Fiji opening lifts Newcrest hopes

Newcrest stands to be the big winner among Australian companies should the Pacific nation be restored to a full-blown democracy.

By InvestSMART · 4 Jan 2012

By InvestSMART ·
4 Jan 2012

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Newcrest stands to be the big winner among Australian companies should the Pacific nation be restored to a full-blown democracy.

NEWCREST stands to be the big winner among Australian companies should the lifting of emergency powers by Fiji's military dictator, Frank Bainimarama, prove to be the first step to the restoration of full-blown democracy in the Pacific nation.

The Melbourne company is the manager and 69.94 per cent owner of the Namosi joint venture, 30 kilometres west of the capital, Suva. Namosi is home to the Waisoi deposit and other copper/gold targets that are being evaluated.

The Waisoi deposit ranks as one of the world's biggest undeveloped copper/gold deposits, with Newcrest last estimating a total resource of 7.9 million tonnes of copper and 7.7 million ounces of gold. Had it not been for Fiji's political turmoil, stronger copper and gold prices would by now have made the deposit a real development candidate.

Hopes that development may proceed have risen since a new year address by Commodore Bainimarama in which he said that emergency powers would be rescinded and a new constitution was in the works.

Commodore Bainimarama seized power in a 2006 coup, the fourth since 1987. The fallout from the 2006 coup did not scare Newcrest away from pursuing Namosi's big-time potential: its entry into the joint venture with Japanese partners occurred in July 2007.

When Newcrest picked up the running at Namosi, the Waisoi deposit was about half the size of the present resource estimate. Recent work has been focused on finding higher-grade ore positions that could sweeten the economics of what would be a multibillion-dollar development.

In its September-quarter report, Newcrest said drilling in an area six kilometres from Waisoi had confirmed higher-grade mineralisation over a distance of 200 metres and 500 metres in vertical extent.

Newcrest would not comment yesterday on the latest political shift in Fiji. It has said previously it plans to complete a feasibility study into development options at Namosi by June.

Despite the world-class size of the known resource, analysts at present give little, if any, value to the asset in their valuations of Newcrest.

Newcrest shares climbed $1.10 yesterday to $30.70. The strong gain was in line with other gold stocks, which were buoyed by the gold price rise.

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Frequently Asked Questions about this Article…

What stake does Newcrest hold in the Namosi joint venture in Fiji and why does it matter for investors?

Newcrest is the manager and owns 69.94% of the Namosi joint venture, located about 30 kilometres west of Suva. That matters for investors because Namosi includes the Waisoi copper‑gold deposit — a very large undeveloped resource — so progress on Namosi could materially affect Newcrest’s future production profile and company value.

How big is the Waisoi copper‑gold deposit at Namosi?

Waisoi is described as one of the world’s biggest undeveloped copper/gold deposits. The last resource estimate cited in the article put it at about 7.9 million tonnes of copper and 7.7 million ounces of gold.

How could recent political changes in Fiji affect Newcrest’s Namosi project?

A statement by Commodore Frank Bainimarama that emergency powers would be rescinded and a new constitution was in the works has raised hopes that political conditions may improve. If Fiji’s political situation stabilises, it could unlock the possibility of developing Namosi; conversely, past political turmoil has been a clear barrier to project progress.

What exploration results has Newcrest reported near the Waisoi deposit that investors should know about?

In its September‑quarter report Newcrest said drilling about six kilometres from Waisoi confirmed higher‑grade mineralisation over a distance of roughly 200 metres and a vertical extent of about 500 metres. The company has been targeting higher‑grade ore positions to improve the economics of a potential multibillion‑dollar development.

Is Newcrest running a feasibility study for Namosi and when is it due?

Newcrest has previously said it plans to complete a feasibility study into development options at Namosi by June (as stated in the article). Investors should watch for the outcome of that study for clearer development timelines and cost estimates.

Do analysts currently include the Namosi asset in Newcrest’s valuation?

According to the article, analysts at present give little, if any, value to the Namosi asset in their valuations of Newcrest despite the world‑class size of the known resource.

How did Newcrest’s share price react to the news and broader gold price movements?

The article notes Newcrest shares rose by $1.10 to $30.70, a gain in line with other gold stocks that were buoyed by a rise in the gold price. The company did not comment on the latest political shift in Fiji at the time.

What are the key risks everyday investors should consider about Newcrest’s Namosi project in Fiji?

Key risks highlighted in the article include political uncertainty in Fiji (including past coups and emergency powers), the potential for development delays, and the fact that analysts were not pricing significant value for Namosi yet. Project economics also depend on finding higher‑grade ore and on commodity prices for copper and gold.