19/08/2008 - 14:07

Gas disruption costs Newcrest $10m

19/08/2008 - 14:07

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Newcrest Mining Ltd has revealed the state's gas crisis has cost the company nearly $10 million as gas supply at it Telfer gold operation in Western Australia returns to normal.

Gas disruption costs Newcrest $10m

Newcrest Mining Ltd has revealed the state's gas crisis has cost the company nearly $10 million as gas supply at it Telfer gold operation in Western Australia returns to normal.

The company today booked an 87 per cent lift in annual profit of $134 million with all operations achieving gold production targets except Telfer.

The mine produced 590,217 ounces of gold over the 2008 financial year, down from 627,077oz from the previous year.

Newcrest said the mine failed to meet its targets due to price increases in diesel fuel, utilities, power and labour, with maintenance and energy costs up by $9.3 million due to the gas supply disruption.

An explosion at Apache Energy Ltd's Varanus Island processing plant in June forced some companies to source alternative gas or use expensive diesel to power their mines.

Newcrest managed to secure interim gas supply for Telfer from the Woodside Petroleum Ltd-operated North West Shelf venture at higher prices.

Newcrest chief executive Ian Smith said today the company had cancelled its agreement with Woodside and Telfer was receiving "full supply" from Apache at "normal prices".

Previously the company said the gas outage would cost the company about $34 million.

Meanwhile the gold miner said it is in a strong position despite general cost pressures affecting the industry.

"Newcrest is in a strong position from a financial, exploration and project perspective to continue to grow the business and capitalise on future growth opportunities," chief executive Ian Smith said.

During the year, group gold production lifted 10 per cent while cash costs fell seven per cent.

"General mining industry cost inflation pressures remain with increases being more acutely experienced at the [company's flagship] Telfer operation," Mr Smith said.

"Minimising these increases at all sites is a key focus."

Newcrest declared a final dividend of 10 cents per share, up from five cents in the prior corresponding period.

Newcrest said a strong operational performance combined with a successful equity raising and gold hedgebook close-out during the year had delivered a record underlying profit and cashflow from operations.

Underlying profit for the year ended June 30 lifted 158 per cent to $493.9 million.

A significant restructure of the balance sheet had reduced gearing to eight per cent.

Newcrest's cash costs for the year were $US229 per ounce ($A255 per ounce), against the recent global average of $US453 per ounce ($A500 per ounce).

The company said its project and exploration pipeline had evolved during the year, with the addition of several exploration opportunities and the progress of development projects and studies in accordance with schedule and on budget.

Significant resource and reserve growth was experienced during the year.

Newcrest said record profit and operating cashflow had been driven by record annual gold production and higher received gold and copper prices.

But site costs had increased due to higher production levels and price increases in key inputs. Group annual site costs were three per cent above guidance.

Gross operating sales revenue from gold, copper and silver rose 11 per cent to $2.36 billion.

Record gold sales volumes were due to significant production increases from Cadia Hill and the Kencana underground mine at Gosowong.

This was partly offset by lower production from Telfer and Ridgeway.

Realised gold prices rose 34 per cent due mainly to a 13 per cent increase in spot gold prices and a significant reduction in gold sales delivered into hedge contracts.

Copper sales volumes fell in line with plan due to lower copper production at Telfer and Ridgeway more than offsetting the increase at Cadia Hill.

Realised copper prices rose 32 per cent due to Newcrest's copper hedge positions maturing in June 2007.

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