but we believe captures only part of the longer-term opportunity at Red Chris,” Mr Biwas said in the releases.
Mr Biwas made it clear Newcrest would not ignore other development ideas while concentrating on the four:
We will also progress other organic projects in the portfolio, such as the potential for further open pit and underground opportunities at Telfer to extend its life and supplement production from Havieron in FY24 and beyond, the development of Wafi-Golpu and potentially Namosi.
“All of these options, and further exploration success elsewhere, represent upside potential to the base case outlook,” he said.
Newcrest shares rose less than 0.1% to $23.92.