Newcrest weighs up future of mines
Newcrest Mining is reviewing the future of some of its mines, as the recent plunge in the gold price continues to take a toll on the nation's fourth-biggest mineral export industry.
Newcrest was one of several ASX-listed goldminers to reveal March-quarter results on Tuesday, and the publication of production costs revealed that numerous mines across Australasia are unprofitable at current gold prices.
While Newcrest's biggest mines are low cost, its portfolio includes stakes in high-cost mines such as Papua New Guinea's Hidden Valley, which the company owns in partnership with Harmony Gold.
Tuesday's report revealed that "all in" costs for the mine were $2268 an ounce during the March quarter; drastically higher than the $US1410 that gold was fetching on Tuesday evening. Newcrest said a program to improve performance and "assess the future" of the mine was under way with "considerable focus".
The Telfer mine in Western Australia is also becoming expensive to run, with production costs of $1573 an ounce in the March quarter.
In what sounded like a portent to divesting certain assets, Newcrest said it would take action to "simplify and reduce activity" across its business. "With its major projects ramping up and the more challenging external environment, Newcrest continues to review all of its business activities, particularly those related to higher cost current or future production," the company said.
"The company is focused on creating a strong return from our major investments in expanded lower cost production sources and generating free cash flow."
Newcrest revealed it had already axed 150 jobs from its Melbourne and Brisbane offices as part of a cost-cutting regime.
While Newcrest shares lost more than 3 per cent of their value, mid-tier gold producer St Barbara was the gold sector's worst performer, losing almost 14 per cent of its value after downgrading its production guidance.
The miner conceded it would produce about 3 per cent less gold than forecast in the year to June 30.
St Barbara said it had reassessed all its mines in the wake of the gold price slump over the past fortnight, and expects all can survive assuming a price of at least $US1400 an ounce.
St Barbara's Golden Ridge mine in the Solomon Islands produced at a cost of $1393 an ounce during the March quarter, which after currency conversion is more than the $US1410 that gold was fetching on Tuesday evening.
Several of the company's other mines are producing on very thin margins at current gold prices.
Evolution Mining shares fell more than 6 per cent after the company revealed an "all-in" production cost of $1353 an ounce during the March quarter.
Over the full year to date, Evolution's all in costs are $1212 an ounce.
Evolution disappointed the market in terms of gold produced, but retained its full-year guidance.