Newcrest forecasts lower production
Troubled goldminer Newcrest has flagged lower production in the September quarter as it continues to wrestle with an inflated cost base which is expected to lead to further retrenchments over the next few months.
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.
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, while helping to reduce capital costs, also results in lower output.
Capital spending will remain high at Lihir as Newcrest revamps ageing equipment in a bid to stabilise production, the company said.