LA Private

Newcrest reaffirms Newmont takeover amid Cadia Mine dust controversy

Newcrest’s (ASX:NCM) board has reaffirmed its unanimous recommendation for investors to support the Newmont takeover offer.

The offer aims to address the ongoing controversy surrounding dust emissions from the Cadia gold/copper and molybdenum mine in central western NSW, which is Newcrest’s most significant operation.

Under the bid, Newcrest shareholders will receive 0.4 Newmont shares for each share they hold, valuing each share at $A29.27.

On Tuesday, Newcrest shares traded at $A26.46 on the ASX.

Acting CEO, Sherry Duhe, highlighted that the combined group would become a leading global player in gold production, with improved project sequencing, growth options, and a market-leading position in safety and sustainability. The company issued its 4th quarter and 2022-23 production and exploration reports, where it made 2022-23 gold and copper production forecasts.

However, All In Sustaining Costs (AISC) jumped by 20% during the year, impacting margins and earnings in Newcrest’s final 2022-23 profit statement as an independent company, to be released next month.

Newcrest confirmed that it has reduced underground mining rates at Cadia following non-compliance with clean air standards, as pointed out by the NSW environmental watchdog in June.

The Environmental Protection Authority (EPA) warned of potential suspension of the mine’s operating license if immediate action was not taken to rectify the breaches.

In response, Newcrest made adjustments to the mine’s underground operations, including reduced mining rates, modifications to the ventilation circuit, and additional dust sprays and spray curtains.

The company does not expect material impacts on Cadia’s overall production targets, as above-ground stockpiles can supplement the mill feed.

The company emphasized its commitment to working openly and transparently with the EPA and the local community to meet all statutory obligations aligned with Newcrest’s values.

It also highlighted a 12-month study conducted in collaboration with the local community and the Australian Government’s Australian Nuclear Science Technology Organisation (ANSTO) in June 2023, confirming compliance with air quality standards at Cadia and the surrounding region.

Regarding production figures, Newcrest met its group gold production and AISC guidance for 2022-23. Copper production increased significantly to 133,149 tonnes from 120,650 tonnes in 2021-22, which aligns with Newmont’s interest in enhancing its copper presence through the takeover.

Newcrest’s guidance for copper production in 2023-24 is set at 135,000 to 155,000 tonnes.

Gold production for the year ending June 30 was higher at over 2.105 million ounces, compared to 1.956 million ounces in 2021-22.

The increase in production was attributed to higher mill throughput at Cadia, Lihir (in PNG), and Brucejack (in Canada), as well as higher gold head grade at Lihir and Brucejack.

Newcrest set its 2023-24 gold production guidance at 2.1 to 2.4 million ounces, indicating potential adjustments later in the year once Newmont takes control.

The company reported increased costs in the June year due to higher inputs and varied mining and production performances. The AISC for the quarter was $1,196/oz, 20% higher than the prior period, primarily due to higher capital expenditure at Lihir, Cadia, and Red Chris, and a lower realized copper price.

These costs were partly offset by higher gold production across all operating sites during the quarter, except for Fruta del Norte, leading to increased gold sales volumes for the Group, as well as higher copper sales volumes and a weaker Australian dollar against the US dollar impacting operating costs.