AUSTRALIA'S largest gold miner Newcrest Mining has urged shareholders to keep the faith in the company's long-term picture after a series of hostile questions at its AGM in Melbourne today.
A rash of problems at its Lihir mine's processing plant in Papua New Guinea led to suspensions in operations, falls in production and sales and rises in costs in 2012, offset by a high gold price currently at about $US1,700 an ounce.
Shareholders accused the board in Melbourne of not conducting enough due diligence on plant equipment before buying the project in 2010, something chief executive Greg Robinson has conceded.
He also warned there was a reasonable chance that there would be more operational issues there this year but guaranteed output at Lihir would be higher, to between 700,000 ounces and 900,000 ounces.
"We make no apologies to anyone for having a broad range, it's just what happens when you deliver an operation reliability program and major operation all in one go,” Robinson said.
He said the value of the project - Lihir Gold was acquired for US$9.5 billion in 2010 - would shine through with annual output doubling within five years to 1.2 million ounces.
The reserve and resources at Lihir was upgraded from 48 million ounces of contained gold to more than 56 million ounces this year.
"There's a long term and short term story on this one, we have a short term fix and think the long term value of the equation is still good," Robinson said.
"At the moment 80%- plus of our effort there is going into making the plant reliable and ensuring that drumbeat of production, day in-day out for weeks and months meets our expectations."
Robinson says that while he expected the plant would need investment, the urgency with how quickly equipment had to be repaired had surprised people.
A US$200 million a year "rectification" programme is now taking place.
Newcrest is already the nation's largest gold play but has embarked on a massive expansion including spending more than US$3 billion building the Cadia East underground mine in central western NSW - which will be Australia's largest - and developing Lihir.
It also aims to have the estimated 400,000 to 580,000 ounces of gold a year, US$4.8 billion Wafi-Golpu gold/copper project in PNG in production by the end of the decade.
The company produced 2.3 million ounces of gold this year, is forecasting 2.3 to 2.5 million ounces in 2012-13 and for that to climb above three million within the next few years.
Gearing is low at only 12.5% with most debt due in 10, 11 and 30-year maturities.
Newcrest shares closed 48 cents lower at $26.01.