Newcrest & the Gold Sector Brisbane Mining Club 26 April 2007 Ian Smith Managing Director and CEO
Total refined gold production throughout history ( ~ 130,000 tonnes ) would form a 20 metre cube ( a six story building ). 75% of all gold ever produced has been extracted since 1910. Central banks hold ~ 30,000 tonnes of gold. Annual mine production is around 2,500 tonnes. Queensland has produced 1,300 tonnes ( 1% of world supply ).
Largest Gold Mining Countries Rank Country Tonnes of Production 1997 Tonnes of Production 2006 1, 1 South Africa 527 292 2, 2 USA 362 252 3, 5 China 163 247 4, 3 Australia 313 245 5, 9 Peru 75 205
Global Gold Sector Trends Mine production dropping Down 3% to 2,471 Mt from 2005 to 2006 Major producers share of total $ spent on exploration down Down 50% from 1997 to $800M whilst total gold exploration spend was $3.2 B. Rate of discovery dropping There were 84 major discoveries ( >2.5Moz ) made in the 1992 2005 period..but only 17 of these have been discovered since 2000.
Past Discoveries Surface Surface Ore Halo Unaltered Rock Surface
Future Discoveries Unaltered Rock Halo Cover Ore core
Projected Top 10 Australian Export Earners (2007-2008) Rank Commodity Value $Billion 1 Coal 23 2 Iron Ore 20 3 Gold 11 4 Alumina, aluminium 10 5 Nickel 10 6 Crude Oil 8 7 Copper 6 8 LNG 6 9 Zinc 4 10 Beef/veal 4 ABARE Outlook 2007
Australian gold sector 11 listed producers Australian Listed Gold Plays by Mkt Cap (A$m) 8000 7000 6000 5000 4000 3000 2000 1000 0 Primary Au Diversified NCM LHG Oxiana Lionore Perilya Compass Straits Oceana Independence St Barbara Pan Australian Alliance *Agincourt Resolute Kingsgate Perseverance Equigold Citigold Kings Minerals * As at Feb 07 In 1987 there were nearly 100 ASX listed gold producers
Market capitalisation approximately AUS$8Billion 6 operating mines and 4 development projects Gold 59 Moz Resources with 33 Moz Reserves Copper 5.5 Mt Resources with 2.4 Mt Reserves Mineral Resources and Ore Reserves are as at 30 June 2006
Market Capitalisation of Major Gold Players 30 25 25.0 20 19.6 18.0 US$ Billion 15 12.8 12.8 10 9.6 8.3 6.6 6.3 5 0 Barrick Newmont Goldcorp Anglogold Goldfields Polyus Kinross Newcrest Harmony Source: Bloomberg as at 13 Apr 2007
Newcrest in a Global Context Reserves (million ounces) Reserve Life (years) Barrick Goldfields Newmont Anglogold Harmony Goldcorp Newcrest Kinross Polyus Lihir Lihir Goldfields Harmony Newcrest Polyus Kinross Newmont Goldcorp Barrick Anglogold 0 20 40 60 80 100 120 140 0 5 10 15 20 25 30 35 Reserve life calculated as current Reserves divided by 2007 forecast production Source: Company Data 13 Apr 2007
Operations the miner of choice
Operations Cracow High grade epithermal underground mine Gold Production - 2005/06 111,003oz Kencana High grade epithermal underground mine Gold Production - 2005/06 187,316oz Cadia Open pit & sub-level cave underground mines 2005/06-614,832 oz & 62,147 t of copper Telfer Open pit & sub-level cave underground mines 2005/06-650,016 oz & 38,374 t of copper
Cash Costs 2002, 2004, and 2006E Cost Curves $700 $600 Total Cash Costs (US$/oz) $500 $400 $300 $200 Alto Chicama (US$115/oz) Yanacocha (US$190/oz) AU West Wits (US$262/oz) Betze Post (US$322/oz) 2006E NEM Nevada (US$402/oz) $100 2004 2002 $0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 12 operations are estiamted to have negative cash costs (net of by-products) Source: BMO Capital Markets Cumulative Production (%)
Costs by Region Comparison of Total Cash Costs by Region (US$/oz) By-Product Accounting % Change Region 2004A 2005A 2006E 2007E 2008E 2004-06E Africa 254 282 325 346 332 28% Asia 189 219 283 307 284 50% Australia Pacific 222 238 261 295 280 18% North America 267 292 315 319 319 18% South Africa 332 365 374 367 362 13% South America 98 104 71 104 71 (27%) Total 242 257 264 282 267 9% Source: BMO Capital Markets, Company reports
Cash Costs after By-product Credits USD per ounce 400 350 Newcrest Weighted average of global gold industry 300 250 200 150 100 50 0 95 96 97 98 99 00 01 02 03 04 05 06 Calendar Years
Global Gold Hedging Hedge Commitments - 12 Million Ounce Reduction in 2006 Million ounces 100 90 80 70 60 50 40 30 20 10 91.9 20% 74.6 14% 63.1 12% 53.1 10% 48.6 9% 36.2 7% 25% 20% 15% 10% 5% Percent Recoverable Reserves Committed - Dec. 2001 Dec. 2002 Dec. 2003 Dec. 2004 Dec. 2005 Dec. 2006 Source: BMO Capital Markets 0%
Hedging Hedging copper hedging finishes in June 07 Gold hedging represents less than 40% of gold production in any calendar year post the Nov 06 partial hedgebook restructure Gold hedgebook expires in June 2013 No intention to undertake any further gold hedging
Current Exploration Program Number of exploration projects 25 Australia 1 Indonesia 8 Nevada 4 Peru 1 Chile Percentage of budget spent on drilling and analysis 50% Australia 76% Indonesia 49% Nevada
Metals Economic Group ranked Newcrest as the most successful company in discovering major gold deposits between 1992-2005 Company Attributable Additions Gold (Moz) Gold Equiv. (Moz) Newcrest 64.6 98.4 Barrick Gold 48.7 59.3 Placer Dome 38.4 38.4 Buenaventura 22.3 31.4 Newmont Mining 22.0 28.2 Goldcorp 10.0 10.0 AngloGold Ashanti 6.5 6.5 Source: Metals Economics Group 2006 (Table E)
Reserves at 30 June 2006 Gold 33 million tonnes Copper 2.4 million tonnes Project Project 32% 63% 68% 37% Operations Operations Projects comprise: Ridgeway Deeps, Cadia East Underground & Open Pit
Cadia Valley Province Cadia East Pit Cadia Extended Cadia Hill Ridgeway & Ridgeway Deeps Cadia East Panel Cave
Cadia Projects - 48M Gold Equivalent Ozs 50 45 40 Gold equivalent million ounces 35 30 25 20 15 10 5 0 Current Cadia Valley Operations Future Cadia Valley Operations Telfer Cadia East Ridgeway Deeps Mineral Resources as at 30 June 2006 converted at A$600/oz & A$1.60/lb
Gosowong - K2 extension Extension of existing decline from K1 to K2 and K-Link Halmahera Contract of Works covers an area of 30,000 hectares 1. 7% undergone moderate exploration 2. 93% preliminary exploration activity and no drilling Additional Mineral Resources and an initial Ore Reserve expected by mid 2007 Use existing processing plant with minor upgrades Production commence by mid 2009. Combined K1 & K2 sustained above 300,000oz pa for over 6 years
High Margin Long Life Reserves 3.5 Gold Backing vs Reserve/P('06) (yrs) 3.0 Gold Backing 2.5 2.0 1.5 GOLDFIELDS HARMONY KINROSS ANGLO BARRICK POLYUS NEWMONT LIHIR 1.0 GOLDCORP 0.5 0.0 0.0 10.0 20.0 30.0 40.0 Reserve/P('06) (yrs) Gold Backing = Net Spot Value of Reserves / Enterprise Value Net Spot Value of Reserves = (spot gold of US$625/oz 2006 cash costs) current reserves Enterprise Value = market capitalisation + Net Debt
Desalination? Every drop of seawater contains approximately 1 billion gold atoms. The ocean may contain 70 million tonnes of gold.