Newcrest Mining’s chief has declared that a four-year run of soaring costs in the mining sector is over.
Labour, energy and fuel price rises pushed up by the demands of the mining boom have cut away at profits causing angst for mining chief executives, but Newcrest’s Greg Robinson says the prices have peaked.
That is in contrast to global miner Gold Fields’ boss Nick Holland who told a Melbourne audience recently those costs would double in five years and much of the industry would be “killed” unless the gold price got to $US2,000 an ounce.
Mr Robinson said while Australia had moved into the third and fourth quartiles – most expensive – for global gold production, he saw reason to be optimistic.
“Commodity inputs into the cost side of our business appear to have in general levelled and maybe slightly declined,” he told reporters.
“The cycle for equipment availability has started to shorten … I’m not saying it’s come off dramatically but it is certainly showing signs of levelling to coming down.”
“You can’t do much about pure input prices but you’ve got to be a master of your own destiny in pursuing technology, people and advantages-productivity gains within your business.”
Newcrest was hit by an eight per cent jump in labour costs, 22 per cent hike in fuel and 17 per cent lift in energy prices for the financial year.
The rises offset but did not stop it posting a record full year net profit of $1.12 billion, up 23 per cent from $908 million and above a consensus forecast of $1.06 billion.
Newcrest shares closed up $1.07, or 4.4 per cent, to $25.40, but have endured a miserable run with a 40 per cent fall in 12 months, caused in part by maintenance issues at overseas mines.
Rising gold prices drove the profit with a higher realised price for the year of $1,609 per ounce, 17 per cent or $231 per ounce higher than the previous year.
The cost of sales increased by nine per cent to $2.6 billion, gold sales fell by six per cent to 2.3 million ounces and production was down 10 per cent.
However it forecasts a nine per cent increase in gold production in 2012-13 because production will start from its new $1.9 billion underground mine at Cadia East with a $1.3 billion plant upgrade at Lihir in Papua New Guinea due to be completed.
2012 was a peak capital expenditure year with $2.5 billion spent, much of it on those two projects, Mr Robinson said.
A $5 billion spend over the next five years would lift output 35-55 per cent above current levels of 2.3 million ounces to up to 3.5 million ounces, the company said, but debt is low, with gearing of only 12.5 per cent.
Newcrest says it plans to pay a final ordinary dividend of 23 cents per share (15 per cent franked), bringing the total to 35 cents per share, 17 per cent higher than the prior year.
It’s interim distribution of 12 cents was unfranked.
