Is Cadia the best gold mine in the world?
24 Jul, 2020
READ TIME 3 mins
Rod Skellet
Equities Investment Strategist

A question like that is completely subjective with no right answer but gee, Newcrest’s strong result yesterday morning owes plenty to their NSW mine located south of Orange. Newcrest’s MD Sandeep Biswas and their operational team have delivered a result that met initial guidance despite the challenges and risks associated with the COVID-19 pandemic. As a result of implementing a range of preventative actions very early on, Newcrest has not had a single case of COVID-19 virus affecting their workforce. Implementing a $20million community support fund within the region no doubt played a big part in keeping the workers and their families and surrounding community in good health and this has shone through in the result.

Looking at the numbers, Newcrest achieved a solid 7% increase in gold production across the group for the June quarter of 573,175oz and a full year number of 2,171,118oz. Guidance was 2100-2200k oz pa. With an all-in sustaining cost of $862 per oz on a realised gold price of $1530 for the year, the margins are very robust, and looking at how next years gold price is panning out that margin is likely to grow.

Source: Google Maps

Looking at star performer Cadia in a little more detail, the numbers here are impressive. Mined ore volumes came in at 31.8million tonnes per annum while the mill had a record throughput of 34.2 million tonnes per annum. This was achieved by having no planned shutdowns in the quarter and implementing a debottlenecking program in one of the circuit concentrators. Producing 236,705oz for the quarter and 843,338oz for the full year, the number that caught my eye was the all-in sustaining cost of just $170 per oz. With the spot gold price at the time of writing trading at $1867 per oz, next quarters numbers should be pleasant viewing for existing shareholders.

Water is always an issue for mining companies, and given the recent horrific drought in the region, it was good to hear that the significant water saving measures implemented over the past two years along with very recent significant rainfall, has put the Cadia mine in a position of having enough stored water for the next two years of operations and possibly beyond.

Source: Factset

The Aussie reporting season kicks off next week, but it’s the 3rd, 4th and 5th weeks that is when most companies report. Next week interest will be on Rio Tinto on Wednesday (29-July-20) and the much smaller but growing Canadian iron ore producer Champion Iron (CIA.ASX). Champion is an interesting company in that it is one of the few mines that produce iron ore with a Fe content of 66%. This iron ore is valued by the steel mills as it is blended with the 62% Fe iron ore that is typical of Western Australia. 65% Fe trades at a 5% to 15% premium to 62% Fe, and despite the extra travel distance CIA has implemented production upgrades from 7 million tonnes per annum to nameplate of 14 million tonnes per annum, however COVID-19 has interrupted this expansion, so extra detail on this will no doubt be sought by investors..

ASX reporting Calendar: Companies per week

Source: JPMorgan
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