Monsters of Rock: Newcrest approves life extension at Telfer as Havieron awaits
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Newcrest Mining (ASX:NCM) will pump 246 million big ones into a fifth cutback at Telfer’s West Dome deposit in a bid to extend the life of the ~30 million ounce WA gold mine.
Newcrest will add two years to the Telfer schedule and prepare for the introduction of the higher grade 3.4Moz Havieron gold-copper project in 2023.
The Paterson province ore body, a 60-40 joint venture between Newcrest and London-listed explorer Greatland Gold, electrified the junior end of the market when it was found back in 2018.
Havieron and Rio Tinto’s Winu copper mine, which will enter production around 2025, have reinvigorated interest in the gold and copper district wedged between WA’s resource rich Goldfields and Pilbara regions.
Newcrest produced 416,138oz of gold and 13,177t of copper at Telfer in the 2021 financial year and saw costs fall to around US$1203/oz in the June quarter at an operating margin of US$577/oz.
That’s decent from a mine once so marginal its threatened closure was central to lobbying by gold miners to avoid a royalty rate hike from the WA Government back in 2017.
“This cutback is an investment in Telfer’s future which will ensure the operation is able to continue for at least the next two years,” Newcrest boss Sandeep Biswas said. “With additional drilling, we believe there is the potential for further mine life extensions in the open pit and the underground beyond this time.
“With the excellent progress we are making at the nearby Havieron project, our objective is to continue utilising the Telfer plant without interruption as we look to introduce Havieron and other new potential feed sources in the future.”
There is of course no shortage of juniors drilling away in the Paterson province who could be in line for a Newcrest payday if they find anything of interest.
RBC mining analyst Kaan Peker said the announcement was a sign of confidence in Havieron, which RBC values at $800 million for Newcrest’s 60 per cent stake.
“The capital being spent on the cut-back at Telfer is significant given mine life, but we believe this opens up long-term optionality with Havieron and potential mine-life extension for West Dome,” he said in a note. “The announcement today flags NCM’s confidence in Havieron.”
The broader materials sector was dragged down by a massive decline from Rio (ASX:RIO), which lost almost 7% of its value or almost $9.
Iron ore prices rose slightly to halt a major slide in recent days, but Rio went ex-dividend on its record $7.60 a share payout and fell correspondingly.
It has also suffered some damaging PR in the past couple days after a review commissioned by Rio Tinto’s partners into a delayed expansion of the Oyu Tolgoi mine in Mongolia blamed Rio’s alleged mismanagement for a US$1.45 billion blow out.
Strong copper prices in the first half of 2021 are likely to give a nice sheen to OZ Minerals half year results, which come out next Wednesday.
$7.7 billion capped OZ is up more than 20% year to date and almost 70% over the past 12 months.
Strong results across the first half of the year, in particular at the Prominent Hill copper-gold mine in South Australia prompted OZ to up guidance for 2021 last month along with the release of its June quarterly.
The miner expects to produce 120,000-145,000t of copper and 205,000-228,000oz of gold at AISC of US$1.30-1.45/lb in 2021.
The major coal stocks on the ASX continue to impress, with Yancoal and Coronado both retracing their early 2021 losses in recent months on the back of higher coking and thermal coal prices.
Chinese-backed Australian coal producer Yancoal is up a tidy 20-odd per cent over the past week, while Coronado has made similar gains despite posting a $96 million loss over the first half of 2021.