Newcrest Mining — FY2016 Earnings Presentation
55 slides from Newcrest Mining's earnings presentation, Aug 15, 2016
Slide 1: FY16 Results – Delivering performance
FY16 Results – Delivering performance Sandeep Biswas, Managing Director & CEO Gerard Bond, Finance Director & CFO 15 August 2016
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 – Reserves and Resources Reporting
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 4: Overview – Delivering performance
Overview – Delivering performance 4-5 Safety 6 - 10 Operational Review 11 - 17 Financial Strength Insert picture 18 - 27 Looking to the Future 28 Value Proposition 29 Q&A 30 - 54 Appendices 3
Slide 5: Safety transformation
Safety transformation Everybody going home safe and healthy every day Zero fatalities and life-changing injuries Build a stronger safety Critical controls for Robust process culture through NewSafe every high-risk task safety management Everybody making safer Verifying that the most Systematically a
Slide 6: FY16 safety performance
FY16 safety performance 1 2 TWO FATALITIES IMPROVED TRIFR1 BY YEAR END 5 Hidden Valley (July 2015) TRIFR 4 3 Cadia (September 2015) 2 1 0 FY14 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 3 NEWSAFE & CRITICAL 4 PROCESS SAFETY CONTROL MANAGEMENT NewSafe active at Cadia, Telfer & Standardising management of Gosow
Slide 7: FY16 highlights
FY16 highlights 1 GROUP PRODUCTION 2 LOWERED COSTS GUIDANCE MET FY16 AISC 2.4moz Au $762/oz 3 years of meeting guidance FY14 FY15 FY16 3 PROGRESSED GROWTH 4 REDUCED DEBT, OPTIONS DIVIDEND ANNOUNCED Leverage ratio 1.6x1 Gearing ratio 22.8% Final unfranked dividend US 7.5 cents 1 Based on Net Debt as
Slide 8: FY16 summary by asset
FY16 summary by asset Lihir Cadia Telfer Production koz 900 721 689 667 669 593 536 520 462 FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 AISC $/oz 1,158 1,156 967 830 925 791 299 203 274 FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 • Record milling & production • Ramp up of Cadia East • Transitioned
Slide 9: FY16 summary by asset
FY16 summary by asset Gosowong Bonikro Hidden Valley Production koz 345 332 197 95 120 138 106 95 73 FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 AISC $/oz 1,287 1,424 1,255 935 1,099 941 756 719 738 FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 • Geotechnical event in Feb 16 • Record production unde
Slide 10: Delivering on operational commitments
Delivering on operational commitments 1 SAFE ACHIEVEMENT 2 INCREASE LIHIR 3 COMPLETE LIHIR OF PRODUCTION GRINDING THROUGHPUT OPTIMISATION PFS 2.4moz Gold Achieved sustainable Released PFS 83kt Copper 12mtpa throughput Feb 2016 2 fatalities >$1bn in potential savings 4 RAMP UP 5 COMPLETE TE
Slide 11: Next steps on improvement journey
Next steps on improvement journey • Increased throughput and remain on target for sustainable 1 grinding throughput of 13mtpa by end of December 2016 Lihir • Improved recoveries a focus • Continued focus on strengthening community relationships • Ramp up of Cadia East to 26mtpa Cadia • Study on 32mt
Slide 12: Financial Strength
Financial Strength Gerard Bond, Finance Director & CFO 11
Slide 13: Delivering on financial commitments
Delivering on financial commitments 1 ACHIEVE COST 2 LOW COST 3 GENERATE GUIDANCE POSITION FREE CASH FLOW (FCF) Within or below AISC $762/oz $814m FCF in FY16 guidance on costs 10 consecutive quarters of positive FCF 4 REDUCE NET DEBT 5 WITHIN TARGET 6 DIVIDEND FINANCIAL METRICS ANNOUNCED
Slide 14: Statutory profit of $332m & Underlying profit of $323m
Statutory profit of $332m & Underlying profit of $323m • Gold and copper prices negatively impacted statutory and underlying profit by $263m • Foreign exchange positive impact of $233m • Higher depreciation driven by Telfer (higher asset base), Cadia (Ridgeway care & maintenance), Lihir and Bonikro
Slide 15: Free cash flow positive at all sites
Free cash flow positive at all sites Free cash1 flow by site (FY16) ($m) 482 307 814 126 (203) 10 44 48 2 Other Hidden Valley Bonikro Gosowong Telfer Lihir Cadia Group Free cash flow reconciliation FY15 to FY16 ($m) 9 41 6 (7) (50) (39) 854 814 FY15 Production Sustaining capital Major projects Explo
Slide 16: Improved balance sheet strength a key focus
Improved balance sheet strength a key focus Debt, Cash and Leverage1 (times) ($m) 4,500 3.0 4,000 2.5 3,500 3,000 2.0 2,500 1.5 2,000 1,500 1.0 1,000 500 0.5 - FY10 FY11 FY12 FY13 FY14 FY15 FY16 - (500) (1,000) (0.5) US Private Placement Notes Corporate Bonds Other Bilateral Bank Debt Cash (as negat
Slide 17: Financial Metrics
Dividend announced Element Target 30 June 2014 30 June 2015 30 June 2016 Leverage ratio (Net Debt / Less than 2.0x (for trailing Financial Metrics 2.7x 2.1x 1.6x EBITDA) 12 months) Gearing Ratio Less than 25% 34% 29% 23% Aim to maintain investment Credit rating Investment grade Investment grade Inve
Slide 18: Future capital allocation decisions
Future capital allocation decisions Free cash flow Profitable Value for Financial growth shareholders strength Returns to shareholders 17
Slide 19: Looking to the Future
Looking to the Future Sandeep Biswas, Managing Director & CEO 18
Slide 20: Growth options
Growth options 1 EXPLORATION 2 GOLPU Brownfield & Greenfield Brownfield & Greenfield Brownfield & greenfield Early entry Early exploration entry M&A Progress the permitting Advanced exploration Early entry M&A 3 CADIA 4 LIHIR Ramp up Cadia East Increase throughput Increase processing capacity Increa
Slide 21: Continue to develop pipeline
Continue to develop pipeline Greenfield Brownfield Early Entry (Acquisition cost: US$0 – 10m) Advanced Exploration (US$10 – 100m) Project Studies (US$100m+) Under Cadia Construction 32mtpa + 1 (US$100m+) beyond Namosi 12 Potential to Lihir Agreements Golpu increase 13mtpa 1 Dec 16 signed O'Calla- pr
Slide 22: Exploration – our competitive advantages
Exploration – our competitive advantages 1• Newcrest’s long life mines = time to explore 2• Smarter targeting for deeper deposits 3 Newcrest’s ability to mine all types of ore bodies 21
Slide 23: Growth Strategy – target geographies
Growth Strategy – target geographies • Exploration search depth to >1km • Global search • Utilise competitive advantages to add value for shareholders and stakeholders Existing search space New search space Knowledge build 22
Slide 24: Cadia – ramping up Cadia East
Cadia – ramping up Cadia East Ore processed at Cadia by ore source Cadia East mining cost Annualised quarterly data (’000 tonnes) Quarterly (US$/tonne) 35000 14 30000 12 25000 10 20000 8 15000 6 10000 4 5000 2 0 0 Cadia Hill Ridgeway Cadia East Permitted process plant capacity • Cadia East ramping u
Slide 25: Cadia – ramping up Cadia East (cont)
Cadia – ramping up Cadia East (cont) Interaction risks being managed 1. PC1 drives interacting with PC2 as expected 2. Maintain appropriate air gap at top of PC2 3. Ongoing interaction between PC1 & PC2 actively monitored Interaction zone and PC2 Breakthrough Seismic Conditioning PC2 air gap around
Slide 26: Cadia Potential – 32mtpa + beyond
Cadia Potential – 32mtpa + beyond Up to 32mtpa Potential Upscaling Options • PFS work confirmed Option A – Additional front end grinding capacity achievable Existing SAG + HPGR Circuit Existing float, tails & concentrate thickener Value from increased scope • Recovery uplift from Existing Coarse New
Slide 27: Lihir – Pathway to 13mtpa + beyond
Lihir – Pathway to 13mtpa + beyond 1 FROM TO characteristics characteristics Ore feed Ore feed Time Time “New” operating strategy Multiple layered ROM strategy Areas under review • Introduced Dec 2014 • Multiple ROMs • Increased recovery via • Removed sulphur constraint • One with optimal blend Floa
Slide 28: Lihir – pursuing improvement in recoveries
Lihir – pursuing improvement in recoveries Impacts on recoveries Approaches to improving • Drought impact reduced by continuing with water savings initiatives developed during drought Drought • Demand and supply initiatives developed to prepare for any future events • Investigate flowsheet change to
Slide 29: Value proposition
Value proposition 1 HAVE A LOT OF GOLD 2 LOW COST PRODUCER 3 DO WHAT WE SAY ~28 years1 $762 3 years of maintaining or increasing reserve life FY16 AISC per ounce Group guidance 4 ORGANIC GROWTH 5 EXPLORATION & 6 FINANCIALLY ROBUST TECHNICAL CAPABILITY Lihir, Cadia Exploration capability 1.6x N
Slide 30: Newcrest Mining Limited
NEWCREST MINING LIMITED
Slide 31: Appendices
iuue. ~~ Appendices
Slide 32: Newcrest's leading reserve life and cost position
Newcrest’s leading reserve life and cost position Indicative AISC Margin - Interest Exp 500 Note: Width of bubble size represents relative size of gold reserves, Barrick indicative AISC margin based on $1,200 gold price Newcrest 400 AngloGold 300 Gold Fields 200 Goldcorp Newmont Kinross 100 per ounc
Slide 33: Cadia – cash generation plus growth potential
Cadia – cash generation plus growth potential Cadia Site Process Key Statistics 1 Gold Reserve Life: ~39 years Element Description Gold Reserves: 26 moz Mining Panel Cave mining from Gold Resources: 43 moz Cadia East (Panel Cave 1 Copper Reserves: 4.5 mt and 2), with underground Copper Resources: 8.
Slide 34: Lihir – turnaround continues
Lihir Lihir – turnaround continues Site Process Key Statistics 1 Gold Reserve Life: ~31 years Element Description Gold Reserves: 28 moz Mining Open pit drill, blast, load Gold Resources: 57 moz and haul mining, currently in Phase 9 of Minifie Pit. FY17 Prod. Guidance: 880-980koz Au2 Substantial stoc
Slide 35: 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 36: Lihir – Near Shore Cut Off Wall lowers capital
Lihir – Near Shore Cut Off Wall lowers capital 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 stockpile NOT TO
Slide 37: Lihir – Seepage barrier options
Lihir – Seepage barrier options 2015 Pit PFS 2015 PFS Pit 2013 Optimisation Study Optimisation Study – PFS1,2 Coffer Dam Wall1,2 Near Shore Cut Off1,2,3 Construction (seepage barrier) – includes ~$760m ~$625m ~$81m engineering and project management Feasibility study ~$75m ~$23m ~$22m Infrastructure
Slide 38: 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 39: Telfer – open pit now contractor mined
Telfer Telfer – open pit now contractor mined Site Process Key Statistics 1 Element Description Gold Reserve Life: ~8 years Gold Reserves: 3.8 moz Mining Open pit mining contracted to Macmahon Gold Resources: 11 moz Copper Reserves: 0.28 mt Underground sub-level cave Copper Resources: 0.78 mt and st
Slide 40: Gosowong – mining returning to full production
Gosowong Gosowong – mining returning to full production 1 Site Process Key Statistics Gold Reserve Life: ~4 years2 Element Description Gold Reserves: 0.76 moz Mining Underground mining using Gold Resources: 1.6 moz predominantly underhand cut-and-fill (Kencana) and 3 FY17 Prod. Guidance: 220-270koz
Slide 41: Bonikro – accessing high grade Hiré ore
Bonikro Bonikro – accessing high grade Hiré ore Site Process Key Statistics1 2 Gold Reserve Life: ~4 years Element Description Gold Reserves: 0.54 moz Mining Open pit drill, blast, load and Gold Resources: 1.4 moz haul mining at Hiré pits (approximately 15km from 3 FY17 Prod. Guidance: 120-145koz Au
Slide 42: Hidden Valley – subject of a strategic review
Hidden Valley Hidden Valley – subject of a strategic review Site Process Key Statistics1 2 Element Description Gold Reserve Life: ~10 years Gold Reserves: 0.78 moz Mining Open pit mining from Gold Resources: 2.1 moz Hamata open pit, using drill, blast, load and haul, and Silver Reserves: 13 moz proc
Slide 43: Wafi-Golpu – development opportunity
Wafi-Golpu Wafi-Golpu – exciting development opportunity1 Key Statistics - Golpu2 Gold Reserves: 5.5 moz Gold Resources: 9.3 moz Copper Reserves: 2.4 mt Copper Resources: 4.3 mt Location: 60km south-west of Lae Newcrest Ownership: 50% (if government exercises full option, Newcrest’s ownership would
Slide 44: FY16 margins
FY16 margins Production FY16 Operating Margins koz % 2,439 EBITDA EBIT AISC 38% 39% 37% 36% 35% 900 669 31% 462 197 138 73 23% 20% 18% All In Sustaining Cost margin FY16 $/oz 892 404 336 231 225 199 (89) FY14 FY15 FY16 43
Slide 45: Long-dated debt maturity profile
Long-dated debt maturity profile Maturity profile as at 30 June 20161,2 – Gross Drawn Debt $2.2bn ($m) 1,200 US Private Placement Notes Corporate Bonds Bilateral Bank Debt & Subsidiary Bank Loan - Drawn 900 600 300 - FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY42 1 Assuming longest dated bilatera
Slide 46: Executive remuneration structure
Executive remuneration structure 1 Short Term Incentive Criteria (FY16) Long Term Incentive Criteria Existing (2015 award) New structure (2016 award) NEW 1 Personal measures represent those of the CEO. Each of the CEO, CFO and other Executives have different personal measures 45
Slide 47: Long-term metal assumptions used for Reserves and Resources estimates
Long-term metal assumptions used for Reserves and Resources estimates1 Newcrest & MMJV Long Term Metal Assumptions Managed Mineral Resources Estimates Gold Price $1,300/oz Copper Price $3.40/lb Silver Price $21.00/oz Ore Reserves Estimates Gold Price $1,200/oz Copper Price $3.00/lb Silver Price $18.
Slide 48: Underlying Profit reconciliation
“Underlying Profit” reconciliation 12 months ended 30 June 2016 30 June 2015 US$m US$m Statutory Profit 332 376 Asset impairment (reversal)/ Inventory write downs1 - (9) Loss/(gain) on disposal of investment (18) 57 Net costs of class action settlement 9 - Total Significant Items (9) 48 Underlying P
Slide 49: All-In Sustaining Cost and All-In Cost reconciliation
All-In Sustaining Cost and All-In Cost to cost of sales reconciliation 12 months to 30 June 2016 12 months to 30 June 2015 US$m US$/oz US$m US$/oz Gold sales (koz)1 2,452 2,433 Cost of Sales2 2,572 1,049 2,718 1,127 less Depreciation and amortisation (680) (277) (549) (228) plus By-product revenue (
Slide 50: Operating costs – exchange rate exposure estimates
Operating costs – exchange rate exposure estimates The below represents an indicative currency exposure on operating costs by site for FY16 USD AUD PGK IDR CFA Total Cadia 15% 85% - - - 100% Telfer 15% 85% - - - 100% Lihir 40% 25% 35% - - 100% Gosowong 60% 5% - 35% - 100% Bonikro 60% 5% - - 35% 100%
Slide 51: Operating costs – indicative costs by type
Operating costs – indicative costs by type The below represents an indicative exposure on operating costs by a variety of spend types (FY16) 1 Maintenance Energy and Labour 2 Consumables (excl labour) Other3 Total Fuel and Parts Cadia 40% 15% 15% 20% 10% 100% Telfer 35% 15% 15% 15% 20% 100% Lihir 40
Slide 52: FY17 foreign exchange sensitivities and oil hedges
FY17 foreign exchange sensitivities1 and oil hedges Full Year Site Parameter Movement EBIT Impact (US$m) Cadia A$:US$ +A$ 0.01 7 Telfer A$:US$ +A$ 0.01 7 Lihir PGK:US$ +PGK 0.10 (10) Gosowong IDR:US$ +IDR 1000 (5) Hidden Valley PGK:US$ +PGK 0.10 (1) Bonikro CFA:US$ +CFA 50 (5) Group A$:US$ +A$ 0.01
Slide 53: FY17 Guidance
FY17 Guidance1 Element Cadia Lihir Telfer Goso- Bonikro Hidden Corp / Group wong Valley Other Gold Production (koz) 730-820 880-980 400-450 220-270 120-145 50-60 - 2,400-2,650 Copper Production (kt) ~65 - ~20 - - - - 80-90 AISC ($m) 230-270 765-850 450-480 200-230 130-150 70-90 75-85 1,950-2,150 Cap
Slide 54: Forging a stronger Newcrest
Forging a stronger Newcrest Our mission Our vision Our Edge To be the Miner of Choice™ Ahigh performance, no-nonsense culture focused on: To deliver superior returns from finding, developing and operating We will lead the way in safe, responsible, Safety gold/copper mines. efficient and profitable m
Slide 55: Newcrest Mining Limited
NEWCREST MINING LIMITED Board Forward Shareholder Enquiries to Peter Hay Non-Executive Chairman Link Market Services Sandeep Biswas Managing Director and CEO Level 1, 333 Collins Street Gerard Bond Finance Director and CFO Melbourne, Victoria, 3000 Philip Aiken AM Non-Executive Director Australia Ro