The Cadia East property is near the town of Orange, New South Wales. The underground resource at the mine has recently been increased by about 7 million oz. gold equivalent.
The Cadia East resource incorporates both the Cadia Far East and Cadia East deposits. There is an indicated underground resource of 200 million tonnes grading 1.1 grams gold and 0.37% copper and an inferred 90 million tonnes grading 0.85 gram gold per tonne and 0.33% copper. The open pit inferred resource is estimated at 300 million tonnes grading 0.46 gram gold and 0.37% copper.
Using these values, the total resource is estimated to be 14 million oz. gold and 2.1 million tonnes of copper. The in situ gold equivalent is estimated at 26 million oz. These estimates used a A$500-per-oz.-gold price and a A$1.30-per-pound copper price. At presstime A$1 equalled US71.8.
The gold-copper porphyry mineralization is both disseminated and vein-controlled. In higher-grade zones, native gold, chalcopyrite and bornite predominate are the ore minerals. Faults crosscut the area. Underground drilling has defined the resource at a 75-metre spacing in the higher-grade core and at a 120-metre spacing outside the core to the west.
This resource is adjacent to Newcrest’s Cadia Hill mine, separated from Cadia East by a fault. Beyond the fault, the porphyry extends for 2.5 km east of Cadia Hill. The Cadia East underground resource is 700-1,500 metres below surface.
The Cadia Hill mine produced 244,261 oz. gold and 37,380 tonnes copper during the year ended June 30, 2004. Production costs totalled A$435 per oz.
Construction at the Telfer project, 400 km southeast of Port Hedland in the northern part of Western Australia, is under way. Over the past year over 40 million tonnes of material have been moved to facilitate open-pit production. A haulage shaft is being developed to access underground ore. The tailings dam is complete and a gas pipeline should be working by mid-October. The mill is undergoing pre-commission testing and other infrastructure has been commissioned.
At June 30, 2003, the measured resource of the open-pit area at Telfer was estimated at 170 million tonnes grading 1.3 grams gold and 0.17% copper. The indicated resource, including underground and satellite deposits, totalled 250 million tonnes grading 1.9 grams gold and 0.2% copper. There is an additional inferred resource of 110 million tonnes grading 1.2 grams gold per tonne and 0.15% copper.
The resource equates to 26 million contained oz. gold and 960 million tonnes of copper. The mine-life is an estimated 20 years.
The Kencana deposit is about 1 km south of the past-producing Gosowong gold mine in Indonesia. It is jointly-owned by Newcrest (82.5%) and
The indicated resource stands at 310,000 tonnes grading 69 grams gold and 46 grams silver per tonne; the inferred resource is 530,000 tonnes grading 26 grams gold and 48 grams silver per tonne, for a total indicated and inferred 1.1 million oz. contained gold and 1.3 million oz. silver.
This estimate used a cutoff grade of 2 grams gold per tonne. Data from 77 holes drilled at about 25-metre spacing were used to calculate the resource. Mineralization remains open to the north, south and at depth.
The mineralized zone is generally 10-15 metres thick (25 metres maximum) and is found in a quartz adularia breccia in volcanic rock. A later quartz chlorite event formed the higher-grade mineralization. The structure strikes northwest and dips 35-55 northeast. No significant grades are found near surface; the resource is at a depth of 75-125 metres below surface.
Takeover target
Since May, Australian analysts have been speculating that Newcrest may become a takeover target by large gold producers.
Apart from the deposits mentioned above, Newcrest owns and operates the Ridgeway mine, near the Cadia mine in New South Wales. It produced 438,026 oz. gold and 47,378 tonnes of copper in the full year ended June 30. The total production costs at the mine during this period were A$172 per oz.
At June 30, 2003, Ridgeway had a measured resource of 41 million tonnes grading 2.2 grams gold and 0.72% copper and an indicated 21 million tonnes grading 1.9 grams gold per tonne and 0.62% copper. In addition there is an inferred 16 million tonnes grading 1.4 grams gold and 0.59% copper. The proven underground reserve stood at 9 million tonnes grading 3.1 grams gold and 0.84% copper.
In Indonesia, Newcrest’s Toguraci mine produced 79,493 oz. gold at a total production cost of A$280 (from June 30, 2003-June 30, 2004). At June 30, 2003, the deposit had probable reserves of 150,000 tonnes grading 43 grams gold per tonne (or 210,000 contained oz.). Milling takes place at Newcrest’s Gosowong mill.
Once the Telfer mine is up and operating, a JP Morgan analyst speculates, the risk will be lower and a Newcrest takeover is probable. Net profit for the fiscal year ended June 30, 2004, is A$122.9 million, up from A$92.2 million in the previous year.
The value of Newcrest hit a 17-year record high in July. Newcrest is Australia’s largest gold company by market cap (currently at about A$4.8 billion). Total debt is around A$1 billion, but once the Telfer mine is in production, the company says its debt will be eliminated in about four years.
The company has restructured its hedge book and negotiated 5.37 million oz. of gold forwards at A$599 per oz., as well as 1.85 million oz. at US$355 per oz. to the end of the 2010-2011 financial year. A further 527,000 oz. are dedicated towards a gold loan. Copper (227,000 tonnes) has also been sold forward. In gold terms the hedging accounts for about 26% of reserves and 13% of resources.
Financial results
Newcrest recently released its financial results for the 12 months ending June 30. Its net profit after tax stands at A$122.9 million, an increase of A$30.7 million over the previous year.
Gold production was 761,780 oz. (up from 714,377 oz.) and the achieved gold price was A$579 per oz. (for total sales of 754,745 oz.).
Copper by-product revenue increased to A$270.3 million (from A$192.8 million) on copper sales of 84,231 tonnes of copper. Both Ridgeway and Cadia sold more copper, and the realized copper price was up to A$1.44 from A$1.28 per pound.
Exploration expenditures totalled A$45.4 million and care and maintenance at Gosowong and Boddington totalled A$8.7 million. Capital, feasibility, development and exploration expenditures totalled A$753.4 million (up from A$265.4 million), primarily (A$666.7 million) because of the Telfer project.
The company maintained a dividend of A5 per share that will be payable in October. Newcrest has about 330 million shares outstanding and recently traded at about A$14.50.
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