Newcrest forecasts lower production
In the June quarter, 490 employees lost their jobs with an unspecified number of cuts also experienced by contractors.
The company has not specified the number of additional jobs to be cut, although it is reducing costs so that it is at least cash flow neutral with a gold price at $1450 an ounce.
After a strong lift to gold and copper output in the June quarter, Newcrest has forecast lower output this quarter, while holding full year production forecast at 2.0-2.3 million ounces, with output to rise progressively through the year.
In the June quarter, gold output rose 25 per cent to 642,032 ounces with copper up 20 per cent at 22,818 tonnes. In the year to June 2013, Newcrest produced 2.11 million ounces of gold.
Its all-in cash production cost, which includes development and head office costs, was a high $1283 an ounce, indicating the group has little room to move with the gold price holding at around $US1300 an ounce ($1430).
In the year ahead, Newcrest said lower capital spending combined with a decline in stripping levels will lead to lower costs. Additional work is under way to cut costs at some properties, such as its half-owned Hidden Valley mine in Papua New Guinea where the costs are "unacceptable", it said.
Newcrest recently disclosed a hefty $6 billion write-down in the book value of its gold properties due to the slump in the gold price, including a $3.6 billion write-down against the Lihir mine, also in Papua New Guinea, which it had bought earlier for $9.7 billion.
In the year to June, the cash costs at Cadia and Gosowong at around $650 an ounce was significantly better than for other mines such as Telfer ($1706) and Hidden Valley ($2422), with both of these mines coming in for particular attention to reduce costs.
Capital costs at Telfer in the year to June were inflated, although pressure remains to cut costs significantly. One option may be to idle one of the two grinding units, together with a cut in throughput and output. Weighing on production in the year ahead was a decision to process stockpiled ore at Lihir which, whilereducing capital costs, also lowers output.
Frequently Asked Questions about this Article…
Newcrest flagged lower production in the September quarter as it works to cut an inflated cost base. After a strong June quarter, the company expects output to fall this quarter while it implements cost reductions and operational changes at higher-cost operations.
Newcrest is holding its full‑year production forecast at 2.0–2.3 million ounces of gold. The company says output should rise progressively through the year despite the weaker September quarter.
In the June quarter Newcrest’s gold output rose 25% to 642,032 ounces and copper was up 20% to 22,818 tonnes. In the year to June 2013 the group produced 2.11 million ounces of gold.
Newcrest is grappling with an inflated cost base. Its all‑in cash production cost — which includes development and head office costs — was a high $1,283 an ounce, leaving little room if the gold price remains around US$1,300 an ounce (about $1,430).
Yes. In the June quarter Newcrest cut 490 employees and also reduced contractor roles. The company has not specified the number of additional jobs to be cut but says further retrenchments are expected as it reduces costs.
Newcrest disclosed a hefty $6 billion write‑down in the book value of its gold properties due to the slump in the gold price. That included a $3.6 billion write‑down against the Lihir mine in Papua New Guinea, which Newcrest had bought earlier for $9.7 billion.
Cadia and Gosowong reported much lower cash costs at around $650 an ounce, while Telfer and Hidden Valley had much higher cash costs — about $1,706 and $2,422 an ounce respectively. Newcrest is targeting cost reductions at higher‑cost operations, including further work at half‑owned Hidden Valley, which it described as having ‘unacceptable’ costs.
Newcrest plans lower capital spending and reduced stripping levels to lower costs. Specific measures mentioned include possibly idling one of Telfer’s two grinding units (cutting throughput and output) and processing stockpiled ore at Lihir — which reduces capital spending but also lowers near‑term output. The company aims to be at least cash‑flow neutral with gold at $1,450 an ounce.
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