Newcrest share price slumps

THE share price of Newcrest Mining, Australia’s biggest listed gold producer, was slammed after the Melbourne-based group revealed serious maintenance issues at its Lihir gold mine in Papua New Guinea.
Newcrest shares were trading A$1.34, or 3.7% lower, at A$34.76 at its noon close last Friday.
The treatment plant’s shortcomings were expected to reduce March quarter production by as much as 60,000 ounces of gold, worth more than US$105 million (A$97.8 million) at current spot prices for the yellow metal.
In its statement to the Australian Securities Exchange, Newcrest said the existing plant, which the company acquired 18 months ago as part of its A$9.2 billion acquisition of Ross Garnaut-chaired Lihir Gold, was suffering from long-term underinvestment in fixed and planned maintenance, which was a clear slap at previous management.
But then, the miner also said the plant’s performance had been unacceptable against its own pre-acquisition expectations, raising questions over whether Newcrest’s due diligence for the takeover was up to speed.
Newcrest said it had set about rectifying “vulnerable and unreliable parts of the older plant” and that sustaining capital expenditure was forecast to be around A$200 million annually for the next few years to support the programme.
The gold mine is one of the world’s largest, with plans by Newcrest to increase output from an annual rate of 700,000oz to more than 1 million annually.
It sits inside a geo-thermally active caldera on Lihir Island in New Ireland province.