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Barrick Gold Corp.NCMAnnual Report 2002
Newcrest Mining Limited
Vision
Challenge
Transformation
(
)
Newcrest Mining Limited
ABN: 20 005 683 625
Notice of Meeting
Notice is hereby given that the 22nd Annual General Meeting will be held
at the Hotel Intercontinental, 117 Macquarie Street, Sydney on Wednesday,
30 October 2002 at 12.30pm.
NCMThe Cover:
NCM: Australian Stock Exchange listing for Newcrest Mining Limited
Photo: Portal Conveyor – Ridgeway Gold Mine, New South Wales, Australia
Contents
Strategy
Performance
Financial Performance
Chairman’s Review
Managing Director and
Chief Executive Officer’s Report
Senior Management
Operations Review
Projects Review
Mineral Resources and Ore Reserves
Exploration
Human Resources
Safety and Health
Environment
Board of Directors
18
23
26
30
32
34
36
38
1
2
3
4
6
11
Corporate Governance
Financial Analysis
Directors’ Report
Discussion and Analysis of the
Financial Statements
Statement of Financial Performance
Statement of Financial Position
Statement of Cash Flows
39
41
43
49
51
52
53
Notes to the Concise Financial Report
Directors’ Declaration
Independent Audit Report
Five Year Summary
Shareholder Information
Corporate Directory
54
63
64
65
66
68
Newcrest Mining
Annual Report 2002
1
In 2002 Newcrest’s strategy of focussing on low-cost,
long-life mines, delivered significant benefits to shareholders.
The successful commissioning of Ridgeway and establishment
of Telfer as a key future project for Newcrest will contribute
strongly to shareholder wealth and will benefit our employees
and the communities in which we operate.
Performance
> Safety performance improved significantly
> 644,626 ounces of gold and 40,055 tonnes of copper produced
> Group cash costs reduced to A$253 per ounce
> Total costs reduced to A$414 per ounce
> Ridgeway gold/copper mine successfully commissioned
> Telfer established as a key future project
> Reserves trebled to 28.2 million ounces
> Resources increased by 29 percent to 53 million ounces
> Full year loss after tax of A$53.0 million
> 5 cent fully franked dividend
Cash Cost NAGIS
Gold Production
Cash Margin
$ per ounce
3
4
4
2
9
5
2
9
0
2
5
3
400
350
300
250
200
thousand
ounces
1200
1000
800
600
400
7
1
1
9
9
9
7
7
3
6
4
5
$ per ounce
2
6
9
3
1
7
3
2
1
2
9
9
400
350
300
250
200
9
9
0
0
0
1
0
2
9
9
0
0
0
1
0
2
9
9
0
0
0
1
0
2
Financial Performance
2
3
Gold produced
Copper produced
Gold sales
Gold price realised
Sales revenue
Earnings before significant items, borrowing costs,
tax, depreciation and amortisation
Depreciation and amortisation
Borrowing costs
Provision for surplus foreign currency and gold contracts
Provision for hedging contract restructures
Loss on sale of New Celebration
Profit/(loss) before tax
Income tax (expense)/benefit
Profit attributable to Outside Equity Interests
Net profit/(loss) after tax attributable to members of the Company
Capital expenditure (including exploration)
Cash and short-term deposits
Total debt
Earnings per share
Return on Capital Employed (ROCE) excluding significant items
(EBIT before significant items/capital employed)
Net debt/net debt plus equity
(All $ are Australian denominated unless specifically stated otherwise.)
(ounces)
(tonnes)
(ounces)
($ per ounce)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
(cents per share)
(percent)
(percent)
12 months to
30 June 2002
12 months to
30 June 2001
644,626
40,055
646,418
559
479.7
145.2
(101.5)
(10.7)
(80.6)
(25.0)
–
(72.6)
21.4
(1.8)
(53.0)
305.9
14.4
550.8
(19.2)
3.5
49.9
773,352
32,838
792,382
623
583.1
193.5
(111.7)
(18.6)
–
(2.0)
(9.2)
52.0
(12.1)
(1.7)
38.2
194.2
48.0
521.4
15.6
7.2
51.4
Chairman’s Review
Ian Johnson – Chairman
In 1998 Newcrest embarked on a simple and long-term strategy of
improving the international cost competitiveness and durability of its
gold/copper business. This was to be achieved by lowering the
Company’s overall cost of production from the third quartile on the
world cost curve, where it then was, to the first quartile, and by effectively
managing the Company’s financial exposures, particularly through
the hedgebook.
Newcrest Mining
Annual Report 2002
4
5
In September 2000 the old Telfer mine was shut down, New Celebration was sold in June 2001
and a few months later remnant mining at Boddington ceased. This reduced gold output but
removed high cost production. It allowed focus on the Cadia and Ridgeway operations and
transformed Newcrest into a low cost producer. The Company’s operations are now comfortably
in the lowest quartile on the world cost curve.
The hedgebook, which was put in place to protect the Company’s higher cost operations and
underwrite the development costs of new projects, has been under review for some time.
At prevailing gold and foreign exchange prices it has become a complicated means of delivering
gold at close to the spot price. Adjustments to the hedgebook will be made as opportunities arise.
Fundamental restructuring of the foreign exchange component of the hedgebook will not be
possible at an acceptable cost, unless there are major favourable changes in foreign exchange
rates. Some of the Company’s foreign exchange positions are expected to continue through the
next two years and will impact negatively on the underlying profitability of the mining operations.
Newcrest has already adopted an accounting treatment for those positions consistent with
emerging international accounting standards for such activities. This resulted in a net loss after
tax of $53 million, a result which is clearly unacceptable.
At the Cadia Hill Gold Mine, which had performed so well since it first began operating in 1998,
technical issues saw costs rise during 2001 as it struggled to maintain its planned production
levels. Those matters have now been fully addressed, with both production and costs at that
operation now restored to earlier levels, with further improvements still to be made.
At the adjoining Ridgeway site, construction was completed in early 2002 on time and on
budget. This was followed by a successful commissioning which saw throughput reach planned
levels well ahead of schedule.
As a result the Company now has two large long-life and low-cost mines in production, at Cadia
and Ridgeway. They are internationally competitive and form a strong basis for future growth.
During the year Telfer was established as Newcrest’s next large development, together with the
smaller but high grade Cracow project in Queensland. Both will comfortably satisfy the
Company’s strategic requirement for production costs in the lowest quartile. Looking ahead,
drilling at Cadia Far East has demonstrated the possibility of another significant underground
operation in the Cadia Valley. A more detailed evaluation has been approved by the Board,
including siting of a future exploration decline.
Newcrest’s geologists have discovered all of the deposits that the Company is now mining. This
provides the confidence to continue a strong commitment to exploration as the preferred means
of generating growth and replacing depleting resources over the longer term.
Just as Newcrest’s good exploration record has been acknowledged for some time, in recent
years the Company has also demonstrated it has added similar high level capabilities in its
capacity to construct and operate the large Cadia Hill and Ridgeway mines and the offshore
Gosowong mine. The Company is confident that it will be able to build and operate successfully
the proposed new mines at Telfer and Cracow.
Foremost among the Company’s other successes of 2001/02 was its safety performance which
again reached new levels, surpassing previous years and exceeding comfortably the industry
average on all key indicators. Its environmental performance continued in an equally strong vein.
A number of changes were also made to strengthen the Company’s senior corporate
management. Mr Tony Palmer, who is an experienced mining executive well qualified to manage
Newcrest’s growing business, was appointed Managing Director and Chief Executive Officer.
Looking ahead the Company is confident that it can maintain its long-term strategy of low-cost
production with continuing development of the two major provinces of Cadia Valley and Telfer.
Supplementing those large resources will be smaller high-grade deposits such as at Gosowong
and Cracow. Ongoing brownfields exploration will continue around Cadia and Telfer, balanced by
greenfields exploration in areas such as the Ashburton in Western Australia.
More than ever Newcrest can now be seen as capable of producing positive and sustainable
business outcomes. Its successes to date, and the potential of its emerging projects, should
result in it being viewed as a long-term investment to be judged on the financial returns it
generates against a peer group well beyond the gold and resource industries.
The strength of Newcrest’s operations and its compelling future have arisen only from the efforts
of its people. We take this opportunity to thank all employees for the strong contribution each of
them has made during the year. Newcrest will continue to provide a positive work environment
in order for its employees to further develop the substantial resource company that they have
helped to create.
Ian Johnson, Chairman
Managing Director and Chief Executive Officer’s Report
Tony Palmer – Managing Director and Chief Executive Officer
Newcrest continued to improve its competitive position with cash
costs and total costs falling for the fifth year in a row positioning
Newcrest as one of the lowest cost gold producers in the world.
Newcrest Mining
Annual Report 2002
6
7
Newcrest will now focus on two major centres, Cadia Valley and Telfer, both with the potential
to be very long life, both on existing granted mining leases, in the politically stable region of
Australia and enjoying considerable local support. In addition Newcrest has smaller high-
grade projects at Toguraci in Indonesia, Cracow in Queensland and its share of the Wandoo
project at Boddington in Western Australia all awaiting development in due course. It is
interesting to note that all of the Company’s planned production going forward is based on
gold that its own exploration program has found and that over a ten-year period reserves
and resources have increased eight-fold and six-fold respectively.
Newcrest’s pipeline of new projects are being developed to continue the trend of lower costs
and the focus on profitable gold and copper production.
Highlights
The 2001/02 financial year was a most significant one because of its importance in the
long-term strategy of transforming the Company into one that will enjoy low costs and long-
life mines well into the future.
• Ore reserves increased from 10 million ounces to 28 million ounces due to an upgrade
at Telfer. The Company also recalculated its reserves and resources at $500 per ounce
(previously $450 per ounce) to bring it in line with its peer group.
• The successful conclusion of the Ridgeway construction stage and the equally successful
commissioning stage.
• The potential for Telfer to once again become the Company’s flagship project.
The profit from operations was lower than the previous year because of lower production
and a lower achieved gold price.
While the lower cash and total costs assisted in the overall result, the achieved gold price
was down from $623 per ounce to $559 per ounce with both the gold and the foreign
exchange hedging positions negatively impacting performance compared to previous years.
The hedging provisions are non-cash and relate to accounting for surplus commodity and
foreign exchange contracts and provisions relating to the restructure of existing hedging
arrangements undertaken earlier in the year. These provisions will be reversed in the year
the designated production to which these contracts related occurs.
Accounting for hedgebooks and financial instruments is evolving and more changes are
anticipated by 2005 when it is envisaged that the world will have uniform accounting
standards.
Newcrest undertook a year of extensive capital spending as Ridgeway was constructed
and the Telfer study and development/exploration effort was in full swing. $138 million was
raised from a share placement, $14 million from a retail purchase plan and loan funds of
US$80 million were arranged through Nippon Mining and Metals Company Limited to assist
in the funding of this capital program.
The Company’s key focus must be returns to shareholders and this year’s ROCE of
3.5 percent is clearly unacceptable. We are confident that our current efforts will result
in dramatic improvement.
• The ongoing success of the exploration team with additional resources being found at
Operational performance
Telfer Deeps, Cadia Far East, Cracow and Toguraci.
Company success during the year can be gauged from the reaction in the market place, where
the share price performed strongly as the year unfolded. The Company conducted extensive
marketing at home and abroad to ensure the investment market was aware of the Newcrest
story. This resulted in renewed support for Newcrest in Europe, North America and Asia.
Financial performance
The financial result for the year should be viewed in two parts: a profit after tax and minority
interest of $20.9 million from normal operations and provisions totaling $73.9 million after
tax relating to hedging and related activities. The net result was a loss of $53 million.
Group gold production of 644,626 ounces was some 130,000 ounces lower compared with
the previous year. The year was very much a transitional year with no production from Telfer
or New Celebration, Boddington completing its oxide production, Gosowong exhausting the
high-grade open-pit reserves and Ridgeway only seriously contributing in the final quarter.
The net result of all this change was substantially lower cash and total costs that will
ultimately result in stronger cash flows and profitability but with Group reserves focussed
on fewer high quality operations.
Managing Director and Chief Executive Officer’s Report cont’d
The summary below demonstrates the degree of change the Company’s production profile
underwent through the year.
Operation
Cadia Hill
Ridgeway
Gosowong
Boddington
New Celebration
Telfer
Total
Production
(ounces)
Cash Costs
(A$/oz)
Total Costs
(A$/oz)
2002
2001
2002
2001
2002
2001
258,834
300,255
127,665
50,688
232,297
226,900
25,830
N/A
N/A
50,756
86,379
58,374
644,626
773,352
315
157
230
316
N/A
N/A
253
272
196
222
383
426
449
290
473
292
419
377
N/A
N/A
414
426
304
408
527
553
494
439
A detailed review of each of the Company’s operations is set out later in this report.
Safety and environment
The Company recognises that to be truly successful it must continue to work with its many
stakeholders to enhance even further its reputation in the areas of safety, environment and
social impact.
In the area of safety the Company’s performance improved greatly over the year as it
pursued its aim of an injury free workplace. The Lost Time Injury Frequency Rate (LTIFR)
more than halved to 2.2 for 2002 compared to 4.6 in the previous year. This compared
favourably with the relevant Australian industry benchmark LTIFR over the period of 9.0.
The Restricted Duties Injury Frequency Rate (RDIFR) also improved indicating an improved
broader safety environment.
Environmental performance also improved substantially during the period with the number of
incidents reported falling by 67 percent compared with the previous year. This was reinforced
by the results of the second survey conducted under the Australian Mining Industry Code for
Environmental Management which resulted in a material improvement in the performance of
each of the Company’s sites compared with the previous year. Each producing site has in
place a rehabilitation plan, the cost of which is being provisioned and reflected in the
production costs for that site.
The Company continued to place a strong emphasis on its interaction with its local
communities. In the Cadia Valley public access to its operations continued with site open
days and support of local community initiatives. The Company’s own fire crews also lent
strong support to rural fire services during the summer bushfire crisis. At Gosowong
substantial humanitarian aid and employment opportunities were provided to local villages
in the wake of the civil unrest which has affected that area since 1999. At Telfer discussions
are continuing with local Aboriginal communities to determine what meaningful training and
employment opportunities exist at the site for their people and at Cracow the Company and
its joint venture partner, Sedimentary Holdings, are working towards signing an Indigenous
Land Use Agreement (ILUA) with the relevant Aboriginal communities.
Development
Over the past five years the Company has constructed and commissioned a number of
new projects starting with the Cadia Hill opencut in August 1998, followed by Gosowong in
June 1999 and then Ridgeway in April 2002. The success of each of these projects ensures
that the Company can progress the Telfer project with confidence that it has the people and
the systems necessary to deliver significant mining projects that perform in line with
expectations.
It is worth repeating that these projects epitomise real organic growth and in its true sense
are all developed from resources that the Company’s own exploration team has discovered.
Telfer
Redevelopment and re-opening of the Telfer mine as a larger opencut and underground
operation remains a key priority. In early 2002 re-interpretation of the Telfer mineralisation
led to an upgraded gold resource of 26 million ounces and a gold reserve of more than
17 million ounces. This announcement followed a massive development and exploration
effort under the old Telfer opencut that included 140 kilometres of drilling and extensive bulk
sampling that was used in the calculation of the new ore reserve.
Substantial financial and technical resources continue to be directed to finalising a feasibility
study for the new large-scale mining and milling project to exploit that mineralisation. The
study is well advanced with well over half the proposed capital expenditure bid by suppliers
at the time of writing.
Newcrest Mining
Annual Report 2002
8
9
The proposed Telfer project will be challenging. However, its strong parallels to the open-pit
and underground mines at Cadia and Ridgeway will aid the development given the substantial
in-house skills retained.
Our concentrate marketing people have also been active, working towards signing
Memorandums of Understanding with a number of smelters around the world so that we
can be sure that the bulk of the planned copper concentrate production is scheduled against
delivery contracts. Satisfactory progress is being made on these negotiations.
At the same time that the technical and marketing studies are drawing to a close, substantial
effort has been put into raising the necessary funds. These crucial elements of the feasibility
study are proceeding concurrently and it is planned the Board will be in a position to officially
agree the project in the coming months.
The Board has already approved the necessary funds for early infrastructure work on the camp
and the road to Telfer and the necessary underground development work. The project remains
on track for commissioning late in the 2004 calendar year at which time Telfer has the potential
to become the largest gold mine in Australia.
Cracow (70 percent)
The smaller but high-grade Cracow underground project advanced during the year with the
announcement of a resource at the Crown prospect. This brought the total resource for the
project to date to almost 800,000 ounces.
Review of 2001/02 objectives
In the 2001 Annual Report the Company set out its objectives for the year ahead. I am pleased
to report on performance against those objectives as follows:
Improve safety performance of the Group.
The Company improved its safety performance considerably over the previous year with
the lost time injury frequency rate (LTIFR) falling to 2.2 from a previous level of 4.6. This
performance was strong when compared to the Australian Metalliferous Mining Industry LTIFR
rate of 9.0 for the same period.
Importantly the restricted duties injury frequency rate (RDIFR) fell to an all time low of 15.6.
Complete development of, and commission, the Ridgeway mine.
The Ridgeway mine was opened by the Premier of New South Wales, The Hon. Mr Bob Carr
on 19 April 2002.
The mine was delivered on budget and ahead of schedule. In its first partial quarter of
production it produced 67,654 ounces of gold at a cash cost of $103 per ounce.
Continue the Telfer feasibility study to determine the most appropriate development option.
Telfer has progressed substantially over the course of the year with a mine plan developed,
based on 20 million ounces of gold and many key items of the proposed project finalised.
Improve operating productivity and reduce costs.
A decision on development is expected in the first half of the 2002/03 year. Whilst Cracow is a
small deposit compared with Newcrest’s other operations, the Company believes there is
strong potential for further discoveries and exploration in the area is ongoing.
Newcrest, via its strategy of focussing on high quality assets and a dedication to business
efficiency, has reduced operating costs by 13 percent to $253 per ounce for the year from
$290 per ounce previously.
Cadia Far East
In the Cadia Valley, the Company’s geologists have identified an area of mineralisation at
Cadia Far East that has the potential to be the next major development project for the Group.
At this stage, $2.3 million has been committed to plan optimal underground access to the area
to allow the necessary close-spaced drilling to be undertaken. In turn, this drilling will provide
the details required to support a bankable feasibility study should the results confirm the
potential of the area. It is anticipated that a commitment to the underground access will be
made during the course of the 2003 financial year.
Consolidate the substantial increase in the resource base and the conversion of new resources
into reserves.
Exploration continues to be strongly value-adding for Newcrest and during the year the
resource base increased to 54 million ounces and the reserve base to 28.5 million ounces.
This level of resource ranks Newcrest among the leaders globally in the gold sector.
Extend the life of the Gosowong operation and advance the Cracow prospect.
The life of the Gosowong operation was extended with the announcement of the Toguraci
resource and reserve which should supply an additional 18 months of ore. Toguraci requires
permitting for mining activity and the necessary applications have been made in Jakarta.
Managing Director and Chief Executive Officer’s Report cont’d
The Cracow project advanced well during the year with the discovery of the Crown shoot taking
the Mineral Resource to 800,000 ounces and the presentation of a development plan to the joint
venture partner subsequent to year end.
Objectives for 2002/03
Newcrest is focussed on creating shareholder wealth via the development of sustainable high
quality businesses and on that basis has set itself the following objectives for 2002/03.
• Continue high level safety performance and continue to entrench in every employee the safety
culture of the Newcrest Group.
• Improve the financial performance of the Company.
• Aggressively pursue sustainable performance and cost enhancements at Ridgeway.
• Continue implementation of Cadia Hill’s optimised strategic plan and target further cost saving
and operating efficiency.
• Establish suitable funding arrangements and commence construction of the Telfer project.
• Commence the underground access to Cadia Far East.
• Achieve permitting for the Toguraci project.
• Commence development at the Cracow project.
• Continue cost effective exploration for discovery of additional resource endowment.
• Improve our return on invested capital (ROCE).
In the short time I have been at Newcrest I have been impressed with its people and their
professionalism as they go about their work. The Company has established a reputation for
discovering, building and successfully operating new projects and it is crucial that Telfer is added
to the list of successes over the next couple of years.
I would like to thank the staff for their efforts and I look forward to delivering the best outcomes for
the shareholders in the coming months and years.
Tony Palmer
Managing Director and Chief Executive Officer
SIGNIFICANT
PROJECT
PIPELINE
The Cadia Valley project corridor has delivered Cadia Hill, Ridgeway and in the
future Cadia Quarry, Cadia Far East and Cadia East. Exploration at Junction Reefs
is also prospective.
Ridgeway has been commissioned and will be a strong cash flow generator for the Group.
Telfer has undergone significant review and will become a key part of the
Company’s future after commissioning in 2004.
Group resources continue to increase strongly.
COMMITMENT
TO BUILDING
SHAREHOLDER
WEALTH
Value generating organic growth remains our principal focus.
We seek production which delivers profit, not just size.
Newcrest only commits to projects which contribute strongly to Group returns.
FOCUSSED AND
CONSISTENT
STRATEGY
We have maintained a consistent strategy of organic growth focussing on large-scale,
long-life and low-cost operations.
A commitment to profitable growth underpins our strategy.
Our people are key to our strategy.
SKILLED AND
EXPERIENCED
MANAGEMENT
AND BOARD
EXPLORA
EXPERTISE
TION
Strong blend of international and local skills in development, operations and finance.
Small central corporate group with strong site management.
Experienced Board with depth and vision.
A strong track record, unparalleled in Australia and among the best internationally.
Continuing to discover significant mineral deposits capable of adding to
shareholder wealth.
Exploration strategy, focussed on long life and high return targets, well aligned
with corporate strategy.
SUSTAINABLE
DEVELOPMENT AND
MANAGEMENT
Operation of existing mines and development of new mines in line with best
environmental and social practice.
Strong ongoing commitment to communities around our operations and the
wider community.
Safety is paramount.
Senior Management
10
11
Left to right:
Bruce Price
Executive General Manager Project Development
Tony O’Neill
Executive General Manager Operations and Marketing
Dan Wood
Executive General Manager Exploration
Bernard Lavery
Executive General Manager Corporate Services
Jeff Smith
Executive General Manager Finance
Peter Reeve
General Manager Corporate Affairs
Greg Monkhouse
General Manager Human Resources
Ridgeway
Ridgeway is the Company’s second
mine in the Cadia Valley. Located
800 metres underground its
development presented significant
technical challenges. The successful
commissioning of this project during
the year exemplified Newcrest’s
vision of creating sustainable returns
for shareholders through the process
of finding, developing and operating
low-cost gold mines.
Vision
Challenge
Transformation
(
)
End of shift at the Ridgeway changeroom.
Newcrest Mining
Annual Report 2002
12
13
Shift change at Ridgeway Muster Room
Glenn Taylor – Bogger Operator
Nathan Beyer and Barry Cologhan – Charge up Crew
Underground conveyor system at the Ridgeway mine.
Vision
Challenge
Transformation
(
)
Graham Howard, Telfer Geology Manager, and Rod Carlson, Senior Geologist.
Newcrest Mining
Annual Report 2002
14
15
Telfer
The Telfer Gold Mine became the
cornerstone of the Newcrest Group
more than 30 years ago. With a total
of 6 million ounces already produced
and a further 20 million ounces now
identified it represents the centre of
a globally significant mining region.
The technical rigour that has
lead to the transformation of Telfer
is a significant achievement for the
Company and the individuals involved.
Telfer Gold Mine production to recommence 2004.
GOSOWONG
NCM CADIA HILL
Gosowong Production
Ridgeway Production
Cadia Hill Production
BODDINGTON
& RIDGEWAY
CRACOW
TELFER
9
0
0
5
1
thousand
ounces
2
5
4
3
2
6
3
0
0
2
5
9
1
2
8
2
7
5
2
2
7
2
3
2
3
5
1
2
6
7
5
8
0
5
4
5
1
5
1
2
6
Telfer Production
Boddington Production
400
300
200
100
0
400
300
200
100
0
400
300
200
100
0
400
300
200
100
0
400
300
200
100
0
9
9
0
0
0
1
0
2
9
9
0
0
0
1
0
2
9
9
0
0
0
1
0
2
9
9
0
0
0
1
0
2
9
9
0
0
0
1
0
2
Newcrest Mining
Annual Report 2002
16
17
Central NSW
Opencut Gold/Copper Mine
Nominal Treatment Rate
2002 Gold Production
2002 Copper Production
Cash Cost
Total Production Cost
17.0 million tonnes per annum
258,834 ounces
23,229 tonnes
$315 per ounce
$473 per ounce
Central NSW
Underground Gold/Copper Mine
Nominal Treatment Rate
2002 Gold Production
2002 Copper Production
Cash Cost
Total Production Cost
4.0 million tonnes per annum
127,665 ounces
16,826 tonnes
$157 per ounce
$292 per ounce
Cadia Hill
Ridgeway
South-west, Western Australia
Opencut Gold Mine
2002 Gold Production
Cash Cost
Total Production Cost
Project Feasibility under review
– Reserve: 2.4 million ounces gold, 110,000 tonnes copper (NCM Share)
– Resource: 4.4 million ounces gold, 180,000 tonnes copper (NCM Share)
25,830 ounces
$316 per ounce
$377 per ounce
Halmahera Island, Indonesia
Opencut Gold Mine
Nominal Treatment Rate
2002 Gold Production
Cash Cost
Total Production Cost
0.3 million tonnes per annum
232,297 ounces
$230 per ounce
$419 per ounce
Boddington
Gosowong
North-west, Western Australia
Project Feasibility nearing completion
– Reserve: 17.4 million ounces gold, 660,000 tonnes copper
– Resource: 26 million ounces gold, 960,000 tonnes copper
Telfer
Operations Review
Tim Lehany, General Manager, Cadia Valley Operations
Cadia Valley
Cadia Valley Operations are comprised of the Cadia Hill Opencut Gold Mine and the Ridgeway
Underground Gold Mine.
Cadia Hill
The Cadia Hill mine underwent rigorous re-engineering during the 2002 year with all aspects
of mining, processing and management reviewed in order to maximise business outcomes.
By year end this process had resulted in significant improvements which will impact the
remainder of Cadia Hill’s 12 year mine life.
The mine produced 258,834 ounces of gold (300,255 ounces) which was lower due to ore
scheduling problems in the pit early in the year which reduced mined grades. Copper produced
was lower at 23,229 tonnes (26,781 tonnes). The mine is now adhering exactly to an optimised
mine plan that will ensure that this issue does not recur.
The cash cost of production was $315 per ounce ($272 per ounce) with total costs of $473 per
ounce ($426 per ounce).
1.1 million tonnes of ore from the Ridgeway operation was processed in the Cadia Hill mill
during the year. This was beneficial to Newcrest as a whole, but reduced recovery and ounces
attributable to Cadia.
A strategic review of the Cadia Hill Life-of-Mine Plan was undertaken in November/December
which included future mining of the Cadia Quarry resource, a larger Cadia Hill pit and a
reduction in the pit-slope angles on the north wall of the Cadia pit. The new mine plan and
schedule will ensure the operation is cash flow positive at all times with consistent and optimised
future production and operating cost performance.
A margin improvement plan was commenced and implemented in the year with a target of initial
annualised savings of $20 million or over $60 per ounce. Cost reductions and productivity
improvements of $14 million of the total target were achieved in 2002 and were reflected in the
improved mine performance. With improvements now identified we confidently expect the initial
target to be easily exceeded. This ongoing program has had a positive effect on the business
culture of the mine and will have benefits for the broader group operations going forward.
The savings achieved in the margin improvement plan have included items such as tyre supply,
mill liners and media and the more cost-effective use of consultants and contract labour. Other
major structural areas addressed included a focus on the size and composition of the haulage
fleet, haul roads and operating practices to improve truck tyre life, optimisation of blast
effectiveness to reduce explosive costs, increased shovel productivity and truck payload
to maximise utilisation.
The Cadiangullong Creek Diversion around the western edge of the Cadia Hill open pit was
completed and has been designed to withstand a 1:10,000 year flood event. The physical
diversion of the creek occurred in early July 2002, and followed an agreed protocol with the
NSW government.
During the year the mill circuit was upgraded by increasing the ball mill speed and increasing
the capacity of the mill pumps which resulted in an improved grind size and better recoveries.
Studies continue for the potential to improve recovery of fine gold in the flotation circuit with
some viable options now under consideration.
The Cadia Hill/Ridgeway combined Public Open Day in March 2002 was attended by 2,500
people and in excess of 2,000 participants undertook educational site tours throughout the year.
More than $166,000 of sponsorship and community support funding was distributed in the year
including $65,000 to CareFlight. In addition two Newcrest scholarships are offered annually to a
maximum of $7,800 per student for local students studying mining-related disciplines.
Newcrest Mining
Annual Report 2002
18
19
Truck haulage at the Cadia Hill Gold Mine.
Operations Review cont’d
Preliminary work has commenced to evaluate the feasibility of developing Cadia Far East/
Cadia East. These deposits have the potential to significantly add to the mine life at Cadia Valley.
Key mining physicals for the year were as follows:
• Total development of 13,345 metres consisting of 6,994 metres capital and 6,351 metres
In the coming year a cutback on the north pit wall will commence, heritage studies on the Cadia
Quarry mineralisation will be finalised whilst the program of margin improvement continues.
operating development.
• 1,900 metres of vertical shaft development by raiseboring.
Ridgeway
Ridgeway Gold Mine was officially opened by the Premier of New South Wales, The Hon. Mr Bob
Carr on 19 April 2002 after project construction and commissioning was completed on time and
on budget in March 2002.
The mine production ramp-up to the design nameplate capacity of 4 million tonnes per annum
was almost complete at year end with the underground sub-level cave (SLC) mine, ore handling
facilities and new concentrator exceeding forecast production throughput.
Underground mining is now well established with all production process steps proven at the
targeted 4 million tonnes per annum rate. The SLC operation is now firmly established and
production is at full intensity on the second and third SLC levels and commenced on the fourth
level. There is sufficient developed reserve ahead of the current SLC production. Caving of the
overlying strata has progressed as planned and there is no foreseeable impediment to the cave
zone progressing, as planned, to surface.
Metallurgical reconciliation and geological data gathered from underground drilling, mapping
and sampling continue to validate and support the Ridgeway ore reserve model.
Ridgeway produced 127,665 ounces of gold (50,688 ounces) and 16,826 tonnes of copper
(6,057 tonnes).
The cash cost of production was $157 per ounce ($196 per ounce) with total costs of $292
per ounce ($304 per ounce).
• Total material (including low grade ore material from SLC establishment and waste) trucked
from the mine was 1,581,593 tonnes.
The completed project now consists of the following elements:
• 45 million tonnes underground planning reserve at a gold grade of 2.6 g/t and a copper grade
of 0.86 percent for 3.9 million ounces of gold and 0.37 million tonnes of copper.
• Underground gyratory crusher.
• 4.1 kilometres inclined conveyor system.
• Stand alone 4 million tonnes per annum metallurgical processing facility.
• An additional tailing facility – Southern Tailings Storage Facility.
• New water storage dam.
The project was handed to the Operations Department at year end and the objective for the
project during the current year is to optimise the project output.
A program to test the mineralisation at depth in the Ridgeway system was commenced with
extension of the main decline. The initial results confirm the current interpretation of the deposit
at depth.
Newcrest Mining
Annual Report 2002
20
21
Richie O’Callaghan – Production Driller
Pouring gold at Ridgeway.
Daniel Le Strange – Jumbo Operator
Stamping Ridgeway’s first gold bars.
Operations Review cont’d
Haul road in the Gosowong mine pit in Indonesia.
Gosowong (82.5%)
Gosowong produced 232,297 ounces of gold (226,900 ounces) which was higher due to
increased delivery of high grade material from the Gosowong pit.
The cash cost of production was $230 per ounce ($222 per ounce) with total costs of $419 per
ounce ($408 per ounce).
Mining is now complete at the Gosowong pit and over its project life the Gosowong mine
produced 734,136 ounces of gold at an average cost of approximately $215 per ounce over
a period of 36 months, a result achieved under, at times, difficult circumstances.
Over the next year a 400,000 tonne stockpile of lower grade material will be treated.
Personnel numbers were reduced at year end to minimise overheads during the lower grade
campaign.
The process of gaining access for mining the promising Toguraci orebody continued with
resolution of the outstanding permitting and Contract of Work issues now in the hands of the
Indonesian government.
Projects Review
22
23
Drilling around the Telfer open pit
Telfer
During the course of the year the major elements of the resource studies were:
The bankable feasibility study for the Telfer project continued and by year end the project scope
envisaged a large scale copper/gold mine with a development cost of approximately $1.0 billion.
By 30 June 2002 the key Telfer project attributes could be summarised as follows:
• Mineral Resource 26 million ounces gold and 0.96 million tonnes copper.
• Ore Reserve* 17.4 million ounces gold and 0.66 million tonnes copper.
• Fully-scheduled project based on 20 million ounces of gold from both open pit and
underground ore sources.
• SLC mining method underground.
• Shaft haulage from underground.
• Truck and shovel open pit mining with excavators configured as hydraulic backhoes for
selective mining areas.
• 16–18 million tonnes per annum metallurgical processing facility.
• Finalised grinding circuit.
• Power supply from Port Hedland via a transmission line or gas pipeline for an onsite gas
turbine power station.
With the strength of these project attributes and detailed financial modelling demonstrating a
viable project, the Company committed $62 million to a program of infrastructure refurbishment
and underground development, drilling and evaluation.
*Bankable Feasibility study requires completion.
• Establishing the initial 18.4 million ounce resource.
• Upgrading of the initial resource to 27 million ounces and scheduling of the 20 million ounce
combined open pit and underground gold project.
• Classification of 17.4 million ounces within the Ore Reserve category.
These elements were determined after completing comprehensive campaigns of RC drilling,
close-spaced diamond drilling and bulk sampling. This program included drilling in excess
of 140,000 metres and bulk sampling of more than 150,000 tonnes of mineralised system in
1,130 separate bulk samples.
Additional areas of more detailed work completed during the year included the following:
In the open pit areas:
• Geotechnical work, pit optimisation and detailed pit design.
• Mining method, bench heights and production rates optimised.
• Composition and detailed costing of the mining fleet.
• Evaluation of options for contractor or owner mining.
In the underground mining area:
• Established SLC as the preferred mining method at a production rate of 4 million tonnes
per annum.
• Extensive study of haulage options from underground, focussed mainly on shaft or decline
mounted conveyor options. Conventional shaft haulage was chosen as the preferred option.
Projects Review cont’d
• Detailed planning of underground mine, haulage, shaft, dewatering and services undertaken.
In the concentrator area:
• Extensive bench scale and pilot plant test work performed to establish the optimum
treatment route.
• Concepts of High Pressure Grinding Rolls, pressure oxidation, solvent extraction/electro
winning (SX/EW) site metal production found to not provide benefits to the financial outcomes
of the project.
• Two predominant ore types identified. One earlier in the mine schedule that will result in a
copper concentrate containing most of the gold associated with the copper in the orebody
from a single flotation stage. The second justifying a sequential flotation route that will result
in both a gold/copper concentrate and gold recovery by cyanidation of a pyrite concentrate
recovered by a second flotation stage.
• Pilot plant work demonstrated the suitability of the ore to conventional SAG/Ball milling.
• Testwork demonstrated that a marketable high precious-metal concentrate can be produced.
• Optimisation of milling and mining operations show production rates over the life of the mine
of 16–18 million tonnes per annum to produce best project outcomes.
In the project services area:
• Power requirements identified supply from Port Hedland of either power via a transmission
line or gas via a pipeline with an onsite gas turbine power station as viable.
• Preferred route via Goldsworthy identified and necessary permitting and clearances well
advanced.
• Site access, camp and project logistics well advanced.
• Commitment made at year end to the first stage of upgrading the access road from Port
Hedland and to prepare for the construction phase of the project. This work is estimated to
cost $20.9 million.
Extensive deep drilling sterilisation holes (>4300 metres drilling) from surface were undertaken
in the latter half of the year to establish the limits of the orebodies and to establish that potential
extensions of orebodies did not impact potential plant and infrastructure positions.
Results of this underground sterilisation drilling led to commitment in June 2002 to a program of
underground development, drilling and bulk sampling that will allow critical path development for
establishment of the underground ore haulage system base position and evaluation of further
potential of the previously outlined underground orebody. The estimated value of this work is
$41.2 million.
The bankable feasibility study is on track to allow commitment to construction in the last quarter
of 2002 with an expected construction period of approximately two years.
Early encouragement has been received for the sale of Telfer gold/copper concentrate with
all concentrate expected to be in strong demand. Finalisation of the funding is expected in the
December quarter of 2002.
Cracow (70 percent)
The scope of the Cracow project continued to expand during the year with the discovery of
a second zone of mineralisation, the Crown shoot, and indications of further potential shoots.
The total resource now stands at 800,000 ounces with exploration programs focussed on
delineating further shoots on similar structures north of the existing shoots.
At year end the joint venture partners were presented with a mining development proposal which
is based on the production of 600,000 ounces of gold over a seven year period at cash costs of
approximately $230 per ounce.
The project scope involves the establishment of decline access to allow simultaneous development
of the Royal and Crown shoots with ore to be processed using the refurbished Cracow mill.
A decision on development is expected by the December quarter 2002.
Cadia Far East
The Cadia Far East mineralisation is two kilometres to the east of the Cadia Hill orebody and
six kilometres to the east of the Ridgeway orebody with the top of mineralisation commencing
1000 metres below surface.
The total Cadia Far East body has a Mineral Resource of 130 million tonnes @ 1.3 g/t of gold
and 0.41 percent copper giving a total of 5.5 million ounces and 0.53 million tonnes of copper.
Newcrest Mining
Annual Report 2002
24
25
1
k
m
2
k
m
3
k
m
4
k
m
5
k
m
6
k
m
6000m
Ridgeway
Cadia Quarry
Cadia Hill
Cadia East
5000m
4000m
Possible Decline
Cadia Far East
48Mt @
2.5g/t Au
0.77% Cu
Mineral
Resource
58Mt @
0.47g/t Au
0.24% Cu
Mineral
Resource
270Mt @
0.71g/t Au
0.16% Cu
Mineral
Resource
300Mt @
0.46g/t Au
0.37% Cu
Mineral
Resource
130Mt @
1.3g/t Au
0.41% Cu
Mineral
Resource
J
u
n
c
t
i
o
n
R
e
e
f
s
i
J
V
L
c
e
n
c
e
B
o
u
n
d
a
r
y
Infill drilling of Cadia Far East was conducted during the year with the aim of locating a high
grade zone of mineralisation.
Hole NC582 was drilled from surface and intersected 240 metres @ 2.2 g/t of gold and 0.42
percent copper and included 134 metres @ 3.4 g/t of gold and 0.49 percent copper. This hole
was significant as it identified a higher grade zone and highlighted the potential for further
mineralisation on the western flank of the orebody.
Boddington (22.2 percent)
Newcrest’s 22.2 percent share of gold production was 25,830 ounces (50,756 ounces) at a cash
cost of $316 per ounce ($383 per ounce) and total cost of $377 per ounce ($527 per ounce).
Recovery of gold from residual material in gravity traps and other locations around the processing
plant commenced in December 2001 and continued throughout the remainder of the year
following completion of oxide treatment materials.
Preparation of the mine plant and infrastructure for an indefinite period of care and maintenance
commenced in December and continued throughout the remainder of the year. Particular
emphasis was placed on preservation of those items of plant and equipment that are planned
to form part of the proposed Expansion Project.
Following endorsement by the Boddington Gold Mine Joint Venture (BGMJV) of the Boddington
Expansion feasibility study in early 2001 additional items such as the transfer of management
from Worsley Alumina and certain environmental and ministerial approvals were achieved.
The Boddington Expansion project is a robust project designed to exploit the basement
mineralisation beneath the depleted oxide pits, and is based on a throughput of 25 million
tonnes per annum over a 16 year mine life. Ore head grades of 0.91g/t gold and 0.12 percent
copper will result in average annual production of 600,000 ounces of gold and 22,500 tonnes
of copper.
With a capital cost of around $500 million (100 percent project) and average total costs well
under $400 per ounce the project is competitive, particularly in an environment where few large
scale quality projects in a stable political environment exist.
The NC582 intersection, in conjunction with all previous resource studies, enabled commitment
at year end to a $2.4 million program of studies of the Cadia Far East mineralisation relating to
possible decline access and haulage.
Newcrest will continue to pursue high quality projects such as the Boddington Expansion project
and balance its capital allocation to minority owned projects with those owned 100 percent by
the Company in order to optimise returns to shareholders.
The next stage consists of decline access, development and drilling and if approved will
commence early in 2003.
Additional studies on Cadia East continue with evaluation focussing on the various methods of
development. The orebody is copper-rich and this has a positive impact on the project financials.
Mineral Resources and Ore Reserves
Total Mineral Resources at year end are estimated at 53 million ounces of gold and 3.7 million
tonnes of copper, an increase of 11 million ounces of gold and 0.4 million tonnes of copper,
compared with June 2001 (all in situ). The increase was due to the addition of new resources
and the increase from reporting Mineral Resources at a gold price of $500 per ounce (previously
$450 per ounce).
The major increases in Mineral Resources were at Telfer, Cadia Far East and Cadia Hill.
Ore Reserves are estimated at 28.2 million ounces of gold, an increase of 17.8 million ounces
after depletion of 0.8 million ounces. Total Ore Reserves for copper are 1.5 million tonnes, an
increase of 0.8 million tonnes as compared with June 2001.
The major increases in Ore Reserves occurred at Telfer, Ridgeway and Cadia Hill where a
reserve is now also reported for Cadia Quarry.
Mineral Resources and Ore Reserves conform to the Australasian Code for Reporting of Mineral
Resources and Ore Reserves (The Joint Ore Reserves Committee Code – JORC). Ore Reserves
are a subset of Mineral Resources. External and internal audits are conducted on completed
estimates. All costs and prices are in Australian dollars unless shown otherwise. Relevant
information on the methods and parameters used to estimate Mineral Resources and Ore
Reserves are presented in the Newcrest Supplementary Information Booklet located in the
Annual Report section on the Company's website at www.newcrest.com.au.
Cadia Hill
The Cadia Hill Mineral Resource was updated during the period, using a $500 per ounce gold
price which resulted in an increase in the Mineral Resource.
The Cadia Hill pit design has been revised to incorporate changes arising from re-optimisation
at an increased gold price and a reduction in the slope of the northern highwall.
The Cadia Hill Ore Reserve was re-estimated based on a gold price of $500 per ounce and
updated financial inputs. This has resulted in an increase in the Ore Reserve.
Cadia stockpile resources and reserves, quantified by in-pit ore control, have been removed
from the Cadia Hill inventory and are reported separately.
Cadia Quarry
The Cadia Quarry Mineral Resource has been updated following resource definition drilling,
re-interpretation of geological controls and the use of a $500 per ounce gold price and this
resulted in a small reduction from the previous resource.
The Ore Reserve has been estimated at a gold price of $500 per ounce and represents the
stage one pit. The permitting process to mine the Cadia Quarry pit is underway and is not
anticipated to present significant problems.
Cadia East
The Cadia East Mineral Resource is situated adjacent to the eastern margin of the Cadia Hill
open pit and is the near surface expression of the mineralised porphyry system which hosts the
Cadia Far East Mineral Resource at depth.
The Cadia East Mineral Resource was updated using a $500 per ounce gold price which
reduced the resource due to the copper gold costing balance.
Ridgeway
The Ridgeway reserve and resource models were updated to incorporate a $500 per ounce gold
price with a copper price of $1.20 per pound and were depleted for mine production. A cut-off
value of $16 per tonne was used to report Mineral Resources.
Refinements to the method of delineating ore boundaries have been used to generate these
Ore Reserves and involves progressively adding material in logical SLC design increments
towards the marginal operating cost. Cash flow is assessed and the incremental material is
included in the Ore Reserve if cash flow is enhanced.
Diamond drilling within and around the deposit continues to increase the level of confidence
of the resource estimate and reconciliation against the Mineral Resource and Ore Reserve
indicates good performance to date.
Newcrest Mining
Annual Report 2002
26
27
Cadia Far East
Boddington
The Cadia Far East deposit is located 1.5 kilometres east of the Cadia Hill open pit and is
separate from the shallower Cadia East deposit. The resource lies between 700 metres and
1500 metres below the surface, and is 420 metres long by 150 metres maximum width.
Oxide resources and reserves remaining after the cessation of oxide mining in late 2001 have
been removed from the mine inventory as there is no longer a reasonable prospect for their
eventual economic extraction. The Direct Leach milling facility has been sold.
It is a body of relatively high grade, porphyry-style gold-copper mineralisation containing native
gold, chalcopyrite and bornite as the main metalliferous minerals. The mineralisation grades
outwards from a central, thickest, highest-grade core in a predictable manner.
Basement resources and reserves have been depleted for mining in the period.
The Boddington Expansion Mineral Resources and Ore Reserves remain unchanged.
The Inferred Resource estimate was completed at a $16 per tonne value cut-off.
Gosowong/Toguraci
Telfer
The new Mineral Resource estimates represent an increase of 8 million ounces of gold and
0.29 million tonnes of copper since June 2001.
Mining of the Gosowong pit was completed in May 2002 with 0.6 percent more ounces of gold
mined than indicated by the resource model achieved and by mining 10 percent more tonnes
at a 9.6 percent lower grade. Stockpiled material at a reconciled grade of 4.13 g/t of gold is
currently being processed.
Significant increases in both tonnage and grade for the Telfer open pit and underground
resources resulted from additional drilling, bulk sampling, development mapping and test work
analysis.
The Toguraci deposit is a high grade epithermal deposit, of a similar style to Gosowong and
located approximately 2 kilometres south-west of the Gosowong Mine, and contains a Mineral
Resource hosted within two steeply north-dipping veins, the Damar and Midas.
The Telfer Ore Reserve is based on the current resource model and a gold price of $500 per
ounce and taking into account recent inputs from the ongoing Telfer Project Feasibility Study
has increased by 17.4 million ounces of gold and 0.66 million tonnes of copper.
The Telfer Open Pit Ore Reserve is constrained within appropriate optimisation shells within Main
Dome and West Dome and is defined using cut-off grades determined by the profit algorithm
approach. A proportion of the reported Inferred Mineral Resource is also located within these
optimisation shells.
A reserve for Toguraci has been developed with allowance made for mining dilution and
minimum mining widths.
Toguraci lies within Hutan Lindung (protected forest). Under current Indonesian law, mining
by open pit methods is not permitted within Hutan Lindung, however there is reasonable
expectation that revision of this law will enable open pit mining to proceed at Toguraci.
Cracow
The Telfer Underground Ore Reserve was developed from SLC of mining outlines based on
a series of breakeven boundaries for each production level assuming appropriate dilution.
The Inferred Resource for the Crown shoot was updated to an Inferred Resource of 1.3 million
tonnes at 9.4 g/t of gold and 5.6 g/t of silver using a gold price of $500 per ounce.
The combined Crown shoot and Royal shoot resource results in a total Inferred Resource of
0.79 million ounces of gold (Newcrest share 0.55 million ounces of gold).
Mineral Resources and Ore Reserves cont’d
Mineral Resources attributable to Newcrest as at 30 June 2002
Measured Resource
Indicated Resource
Inferred Resource
Gold
in situ
Copper Competent
Person
in situ
Dry
Tonnes
(million)
230
1.6
Gold
Grade
(g/t Au)
0.73
0.51
Copper
Grade
(% Cu)
0.16
0.23
Dry
Tonnes
(million)
40
53
Gold
Grade
(g/t Au)
0.59
0.47
Copper
Grade
(% Cu)
0.16
0.24
Cadia Hill
Cadia Quarry
Cadia East
Cadia Stockpiles
Ridgeway
In situ
Undrawn Broken Stocks
Total Gold and Copper
Cadia Far East
Telfer
Open Pit
Underground
Satellites
Stockpiles
14
29
29
0.45
0.14
2.8
2.8
0.86
0.86
170
1.3
0.17
Total Gold and Copper
170
1.3
0.17
Boddington
Basement
Boddington Expansion
Total Gold and Copper
Gosowong
Toguraci
Cracow
Total Gold and Copper
0.081
29
29
0.37
1.8
0.93
0.93
2.8
0.11
0.11
15
1.2
16
200
46
0.72
3.1
250
0.12
82
82
1.9
2.3
1.9
1.7
2.8
4.2
0.83
1.9
2.1
0.83
0.83
0.63
0.94
0.65
0.13
0.52
0.06
0.14
0.20
0.12
0.12
0.19
40
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
(million
ounces)
(000’s
tonnes)
4.1
300
2.7
2.7
130
94
11
1.7
110
0.022
51
51
0.15
1.7
0.18
0.37
0.56
0.56
0.41
0.12
0.41
0.08
0.15
0.091
0.091
0.40
0.46
1.5
1.5
1.3
1.1
2.0
2.6
1.2
9.0
0.8
0.8
10
10
6.2
0.87
4.3
0.20
3.7
0.09
3.8
5.5
21
4.8
0.24
0.08
26
0.02
4.4
4.4
0.033
0.30
0.55
53
450
140
1100
19
360
11
370
530
670
290
1.9
4.4
960
180
180
3700
1
1
1
1
2
2
3
4
4
4
4
5
6
7
7
8
Competent Persons: 1. C.F. Moorhead, 2. J.L. Grace, 3. J.R. Holliday, 4. G.R. Howard, 5. K.P. Gleeson, 6. S. Williams, 7. G.N. Petersen, 8. J.F. Leckie/P. Creenaune
Rounding, conforming to the JORC Code, may cause some computational discrepancies. The gold and copper grades totals in the resources are weighted averages.
Information in this report which relates to Mineral Resources is based on and accurately reflects reports prepared by the Competent Person named beside the information. All these persons are full-time employees
of Newcrest Mining Limited or the relevant subsidiary, except K.P. Gleeson, who is an employee of Worsley Alumina Pty Ltd, Boddington Gold Mine, and S. Williams, who is a full-time employee of Newmont Australia
Limited, who consent to the inclusion of material in the form and context in which it appears. This resources report is compiled by J.F. Leckie, Chief Geologist Mining and Development, Newcrest Mining Limited. All the
Competent Persons are Members or Fellows of The Australasian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists and have the relevant experience in relation to the mineralisation being
reported on by them to qualify as Competent Persons as defined in the Australasian Code for Reporting of Mineral Resources and Ore Reserves.
Newcrest has retained Peter Stoker of Hackchester Pty Ltd to act as external auditor for the Newcrest Mineral Resources where Newcrest is the operator. External audits have been completed or are in progress, and
Mr Stoker has stated that he is not aware of any issues which materially affect the reported Mineral Resources. Mr Stoker is a geologist with over 30 years experience in mine geology, Mineral Resource and Ore Reserve
estimation, feasibility studies, project evaluation and mineral exploration.
Newcrest Mining
Annual Report 2002
28
29
Ore Reserves attributable to Newcrest as at 30 June 2002
Gold and Copper Reserves
Cadia Hill
Cadia Quarry
Stockpiles
Total Gold and Copper
Ridgeway
Underground
Total Gold and Copper
Telfer
Main Dome
West Dome
Telfer Deeps
Total Gold and Copper
Boddington
Expansion
Total Gold and Copper
Gosowong
Stockpiles
Toguraci*
Total Gold
Total Gold and Copper
Proved Reserve
Probable Reserve
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
0.18
0.14
0.18
0.84
0.84
0.12
0.12
180
14
190
11
11
28
28
0.37
0.37
0.78
0.45
0.76
3.0
3.0
0.94
0.94
2.8
2.8
0.20
0.25
0.24
0.71
0.71
0.18
0.08
0.56
0.19
0.13
0.13
5.8
15
20
30
30
240
94
32
360
59
59
0.15
0.15
0.38
0.48
0.45
2.2
2.2
1.4
1.1
3.0
1.5
0.84
0.84
43
43
Gold
In situ
(million
ounces)
4.5
0.23
0.20
4.9
3.2
3.2
11
3.3
3.1
17.4
2.4
2.4
0.03
0.21
0.25
28.2
Copper
In situ
Competent
Person
(kilo
tonnes)
330
36
19
380
310
310
410
65
180
660
110
110
1500
1
1
1
9
10
10
11
6
7
7
1. C.F. Moorhead, 2. J.L. Grace, 3. J.R. Holliday, 4. G.R. Howard, 5. K.P. Gleeson, 6. S. Williams, 7. G.N. Petersen, 8. J.F. Leckie/P. Creenaune, 9. A. Logan, 10. M. Staples, 11. A. Pratt
Rounding, conforming to the JORC Code, may cause some computational discrepancies. The gold and copper grade totals in the reserves are weighted averages.
Information in this report which relates to Ore Reserves is based on and accurately reflects reports prepared by the Competent Person named beside the information. All these persons are full-time employees of
Newcrest Mining Limited or the relevant subsidiary, except K. Gleeson, who is an employee of Worsley Alumina Pty Ltd, S. Williams, who is an employee of Newmont Australia Limited, and M. Staples, who is an employee
of Australian Mining Consultants Pty Ltd contracting to Newcrest Mining Limited who consent to the inclusion of material in the form and context in which it appears. This reserves report is compiled by D. Corp, Manager
Business Development, Newcrest Mining Limited. All the Competent Persons are members of The Australasian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists and have the relevant
experience in relation to the mineralisation being reported on by them to qualify as Competent Persons as defined in the Australasian Code for Reporting of Mineral Resources and Ore Reserves.
Goss Consulting Pty Ltd was engaged to conduct audits on the process used for Ore Reserve estimation for Cadia Hill, Cadia Quarry and Ridgeway and Toguraci. Goss Consulting is not aware of any issues with the
process used which may materially affect the reported Ore Reserve.
*Toguraci lies within Hutan Lindung (protected forest). Forestry Law 41/1999 currently precludes open cut mining in Hutan Lindung. This law post-dates the granting of the Halmahera Contract of Work and there is
a reasonable expectation that a revision of this law will occur enabling mining to proceed at Toguraci.
Exploration
Newcrest maintained its strong commitment and budget support for exploration over the year
despite substantial cutbacks in exploration expenditure within the industry globally.
Exploration remains a core element of Newcrest’s corporate strategy providing value adding
growth opportunities due to the Company at a 10-year discovery cost ($13 per ounce) of less
than one-fifth of the gold industry’s world average.
Persistent, cost effective exploration based on district focussed strategies remains Newcrest’s
preferred growth option over acquisition.
Other Projects
The Company has re-established a presence in the Americas and presently has four projects
in Nevada, which it plans to drill in the coming year. These include the historic Silverton mining
district, located about 170 kilometres east-northeast of Tonopah.
The Company has also extended its search in eastern Australia to Victoria, where it has an
option to acquire the Stavely project, near Ararat. A narrow interval of secondary copper
mineralisation was intersected in one of three core holes drilled.
Greenfields Exploration
Mine Area Exploration
Cracow (70 percent)
Infill drilling on the Crown structure increased the size of the estimated resources in the Royal
and Crown shoots to 790,000 ounces of gold (Newcrest share 550,000 ounces) and provided
justification for the joint venture partners to consider developing decline access to the
mineralisation.
Drilling one kilometre north of the Crown shoot intersected high grade gold mineralisation
on a new structure. The hole CBK83 returned 6.4 metres @ 10g/t gold and included
1.1 metres @ 15g/t gold.
The extent of this mineralisation will be determined by further drilling.
Drilling will also continue in the search for other mineralised structures in the Royal and Crown
areas and investigate promising targets elsewhere in the Cracow mining field.
Ashburton, WA (Newcrest earning up to 70 percent)
Exploration is currently focussed on the Cheela area, located about 100 kilometres north-west
of Paraburdoo, the Xanadu area, 60 kilometres to the south-west and the Diligence Dome area,
immediately to the east of the Mt Olympus mine, where Sipa Resources plan to mine the small,
Waugh oxide gold deposit.
The extensive distribution of gold anomalies over a broad area and the observed spatially-
related alteration are encouraging indications of the mineralisation potential of the district.
Regional RAB/aircore drilling and surface mapping and sampling have defined a number of gold
anomalies and targets for testing by RC-percussion and core drilling.
Cadia District
At Cadia Far East resource definition drilling on a 100-metre pattern was completed within an
area of potentially better grade gold/copper mineralisation.
As a result of the information obtained from this drilling, the estimated Inferred Resource for this
part of the Cadia Far East mineralisation was increased to 130 million tonnes grading 1.3g/t gold
and 0.41 percent copper, using a $16 per tonne value cut-off.
Encouragingly, drill hole NC582 located to the west of this area returned a downhole intersection
of 240 metres grading 2.2g/t gold and 0.42 percent copper and indicates potential to expand
the size of the presently estimated resource of 5.5 million ounces of gold and 0.53 million tonnes
of copper.
Drilling by the Cadia Mine geology team, on part of the shallower Cadia East portion of the Cadia
East-Cadia Far East mineralised body, resulted in the Inferred Resource estimate for Cadia East
increasing to 300 million tonnes grading 0.46g/t gold and 0.37 percent copper.
The Cadia East deposit is presently estimated to contain 4.3 million ounces of gold and
1.1 million tonnes of copper using a gold price of $500 per ounce and copper price of $1.20
per pound. Further resource definition drilling at Cadia East is planned for the coming year.
Drilling on the Junction Reefs joint venture area (Newcrest earning 51 percent), immediately to
the east of Newcrest’s Cadia tenements, has intersected relatively long intervals of low grade
gold/copper mineralisation and porphyry-related hydrothermal alteration at the Gooley’s prospect.
Investigations at Junction Reefs are presently focussed on the Gooley’s and Black Rock
prospects.
Newcrest Mining
Newcrest Mining
Annual Report 2002
Annual Report 2002
30
31
Toguraci Exploration Camp
Gosowong (82.5 percent)
Infill drilling at Toguraci outlined high-grade mineralisation in the Midas and Damar shoots, with
an estimated combined resource (Inferred and Indicated) of 360,000 ounces of gold (Newcrest
share 300,000 ounces). An Ore Reserve of 260,000 ounces of gold (Newcrest share 210,000
ounces) at an average grade of 43 g/t gold has been estimated, using a 2.5 g/t gold cut-off grade.
Investigations are presently centred on the Seksekel area, located about 1.5 kilometres north-
east of Gosowong and outside the protected forest.
Outlook
Exploration in 2002/03 will continue to be focussed on a small number of projects in Australia,
Indonesia and North America.
In addition, given the increasing contribution of copper to the Company’s overall production,
a review of exploration opportunities for copper-only discoveries will be undertaken.
Growth in Reserves
Gold Reserve
(Moz)
30
25
20
15
10
5
0
9
2
9
3
9
4
9
5
9
6
9
7
9
8
9
9
0
0
0
1
0
2
Growth in Resources
Gold Resource
(Moz)
60
50
40
30
20
10
0
9
2
9
3
9
4
9
5
9
6
9
7
9
8
9
9
0
0
0
1
0
2
Copper Reserve
(Mt)
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Copper Resource
(Mt)
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
Human Resources
The development of Newcrest’s employees continued to be a priority. Company sponsored
training programs/support were provided via external education programs, such as the Education
Assistance Program, with career advancement through internal transfer and promotion.
96 Newcrest employees in senior and middle management roles participated in training
modules as part of the Newcrest Leadership Development program. Further leadership
development modules are planned.
The Company introduced the Newcrest Graduate Scholarship Program during the year. This
provides direct financial sponsorship, and practical vocation training to talented young people
committed to tertiary study in a mineral industry related technical discipline.
In addition to its scholarship program, Newcrest continued to support graduate development
within the Australian Minerals industry through its program of providing undergraduate vacation
employment.
At 30 June 2002 Newcrest had 799 direct employees and 795 contractors. This compares with
775 employees and 1491 contractors for the previous year. The lowering of contractor numbers
relates to the demobilisation of the Ridgeway construction team.
Recruitment and training of employees for the new Ridgeway mine was finalised during the year,
prior to commissioning.
The year also saw the recruitment of a number of new technical and project staff to support the
Telfer Project Study. Recruitment of the key operations management team is now underway, in
anticipation of project approval.
The senior management ranks were strengthened during the year by the following appointments:
• Tony Palmer – Managing Director and Chief Executive Officer.
• Tony O’Neill – Executive General Manager Operations and Marketing.
• Jeff Smith – Executive General Manager Finance.
• Marco Zolezzi – General Manager Telfer Mine.
Newcrest Mining
Annual Report 2002
32
33
Safety
Substantial improvements were made
in safety during the year reflecting the
Company’s quest for an injury-free
workplace.
Innovation to achieve even higher goals
in safety is a challenge that will be strongly
pursued.
Safety and Health
The safety and health (S&H) of employees and contractors is a key priority for Newcrest. The
Company continues its quest of achieving ‘Industry Best Practice’ in this aspect of its business
and in particular, an injury-free workplace. Newcrest will also continue to use other leading
industries to benchmark its performance.
During the year Newcrest’s safety performance improved strongly, in line with the objectives
of the Board, management and employees.
The approach for the coming year is to:
• ‘Lock in place’, then review and improve the S&H Management Systems with an increased
focus on:
– Contractor Management,
– Occupational Health issues, and
The improvement through the year can be seen in the following indicators:
– Improving Incident Investigation and Analysis skills.
• Lost Time Injury Frequency Rate (LTIFR) improved from 4.6 to 2.2. This compares favourably
to the most recent industry benchmark which is the Australian Metalliferous Mining Industry
LTIFR of 9.0 for 2000/01. Noteworthy achievements within Newcrest were:
• Enhance the ‘sharing & learning’ culture across the Company particularly in relation to Major
Hazard Plans and key S&H procedures.
• Ensure compliance with established site S&H procedures and personal S&H accountabilities
– Gosowong did not have an LTI in 2001/02 (16 months in total without an LTI), and
is achieved.
– Cadia’s 10-fold improvement (from 9.7 in June 2001 to 0.9 in June 2002).
• Reinforce the positive aspects of the existing S&H Culture and develop a behavioural
approach that will support Newcrest’s desire for further improvements in S&H performance.
• Restricted Duties Injury Frequency Rate (RDIFR) improved from 33.7 to 15.6. There was strong
improvement against this indicator at all sites with the exception of Boddington.
• The number of Serious Potential Incidents (SPI) dropped from 39 in 2000/01 to 23 in 2001/02.
The success that Newcrest has achieved has arisen from a ‘double-barrelled’ approach that
relies on having risk-based S&H Management Systems together with a strong S&H culture. Key
to this approach is setting S&H accountabilities for individuals and then ensuring that they meet
these requirements.
Throughout the year, major S&H Reviews of the effectiveness of site S&H Management Systems
were conducted at Cadia and Ridgeway, as well as the Exploration Group with each review
showing excellent progress being made towards Newcrest’s S&H Objectives. In particular,
strong results were seen in the areas of S&H Leadership, Personal Accountability, Employee
Involvement and the Management of Corrective Actions, all of which are positive indicators of
a move to robust S&H Management Systems.
34
35
Site Safety Performance
Site
LTIFR
RDIFR
This Year
Previous Year
This Year
Previous Year
Cadia
Ridgeway
Gosowong
Telfer Project
Boddington
Exploration
Total Newcrest
0.9
3.0
0.0
4.4
11.9
5.1
2.2
9.7
3.0
1.4
7.3
3.0
5.4
4.6
19.7
14.2
4.0
28.5
59.4
27.4
15.6
41.9
29.4
6.8
87.4
27.0
34.0
33.7
Lost Time Injury (LTI) – An injury where the person misses one or more full rostered shifts.
LTIFR – Number of LTIs per million hours worked.
Restricted Duties Injury (RDI) – Any injury requiring more than first aid treatment.
RDIFR – Number of RDIs per million hours worked.
LTIFR - Total Group
12
10
8
6
4
2
0
RDIFR - Total Group
2
0
.
9
2
9
.
8
3
7
.
9
3
3
.
7
1
5
9
.
40
30
20
10
9
7
/
9
8
9
8
/
9
9
LTIFR
9
9
/
0
0
0
0
/
0
1
0
1
/
0
2
Aust. Metalliferous Mining Industry
MCA Member Estimate
9
7
/
9
8
9
8
/
9
9
9
9
/
0
0
*
0
0
/
0
1
0
1
/
0
2
*Data collection commenced in this year
Environment
Newcrest has continued to enhance its environmental performance through its commitment
to continual improvement. The past year has been one of consolidation, ensuring that good
environmental performance is integrated into the Company’s business culture.
Newcrest continues to promote the concept of sustainability, embracing a balance between
economic prosperity, environmental quality and social responsibility. Within this context, the
Company will release its first public Sustainability Report later this year.
The continued development of the Environmental Management System provides support for
our key environmental functions. To strengthen these core functions, we have reviewed and
strengthened our environmental incident reporting procedure, upgraded our corporate
environmental management plan and conducted a review of closure planning at all of our
operations.
Key elements of the year’s activities include:
• The number of reported environmental incidents was reduced by 67 percent compared
with the previous year. A review of the incident reporting system has strengthened elements
of the reporting process.
• A review of closure plans has been completed for all operations. Costings have been
prepared for the revised closure plans, and provisioning has been adjusted to reflect the
changes to closure costs.
• The corporate Environmental Management System has been enhanced by the development
and adoption of four Group Environmental Operating Standards. These Standards cover
the key areas of Environmental Management Systems, Environmental Audit, Environmental
Incident Reporting and Mine Closure. All operations are already in substantial compliance with
the Standards.
• In keeping with its commitment under the Australian Mining Industry Code for Environmental
Management, Newcrest completed its second Code Implementation Survey during the year.
This survey measures the success of individual operations in implementing the various
principles of the Code. Each operation showed an improvement on the initial baseline (2000)
survey. The results from each site (and the Group average) are shown in the table below,
along with the industry median.
Operation
Cadia Hill
Gosowong
Ridgeway
Newcrest Group
Industry median
Improvement since
Implementation (2001)
Improvement since
Implementation (2000)
59 percent
57 percent
52 percent
57 percent
55 percent
55 percent
49 percent
44 percent
43 percent
46 percent
• Newcrest submitted data to the National Pollutant Inventory (NPI) on those of the 36
designated substances that exceeded pre-defined thresholds. We continue to work with
regulators and industry groups to enhance the performance monitoring data and its relevance
to our stakeholders.
• Newcrest has continued to provide input to the development of the international Cyanide
Management Code. The Code has reached a final draft form, and articulates nine Principles
and 31 Standards of Practice for the manufacture, transport and use of cyanide in the
production of gold.
Newcrest Mining
Newcrest Mining
Annual Report 2002
Annual Report 2002
36
37
The Gosowong plant nursery used in mine rehabilitation.
Board of Directors
Left to right:
Ian Johnson, Non-Executive Chairman
Bachelor of Science (Hons.) from the University of New England. Former Chief Executive Officer of
Newcrest Mining Limited. Former Group Executive of CRA Limited. Fellow of AusIMM and a Fellow of the
Australian Institute of Company Directors. Appointed to the Board on 2 September 1998 and elected
Ronald Milne, Non-Executive Director
Member of the Australian Society of Certified Practising Accountants. Appointed to the Board in
November 1995 with a management career extending through the manufacturing, merchant banking
and oil exploration industries. A member of the Audit, Compensation, Finance and Safety, Health and
Environment Committees.
Chairman on 28 October 1998. A member of the Compensation, and Nomination & Governance
Ian Renard, Non-Executive Director
Committees.
Tony Palmer, Managing Director and Chief Executive Officer
Bachelor of Engineering (Hons) from the University of NSW. Former General Manager with
Bachelor of Arts and Master of Laws degrees from the University of Melbourne. Consultant of Allens
Arthur Robinson. Fellow of the Australian Institute of Company Directors. Appointed to the Board in
May 1998. A member of the Compensation, Audit and Finance Committees.
WMC Ltd including responsibility for Olympic Dam project. Former Managing Director of
Nora Scheinkestel, Non-Executive Director
Normandy Mining Ltd and Danae Resources. Commenced as MD and CEO of Newcrest
Bachelor of Laws degree and PhD from the University of Melbourne. Member of the Australian Institute
on 3 December 2001. Member of AusIMM.
Bryan Davis, Non-Executive Director
Bachelor of Science Technology (Mining) from the University of NSW. Former Executive Director of
Pasminco Limited. Fellow of AusIMM and a member of the Australian Institute of Company Directors.
Appointed to the Board in March 1998. A member of the Compensation, Audit and Safety, Health and
Environment Committees.
of Company Directors. Appointed to the Board in August 2000 with a management background in
international banking and project finance. An Associate Professor at the Melbourne Business School
at the University of Melbourne. Member of the Compensation, Finance and Nomination, Governance
and Ethics Committees.
Corporate Governance
38
39
On behalf of the shareholders, the Board:
Board Function
• Sets the Company’s strategic goals and objectives.
• Oversees the management and performance of the Company’s business.
• Determines broad issues of policy.
• Sets an appropriate framework of corporate governance for management.
Board Composition
Newcrest’s Board currently comprises six Directors, five of whom are Non-Executive including
the Chairman of Directors, and one of whom is the Managing Director. All of the Non-Executive
Directors are independent and free of any relationship which might conflict with the interests of
the Company.*
The number of Directors and Board composition is periodically reviewed by the Board to ensure
that it remains appropriate, having regard to the needs of the Company. The Board believes that
its present membership provides the range of business skills and expertise demanded by the
Company’s existing operations.
When a Board position becomes vacant or additional Directors are required, candidates are
identified with the assistance of professional advice and are considered, at first instance, by the
Nomination, Governance and Ethics Committee of the Board, and finally by the full Board.
Directors are selected for their specialist skills and business backgrounds in order to create
appropriate skill balance on the Board. In the case of the appointment or resignation of the
Managing Director, decisions are made only by the full Board, with professional advice sought,
as required. All Board appointments are subject to shareholder approval. As a general rule, a
Non-Executive Director who has served on the Board for 12 or more years will not seek re-election.
All Directors of the Newcrest Board are required, as a matter of Board Policy, to own a minimum
of 3,000 shares in the Company. Non-Executive Directors are able to acquire shares either on
market or through the Non-Executive Directors’ Share Plan, which was approved by
shareholders at the Company’s 1999 Annual General Meeting. Under the Plan Non-Executive
Directors can receive a portion of their remuneration in the form of shares (purchased at market
prices) rather than as fees. Directors who do own Company shares must observe the
Company’s Share Trading Policy which restricts the times when a Director can purchase or sell
Company stock and also prohibits short-term trading.
* Non-Executive Director Mr Renard, is a consultant to a law firm which, amongst others, provides legal services
to Newcrest, however he is not personally involved in providing legal advice to the Company.
The Board meets every month and at such other times as the business of the Company
requires. Each year at least one Board Meeting is held at one of the Company’s mine sites.
At each regular meeting the Board reviews the performance of the Company, with particular
emphasis on safety and environmental performance. As well as considering any major strategic
or investment decisions, the Board reviews in detail principal aspects of the Company’s
operations and performance. This process involves receiving detailed presentations from
management about key components of the Company’s business.
The Board periodically reviews the Company’s strategic direction and each year, together with
senior management, conducts a structured strategic review of the Company’s activities and its
future direction.
To enhance the Board’s capacity to monitor the full range of the Company’s operations and
to increase Directors’ exposure to them, a number of Board Committees have been put in place.
The Committees also provide specialist independent advice to the Board.
The current Committee structure is:
Audit Committee
Ensures compliance with all accounting and financial reporting obligations of the Group and
reviews internal financial controls, the role of the internal and external auditors, including the
independence of the external auditors, and the Company’s risk management activities.
Compensation Committee
Deals with all matters relating to the Company’s remuneration policy, executive and employee
remuneration levels and remuneration matters generally.
Finance Committee
Formulates and monitors policies and procedures for treasury practices and considers the
Company’s funding requirements.
Nomination, Governance and Ethics Committee
Considers candidates for the Board, reviews corporate governance and compliance processes
and monitors the ethical standards of the Company.
Corporate Governance cont’d
Safety, Health and Environment Committee
Ensures that the Company has in place, and monitors, the Company’s practices in the areas
of safety, health and environmental management.
Each Committee is comprised of selected Non-Executive Directors, one of whom acts as
Committee Chairman. Memberships, which are detailed in the Directors’ Report on page 43
are reviewed periodically by the Board. Each Committee acts pursuant to a formal charter also
approved by the Board. All Board Committee deliberations are reported to the Board at the
earliest opportunity and, where necessary, recommendations of a Committee are submitted
to the Board for a decision.
The Managing Director, although not formally a Committee Member, is invited to attend
Committee meetings. Other Board members are also invited to attend if they wish to do so.
Directors of the Company have direct access to the Company’s senior managers. The Board
has adopted a formal policy which ensures that Directors also have access to independent
external advisers where necessary. All Directors are encouraged to visit the Company’s
operating sites annually.
The Board establishes with the Managing Director appropriate and specific objectives for the
short and long term. The performance of the Managing Director is formally assessed against
these objectives annually. The assessment determines, in part, the level of the Managing
Director’s remuneration.
The Board has also introduced a formal process for evaluating its own performance. Directors
measure Board performance in key areas and seek to identify areas where that performance can
be improved.
Remuneration levels and trends are assessed with the assistance of professional independent
remuneration consultants.
From time to time individual Directors may be asked by the Board to devote extra time or
undertake extra duties, usually involving their specialist skills or knowledge to assist the Board
monitor, review or direct key aspects of the business. As any Director who undertakes such extra
duties does so only at the request and direction of the Board, rather than management, no
conflict of interest or loss of independence arises.
Risk Management and Compliance
The Board recognises that risk management and compliance are among its key responsibilities
and are fundamental to the sound management of the business. The Company has a
comprehensive reporting system which seeks to identify, at the earliest opportunity, any
significant business risks. The Company has in place specific reporting and control mechanisms
to manage significant risks and monitor compliance levels across a range of key areas, as well
as an internal audit function which reviews and reports to the Board on the effectiveness of those
mechanisms.
Ethics
The Board has adopted a formal Code of Ethics which all Newcrest Directors, employees and
contractors are required to observe and which is published in internal Company publications.
The Company also has a comprehensive range of corporate policies which detail the framework
for acceptable corporate behaviour. These set out procedures that employees are required to
follow. The Company policies are reviewed periodically.
Board Remuneration
Communication with Stakeholders
Total annual remuneration paid to all Non-Executive Directors may not exceed the maximum
amount authorised by the shareholders in a general meeting (currently $500,000). Also each
Non-Executive Director enters into a deed with the Company which provides that upon
retirement, that Director will be eligible to receive a retirement benefit equivalent to the fees paid
to that Director during their preceding three years.
Remuneration of the Non-Executive Directors is determined with regard to the need to maintain
Board membership of an appropriate calibre and remuneration trends in the marketplace.
The Board recognises the importance of communicating openly and clearly with all stakeholders.
Company information considered to be material is announced immediately through the Australian
Stock Exchange. Key presentations given by Company personnel to investors and institutions
are also lodged with the Australian Stock Exchange. Every effort is made to ensure that
communications are clear and complete and that they address shareholders’ needs for
information. Where necessary key communications are mailed directly to all shareholders.
The Company maintains a comprehensive website on the Internet at www.newcrest.com.au.
Financial Analysis
40
41
The Group reported an after tax loss from ordinary activities of $53.0 million which compares to a
profit after tax from ordinary activities for the previous year of $38.2 million. The current year result
includes provisions totalling $105.6 million ($73.9 million after tax). These items are discussed in
more detail below. Excluding the provisions, the Group recorded a profit after tax from ordinary
activities of $20.9 million.
The Group result includes significant items totalling $105.6 million consisting of an $80.6 million
provision for surplus US dollar currency contracts and surplus gold contracts and a $25.0 million
provision for restructuring costs relating to hedge contracts. The provision for surplus US dollar
currency contracts is $79.1 million and results from an excess of foreign currency contracts in
FY2002/03 and FY2003/04 compared to projected net US$ cash flows in the same period while
$1.5 million surplus gold contracts result from an excess of gold contracts compared to forecast
gold production in FY2002/03 and FY2003/04. Under accounting standards these surpluses
must be immediately recognised in the Statement of Financial Performance. The $25.0 million
provision for restructuring hedge contracts is set out in detail on page 55 of the Notes to the
Concise Financial Report and involve a series of hedge contract restructures with no cash outlay
for the Group.
Sales revenue for the year was $479.7 million, down 18 percent on the previous year due to
lower sales volumes and a lower achieved gold price.
Gold sales were 646,418 ounces (FY2000/01 792,382 ounces) with a lower contribution
from the Cadia Hill mine (35,621 ounces), the cessation of operations at Boddington in
November 2001 (23,827 ounces), the cessation of operations at Telfer in October 2000
(82,560 ounces) and the sale of New Celebration in June 2001 (86,498 ounces) partly offset
by higher production at Ridgeway (71,668 ounces) following the commencement of full scale
operations in the last quarter of the year and higher production at Gosowong (10,874 ounces).
The achieved gold price for the year was $559 per ounce ($623 per ounce), $11 per ounce
above the spot gold price for the year. The achieved gold price excludes the $80.6 million
provision for surplus US dollar and gold hedge contracts and $25.0 million provision for
restructuring of hedge contracts.
The following table provides a breakdown of the achieved gold price for 2001/02 and 2000/01
between the gold hedge book and foreign currency hedge book.
FY2001/02
FY2000/01
Gold Book
Outcome
($/oz)
667
707
FX Book
Outcome
($/oz)
(108)
(84)
Achieved
Gold
($/oz)
559
623
Spot
Gold
($/oz)
548
506
The gold hedge book is delivering a significantly higher price compared with the spot price.
The $40 per ounce reduction in the gold book outcome from FY2000/01 is due to the settlement
of sold call option contracts at strike prices between $500–$520 per ounce in the second half of
FY2001/02.
Exchange losses on the US dollar foreign currency contracts amounted to $69.8 million
($66.4 million). During the year, US dollar currency contracts delivered to Newcrest Australian
dollars at the rate of 0.74 cents which when compared to the prevailing A$/US$ exchange rate
on maturity of the contracts resulted in exchange losses totalling $69.8 million. The higher per
ounce exchange loss in FY2001/02 is due to lower sales volumes.
The achieved gold price in future years will be dependent on production, spot gold prices and
the A$/US$ exchange rate, with an appreciating Australian dollar reducing the level of exchange
losses.
Details of the Company’s hedge position are updated quarterly and set out on the website. The
mark to market value of the hedge book at 30 June 2002 was a negative $792 million consisting
of $394 million on gold contracts, $219 million on foreign currency contracts, $93 million on gold
loan swap contracts and $86 million on copper contracts.
The Company has been successful in driving costs down and thereby increasing the profit
margin on each ounce of gold produced. Since 1997/98 cost of sales before depreciation and
amortisation charges have fallen by 38 percent while cost of sales including depreciation and
amortisation charges have fallen by 20 percent. The following table shows the trend over the last
five years.
Financial Analysis cont’d
1997/98
1998/99
1999/00
2000/01
2001/02
Achieved gold price ($ per ounce)
Less cost of sales before depreciation
and amortisation charges ($ per ounce)
Cash margin ($ per ounce)
Less depreciation and amortisation
charges ($ per ounce)
Total margin
590
421
169
99
70
623
354
269
121
148
616
299
317
138
179
623
302
321
144
177
559
260
299
154
145
Copper production is becoming an increasing source of income to the Group with an expected
doubling of production from 2001/02 to 2002/03 from Ridgeway following commissioning
of facilities in April 2002. Copper hedging, which was initiated in 1997, has been undertaken
to underpin the value of copper revenue. The achieved copper price was $1.27 per pound
($1.22 per pound) compared to the spot price of $1.36 per pound ($1.52 per pound).
Operating profit before tax, depreciation, amortisation, interest and the significant items was
$145.2 million ($193.5 million).
Depreciation and amortisation for the year was $101.5 million compared to $111.7 million
in FY2000/01.
Borrowing costs for the year were $21.4 million, of which $10.7 million were expensed and
$10.7 million capitalised to the Ridgeway and Telfer Projects. Borrowing costs in FY2000/01 were
$24.4 million of which $18.6 million was expensed and $5.8 million capitalised. The $3.0 million
decrease in total borrowing costs was due to lower interest rates and lower gold loan and
finance lease balances following scheduled repayments partly offset by interest paid/payable
on the US$80 million loan from Nippon Mining and Metals Company Limited which was drawn
down in October 2001 to fund the Ridgeway Project.
Exploration expenditure for the year was $44.8 million ($51.4 million) of which $21.5 million
was expensed ($22.4 million) and $23.3 million ($31.7 million) capitalised to Telfer, Cadia Valley,
Cracow and Toguraci in Indonesia.
Cash flows from operations were $90.3 million down $47.7 million from the previous period
mainly due to the lower achieved gold price.
FY2001/02 saw the cash flows from investing activities of $305.9 million ($194.2 million). Major
items of expenditure were the completion of the Ridgeway Project ($193.5 million), Telfer
Feasibility Study ($58.1 million) which included substantial bulk sampling, drilling, underground
development and exploration expenditure ($44.8 million).
Scheduled gold loan and lease repayments in year were $74.9 million ($30.7 million) while
standby loan facilities totalling $45 million were repaid.
Cash flows from operations were not sufficient to meet the capital and exploration program
and scheduled loan repayments therefore the following additional funds were required to meet
the above commitments. A US$80 million loan from Nippon Mining and Metals Company
Limited was drawn down in October 2001 to fund the Ridgeway Project, a share placement
generated $136.3 million and $15.8 million was received from the share purchase plan.
The Statement of Financial Position at 30 June 2002 has seen total assets increase by
$159 million to $1,376 million with the increase mainly attributable to Ridgeway capital
expenditure and Telfer Feasibility Study expenditure. Total liabilities have increased by
$68 million reflecting the $103 million of provisions and US$80 million Nippon Loan partly offset
by scheduled gold loan repayments, lease repayments and repayment of the standby facilities
and repayment of Ridgeway capital creditors. Equity increased by $91 million mainly due to the
placement of 33.75 million shares at a price of $4.10 per share raising a net $136.3 million partly
offset by the net loss after tax of $53.0 million.
A major change will impact the Statement of Financial Position with the introduction of revised
accounting standard AASB1012 on Foreign Currency Translation, effective from 1 July 2002.
From this date unrealised gains or losses on revaluation of US dollar foreign currency contracts
will be recognised in the Statement of Financial Position. For Newcrest, the impact on the
Company’s accounts is to increase assets and liabilities by approximately $210 million
compared to the 30 June 2002 Statement of Financial Position. The US dollar foreign currency
contracts will be translated at the spot exchange rate at each subsequent reporting period until
maturity of the contracts. To the extent that the unrealised losses relate to contracts that mature
within the next 12 months, these contracts will be shown as a current asset and current liability.
Directors’ Report
42
43
The Directors present their Report on the Consolidated Entity consisting of Newcrest Mining
Limited and the entities it controlled at the end of, or during, the year ended 30 June 2002.
Directors
The Directors of the Company in office at the date of this Report are:
Ian Johnson, Non-Executive Chairman
Anthony Palmer, Managing Director and Chief Executive Officer (commenced 3 December 2001)
Bryan Davis, Non-Executive Director
Ronald Milne, Non-Executive Director
Ian Renard, Non-Executive Director
Nora Scheinkestel, Non-Executive Director
Appointment and Retirement of Directors
Unless otherwise indicated all Directors held their position as a Director throughout the entire
year and up to the date of this Report.
Mr Russell Barwick resigned as Managing Director and Chief Executive Officer on
18 September 2001.
Details of the Directors’ qualifications, experience and special responsibilities appear in the table
on page 45.
Principal Activities
The principal activities of the Consolidated Entity during the year were exploration, development,
mining and the sale of gold and gold/copper concentrate. There were no significant changes in
those activities during the year.
Consolidated Result
The loss of the Consolidated Entity for the year ended 30 June 2002 after income tax and
outside equity interest amounted to $53,033,000 (profit: $38,154,000).
Dividends
The following dividends of the Consolidated Entity have been paid, declared or recommended
since the end of the preceding year:
• Final fully franked dividend for 30 June 2001 of 5 cents per share, amounting to $14,028,000
was paid on 19 October 2001.
• Final fully franked dividend for 30 June 2002 of 5 cents per share, amounting to approximately
$14,331,000 to be paid on 18 October 2002 to shareholders registered by close of business
on 27 September 2002.
• Total of dividends paid by partly-owned subsidiaries to outside equity interests amounted to
$1,312,000.
Review of Operations
Information on the operations of the Group during the year and the results of those operations
are set out in the Annual Report at pages 1 to 42.
Environmental Regulation
The operations of the Consolidated Entity in Australia are subject to environmental regulation
under the laws of the Commonwealth and the States in which those operations are conducted.
The operation in Indonesia is subject to environmental regulation under the laws of the Republic
of Indonesia and the Province in which it operates. It is the policy of the Consolidated Entity to
comply with all relevant environmental regulations in the other countries in which it operates.
Each mining operation is subject to particular environmental regulation specific to the activities
undertaken at that site as part of the licence or approval for that operation. There are also a
broad range of industry specific environmental laws which apply to all mining operations and
other operations of the Consolidated Entity. The environmental laws and regulations generally
address the potential impact of the Consolidated Entity’s activities in relation to water and air
quality, noise, surface disturbance and the impact upon flora and fauna.
The Consolidated Entity has a uniform internal reporting system across all sites. All environmental
events, including breaches of any regulation or law, are ranked according to their actual or potential
environmental consequence. Five levels of incidents are recognised (based on Australian Standard
AS4360): I (insignificant), II (minor), III (moderate), IV (major) and V (catastrophic). Data on Category I
incidents are only collected at a site level and are not reported in aggregate for the Consolidated Entity.
The number of events reported in each category during the year are shown in the accompanying
table. In all cases environmental authorities were notified of those events where required and
remedial action undertaken.
Category
2002 – No. of incidents
2001 – No. of incidents
II
14
41
III
2
7
IV
–
1
V
–
–
Directors’ Report cont’d
The Managing Director reports monthly to the Board on all environmental and health and safety
incidents. The Board also has a Safety, Health and Environment Committee which reviews the
environmental and safety performance of the Consolidated Entity. The Directors are not aware of
any environmental matter which would have a materially adverse impact on the overall business
of the Consolidated Entity.
• Provision for hedging contract restructures of ($25,000,000) has been recorded. This amount
will be brought to account as income in future years when the restructured contracts mature
(Note 2).
• The mark to market of off-balance sheet financial instruments at 30 June 2002 was negative
$792,463,000 (negative $806,400,000).
Significant Changes in the State of Affairs
Significant changes in the state of affairs of the Consolidated Entity that occurred during the year
and which are reported in the Consolidated Financial Statements, were:
• Ridgeway was officially opened on 19 April 2002. The facility, including underground crushing
and conveying, is now fully commissioned and operating above nameplate capacity. Total
production for the year was 127,665 ounces of which 67,654 ounces were produced in the
last quarter of financial year 2001/02 following full commissioning.
• Sales revenue fell 18 percent due to the reduction in production from the cessation of Telfer
and Boddington operations and the sale of New Celebration. The achieved gold price for the
year was $559 per ounce compared to $623 per ounce last year. The effect of the lower
Australian dollar has reduced sales revenue through foreign currency hedging. All currency
hedge contracts maturing in the year were delivered into, and the achieved gold price was
after absorbing all foreign currency exchange losses.
• Surplus foreign currency contracts in excess of anticipated net US$ receipts have been
provided for resulting in a provision of ($79,064,000) and surplus gold contracts resulted in
a provision of ($1,500,000) (Note 2).
Directors’ Meetings
• A US$80,000,000 loan from Nippon Mining and Metals Company Limited was drawn down in
October 2001. The loan principal is to be repaid in instalments of US$16,000,000 per annum
commencing in July 2003 and concluding in July 2008.
• Capital raising in the year comprised an equity placement with financial institutions which
resulted in 33,750,000 shares being issued, raising a net $136,288,000. A share purchase
plan also raised an additional $15,845,000 in consideration for the issue of 4,735,541 shares.
Subsequent Events
There are no other matters or circumstance which have arisen since 30 June 2002 that have
significantly affected or may significantly affect the operations of the Consolidated Entity, the results
of those operations or the state of affairs of the Consolidated Entity in subsequent financial years.
Future Developments
Disclosure of information regarding likely developments in the operations of the Consolidated
Entity and the expected results of those operations in future financial years has not been
included in this Report because disclosure of the information would be likely to result in
unreasonable prejudice to the Consolidated Entity.
The attendances of the Directors at meetings of the Board and of its Committees of which they were members during the year were:
I. R. Johnson
A. J. Palmer
R. C. Barwick
N. L. Scheinkestel
R. B. Davis
R. C. Milne
I. A. Renard
Directors’
Meetings
Audit
Committee Meetings
Compensation
Committee Meetings
Finance
Committee Meetings
Nomination,
Governance & Ethics
Committee Meetings
Safety, Health
& Environment
Committee Meetings
A
18
9
4
18
17
17
18
B
18
9
5
18
18
18
18
A
–
–
–
–
4
4
4
C
–
–
–
–
4
4
4
A
3
1
2
3
3
3
2
C
3
1
2
3
3
3
3
A
–
–
–
5
–
5
4
C
–
–
–
5
–
5
5
A
5
3
–
5
–
–
–
C
5
3
–
5
–
–
–
A
–
1
–
–
2
2
–
C
–
1
–
–
2
2
–
Column A – Indicates the number of meetings attended.
Column B – Indicates the number of meetings held whilst a Director.
Column C – Indicates the number of meetings held whilst a member.
The details of the functions and memberships of the Committees of the Board are presented in the Statement of Corporate Governance.
Information on Directors
Ian Johnson
Non-Executive Chairman
Anthony Palmer
Managing Director and
Chief Executive Officer
Bryan Davis
Non-Executive Director
Ronald Milne
Non-Executive Director
44
45
Qualifications, Experience and Special Responsibilities
Other Directorships
Bachelor of Science (Hons) from the University of New England. Former Chief Executive
Officer of Newcrest Mining Limited. Former Group Executive of CRA Limited. Fellow of AusIMM
and a Fellow of the Australian Institute of Company Directors. Appointed to the Board on
2 September 1998 and elected Chairman on 28 October 1998. A member of the Compensation,
and Nomination, Governance & Ethics Committees.
Director of Leighton Holdings Limited, and John Holland
Group Pty Ltd.
Bachelor of Engineering (Hons) from the University of NSW. Former General Manager with
WMC Ltd including responsibility for Olympic Dam project. Former Managing Director of
Normandy Mining Ltd and Danae Resources. Commenced as MD and CEO of Newcrest
on 3 December 2001. Member of AusIMM.
Nil
Bachelor of Science Technology (Mining) from the University of NSW. Former Executive
Director of Pasminco Limited. Fellow of AusIMM and a member of the Australian Institute of
Company Directors. Appointed to the Board in March 1998. A member of the Audit,
Compensation and Safety, Health & Environment Committees.
Member of the Australian Society of Certified Practising Accountants. Appointed to the Board
in November 1995 with a management career extending through the manufacturing,
merchant banking and oil exploration industries. A member of the Audit, Compensation,
Finance and Safety, Health & Environment Committees.
Ian Renard
Non-Executive Director
Bachelor of Arts and Master of Laws Degrees from the University of Melbourne. Consultant
of Allens Arthur Robinson. Fellow of the Australian Institute of Company Directors. Appointed
to the Board in May 1998. A member of the Audit, Compensation and Finance Committees.
Nora Scheinkestel
Non-Executive Director
Bachelor of Laws (Hons) and PhD from the University of Melbourne. Member of the
Australian Institute of Company Directors. Appointed to the Board in August 2000 with a
management background in international banking and project finance. An Associate Professor
at the Melbourne Business School at the University of Melbourne. Member of the Compensation,
Finance and Nomination, Governance & Ethics Committees.
Chairman of Indophil Resources N.L. Director of Coal and
Allied Industries Ltd.
Director of Brambles Industries Limited, Brambles Industries
PLC, Regis Nominees Pty Ltd, J. Capital Pty Ltd and OPSM
Protector Limited.
Deputy Chancellor of the University of Melbourne, Director
of AMP Limited, CSL Limited, Hurstmead Pastoral Company
Pty Ltd and Hillview Quarries Pty Ltd. Chairman of
Melbourne Theatre Company.
Director of PaperlinX Ltd, Docklands Authority and
Hydro Tasmania. Chairman of South East Water Ltd.
Directors’ Report cont’d
Directors’ and Senior Executives’ Emoluments
The Compensation Committee, consisting of the Non-Executive Directors, is responsible for
making recommendations to the Board on remuneration policies and practices generally, and
makes special recommendations on remuneration packages and other terms of employment
applicable to Executive Directors, senior executives and Non-Executive Directors of the
Company. The broad remuneration policy objective is to ensure remuneration packages properly
reflect employees’ duties and responsibilities and that remuneration is competitive in attracting,
retaining and motivating people of the highest quality.
Executive remuneration and other terms of employment are reviewed annually by the
Compensation Committee having regard to performance against goals set at the start of the
year, relevant comparative information and independent expert advice. As well as a base salary,
remuneration packages include superannuation, resignation and retirement entitlements,
performance related bonuses and fringe benefits. Executives are also eligible to participate in the
Company’s Share Option Plans. The ability to exercise options is conditional on the
Consolidated Entity achieving certain performance hurdles.
Remuneration and other terms of employment for the Managing Director and certain senior
executives are formalised in service agreements.
Remuneration of Non-Executive Directors is determined by the Board within the maximum
amount approved by the shareholders from time to time. Non-Executive Directors do not receive
any performance related remuneration and are not entitled to participate in the Company’s
Share Option Plans. Non-Executive Directors are entitled to retirement benefits in accordance
with a shareholder approved scheme.
Details of the nature and amount of each element of the emoluments of every Director of
Newcrest Mining Limited and each of the five officers of the Company and the Consolidated
Entity receiving the highest emoluments are set out in the following tables.
Directors of the Company
Name
I. R. Johnson
A. J. Palmer
R. C. Barwick
R. B. Davis
R. C. Milne
I. A. Renard
Non-Executive Chairman (1)
Managing Director
(resigned 18 September 2001)
Non-Executive Director
Non-Executive Director
Non-Executive Director
N. L. Scheinkestel
Non-Executive Director
Directors’
Base Fee/Salary
$
Superannuation
Contributions
$
200,750
360,469
175,900
71,250
86,250)(2)
71,250
71,250
17,542
47,865
2,201
5,700
9,900
5,700
5,700
Other
Benefits
$
–
50,440
11,750
–
–
–
–
Incentive
Payments
$
–
125,000
–
–
–
–
–
Options
$
–
500,000
–
–
–
–
–
(1) Includes remuneration as Executive Chairman for the period 19/9/2001 – 28/11/2001.
(2) Includes a payment of $15,000 for other duties performed as Chairman of the Newcrest Superannuation Fund and as Chairman of the Superannuation Policy Committee.
Senior Executives of the Company and Consolidated Entity
Name
B. Price
D. Wood
J. Blake
B. Lavery
Executive General Manager Project Development
Executive General Manager Exploration
General Manager Gosowong Mine
Executive General Manager Corporate Services
G. Scanlan
Executive General Manager Finance
Base Salary
$
400,000
372,501
203,996
363,667
417,000
Other
Benefits
$
56,150
3,388
227,489
4,816
4,816
Incentive
Payments
$
163,200
114,000
67,500
110,700
–
Executives are officers who are involved in, concerned in, or who take part in, the management of the affairs of the Company and/or related bodies corporate.
Resignation
Benefits
$
–
–
922,500
–
–
–
–
Options
$
105,000
105,000
95,100
105,000
105,000
Total
$
218,292
1,083,774
1,112,351
76,950
96,150
76,950
76,950
Total
$
724,350
594,889
594,085
584,183
526,816
Newcrest Mining
Annual Report 2002
46
47
Senior Management Employee Options
‘Employee Options’ in the case of the Company refers to those options granted to senior
management, including the Executive Director, pursuant to the Newcrest Executive Option Plan.
No person entitled to exercise any of the options had or has any right, by virtue of the options, to
participate in any share issue of any other body corporate.
The Newcrest Executive Option Plan provides for the allocation of five year options with
performance hurdles and exercise conditions. Under the Plan, options may not be exercised
until after the second anniversary of the grant date and can only be exercised to a maximum of
25 percent of the options granted in each subsequent year to the exercise date, subject always
to the performance hurdles being satisfied. Where the previous year’s maximum entitlement was
not exercised, accumulated entitlements to that anniversary date may be exercised. The exercise
price at which these options are issued is based on the weighted average of the prices at which
the Company’s shares were traded on the Australian Stock Exchange during the one week
period prior to issue date.
Details of options issued under the Newcrest Executive Option Plan and the balance exercisable
under the Newcrest Executive Option Plan and Employee Share Option Plan at balance date are
detailed in Note 17 to the full 2002 Financial Report.
Share Options Granted to Executive Directors and Most Highly Remunerated Officers
During or since the end of the financial year, the Company granted options over unissued
ordinary shares to the following Executive Director and the five highest remunerated executive
officers as part of their remuneration:
Executive Director
Number of Options Granted
A. Palmer
Managing Director and Chief Executive Officer
500,000
Other Executive Officers
Number of Options Granted
B. Price
Executive General Manager Project Development
J. Blake
General Manager Gosowong Mine
G. Scanlan
Executive General Manager Finance
D. Wood
Executive General Manager Exploration
B. Lavery
Executive General Manager Corporate Services
150,000
135,000
150,000
150,000
150,000
All options granted to executive officers during the financial year were granted under the
Newcrest Executive Option Plan. No options have been granted since the end of the financial year.
Share options granted to executive officers and senior management comprised a quantity
of Tranche A options and a quantity of Tranche B options. The Managing Director and Chief
Executive Officer was granted Tranche C options.
The performance hurdle applying to the Tranche A options is:
The Total Shareholder Return (TSR) growth of Newcrest Mining Limited (Newcrest) must have
at least equalled the TSR growth of the median of companies in the group of companies
(excluding Newcrest) from time to time included in the Gold Accumulation Index.
The performance hurdle applying to the Tranche B options is:
Newcrest’s TSR exceeding a compound average growth rate of 10 percent per annum.
Share options granted to the Managing Director and Chief Executive Officer comprised Tranche
C options, which is subject to the following performance hurdle:
The successful development and commissioning, under Mr Palmer’s supervision, of the Telfer
Gold Mine project in the time frame and within the budget ultimately approved by the Board.
The Directors’ assessment of the fair value of options granted, for the purpose of reporting
emoluments of Directors and executive officers is based upon independent advice.
The methodology followed in valuing the options was as follows:
• The options were valued on the date of grant based on the relevant market parameters
applying at that time.
• The options were first valued as if they were unrestricted, freely tradable options using an
option pricing model which combines both Black-Scholes and binomial methodologies to
arrive at a base option valuation.
• To take into account the performance hurdles and forfeiture conditions attached to the options,
a discount factor based on the probability estimate that the options will vest, was then applied
to arrive at a final option valuation.
On the basis of this methodology, the various tranches of options granted on 8 November 2001
have been valued as follows:
Tranche A Options
$0.72 per option
Tranche B Options
$0.66 per option
Tranche C Options
$1.00 per option
A total of 3,920,000 options were granted in November 2001. These options have a valuation of
$2,895,200.
Directors’ Report cont’d
Shares Issued on the Exercise of Options
Insurance Premiums
Since the end of the previous financial year the Company has paid an insurance premium in
respect of a contract insuring against liability of Directors and Officers in accordance with the
Company’s Constitution and the Corporations Act 2001.
The contract of insurance prohibits disclosure of the amount of the premium and the nature
of the liability insured against. Each Director named on page 43 of this Report has paid the
insurance premium in respect of cover which may apply in relation to liabilities of the type
referred to in Section 199B of the Corporations Act 2001.
Rounding of Amounts
The Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities
and Investments Commission dated 10 July 1998, and in accordance with that Class Order,
amounts in the financial report have been rounded to the nearest thousand dollars, unless
otherwise stated.
This Report has been made in accordance with a resolution of the Directors.
Ian Johnson
Chairman
28 August 2002
Melbourne
Anthony Palmer
Managing Director and Chief Executive Officer
During the year an aggregate of 1,562,792 options were exercised, resulting in the issue of
1,562,792 ordinary shares of the Company at an aggregate consideration of $4,440,000.
Directors’ Interests
The relevant interest of each Director in the share capital of the Company, as notified by the
Directors to the Australian Stock Exchange in accordance with Section 235(1) of the
Corporations Act 2001, at the date of this Report, is as follows:
Name of
Director
Chief Entity
or Related
Body Corporate
Number of
Ordinary
Shares
Nature of
Interest
Number of
Options Over
Ordinary Shares
I. R. Johnson
Newcrest Mining Limited
A. J. Palmer
R. B. Davis
R. C. Milne
I. A. Renard
Newcrest Mining Limited
Newcrest Mining Limited
Newcrest Mining Limited
Newcrest Mining Limited
N. L. Scheinkestel
Newcrest Mining Limited
17,034
10,000
10,000
3,000
7,975
5,887
13,095
3,000
60,317
Indirect
Direct
Direct
Direct
Indirect
Direct
Direct
Direct
Indirect
–
500,000
–
–
–
–
The Newcrest Non-Executive Directors’ Share Plan was approved by Shareholders on
28 October 1999. The Plan provides Non-Executive Directors with an opportunity to receive,
at their election, a portion of their annual remuneration in the form of shares in the Company
rather than as fees. Shares acquired by a Non-Executive Director under the Plan may not be sold
for a period of ten years after they are acquired, except if the Director retires from the Board or if
the Board permits earlier sale.
Indemnification of Directors and Officers
Pursuant to Article 103 of its Constitution the Company insures and indemnifies its Directors
and Officers against liabilities to another person (other than the Company or a related body
corporate) that may arise from their position as Directors and Officers of the Company and its
controlled entities, except where the liability arises out of conduct involving a lack of good faith.
Each Director named on page 43 of this Report and the Secretary, has entered into a Deed of
Indemnity with the Company on these terms.
Discussion and Analysis of the Financial Statements
48
49
This discussion and analysis is provided to assist readers in understanding the Concise
Financial Report. The Concise Financial Report has been derived from the full 2002 Financial
Report of Newcrest Mining Limited.
The Newcrest Mining Limited Consolidated Entity consists of Newcrest Mining Limited and its
controlled entities. The principal activities of the Newcrest Mining Limited Consolidated Entity
during the financial year comprised exploration, development, mining and the sale of gold and
gold/copper concentrate.
Statement of Financial Performance
Net loss attributable to shareholders for the year was $53,033,000 (profit of $38,154,000).
Major factors impacting the result for the current year are:
• Ridgeway was officially opened on 19 April 2002. The facility, including underground crushing
and conveying, is now fully commissioned and operating above nameplate capacity. Total
production for the year was 127,665 ounces of which 67,654 ounces were produced in the last
quarter of financial year 2001/02 following full commissioning.
• Sales ounces were 646,418 ounces (792,382 ounces). This decrease of 145,964 ounces was
a result of:
– the sale of New Celebration (86,498 ounces)
– suspension of operations at Telfer (82,560 ounces) and Boddington (23,827 ounces)
– lower grade at Cadia Hill (35,621 ounces)
– increase from the commissioning of Ridgeway, 71,668 ounces; and
– increase at Gosowong of 10,874 ounces.
• Sales revenue fell 18 percent due to the reduction in production and a reduction in the
achieved gold price to $559 per ounce ($623 an ounce). The reduction in the achieved gold
price was due to:
– the gold hedge book delivered an outcome of $667 per ounce ($707 per ounce). The
decrease from the previous year was primarily due to the impact of contingent gold call
options maturing at prices between $500-$520 an ounce; and
– the delivery of US$119.6 million of foreign exchange contracts that matured in the period at
an average rate of $0.74 cents resulted in a foreign exchange loss of $69.8 million, equating
to a loss of $108 per ounce ($66.4 million, $84 per ounce).
• The adverse impact on earnings from the lower achieved gold price was partially offset by
a $37 per ounce reduction in the cash cost per ounce. The reduction in cash cost per ounce
was due to the contribution from the commissioning of Ridgeway and additional copper
by-product revenue. Copper production for the year was 40,055 tonnes (34,002 tonnes).
The achieved copper price for the period was $1.27 per pound ($1.22 per pound).
• Corporate administration expenditure was also reduced from the previous year by 32 percent
due to the benefits from restructuring of the organisation.
• Lower net interest expense due to principal repayments on the gold loan and finance leases
and an increase in the amount of debt associated with major capital projects.
• Surplus foreign currency contracts in excess of anticipated net US$ receipts have been
provided for resulting in a provision of $79.1 million. The provision for surplus US$ foreign
currency contracts has been based on a mark to spot exchange rate at balance date of
$0.56 cents on US$111 million surplus foreign exchange contracts in the financial year
2002/03 against the hedged rate of $0.7476 cents and US$61.0 million against the hedged
rate of $0.7570 cents in 2003/04.
• $1.5 million provision for surplus gold contracts over forecast gold production for the
30 June 2003 and 2004 financial years.
• A series of hedging restructures involving gold, copper and gold lease rate contracts were
undertaken during the year resulting in a provision of $25,000,000. This amount will be brought
to account as income in future years when the restructured contracts mature.
Statement of Financial Position
Assets
Current assets have reduced by $19,181,000 to $161,954,000 with the reduction in cash and
inventories partly offset by a build up in trade debtors and higher current position of deferred
mining costs.
Total non-current assets have increased by $178,442,000 to $1,214,035,000 mainly due to
capital expenditure on the Ridgeway Project and feasibility expenditure on the Telfer Project.
Liabilities
Current liabilities have decreased by $18,984,000 to $233,935,000 primarily due to the
repayment of $45,000,000 short-term bank loans and payables have decreased due to the
payment of capital expenditure creditors on completion of construction at the Ridgeway Project.
Discussion and Analysis of the Financial Statements cont’d
This has been offset by tax payable in the Indonesian subsidiary, PT Nusa Halmahera Minerals,
which owns the Gosowong mine and the current liabilities for surplus foreign exchange contracts.
Non-current liabilities at $602,492,000 have increased by $86,882,000 due to a US$80 million
loan from Nippon Mining and Metals Company Limited which was drawn down in October 2001
and provisions for surplus foreign exchange and gold contracts and provision for hedging
contract restructures. This was partly offset by the transfer to current liabilities of the gold loan
and finance lease repayments due to be settled within the next 12 months.
Equity
The increase in equity of $91,363,000 was due mainly to:
Cash Flows from Financing Activities
Capital expenditure programs were largely financed by external borrowings and capital raisings.
Major movements in the cash flows from financing activities include:
• $158,936,000 from US$80,000,000 Nippon Mining and Metals Company Limited loan.
• Scheduled repayment of debt consisted of:
– $58,087,000 gold loan facility
– $8,782,000 finance lease principal
– $45,000,000 stand-by facility
– $8,047,000 collateral loan.
• Capital raising in the year comprised an equity placement with financial institutions which
• Capital raising in the year comprised an equity placement with financial institutions which
resulted in 33,750,000 shares being issued, raising a net $136,288,000. A Share Purchase
Plan also raised an additional $15,845,000 and $4,440,000 was raised from the exercise of
options.
resulted in 33,750,000 shares being issued, raising a net $136,288,000. A Share Purchase
Plan also raised $15,845,000 and exercise of options $4,440,000.
• Net loss of $53,033,000 and dividends payable of $14,359,000, offset by the Dividend
Reinvestment Plan of $1,734,000 and movement in outside equity interest of $448,000.
Statement of Cash Flows
Group cash balances for the year have fallen from $47,956,000 to $14,365,000 mainly reflecting
lower cash flows from operating activities and utilisation of debt and equity raising to meet cash
flows from investing activities.
Cash Flows from Operating Activities
• Cash flows from operating activities at $90,324,000 are $47,702,000 lower than the previous
period due mainly to decrease in sales receipts arising from lower sales ounces and lower
achieved gold price.
Cash Flows from Investing Activities
Net cash used in investing activities amounted to $305,902,000. Major areas of expenditure
include:
• Mine under construction payments in respect of the Ridgeway Project of $193,506,000.
• Feasibility expenditure of $58,141,000 mainly relating to the Telfer Project.
• Exploration expenditure of $44,832,000 of which $9,845,000 related to the Telfer Project.
Statement of Financial Performance
For the year ended 30 June 2002
Note
Sales revenue
Cost of sales
Gross profit
Other revenues from ordinary activities
Exploration costs
Corporate administration costs
Written down value of assets sold
Other expenditure
Borrowing costs
Provision for surplus foreign exchange and gold contracts
Provision for hedging contract restructures
Expenses and written down value of net assets sold from the sale of New Celebration
Profit/(loss) from ordinary activities before income tax expense
Income tax (expense)/benefit relating to ordinary activities
Profit/(loss) from ordinary activities after related income tax
Net profit attributable to outside equity interest
Net profit/(loss) attributable to members of the parent entity
Revenue, expense and valuation adjustments attributable to members
of the parent entity recognised directly in equity
Total changes in equity other than those resulting from transactions with owners as owners
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2
2
2
2
2
6
6
50
51
Consolidated
2002
$’000
479,667
(395,331)
2001
$’000
583,106
(468,135)
84,336
114,971
3,402
(21,547)
(15,263)
(854)
(6,506)
(10,660)
(80,564)
(25,000)
–
(72,656)
21,383
(51,273)
(1,760)
(53,033)
55,289
(22,366)
(22,570)
(7,032)
–
(18,573)
–
(2,000)
(45,743)
51,976
(12,087)
39,889
(1,735)
38,154
–
–
(53,033)
38,154
(19.2)
(19.2)
15.6
15.5
Statement of Financial Position
At 30 June 2002
CURRENT ASSETS
Cash assets
Receivables
Other financial assets
Inventories
Other
Total Current Assets
NON-CURRENT ASSETS
Receivables
Other financial assets
Inventories
Property, plant and equipment
Exploration, evaluation and development
Other
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Other
Total Current Liabilities
NON-CURRENT LIABILITIES
Interest bearing liabilities
Deferred tax liabilities
Provisions
Other
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Retained profits
Parent entity interest
Outside equity interest
TOTAL EQUITY
Consolidated
2002
$’000
14,365
99,108
175
25,396
22,910
2001
$’000
47,956
93,881
155
28,034
11,109
161,954
181,135
20,038
–
8,380
603,750
439,768
142,099
26,415
–
9,688
446,140
442,310
111,040
1,214,035
1,035,593
1,375,989
1,216,728
57,578
66,706
12,850
74,826
21,975
110,482
111,712
–
22,678
8,047
233,935
252,919
484,054
409,674
20,648
72,790
25,000
602,492
836,427
539,562
528,324
3,251
531,575
7,987
58,985
42,773
4,178
515,610
768,529
448,199
370,017
70,643
440,660
7,539
539,562
448,199
Statement of Cash Flows
For the year ended 30 June 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Borrowing costs paid
Other
Income taxes paid
Net cash provided by/(applied to) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Proceeds from sale of non-current assets
Exploration and evaluation expenditure
Payments in respect of mine development
Payments in respect of mines under construction
Feasibility expenditure
Payments of research and development costs
Net cash provided by/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of bank loans
Repayment of loans from bullion banks
Repayment of gold loan
Repayment of finance lease principal
Proceeds from share issues
Share and option issue costs paid
Dividend paid
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
Consolidated
2002
$’000
2001
$’000
52
53
461,745
(354,725)
1,567
(12,029)
(2,807)
(3,427)
569,884
(419,315)
3,468
(19,289)
3,278
–
90,324
138,026
(8,858)
14,379
(44,832)
(14,423)
(193,506)
(58,141)
(521)
(17,550)
8,651
(51,421)
(1,545)
(93,639)
(37,862)
(794)
(305,902)
(194,160)
158,936
(45,000)
(8,047)
(58,087)
(8,782)
158,812
(2,239)
(13,606)
181,987
(33,591)
47,956
14,365
45,000
–
(7,458)
(14,566)
(8,715)
6,324
–
(8,793)
11,792
(44,342)
92,298
47,956
Notes to the Concise Financial Report
Note 1 Accounting Policies
This Concise Financial Report has been derived from the full 2002 Financial Report which complies
with the Corporations Act 2001, Australian Accounting Standards and Urgent Issues Group Consensus
Views. This Concise Financial Report has been prepared in accordance with accounting standard
AASB1039 – ‘Concise Financial Report’, and the relevant provisions of the Corporations Act 2001.
A full description of the accounting policies adopted by Newcrest Mining Limited is provided in the full
2002 Financial Report. The accounting policies are consistent with those of the previous financial year.
Note 2 Operating Profit/(Loss)
Consolidated
2002
$’000
2001
$’000
Profit/(loss) from ordinary activities after crediting the following revenues:
Sales Revenue
Sale of gold
Sale of gold/copper concentrate
198,075
281,592
479,667
1,473
–
1,403
–
526
3,402
483,069
Other Revenues
Interest from other persons
Revenue from the sale of New Celebration
Revenue from the sale of non-current assets
Net foreign exchange gains
Other revenue items
Total Revenue
Profit/(loss) from ordinary activities is after charging the following expenses:
Depreciation of property, plant and equipment
Amortisation:
54,780
Plant and equipment under finance leases
Mine development
Mines under construction
Mine leases
Feasibility expenditure
Deferred expenditure
Royalties
Total depreciation and amortisation
Borrowing costs:
Interest paid/payable
Finance charges relating to finance leases
Other borrowing costs
Less: Amount capitalised
Total borrowing costs expensed
Significant Items
Provision for surplus foreign currency and gold contracts (i)(ii)
Provision for hedging contract restructures (iii), (iv), (v), (vi) and (vii)
Loss on sale of New Celebration
Total Significant Items
6,715
23,227
13,692
603
–
1,025
1,473
101,515
15,618
1,222
4,551
(10,731)
10,660
80,564
25,000
–
105,564
Provision for Surplus Foreign Currency and Gold Contracts
(i) The provision for surplus US$ foreign currency contracts has been based on a mark to spot exchange rate at
balance date of $0.5634 cents on US$111 million surplus foreign exchange contracts in the financial year
2002/03 against the hedged rate of $0.7476 cents and US$61 million against the hedged rate of $0.7570 cents
in 2003/04. The final outcome of these surplus contracts is dependent on the spot exchange rate at maturity
of each contract. Included in the provision is $2,764,000 write-off of upfront costs paid.
(ii) A surplus of gold contracts over forecast gold production for the 2003 and 2004 financial years existed as at
30 June 2002. These contracts were valued on the basis of the average hedge price compared to the spot
price at 30 June 2002. This resulted in an unrealised loss of $1,500,000 to profit before tax for the year. The final
outcome of these surplus contracts is dependent on the spot gold price at maturity of the gold contracts.
Provision for Hedging Restructures
This provision for hedging restructures represents the non-cash provision on a mark to market or mark to spot
basis relating to restructuring hedge contracts. This amount will be brought to account as income in the future
years when the restructured contracts mature. The amount comprises the following transactions:
(iii) A non-cash expense of $4,100,000 for novating US$80,000,000 of foreign currency contracts from one
counterparty to another counterparty. The cost of this transfer was paid for by restructuring existing gold
contracts with the counterparty that the foreign exchange contracts have been novated to on terms less
favourable than originally established. The restructure involved 500,000 ounces of gold convertible forward
contracts at a strike price of $665 per ounce in 2004/05-2005/06 which were restructured into convertible put
options at a strike price of $633 per ounce in 2004/05-2008/09.
(iv) $7,700,000 provision related to the restructure of gold lease rate contracts. The gold lease rate payable in future
years is dependent on the actual gold lease rates and gold prices prevailing at the lease rate roll-over dates.
Note 4 discloses the Company’s exposure to lease rates received/paid at certain gold prices.
(v) $5,000,000 provision for the loss on restructured copper contracts calculated at the date of the restructure.
This amount will be brought to account as income in the 2005/06 and 2006/07 financial years when the
restructured contracts mature.
(vi) $6,700,000 provision for restructuring the foreign exchange rate ‘knock-in’ barriers relating to copper contracts.
This cost was funded by the restructure of 500,000 ounces of gold contracts. This amount will be brought to
account as income in financial years 2005-2009 when the gold contracts mature.
(vii) 30,000 ounces of forward contracts maturing in November 2001 were rolled into forward contracts maturing in
2005. The $1,500,000 represents the unrealised loss at the date of redesignation. This amount will be brought
to income in 2005.
Note 3 Dividends
Consolidated
2002
$’000
2001
$’000
Dividends paid or proposed during the financial year:
Fully franked to 30 percent (2001: 30 percent)
14,331
14,000
Final fully franked dividend for 30 June 2001 not previously provided for
(fully franked to 30 percent)
Total dividends
Franking credits available
28
14,359
52,877
55
14,055
41,652
The simplified dividend imputation system is effective from 1 July 2002. As a result, franking
accounts will record credits on a tax paid basis, rather than the previous method where franking
credits reflected after tax profits. This will not affect the Company’s ability to be able to pay
franked dividends. The ability to utilise the franking account credits is dependent upon there
being sufficient available profits of the Company to declare dividends. The restated franking
credit balance for the Consolidated Entity and the Company as at 1 July 2002 was $22,662,000
and $20,638,000 respectively.
347,963
235,143
583,106
4,067
36,497
8,984
5,741
–
55,289
638,395
68,105
7,327
28,453
1,804
1,923
544
1,281
2,296
111,733
17,542
3,862
3,032
(5,863)
18,573
–
2,000
9,246
11,246
54
55
Note 4 Financial Instruments
The Consolidated Entity uses derivative financial instruments in the normal course of business for the purpose of hedging its future production and sales and managing its commodity, foreign
currency and interest rate exposures. The derivative financial instruments used by the Consolidated Entity are explained below.
(a) Commodity Contracts
(i) Gold Hedging and Commitments
The Consolidated Entity has entered into forward sales, put options and call options to hedge future production and sales. (The table excludes transactions to close out New Celebration hedging.)
Financial year ending 30 June 2002
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11+
30 June
2002
Total
30 June
2001
Total
Forward sales (1)
A$ denominated (koz)
A$/oz
Put options purchased (2)
Strike price A$500/oz-A$599/oz
Strike price A$600/oz-A$699/oz
Strike price greater A$700/oz
Strike price US$490/oz-US$515/oz
TOTAL
A$/oz
Gold loans (4)
Gold loan (koz)
A$/oz
Call options sold (3)
A$ denominated (koz)
Strike price (A$/oz)
Contingent call options sold (3)
Strike price A$490/oz-A$550/oz
Strike price A$551/oz-A$599/oz
Strike price greater A$600/oz
TOTAL
Strike price (A$/oz)
Ounces subject to in-triggers
In-trigger price (A$/oz)
Ounces subject to out triggers
Out-trigger price (A$/oz)
Total hedged (includes gold loan,
forwards and put options)
Total denominated (koz)
A$/oz
Total committed (includes forwards,
gold loan, call options and contingent call options)
A$ denominated (koz)
A$/oz
137
690
403
–
145
100
648
648
119
488
260
528
370
29
–
399
525
72
529
418
–
171
100
689
662
104
488
103
549
555
78
–
633
529
108
635
433
30
49
30
542
601
84
488
–
–
412
50
–
462
529
299
550-625
100
500
322
550-625
311
440-500
210
535-610
252
440-550
150
684
453
140
–
–
593
573
68
488
–
–
382
100
–
482
546
100
610
382
300
656
251
300
–
–
551
599
68
488
–
–
192
180
100
472
580
100
610
372
300
681
176
330
–
–
506
623
68
488
–
–
80
180
100
360
589
100
610
260
300
807
110
205
100
–
415
639
68
488
–
–
–
215
100
315
600
100
610
215
440-550
490-550
490-550
490-550
904
633
915
546
865
630
912
526
734
593
654
541
811
586
700
570
919
610
840
600
874
633
728
618
783
690
683
680
225
909
50
–
100
–
150
703
68
488
–
–
–
50
100
150
607
50
610
100
490
443
774
443
742
150
809
–
–
100
–
100
809
103
488
–
–
–
–
100
100
620
–
–
100
490
353
715
353
661
1,742
731
2,294
1,005
665
230
4,194
629
750
488
363
534
1,991
882
500
3,373
557
1,281
550-625
2,092
440-550
6,686
640
6,228
596
1,864
731
2,723
1,005
800
330
4,858
636
870
488
509
539
2,467
847
520
3,834
520
1,740
550-625
2,094
440-550
7,592
641
6,987
595
Note 4 Financial Instruments cont’d
(a) Commodity Contracts cont’d
(i) Gold Hedging and Commitments cont’d
Transactions previously brought to account in the Statement of Financial Performance for New Celebration are:
Financial year ending 30 June 2002
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11+
30 June
2002
Total
30 June
2001
Total
Put options purchased (koz) (2)
Strike price A$500/oz-A$599/oz
Strike price A$600/oz-A$699/oz
TOTAL
A$/oz
Forward purchases
A$ denominated (koz)
A$/oz
60
55
115
645
115
559
55
29
84
632
84
576
10
1
11
601
11
587
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
125
85
210
637
210
567
145
150
295
643
295
559
The average hedged price per ounce in respect of 6,686,000 (2001: 7,592,000) ounces represents the estimated achieved gold price which includes a lease rate allowance of 1.6 percent (2001: 1.8 percent).
(1) Forward sales represent contracts at which future production is sold at specific prices in Australian dollars and include:
• 280,000 ounces of Variable Price Forwards that have a realisable price dependent upon the spot price at
maturity; and
• 1,250,000 ounces of Convertible Put Options that are purchased put options that can become forward sales if
the spot price increases to defined levels ranging from $543 per ounce to $750 per ounce.
(2) Put options purchased provide the right but not the obligation to deliver gold at specific prices in Australian and US
dollars if the spot price is less than the strike price at expiry date. The price of the US dollar put options has been
converted to an equivalent Australian dollar price at the year end rate of 0.5664.
160,000 ounces of Purchased US Dollar Knock-Out Put Options maturing between 2002/03 and 2003/04 have been
excluded from the table based on current market prices. These put options become active at a price of US$456 per
ounce if the spot price of gold exceeds US$330 per ounce every day in the last 90-day period prior to expiry.
(3) Call options sold create an obligation to deliver gold at specific prices if the spot price is greater than the strike
price at expiry date. All contracts are in Australian dollars.
Contingent call options sold can become sold call options if the spot price increases to defined levels ranging from
$550 per ounce to $625 per ounce.
(4) The gold loan was monetised at A$488 per ounce in June 2000. Repayment obligations thereunder represent future
commitments.
(ii) Copper Hedging
During the year:
• 30,000 ounces of Forward Sales at $474 per ounce maturing in November 2001 were
restructured into forward sales maturing in 2004/05 at $524 per ounce. This resulted in a
$1,500,000 loss at the date of redesignation being brought to account in the year (Note 2).
• 500,000 ounces of Convertible Forwards at $665 per ounce maturing between 2004/05 and
2005/06 were restructured into convertible put options at $633 per ounce expiring between
2004/05 and 2008/09. This restructure involved the novation of certain foreign currency contracts
and resulted in a provision of $4,100,000 being brought to account in the year
(Note 2).
Financial year ending 30 June 2002
2002/03
2003/04
2004/05
2005/06
2006/07
Forward sales (1)
A$ denominated (Kt)
Price (A$/mt)
Purchased put options (2)
A$ denominated (Kt)
Price (A$/mt)
Granted call options (3)
A$ denominated (Kt)
Price (A$/mt)
36.4
2,826
33.0
2,821
23.4
2,870
36.0
2,646
36.0
2,646
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30 June
2002
Total
164.8
2,754
–
–
–
–
30 June
2001
Total
70.6
2,968
46.2
2,216-2,877
56.7
2,216-2,877
56
57
30 June
2002
Total
30 June
2001
Total
32.4
2,877
2,816-2,838
32.4
2,877
2,816-2,838
164.8
197.2
149.2
159.7
Note 4 Financial Instruments cont’d
(a) Commodity Contracts cont’d
(ii) Copper Hedging cont’d
Financial year ending 30 June 2002
2002/03
2003/04
2004/05
2005/06
2006/07
Contingent forward sales (4)
A$ denominated (Kt)
Strike price (A$/mt)
Out-trigger price (A$/mt)
Total hedged
A$ denominated (Kt)
Total committed (inc contingent)
A$ denominated (Kt)
7.2
2,877
2,816-2,838
14.4
2,877
2,816-2,838
10.8
2,877
2,816-2,838
36.4
43.6
33.0
47.4
23.4
34.2
During the year:
–
–
–
36.0
36.0
–
–
–
36.0
36.0
(1) Forward sales represent contracts under which future production is sold at specific prices in Australian dollars
and includes 24,250 tonnes of ratchet forwards that can decrease in value if the spot price decreases to
A$2,425 metric tonnes.
(2) Put options purchased provide the right but not the obligation to deliver copper at specific prices in Australian
dollars if the spot price is less than the strike price at expiry date.
(3) Call options sold create an obligation to deliver copper at specific prices if the spot price is greater than the
strike price at expiry date. All contracts are in Australian dollars.
(4) Contingent forward sales are forward sales that lapse if the spot price increases to the out-trigger price range.
• 39,600 metric tonnes of copper put options and 48,600 metric tonnes of copper call options
maturing between 2001/02 and 2004/05 were restructured into 120,280 metric tonnes of
copper forwards at $1.20 per pound maturing between 2001/02 and 2006/07. A $5,000,000
loss at the date of the restructure was brought to account in the year (Note 2).
(b) Foreign Exchange Contracts
Revenue Hedging
The Consolidated Entity has entered into forward foreign currency exchange contracts, put option contracts and call option contracts to hedge potential forward sales commitments denominated in US dollars.
Financial year ending 30 June 2002
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
Forward sales (1)
Principal (US$M)
Rate
A$ Put options purchased (2)
Principal (US$M)
Strike price
A$ Call options purchased (3)
Principal (US$M)
Strike price
A$ Put options sold (4)
Principal (US$M)
Strike price
Contingent A$ put options sold (5)
Principal (US$M)
Strike price
In-Trigger price
Total committed (inc. contingent)
Principal (US$M)
Rate
19.8
0.7657
50.0
0.5150
49.0
0.7406
13.1
0.7419
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59.0
0.7570
120.0
0.7570
120.0
0.7570
90.0
0.7577
20.0
0.7590
10.0
0.7590
–
–
–
–
–
–
–
–
–
–
–
–
35.9
0.7400
0.58-0.64
59.0
0.7570
0.60-0.64
120.0
0.7570
0.60-0.68
120.0
0.7570
0.60-0.68
90.0
0.7577
0.60-0.68
20.0
0.7590
0.64-0.68
10.0
0.7590
0.64-0.68
68.8
0.7476
59.0
0.7570
120.0
0.7570
120.0
0.7570
90.0
0.7577
20.0
0.7590
10.0
0.7590
30 June
2002
Total
19.8
0.7657
50.0
0.5150
468.0
0.7559
13.1
0.7419
454.9
0.7559
487.8
0.7559
30 June
2001
Total
39.4
0.7618
–
–
347.5
0.7239
25.0
0.7397
715.0
0.7526
779.4
0.7527
Note 4 Financial Instruments cont’d
(b) Foreign Exchange Contracts cont’d
During the year, a provision was made to mark to spot the surplus foreign currency contracts
maturing in 2002/03 and 2003/04. This is an accounting provision only (Refer Note 2). The table
above excludes these surplus contracts which are no longer regarded as hedges. Details of
these contracts are as follows:
A$ Call options purchased (US$M) (3)
Strike price
Contingent A$ Put options sold (US$M) (5)
Strike price
Provision recorded at mark to spot (Note 2)
Mark to market valuation at 30 June 2002
2002/03
2003/04
111.0
0.7476
111.0
0.7476
$’000
48,500
52,100
61.0
0.7570
61.0
0.7570
$’000
27,800
30,900
(1) Forward sales represent an obligation to sell US dollars in exchange for Australian dollars at a fixed price.
(2) A$ Put options purchased provide the right but not the obligation to buy US dollars (and sell Australian dollars) if
the spot price is less than the strike price at expiry date.
(3) A$ Call options purchased provide the right but not the obligation to sell US dollars (and buy Australian dollars)
if the spot price is greater than the strike price at expiry date.
(4) A$ Put options sold create an obligation to sell US Dollars (and buy Australian dollars) if the spot price is less
than the strike price at expiry date.
(5) Contingent A$ put options sold create an obligation to sell US dollars (and buy Australian dollars) if the spot
price falls to below trigger prices and subsequently remains less than the strike price at expiry date.
During the year:
• US$372.5 million of A$ call options expiring between 2002/03 and 2008/09 were purchased.
• US$50.0 million of A$ put options expiring in 2002/03 were purchased.
(c) Interest Rate Risk
The Consolidated Entity is exposed to interest rate risk in respect of primary financial assets and liabilities, managed through derivative financial instruments such as gold lease rate swaps.
The Consolidated Entity’s interest rate risk exposures together with the effective interest rate for each class of financial assets and financial liabilities at balance date are summarised as follows:
Fixed interest rate maturing in:
Average Interest Rate
30 June 2002
Financial Assets
Cash
Bullion awaiting settlement
Accounts receivable – trade & other
Outside equity interest loan receivable
Financial Liabilities
Trade and other creditors
Finance lease liabilities
Bank loans
Bullion bank borrowings
Floating
interest
rate
$’000
14,365
–
–
–
–
33,126
141,243
4,178
1 Year
or less
$’000
Over 1-5
Years
$’000
–
–
–
–
–
5
58,263
–
–
–
–
–
–
9,274
157,239
–
More
than
5 Years
$’000
–
–
–
–
–
1,039
150,571
–
Non
Interest
Bearing
$’000
–
9,217
103,124
6,805
57,578
–
–
–
Total
$’000
Floating (*)
%
Fixed
%
14,365
9,217
103,124
6,805
57,578
43,444
507,316
4,178
4.75
–
–
–
–
5.97
2.85
4.97
–
–
–
–
–
0.24
2.60(i)
–
(i) The interest rate on the gold loan can increase from 2.6 percent to 10.05 percent from August 2003, for each dollar the spot gold price at the date quarterly interest payments are due is above $600 per ounce to a maximum of
$750 per ounce.
58
59
Note 4 Financial Instruments cont’d
(c) Interest Rate Risk cont’d
30 June 2002
Financial Assets
Cash
Bullion awaiting settlement
Accounts receivable – trade & other
Outside equity interest loan receivable
Financial Liabilities
Trade and other creditors
Finance lease liabilities
Bank loan
Standby loan
Bullion bank borrowings
Fixed interest rate maturing in:
Average Interest Rate
Floating
interest
rate
$’000
33,956
–
–
–
–
41,429
–
45,000
12,225
1 Year
or less
$’000
14,000
–
–
–
–
478
58,087
–
–
Over 1-5
Years
$’000
–
–
–
–
–
8,173
181,983
–
–
More
than
5 Years
$’000
–
–
–
–
–
2,146
184,090
–
–
Non
Interest
Bearing
$’000
–
25,188
87,482
7,626
110,482
–
–
–
–
Total
$’000
47,956
25,188
87,482
7,626
110,482
52,226
424,160
45,000
12,225
Floating (*)
%
5.95
–
–
–
–
5.84
–
5.67
5.08
Fixed
%
5.14
–
–
–
–
0.24
2.60
–
–
(*) Floating interest rates represent the most recently determined rate applicable to the instrument at balance date.
Gold Lease Rate
Hedging instruments involve the borrowing of gold for future repayment. The cost of borrowing
gold is the gold lease rate. The Company manages its exposure to movements in gold lease
rates through a number of mechanisms one of which is to prepay, through adjustment to the
gold hedge strike price, a large portion of the expected short-term gold lease rate.
As an additional element of many of these arrangements, the strike price has been enhanced by
incorporating into the arrangements a further mechanism where the cost of borrowing increases
(by forfeiting the prepaid lease rate allowance) if predetermined gold price barriers are breached.
The barriers have been set above the spot price of gold at the date of entering the transaction
but there are substantial increased costs in the event that the barriers are breached.
The Consolidated Entity generally borrows gold on a floating basis under the gold sales
contracts and embeds a prepaid rate into the borrowing (an ‘allowance’). The Estimated Net
Realisable Price (ENRP) per ounce in respect of gold hedging is on the basis of an assumed
lease rate equal to the allowance of currently 1.6 percent (1.8 percent). The allowance is subject
to indexation based upon increases in the spot price of gold.
(i) Gold Lease Rate Arrangements
The table below sets out the average increase over the floating cost of borrowing the gold in
terms of the fixed rate received/paid at certain gold prices.
Exposure as at Year Ending
Notional
Principal (oz)
Max Net Ave
Allowance
Receivable
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