Newcrest Mining Ltd is still waiting to resume discussions with the Papua New Guinea government to grant a Special Mining Lease to start developing the Wafi-Golpu gold-copper project. The enforced delay has given the company license to focus on its other projects, reports David James.

Newcrest’s Michael Nossal at the International Mining and Resources Conference in Melbourne, Australia. Credit: BAI

Wafi-Golpu, in Papua New Guinea’s Morobe Province, is one of the ‘premier undeveloped gold–copper projects in the world,’ according to Michael Nossal, Chief Development Officer for Newcrest Mining Ltd. Yesterday, he told the International Mining and Resources Conference in Melbourne, Australia, that the aim is to start production five years after a Special Mining Lease is granted.

‘Following the recent changes in the PNG government, we are waiting to continue our discussions regarding the Special Mining Lease to start developing that project,’ Nossal said.

Negotiations over the lease between the project developers (Newcrest and Harmony Gold, who together own the Wafi-Golpu Joint Venture) and the PNG Government were effectively put on ice in May 2019, following an application for leave to review a Memorandum of Understanding for the project signed last year.

‘What I hear very clearly from the government is a desire to make sure that the broad message to the investor community is a positive one.’

Speaking to Business Advantage PNG yesterday, Ian Kemish, Chief People and Sustainability Officer for Newcrest, said the government, ‘from the Prime Minister down’ is committed to the mining industry.

‘I know there is open dialogue between industry and government on where this all goes.’

Kemish said the PNG government is giving ‘careful consideration’ to the project. ‘What I hear very clearly from the government is a desire to make sure that the broad message to the investor community is a positive one. There have been some mixed messages, but my firm impression is that they are pausing to think about it all.’

Newcrest’s All In Sustaining Costs compared with its peers. Source: Newcrest

Lihir

Newcrest’s Lihir gold mine.

Nossal said that four of Newcrest’s assets: Lihir and Wafi-Golpu in PNG, Cadia in Australia and Fruta del Norte in Ecuador are all ‘tier one’ assets.

Lihir, he said, is ‘one of the largest gold deposits in the world,’ with 24 million ounces of gold, 50 million ounces of gold reserves and 50 million ounces of mineral resources. ‘It is a really incredible deposit,’ Nossal said, adding that Lihir over the last four years has generated US$1.2 billion (K4 billion) in free cash flow.

At current production rates, the mine has a projected life of 26 years. ‘Large reserves are quite rare in gold. In our peer group, Cadia and Lihir are the only operating assets with an ore reserve base of more than 15 million ounces.’

Nossal also mentioned that having ‘this large gold endowment’ means Newcrest has one of the longest reserve lives in its peer group of gold miners.

‘This enables us to be patient with our capital as we look towards growth and gives us time to make decisions which are aligned with our focus on cash generation and shareholder value.’

‘Newcrest [historically] has found a lot more [gold] than we have bought. We are bringing the company back to that tradition and really going out quite strongly into the green field space.’

Nossal also claimed that Newcrest is the lowest cost major gold producer, with an All In Sustainable Cost (AISC) of US$738 (K2512) an ounce.

‘The industry is cyclical. Being low-cost means you have the best chance of generating cash throughout the cycle. Our aim is to safely generate the most cash we can from our existing asset base and sensibly growing the business profitably.’

Priorities

Wafi-Golpu is a joint venture between Newcrest Mining Limited and Harmony Gold Mining Company Limited. Credit: Wafi-Golpu Joint Venture

Newcrest’s first priority is organic growth – developing brownfield (already partly explored) areas first. Nossal said the company will be looking to improving recovery rates in Lihir, which requires putting in ‘a lot’ of capital.

‘It is a cost, high return way to grow.’ The company’s next priority is to develop greenfield (unexplored) areas.

‘Newcrest [historically] has found a lot more [gold] than we have bought. We are bringing the company back to that tradition and really going out quite strongly into the green field space.’

Nossal said new discoveries are only available at deeper areas, which requires new techniques. One, called block caving, has allowed Newcrest ‘to look at Wafi-Golpu, where we found the deep underground gold high grade area and could justify the capital to develop it.’

A third priority is early-entry partnerships, where another company has already ‘done the ground work for discovery.’ Newcrest’s only play of this type in PNG is the gold–copper Wamun project.

The company’s remaining priority is mergers and acquisitions, which Nossal believes only make sense when Newcrest can add to the technical capabilities of a project. He added that the company is aiming for a 30 per cent reduction in greenhouse gas emissions per tonne of ore treated by 2030 (measured against the 2018 baseline).