Newcrest profit hit by lower copper price and mine issues

Leading Australian gold producer Newcrest Mining (ASX: NCM) has reported an 11% fall in profits largely related to a decline in copper prices and issues at its Lihir, Telfer and Brucejack operations.

The company’s statutory and underlying profits both came in at $778 million, with the company pointing the finger at a lower realised copper price, higher depreciation and higher operating costs for the $94 million decline in underlying profit.

Newcrest also revealed falls in performances at the Lihir gold mine in Papua New Guinea, at Telfer in Western Australia and the Brucejack operation in Canada.

Lihir impacted by weather issues

Newcrest reported a worse than expected operating and financial performance at Lihir largely thanks to lower feed grade, with the mine forced to process a larger amount of low-grade ex-pit material in the second half following extreme rainfall which limited pit access and caused materials handling issues at the crushers.

It was a totally different story in the first half when mill throughput was significantly constrained due to drought conditions which limited raw water supply to the plant.

Gold production at Telfer was lower than the previous period thanks to lower mill throughput and lower head grade, with a higher proportion of stockpile material processed.

At Brucejack, a tragic fatality in October 2022 had an impact on the financial and operating performance, with operations suspended until the mine returned to full capacity in early December 2022.

Gold production in the second half of FY23 was also lower than expectations due to lower gold head grade.

Much improved cash flow

Interim chief executive officer, Sherry Duhe, said the company still produced 2.1 million ounces of gold and 133 thousand tonnes of copper and achieved a significantly improved free cash flow of $404 million.

“Our balance sheet remains in excellent shape, sitting comfortably within all our financial policy targets as we continued to invest in our organic portfolio of value generating projects.”

“On the safety front, our injury rates decreased by 26% compared to last year, however, we were deeply saddened by the tragic fatality at our Brucejack mine in October and a serious injury at Cadia in June.”

Transformational year for Newcrest

Ms Duhe said FY23 has been a transformational year for Newcrest.

“We made significant progress against our growth strategy with key study milestones achieved at Cadia and Lihir, the signing of the framework MOU at the world-class Wafi-Golpu copper-gold deposit, and continued success realised through the Brucejack transformation program.”

“Following our strong exploration performance we significantly expanded the exploration target at East Ridge, highlighting the exciting opportunity for Red Chris as the Block Cave feasibility study continued to pursue a range of optimisation opportunities. Together with activities underway to maximise the value of Telfer and Havieron, our global gold and copper portfolio is very well placed for the future.”

She also highlighted the May 2023 agreement which will see Newmont acquire 100% of the issued shares in Newcrest.

“If the transaction receives the necessary approvals and proceeds, the combined company will set a new benchmark in gold production with increased diversification across a premier portfolio of gold and copper assets, as well as additional flexibility in project sequencing and growth optionality.”