MELBOURNE , VICTORIA Aug 17, 2015 (Thomson StreetEvents) -- Edited Transcript of Newcrest Mining Ltd earnings conference call or presentation Monday, August 17, 2015 at 1:00:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Chris Maitland Newcrest Mining Limited - Head of Investor Relations * Sandeep Biswas Newcrest Mining Limited - MD and CEO * Gerard Bond Newcrest Mining Limited - Finance Director and CFO ================================================================================ Conference Call Participants ================================================================================ * Craig Sainsbury Goldman Sachs - Analyst * Brendan Fitzpatrick Morgan Stanley - Analyst * Michael Slifirski Credit Suisse - Analyst * Mark Busuttil J.P. Morgan - Analyst * Cathy Moises Evans and Partners - Analyst * Paul Hissey RBC - Analyst * Andrew Knuckey Commonwealth Bank - Analyst * Brett McKay Deutsche Bank - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by and welcome to the Newcrest Mining 2015 full year results conference call. I must advise you that this conference is being recorded today, Monday 17 August 2015. I will now hand the conference over to Mr Chris Maitland, Head of Investor Relations of Newcrest Mining. Please go ahead Mr Maitland. -------------------------------------------------------------------------------- Chris Maitland, Newcrest Mining Limited - Head of Investor Relations [2] -------------------------------------------------------------------------------- Thank you, Rob. Good morning and welcome. With me today is our Managing Director and CEO Sandeep Biswas, and our Finance Director and CFO Gerard Bond. Both will be speaking today on Newcrest's full year financial results for the year ended 30 June 2015. First, please note the Company's disclaimers on the first two slides of our presentation. These relate to forward looking statements, ore reserve and resource reporting. The competent person's statement and the use of non-IFRS financial information is referred to the in the presentation. Dollar references made in this presentation refer to Australian dollars unless otherwise specified. I'll now hand the call over to Sandeep. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [3] -------------------------------------------------------------------------------- Thanks Chris and good morning everyone. Today Gerard and I will take you through our financial results, provide a review of our operations and update you on the progress of projects and studies at some of our key assets. It's a big presentation to get through today, with lots of information included. I'll keep things moving as best as I can and I look forward to taking your questions at the end. Let me start with safety on slide 5. Two fatalities during the year and one at the start of the new financial year is simply unacceptable. This year we focused heavily on our major hazard standards and implementation of effective controls. This work has now been extended to critical risks and continues to be a major area of focus in order to eliminate fatalities from our business. It's also important to focus on our people and the importance of safety leadership and safety behaviours. That's why we launched our NewSafe program this year, to drive a cultural change in safety across the Group. The importance of NewSafe is that it's about people. It's about engaging every member of the organisation in the challenge to prevent fatalities and serious injury. At each level of the business we look at what the most important behaviours are to deliver safer work. This includes the leaders looking at how they coach, role model and interact with their teams, and our frontline workforce taking ownership of their safety commitments. It's creating a culture within Newcrest that's absolutely focused and targeted towards eliminating fatalities and life-changing injuries. Safety is a core value for us and we're more determined than ever to improve in this area. At the start of this year, I outlined our focus on safety, operating discipline, cash generation and profitable growth, all underpinned by a culture of accountability and personal ownership. On cash generation and profitable growth we had a strong year. A lower all-in sustaining cost of $789 per ounce underpinned our strong free cash flow of AUD1.1 billion. We used this cash to reduce our US dollar denominated net debt by $819 million. At year end, net debt stood at $2.9 billion. I'm pleased with the operational and financial performance from Cadia, Telfer, Gosowong and Bonikro, which were the driving force behind the underlying profit of AUD0.5 billion. I'm also pleased with the improved grinding rates at Lihir, which is essential for it to achieve its full potential. The Edge improvement program has continued to deliver productivity improvements and cost reductions across the Group, with cash benefits totalling almost AUD400 million to date. We've been working hard on the next steps. Studies are ongoing at Lihir and Telfer, and I'll share with you some details on that progress shortly. But briefly, there's been good progress on the Lihir Pit Optimisation Study. Secondly, whilst a review of Telfer is continuing, I'm pleased to announce that we'll be retaining the assets, as we believe this provides the most value to shareholders. We have also approved the next open pit cutbacks at Telfer. At Cadia, there's been a great deal of work since the seismic event in February this year at Panel Cave 2. The development and ramp up of this cave will be a key driver for our performance over the coming years. Panel Cave 2 returned to production last week. We'll also share some more detail on our growth options and exploration today, including the intention behind the appointment of Mike Nossal as Chief Development Officer. Slide 8 shows Newcrest's industry leading cost position. The two charts of our all-in sustaining cost plus interest expense per ounce of gold sold relative to our six major gold peers, based on the most recently reported 12 months for each. The horizontal access of the top chart shows each company's indicative reserve life and the size of the bubble represents the gold reserves of each company. The bottom chart shows Newcrest's all-in sustaining cost per ounce plus interest expense per ounce compared to our major peers. We will continue to focus on reducing our all-in sustaining costs with the Edge program, the ramp up of Cadia East and the turnaround of Lihir. Now turning to Edge, our company-wide improvement program. Edge has now been embedded at all sites and is delivering real cash benefits to the Group, with approximately AUD390 million of cash benefits delivered since commencement in May 2014. To me, the real and enduring benefit of Edge is the cultural change it delivers to the Company by involving our workforce in our improvement efforts and accelerating the delivery of an owner's mindset to all levels of the organisation. One example of the benefits we're seeing from Edge is what's happening in Gosowong. Challenging the status quo is central to the philosophy. These three examples are a snapshot of the hundreds of initiatives which are under way across the business. The initiatives that I like the most are the ones that come from the shop floor and we're seeing examples of this every week in our Edge review meetings. At our Investor Day last October we outlined our key objectives for the years ahead. Let me update you on how we're performing. Guidance is being delivered, with the June 2015 quarter representing the ninth consecutive quarter that guidance was met or exceeded. The all-in sustaining cost spend was below the lower end of the guidance range. We have a low position on the industry cost curve, driven primarily by the Edge program, the ramp up of Cadia East and the lower Australian dollar. Each operation was free cash flow positive, with the exception of Hidden Valley. As a result we were able to apply this free cash flow towards reducing our US dollar denominated net debt. Operationally, we're making good progress towards our objectives. However, it Lihir we're not there yet. The team are working hard to improve the performance of the processing plant. The increase in the grinding throughput rate to an annualised 11.6 million tonnes per annum in the June quarter was pleasing. Continued efforts and improvements in plant reliability and cost reduction remain the biggest levers for improving Lihir's performance. Mike Nossal joined the team in July and has a wealth of industry experience which he will bring to bear in his role as Chief Development Officer. I've consolidated all growth functions under Mike's portfolio. This includes brownfield and greenfield exploration, M&A, projects and studies. Craig Jones has now taken responsibility for the development of our next generation of caving operations at Cadia and Gulpu. As Gulpu is part of the MMJV, Craig has also assumed responsibility for Hidden Valley. Phil Stephenson has been promoted to Executive General Manager responsible for Telfer and Gosowong. Craig Jetson, General Manager of Lihir, now reports directly to me, reflecting the importance of the turnaround at Lihir. We have appointed a new General Manager of Safety to replace Phil, who is still heading the safety function at this time. Let me now turn to the key operational highlights for the year. Gold production was up 1% to 2.4 million ounces, copper production increased 12% due to the ramp up of PC1 and the outperformance of Ridgeway. The Group's all-in sustaining cost in US dollars declined 12% year-on-year, a result driven by our Edge program, Cadia Ridge performance and the weaker Australian dollar. At Lihir, it was encouraging to see steady improvement on our key metric of grinding throughput, achieving a record for the financial year. Turning now to each operation, Cadia had another good year. Gold and copper production were up 13% and 22% respectively. This was a result of the ramp up of PC1, partially offset by lower grade from Ridgeway as this mature cave comes closer to the end of its operating life. All-in sustaining cost was 31% lower at $206 per ounce. During the year, PC1 successfully propagated through the surface. In February 2015 there was a seismic event in PC2 which I will discuss in more detail later. We're expecting further growth in Cadia production from the continued ramp up of PC1 and PC2. We've also applied for an increase in the processing permit from 27 million tonnes per annum to 32 million tonnes per annum. At Lihir, gold production was down 5%, primarily due to a 9% lower grade. You can see that the second half of the financial year was an improvement on the first half and for the full year, Lihir achieved a free cash flow of AUD154 million. Although the plant is not performing to a level I'm satisfied with, the improvements in grinding throughput have been substantial. Our target remains to achieve a sustainable grinding throughput rate of 12 million tonnes per annum by December this year. As we close in on achieving this rate, I'm now comfortable setting the next target of a sustainable grinding throughput rate of 13 million tonnes per annum. Also, in view of the relatively low rainfall in PNG at the moment, we're also working hard to reduce our water consumption on site. Telfer has had a mixed year. A fatality in May overshadowed a good operational result. The second half performance was softer than the first, affected by restricted underground operations and open pit access issues in the June quarter. While gold production was marginally lower year-on-year, the all-in sustaining cost of $803 per ounce was 13% lower. This growed free cash flow to AUD270 million, a strong performance. The next open pit cutbacks at Telfer have been approved. It comprises a AUD46 million spend over the next 24 months to access all Main Dome Stages 6 and 7 and West Dome Stage 2. There's more detail on the Telfer study coming out but in summary the study showed us that the best way to restrict value is by smaller, progressive cutbacks. The results of this study combined with the lower Australian dollar resulted in a revised upward valuation of Telfer. Onto our other operations. Bonikro had a good year with gold production up 26%, driven mainly by higher grade from (inaudible) and higher recovery. The US dollar all-in sustaining cost was down 31% to AUD752 (sic - see slide 17 - AUD742) per ounce. Free cash flow of AUD53 million from Bonikro is a good result. At Gosowong, gold production was down 4% on FY14 as higher gold grade was offset by lower ore availability. US dollar all-in sustaining cost per ounce was down 4%, due to lower sustaining capital. The updated reserves at Gosowong as at 31 December 2014 largely replaced the 2014 calendar year depletion. At Hidden Valley, we had a tough year. Two fatalities in the past eight months have hit the site hard. Following the fatality in July we suspended operations and extensively reassessed major hazards and improved our critical controls on site. A phased resumption of operations commenced last week. Our priorities for Hidden Valley in this lower gold price environment is to ensure safe production while maintaining a cash flow positive operation. We've taken a write down in the value of the asset which is reflective of the lower gold and silver price assumptions. Whilst we continue to assess mining options, we'll be deferring pre-stripping in the short-term and restructuring operations reflecting the lower operational activity levels and current gold price environment. We will continue with the deployment of our improvement process that focuses on safety and cash generation. For the financial year 2016 we've set our gold production guidance range at 2.4 million to 2.6 million ounces. Our guidance shows that we believe Lihir is likely to provide the majority of the increase in production. At Cadia, we just hope the ramp up of PC2 will offset the decline in our output from Ridgeway, with Ridgeway expected to cease production during the year. I will now hand over to Gerard who will take you through the financial results. -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [4] -------------------------------------------------------------------------------- Thank you Sandeep and good morning everyone. Let me start with the key highlights of the year from a profitability cash flow and balance sheet perspective. A statutory profit of AUD546 million was significantly higher year-on-year due primarily to the asset impairments in the corresponding period. Underlying profit of AUD515 million was AUD83 million higher than the corresponding period and primarily reflects increased revenues from the ramp up of Cadia East along with the weakening of the Australian dollar increasing our realised metal prices. The Group all-in sustaining cost per ounce sold at AUD941 was 4% lower than the corresponding period, reflecting lower levels of production stripping and sustaining capital expenditure, higher by-product revenue associated with higher copper sales volumes and lower corporate expenditure. This was particularly offset by the 9% deterioration in the Australian dollar increasing our US dollars at nominated cost and lower sales volumes at Lihir due primarily to 9% lower feed grades. Free cash flow was in inflow of AUD1.1 billion, AUD953 million higher than the corresponding period. All operations, excluding Hidden Valley, improved free cash flow generation in the current year and were free cash flow positive. This strong free cash flow performance enabled us to reduce our US dollar denominated net debt by $819 million to $2.9 billion. The chart on the top left of this slide shows how the Group and each operation performed on an all-in sustaining cost margin basis in US dollar terms. The chart shows that Newcrest's all-in sustaining cost margin in the period was powered by Cadia, Telfer, Gosowong and Bonikro. The chart also shows the potential for an improved contribution from Lihir. The bottom left graph shows we've been able to improve our EBITDA and the EBIT margin and increase our all-in sustaining cost margin compared with the corresponding period. This improved margin increased our free cash flows and helped to accelerate our debt repayment. Turning to the next slide, we see the drivers of the change in underlying profit after tax between the current period and the corresponding period. The improvement of AUD83 million was largely due to increased gold sales from higher margin production in Cadia, the weakening of the Australian dollar against US dollar increasing realised metal prices and lower corporate expenditures. This was offset by the impact of a weaker Australian dollar in US dollar denominated costs, higher unit operating costs, partly due to exchange rates, and higher income tax expense compared to the corresponding period. Free cash flow constitutes cash flow from operations less cash flow related to investing activities. Our FY15 free cash flow of just under AUD1.1 billion was AUD953 million higher than the prior year. The top chart on slide 23 shows free cash flow contribution by site. All operations, except for Hidden Valley, improved free cash flow generation in the current period and were free cash flow positive. The bottom chart shows the composition of the increase in FY14. The improvement reflects higher operating cash flow, lower capital and stripping expenditure and proceeds of AUD105 million from the partial sell down of our investment in Evolution. Newcrest will continue to prioritise application of free cash flow to the reduction of debt. The strong result we've announced today has enabled us to reframe the financial parameters upon which capital management decisions will be based. These parameters are shown on slide 24. This shows that Newcrest is targeting a leverage ratio of less than 2 times. It was 2.2 times at 30 June 2015. Newcrest is also targeting the gearing ratio of less 25%. It was 29% at 30 June 2015. We want to maintain our investment grade, credit rating and we want to maintain cash and committed bank facility cover of at least $1 billion, and we have $2.4 billion of cash in undrawn bank loans at 30 June 2015. There is no dividend declared in relation to the 2015 financial year as the priority now remains a stronger balance sheet and achieving these financial policy parameters. I also want to reiterate that the Board has no present intentions to raise equity. The next slide shows our debt maturing profile, and the key points I want to make in this slide are that in the next three financial years we only have $100 million of debt scheduled to be repaid. Over 60% of the debt is in the form of long-dated corporate bonds. As you can see, the Company's bank debt facilities have good [turnover] and there is considerable headroom in the existing bank debt facilities with a drawn level of debt being much less than the facility size. So although our absolute debt level is still elevated relative to where we want it to be, the structure of that debt is appropriate and the maturity profile is accommodating for both the cash flow generation and the investment profile of the Company. This next slide seeks to make two simple points. The financial covenants in our debt facilities which are listed here were comfortably satisfied at 30 June 2015, and Newcrest debt is competitively priced. It's also worth pointing out that the private placement and corporate bonds debt is at fixed rates, and absent Newcrest being taken over by another company with a lower credit rating than Newcrest, a change in Newcrest's credit rating does not of itself alter the cost or availability of any of Newcrest's debt. This slide shows the movement in our gearing ratio and how it is impacted by the weakening of the Australian dollar against the US dollar. The key points I want to make are that all of our debt is denominated in US dollars, and that our gearing ratio was reduced by 4.5% year-on-year. Net debt when translated in Australian dollars was reduced by AUD174 million. On the total equity side of the gearing calculation, the translation of our US dollar denominated assets into Australian dollars had a AUD1.7 billion positive impact on shareholders' equity, and a net debt positive impact on total equity of AUD806 million after taking into account the FX impact on the debt translation. So you can see that the gearing ratio is impacted not only by the debt number but also by total equity. For Newcrest shareholders, the weaker Australian dollar had a greater positive impact on equity than it's had on the translation of debt. As Newcrest sells all of its product by reference to US dollars, pays a lot of its cost and capital in US dollars, and has all of its debt in US dollars, Newcrest is moving to US dollar reporting in FY16. Finally, let me step you through the significant items in this year's results. After tax and non-controlling interests, there was a net benefit of AUD31 million. This comprised an asset impairment reversal of AUD376 million at Telfer, primarily reflecting a reduction in the short and long-term Australian dollar US dollar exchange rate assumptions applied by the Company, and updated cost production and development timing assumptions flowing from the Telfer future options review. We impaired our Hidden Valley asset by AUD245 million due to a decrease in short and long-term US dollar gold price assumptions, increased operating cost assumptions, and reduced value ascribed to exploration cost activity. West Africa's carrying value was also impacted by the change in US dollar gold prices and the reduced value ascribed to exploration prospectivity, with its assets impaired by AUD76 million. There was a AUD43 million write-down on the value of inventory at Hidden Valley and Bonikro, primarily reflecting the lower long-term US dollar gold price assumptions. Lihir asset values were impacted by the lower near- and long-term gold price assumptions. This was offset by the favourable impact of lower Australian dollar and Papua New Guinea kina exchanged rate assumptions. Included in the AUD31 million of significant items was a gain of AUD19 million recognising the partial sell down of shares in Evolution during the year. I'll now hand back to Sandeep who'll take you through the remainder of the presentation. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [5] -------------------------------------------------------------------------------- Thanks Gerard. Let me share some of the progress we're making on our studies, starting with the Lihir Pit Optimisation pre-feasibility study. It's important to note that this study is ongoing. We expect it to be completed by the end of this calendar year, but this update will help you understand some of the options we are considering. The study seeks to do a number of things, firstly to optimise the sequence of the mine plan; and secondly to identify the optimal seepage barrier options to best balance cash flow, capital efficiency, and risk mitigation. This illustration shows an aerial of the Lihir ore bodies. The main change proposed in the study plan is to move from vertically accessing the Kapit ore bodies to laterally developing the Lienetz pit open pit towards Kapit. We've been able to consider this change to the mine plan because of the change in operating strategy at Lihir that we announced in February. This important change in operating strategy largely removes sulphur as a constraint in processing the ore. With this knowledge, we went back to the mine plan, were able to re-classify ore as plant feed which otherwise would have been stockpile due to its sulphur content. This has made the lateral extension more economical. The advantages of a lateral development are progressive cooling and depressurisation of the ore body ahead of mining and it defers the date that a seepage barrier is required. We've also challenged the thinking on how to construct a coffer dam, and have identified two other seepage barrier options for consideration. The ability to utilise waste material in the construction of all three seepage barrier options would help reduce rehandling costs. This diagram shows one potential scenario for extending into Kapit from the Lienetz open pit. Under this scenario, a coffer dam would be built and mining would extend laterally from the existing pits in the south to Kapit in the north, processing all medium and high grade material along the way irrespective of sulphur content. A coffer dam would potentially not be required until beyond 2030. The table shows the potential material movements and planned feeds for the first five years under this scenario if we continued with a feed ratio of around one third direct mine feed to two thirds stockpile. The first five years of the mine plan is common to all seepage barrier options. As you'd appreciate, numbers beyond that time become dependent on which option is chosen. An extensive amount of work has been done investigating seepage barrier options. The estimated cost to construct a coffer dam has been substantially reduced to around $625 million in the previous PFS with plan to decommission then recommission our geothermal wells and infrastructure. Now the construction of the coffer dam has been pushed to a date where there's no need rebuild this infrastructure. There are also plans for an additional construction camp which is also no longer required. A significantly cheaper near-shore cut-off wall, estimated at $75 million, is also under consideration. Work continues on the pit design for this option. The first stage in building a near-shore cut-off wall would be to fill the inner harbour with clay waste material from the open pit. We would then build low grade stockpile on top of the clay in-fill which would help compact the material. Building a seepage barrier on land as opposed to constructing a coffer dam in the sea is significantly cheaper, as the engineering is simpler and there's no need for expensive dredging. The third option is essentially the same as the second except the possibility that the near-shore cut-off wall will be shorter. Work is currently underway to determine if the compacted clay material is able to act as a seepage barrier in its own right. Conceptually, this third option could be the cheapest. Out beyond 2030, another seepage barrier in the form of either a coffer dam or shallow cut-off wall would be required to access the southern resources. As you'd appreciate this is not an area of current focus. This next slide includes animation which illustrates how a lateral extension of the pit would progress if a near-shore cut-off wall was selected. As the pit develops, clay waste material would be used to fill the inner harbour. Stockpiles would be relocated to above the filled in harbour to help compress the clay waste material. Pre-strip of the lateral advance would keep ahead of mining activity, which would actively depressurise and cool the ore body. Once the inner harbour has been compacted, the stockpile material would be available to be drawn upon as plant feed. A new road and associated services such as power and water would be required, and a near-shore cut-off wall would be constructed. You can see we have a number of options we are looking at, and we expect to complete the PFS by the end of December this year. Turning now to Cadia and the seismic event that suspended operations at Panel Cave 2 in February. A seismic event is the movement of rock underground, an expected and regular occurrence with block caves. This event caused a rock burst through the roof of a drive which you can clearly see in the picture on the bottom left. No-one was injured in the event. The team at Cadia rehabilitated the damaged area and investigated the underlying causes. A major learning from the investigation was an appreciation of the different rock response under pressure between the geology of PC2 from that of PC1. Due to the PC2 rock presenting as more brittle and therefore less ductile under stress, the decision was taken to continue the development of PC2 using the advanced undercutting method as opposed to the post undercutting method used to develop PC1. Let me explain the difference between the two methods. Under the post undercutting approach, the drawbell between the undercut level and the extraction level are created ahead of the undercut development. During the development phase, this results in stress being transferred to the extraction level. It's a faster development method as larger undercut burrowing of the cave can occur, and the material from the blast falls directly into the drawbells. Under the advanced undercut method, the undercut level development of the cave occurs before the drawbells are created. This results in the stress from the cave being spread over a larger area at the extraction level. However, because the drawbells have yet to be fired the undercut level work is restricted as the blasted rock needs to be hauled out. The switch from post undercut to advanced undercut required the filling in of drill-holes already developed for the firing of the PC2 extraction level, then new drill-holes had to be created for the smaller blast pattern required for advanced undercut. That work has progressed well and we're pleased to say that PC2 has returned to production as of last week. Now to the ongoing Telfer future options review. As I mentioned earlier, we've made the decision to retain Telfer, an asset which has been in the Newcrest portfolio for over 35 years. This decision represents best value for our shareholders. We have achieved good returns from Telfer in the past 12 months and continue to focus on all options to lower cost and improve productivity. The illustration on the left of the next slide shows the cutbacks which we have approved in West Dome Stage 2 and in Main Dome Stage 6 and 7. This is expected to cost around AUD46 million and will extend the open pit through to December 2017. Future cutbacks will be progressive, so they'll largely be undertaken in the normal course of mining, which is a change from the big pre-strip we did for the last main dome cutback. That is, we believe the value of Telfer can be best realised through a series of smaller cutbacks, which reduces the capital at risk at any one time and keeps the asset free cash flow positive. The illustration on the right shows the cutbacks available to us in the future. A brief update on Golpu, in December we announced the progression of stage one of the Golpu project to feasibility stage. This is a world class project, with first ore targeted for 2020 and the feasibility study is expected to be completed by the end of December this year. The permit for advanced exploration and feasibility support has been granted, and we're in the process of finalising a suitable framework with the PNG government and in discussions with local landholders for progressing with the development. Taking a look at exploration now, we maintain a small but highly capable exploration team, and they continue to look in the most highly prospective regions. Our FY16 priorities are shown here, but the team is actively looking to bring more potential targets and early entry opportunities to us for consideration. Over the last year the team has restocked our exploration portfolio with several exciting opportunities that leverage our existing operational footprints and technical strengths. For example, we have to leverage our experience in Gosowong in our search for epithermal vein style mineralisation at the Southern Coromandal project in New Zealand. In summary, we're pleased with our financial results and operational progress over the year. Our all-in sustaining cost of $789 per ounce is a reflection of the hard work we've been doing and the positive impact Edge is having on the Group. I'm particularly pleased that we've been able to reduce US dollar denominated debt by $819 million. We have a plan for the future at our key assets, and we have a world class growth option in feasibility, and an active exploration program. Moving forward our key focus areas continue to be safety, operational discipline, cash generation, and profitable growth, all underpinned by a culture of accountability and personal ownership. With that, I'll now hand back to the operator who will open the line for your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator instructions). Your first question is from the line of Craig Sainsbury from Goldman Sachs. Your line is open, please go ahead. -------------------------------------------------------------------------------- Craig Sainsbury, Goldman Sachs - Analyst [2] -------------------------------------------------------------------------------- Thanks. Morning Sandeep. Just a -- great job on getting the debt down it's made as a key take-away from the results in 2006 and a period where you're probably going to be well within your guidance range in terms of where you want your balance sheet to be. So could you just talk us through how you see your and the Board's views of where you'll be allocating that surplus cash going forward where in a period where there's potential to keep paying debt down, have a really low strong balance sheet, is there going to be returns back to shareholders, and where does the potential for project development and (inaudible) fit into your thinking? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [3] -------------------------------------------------------------------------------- Thanks for the question Craig, and thanks for the recognition of getting our debt in a better position. Our priority remains, as you hinted at, at reducing our debt as we go forward. The Board will look at that as it determines what to do in relation to recommencing a dividend at the right time. As I've said before, the development pathway on Golpu is a pretty slow burn over the next few years based on achieving approval to progress. Our focus on growth is pretty much on early paid entry and using our skills as an explorer, developer, and builder of projects in order to grow. That said, if there's bargain basement prices out there for something that we would like, we'll have a look at it, but acquisition is not our preferred mode of growth. -------------------------------------------------------------------------------- Craig Sainsbury, Goldman Sachs - Analyst [4] -------------------------------------------------------------------------------- Thanks. -------------------------------------------------------------------------------- Operator [5] -------------------------------------------------------------------------------- Your next question is from the line of Brendan Fitzpatrick from Morgan Stanley. Your line is open, please go ahead. -------------------------------------------------------------------------------- Brendan Fitzpatrick, Morgan Stanley - Analyst [6] -------------------------------------------------------------------------------- Thanks very much, and good morning everyone. I'd like to focus on the costs going into the FY16 period if I may. It looks like the absolute costs are going to be rising, particularly at Telfer and Gosowong, and I'm curious about if there's any specific drivers there. Then overall if we just take the midpoint of the production guidance range and the all-in sustaining cost basis on the dollar millions basis, it suggests that the unit costs are rising on a year-on-year basis FY15 to FY16. Just making sure that that's a reasonable interpretation of what to expect at this point. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [7] -------------------------------------------------------------------------------- I think as you look at FY16 there is more development work that's occurring across the Group. There's the underground development at Telfer in addition to a tailing dam lift. There's some development at Bonikro, and increasing development underpinning its performance over the coming years. You've also got a high level of stripping activity at Lihir. The other balance to this is to look at it in US dollar terms. The exchange rate -- both the kina and the Aussie dollar has gone the right way for us. If you convert everything back to US dollar all-in sustaining cost, I think you'll find that we're pretty competitive. The reason I always emphasis US dollars is that's the currency of our revenue. It's the currency of our debt, and it's a US dollar margin that makes the difference. The last one on all-in sustaining cost, you'll note that we have reduced our copper price for the next year, to AUD2.40 or thereabouts, which also has an impact on all-in sustaining cost. -------------------------------------------------------------------------------- Brendan Fitzpatrick, Morgan Stanley - Analyst [8] -------------------------------------------------------------------------------- Okay, thanks very much, I'll work forward from there. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Your next question is from the line of Michael Slifirski from Credit Suisse. Your line is open, please go ahead. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [10] -------------------------------------------------------------------------------- Thanks. I'd like to start, if I may, with a question on Lihir, and specifically chart 32 where you talk about the first five years -- years to five of Lihir, and the plant feed 60 million to 70 million tonnes. So implicit in that the upper end is a 14 million tonne throughput rate, is that what's being targeted during that period? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [11] -------------------------------------------------------------------------------- I think Michael, if you look at that -- so yes on the barefaced numbers your mathematics are correct. I think what I'm flagging is we're comfortable that we'll get to our 12 million tonne per annum target. The results that we see in terms of particularly the peak rates for the milling circuits give me confidence to target 13 million tonnes per annum next as we work on our availability and reliability. But the 60 million to 70 million is a range, and that's how it showed be geared. But look, the bottom line is grinding rate is getting better at Lihir and we have to build on that going forward. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [12] -------------------------------------------------------------------------------- So that range -- the upper end of that range is capital required to get there. Is that just deep bottlenecking to get that throughput from the existing grinding capacity? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [13] -------------------------------------------------------------------------------- You'll see in the guidance for next year we flagged about AUD20 million odd for just some minor works around the milling circuit around the autoclaves to help get our milling rate up towards that 13 million tonnes that I flagged as a target. The rest is under a study that we'll have a look at to see where we take it from there. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [14] -------------------------------------------------------------------------------- Okay, thank you. At Lihir specifically, the sustaining capital -- the big increase in sustaining capital in FY16 versus FY15, and that major project capital -- can you talk through what the drivers of those changes? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [15] -------------------------------------------------------------------------------- The key drivers are the production pre-strip as we push forward for Minife and then after that to Lienetz. The other is pioneering work which is occurring up the back of Lienetz to prepare for the lateral advance in the coming years. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [16] -------------------------------------------------------------------------------- Okay. One last question if I may, the gearing target historically 10% was talked and that increased to 15%, and now sub-25%. What gives you confidence to say sub 25% is the right number versus the 15% and the 10% historically? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [17] -------------------------------------------------------------------------------- Look, I think putting a range of effectively 0% to 25%, if you look at the numbers, is just more realistic, in my view, about the ebb and flow of investment cycles as we build things, as we harvest cash and what have you. I think that's better than a single point number like a 15% target. I think a range provides a more realistic situation. You've got to see that along with the other target, which is the net debt to EBITDA of less than 2.0 times. I think these two in combination gives a more holistic approach to debt than single point numbers. And do you want to expand on that, Gerard? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [18] -------------------------------------------------------------------------------- Michael, if you go back in time, too, that original lower gearing target was done at a time when the Company had a large amount of capital expenditure ahead of it, and it was also in a period of higher gold prices. So at the time, I understand the idea was that, as you said yourself, low level of gearing such that you were able to complete that major capital spend and withstand a price shock. Both of those events have happened now, so that's why we're comfortable with the higher level or higher assumed level of gearing. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [19] -------------------------------------------------------------------------------- That makes sense, thank you. Look, one very final one, if I may just sneak it in. With the change of development strategy of Cadia East Panel Cave 2, is a ramp-up profile still in line with what was -- I can't think when it was last guided, but is there any change to that? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [20] -------------------------------------------------------------------------------- Well, it is going to be a little slower because of the change in going from post to advanced undercut. One thing we have done, though, we've made good progress on the production drilling, which is a critical path, which has taken us out of the stress abutment zone, but you'll see that we've also guided -- given an outlook, I should say, for FY17 which is up from the previous outlook of 700,000 ounces to 750,000 ounces. But in short, the answer is a little bit slower than the previous curve. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [21] -------------------------------------------------------------------------------- Great, thanks Sandeep. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Your next question is from the line of Mark Busuttil from JP Morgan. Your line is open. Please go ahead. -------------------------------------------------------------------------------- Mark Busuttil, J.P. Morgan - Analyst [23] -------------------------------------------------------------------------------- Yes, hi, guys. Just a couple of things on Lihir. Previously you've provided a timeframe for that grinding target of 12 million tonnes by the end of the calendar year. Is it fair to assume that that's 13 million tonnes that you're now providing is for the end of 2016? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [24] -------------------------------------------------------------------------------- No, I wouldn't say that. If you think back and look through what I've said in the past, I set a 12 million tonne target. I then set a date for that target and I'll probably do something similar with this. It's just to flag that we have our eyes on 13, not yet fully definitive on when we think we can get there, but when I feel confident that I can put a time out there I will do so. -------------------------------------------------------------------------------- Mark Busuttil, J.P. Morgan - Analyst [25] -------------------------------------------------------------------------------- Okay, and then sort of broader than that, I understand you're still working on the pit optimisation work and that won't be complete until the end of the year, but you've provided production guidance which is 10% to 20% higher than what you did in FY15 at higher sustaining capital and a few other bits and pieces. So just in order to reconcile those metrics, can you give us an indication of what you're looking for to achieve those numbers, in terms of mill rates, process grades, strip ratios, proportion of direct mill feed versus stockpile, those sort of things? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [26] -------------------------------------------------------------------------------- Mark, Gerard here. I think your answer is in that question, isn't it? There are a lot of variables there that we haven't -- the one that we don't go into that level of specificity on in our guidance. There's one other variable as it relates to Lihir that people might want to keep in mind is the exchange rate. Again, Sandeep alluded to it before, but we enter this year at a much lower Australian dollar relative to the US dollar than we did last year, and that has an inflationary impact on our Australian dollar quoted sustaining capital and sustaining expenditure for the year ahead. -------------------------------------------------------------------------------- Mark Busuttil, J.P. Morgan - Analyst [27] -------------------------------------------------------------------------------- Okay. Well, can I maybe then simplify the question as to say how do you expect to get 10% to 20% higher production out of Lihir? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [28] -------------------------------------------------------------------------------- A combination of mill throughput and a higher grade. -------------------------------------------------------------------------------- Mark Busuttil, J.P. Morgan - Analyst [29] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- Your next question is from the line of Brendan Fitzpatrick from Morgan Stanley. Your line is open. Please go ahead. -------------------------------------------------------------------------------- Brendan Fitzpatrick, Morgan Stanley - Analyst [31] -------------------------------------------------------------------------------- Thanks. Just thought I'd come back in and follow up on the question about Telfer. It was pretty clear in the commentary that retaining Telfer and doing the cutback offers more value, but I would like to get clarification it also meets internal hurdle rates and perhaps get a sense of what those hurdle rates were that were determined to proceed with the cutbacks. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [32] -------------------------------------------------------------------------------- The hurdle rates typically that I look for on these sort of things are in the 15% to 20% range, and these progressive cutbacks comfortably exceed that by quite some margin. -------------------------------------------------------------------------------- Brendan Fitzpatrick, Morgan Stanley - Analyst [33] -------------------------------------------------------------------------------- Great, thanks for that. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Your next question is from the line of Michael Slifirski from Credit Suisse. Your line is open. Please go ahead. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [35] -------------------------------------------------------------------------------- Thanks. Sorry to return. Oil price hedging. Last year you were fully hedged. What was the -- did you announce what strategy you were going to take for this year? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [36] -------------------------------------------------------------------------------- Michael, Gerard here. We did. We said we would hedge around 50% of our exposures in the year ahead, and you'll see on slide 49 we have listed the quantum and the amount and price at which we've done those hedges. So around 50%, and in broad terms, as you'll appreciate from where we entered our hedges last year, the oil price is significantly lower. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [37] -------------------------------------------------------------------------------- Thank you. Then the Cadia all-in sustaining cost guidance. That number seems reasonably higher than what you did in 2016, yet you're dropping off the high-cost Ridgeway production. Can you give us the bridge to that higher number? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [38] -------------------------------------------------------------------------------- I think that you'll find, Michael, one of the key drivers there is copper. The copper price last year in average terms was about AUD2.90 a pound, and this year we've based our guidance on AUD2.40 a pound. -------------------------------------------------------------------------------- Michael Slifirski, Credit Suisse - Analyst [39] -------------------------------------------------------------------------------- Okay, great. Thank you. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Your next question is from the line of Cathy Moises from Evans and Partners. Your line is open. Please go ahead. -------------------------------------------------------------------------------- Cathy Moises, Evans and Partners - Analyst [41] -------------------------------------------------------------------------------- Good morning. I guess the first question is if you're converting to US dollar reporting in 2016, why didn't you give us all a guidance in 2016? I guess we're going to have to do it all again in a little while. Whilst we're still on the finance side, just wondering if you can give us a feel for what sort of tax rate we should be expecting in 2016. I know there shouldn't be a lot of tax payable, but I guess some of the non-Australian stuff will be payable. Then the final question is Bonikro and the mid-point of the all-in sustaining costs around $1650. Presumed there's a major cutback there and we'll get back into profitability the following year? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [42] -------------------------------------------------------------------------------- Cathy, I'll take a couple of those. As related to US dollar reporting, there is actually a bit of work involved in doing that, and we want to do it right. It's not a simple Excel spreadsheet that we need to modify. So we're going to do it right and flow through those estimates into a lot of internal and external reporting over the course of this year. So when we've done that, we'll update the market accordingly. To your question on tax rate, 30% effective tax rates is the most appropriate assumption to use going forward. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [43] -------------------------------------------------------------------------------- On Bonikro, you're right in that the investment this year does set up the site for the coming years, but we're just not going to rest on that. There is a strong focus on taking costs out of Bonikro and productivities, and we hope to improve its performance better than we currently expect, but that's subject to the Edge program delivering what we hope it will. -------------------------------------------------------------------------------- Cathy Moises, Evans and Partners - Analyst [44] -------------------------------------------------------------------------------- Just one final question, sorry. With the Telfer AUD46 million spend over 24 months, I presume it's skewed towards the 2016 year? Can you give us a split? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [45] -------------------------------------------------------------------------------- The bulk of it is probably -- -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [46] -------------------------------------------------------------------------------- About AUD21 million this year. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [47] -------------------------------------------------------------------------------- About AUD21 million this year, right, Gerard? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [48] -------------------------------------------------------------------------------- Something like that, yes. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [49] -------------------------------------------------------------------------------- Maybe this year, and half next year. -------------------------------------------------------------------------------- Cathy Moises, Evans and Partners - Analyst [50] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Operator [51] -------------------------------------------------------------------------------- Your next question is from the line of Paul Hissey from RBC. Your line is open. Please go ahead. -------------------------------------------------------------------------------- Paul Hissey, RBC - Analyst [52] -------------------------------------------------------------------------------- Hi, guys. Gerard, a question for you. You mentioned in the back of the report that Lihir passed its impairment testing, no revisions required there, although you did cut the gold price assumption by $50 an ounce, which, using your sensitivity, should have cost you about AUD600 million, I think, in carrying value. Now, you've also used a lower currency, which probably adds about AUD100 million of that back in. Can you just sort of reconcile what else you've assumed which has enabled you to carry that value effectively unchanged except for the CapEx spent during the year? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [53] -------------------------------------------------------------------------------- Thanks, Paul. I think you're underestimating the positive impact of the change in exchange rates. If you'll see there that the AUD0.05 -- if I go to page E51 in the OFR, you'll see a AUD0.05 change in exchange rates adds positively AUD115 million, which I think you've picked up. What you also need to pick up is the kina exchange rate assumption, and that altered by AUD0.20, which is two times the AUD250 million that you see in there. So if you aggregate that, pretty much all of the gold price effect was offset by the currency effect, both kina and dollar, and recognise also that the Lihir asset relative to a year ago was also depreciated in line with our normal processes as well. -------------------------------------------------------------------------------- Paul Hissey, RBC - Analyst [54] -------------------------------------------------------------------------------- Okay, so no change in your assumptions around productivity or operating improvements? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [55] -------------------------------------------------------------------------------- No change for the purposes of carrying value, no. -------------------------------------------------------------------------------- Paul Hissey, RBC - Analyst [56] -------------------------------------------------------------------------------- Okay. Another question from me. You underspent compared to your guidance on some of the CapEx items for FY15. Just wondering, for the year ahead, how you've set guidance for this year and firstly why did you underspend last year? Was it planned or you were able to cut costs along the way? I know things change as you move through the year. Just wondering if you had any comments on what that means for FY16 guidance you've just given. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [57] -------------------------------------------------------------------------------- Let me start there, and then Gerard can pick up. A lot of that CapEx underspend -- there is a currency relation there was well, but it's really about the whole point of Edge is to focus on maximising the value for your dollar. So we used that same technique across capital projects. A number of them dropped out, because in the end it was shown that capital wasn't actually the solution, and there's no question that ourselves in the past, and the industry, was very CapEx solution-motivated, where the real underlying issues were probably not related to CapEx. So that, together with the exchange rate and just genuine underspend, I think, is the best way to look at that. There's no real one item, although I think at Cadia there was a bit of an underspend on development. -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [58] -------------------------------------------------------------------------------- Agreed. So Cadia did underspend relative to what it had originally guided. In part, that was due to something that affected all of our underspend across the Company, that the market is very much in our favour. We are procuring smarter, harder, and things are working in our favour as the resources sector in Australia and our region is more favourable to us from a contracting side. -------------------------------------------------------------------------------- Paul Hissey, RBC - Analyst [59] -------------------------------------------------------------------------------- Okay, great. Two more quick questions from me, just following on from Cathy's question. What kind of currency assumptions have you assumed in setting that guidance, Gerard? I know you said it's more complicated than that, but is that a number around spot or a number around your longer-term averages? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [60] -------------------------------------------------------------------------------- The guidance that you see is on a AUD0.74 to $1 exchange rate and a copper price assumption of AUD2.40 per pound. -------------------------------------------------------------------------------- Paul Hissey, RBC - Analyst [61] -------------------------------------------------------------------------------- Okay, great. Last question. Sandeep, in terms of the growth pipeline, you've obviously added a few things organically in which I would consider to be very, very early stage. Do you think there's still something missing between perhaps some of those greenfields and JVs you've started up and Golpu? It feels to me there's still probably a gap in there, and it would be good to add some additional growth, if and when you can find something that's value-accretive that fits in between now and 2020 and beyond, perhaps. Do you have any comments there? What do you think about that statement? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [62] -------------------------------------------------------------------------------- I think it's a fair reflection. That's something that we're looking at, in addition to more early-phase stuff, but in the end it comes down to the opportunities that come before us. There's a great amount of discipline as to go into this phase, but your comment is a fair one, and that's something, one of the areas that we're looking at in addition to broader growth opportunities. -------------------------------------------------------------------------------- Paul Hissey, RBC - Analyst [63] -------------------------------------------------------------------------------- All right, thanks. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- (Operator instructions) Your next question comes from the line of Andrew Knuckey from the Commonwealth Bank. Your line is open. Please go ahead. -------------------------------------------------------------------------------- Andrew Knuckey, Commonwealth Bank - Analyst [65] -------------------------------------------------------------------------------- Good morning, everyone. Just a couple of questions. Firstly on Golpu. You mentioned that you're still in negotiations around the framework with the PNG government. Does that propose a risk to the feasibility study timing at the end of the year? Secondly, with regards to Gosowong, you mentioned that reserve is largely being replaced -- sorry, mine volumes this year has largely been replaced with additional reserve, but can you give us a sense of what's happening with the resource? Is the resource also growing there, or are we seeing overall depletion of the resource relative to the reserve? Then finally on Cadia, the CapEx for FY16, does that include anything, any early works for your potential expansion to 32 million tonnes there? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [66] -------------------------------------------------------------------------------- There's three questions there. The first one I think was on Golpu. Look, agreement's not agreed until it's there, but what I can say is we're very well-advanced on the framework of [doing well] with the PNG government, and we hope to have that in short order. But to answer your specific question, it is in line with our feasibility timing, which is to deliver the feasibility study by the end of this calendar year. -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [67] -------------------------------------------------------------------------------- Andrew, as it relates to Gosowong, in broad terms think resource and reserve in much the same. We are -- it's a short-life asset and there's not that much difference between the two. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [68] -------------------------------------------------------------------------------- Gosowong is just one of those ore bodies. This is its history, Andrew, as you will know, that for some years now we've found as much gold along the way as we've mined, and this isn't something you can count on forever, but that seems to be the trend, certainly up until the end of the 2014 year. -------------------------------------------------------------------------------- Andrew Knuckey, Commonwealth Bank - Analyst [69] -------------------------------------------------------------------------------- I guess my question was driven from I think historically it's fair to say that there was a lot more resource out in front of the reserve, and therefore, if you like, potential for resource-to-reserve conversion, whereas over the last few years we've seen whilst the reserve has been replenished, we've seen the resource actually perhaps not be replenished or even shrink relative to the size of the reserve, and therefore perhaps less potential for ongoing conversion. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [70] -------------------------------------------------------------------------------- I think that's one of the reasons you see that we've stepped up significantly our exploration efforts in and around Gosowong and also further through our contracted work area. We consider the ground there still highly prospective, and we've got a bunch of new targets that we've identified through aeromagnetic surveys, which we're in the process of assessing, firstly through geochemical and then, depending on those results, ultimately drilling. -------------------------------------------------------------------------------- Andrew Knuckey, Commonwealth Bank - Analyst [71] -------------------------------------------------------------------------------- Sure, okay. Sorry, my final question was with Cadia, whether there's any early work for your 32 million tonne proposed expansion or, if not, what sort of timing might we expect with that? -------------------------------------------------------------------------------- Gerard Bond, Newcrest Mining Limited - Finance Director and CFO [72] -------------------------------------------------------------------------------- All the spend you see there primarily relates to this year and in the productive capacity of the site to 27 million tonnes. The balance to get it to a 32 million tonnes remains in study. -------------------------------------------------------------------------------- Andrew Knuckey, Commonwealth Bank - Analyst [73] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Operator [74] -------------------------------------------------------------------------------- Your next question is from the line of Brett McKay from Deutsche Bank. Your line is open. Please go ahead. -------------------------------------------------------------------------------- Brett McKay, Deutsche Bank - Analyst [75] -------------------------------------------------------------------------------- Good morning, guys. Just wanted to get a bit more clarity on the timeline for Kapit. I hear you that more detail will be forthcoming with pre-fees, but would you be expecting to move into a full feasibility study on that, and if so, how long would that likely take? How long have you got, doing what you're currently doing on site there before you actually need to make a decision one way or the other which option that you would need to be pursuing? -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [76] -------------------------------------------------------------------------------- Thanks for the question. I think the takeaway from the slide and the update is that for the next five years, irrespective of what option we chose on the seepage barrier, the mine plan is pretty much the same. So I would say five years. By the end of the PFS and which option we choose, we'll then decide the timing of when we enter a full-fees or not. There's plenty of time to get this right, and the key takeaway that I want to leave you with is this is substantially different, bought about the metallurgical mineralogical test work and application of the new operating strategy. That's unleashed this option for us, and we want to take some time to do it properly, understand all the implications, capture all the benefits, and there really is no rush to do so. -------------------------------------------------------------------------------- Brett McKay, Deutsche Bank - Analyst [77] -------------------------------------------------------------------------------- Okay, cheers. -------------------------------------------------------------------------------- Operator [78] -------------------------------------------------------------------------------- There are no further questions as this time, Mr Biswas. Please continue. -------------------------------------------------------------------------------- Sandeep Biswas, Newcrest Mining Limited - MD and CEO [79] -------------------------------------------------------------------------------- Well, if there's no more questions, I think thank you very much for all your questions and the time. We've gone on a bit longer than we normally do, but I think it was important, given the contents of the pack. So thank you very much, everyone. -------------------------------------------------------------------------------- Operator [80] -------------------------------------------------------------------------------- Ladies and gentlemen, that does conclude today's conference. Thank you for your participation.
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