Newcrest Mining Ltd Earnings Call Transcript

Newcrest Mining Ltd Earnings Call Transcript
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Newcrest Mining Ltd (NCMGY.PK)

Q1 2010 Earnings Call

April 22, 2010 11:00 am ET

Executive

Ian Smith – CEO and Managing Director

Analysts

Clarke Wilkins - Citigroup

Michael Slifirski - Credit Suisse

[Cathy Moises] - Evans and Partners

[Brandon Fitz Patrick] - Georgia Bank

David George - JP Morgan

Presentation

Ian Smith

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Welcome to the Quarter 3 March update from Newcrest on their production on their projects and [exploration]. The main focus today will be on those three areas. So there might be much mention in the presentation as to what’s going with our bid [fully here] or our proposal [fully here]. And I’ll be touching on the Cadia raised approval, which took place during the quarter.

I’m sure everyone has read the disclaimer on page 2. And I’ll draw your attention to the bottom of that disclaimer on exploration targets. It is further running the presentation. We’ll be talking more about an exploration target in particular and there is another supplementary page that goes with that. So full explanatory notes on what we mean when we talk about exploration target.

So maybe on the point on page 3; our quarterly gold production was 416,651 ounces while we’re going over lighter in the presentation, some [upside] opportunities that we had during the quarter, and some missed opportunities especially at Hidden Valley. But apart from Hidden Valley, results are in line with some expectations that we head for the quarter, although we could have had some upside, which was undelivered due to some [payer] issues that we have in the Cadia Valley.

Most important thing to note about production is we’re expecting significant production increases in the June Quarter with an expectation of production being in excess of 500,000 ounces. Our cash cost remain within the first quartile industry. The site operating costs in line with the previous quarter. The gross cash cost came in at 336 AUD, or 304 Euros and their net cash costs came in at 310/oz or US$280 to around the same level as the last quarter. As I’ve said before, Cadia East development was approved by Newcrest Board and I’ll be talking about that in greater data. And the proposal was made to Lihir Gold to combine the two companies.

So maybe onto page 4 Operations, the main point to consider in Cadia Valley is that not only the greatest increasing with Cadia (Hill Pit King) into the richest zone of the (Cup back). But we have basically completed the transition from the sub level cave operation of Ridgeway to the block cave operation of Ridgeway. So during the quarter just completed, a greater proportion of the total production from the Ridgeway system came out of the block cave system.

The Telfer, we were in the north end of the pit for the predominant part of the quarter and that carries with it a lower gold grade. During the quarter, we’re now in the fourth quarter of the year, we’re moving better to the south end of the pit which (inaudible) the gold grade.

At Gosowong, the grade did increase in line with plan. And during March, it exceeded 30 grams per ton, and we still maintain the recovery well in the excess of 95%.

On projects Cadia East, as I said before was approved. Hidden Valley is expected to reach design capacity of 250,000 ounces during the June quarter. And the quite plainly, the [ramp off] and the commissioning periods for Hidden Valley have taken us longer than expected. Are we going through a range of explanatory notes (inaudible)? But that production was frankly disappointing during the quarter, but a lot of the issues such as being hampering out, commissioning, and ramp up were resolved during the quarter as well.

Ridgeway Deeps, as I’ve mentioned before, three months ahead of schedule, 40 million under budget. A good transition and a good outcome and it does act as a living laboratory, as a learning point from Cadia East before we undertake the commissioning of what will be Australia’s biggest underground mine and one of the largest panel cave mines in the world. And the Gosowong Expansion Plan remains on schedule and on the budget.

So turning to the production summary, there are two main points of note here. Number one is we only produce [79,680] tons out of Hidden Valley. I talked about this disappointment with that, but resolution of some main constrictions that we’ve been living with. And the other thing to note is that during the March quarter, we [milled] just to have a million tons less than we did in the previous quarter and most of that short for a million (inaudible) out of Cadia Valley.

It was on the back of some planned maintenance that we had envisaged, plus some electricity interruptions that we experienced in January and February of this year. That’s as part of the [grid supply] in (inaudible). So they combined to push down the amount of ounces that we could have got out of (inaudible) about 20,000 ounces. And then Hidden Valley came in around 10,000 to 13,000 below the expectation point.

Moving on to our cash cost comparisons, you can see that we continue with a very positive comparison to the rest of the industry, the latest stat that we have for the industry of the Global Gold industry is a halt. It is US $ 507 per ounce, cash cost after byproduct credits in the March quarter. We achieved 280 Euros. And in the December quarter, we had achieved 282 so we’re sitting with, at most, a $ 200 differential to the average producer in the industry, and that flows through from our cash cost through the real total cost. So we do make a fair margin compared to other producers within the gold industry.

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