Thursday, April 25, 2013

Hidden Valley a problem child — Newcrest CEO

by Allan Seccombe, 24 April 2013, 10:29

THE Hidden Valley mine in Papua New Guinea was a "problem child" and three key areas had come under focus to bring costs down, Greg Robinson, CEO of Australia's Newcrest Mining, which shares the project with Harmony Gold, said yon Tuesday."Hidden Valley is our problem child on a negative cash flow basis to us and we continue to see poor results," Mr Robinson said during a presentation on Newcrest's March-quarter results. Newcrest is Australia's largest gold miner and has guided the market to expect output of 2-million ounces to 2.15-million ounces of gold for this financial year.
Like its peers in South Africa, Newcrest is struggling with the fall in the gold price, strong Australian and Papua New Guinea currencies and rising costs. It has already cut 150 jobs.
Newcrest shares Hidden Valley with Harmony as well as the Wafi-Golpu exploration project that promises to be a large copper and gold mine.
Hidden Valley produced 18,988oz of gold for Newcrest, and Harmony will report similar results when it releases its third-quarter results on May 3. Hidden Valley produced 20,649oz for Newcrest in the December quarter. Harmony declined to comment on Mr Robinson's view, citing a closed period ahead of releasing its own results.
Hidden Valley's cash cost in the March quarter, which included production of 205,651oz of silver, was A$1,790/oz, up from A$1,584 in the previous quarter.
Mr Robinson said the partners were addressing the continuing problems at Hidden Valley, with them taking delivery of a primary crusher in May instead of this month, as had been expected. This would allow the mine to ramp up production from a high-grade part of the mine using conveyor belts to move the ore to the processing plant instead of relying on an expensive trucking option.
"It's a big priority," Mr Robinson said. Mine management was looking at ways to improve metal recoveries at the plant and it had brought in an independent operational review team to reduce costs by between 20% and 30% in the "very short term".
"We will continue to review the viability of this operation in particular after the primary crusher is in place and that we've taken the appropriate steps. We hope once we've done those, we'll have this thing back in a reasonable return profile ."
With Newcrest becoming "stingy" with its capital, analysts quizzed Mr Robinson about Wafi-Golpu, a $4.9bn project that has attracted criticism for Harmony from some analysts who argue it should focus on returning capital to shareholders rather than spend billions of rand on this project.

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