Newcrest Mining Limited
24 April 2012
Newcrest's Board and Management recently undertook its annual
strategy review which comprises a comprehensive review of
industry conditions, business objectives, key strategies and
Newcrest's key objectives were reaffirmed: we will focus on
gold, securing high quality resources and converting these
resources into low cost, high margin operations. Newcrest
will continue operating sustainably and profitably, having
regard to the health, safety and wellbeing of our employees,
the environment and the communities in which we operate.
The review of industry and operating conditions focused on
the following pressures being experienced by Newcrest:
1. The resources industry is facing continued high cost
inflation in relation to energy, labour, contractors and
suppliers, and a decline in labour productivity.
2. Our operating regions have currencies that have
experienced sustained strength relative to the US$ in which
our products are sold. This is impacting both operations and
projects, particularly labour and energy costs.
3. Continuation of the shortage and high turnover of people
with the experience and skills required to deliver on
4. The co-existence of major capital projects of considerable
scale at two of the largest operational sites (Cadia Valley
and Lihir) creating greater complexity and the risk of more
variation in production. In particular, pre- commercial
production ore sourced from Cadia East has been lower than
5. The effects of long term underinvestment in fixed plant
maintenance at Lihir that has caused production
Newcrest remains confident in Lihir's long term potential
that will be realised by sustainable production growth at a
low cash cost with resource and reserve increases. Newcrest
is also confident that Cadia East will realise targeted
medium term production at low cash costs.
These industry and operating conditions have been present for
a while but it is now apparent that the impacts have become
more significant over the past 12 months and particularly in
the last quarter. The resulting short term production
performance has been unacceptable to the Board and
Management. In response, Newcrest has significantly
intensified its focus on operating excellence, and cost and
capital control, and has re-assessed short term guidance.
Following review, gold production for the 2012 financial year
will be reduced from 2.43 to 2.55 million ounces to 2.25
2.35 million ounces.