A big turnaround at Newcrest Mining's Telfer operations underpinned a positive December-quarter result for the under-pressure gold producer, with a cost-cutting spree and higher gold grades slashing 26 per cent from the mine's production costs.
Although a shadow still hangs over the mine after the death of a young contractor at the site last month, Newcrest said its costs and output improved markedly over the three months to the end of December.
Newcrest produced 156,789 ounces of gold and 7352 tonnes of copper from Telfer in the quarter, 27 per cent more gold and 39 per cent more copper than the September quarter. A higher grade feed from its underground operations, hit in the September quarter by the failure of the mine's hoisting system, and the completion of a stripping program at the open pit led to a 26 per cent fall in all-in sustaining costs to $957/oz.
That meant Telfer was generating positive cash flow for Newcrest for the quarter, with the miner receiving an average price of $1372/oz during the period. Even Newcrest's major problem child, the Hidden Valley mine in Papua New Guinea, achieved all-in costs below Newcrest's average sale prices for the quarter.
That may not last, however, with Newcrest tipping lower gold grades and lower production at Telfer in the second half.
And, with the gold price still volatile and dipping to $US1235/oz yesterday, it is unclear whether Newcrest's mines will be cash- flow positive this year.
It said its financial year output would be towards the top end of guidance, at about 2.3 million ounces, but it was "managing the business to be free cash-flow positive . . . at a gold price of $1450/oz".
China-backed MMG also reported falling costs at its Golden Grove base metals mine yesterday, saying C1 cash production costs for both copper and zinc were below its guidance.
For the full year ending December 31, Golden Grove produced 33,780t of copper and 23,619t of zinc. Cash costs for copper of $US2.69/lb were below MMG's forecast of $US2.80 to $US3.10/lb. Zinc production was more than 3600t ahead of MMG's guidance but less than half of forecasts of US45Â¢ to US55Â¢/lb at US19Â¢/lb.
Newcrest shares shed 21Â¢ yesterday to close at $9.13 yesterday. Cutting costs $957 The all-in December-quarter sustaining costs for an ounce of gold at Telfer, a 26 per cent drop.