Newcrest Mining
(ASX:NCM), the country's largest gold miner, is poised to be acquired by Newmont in a US$19 billion all-paper deal. The company's transition away from independence is marked by a lacklustre performance, as it reported a 10.8% decline in annual profits on Friday.
In what serves as its final financial report, Newcrest's directors attributed the earnings dip to elevated operating and finance costs. The underlying profit for the year ending June 30 was US$778 million (A$1.194 billion), compared to $872 million the previous year. This outcome, however, exceeded analyst forecasts of approximately $689.7 million.
Group revenue for the year through June increased by 7% to reach US$4.508 billion. The board declared a final dividend of 20 US cents a share, culminating in a total of 55 US cents for the year, after a 35 US cent interim dividend and a special dividend of 20 US cents a share were disbursed earlier in the year.
Directors noted that Newcrest achieved an 8% increase in gold production, amounting to 2.1 million ounces, compared to the prior period. This increase was attributed to factors such as a full year of production from Brucejack (as opposed to four months in the prior period), higher gold production at Cadia following upgrades to the SAG mill motor, and increased gold production at Fruta del Norte.
However, this growth was offset by reduced gold production at Telfer due to lower mill throughput and head grade, as well as challenges faced by Lihir, where extreme weather events and unplanned downtime negatively impacted mill availability. Drought conditions and subsequent heavy rainfall affected operations, constraining mill throughput and disrupting ore delivery.
Copper production demonstrated a 10% growth, totalling 133,100 tonnes, primarily attributed to increased copper production at Cadia following upgrades to the SAG mill motor.
The underlying profit of US$778 million was US$94 million lower compared to the previous year. This reduction was primarily due to factors such as a lower realised copper price, heightened depreciation, increased operating costs, a decline in Newcrest's share of associate profits, and higher finance costs resulting from increased debt and interest rates.
These effects on underlying profit were partly mitigated by the inclusion of Brucejack, a greater contribution from low-cost Cadia production, positive currency movements against the US dollar, favourable fair value adjustments related to investments in Fruta del Norte finance facilities, reduced income tax expenses due to decreased profitability, and higher molybdenum revenue from increased sales.
Newcrest reported an All In Sustaining Cost (AISC) of US$1,093 per ounce, reflecting a 5% increase from the prior period. This rise was primarily driven by a lower realised copper price and heightened operating costs. However, these impacts were somewhat offset by contributions from low-cost Cadia production, the inclusion of Brucejack, favourable currency movements, and reduced production stripping activity."
