NVDA gained a massive 197% since our AI first added it in November - is it time to sell? 🤔Read more

UPDATE 2-Newcrest Q2 gold output drops, flags drought risk to output

Published 30/01/2020, 02:41 pm
© Reuters.  UPDATE 2-Newcrest Q2 gold output drops, flags drought risk to output
NCM
-
HARJ
-

* Output at Cadia could be impacted by Dec if drought persists

* Lihir, Telfer mines under review after lower production

* Newcrest shares drop by as much as 5.1%

(Adds analyst comment, detail on drought, share price reaction)

MELBOURNE, Jan 30 (Reuters) - Australia's Newcrest Mining Ltd NCM.AX posted a 16% drop in second-quarter gold output on Thursday due to shutdowns at its Lihir mine, and flagged that production at its flagship Cadia mine could be impacted by year-end if a drought persists.

Newcrest said it was putting together "corrective action plans" on its Lihir and Telfer mines "with the objective of improving their performance over the next six months."

The lower production over the October-December quarter was a result of shutdowns at its Lihir mine in Papua New Guinea as well lower ore grades there and at Telfer in Australia.

"It is a soft production result. As you can see, the market has sold it off," said Dan Morgan of UBS in Sydney.

Shares in Newcrest fell by as much as 5.1% before trimming the losses, trading around A$30.20 ($20.65), down about 3.7%.

Australia's biggest independent gold producer said production at Cadia could be hit this year if a drought continues in New South Wales state.

"Newcrest's internal modelling ... indicates that if rainfall remains at 1-in-100 year lows (with the last two years being at this level) then production may be impacted by the end of calendar year 2020," the miner said.

Bushfires that have scorched Australia over the southern hemisphere summer have damaged train lines and associated infrastructure, delaying shipments, but have had no direct impact on the Cadia mine, it said.

Bushfires in Australia have killed 33 people and about 1 billion animals since September, while some 2,500 homes and an area the size of Greece have been destroyed. trains have been scheduled and the expectation is that these (Cadia) concentrate stocks will be cleared in the March 2020 quarter," the miner said in a statement.

Cadia reported a 40% increase in output in the second quarter of the financial year compared with the previous quarter.

The Melbourne-based company also said Papua New Guinea withdrew support for a memorandum of understanding related to the Wafi-Golpu joint venture (WGJV) due to delays caused by legal proceedings.

"(Papua New Guinea) intends to resolve legal proceedings and to work with the WGJV to expedite the project permitting discussions," the miner said.

The PNG government in September said it wants to keep 40% of gold produced from the proposed project, creating potential hurdles for Newcrest and co-owner Harmony Gold HARJ.J . total gold production fell to 551,115 ounces in the three months ended Dec. 31, from 654,849 ounces a year earlier. It maintained its fiscal 2020 gold production forecast at between 2.38 million and 2.54 million ounces.

($1 = 1.4622 Australian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.