GGPChat

'Havieron' mentioned 260 times...

https://www.newcrest.com/sites/default/ ... ooklet.pdf

NEWCREST - VALUATION SUMMARY ($ MILLIONS)


Telfer (including 70% interest in Havieron) VALUE RANGELOW 500 HIGH 600

Two valuation scenarios were developed for each of Cadia and Telfer:

• Scenario 1 for Telfer assumes that Newcrest successfully develops the Havieron project and
identifies new mining fronts to extend the operating life of Telfer. Gold production over the
project life is approximately 2.4Moz and copper production is approximately 100kt. In addition
to sustaining capital expenditure, total capital expenditure includes upfront development costs
for Havieron and growth capital expenditure to develop new Telfer underground extensions.
Scenario 2 incorporates the development of incremental ore inventory (from Havieron as a result
of successful resource-to-reserve conversion and at Telfer underground) so that total gold and
copper production increases to 4.3Moz and 184kt respectively. Capital expenditure is also higher
due to investments associated with developing new underground mining fronts.

If I’m reading it right it doesn’t shed a favourable light on hav/telfer in terms of value?
A lot of posts on how much people thought we were worth including me! but reading this has left me a little dejected I wonder what the mouth watering sum was meant to be (quoted by Shaun) if someone was to buy us out? because it doesn’t look mouth watering to me
I guess it’s just a matter now of waiting till production then hopefully the sp will be better and sell out. Really glad I listened and trusted Shaun all those years ago in his first lse interview where he was gonna build from our (at the time) billion dollar mcap!

4.3.4 Telfer and Havieron
Summary
Grant Samuel has valued Telfer in the range $500-600 million. The valuation incorporates the value of the
existing operating mine at Telfer and the value of the Havieron Project (at Newcrest’s 70% interest).
Scenarios and Assumptions
The valuation of Telfer’s core operations (inclusive of Havieron) is based on production scenarios developed
by AMC. The valuation assumptions are summarised below (all costs are presented on a real FY23 basis
and on a 100% basis).
SCENARIO 1
Scenario 1 assumes that Newcrest successfully develops the Havieron project and identifies new mining
fronts to extend the operating life of Telfer. The production case includes the following assumptions:
 total ore production of 59Mt over the project life, including:
• 37Mt from Telfer’s existing open pit and mining fronts through to FY26. Head grades decline to
less than 0.5 g/t gold and 0.1% copper as the ore reserves in these areas are depleted;
• 8Mt from new higher grade underground mining fronts in Telfer at slightly lower production rates
than the historical underground operations (at around 0.9Mtpa). Production from these areas
are assumed to commence in FY28 and run through FY35; and
• 14Mt from Havieron from FY27 to FY35, which ramps up to 2Mtpa in the second year of
operations. Head grades are substantially higher than at the legacy mining operations at Telfer
(averaging around 3.7 g/t gold and 0.5% copper);
 total ore milled broadly equals ore production in each year (with the exception of the wind-down of
ore stockpiles in the first years of operations). Following the conclusion of open pit mining operations,
recovery rates are expected to jump from around 75% to 87-91%
As a result, gold production over the project life is approximately 2.4Moz and can be broadly
categorised into two distinct phases:
• between FY24 and FY26, a sharp decline from around 400koz of gold in FY24 (consistent with
historical periods) to just 120koz in FY25 and 90koz in FY26 (and zero in FY27); and
• between FY28 and FY32, approximately 250-290koz gold per annum as higher grade ore from the
new mining areas is processed before ramping down in the final three years of operations.
Havieron accounts for around 75-80% of gold production in each year.
Approximately 490koz of gold sales are assumed to be hedged at fixed Australian dollar contracts
through FY26 (representing approximately 77% of total sales over that period). The balance is sold at
spot prices.
Total copper production over the project life is approximately 100kt and produced at 9kt per annum
over the project life (higher production rate in the second phase due to improved copper head grades
and recovery rates);
 cash operating costs of approximately $53/t of milled ore over the project life, reflecting the stepchange in cost profile
• from FY24 to FY26, as the lower cost open-pit mining operation winds down; and
• from FY27 onwards, as operating costs step up due to the transition to underground-only
operations at both Telfer and Havieron;
 other costs including state royalties (approximately 2.5% of gold revenue and 5.0% of copper
revenue), treatment and refinery charges, tolling recoveries (for Havieron), penalties and cash
rehabilitation costs (assumed to be approximately $160 million for Telfer and $105 million for
Havieron);
 total capital expenditure comprises:
• upfront development costs in relation to Havieron (primarily incurred between FY24 and FY27).
The capital expenditure is based on the initial estimates contemplated in the 2021 pre-feasibility
study and escalated for cost inflation, scope changes and new geotechnical information;
• other growth capital expenditure of approximately $35 million (most of which is incurred
between FY28 and FY32) to develop new Telfer underground mining extensions; and
• sustaining capital expenditure of approximately $30 million per annum (total at both Telfer and
Havieron); and
 income tax rate of 30% (the Australian corporate tax rate).
SCENARIO 2
Scenario 2 incorporates the development of:
 19Mt in incremental ore inventory from Havieron (33Mt total) as a result of successful resource-toreserve conversion, including the inferred resource zone at the high grade Southeast Crescent Zone
and Breccia Zone. Mining rates improve to 3Mtpa and extend the mine life to FY39; and
 14Mt in incremental ore inventory at Telfer underground (22Mt total). Mining rates ramp up to as
high as 3.5Mtpa and extend the mine life to by an additional year to FY36.
Total ore milled increases to nearly 100Mt over the project life (representing over 55% of total mineral
resource at Telfer’s operating deposits and Havieron). As higher grade areas are included in Scenario 2,
total gold and copper production over the mine life increase by a greater proportion to 4.3Moz gold and
184kt copper over the life of mine.
Cash operating costs are slightly higher (approximately $55/t of milled ore over the project life) as more
production is weighted towards the higher cost underground operations than in Scenario 1. Capital
expenditure is expected to be approximately $320 million higher than in Scenario 1 due to the investments
associated with developing new underground mining fronts (of which approximately 85% of the
incremental spend is incurred in Havieron). Rehabilitation costs are expected to be unchanged.
The following chart shows the ore volumes assumed to be produced from Telfer (inclusive of Havieron) (on
a 100% basis) as well as the expected gold and copper in each year (incremental volumes from Scenario 2
are represented by dotted lines): more to follow

Cont

DCF Outputs and Valuation
The following table summarises the projected production and costs: The following chart aggregates the NPV outcomes for Telfer (inclusive of Newcrest’s 70% interest in
Havieron) together with the value attributed by AMC to any remnant resource and exploration targets (a
total of $133 million in Scenario 1 and $86 million in Scenario 2)
Grant Samuel’s valuation range of $500-600 million takes into account a number of subjective judgements,
particularly the:
 future resource-to-reserve conversion from Telfer underground; and
 valuation upside from the development of Havieron.
The value of existing mining operations at Telfer is constrained by its remaining reserve life and is further
capped by its declining free cash flow profile over that period as a result of naturally declining grades and
cutback investments. While Telfer has consistently generated EBITDA in excess of $100 million per annum
in recent years, free cash flows have been substantially lower.
Extensions will be required to sustain ongoing operations at Telfer beyond FY26 and defer its rehabilitation
obligations. Studies to extend the open pit mining operations remain at very early stages and have not
been included in the valuation. On the other hand, studies for additional underground mining fronts are
more advanced but collectively would still mean a substantial reduction in scale at Telfer (as the open pit mine historically comprised over 75% of ore production at Telfer). The DCF analysis indicates that the
Telfer mine extensions contemplated in either Scenario 1 and Scenario 2 are expected to be subscale and
marginal contributors to value.
Accordingly, the positive value hinges on the value of Newcrest’s interest in the Havieron project. The
discount to the Scenario 2 NPV reflects Havieron’s status as a development project that is still subject to a
feasibility study (and subsequent FID).
The recent negotiations between Newcrest and Greatland Gold plc (“Greatland”), which owns 30% of
Havieron, can also provide some (albeit limited) evidence to value. These include announcements in:
 March 2022, that Greatland made a non-binding offer to acquire a 5% interest for $85 million (implied
value of $1.7 billion for 100% of Havieron) which was not progressed; and
 August 2022, that an independent valuer determined that the option exercise price for a 5% interest to
be $60 million (implied value of $1.2 billion for 100% of Havieron). The valuation was based on
information (including geological data) available at 15 December 2021. Newcrest declined to exercise
the option, stating that the price “did not meet Newcrest’s investment hurdles”.
The implied values resulting from these discussions are contradictory (the value of Havieron cannot be both
less than $1.2 billion and greater than $1.7 billion). On the other end, the value ascribed by the
independent valuer reflects the prescriptive process and principles outlined for the in the joint venture
agreement. In most instances, Newcrest’s decision not to exercise the option (particularly given its
knowledge of the asset) would suggest that $1.2 billion is a notional “ceiling” to the value of Havieron.
However, there are several factors to suggest that the project value may have changed since then:
 over 1.9Moz of gold and 0.05Mt of copper have been added to mineral resource (approximately a 50%
increase over previous estimates); and
 exploration studies and drilling continue to progress and the feasibility study is currently being
undertaken.
On the other hand, upfront capital expenditure estimates are expected to increase materially due to the
expanded scope and increased geotechnical and hydrogeological understanding of the deposit.
While it is difficult to make any definitive conclusions from these two datapoints, it is clear that the implied
values resulting from these discussions are materially higher than the NPV outcome in the pre-feasibility
study that was completed in October 2021 ($228 million). The significant uplift is due to the nature of the
study, which calculated NPVs based on long term gold and copper prices of $1,500/oz and around $7,250/t,
respectively. Valuation parameters in the current market environment would involve assumptions that
would result in materially higher NPVs.
Another valuation benchmark is the recent share price performance and capital raisings undertaken by
Greatland. Havieron is Greatland’s flagship asset and comprises most, if not all, of the company’s value (as
its other exploration projects and joint ventures are less advanced and do not have any mineral resource).
The analysis is set out below:

to be cont

The analysis broadly points to a value for 100% of Havieron of around $1.4 billion. However, the valuation
evidence from Greatland’s share price must be considered in light of its share price and its volatility. It has
very limited broker coverage (only three analysts).
Wyloo Metals is a sophisticated investor that is familiar with the mining industry (albeit with no other
investments in the gold sector). However, while its investment in Greatland represents a useful third party,
arms’ length value for the project, it is necessary to recognise the emerging picture of materially higher
development costs subsequent to the investment.
Taking these factors into consideration, Grant Samuel considers the valuation range for Telfer (including
70% of Havieron) of $500-600 million (inclusive of the value of remnant mineral resources) to be a
reasonable balancing of these issues.
Valuation Cross Checks
The valuation range for Telfer (inclusive of Havieron) implies the following valuation parameters: The implied EBITDA multiples for Telfer (inclusive of Havieron) are very low relative to the rest of
Newcrest’s mineral assets (as well as the rest of the market evidence) due to the limited life of its open pit
operations (closing in FY26).
The resource multiples for Telfer (inclusive of Havieron) are below the market evidence due to the:
 significant upfront capital to develop Havieron (relative to the project’s value at this point in time);
 lack of clarity for future growth plans, as the feasibility study for Havieron is still underway and more
work is required to better define the extent of the underground mine extensions at Telfer; and
 challenging economics at Telfer’s existing operations, which are further impacted by the rehabilitation
obligations at the end of its life.
The reserve multiples are more towards the middle of the range of the market evidence due to the very
high resource-to-reserve ratio (over 4 times) and expectation that extending the operating life of Telfer
beyond FY26 will lead to additional conversions of mineral resource to reserves. The production cases
incorporate some of this upside, particularly at Havieron, which has only recognised 14Mt in ore reserves
(but has 32Mt of ore included in Scenario 2 of the DCF analysis).
In Grant Samuel’s view, the multiples are a reasonable balancing of the opportunities and risks at Telfer.

end, there is more but the above summary says most of what is to be said

- The approach taken by Grant Samuel is to assess Newcrest's interest in Havieron (70%) on an aggregated basis with Newcrest's interest in Telfer (100%). Accordingly, Havieron has not been separately valued. The combined valuation therefore includes significant closure costs and other liabilities associated with Telfer (which Greatland has no exposure to).

- Grant Samuel has applied its own assumptions and adjustments to arrive at their opinion as to the current combined value of hypothetical Telfer (100%) and Havieron (70%) scenarios.

- Additionally, because Newcrest did not complete its own planned update to the Havieron Mineral Resource Estimate (MRE) in August 2023, the Grant Samuel assessment is based on Newcrest's August 2022 MRE update, which only incorporated drilling results up to November 2021.

https://polaris.brighterir.com/public/g ... ry/xlk86gw

- Additionally, because Newcrest did not complete its own planned update to the Havieron Mineral Resource Estimate (MRE) in August 2023, the Grant Samuel assessment is based on Newcrest's August 2022 MRE update, which only incorporated drilling results up to November 2021.

STILL UNDERVALUING HAVIERON
Hopefully removing another blockage out of the pipeline

Looks like newcrest may have stubbed their toe in delaying the MRE, and got the value of H snarled up with valuing telfer, and old data.

So sad, tiny violin.

Great work Rotherby. - Thank you!!