NCM 2.79% $30.71 newcrest mining limited

cash cow....a record cashflow of 1.018 billion

  1. SCD
    3,438 Posts.
    Newcrest to keep a lid on debt with two gold mine developments

    Australia’s biggest domestically owned and the world’s 10th largest gold miner Newcrest Mining believes it can keep its future gearing with mine developments in the range of 15% to 20%.

    Author: Ross Louthean
    Posted: Wednesday , 12 Nov 2008

    The chief executive of Newcrest Mining (ASX: NCM), Ian Smith, told the Morgan Stanley Asia Pacific Summit in Singapore today that it expects its gearing to be around 15% in June next year when the mines Ridgeway Deeps at Cadia in New South Wales and Hidden Valley in Papua New Guinea are completed.

    The gearing level at the end of June was 8%.

    Smith said Newcrest's market capitalisation was now $US7 billion ($A10 B) and in the past 12 months the company has had a 48% lift in gold equivalent resources and a 33% lift in gold equivalent reserves.

    Newcrest is still setting an example on cash costs which in the financial year just ended had dropped to $A261/ounce ($US173/oz) after by-product credits. In the year just ended the company achieved a record cash flow from operations of $A1.018 B ($US674 M) - up 163% on the previous year and the return on capital employed lifted to 21%.

    The strong exploration programme should see the company detail an initial resource in December for the O'Callaghans polymetallic project near the Telfer gold project in Western Australia's Pilbara hinterland, and also at Namosi in Fiji and Nambonga North in the Wafi-Golpu district of PNG.

    Smith said 80% of revenue is derived from gold with the other major contributor being copper.

    Ridgeway Deeps adds to Newcrest's big gold operations in the Cadia Valley and when this mine extension is commissioned it is expected to have cash costs of $A82/oz ($US54.20/oz) with the copper by-product - assuming a copper price of $US1.50/lb.

    The production profile from this area over eight years - utilising block caving - was expected to be 1.6 M oz gold and 210 tonnes of contained copper metal.

    In the same region the Cadia East project will have its pre-feasibility completed in December and could be Australia's largest underground mine with "world record underground development rates at low cost."

    The gold resource is 28 M oz (reserves 15.8 M oz) and copper 5.57 Mt (2.68 Mt reserves).

    Smith said the first appreciable production is expected in 2012 with a mine life set at +30 years.

    Rationalisations being undertaken at the Telfer project were expected to produce cost savings of between $A25-30 M ($US16.54-19.84 M) in the current financial year with ongoing annual cost savings being about 80% more. (Telfer has been a high cost producer for the Newcrest stable though costs should fall into the range of $US450-470/oz after by-product credits.)

    O'Callaghans in the Telfer district is an unique development for the company as it contains tungsten, molybdenum, lead-zinc and copper which Smith said had an estimated gold equivalent value of 3-3.5 grams/tonne. O'Callaghans has a known strike length of 2.5 kilometres and is open, and known to a depth of 300 metres.

    The Hidden Valley joint venture with Harmony Gold should be in production in mid 2009 to produce 250,000 oz gold and 3.6 M oz silver per annum, with a 14 years mine life.

    In Fiji Newcrest has acquired a 65% interest on Namosi on Viti Levu Island and the Waisoi deposits there were estimated by Placer Dome to be in excess of 900 Mt grading 0.43% copper and 0.14 g/t gold. One drill hole had an intercept of 751m @ 0.18 g/t Au and 0.36% Cu within which 459m went 0.28 g/t Au and 0.45% Cu.
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