Newcrest has not yet outlined a clear strategy for the revival of its struggling Lihir goldmine.Newcrest Mining managing director Sandeep Biswas insists his new improvement and optimisation agenda will not “burn the furniture” at the goldminer, despite demanding a renewed focus on cost reduction and productivity.
Mr Biswas introduced his new company-wide improvement plan, known as “edge”, to the market during a marathon day of investor briefings on Tuesday.
Having acknowledged Newcrest’s track record of failing to meet market guidance over recent years, Mr Biswas said “edge” would ensure the miner was maximising its assets and focusing on ways to reduce fixed costs across the business.
He said “edge” involved hundreds of small improvement programs across the company’s multiple assets, and, hinting at his time inside the Rio Tinto culture, Mr Biswas said the plan would create an “owner’s mindset” in the workforce.
“This is not a cost-out program and not about burning the furniture,” he said, in an apparent reference to maintaining a focus on growth through exploration and affordable, profitable development plans for new mines like Wafi-Golpu.
He pointed out that Newcrest still had a 30-person exploration team searching for new opportunities, despite the new era of lower gold prices.
While pleased by the pledge to avoid “burning the furniture”, most of the analysts who attended Tuesday’s six-hour investor briefing wished they could just get a better look at the furniture in the first place.
Mr Biswas had not yet outlined a clear strategy for the revival of the struggling Lihir mine in his first three months in charge of the company, and many were hoping the investor day would shed more light on the path toward resuming full-scale mining at the asset, which has done little more than process stockpiles in recent years.
Investors have been particularly focused on the timeline toward development of the Kapit deposit at Lihir, which is prospective but buried under the stockpiles.
But little guidance emerged on Tuesday, and even an ambition to ramp volumes through the Lihir processing plant to 12 million tonnes per annum carried an asterisk that suggested the target should not be taken as formal guidance.
“It is their No.2 asset but the one with the least clarity around it, there are a lot of moving parts around the operation and that heightens the uncertainty,” said CIMB analyst David Coates.
Investors were also hoping for guidance on the new development plan for the Wafi-Golpu joint venture in Papua New Guinea, and also for an indication of when Newcrest might return to paying dividends.
Mr Biswas indicated the Wafi-Golpu plan would be ready in 2015, and that debt repayments would be a bigger priority than resuming dividends, with dividends set to resume only “when it is prudent to do so”.
Mr Coates said the company-wide improvement program was a positive move, but the continuing lack of clarity was frustrating the market.
“There was not a lot of new information out of the day, people were not necessarily expecting a lot but I think we were hoping for more than the deflections we got,” he said.
Newcrest had an all-in cost of production of $864 per ounce during the September quarter, and received an average price for its product of $1393 per ounce.
Newcrest shares closed 4¢ higher at $10.
This story Administrator ready to work first appeared on Nanjing Night Net.