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Newcrest eyes strong fiscal H2'18 performance on Cadia mine ramp-up

Despite a weaker performance in the first half of its fiscal year, Newcrest Mining Ltd. remains on track to achieve its production, cost and CapEx guidance for the full year.

"We remain on track to achieve our annual guidance, with production expected to be stronger in the second half of the year, and [all-in sustaining costs] spend potentially being below the guidance range if copper prices remain around current levels," Managing Director and CEO Sandeep Biswas said on a Feb. 15 conference call.

The company's net profit dropped 48% year over year to US$98 million in the six months ended Dec. 31, 2017, driven by lower gold and copper sales volumes related to the effects of a seismic event in mid-April 2017 at the Cadia copper-gold mine in New South Wales, Australia.

The effect on revenue was only partially offset by higher realized copper and gold prices in the half, and especially copper prices, which were up 31% in the period. The company's free cash flow was also impacted by higher depreciation expenses and higher costs related to a stronger Australian dollar.

With remediation work completed and the Cadia mine continuing its progressive ore production ramp-up, Newcrest is targeting annual capacity of 30 million tonnes by June.

"By the end of June 2018, we expect Cadia to achieve a 30 million tonne per annum annualized production rate with minimal capital expenditure," Biswas said. "This will be a remarkable achievement in itself, up from the previous rates of below 26 million tonnes per annum."

Pre-feasibility studies on the Cadia East mine and the Cadia plant expansion are anticipated in August, which Biswas said will define "the optimal mining and plant capacity needed for Cadia."

The company is targeting production of between 2.4 million and 2.7 million ounces of gold and between 80,000 and 90,000 tonnes of copper in its fiscal 2018.

Biswas also said the deal for the sale of Newcrest's 89.89% stake in the Bonikro gold mine in Ivory Coast is expected to be completed by the end of March.

Indonesia troubles

Newcrest is engaged in talks with the Indonesian government to extend the fiscal regime on its Gosowong gold mine and increase Indonesian equity participation in the mine in the wake of new mining legislation unveiled by the country in early 2017.

The current contract of work for its Gosowong mine is set to expire in 2029.

"Look, in terms of Gosowong, in the immediate, obviously, we continue to talk constructively with the government on resolving any concerns around the contract of work with the work program and budget," Biswas said. "We expect that to conclude satisfactorily."

He said that subsequently, it is more about making sure the company has completed exploration required on the contract of work lease.

"As you know, Gosowong has a history of finding almost the amount of ore or the amount of ounces it produces every year in extensional exploration," Biswas added. "But realistically, that must come to an end one day. So we'll be taking a view on these matters in the course of the next six to 12 months."