Notes from NCM Full Year Results for 2022 - 19 Aug 2022

[DipSard]

Notes from NCM Full Year Results for 2022 - 19 Aug 2022

Links to reports/slides: https://www.newcrest.com/investor-centr ... pe=results
(Select files under ‘2021/22 Full Year Financial Results’)

***Transcript adapted from marketscreener transcript available (1) and downloadable PDF (2) has areas of interest highlighted***

1 - https://www.marketscreener.com/amp/quot ... -41358284/

2 - https://www.mediafire.com/file/7yj7478d ... 2.pdf/file

Presentation Operator Message
Operator (Operator)

Thank you for standing by, and welcome to the Newcrest Mining Full Year Financial Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Tom Dixon, Head of Investor Relations. Please go ahead.

Presenter Speech
Tom Dixon (Executives)

Thank you, operator. Good morning, and welcome to Newcrest Mining's FY '22 Full Year Results Conference Call. This is Tom Dixon, Head of Investor Relations for Newcrest. This call is being recorded today, Friday, 19th of August 2022.
Just a reminder, the Newcrest is a U.S. dollar reporting entity, and all dollar references in the slides today are to U.S. dollars. Any references to the prior period after the 12 months ended 30th of June 2021. With that, I'll now hand over to our Managing Director and CEO, Sandeep Biswas.

Presenter Speech
Sandeep Biswas (Executives)

Thanks, Tom, and good morning, everyone, and thanks for joining us today. With me on the call is Sherry Duhe, our Chief Financial Officer. Today, we'll give you an overview of the full year results and operations, and then we'll be very happy to take questions.
Before I begin, please note the company's important disclaimers.
FY '22 has been a very successful year, both from a strategic and operational perspective. Following our focus on maintenance and productivity improvements in the first half, we finished the year strongly producing just under 2 million ounces of gold at an all-in sustaining cost of $1,043 per ounce. We released a strong set of financial results today with a statutory and underlying profit of $872 million, and operating cash flows of more than $1.6 billion.
I'm very pleased to announce that the Board has determined a fully franked final dividend of $0.20 per share, bringing our total dividends for the year to $0.275 per share. While this exceeds the payout targeted by our dividend policy, we're comfortable this reflects our commitment to disciplined capital management.
Our balance sheet remains in excellent shape, following completion of the Pretium Resources acquisition, and we have access to well over $2 billion in liquidity, giving us ample flexibility to fund our growth portfolio. We continue to advance works across our portfolio with Cadia, Red Chris, Havieron and Lihir all expected to reach key steady milestones in FY '23.
As we've previously said, our substantial increasing exposure to copper positions us very well over the longer term. Copper is a critical metal of the future with a compelling outlook in a decarbonizing world.
In March, we successfully completed the Pretium Resources transaction, generating immediate production and cash flows for the group. Our transformation program at Brucejack is progressing well and we've made considerable progress with a range of new opportunities being pursued.
On the safety front, I'm pleased to report that we are now nearly 7 years free of fatalities. It's a tremendous credit to our people and testament to how far safety is embedded into our culture. We did, however, have a challenging year in relation to injury rates. While the injuries incurred were predominantly low severity in nature, no injury is acceptable, and we're working hard on prevention.
We've made inroads into building a high-performing, inclusive and psychologically safe workplace culture this year. We're absolutely focused on preventing and eliminating sexual assault and sexual harassment from our workplace. And our Respect@Work program is aimed at ensuring everyone across our global workforce feels safe, respected and valued.
We made great progress against our forging and even stronger Newcrest aspirations in FY '22. Works have been advancing for Cadia PC 1-2, Red Chris Block Cave, Havieron Stage 1 and Lihir Phase 14A as these projects progress through the feasibility stage, and we look forward to providing updates over the coming months.
Cadia achieved some important milestones during the year, including the successful replacement and upgrade of the SAG mill motor, the commissioning of the new moly plant and first shipment of moly concentrate and regulatory approval to increase the permitted processing capacity to 35 million tonnes per annum.
I'll also note that the activities to remediate instability in one of the ventilation rises at Cadia has now been completed and underground mining has returned to full capacity. Our team has done a fantastic job to continue surface operations while completing the necessary works to stabilize the rise. And we've seen no material impacts to our expected production this year as a result.
At Lihir, we remain focused on realizing the full potential of this unique asset. We expect to release the findings of the Phase 14A feasibility study next quarter, and we continue to work on delivering a sustained improvement in operating performance. The benefits of Lihir's mining improvement program were evident in the June quarter with record quarterly material movement, and we expect higher mining rates to continue into FY '23.
Red Chris continues on its journey to be a long-life, low-cost mine. The Block Cave PFS released last October highlighted the quality of the Red Chris deposit, which is capable of producing a significant amount of gold and copper at very attractive cash margins. Drilling results at East Ridge have also been beyond expectation and continue to expand the mineralization outside of our initial mineral resource estimate. FY '23 is expected to be an investment year for Red Chris with the stripping program underway in the open pit as we finalize the feasibility study and turn our mines to the block cave.

Our team is also progressing plans to extend the life of the Telfer operation. The West Dome cutback is well underway, and we're continuing to assess both open pit and underground extensional opportunities to further extend Telfer's life.
We've announced today that we will not be exercising our option to acquire an additional 5% JV interest in the Havieron project. The 5% option price was determined by an independent valued to be USD 60 million based on the process set out in the Havieron joint venture agreement. Newcrest earned its current 70% interest through expenditure of USD 65 million and the delivery of a prefeasibility study. An additional 5% for $60 million does not meet our return hurdle requirements and we're very comfortable with our 70% interest. The Havieron team continues to work through the feasibility study, including the scheduled first ore, and we expect to release this in the December quarter.
The JV is moving forward with early works activities, including the exploration decline, which saw development rates accelerate towards the end of the financial year, with steady improvement expected to continue in FY '23.

We were very excited to add the Brucejack mine to our portfolio earlier this year. The transaction positions Newcrest as the leading gold mine in British Columbia's golden triangle. And we now have a global exposure to 6 Tier 1 ore bodies with a significant long life advantage compared to our peers. Following completion, our team has continued to make great progress on our 3-phase transformation program.
I was particularly proud to see the safety performance of Brucejack continue to strengthen with our new SAFE safety program now well underway to further improve the safety culture. Our team has worked extensively over the past few months to validate our synergy estimates. We're very pleased to increase these expected benefits today with a clear path to surpass our pre-acquisition goals.
Our EDGE program has also kicked off to pursue additional cash flow opportunities at Brucejack with an initial focus on stope turnaround time and more efficient mine operations. Together, these programs are expected to deliver savings of between CAD 35 million to CAD 50 million per year.
We're also progressing the debottlenecking concept study to target an increase in mill throughput capacity at Brucejack. We expect this to be completed in the coming quarter with a permit application expected to follow in the March quarter. We've seen some exceptional drilling results at Brucejack in recent months, supporting the potential for a significant resource growth adjacent to and beyond the value of the Kings Deposit.
The drilling results have also expanded the footprint of high-grade mineralization at Golden Marmot, a new discovery located outside of the Pretium mineral resource estimate. And this remains open in all directions. Brucejack is a very exciting asset with so much potential, and we look forward to providing further updates as we uncover additional opportunities for growth.
So as I said, it's been a very busy year for Newcrest. Delivering profitable growth has been our strategy for several years now. And on this slide, you can see the significant progress made on our growth objectives through FY '22 and we have a range of important milestones approaching in the near term.
So let's move now to sustainability. We have a goal of 0 carbon emissions by 2050, alongside many of our sector peers. Our dedicated team has been working hard to develop our group Net Zero emissions road map that underpins this goal. Newcrest is starting from a good place on the journey to Net Zero with our Red Chris and Brucejack assets being hydropower. At Cadia, we have one power purchase agreement in place, with the Rye Park wind farm expected to provide around 40% of Cadia's power from 2024 onwards, and we plan to increase renewable energy at Cadia through the use of further such PPAs.
In the medium term, the emissions reduction program will focus on emerging technologies and site applications of renewable energy. And in the long term, we're investigating advanced technologies and processing efficiencies to reduce carbon emissions further with a specific focus on Lihir. We are committed to playing a positive role in the global transition to a Net Zero future and look forward to providing further updates as the road map progresses.
I'll now pass over to Sherry, who will run through Newcrest's financial performance for the year.

Presenter Speech
Sherry Duhe (Executives)

Thanks, Sandeep, and good morning, everyone. I'm very pleased to present to you for the first time, and it's such an exciting stage for Newcrest.
In FY '22, we delivered an underlying profit of $872 million at a healthy all-in sustaining cost margin of $732 per ounce or 41%. Our solid performance was in line with our expectations following the planned replacement and upgrade of the Cadia SAG mill motor and lower production at Lihir. The result is notable in the face of a number of other external challenges across our business, including the ongoing impacts related to COVID-19, supply chain issues and significant rainfall at Cadia.
Despite the headwinds, we remain in excellent financial shape to progress our exciting growth agenda. In FY '22, we invested almost $900 million across a range of major capital projects and exploration activities. We were particularly pleased to see our operating costs trending lower in the second half of the year. And Cadia achieved its lowest ever annual all-in sustaining cost of negative $124 per ounce.
Our balance sheet remains strong with significant liquidity, which I'll touch on in the following slides.

Newcrest continues to maintain its very strong balance sheet and long-dated debt maturity profile. Our balance sheet strength enables us to be resilient through market volatility and provides a foundation for growth. We retain considerable capacity to execute our pipeline of organic growth projects at Cadia, Red Chris, Havieron and Lihir with access to $2.4 billion in liquidity.

Our next corporate bond repayment is not due until 2030, and we have a low weighted average bond coupon rate of only 4.3%. We will continue to maintain a strong balance sheet through the cycle. And pleasingly, we are not reliant on high gold prices to fund our future growth.
As you can see, we remain comfortably within all of our key financial policy targets. Our leverage ratio of 0.6x remains well below our target of being less than 2x EBITDA, and our gearing of 10.2% is well below our target of being less than 25%. We also continue to retain our investment-grade credit rating, which gives us good access to all capital markets if and when needed.
As Sandeep mentioned earlier, the Board has determined a final fully franked dividend of $0.20 per share. This brings our total dividend for the year to $0.275 per share. While this exceeds the payout targeted by our dividend policy, we are comfortable this reflects our commitment to disciplined capital management. Even with the pipeline of very attractive growth opportunities ahead of us, we remain committed to paying dividends to our shareholders throughout the cycle.

Newcrest continues to monitor the impact of the cost inflation globally. A few examples of these cost pressures include higher oil, natural gas and electricity prices influenced by the Ukraine/Russia war and rising demand, higher wages driven by a tight labor market additional costs across a range of consumables influenced by geopolitical instability and rising equipment costs, largely driven by supply chain constraints. In FY '23, we estimate inflationary pressures will increase our cost base by around 6% to 8%, though the short-term outlook for cost forecast remains unpredictable. We also expect continued pressure on our capital costs given competition for labour from infrastructure projects and higher steel prices.

Through Newcrest EDGE program, we aim to drive a culture of innovation high performance and continuous improvement. And this has been instrumental in us identifying inflationary impacts across our business, managing exposures through various protection mechanisms and ensuring appropriate mitigation strategies have been implemented.
We have a number of protections already in place to reduce our exposure to this volatility. For example, we extended our long-term fixed price electricity contract at Cadia until the end of FY '24. And oil hedging contracts are in place at Lihir for the current financial year. We are also managing market volatility in steel, energy and ammonia through pricing formula structures, meaning we are less exposed to certain price fluctuations.

It's important to note that our FY '23 cost guidance incorporates our expectations on inflationary measures -- or pressures as well as our protections and actions to manage through this environment. We've identified an array of levers to address and mitigate the inflationary pressures we are seeing in the market for both our operating and capital costs. These levers range from more traditional approaches such as supplier shifting and contract negotiations through to detailed demand management and inventory management. Other levers like the use of digital enablers to increase efficiencies are also in place.
We've highlighted some recent examples of successes in this slide. And I note that the market is forecasting some key costs such as fuel, power, shipping and steel to reduce in FY '24 and beyond. We remain seriously focused on minimizing the cost pressures right across our global portfolio of assets and projects.

In that context, I'm pleased to present our guidance for FY '23. As highlighted on this slide, Newcrest is expecting to produce well over 2 million ounces of gold, reflecting a full year of production from Brucejack and another solid year from our other operating sites. I should highlight that Fruta del Norte had a fantastic year, and this is expected to continue for the year to come.
Pleasingly, copper production is expected to increase in FY '23, which is largely driven by higher throughput at Cadia. We anticipate continuing our low-cost production in FY '23 despite a slight increase in dollar million all-in sustaining costs compared to last year, driven by inflation, the addition of Brucejack for 12 months, and additional mining and milling volumes at Cadia, Lihir and Red Chris. We expect this to be offset by a weaker Australian and Canadian dollar in FY '23, easing pressure on cost in U.S. dollars.
I'll now pass it back to Sandeep.

Presenter Speech
Sandeep Biswas (Executives)

Thanks, Sherry. So, in conclusion, our strategy is on track, and we are investing in our future. We have an outstanding organic growth portfolio capable of producing more than 2 million ounces of gold for many years to come. Our long-life production profile is expected to be delivered at a competitive all-in sustaining cost, which means strong profits and margins even at lower gold prices.
We have a substantial and increasing exposure to copper, and we continue to maintain our long reserve life advantage compared to our peers. We remain relentlessly focused on safety, building an empowered and inclusive culture and developing our sustainability credentials across our business. Our priorities for FY '23 are very clear, and we're very well placed for a bright future.
So, thank you so much for listening. And with that, Sherry and I are very happy to take any questions you might have.

Question and Answer Operator Message
Operator (Operator)
[Operator Instructions] Your first question comes from Rahul Anand with Morgan Stanley.
Question
Rahul Anand (Analysts)

Perhaps if we start with Brucejack. You pointed out the potential expansion in terms of throughput rates to 1.6 million to 1.8 million tonnes per annum. That's a bit of a pickup from the current rates around 1.35 million to 1.4 million that you did in FY '21. I tell that the constraints are likely to be in the mining side. So perhaps can you help us understand what the scope of work is going to be? What the CapEx would look like in terms of getting that extra throughput? And what's the strategy in terms of being able to achieve that? And then I'll come back for the second.

Answer
Sandeep Biswas (Executives)

Yes. Thanks, Rahul. It's a good question. So, it is principally mining focused in order to get up to that sort of 5,000 tonnes a day-odd, 4,000 tonnes a day, under 5,000, and that's where the majority of the work is going. So, a lot of what I talked about or alluded to on the plan in relation to the efficiency of our stopes and our mining efficiencies are all directed towards how do we get more predictive about what comes out and how do we actually make it more efficient to enable the tonnages.
The second piece is there will have to be some debottlenecking on the surface operations. I mean this is part of the study that we're doing. We don't expect that to be major, but we expect to have to tweak certain things here and there.
And of course, the other piece is the permitting. We have to be in a position to have the study more or less completed to the point where we can submit a permit application in March or April next year, something like that. And so would submit that permit. And obviously, if it makes sense, we'll continue with the PFS and FSS and what have you in parallel. So, when we do get a permit, then we're ready to go. So that's kind of the broad outline.

Question
Rahul Anand (Analysts)

Okay. So, it sounds more like a debottlenecking and efficiency type exercise rather than doing something like developing a lot basically?

Answer
Sandeep Biswas (Executives)

Absolutely. We're not going to build a new milling line or anything like that. It's debottlenecking with a lot around the mine around efficiencies and how do we get that mining rate up.

Question
Rahul Anand (Analysts)

Perfect. Okay. Second question, look, you mentioned it a few times in the release today around inflation. And you have flagged 68% inflationary impacts on operating costs. I just wanted to get a feel for perhaps if you can break that number down a bit in terms of geographies. Like what are you seeing in Canada, Australia, Lihir?
And then also in terms of your growth projects in the current environment, you're obviously undertaking several feasibility studies. How are you trying to factor that in? And does that -- is there a merit in considering delaying some of that CapEx in light of what's happening on the inflation side?

Answer
Sandeep Biswas (Executives)

So let me give you a few comments. It's pretty big question there, Rahul, and then Sherry, I'm sure will chip in. So in terms of geography, we haven't delineated it in the release, but we certainly have looked at it in terms of the studies that we've looked at in relation to where to expect inflation. And it kind of depends where you are.
For example, in Lihir, you will see more from the -- although we're hedged for fuel, that is -- energy is obviously a key component seaborne and therefore, that will attract inflation in that sense. Whereas elsewhere in WA, you're going to have a more of a labor shortage type issue. So you'll see more inflation there potentially. So it kind of depends. And that's why we'd rather talk about it at a broad level. And Canada and BC has its own issues.
But the CapEx is an important point. So that's why we're spending a lot of time during this feasibility studies to make sure that our estimates of escalation and also inflation on some of the key input costs are relevant. I mean there are some of these things that we expect will start actually easing in FY '24, '25, but that's on current projections. So we just are taking a very holistic look and doing a lot of statistical analysis and what have you to make sure that the estimates that we put forward are robust and we can deliver on them.

Sherry, do you want to?

Answer
Sherry Duhe (Executives)

Yes, just a couple of comments, and thanks for that, Rahul. And I mentioned it briefly in my speaker notes as well that we really go through and look methodically across a number of different cost categories. We've kind of identified what we'd say are about 10 different macroeconomic indicators, and then we go in and look at what our contract mechanisms are in place and what else we can do.
And there's really 3 broad categories that we go after to help offset that whether it be internal or external spend. The first are just traditional commercial levers. I mentioned a couple of them in the space, but consolidation of contracts, volume-based discounts, rate standardization, low-cost country sourcing and all of the typical things that you would do.
But equally, if not more important for us are the other 2 categories, which is around demand and specification levers. And then also around using innovation and technology to help in those. We've had a number of successes with those already and muting some of these impacts in '22, and we'll continue to pursue that vigorously in '23.
Maybe the only other comment I'd make is just to add on, in terms of our capital projects, we have a very disciplined approach to screening those projects, and we'll continue to apply those hurdle rates that we're looking for to make sure they have competitive returns even in this inflationary cost environment. And we're very confident we've got the tools in place to do that, again, going back to the levers that we have across our categories of spend.

Question
Rahul Anand (Analysts)

Okay. Perfect. Sherry, just would you be able to share those hurdle rates? Or is that something that you don't want to discuss on the call?
Answer
Sherry Duhe (Executives)

I'm looking over at the team. I mean...

Answer
Sandeep Biswas (Executives)

So, it kind of depends, Rahul, what projects we're talking about. So greenfield projects as I and this I have said in the past, we typically look for 15% plus. Or if we're doing a 2-stage project, we look for pathways through to 15% plus after you do 1 or 2 stages.
On brownfield projects, typically, they're lower. We look for double-digit returns. Now that's how it's been in the past. Then we've got in these unprecedented times, we're going to have a look at all of that as we do our projects. But our projects are pretty good, right? And you've seen some of the preliminary numbers out of the pre-feas on PC 1-2 and 14A and what have you. So, I'd wait and see, but they're the sort of in the range of the rates we looked at based on whether it's brownfield or greenfield.

Question and Answer Operator Message
Operator (Operator)
Your next question comes from David Radclyffe with Global Mining Research.
Question
David Radclyffe (Analysts)

Sandeep and team, so I've just got a couple of follow-up questions actually on Brucejack. So at the time of acquisition, you had a lot of confidence in your geological model of the deposit. Yet looking at the resource reserve, you're still obviously working on your own estimate. So just wondering there, do you still feel that you've got confidence in your model, and it's holding up to expectations? There's been a lot of drilling done since the last estimate. So I was just wondering, firstly, if you could provide a bit more colour there.

Answer
Sandeep Biswas (Executives)

Well, the first one is very similar to what happened at Red Chris. We can't quote any numbers of our own unless they're JORC estimates, right? So we do that now with Red Chris because it's a JORC estimate. Now we will -- once we have a JORC estimate for Brucejack, then we'll start talking about our estimates, right, as opposed to what Pretium has said, and that's just the way it is.
But in terms of the ore body itself, well, you've seen the drill results, we're updating our model on the predictability in the mine itself. And that's part of the secret of how to unlock the higher tonnages is having to be less selective because you're more able to predict what's going to be in a stope that can release some of the equipment that we've got by trying to be more selective into just smoothing out that flow.
And we've got a summer drilling program underway and the results will be published in due course, but you've seen some of the results so far. So I can tell you for a fact that I for one and the Board are very happy with that acquisition at this point in time.

Question
David Radclyffe (Analysts)

Brilliant. That's great to hear. Then maybe just following up on the debottlenecking concept. The deposit, I guess, you got a history of the grades come down, throughput's kind of gone up. So when you sort of think about this concept, do you think of it operating at a similar sort of grade to what we're seeing now? Or do you think about lowering the cut-off and then maybe putting through a lower sort of grade bulking it out? I'm really, I'm just interested here given your comments about trialling ore sorting.

Answer
Sandeep Biswas (Executives)

Yes. So, look, I mean, you know me, I'm going to do what makes us the most money safely, right? So all options are open. But I think that if we can -- for example, if you are sort of you mentioned, if that works out, you can have your cake and eat it too. What you can do is you can not only up the tonnage, you can up the grade as well, which is -- that's like Nirvana and anywhere in between.
But I think with the installed capital we have, if you sweat it harder, such as what you would be doing with a small debottlenecking and increasing efficiencies, you're always going to make more money. It's just a question of how much. And I think -- so that's -- as we go into the concept study and then all these options remain in there, we've got test work on. we've done some preliminary work in BC, and we've got test work, we're sending samples over to Sydney to -- we've got a rig set up there with some suppliers of ours to test the ore. So all that is progressing, as I said last time, but it is work in progress.

Question and Answer Operator Message
Operator (Operator)
Your next question comes from Matt Greene with Credit Suisse.
Question
Matthew Greene (Analysts)

Sandeep, Sherry, if I could just start on the [indiscernible] for the oil hedges in the presentation. I was just hoping to get a bit more color on the actual profile there. So you say you've got 80% of the financial year, and it ranges between 50% and 90% of your consumption. If I recall, your last briefing book, you had calendar year '22 as 90% of your consumption hedged. So do I interpret this as the December half, you got 90% hedged and the second half of the financial year, it's around 50%?

Answer
Sherry Duhe (Executives)

No, Matt. It was just a slight nuance in terms of how we applied the hedging policy, just given the volatility in oil prices. So we have a mandate that allows us to go in and look at what the forward curve is doing versus what our budget premises were and then just a side in a particular quarter because we do it on a rolling basis, whether or not we want to go 50 or all the way up to 90%. What we have seen in the last few months here is that actually on average, we're closer to that 90% across the quarters. And again, we do it on a rolling basis. Every 3 months, we go out and grab another 3 months going forward.

Question
Matthew Greene (Analysts)

Okay. Got it. So just to be clear then, if you're hedging 90% over the near term, does that mean you have to lower the amount hedged up begun towards the back end of the financial year?

Answer
Sherry Duhe (Executives)

No. If I understood the question correct, we've got the mandate to go all the way up to 90%. We can go as low as 50%, but we can always go catch it up in the future months or future period if we see the curves doing what we think makes the most sense from an economic perspective.

Question
Matthew Greene (Analysts)

Okay. That's great. And then just my second question, just on the Phase 2 of Brucejack on the debottlenecking. Sandeep, you just touched on the underground there. But if I focus on the plants, it sounds like there's minimal spend there to get the mill up to the 4,500 to 5,000 tonnes level. This is just the case of optimizing grind size and reagent consumption. Is that a fair observation?

Answer
Sandeep Biswas (Executives)

There will have to be some upgrading of equipment. As you know, in debottlenecking -- for example, the mill, I think, is going to be fine at whatever tonnes, but that doesn't mean all the bits that lead to the mill and away from it. So this is a whole part of the debottling.
I guess what I'm flagging is it's not a like kind of major second line or anything like that, but there will be some CapEx involved. And yes, there may be some opportunities as well to upgrade some of the efficiencies as we do our modelling. We've got a lot of great innovation in processing from our experience elsewhere in Newcrest. We want to make sure that we take a holistic look at the next step at Brucejack because we can, and we've got the IP and the knowledge.

Question and Answer Operator Message
Operator (Operator)
Your next question comes from Kate McCutcheon with Citi.
Question
Kate McCutcheon (Analysts)

Sandeep, so that's good news that mining and PC 2-3 development has recommenced at Cadia. Are you able to just talk through the team's comfort in the fixed of the geotechnical event in terms of stability for that rise for the life of the mine? And maybe just clarify the nature of the event. And are you going to be able to rebuild those stockpiles that you've been feeding recently? .

Answer
Sandeep Biswas (Executives)

Yes. So, we're having a very close look, as you can imagine, as to the circumstances that led to what we faced. And our priority as you know, is always safety, and that's what we moved literally everything to make sure that priority 1, everyone's secure, make sure we contain the risk, which is what we've done now. And now we'll turn our mind to the root cause.
So, we're doing investigation. And then as part of that, we'll also assess whether we look at reopening that rise or not or doing something else somewhere else. There's a lot of flexibility at Cadia. So, we'll do a full ventilation review as well to look at other options.
So, this is not on the critical path for anything. The expansion works will continue, PC 2-3. And well, the PC 1-2 study will come out later this year and what have you. But really, we just want to make sure we take stock of the current situation before we say what we're going to do is next steps.

Question
Kate McCutcheon (Analysts)

Okay, right. So you're still evaluating?

Answer
Sandeep Biswas (Executives)

Yes and investigating, that's right. So the mine is up and running. This -- the vent raise is not on the critical path for any development. So we've got the time to go through it in a considered way. But as I said, the priority has been all about the people.
In terms of the stockpiles, yes, we have chewed up some of the stockpiles. The stockpiles happen to be of higher grade than the run of mine because they were made some time back. So that was very helpful, as you can imagine. Will we build them up again? We'll just have to see as we increase our mining rates and what the match between that and processing is. We'll see over time, but that's not the focus right now.

Question
Kate McCutcheon (Analysts)

Okay. Great. And second question just on Lihir. So ounces for this year were a bit lower than I was expecting. But look, June quarter, you had great total material numbers out of the mine. What are the things that need to happen at this asset to get to that $900 million run rate? And when do you think we can get there? And has the timing of that 14A study pushed back a little bit?

Answer
Sandeep Biswas (Executives)

Well, the study is yet to be complete, but it's on track is what I'll say at this point. So the 3 things that have to happen is, one, we've got to deliver the mining rates to make sure we have the face positions and the stripping, et cetera, to get to the grades that we want as predicted, right? So that's step 1.
And as you pointed out, we've made a good start in Q4, and we continue to increase mining rates. So that's on track.
The Phase 14, we'll relist the project, but that's got to come in on time. And the other piece is the one around reliability and availability in the fixed plant. So because of the mining rates and the stockpiles that we've got, the more we can do to improve the availability and utilization in the mill, then you'll be able to just treat more tonnes through it. And that's -- they're the kind of 3 key drivers that we're absolutely focused on delivering on. So we've got our asset management program focusing on the plant. We've got the mine improvement, which is what you see happening. And then we've got the 14A project NFS to be released later this year.

Question and Answer Operator Message
Operator (Operator)
Your next question comes from Daniel Morgan with Barrenjoey.
Question
Daniel Morgan (Analysts)

Sandeep and team, question is on Havieron. I note you didn't exercise the option you had to get an extra 5%. Can you just talk through why a little bit broader, isn't the value of this 5% only going to grow? And what are some of the key assumptions in the option process you were clearly uncomfortable with paying for? And I note that you do talk about your return hurdles, which I imagine that this -- everything you've talked about in the past, I would have thought this would need it.

Answer
Sandeep Biswas (Executives)

Yes. So, as you know -- well, as I said, the first 70% cost of $65 million, which is an excellent investment. And if you look at our -- as Sherry alluded to, we've got a very rigorous capital allocation program. We've got a lot of projects to allocate capital to. And obviously, we've also got our shareholders to think about as well. And in that context, it didn't make the returns compared to putting that $60 million somewhere else. We didn't need to do it, and we didn't think it would deliver the sort of returns and the sort of thinking our shareholders expect from an owner's mindset in this company.

Question
Daniel Morgan (Analysts)

And just returning to Lihir. Material movements have been below plan for a while, but you had a huge step up in that June quarter, which I just want to hear more about your confidence about material movements through the year and then delivering that. Can we get to that 70 million tonne material movement and beyond, which is needed to get to that plan? Do you have the equipment that people...

Answer
Sandeep Biswas (Executives)

One quarter doesn't make a summer or whatever the crate is to swallow or something, I agree. However, we have been planning to improve rates for a while. COVID did slow our progress considerably, particularly in the mine, which I've flagged before. I mean it was just getting people on machines and getting them to site and getting them healthy that was the priority. But now that we're coming out of that, we're starting to see the plans that we've had in place and the team is doing a great job to start implementing those plans. And now we're starting to see the results of that. And we expect that to continue right through FY '23 up to the sort of rates that we need. And the important thing is to keep it that way.
So a lot of time is going into operator training and to making things easier for them to do their jobs, straightening out roads and what have you, so there's minimal delays and -- just the grass roots bread and butter stuff that are important now but weren't maybe so important at lower rates. That's -- there's no magic bullet here. It's sort of in the weeds fundamental operating stuff.

Question and Answer Operator Message
Operator (Operator)
Your next question comes from Pauline Livon with FactSet.

Question
Levi Spry (Analysts)

Would that be Levi Spry? Again, a question on Havieron. Can you put that in context around Telfer? So what does production in FY '24 look like at Telfer, and when do you need to make some of these decisions on the pit and the underground. How do we think about that as a production hub as opposed to the Havieron online plan, which looks like it's pretty well laid out?

Answer
Sandeep Biswas (Executives)

Yes. So, the way -- what the Havieron study will come out in the course of the year, of course. In terms of Telfer for the next decision, so Stage 5 is in the middle of the strip, which we approved. The next step for us to determine further production beyond Phase 5 is we need to make a decision on Phase 8. And that decision to do it or not do it, is going to probably come up in the next 6 months or so.

Question
Levi Spry (Analysts)

Next 6 months, okay. And just back to Cadia. Obviously, it's the bulk of valuations. So Kate's question on the shaft. So categorically, no impact on development of PC 2 and 3. So you're processing even higher. Did you say the grades from the stockpiles are higher than mine fee?

Answer
Sandeep Biswas (Executives)

Yes. Yes, they were. I mean we've obviously gone back to run-of-mine feed because the mine's at full production again. But to be clear, there is a delay on PC 2-3 because we stopped work for 2 or 3 weeks. But within the scheme of things, we'll obviously try and peg that back.

Question
Levi Spry (Analysts)
Okay. So the FY '23 guidance...

Answer
Sandeep Biswas (Executives)

All underground activity to make sure there's absolutely no risk to personnel and we stopped that for 3 weeks. So we stopped everything, just to be clear. Other than the mill, obviously, everything underground.

Question
Levi Spry (Analysts)
The 3 weeks on the ground and then 3 weeks of stockpiles for the...

Question and Answer Operator Message
Operator (Operator)
[Operator Instructions] Your next question comes from Mohamed Steba with CIBC.
Question
Anita Soni (Analysts)

I think I dialled in under my associates. It's Anita Soni from CIBC. So 2 questions for Sandeep and Sherry. The first one, I think, is with respect to the capital numbers at Havieron and Red Chris.
I think when we look at the technical reports that were released in the last 6 or 9 months, there was a higher CapEx spend for Havieron. I think it was around $140 million on a 70% basis. And similarly, at Red Chris, it probably should have been closer to $300 million, and you guys are materially lower. So is there a reason that you are, I guess, taking it a little bit easier? Is that part of your capital reduction efforts and sort of trying to mitigate the inflationary pressures that you have?

Answer
Sandeep Biswas (Executives)

No. I think Don -- on Havieron, if you're saying that we're spending at a lower rate than what we said, that will be primarily due to the delay in the decline. As I flagged in the past, we encountered some really, really tough conditions in the initial phase as we worked our way through the Permian. That's easing now, and we're starting to see development rates come up. But if it slows that down, obviously, it slows your overall CapEx around all the other bits and pieces that make up the CapEx estimate other than the jumbos and what have you that we're doing the decline with. So that's Havieron. And what was the question on Red Chris?


Question
Anita Soni (Analysts)

Yes, Red Chris, the technical report showing closer to life. I mean the PFS had around USD 283 million for this year. And I think if you look at the technical reports, even closer to like $500 million on a 100% basis. So U.S. dollars. So I'm just wondering why the lower rate of spend. .

Answer
Sandeep Biswas (Executives)

Yes. No reason other than just to be probably the readjustment of the timing and the profile of the spend.

Answer
Sherry Duhe (Executives)

Yes, exactly. We don't have that report sitting in front of us, but it would just be pacing because the scope of activity has not changed materially versus what you would have seen in that report.

Answer
Sandeep Biswas (Executives)

I mean the key thing which we're very happy about is the critical path, which is the decline advance is proceeding. It's in fact, is slightly ahead of schedule. So that's the bold weather for us is the critical part.

Question
Anita Soni (Analysts)

Okay. And then my second question, I'm curious about this move up to 4,000 to 5,000 tonne per day at at Pretium -- sorry, at the Brucejack asset. A couple of things that I would wonder about is, right now, it's all declined. Would you need a shaft there? I mean it seemed like the -- as I recall, having been there a couple of times myself, its pretty narrow, winding twisty, ventilation is an issue. And then once you get it up to surface, you've got your shipping out concentrate over a glacier. So, have you talked to the BC government yet about whether or not that amount of shipping would be allowed?

Answer
Sandeep Biswas (Executives)

Well, that will be all part of the permit process. But the thing we have to remember is Brucejack's mine that mines under 2 million tonnes. It's not like a Cadia, where we mine 35 million tonnes. I mean -- and obviously, we'll do ventilation studies, particularly as we expand the mine and the footprint further with these further extensional things. And we put a vent shaft in, we'll put a vent shaft in. It's not -- I mean this is at a very different scale to what we're used to. So it's relatively straightforward once we know what we need to do.
But in terms of the government, absolutely, we've got to do our homework and we've got to submit a permit that gives them the confidence as we should do, that we're going to manage everything well, and we've considered all the -- whether it's grocer traffic or corn shipping or what have you. But we have no concerns with any of that.

Question
Anita Soni (Analysts)

Yes. I guess my comment on the mine as it exists now. I know it just seems like it's comparing it, I think, to Cadia's, it's just such a different line from what Cadia is right now. So it seems like it's going to be a bit of work to get there, maybe not capital, but time lines, but only the...

Answer
Sandeep Biswas (Executives)

It is. And that's why we want to submit the permit earlier rather than later, but we've got to do the work to get there. But we -- but Brucejack is very similar to Gosowong, where we mined there for like 25 years or something like that, narrow vein underground mine.
So, one of the things about Newcrest is we've kind of mined almost any type of ore body you can think of. and that expertise resides within the company. And obviously, the significant experience we picked up from the team at Brucejack and Pretium.

Question and Answer Operator Message
Operator (Operator)
Your next question comes from Tanya Jakusconek with Scotiabank.
Question
Tanya Jakusconek (Analysts)

Thank you for taking my 2 questions. First one is on costs. I just need some clarification. I see that you're using $95 a barrel in your guidance. So I'm just trying to understand for a $10 a barrel move is $3 to $4 an ounce on your all-in sustaining, am I in the ballpark for sensitivity?

Answer
Sherry Duhe (Executives)

Well, give us a couple of minutes to do the calcs and we'll let you know that, Tanya. Do you want to get your next question and we'll come back to that?

Question
Tanya Jakusconek (Analysts)

Yes. So, it's still on costs. I'm just keen that you have 40% of your cost structure is labour. I just want to know what percentage of that is actually contractors versus just employees. Just trying to figure out why you're at 6% to 8% inflation and most others are seeing 10% to 12%. Just trying to understand the contractor component.

Answer
Sandeep Biswas (Executives)

Well, yes, contract as well, now that we're in the middle of the project, what sort of contractors, well, we've got project contractors, we've got mine contractors. I mean -- it's -- I think the simple way to say is we've kind of looked at it from all angles, whether it's employees and whatever wage escalation we expect the contract rates that we're seeing. Some are fixed-price contracts, you've got to chase what the labour component is. Some are cost plus.
So, we've done the analysis, and that's where our estimate has come up. We've taken external advice as well as to what they're seeing people with a broader kind of exposure to data, and this is what we've come up with.

Question
Tanya Jakusconek (Analysts)

Okay. All right. and just still on these costs, just some...

Answer
Sherry Duhe (Executives)

Tanya, can I just maybe add just one comment into that. I think part of it, too, when you look at what other people are saying, you've got a lot of calendar reporters that are picking up a different period when they look at their cost inflation across 2022, where we're looking at stuff that already came in, in the course of '21 and the first part of '22, when you then compare that to what we're going to see in '23, where it starts to slow down already in some of those categories.

Question
Tanya Jakusconek (Analysts)

Okay. So you're putting in a slowdown as you go into next year? Okay, got it. And just -- and I appreciate we're seeing huge capital cost increases of your big capital spend, which you do have at Havieron and Red Chris, Lihir. Which one would be more sensitive do you think to capital inflation because of where they're located and what has to be done? Each 1 is different, as I know.

Answer
Sandeep Biswas (Executives)

And they're 2 very different scale projects, too. It would -- I think it's very difficult to say, Tanya. And we're just going to have to wait for the FS studies. I can think of ups and downs all over the place.
In one case, you've got a mine like Havieron where your expenses is as you go, once you set it up, whereas a Block Cave as you put all your CapEx in upfront and then you move to more an operating model. So -- but it's a much bigger scale project. So, on a just on materiality, the same percentage of both mines, there's more exposure in whole dollars at Red Chris because it's a bigger project. And that's probably all I can say for now.

Question
Tanya Jakusconek (Analysts)

Okay. So then I'll just go on to my last question, which is just on guidance. Just looking at it from a quarterly perspective, would be very helpful if we can have some quarterly guidance. Looks like Cadia for fiscal Q1 will be weaker. So maybe just remind us on the maintenance and any weakness that you're expecting per mine in various quarters? That would be very helpful.

Answer
Sandeep Biswas (Executives)

Well, we've got -- I mean, Lihir has its usual maintenance cycle where we see shutdowns in sort of the September, October period and then again in March, April. Cadia is on a fixed regimen of -- which you've been doing it for years. I think the mill realigns every 12 or 14 weeks, something like that. So nothing's changed at Cadia.

Question
Tanya Jakusconek (Analysts)

Okay. But we maybe expect a weaker Q1 because you were down a bit in this period?

Answer
Sandeep Biswas (Executives)

We are -- if you're talking about the vent rise, that's not expected to impact our production.

Question
Tanya Jakusconek (Analysts)

All right. So when you're looking at it, it's just maybe some fluctuations on Lihir being weaker in those periods of maintenance, but everything else looks otherwise relatively stable?

Answer
Sandeep Biswas (Executives)

It typically, obviously, because we have plant shutdowns, it will be weaker at those periods than others, but that's kind of what happens every year.

Answer
Sherry Duhe (Executives)

Tanya, going back to your question on the sensitivities. We've been looking at what we've published, and I don't think we're going to be able to give you that level of granularity that you're looking for in terms of dollars per unit consumed.
I think you have to be careful because you think about the hedge strategies that we have in place that currently are applied to Lihir, will cause fluctuations even from that assumed price that we put in, just given the volatility in the energy markets. So sorry I can't help you further with that specific number.

Question and Answer Operator Message
Operator (Operator)
Your next question comes from Al Harvey with JPMorgan.
Question
Alistair Harvey (Analysts)

Sandeep, Sherry and Tom, just one from me. I wanted to get an update on Wafi-Golpu, how the mining license negotiations are going there after the recent elections and how you're seeing that unfold, assuming it will be a little easier with the continuation of the existing government, but just a general update there would be very helpful.

Answer
Sandeep Biswas (Executives)

Yes, the update there. So, if we go back to prior to the election, so maybe around the March, April period, there was a flurry of activity and discussions between ourselves and -- when I say ourselves, it's Newcrest and Harmony and the state negotiating team and various ministers, et cetera. But that obviously comes to a standstill during the election period.
Now that the Prime Minister has been re-elected and he's yet to select his cabinet and et cetera, et cetera, we haven't -- there is no reengagement on Wafi at the moment, but we're hopeful that once the Prime Minister sets his team out and would like to recommence discussions as soon as they're ready, we're ready. It's a great project, and I do still want to get that going. I mean it's only become more valuable with the copper and the gold and where the world is headed in those commodities. And it's time, I think, to get it going for the benefit of, obviously, the P&G people, the country, the communities and the developers.

Question
Alistair Harvey (Analysts)

Maybe just a quick follow-up on your comment there about copper. I guess you've also got Namosi in the portfolio. Does anything, I guess, given recent transactions, make you think differently about what to do with that asset in the portfolio in the short term?

Answer
Sandeep Biswas (Executives)

In the short term, I mean, we're not -- I mean, I'm slowly thinking you're dusting off the file on that. But at the moment, we've got a lot on. So I think the first thing, and I think I said this last time, is we'll be relooking at the whole concept of that given where copper prices are headed. It's nothing going to happen imminently. But I think because of its -- and it's basically a couple mine with a little bit of gold. Nothing of that size in a location at C level in our neck of the woods can be ignored forever. But right now, it's not a priority. .

Question and Answer Operator Message
Operator (Operator)
Your next question is a follow-up from Mohamad Sitab with CIBC.
Question
Anita Soni (Analysts)

It's Anita again. I just want to -- I was curious, the -- I didn't see the briefing book filed. Is that -- do we expect one this quarter? Or is it just delayed or you're not doing it at this time around?

Answer
Sherry Duhe (Executives)

It's a good question, Anita. We had to look through that briefing book, and we think a lot of that stuff didn't make sense to update again this time around. So, we've taken a number of the key slides that we thought you'd be very interested in and put those into the appendix of the presentation. So, you shouldn't expect an additional document at this time.

Question
Anita Soni (Analysts)

All right. So in terms of not updating it, meaning maybe not applicable or just we should just use the prior briefing book as the go forward for the next 2 to 3 years?

Answer
Sherry Duhe (Executives)

I wouldn't say 2 to 3 years. I would say that stuff that's in the briefing book that's actually what you can continue to refer to, that's still sitting on our website. Stuff that's related to long-term studies, et cetera, the next updates that you should see on those will be when we get to the next stage gates that we've talked about over the next year.

Question and Answer Operator Message
Operator (Operator)

Thank you. There are no further questions at this time. I'll now hand back to Mr. Biswas for closing remarks.

Answer
Sandeep Biswas (Executives)

Well, thank you, everyone, for joining the call, and thanks so much for the questions, and have a great day wherever you may be.

Download Link:
https://www.mediafire.com/file/7yj7478d ... 2.pdf/file

The End.