Newcrest Mining — FY2015 Earnings Presentation
53 slides from Newcrest Mining's earnings presentation, Aug 17, 2015
Slide 1: 2015 Full Year Financial Results
2015 Full Year Financial Results 17 August 2015 Sandeep Biswas Managing Director and Chief Executive Officer Gerard Bond Finance Director and Chief Financial Officer
Slide 2: Disclaimer – Forward Looking Statements
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 3: Disclaimer – Competent Person's Statement
Disclaimer Competent Person’s Statement The information in this presentation that relates to Exploration Targets, Exploration Results, Mineral Resources and Ore Reserves, is based on information compiled by Mr C. Moorhead. Mr Moorhead is the Executive General Manager Minerals and a full-time employe
Slide 4: Overview
Overview Slides Cadia underground Financial Year 2015 Summary 5 – 12 Review by operation 13 – 18 Financial results 19 – 28 Update on key assets 29 – 39 Growth 40 – 42 Summary 43 Q&A and Appendices 44 – 52 4
Slide 5: Safety & environment
Safety & environment Lost Time Injury Frequency Rate per million hours • 2 fatalities in FY15 0.65 – Hidden Valley (Dec 2014) 0.36 0.42 – Telfer (May 2015) • 1 fatality in FY16 FY13 FY14 FY15 – Hidden Valley (July 2015) Total Recordable Injury Frequency Rate • NewSafe program launched per million ho
Slide 6: Financial Year 2015 summary
Financial Year 2015 summary Good financial results • All-In Sustaining Cost1 of USD 789/oz2 • USD net debt reduction of USD 819m • Statutory profit of AUD 546m • Underlying profit of AUD 515m • Free cash flow of AUD 1,086m • Edge program cash benefit of ~AUD 390m to date • Nine consecutive quarters
Slide 7: Looking ahead
Looking ahead Update on key asset reviews • Lihir Pit Optimisation Study – potential for lower development costs • Telfer Future Options Review – asset retained and initial cutbacks approved • Cadia continued ramp-up – Panel Cave 2 recommenced Positioning for growth • New Chief Development Officer a
Slide 8: Newcrest maintains leading cost position
Newcrest maintains leading cost position 1 1250 AngloGold Barrick Gold Fields 1150 USD AISC3 + Interest Expense per ounce1 1050 950 Kinross Newcrest 850 Goldcorp Newmont 750 Note: Width of bubble size represents relative size of gold reserves 650 0 5 10 15 20 25 30 35 40 Indicative Reserve life year
Slide 9: Edge program delivering cash and cultural change
Edge program delivering cash and cultural change • Newcrest’s Edge program has delivered cash benefits1 of ~AUD 390m to date • Value delivered from improvement in operational performance, costs, working capital and overhead • Key focus areas continue to be: – safety – operational discipline – cash g
Slide 10: Edge example – Gosowong delivering results
Edge example – Gosowong delivering results • Overhaul equipment and rebuild components on site – delivering value of USD 3.5m per annum • Resin injection and expanding foam to mine and manage fall of ground and voids – injecting resin to fill the voids allowing stabilisation of ground to mine high g
Slide 11: Performance against key objectives
Performance against key objectives Financial objective1 Outcomes Deliver on production and cost Nine consecutive quarters delivered of meeting or exceeding guidance guidance AISC2 A$ million spend was below lower end of guidance range Low cost curve position Group USD 789 AISC/oz, 12% lower th
Slide 12: New senior leadership appointments and accountabilities
New senior leadership appointments and accountabilities Michael Nossal Craig Jones Philip Stephenson Craig Jetson Chief Development Officer General Manager Executive General Manager Executive General Manager Commenced July 2015 Reporting to CEO Global exploration Panel Cave Operations Operations Ope
Slide 13: Financial Year 2015 operational overview
Financial Year 2015 operational overview • Gold production of 2,422,568 ounces up 1% on FY14 • Copper production of 96,816 tonnes up 12% on FY14 • Group AISC1 of USD 789/oz down 12% on FY14 • Group AISC margin increased to USD 447/oz • Cadia – Ridgeway & Panel Cave 1 both outperformed expectations •
Slide 14: Cadia - continues its ramp-up
Cadia - continues its ramp-up All-In Sustaining Cost 1 Operational overview per ounce • Gold production 13% higher than FY14 AUD AISC USD AISC • Copper production 22% higher than FY14 • Full year free cash flow of AUD 606m • Panel Cave 2 (PC2) development work recommenced during Q4 2015 FY13 FY14 FY
Slide 15: Lihir – focused on operational improvements
Lihir – focused on operational improvements All-In Sustaining Cost 1 Operational overview per ounce • FY15 gold production down 5% on 9% lower grade compared to FY14 AUD AISC USD AISC • USD AISC per ounce up 1% compared to FY14 • Key levers remain plant uptime and intensity improvements • Full year
Slide 16: Telfer – Future Options Review progressed
Telfer – Future Options Review progressed All-In Sustaining Cost1 Operational overview per ounce • Telfer Future Options Review – maximum value by retaining asset AUD AISC USD AISC • Fatality in May 2015 • Fourth quarter FY15 impacted by: – underground mine operations restricted from mid May to Augu
Slide 17: Overview of other operations
Overview of other operations Bonikro Gosowong Hidden Valley per ounce AUD AISC USD AISC AUD AISC USD AISC AUD AISC USD AISC 1,751 1,799 2,407 2,472 1,4841,369 1,961 AISC1 1,627 1,501 1,4911,331 1,536 992 907 1,132 1,011 742 990 913 897 801 833 652 1,205 1,102 581 664 682 683 625 FY13 FY14 FY14 FY15
Slide 18: Financial Year 2016 production guidance
Financial Year 2016 production guidance1 Operation Gold Production Operation Copper Production Cadia 650 – 700 koz Cadia Valley ~ 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
Slide 19: 2015 Full Year Financial Results
2015 Full Year Financial Results
Slide 20: 2015 Full Year financial highlights
2015 Full Year financial highlights Cadia Profitability • FY15 Statutory profit of AUD 546m (FY14 Statutory loss of AUD 2,221m) • Underlying profit up 19% to AUD 515m 1 • EBITDA of AUD 1.7bn • EBITDA margin 39% 1 • Improved AISC margin Cash Flow • Cash flow from operating activities of AUD 1.6bn • F
Slide 21: Disciplined cost management underpins performance
Disciplined cost management underpins performance All In Sustaining Cost1 margin FY15 Performance overview USD/oz • Financial performance driven by: 1,030 – Edge program 447 433 67 512 484 (192) – increased production of higher margin ounces from Cadia – net effect of lower AUD • Lower production st
Slide 22: Group underlying profit
Group underlying profit 1 Underlying profit up 19% to AUD 515m compared to corresponding period • Increased contributions from higher margin production at Cadia East • Weakening of the AUD against the USD increased AUD gold and copper price • Site production costs adversely impacted by higher USD de
Slide 23: Increased free cash flow
Increased free cash flow 1 Free cash flow by site (AUDm) 1,086 606 53 271 154 192 (15) (175) 2 Other Hidden Valley Bonikro Lihir Gosowong Telfer Cadia Group Free cash flow reconciliation FY14 to FY15 552 1,086 (AUDm) 17 105 53 108 118 133 FY14 Production stripping Sustaining capex Major projects Exp
Slide 24: A strong balance sheet remains a priority
A strong balance sheet remains a priority Strong FY15 result = strengthened Newcrest balance sheet Updated financial policy parameters targeting: Metric Target 30 June 2015 30 June 2014 Leverage ratio Less than 2.0x 2.2x 2.6x (Net debt/EBITDA) Gearing Ratio Less than 25% 29% 34% Credit rating Aim to
Slide 25: Long-dated debt maturity profile
Long-dated debt maturity profile Maturity profile as at 30 June 20151,2 USDm $1,400 US Private Placement Rule 144A Bonds $1,200 Bilateral Loan Facilities - Drawn Bilateral Loan Facilities - Undrawn $1,000 $800 $600 $400 $200 $0 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY42 1 Assuming longes
Slide 26: Financial covenants comfortably satisfied
Financial covenants comfortably satisfied Financial covenants 1 Minimum Total Net EBITDA & Assets 1 Drawn 30 EBITDA Tangible Liabilities of Borrower & Provider of June 2015 Interest Net to Tangible Guarantors as a Average debt funds USDm Coverage Worth Net Worth % of group interest rate 13 Banks 975
Slide 27: Gearing ratio impacts of currency translation
Gearing ratio impacts of currency translation Debt FX translation & other 30 June reduction Profit after Net 30 June AUDm 2014 and cash Net debt Total equity tax movement 2015 increase Net debt 3,935 (1,070) 896 (174) 3,761 Total equity 7,707 806 546 1,352 9,059 Gearing 33.8% (5.7)% 4.7% (2.1)% (1.4
Slide 28: Significant items (after tax and non-controlling interests)
Significant items (after tax and non-controlling interests) Item AUDm Driver • Strong operating and financial performance during 2015 • Increased value of future developments per the Telfer Future Options Review Telfer 376 • Favourable impact of AUD currency depreciation against the USD • Partly off
Slide 29: Update on key assets and growth
Update on key assets and growth
Slide 30: Lihir Pit Optimisation Study – a work in progress
Lihir Pit Optimisation Study – a work in progress Lihir • Targeting completion of Pre Feasibility Study by end of December 2015 • Pre Feasibility Study is looking to a) optimise the mine plan, and b) review seepage barrier options to ensure: – cash flow maximisation – capital efficiency – risk mitig
Slide 31: Lihir Pit Optimisation Study – orebody profile
Lihir Pit Optimisation Study – orebody profile 1 km Pacific Ocean Low grade stockpile Minifie stockpile Inner harbour Kapit North low grade stockpile Grade Mineralisation1 Stockpile Kapit >1 g/t Au Kapit stockpile Lienetz Minifie 2-3 g/t Au Low grade >3 g/t Au stockpile Integrated mining sequence Th
Slide 32: Integrated mining sequence possibility being examined
Integrated mining sequence possibility being examined N Kapit stockpile Stage 1&2a Minifie SP Stage 1&2a Stage 2b Stages 1 1-2g/t & 2a 2-3g/t N >3g/t Stage 3 Resource shell3 Lienetz Minifie Ore reserve design3 Kapit Ore Ore A potential scenario for Lihir being examined: Timing Tonnes to Ex-pit Tonne
Slide 33: Three seepage barrier options being studied (continued)
Three seepage barrier options being studied (continued) Low grade stockpile Stage 1&2a Existing harbour 1. Coffer Dam Wall Stage 1&2a Coffer Dam waste platform Potentially not required until Pit wall N Ocean 2030+ 1,2 Capital cost ~USD 625m Engineered Resource shell2 Current reserve case mater
Slide 34: Three seepage barrier options being studied (continued)
Three seepage barrier options being studied (continued) Low grade stockpile Low grade stockpiles Existing harbour 3. Clay infill using clay waste Stage 1&2a Stage 1&2a waste platform Compacted clay seepage barrier Ocean Pit wall Option needs testing Compacted clay infill Current focus of study
Slide 35: Potential scenario for pit optimisation sequence employing a Near Shore Cut-off Wall
Potential scenario for pit optimisation sequence employing a Near Shore Cut-off Wall Pit animation NOT TO SCALE. The images are illustrative only. Subject to further study, investment approval, receipt of all necessary permits and approvals and are subject to changes in market and operating conditio
Slide 36: Potential scenario for pit optimisation sequence employing a Near Shore Cut-off Wall
Potential scenario for pit optimisation sequence employing a Near Shore Cut-off Wall Pit animation NOT TO SCALE. The images are illustrative only. Subject to further study, investment approval, receipt of all necessary permits and approvals and are subject to changes in market and operating conditio
Slide 37: Cadia – Panel Cave 2 seismic event update
Cadia – Panel Cave 2 seismic event update • Feb 2015 seismic event caused localised damage – in drawbell and extraction drives – required rework and some design tuning • Cave establishment and propagation process requires stress redistribution and release • Seismicity occurs as stress releases and i
Slide 38: Cadia – Panel Cave 2 moving to advanced undercut method
Cadia – Panel Cave 2 moving to advanced undercut method Post undercut method: Advanced undercut method: • Stress taken by extraction level (EXL) • Stress shadow created on extraction level, providing greater • Faster and more efficient, as material from undercut protection for permanent infrastructu
Slide 39: Telfer Future Options Review
Telfer Future Options Review • Decision made to retain Telfer • Initial open pit cutbacks approved – West Dome Stage 2 and Main Dome Stage 6/7 – total capex of approximately AUD 46m – extending open pit to December 2017 • Future open pit cutbacks still subject to study – likely to be staged, progres
Slide 40: Telfer orebody
Telfer orebody Cutbacks FY16-FY18 Cutbacks FY19+ WD Stg 3 MD Stg 6/7 Final MD Stg 6/7 MD Stg 4 WD Stg 2 Interim WD Stg 2 Final Proposed development of Telfer mining operations1 Total material Timing Total material Open pit ore Open pit Open pit Underground ore Underground Underground moved (years) m
Slide 41: Golpu a world class copper-gold deposit
Golpu a world class copper-gold deposit • World class ore body with Mineral Resources of 9mt of copper and 20moz of gold (100%)1 • Stage one Feasibility Study scheduled to be completed by December 2015 • Stage two Pre-Feasibility Study scheduled to be completed by December 2015 • Permit for advanced
Slide 42: Global search for new ore bodies – FY16 priorities
Global search for new ore bodies – FY16 priorities Far East Russia Alaska Eastern Europe West Africa Central America PNG Indonesia Wamum – Search for new discoveries Portfolio rebuild MEJV target generation Côte D’Ivoire Latin America SW Pacific CDI Fiji Rebuild portfolio - property generati
Slide 43: Seeking value creation through exploration and project entry
Seeking value creation through exploration and project entry Greenfields – restocking and advancing the portfolio • Mungana JV (Queensland, Australia) – Centred on a metal rich district – targeting Gold-Copper porphyry related mineralisation • Southern Coromandel JV (New Zealand) – located in highly
Slide 44: Summary
Summary Good financial results 1 2 • All-In Sustaining Cost of USD 789/oz • USD net debt reduction of USD 819m • Free cash flow of AUD 1,086m Clarity on strategy • Lihir Pit Optimisation Study – potential for lower development costs • Telfer Future Options Review – asset retained and initial cutback
Slide 45: Questions & Answers
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Slide 46: Appendices
Appendices
Slide 47: Underlying Profit reconciliation
“Underlying Profit” reconciliation 30 June 2015 30 June 2014 12 months ended AUDm AUDm Statutory Profit 546 (2,221) Research and development tax claim amendment - 120 Asset impairment (reversal)/ Inventory write downs1 (12) 2,499 Restructure costs (after tax) - 34 Gain on disposal of associate (19)
Slide 48: Financial Year 2016 production guidance
Financial Year 2016 production guidance1 Operation Gold Production Operation Copper Production Cadia 650 – 700 koz Cadia Valley ~ 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
Slide 49: 2016 cost and capital guidance
2016 cost and capital guidance1 Gosowong Hidden Bonikro Corporate Cadia Lihir Telfer (100%) Valley (50%) (100%) & Other Group AUDm AUDm AUDm AUDm AUDm AUDm AUDm AUDm 2,3 All-In Sustaining Cost 240-290 1,050-1,150 680-730 290-330 120-140 190-210 90-100 2,650-2,950 Capital expenditure • Production str
Slide 50: 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 AUD 35 m Oil hedges entered into for FY16 for ap
Slide 51: Long-term metal assumptions used for Reserves and Resources estimates
Long-term metal assumptions used for Reserves and Resources estimates 1 Long Term Metal Assumptions Newcrest Managed MMJV Managed Mineral Resources Estimates Gold Price USD 1,350/oz USD 1,400/oz Copper Price USD 3.40/lb USD 3.50/lb Silver Price USD 23/oz USD 25/oz Ore Reserves Estimates Gold Price U
Slide 52: Peer comparison reserves and reserve life
Peer comparison reserves and reserve life Reserves - Gold (Moz)1,2 Reserve Life - Gold (Years)1,2 90 31 86 75 23 54 50 48 17 16 16 15 34 13 1 Reserves reflect proven and probable gold reserves (contained metal) as at 31 December 2014 for all companies, obtained from company statements and adjusted t
Slide 53: Lihir – Operating Strategy
Lihir – Operating Strategy • Implemented December 2014 • Actively manage autoclave throughput based on sulphur content of feed to maximise gold production • Extent of oxidation is optimised/reduced with limited impact on gold recovery – Microcrystalline pyrite - more reactive with higher gold conten