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Newcrest powers through tough cost climate

Newcrest

Newcrest Mining was impacted by increased costs in the first half of the 2022 financial year (FY22), which amounted to $US255 million in lost profit compared to the prior corresponding period.

The Tier 1 miner generated $US298 million of underlying profit across the six months, a 46 per cent drop from the $US553 million earned in first half of the 2021 financial year (FY21).

Newcrest said increased costs were compounded by lower production levels at its Lihir gold operation in Papua New Guinea, along with the planned replacement and upgrade of the semi-autogenous grinding (SAG) mill motor at the Cadia gold operation in New South Wales.

“The current period reflected lower gold and copper sales volumes (driven by lower production), a lower realised gold price, higher concentrate freight costs due to the global tightness and challenges in the sea freight market, and the unfavourable impact on operating costs from the strengthening of the Australian dollar against the US dollar,” Newcrest stated in its half-year results.

“Operating costs were also impacted by labour and consumable cost pressures due to rising demand, constrained supply and underlying commodity price increases.”

Newcrest generated $US1.3 billion of revenue from gold sales in the half-year, a 27 per cent decrease from the prior corresponding period ($US1.77 billion).

Despite this, copper revenue increased from $US469 million to $US479 million as Newcrest enjoyed higher realised copper prices during the six months.

Newcrest remains on track to meet its FY22 production guidance (1.8-2 million tonnes of gold), while the company’s all-in sustaining cost (AISC) guidance hasn’t changed.

The major miner’s AISC increased 23 per cent to $US1194 per ounce in the first half of FY22. Newcrest forecasts its total AISC spend to be between $US1.84 billion and $US2.04 billion in the 12 months to June 30, 2022.

While profits have been impacted in the short term, Newcrest is in a significant growth phase.

In January, Newcrest took one step closer to acquiring Canadian miner Pretium Resources, after more than 95 per cent of Pretium shareholders voted in favour of the acquisition in January.

The acquisition will see Newcrest add the Tier 1 Brucejack gold mine in Canada to its portfolio, considered one of the highest-grade operating gold mines in the world.

Newcrest continues to develop its Havieron joint venture project alongside Greatland Gold, while the company achieved other milestones at Cadia, Lihir and its Red Chris mine in Canada.

“We have taken a big step forward in our profitable growth agenda during the first half of FY22,” Newcrest chief executive officer Sandeep Biswas said.

“The depth and quality of our global organic growth portfolio was demonstrated through the announcement of the findings of the Cadia PC1-2 (expansion project), Red Chris block cave, Havieron stage one and Lihir phase 14A pre-feasibility studies.

“Each of these studies indicate excellent rates of return and we are projecting a material growth in our operating margin and cash flow over the next decade.

“Progressing each one of these studies makes compelling financial sense and we are excited by the significant potential beyond the base case projections.”

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