Newcrest plans review of mines’ future

 NEWCREST Mining Ltd is reviewing the future of its higher-cost mines after a slump in gold prices including last week’s dramatic plunge to two-year lows.

The price of gold fell by about US$300 an ounce in a fortnight to below 

US$1,400 – threatening Australia’s higher cost producers.

Newcrest said in its March quarter update that it was reviewing all of its business activities, particularly those related to higher-cost current or future production.

It revealed it had cut 150 jobs in March, mostly from its Brisbane and Melbourne offices.

The company’s most expensive mine, Hidden Valley, is losing money and costs A$1,790 per ounce of gold in the latest quarter while production had fallen 8% from the previous quarter.

Newcrest, which has a 50 % stake in the project, called Hidden Valley’s production and cost performance unacceptable.

It said its improvement plan included installing a new crusher to process higher-grade mill feed.

The company noted that operating and capital costs were high in the global gold mining industry, adding that the drop in prices had not been accompanied by a reduction in the strength of the Australian and PNG currencies.

Newcrest expects to produce between 2.0 and 2.15 million ounces of gold this financial year. 

It produced 2.29 million ounces last year.

NML produced 514,421 ounces in the three months to the end of March, down three percent on the previous quarter and at a cost of A$799 an ounce.

This is a 31% jump on A$609 an ounce of a year ago.

The company’s shares had fallen 31 cents or 1.82 % to A$16.70.

“The company is now focused on creating a strong return from our major investments in expanded lower cost production sources and generating free cash flow,” Newcrest says.