Newcrest Boddington gold sale lifts project hopes

Newcrest Mining today announced the $225 million sale of its stake in the Boddington gold project, south-east of Perth, to one of its former joint venture partners, Newmont Mining.

The sale of Newcrest's stake is seen by the market as a strong indicator that Boddington will move to production, with Newmont now moving to a controlling 66.6 per cent interest in the project, which was believed to have suffered from differences in opinion among the previous three partners.

Commenting on the sale, Hartley analyst Rob Brierley said, "it would not make any sense to pay $225 million for something that is not going to go ahead."

He said that cost pressures for Newcrest, caused by delays at its Telfer project, along with Boddington now being at final approval stage and the remaining joint venture partners - Newmont and Anglo Gold - keen to press ahead, had also contributed to Newcrest's sale.

Subject to relevant regulatory approval of the sale, Mr Brierley said he expected that work on the ground would start some time in the June quarter.

Newscrest flagged its intention to review its 22.2 per cent position in the Boddington development in August last year following an assessment of its portfolio of assets, sighting a desire to focus on wholly or majority owned projects.

Aside from the Newcrest stake, Newmont had a 44.4 per cent interest and South African miner AngloGold Ashanti held the remaining 33.3 per cent.

There has been a perception in the market that the differing views and objectives of the joint venture partners had made it difficult to advance the Boddington project.

Newcrest is now able to pursue its stated aim and focus on other core projects in its portfolio, such as Cadia East and Ridgeway Deeps in central New South Wales, and Kencana in Indonesia.

Sales proceeds will be used to retire debt, reducing its gearing position.

The Boddington gold project is a combination open cut and two major pit operations, scheduled for production by mid 2008 and averaging over 800,000 ounces of gold and 30,000 tonnes of copper a year over an expected 17 year mine life, with significantly higher production levels expected in the first five years.

Newcrest's core business is the exploration, development and operation of gold and copper mines utilising a strategy of identifying projects in the lowest cost quartile to maximise profitability and minimise the impact from commodity price variation.