Newcrest Mining (NCM) has made a disappointing start to the 2015-16 financial year, with two workplace fatalities, mechanical failures at its Cadia (NSW) and Lihir (PNG) mines and reporting below-par production rates.
But for the moment it is maintaining its full year guidance for gold production to range between 2.4 to 2.6 million ounces, and 80,000-90,000 tonnes of copper.
The deaths of workers at the Cadia Ridgeway mine in NSW and the Hidden Valley project in PNG were notable departures from an existing safety regime.
The fatalities prompted Newcrest to shut the two mines for 11 and 33 days respectively, which meant lower gold production for the quarter and a weak start to the year to next June.
But the company had other problems in the quarter.
Output at the Cadia mine was also dented by lower grades and maintenance at the Lihir mine reduced the tons milled, although Newcrest said a lower level of maintenance was scheduled for the new quarter.
Gold output at the Telfer mine in Australia was held back by a planned mill shutdown and lower grades, while gold production at the Gosowong operation in Indonesia was hit by a fall in grades for the metal.
As a result Newcrest produced 583,745 ounces in the September quarter, up from a year ago when 561,731 ounces were produced, but down from the 673,542 ounces in the June quarter.
Newcrest will be looking to repeat its 2014-15 result when it managed to produce an acceleration in output in the next three quarters to reach 2.43 million ounces for the year to June.
So gold (and copper) production will have to accelerate in the next three quarters if the company is to make the lower level of guidance of 2.4 million ounces, let alone the upper end.
The 2014-15 experience seems to be why, for the time being, the full year guidance remains in place.
Copper output eased to 21,337 tonnes in the quarter, from 22,170
As a result the shares closed down 5% at $14.11 after being off more than 7% in early trading as investors digested the poor news in the report.
NCM 1Y – Weak start to FY16 for Newcrest
The fall in production saw all-in sustaining costs rise to $A1,088 an ounce of gold during the quarter, well above the $A941 an ounce the company achieved during the 2015 financial year (which also worried investors who now think Newcrest will be looking at a weak December half year profit).
Newcrest chief executive Sandeep Biswas said his focus was on the worker fatalities and their impact on family and friends.
"We are deeply saddened that two of our colleagues were fatally injured during the quarter … I have instigated a full and detailed review of all aspects of safety management at all our sites with a particular focus on high-risk tasks,” he said in yesterday’s report.
Since becoming chief executive, Mr Biswas has vowed to fix the severe problems that have dogged the processing unit at Newcrest’s second most important asset, the Lihir mine in PNG.
Newcrest received $US1,128, or $A1,552, an ounce on average in the quarter, down from $US1,193, or $A1532, in the June quarter with a lower Australian dollar helping to improve prices in local currency terms. Copper prices also fell.
Early this month, Newcrest sold a minority stake in emerging gold miner Evolution Mining for an $A125 million profit which will be used to cut debt.
