Newcrest Mining is looking at a sharp rise in interim earnings after another solid quarterly report as the company benefited from the contribution from the rich Brucejack mine in Canada that was acquired earlier in 2022.
Newcrest delivers its full half year financials late in February and will have the benefit of a 25% jump in gold production for the six months to December, a small rise in gold prices in the half year – especially the December quarter, a jump in copper output and 80% rise in silver production for the half year.
On top of that costs either steadied or eased slightly in the final quarter and the half year, which will benefit the bottom line. And there was an 8% plus drop in the value of the Aussie dollar against the US currency, will give a final boost for earnings and trim costs.
Newcrest said in the latest report that it was maintaining full-year guidance of 2.1-2.4 million ounces of gold after what it called a ’solid’ performance in the three months to December and leaving its copper guidance unchanged at 135,000 to 155,000 tonnes.
December half gold production jumped to 1.039 million ounces from 832,298 ounces in the December, 2021 half (which was before the acquisition of Pretium Resources, the owner of the Brucejack mine).
Newcrest said its average gold price for the December, 2022 half was $US1,696 an ounce, down 2.1% or $US37 an ounce from the level of the December, 2021 half.
Copper production through surged 31% to 67,023 tonnes from nearly 51,000 a year earlier. The average copper price dropped 16% or 71 US cents to $US3.60 a pound in the latest half from $US4.31 a pound previously.
While silver output leap to 665,493 ounces in the latest half from 362,232 a year earlier, there was no price data given for the latest or previous periods.
Helping offset the price falls is a sharp fall in the value of the Aussie dollar against the greenback.
Newcrest said its average Aussie/US rate for the December, 2p22 half was 67.05, 1.13 US cents down from the 73.19 US cents a year earlier. That was an 8.3% slide and will provide a modest boost to the higher production of both metals, especially gold.
The company told the ASX in its December quarter and half year report that with healthy gold and copper pricing, favourable exchange rates and expected growth in output, it is looking to a better performance in the (current) second half of the financial year.
“Following a solid start to the year we remain confident in delivering a stronger operating performance through the second half of FY23. With the continued strong momentum in gold and copper pricing, a competitive cost structure assisted by favourable exchange rates, and clear progress across our key growth projects, Newcrest is very well positioned to deliver superior returns for our shareholders.
“Newcrest remains on track to deliver its full year production guidance for FY23,” interim CEO Sherry Duhe told the ASX in the quarterly release.
“Gold production at Lihir and Brucejack are expected to increase in the second half of FY23 driven by higher mill throughput across both sites (subject to increased rainfall at Lihir).
“Following the water restrictions and unplanned mill downtime events experienced at Lihir and the Brucejack fatality, both operations are anticipated to deliver at the lower end of their production guidance ranges for FY23,” the company said in the report.
The miner produced 512,130 ounces (oz) of gold in the three months to December 31, down from the 527,115 oz in the September quarter.
That fall was due to a fatality at the company’s newly acquired Brucejack gold mine in Canada which saw operations shut for three weeks. the water restrictions were imposed at Lihir in Papua New Guinea (a by-product of La Niña in Eastern Australia) which impacted operations and output.
The company’s quarterly copper output rose to 34,564 tonnes from 32,459 tonnes in September quarter.
All-in sustaining costs fell 1% for the quarter to $A1,082/oz as production costs eased off the back of higher throughput at the Cadia mine in central western NSW.
Gold miners had a volatile 2022, as bullion prices were swayed by a global rise in interest rates, and fears of an impending recession. Spot gold rose nearly 10% in the December quarter.
Gold prices have topped the $US1,900 an ounce level this month and remain there with most forecasts anticipating prices will remain high for the first half of this year as the value of the US dollar eases.
From what the company and the acting CEO said in the quarterly report, Newcrest has some major expansion work planned.
“In January, we received $173m through the early repayment of our gold prepay credit facility by Lundin Gold, providing us with additional near-term financial flexibility.”
“With the Red Chris Block Cave Feasibility Study expected to be released later this calendar year and another quarter of impressive drilling results across our key projects, our unique pipeline of gold and copper growth opportunities continues to set us apart from our peers.”
Newcrest revealed its board had approved the Lihir Phase 14A Feasibility Study (the Study), which will see the project into full implementation at a cost of close to $A300 million.
Ms Duhe said, “The development of Phase 14A is another innovative step forward in realising the full potential of Lihir. The findings of the Study are expected to deliver gold production from an additional high grade ore source which would have otherwise been inaccessible through standard mining techniques.”
It will see an additional 400,000 ounces of gold mined and processed by 2026. The life of mine output addition from the project is estimated at 800,000 ounces of gold.
“The Study outlines an updated life of mine plan, with upside potential. The application of steep wall technologies, together with an alternative, lower cost and simpler seepage barrier design have the potential to enable access to additional high-grade zones outside the current Ore Reserve and extend the elevated production profile beyond FY31m” Ms Duhe said.
Early work started on the project last June.
Newcrest also pointed to strong drilling results which “continue to expand the higher-grade footprints” at Brucejack, Red Chris (both in Canada) and Havieron (in WA).
