If the weakening gold price and production problems at some of its mines were not enough, Newcrest (NCM), the country’s biggest gold miner, now faces a serious legal situation that could threaten its hold on its huge, $2 billion Cadia mine in central Western NSW.
A NSW court yesterday quashed an exploration licence held by Newcrest for an area near the mine, and decided in favour of Gold and Copper Resources, a small exploration company.
The NSW Land Environment Court killed off, for the time being, the decision by former ALP Mining Minister, Ian Macdonald to renew Newcrest’s exploration licence 3856 (EL3856).
The renewal application was made in 2008, when Mr Macdonald was minister and renewal was granted in 2011.
The news helped Newcrest shares drop more than 80 cents at one stage (a fall in the gold price overnight Tuesday didn’t help either) to $14.685. They bounced back over $15, then eased again to close down 70c, or more than 4% on $14.90.
NCM YTD – Now a tough court case to go with gold price slide and output woes
Licence, EL3856, encompasses some 70% of Newcrest’s wholly-owned exploration area in NSW and it surrounds its Cadia Valley Operations mining leases.
Cadia is the biggest underground mine in Australia and the area is claimed to contain $200 billion worth of gold. Newcrest has spent $2 billion on the development of Cadia.
Cadia produced 473,195 ounces of gold and 44,778 tonnes of copper for Newcrest in 2011-12.
The lease EL3856 has already been the subject of other proceedings in the NSW Supreme Court where Gold and Copper had been pursuing Newcrest for breach of confidentiality.
The Sydney Morning herald reported yesterday that "Gold and Copper has another five legal actions in train. The next two are not over exploration leases however. They concern the Cadia ore body itself."
"The next claim alleges that Newcrest continued to mine without a proper mining licence. For a Mining Licence to be awarded it should be preceded by an Exploration Licence."
Newcrest told the ASX last October that “none of the claims has merit” and “this exploration tenure is not material to Newcrest’s mining operations”.
The paper says that EL3856 "is the underlying authority needed by Newcrest to allow it to get its Cadia East Mining Lease Applications (MLAs) approved. Considering these MLAs were contemplated in the Cadia East Project Approval, without them it could be contended that Newcrest was not operating legally."
Seeing so much is at stake, Newcrest is certain to appeal this decision.
