Newcrest loses just a bit of its lustre

Newcrest Mining’s (ASX:NCM) gold and copper production and sales saw the anticipated improvement in the 4th quarter but it wasn’t enough to prevent the company from finishing short of 2020-21’s levels.

Newcrest told the ASX in its June quarter report on Thursday that full-year gold production was 6.6% weaker than a year earlier, in line with the company’s forecast, and that costs increased despite recent quarter-on-quarter improvements, especially at its Cadia mine in central NSW.

Newcrest reported gold output of nearly 1.96 million ounces in the year to June, down from more than 2.09 million the year prior.

Newcrest had previously estimated it would produce between about 1.93 million and 2.03 million ounces.

Copper production was 3% short of 2021-22 guidance at 129,650 tonnes against guidance of 125,000 to 130,000 tonnes. But it was also 12% down on 2020-21’s 142,724 tonnes.

Newcrest blamed the lower copper production on lower mill throughput at its Red Chris (Canada) and Telfer (WA) gold copper mines.

The company reported so-called all-in sustaining costs, a measure intended to reflect the full cost of gold mining, of $US1,044 an ounce. That was up from $US911 an ounce in 2020-21.

Full year AISC was 2% higher than FY22 guidance due to lower copper production and a lower realised copper price, timing of Cadia copper sales and higher production stripping at Lihir and Telfer, the company told the ASX.

Still, its fourth-quarter cost of $US896 an ounce was materially down from its first quarter cost recorded at $US1,269 an ounce.

Newcrest said that improvement was underpinned by rising gold and copper sales volumes in the 4th quarter and a weakening Australian dollar versus the greenback (which helped keep a lid on cost rises).

In terms of revenues and earnings for the year, it’s hard to see Newcrest matching the 2020-21 record result when it reported a statutory and an underlying profit of $1.164 billion, up 80% and 55% respectively from the previous year.

While the company will see an extra $US120 million of revenue from its Brucejack gold mine in Canada from February this year, but its gold sales from Lihir in PNG fell more than $US100 million to $US666 million (from $US773 million).

Gold sales from the Cadia mine in NSW dropped even further – to $US543 million from $US766 million in 2020-21. Gold sales revenue from Red Chris in Canada dipped to just on $US41 million from $US45.6 million and gold sales from the old but still productive Telfer mine in WA eased from $US411 million to $US407 million.

Copper revenue from Cadia fell to $US83.8 million from $US105.4 million, rose to $US14.27 million at Telfer from $US12.56 million but fell to $US1.23 million from $US23 million at red Chris.

Newcrest CEO Sandeep Biswas, said, “Newcrest delivered a strong fourth quarter to achieve our group gold production for the year. Over the last four quarters we have steadily increased our gold and copper production, driving lower group All-In Sustaining Costs and delivering a record breaking annual cost performance at Cadia. We were particularly pleased to record a fourth consecutive quarter of lower group costs during this challenging inflationary environment.”

“The three phase transformation program at Brucejack continues to progress well and we have a range of initiatives underway to maximise the long-term potential of this asset and district. We are on track to provide an update on our Brucejack uplift road map, together with the outcomes of the Cadia PC1-2 Feasibility Study, later this quarter,” he added.

The company said 2023 financial year guidance will be released with the Full Year results on August 19 “and will outline Newcrest’s views of the risk of cost inflation on AISC and capital expenditure, and the associated mitigation strategies underway.”

That will make the annual results really interesting.

Newcrest shares were a bit all over the place Thursday, falling, rising and then easing before a late burst took them up 1.6% to $19.35.