Newcrest Mining took two big decisions this week – at a cost of around $A1.5 billion with another $1 billion plus down the track – to assure its future and keep gold production above its 2-million-ounce annual production target.
The two decisions involving expansion projects at anchor mines in Australia – Telfer in WA and Cadia in central Western NSW – have also ruled Newcrest out of any merger and acquisition activity that some analysts reckon is in the offing for the gold sector.
The Telfer expansion keeps that veteran mine alive until at least 2025 and allows Newcrest and its UK partner, Greatland Gold, time to refine the feasibility plan and pursuant investment decision for the underground mine nearby called Havieron – that’s what the extra billion dollars referred to is for.
The Telfer expansion to extend the life of the mine by 3 to 4 years will cost more than $200 million, while Newcrest said it will spend around $A1.2 billion for its next panel cave at its Cadia mine after getting the greenlight in an extensive feasibility study.
(Panel cave mining is a method different to the more traditional tunnel and stope approach. It is similar to block cave mining and involves measuring and dividing the mineralised resource into a series of panels for extraction. The panels are mining progressively by creating a cave and then collapsing the ore in the panel and then clearing it away and to the surface for processing.)
Early works program funding for the Cadia expansion of $A120 million was approved in August 2021, with preliminary works on ventilation systems and other critical path development activities already underway.
The study says the new panel will see total ore production of 280 million tonnes producing 3.7 million ounces of gold and 670,000 tonnes of copper over its life, with an average 231,000 ounces of gold and 42,000 tonnes of copper a year from the new panel cave development.
Newcrest said the new development is expected to sustain total Cadia mine production at approximately 35 million tonnes a year as production from the current operational PC1 and PC2 caves begin to fall from the 2024 financial year.
First gold and copper production are anticipated in the 2025-26 financial year and the cave will have a roughly 16-year mine life, it said. Full production of around 25 million tonnes of ore a year is expected by 2029.
The project “forms a key strategic milestone for Newcrest to maintain Cadia’s long-life production profile, with the development of PC1-2 accounting for approximately 20% of Cadia’s published ore reserves,” said the company.
Newcrest CEO Sandeep Biswas said the company has “significant financial headroom” to fund the construction of PC1-2 through our internal cash flow and prudent use of its strong balance sheet.
“Together with the Cadia Expansion Project which is nearing completion, we are confident that Cadia will continue to be an outstanding gold and copper producer for decades to come,” he said on Friday.
Newcrest also gave a big hint this week that the delay to the billion-dollar-plus initial development of the Havieron gold and copper deposit in the remote East Pilbara of WA – which it announced in late October – won’t be a long one.
The company revealed the spending of more than $200 million on a project to extend the life of its ageing but still productive Telfer mine in the East Pilbara (the Patterson Province) close to the Havieron deposit.
Telfer features heavily in the plans Newcrest and its UK partner Greatland Gold have for Havieron.
If the mine development gets the final greenlight, the plan is to use Telfer’s processing facilities for ore from Havieron, a plan that will cut hundreds of millions of dollars from the cost of the new mine 45 kilometres to the east.
Newcrest said Tuesday that the West Dome Stage 8 cutback at Telfer operation should start producing ore in the current quarter and extend operations there into early fiscal year 2025.
And in another move that confirms Newcrest is looking to keep Telfer in business until Havieron can start producing, more gold hedging has been announced to effectively underwrite the expansion and development at the mine.
Newcrest said Telfer guidance for the 2023 financial year “remains unchanged, including gold production (355,000-405,000), sustaining production stripping ($US55-75 million) and sustaining capital expenditure ($US35-55 million).
Newcrest said a further 432,479 troy ounces of planned gold sales from Telfer have been hedged. A total of 137,919 ounces in hedges of gold from the mine were recorded as outstanding at June 30.
“Telfer is a large-scale, low-grade mine and its profitability and cash flow are both very sensitive to the realised Australian Dollar gold price. Following the approval of West Dome Stage 8 cutback, Newcrest has completed further hedging of a portion of Telfer’s future planned production for FY23 and FY24 to secure margins and support investment in cutbacks and mine development, Newcrest said.
And on Havieron, Newcrest reiterated what it and Greatland Gold said at the end of October – that the delay in the project is to allow more consideration of costs and other factors.
As highlighted in the September 2022 quarterly report, the Havieron Feasibility Study has been extended beyond the December 2022 quarter to allow further time to maximise value and de-risk the project. An update on timing expectations for the study will be provided as value enhancing options are assessed.
One major factor to be sorted out is the mining plan as the deposit is looking more and more like it is larger and continues at depth down as far as 2,000 metres with a mineralised area starting from below around 450 metres of overburden that is now being penetrated by a development drive more than 1,000 metres deep.
Drilling results in the quarterly reports from both companies suggest the mineralised area is a group of associated areas from the base of the overburden to around 2,000 metres or more.
