Newcrest Mining — H1 FY16 Earnings Presentation
50 slides from Newcrest Mining's earnings presentation, Feb 15, 2016
Slide 1: ASX market release cover note
LEVEL 9 To: Company Announcements Office 600 ST KILDA ROAD MELBOURNE From: Francesca Lee VICTORIA 3004 AUSTRALIA Date: 15 February 2016 PO BOX 6213 Subject: Half Year Financial Results Market Release ST KILDA ROAD CENTRAL MELBOURNE 8008 T +613 9522 5333 F +613 9525 2996 www.newcrest.com.au Please fi
Slide 2: FY16 Half Year Financial Results
FY16 Half Year Financial Results 15 February 2016 Sandeep Biswas Managing Director and Chief Executive Officer Gerard Bond Finance Director and Chief Financial Officer
Slide 3: Disclaimer
Disclaimer Forward Looking Statements These materials include forward looking statements. Often, but not always, forward looking statements can generally be identified by the use of forward looking words such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “continue”, “outloo
Slide 4: Disclaimer
Disclaimer Ore Reserves and Mineral Resources Reporting Requirements As an Australian company with securities listed on the Australian Securities Exchange (“ASX”), Newcrest is subject to Australian disclosure requirements and standards, including the requirements of the Corporations Act and the ASX.
Slide 5: Update on rescue effort
Update on rescue effort Kencana underground mine, Gosowong Indonesia Failure zone Location of trapped miner 4
Slide 6: Update on rescue effort
Update on rescue effort • 8 February - ~8:30pm local time a geotechnical event occurred • Mine evacuated – Pak Mursalim Sahman trapped • Three levels of crisis management team immediately established and global expertise accessed • 9 February - contact made with Pak Mursalim Photo taken by Pak Mursa
Slide 7: Overview
Overview Slides Telfer gold room Safety 7 Half Year FY16 Summary 8 - 16 Financial results 17 - 23 Update on Lihir, Golpu & Cadia 24 - 34 Growth 35 - 36 Summary 37 Appendices 38 - 49 6
Slide 8: Safety – Three focus areas
Safety —- Three focus areas Everybody going home safe and healthy every day Zero fatalities and life-changing injuries Build a stronger Critical Robust safety culture controls for process safety through every high-risk management NewSafe task Supported by the right systems and tools Qu
Slide 9: Half Year FY16 Summary
Half Year FY16 Summary 1 2 • Statutory profit USD 81m and Underlying profit USD 63m 2 • Free cash flow of USD 254m • Net debt reduction of USD 235m from 30 June 2015 • Gold production up 6% half-on-half to 1.2Moz • Copper production down 23% half-on-half to 39kt 2 • EBITDA margin of 35% 2 2 • 5% low
Slide 10: Lihir – Focus on operational improvements starting to deliver
Lihir – Focus on operational improvements starting to deliver All-In Sustaining Cost 1 H1 FY16 operational overview USD per ounce • AISC of USD 890/oz for H1 FY16 (28% improvement period on period) • Production increase of 37% half-on-half 1,158 1,239 1,085 890 • Achieved 12.4 mtpa grinding throughp
Slide 11: Lihir – Breaking the reactive maintenance cycle
Lihir – Breaking the reactive maintenance cycle Grinding Utilisation (run time / calendar time) Improving the maintenance cycle 12 Month Moving Average • ‘Runtime’ (or availability) has been a key focus 95.0% • Have successfully improved planned v unplanned maintenance 90.0% • Scope for even more im
Slide 12: Lihir – Water initiatives being implemented
Lihir – Water initiatives being implemented Rainfall at Upper Londolovit1 Water Usage2,3 Monthly average (mm) Cubic metres per hour 600 Average rain/month (2010 - 2014) 2015 3,700 Cubic metres per hour 500 Available Water3 400 1,300 300 467 200 12mtpa Improvements 12mtpa 370 350 312 316 348 352 (pri
Slide 13: Cadia – Challenging first half FY16
Cadia – Challenging first half FY16 All-In Sustaining Cost1 H1 FY16 operational overview USD per ounce • Fatality in September 2015 299 • Gold and copper production impacted by main SAG Mill motor 210 246 197 issue • SAG mill repaired and bypass built to mitigate impact of any future mill outages FY
Slide 14: Cadia – Transitioning to Cadia East
Cadia – Transitioning to Cadia East Ore processed at Cadia by ore source1,2 Rolling 12 month (tonnes) • Panel Cave 2 undercut progressing as planned 35000 • Early stages of Panel Cave 1 interaction with Panel Cave 30000 2 progressing in accordance with cave management plan 25000 • Ridgeway scheduled
Slide 15: Cadia – Update on Concentrator 1 SAG mill outage
Cadia – Update on Concentrator 1 SAG mill outage1 • Following repairs, Concentrator 1 SAG Mill now operating at full capacity • Will eventually require full rewind or replacement; currently assessing best option • Bypass conveyor installed - will reduce impact of any future downtime (including plann
Slide 16: Telfer – First half FY16 impacted by access to ore
Telfer – First half FY16 impacted by access to ore All-In Sustaining Cost1 H1 FY16 Operational overview USD per ounce • Waste stripping continues on stages 6 / 7 of Main Dome 925 955 • AISC per oz was impacted by: 760 824 – constraints on open pit and underground activity reducing ore grade to the m
Slide 17: H1 FY16 - Overview of other operations
H1 FY16 - Overview of other operations1 Bonikro Gosowong Hidden Valley 1,853 AISC USD per ounce 1,099 1,535 988 756 794 737 1,287 1,334 797 651 2 574 Gold production FY14 H1 FY15 H2 FY15 H1 FY16 FY14 H1 FY15 H2 FY15 H1 FY16 FY14 H1 FY15 H2 FY15 H1 FY16 72 74 172 197 47 134 141 53 48 49 46 28 koz FY1
Slide 18: 2016 Half Year Financial Results
2016 Half Year Financial Results
Slide 19: FY16 Half Year financial highlights
FY16 Half Year financial highlights Cadia Profitability • Statutory profit USD 81m and Underlying profit USD 63m 1 1,2 2 • EBITDA USD 545m • EBITDA margin2 35% • AISC margin USD 343/oz (or 31%) 2 Cash Flow • Cash flow from operating activities of USD 367m • Free cash flow2 of USD 254m Balance Sheet
Slide 20: Margins impacted by metal prices, copper volumes & FX
Margins impacted by metal prices, copper volumes & FX All In Sustaining Cost1 margin H1 FY16 Operating Margins1 USD/oz % EBITDA EBIT AISC 40% 867 36% 38% 35% 34% 343 376 316 31% 158 223 24% 21% (740) 12% H1 FY15 H2 FY15 H1 FY16 1 Refer to slide 3 “Non-IFRS Financial Information” 19
Slide 21: Group Underlying profit of USD 63m
Group Underlying profit of USD 63m 1 • USD 222m negative impact from commodity prices • Higher gold production from Lihir and Bonikro offset by lower gold and copper production from Cadia and Telfer • Operating costs benefitting from weakening of operating currencies against US dollar Underlying Pro
Slide 22: Increased free cash flow
Increased free cash flow 1 Free cash flow by site (H1 FY16) (USDm) 254 37 127 11 21 87 (16) (13) 2 Hidden Valley Other Gosowong Bonikro Telfer Lihir Cadia Group Free cash flow reconciliation H1 FY15 to H1 FY16 88 44 1 254 214 28 (7) (114) (USDm) H1 FY15 Production Sustaining capital Major projects E
Slide 23: Long-dated debt maturity profile
Long-dated debt maturity profile Maturity profile as at 31 December 20151,2 USDm $1,400 US Private Placement Rule 144A Bonds Bilateral Loan Facilities - Drawn $1,200 $1,000 $800 $600 $400 $200 $0 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY42 • USD 2.5bn remain undrawn on USD 3.15bn of commi
Slide 24: Improved performance against target financial policy parameters
Improved performance against target financial policy parameters 31 December 31 December Metric Target 30 June 2015 2014 2015 Leverage ratio Less than 2.0x (for trailing 12 months) 2.6x 2.2x 2.1x (Net debt/EBITDA) Gearing Ratio Less than 25% 34% 29% 28% Investment Investment Investment Credit rating
Slide 25: Three assets with life of 30+ Years
Three assets with life of 30+ Years
Slide 26: Lihir - New operating strategy unlocks lower capital option
Lihir - New operating strategy unlocks lower capital option REVISED OPERATING STRATEGY PIT OPTIMISATION SEEPAGE BARRIER OPTION Sulphur removed as a Changed from vertical to lateral constraint Reduced capital expenditure 12mtpa grinding throughput Staged cooling and rate achieved depressurisation Cap
Slide 27: Lihir Pit Optimisation Project - Prefeasibility Study
Lihir Pit Optimisation Project - Prefeasibility Study1 1 km Pacific Ocean Low grade Near Shore stockpile Cut-off Wall Minifie stockpile Inner harbour Kapit North low grade stockpile Grade Mineralisation Stockpile Kapit >1 g/t Au Kapit stockpile Lienetz Minifie 2-3 g/t Au Low grade >3 g/t Au stockpil
Slide 28: Seepage barrier options – comparison to prior study
Seepage barrier options – comparison to prior study 2015 PFS Pit 2015 Pit PFS 2013 Optimisation Study – Optimisation Study PFS1,2 Near Shore Cut Coffer Dam Wall1,2 Off1,2,3 Construction (seepage barrier) – includes ~USD 760m ~USD 625m ~USD 81m engineering and project management Feasibility study ~US
Slide 29: Near shore cut-off capital expenditure profile
Near shore cut-off capital expenditure profile Financial Year Capex Key Events • Geotechnical investigation, analysis and monitoring FY17–22 ~USD 22m • Compaction testing of the Inner Harbour fill • Feasibility and design work on Near Shore Cut-off Wall • Early infrastructure removal ~USD 38M • Exca
Slide 30: Lihir Pit Optimisation PFS based on indicative mine plan
Lihir Pit Optimisation PFS based on indicative mine plan1 N Kapit SP Stage 1 Minifie SP Stage 1 Stage 2 Stage 1 1-2g/t 2-3g/t Stage 3 Kapit >3g/t Stage 2 N Minifie Lienetz Lienetz Minifie Ore Ore Kapit Ore NOT TO SCALE. The image is North-South schematic through Minifie, Lienetz and Kapit, illustrat
Slide 31: Lihir – Engaging with the community
Lihir – Engaging with the community • Improved dialogue – group and one-on-one meetings • Greater involvement of General Manager Sewer Upgrade and Maintenance • Tax Credit Scheme projects progressing ― Lihir Secondary School completed Lihir Secondary School – 76 person boys dorm New Hanover High Sch
Slide 32: Lihir – Engaging with local companies
Lihir – Engaging with local companies • Newcrest tenders major contracts • Lihirian companies competed with international parties on safety, quality and price • Four recent awards to Lihirian-based companies NCS Lihir – Catering & Cleaning South Sea Lines - Shipping Anitua Radial Drilling Services –
Slide 33: Wafi-Golpu – Overview
Wafi-Golpu – Overview GOLPU GOLD RESOURCE • Updated Wafi-Golpu prefeasibility study of December 2014 identified improved business case for the project by splitting it into two stages • Stage One Feasibility and Stage Two Prefeasibility studies have been 19 million 1 reviewed by the Boards of Harmony
Slide 34: Wafi-Golpu – Stage One indicative timetable
Wafi-Golpu – Stage One indicative timetable1,2 Commence earthworks Ventilation shaft Block Cave 2 (BC2) BC2 at for declines sink commences cave establishment 6mtpa Receipt of Pre Mine Month 1 Month 10 Month 40 Month 60 Month 70 Month 85 Month 95 Development Agreement Block Cave 1 (BC1) BC1 1st produ
Slide 35: Cadia – Prefeasibility Study to 32mtpa commenced
1 Cadia – Prefeasibility Study to 32mtpa commenced • Internal project team established • PFS targeting completion by end FY16 • Options being explored – Increasing high pressure grinding rolls (HPGR) to be fed from either Coarse Ore Stockpile or HPGR Stockpile – Additional milling capacity – Investi
Slide 36: Exploration and early stage entry
Exploration and early stage entry1 PNG Fiji Wamum – Search for new discoveries • Target generation MEJV target generation Nicaragua Nicaragua Topacio Farm-in at Oro Verde Côte d’Ivoire Indonesia Portfolio rebuild PNG Indonesia CDI Co-operation Agmt Mungana Rebuild portfolio - property Pa
Slide 37: Ore Reserve update
Ore Reserve update Newcrest Gold Ore Reserve Changes 31 December 2015 (Moz) Key drivers 75 69 • Impact of lower gold price assumption – down USD 50/oz to USD 1,200/oz (2.9) (2.9) (0.2) • Reduction in gold considered economically mineable: – Telfer Vertical Stockwork Corridor (0.5 Moz) – Bonikro Push
Slide 38: Summary
Summary Good H1 FY16 results 1 • All-In Sustaining Cost of USD 770/oz 1 • Free cash flow of USD 254m • Net debt reduction of USD 235m Near term organic growth • Lihir Pit Optimisation Study - PFS complete • Cadia East continued ramp-up Longer term growth platform • Wafi-Golpu a world class growth op
Slide 39: Questions & Answers
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Slide 40: Appendices
Appendices
Slide 41: “Underlying Profit” reconciliation
“Underlying Profit” reconciliation1 31 December 2015 31 December 2014 6 months ended USDm USDm Statutory Profit 81 180 Gain on disposal of investment (18) - Total Significant Items (18) - Underlying profit2 63 180 Non-controlling interest in controlled entities 8 6 Income tax expense 42 112 Net fina
Slide 42: All-In Sustaining Cost and All-In Cost to cost of sales reconciliation
All-In Sustaining Cost1 and All-In Cost1 to cost of sales reconciliation 6 months to 31/12/15 6 months to 31/12/14 USDm USD oz USDm USD oz Gold sales (koz)2 1,199 - 1,167 - Cost of Sales 1,316 1,099 1,368 1,190 less Depreciation (347) (290) (258) (224) plus By-product revenue (213) (178) (357) (311)
Slide 43: Financial Year 2016 production guidance
Financial Year 2016 production guidance1 Operation Gold Production Operation Copper Production Cadia 650 – 700 koz Cadia ~ 65 kt Lihir 770 – 850 koz Telfer ~ 20 kt Telfer 470 – 520 koz Group 80 – 90 kt Gosowong 300 – 350 koz Operation Silver Production Hidden Valley (50%) 80 – 100 koz Group 2.0 – 2.
Slide 44: Updated USD guidance
Updated USD guidance1,2 Gosowong Hidden Bonikro Cadia Telfer Lihir (100%) Valley (50%) (100%) Other Group USDm USDm USDm USDm USDm USDm USDm USDm All-In Sustaining Cost 165-195 475-500 740-815 235-265 90-100 125-145 70-80 1,900-2,050 Capital expenditure • Production stripping - 30-35 30-40 - - 5-10
Slide 45: Operating costs – foreign currency exposure estimates
Operating costs – foreign currency exposure estimates The below represents an indicative currency exposure on operating costs by site for first half FY16 USD AUD PGK IDR CFA Other Total Cadia 20% 80% - - - - 100% Telfer 20% 80% - - - - 100% Lihir 20% 30% 45% - - 5% 100% Gosowong 40% 10% - 50% - - 10
Slide 46: FY16 foreign exchange sensitivities and oil hedges
FY16 foreign exchange sensitivities1 and oil hedges Foreign Exchange Full Year Site Parameter Movement EBIT Impact Lihir USD/PGK + PGK 0.10 USD 12 m Hidden Valley USD/PGK + PGK 0.10 USD 2 m Gosowong USD/IDR + IDR 1,000 USD 5 m Group AUD/USD - AUD 0.01 USD 19 m Oil hedges entered into for FY16 for ap
Slide 47: Long-term metal assumptions used for Reserves and Resources estimates
Long-term metal assumptions used for Reserves and Resources estimates 1 Newcrest & MMJV Long Term Metal Assumptions Managed Mineral Resources Estimates Gold Price USD 1,300/oz Copper Price USD 3.40/lb Silver Price USD 21.00/oz Ore Reserves Estimates Gold Price USD 1,200/oz Copper Price USD 3.00/lb S
Slide 48: Lihir – operating strategy
Lihir – operating strategy • Actively manage autoclave throughput based on sulphur content of feed to maximise gold production Microcrystalline pyrite1 – appears more reactive Crystalline (blocky) pyrite1 – appears less and generally has higher gold content reactive and generally has lower gold cont
Slide 49: Newcrest maintains leading cost position
Newcrest maintains leading cost position 1 1150 Barrick Gold Fields AngloGold 1050 USD AISC3 + Interest Expense per ounce1 950 Kinross Newcrest 850 Newmont Goldcorp 750 Newcrest H1 FY16 Note: Width of bubble size represents relative size of gold reserves 650 0 5 10 15 20 25 30 35 40 Indicative Reser
Slide 50: Forging a stronger Newcrest
@ BEY GREST Forging a stronger Newcrest Our mission Our vision _ Ahigh performance, no-nonsense culture focused on: he way in safe, responsible, > Safety ~— and profitable mining. > Operational discipline > Cash > Profitable growth. We deliver on our commitments. We value... We achieve superior resu