Newcrest Mining Limited (ASX:NCM) managed to boost its production for the quarter ending 31 December 2015 despite facing several impediments.
The overall gold production increased to 620,691oz for the December quarter, compared to 583,745oz in the September quarter. The company reported that it improved its ‘Group All-In Sustaining Cost’ by 3.6% to US$757/oz for this quarter. The increase in gold production was mainly driven by increased output at Lihir and Telfer mines, which was partially offset by lower production from Cadia mine caused by an outage in its mill motor.
Operations in Cadia suffer
Production in the Cadia mine during the quarter was adversely impacted by processing issues, such as the previously stated Concentrator 1 SAG mill motor outage, temporary loss of power caused by a transformer fire and downtime for a ball mill gearbox replacement. These impacts were however partially offset by marginally higher gold recoveries. The total gold production decreased to 128,550oz for the quarter, from 157,963oz in the September quarter.
Production in Lihir soared
Gold production in Lihir was 50koz or 26% higher for the quarter, compared to the previous comparable period. Productivity of the mine was boosted by 12% higher milled tonnes and 15% higher milled head grade. The production level soared despite a planned 15 day shutdown of Autoclave 2, premature valve failure on Autoclave 3 and premature failure of liners in the High Grade Ore (HGO) 1 and HGO2 mills. Moreover, the company plans to connect the flotation tails to the leaching circuit through a pipeline, in order to partially offset flotation recovery losses.
Telfer’s production increased due to improved access
Telfer produced higher gold and copper as it gained better access to open pit ore after access road void issues were resolved in the previous quarter. Waste tonne movement, displacing utilisation of low grade stockpiles and increasing overall grade.
Lower production in Indonesia
Gold production in Gosowong, Indonesia decreased from 72,253oz in the September quarter to 68,702oz in the current quarter. The production was impacted by a planned mill shutdown.
Lower AISC per ounce in Papua New Guinea
The company reduced its AISC per ounce for the quarter from US$2,222 in the September quarter to US$1,589 in the current period. This was achieved through higher gold and silver production and sales in Hidden Valley. However, the mine was affected by poor grade and road closures which restricted mining activity.
Bonikro pit under maintenance
Gold production at Bonikro declined from 40,659oz to 33,527oz due to a planned mill re-line. The pit was placed on care and maintenance in October 2015 and the company continues to process its stockpiles.
Newcrest Managing Director and CEO, Sandeep Biswas comment on the operations: “We have had a good quarter in which we maintained our strong focus on safe production and delivered an increase in gold production and lowered our All-In Sustaining Cost, despite operational challenges at our two largest mines, Cadia and Lihir.”
The production guidance for FY16 remains unchanged as the company expects Lihir and Bonikro to produce the highest while Telfer and Hidden Valley are anticipated to be at the bottom end of their ranges.
NCM jumped 2.6% upon opening and was last traded at $13.87, as at 10:23 AM (AEDT).
Author: Simon Herrmann
Jan 28, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.