Newcrest targets copper output hike, gives the nod to new explorations

Highlights

  • Newcrest Mining said that its new projects could help in lifting copper production by 37% in the long term.
  • Australia’s largest gold miner reported pre-feasibility studies across four possible new gold and copper projects.
  • The projects include the Red Chris mine, Lihir mine, Havieron mine, and the Cadia PC1-2 mine. 

Gold miner Newcrest Mining Ltd (ASX:NCM) on Monday said that its new projects could help in lifting copper production by 37% in the long term. In its latest ASX update released on Tuesday, Australia’s largest gold miner reported pre-feasibility studies across four possible new gold and copper projects. It has the approval for new project explorations.

These projects have a potential to offer an internal rate of return of 16% or higher. The miner updated the market on four growth projects, including its Canadian Red Chris operation that it bought in 2019, the Havieron gold project in Western Australia, and expansions at Lihir in Papua New Guinea and Cadia in Australia.

“Projections generated by PFS studies for these projects indicate compelling rates of return and material improvement in operating margin and cash flow. These projects target a 37% increase in copper output and a reduction in already low All-In Sustaining Cost per ounce by more than 50% over the next decade, with the majority of new investments in Tier 1 jurisdictions,” said chief executive Sandeep Biswas.

The company also said that the projected growth profile of its copper production was expected to allow it to participate in the potential opportunities presented by a global shift to decarbonisation.

Even as Newcrest was primarily a gold company, it would continue to have a substantial and increasing exposure to copper, Biswas added.

Production costs to halve

Newcrest said that it expected the production costs to halve in the coming 10 years. It also forecast a surge in the output of copper.

In financial year 2020-21, the company produced 2.1 million ounces of gold.

The miner expects to produce nearly 2 million ounces of gold a year until at least 2030. According to the company, the all-in sustaining costs are expected to drop by more than 50% to less than US$500 per oz, partly helped by the production of copper as a byproduct.

The company also expects the copper production from its Australian and Canadian mines to jump 37% to around 175,000 tonnes by the end of the decade from current levels, raising its exposure to rising copper demand from the push for green energy.

Newcrest Mining in FY21

In its latest financial results released in August, Newcrest reported a record US$1.1 billion in free cash flow conversion for FY21, up from US$804 million in 2019.

The statutory profit was US$1.16 billion, up from US$647 million a year ago. Newcrest recorded a return on capital employed (ROCE) of 18.5% in FY21, up from 13.8% in the previous year.

Meanwhile, the stock is down just over 10% so far this year. The past year returns are down over 24%. At 12:05 PM (AEST), the stock was trading up 1.26% at AU$24.20.

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