Newcrest tackles costs, gets first strike

Marion Rae | November 9, 2022

Australia’s biggest gold producer is tackling global and internal challenges but has suffered a “first strike” on executive pay.

Newcrest Mining CEO Sandeep Biswas told shareholders on Wednesday the company has faced inflationary pressures, labour shortages, floods and supply chain bottlenecks since the last annual general meeting.

He said the company has put in place long-term and fixed-price contracts for maintenance, fuel and energy to control rising operating costs.

“It means we expect to contain cost growth to a range of around six per cent to eight per cent for the 2023 financial year,” he said.

Shares in Newcrest surged $1.16 or 6.4 per cent to $19.32 in afternoon trade.

Quizzed by shareholder activist Stephen Mayne, Newcrest chair Peter Tomsett admitted the company suffered a “first strike” on executive pay but did not disclose the numbers.

A so-called first strike happens when a company’s remuneration report receives a “no” vote of 25 per cent or more from shareholders at its annual general meeting. 

A second strike at next year’s meeting would spark a vote to change the board.

Mr Biswas disclosed he normally sells some shares to cover the tax bill on any vested shares.

“But I did sell some about three or four years ago in order to fund a beach house which my wife wanted,” he said.

Newcrest distanced itself from an investigation at state-owned Perth Mint by Australia’s financial intelligence agency for alleged breaches of anti-money laundering laws.

“Fortunately the person does not store any physical gold or silver on behalf of Newcrest and Newcrest does not have any financial affiliation with them,” Mr Tomsett said.

As global demand surges for minerals critical to building renewable energy systems, Newcrest intends to mine more copper.

Its group-wide road map has set milestones for reaching net zero by 2050 and Newcrest benefits from Canadian assets being hydro-powered.

In Australia, construction has begun on the Rye Park Wind Farm in NSW – which will have 66 wind turbines and produce 1200 gigawatt hours of electricity per year – to power the Cadia mine near the town of Orange from 2024.

In the past financial year, copper accounted for a quarter of Newcrest’s revenue, up from 22 per cent a year earlier.

“Having a real, meaningful exposure to copper is vital to having a strong gold company,” Mr Tomsett reiterated.

A drilling program is under way at the Havieron project in the resource-rich Paterson Province of Western Australia but Mr Biswas did not detail a timeline for the feasibility study to be completed.

Newcrest recently suspended mining and processing operations at the Brucejack mine in British Columbia, Canada, after a fatality and is working with authorities to investigate the incident.

Mr Biswas said Brucejack remains shut down and Newcrest will also conduct its own independent investigation until all risks are controlled or eliminated.

The Australian mining industry has faced a WA parliament inquiry into mines being unsafe for women and Newcrest has established a dedicated Respect At Work team.

Mr Biswas said the stories highlighting the prevalence of sexual assault and harassment in the mining industry have been “deeply disturbing”.

“For Newcrest, zero is the only acceptable number of such incidents,” he said.

During FY22, the proportion of women in Newcrest’s global workforce rose from 15.6 per cent to 16.5 per cent.

Mr Biswas said the graduate program had received a record number of female applicants.