Gold Mining an Industry in Transition Melbourne Mining Club 7 June 2007 Ian Smith Managing Director and CEO Newcrest Mining Limited NEWCREST 1
Gold Production ('000 t) Cumulative Gold Production Since 1835 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 80% of all gold production has occurred since 1900 50% of all gold production has occurred since 1960 Australia has produced 7,500 tonnes of gold (equivalent to 5% of global production) Victoria has produced ~ 2,500 tonnes of gold 1835 1850 1865 1880 1895 1910 1925 1940 1955 1970 1985 2000 The volume of all gold ever produced would occupy 40% of the total volume of the Melbourne Town Hall auditorium NEWCREST 2
Impact of the Gold Rush In the 1850s, Victoria contributed some 90 percent of the gold mined in Australia and more than one third of the world s gold output Between 1851 and 1861 Victoria s population grew from 76,000 to 540,000 making the colony the largest and most prosperous with 45 percent of Australia s population The 1850s saw the construction of Parliament House, the Old Treasury and the public library NEWCREST 3
Projected Top 10 Australian Export Earners (2007-2008) Rank Commodity Value ($Billion) Cumulative Value ($Billion) 1 Coal 23 23 2 Iron Ore 20 43 3 Gold 11 54 4 Alumina/aluminium 10 64 5 Nickel 10 74 6 Crude Oil 8 82 7 Copper 6 88 8 LNG 6 94 9 Zinc 4 98 10 Beef/veal 4 102 NEWCREST 4
Changing Profile of the Global Gold Industry 1970 Mine Production Australia, 1.3% United States, 3.7% Canada, 5.1% Other, 8.6% 2006 Mine Production PNG, 2.4% Ghana, 2.8% Canada, 4.2% Indonesia, 4.6% Other, 28.8% Russia, 7.0% South Africa, 67.7% Former USSR, 13.7% South Africa, 11.8% United States, 10.2% China, 10.0% Peru, 8.2% Australia, 9.9% 1,480 tonnes 2,470 tonnes South Africa is no longer the dominant gold producer, with the United States, China and Australia now in the same league as South Africa World gold production peaked at 2,645 tonnes in 2001 NEWCREST 5
Newcrest Overview Market capitalisation approximately A$8.0 Billion 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 NEWCREST 6
cash cost / oz after by-product credits USD per ounce 400 350 300 250 200 150 100 50 Industry Costs have been Increasing Newcrest Weighted average of global gold industry 0 95 96 97 98 99 00 01 02 03 04 05 06 Source: GFMS Ltd Calendar Years NEWCREST 7
Gold Backing Gold Backing - Enterprise Value Gold Backing - Market Capitalisation 2.5 3 2 2.5 1.5 1 0.5 2 1.5 1 0.5 0 0 NEWCREST GOLD FIELDS LIHIR HARMONY ANGLO BARRICK GOLDCORP NEWMONT NEWCREST GOLD FIELDS HARMONY LIHIR ANGLO BARRICK GOLDCORP NEWMONT ( Newcrest = 2.1 after hedge impact ) ( Newcrest = 2.4 after hedge impact ) Gold Backing = Net Spot Value of Reserves / Enterprise Value or Market Cap. Net Spot Value of Reserves = (spot gold US$625/oz Mar Qtr 2007 cash costs) reserves Enterprise Value = market capitalisation + Net Debt NEWCREST 8
Cost (US$/oz) Cost to Deliver an Ounce of Gold to Market 600 500 Sustaining Capital 400 300 200 100 0 Industry Average Operating Cash Cost Project Construction Reserve Ounce Discovery/Acquisition Cost (including recovery losses) Newcrest NEWCREST 9
Newcrest Operations & Projects Gosowong 340,000 oz Telfer 620,000 oz / 27,000 t Cracow 114,000 oz Cadia Valley 545,000 oz / 60,400 t FY06-07 indicative production NEWCREST 10
Development Projects Gosowong K2 Extension Cadia Valley Projects Ridgeway Deeps Cadia East Open Pit Cadia East Underground NEWCREST 11
Gosowong Contract of Work GOSOWONG 7% of the area has been subject to moderate exploration Remaining 93% shows the presence of gold through stream sediment sampling 30 Year tenure No sell-down requirements Total Gosowong resource to date already exceeds 5 Moz of gold NEWCREST 12
Kencana Production from K2 will commence by mid 2009 Combined K1 & K2 will deliver production in excess of 350,000oz pa for over 6 years Will use existing processing plant with minor upgrades NEWCREST 13
Cadia Valley Endowment Ridgeway Cadia Hill Pit Cadia East Pit Ridgeway Deeps Cadia East Panel Cave NEWCREST 14
Development & operating costs (A$/t ore) $18.00 Cadia Valley Mining Method $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 Sublevel Cave Open Pit Block Cave $0.00 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Open Pit Stripping Ratio NEWCREST 15
Gold equivalent million ounces Cadia Projects 48M Gold Equivalent Ozs 50 45 40 35 30 25 20 15 10 5 0 Current Cadia Valley Operations Future Cadia Valley Operations Telfer Mineral Resources as at 30 June 2006 converted at A$600/oz & A$1.60/lb NEWCREST 16
Exploration (Discoveries above 2.5Moz in size) 84 discoveries were made between 1992 and 2005 90s average = 8.4 deposits discovered per annum Post 90s average = 2.8 deposits discovered per annum Global gold exploration expenditure in 2006 was US$3.2B NEWCREST 17
Deposits Discovered Moz of Gold Discovered Gold Supply Exploration Success Gold Discovery Rate (1995 2005) 16 120 14 12 10 100 80 8 60 6 4 2 40 20 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0 Deposits Ounces source: MEG Discoveries and Contained Ounces for Major Discoveries (>2.5 Moz in size) NEWCREST 18
The most successful discoverer of major gold deposits between 1992 and 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) NEWCREST 19
Summary Industry cost curve has been on a steady upward trend Recent discovery rate hasn t kept pace with production Increasing trend to deeper and harder to find deposits The future lies in underground bulk mining methods NEWCREST 20