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9
ANNUAL REPORT 2009
Annual General
Meeting
The 29th Annual General Meeting
of Newcrest Mining Limited will
be held at the Grand Waldorf
Ballroom, The Sebel Albert Park,
65 Queens Road, Melbourne,
Victoria, on Thursday, 29 October
at 10.30am
Newcrest is Australia’s largest gold
producer and one of the world’s top 10 gold
mining companies by production, reserves
and market capitalisation.
COMPANY SNAPSHOT
Newcrest provides investors with exposure to a portfolio
of low-cost, long-life operating mines, a strong pipeline of
growth projects and highly prospective brownfields and
greenfields exploration projects. The Company has a substantial
reserve and resource base, with reserves representing more
than 20 years production. Newcrest has the financial strength
coupled with extensive technical skills to deliver both organic
growth and external opportunities. Key components of the
value chain are:
– Exploration – the team is acknowledged as one of the best
and lowest cost gold discoverers in the world today.
– Projects – the current portfolio of development projects and
advanced exploration opportunities represent greater than
50 percent of the Group’s Mineral Resource.
– Operations – comprise a portfolio of seven mines, five mines
in Australia, one in Indonesia and one in Papua New Guinea.
Gosowong
Telfer
Operations
Projects
† Morobe JV includes
Hidden Valley and Wafi Golpu
Namosi
Morobe JV
†
Cracow
Cadia Valley
This page
Crushed Ore Stockpiles, Cadia Valley
CORPORATE DIRECTORY
Investor Information
Registered and Principal Office
Newcrest Mining Limited
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004 Australia
Telephone: +61 (0)3 9522 5333
Facsimile: +61 (0)3 9525 2996
corporateaffairs@newcrest.com.au
www.newcrest.com.au
Company Secretary
Bernard Lavery
Newcrest Mining Limited
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004 Australia
Telephone: +61 (0)3 9522 5333
Facsimile: +61 (0)3 9521 3564
bernard.lavery@newcrest.com.au
Head of Investor Relations
Karen McRae
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004 Australia
Telephone: + 61 (0)3 9522 5316
Facsimile: + 61 (0)3 9522 5505
Stock Exchange Listings
Australian Stock Exchange
(Ticker NCM)
New York ADRs
(Ticker NCMGY)
Share Registry
Link Market Services Limited
Level 1, 333 Collins Street
Melbourne, Victoria 3000 Australia
Postal Address
Locked Bag A14
Sydney South,
New South Wales 1235 Australia
Telephone: 1300 554 474
+61 (0)2 8280 7111
Facsimile: +61 (0)2 9287 0303
+61 (0)2 9287 0309*
*For faxing of Proxy Forms only.
registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
ADR Depositary
BNY Mellon Shareowner Services
PO Box 358516
Pittsburgh, PA 15252-8516
Telephone:
Toll free for domestic callers:
1-888-BNY-ADRS or 1-888-269-2377
International Callers: +1 201-680-6825
shrrelations@bnymellon.com
www.bnymellon.com\shareowner
Other Offices
Brisbane Office
Newcrest Mining Limited
20 Hudson Road
Albion, Queensland 4010 Australia
Telephone: +61 (0)7 3624 6100
Facsimile: +61 (0)7 3262 7200
Perth Office
Newcrest Mining Limited
Hyatt Business Centre
Level 2, 30 Terrace Road
East Perth, Western Australia 6004
Australia
Telephone: +61 (0)8 9270 7070
Facsimile: +61 (0)8 9221 7346
Annual General Meeting
29 October 2009 at 10.30am
Grand Waldorf Ballroom
The Sebel Albert Park
65 Queens Road
Melbourne, Victoria 3004
Visit our website at
www.newcrest.com.au to
view our key dates and features;
current share price, market releases,
annual, quarterly and financial
reports; operations, project and
exploration information; corporate,
shareholder, hedging, employment
and sustainability information.
This page
Sunny Tan (Plant Metallurgist) and Steve Baker
(Plant Metallurgist) inspecting material movement
on the pebble crusher feed conveyor at Telfer
Strategy
Newcrest pursues a strategy of delivering
competitive shareholder returns by:
— building a portfolio of low-cost, long-life
gold assets, primarily through exploration
and a focus on early entry merger and
acquisition prospects in known gold regions;
— optimising performance at each phase
of the gold mining value chain; and
— harnessing its technical expertise across
a wide range of mining formats.
ViSion
Our vision is to be the ‘Miner of Choice’ for
all stakeholders, including our employees
and contractors, the communities in which
we operate and our shareholders.
Corporate reSponSibility
Newcrest is focussed on maintaining a safe
environment for its employees, operating
and developing mines in line with good
environmental practices and embracing
a strong sense of commitment to the local
communities around its operations.
Building and maintaining sound relationships
with the communities surrounding Newcrest’s
operations is a key component of being the
‘Miner of Choice’.
Contents
2 Results at a glance
4 Chairman’s Report
6 Managing Director’s Review
8 The Board
10
Mineral Resources and
Ore Reserves
16 Corporate Governance
20 Financial Report
21 Directors’ Report
24 Management Discussion
and Analysis
32 Remuneration Report
53 Auditor’s Independence
Declaration
54 Income Statement
55 Balance Sheet
56 Statement of Changes
in Equity
59 Statement of Cash Flows
60 Notes to the Financial
Statements
111 Directors’ Declaration
112 Independent Auditor’s Report
114 Shareholder Information
116 Five Year Summary
IBC Corporate Directory
NEWCREST MINING ANNUAL REPORT 2009 1
reSultS at a glanCe
— Newcrest’s cash costs continue to be in the lowest cost
quartile for global gold producers
— The successful $792.7 million equity raising has strengthened
Newcrest’s financial position. Proceeds were used to repay
debt and fund project development activities
— Completed acquisition of 50% interest in the Morobe Mining
Joint Venture in Papua New Guinea and earn-in of 69.94%
interest in Namosi Joint Venture in Fiji
— Group Mineral Resources up 13% to 80 million ounces
of gold and 56% to 14.36 million tonnes of copper
— Group Ore Reserves up by 7% to 42.8 million ounces
of gold and 13% to 4.67 million tonnes of copper
— Record statutory profit up 85% to $248.1 million
— Cash flow from operations exceeded $1 billion for the
second consecutive year
— Gearing at 30 June 2009 reduced to 2%
— Final dividend increased 50% to 15 cents per share, unfranked
12 months to
30 June 2008
12 months to
June 2009
%
change
(ounces)
(tonnes)
($ per ounce)
($ million)
($ million)
($ million)
($ million)
($ million)
($ million)
(cents)
(percent)
(percent)
1,781,182
87,458
917
2,363.1
738.2
493.9
134.3
1,018.1
414.7
113.2
21
8
1,631,183
89,877 3
1,169
2,530.8 7
772.6 5
483.1
248.1
1,024.1 1
1,381.6
103.2
17
2
(8)
27
(2)
85
233
(9)
(19)
(6)
Gold produced
Copper produced
Gold price realised
Sales revenue
Operating EBIT
Underlying profit
Statutory profit
Cash flow from operations
Capital expenditure (cash flow basis including exploration)
EPS on underlying profit
Return on capital employed (ROCE)
Gearing (Net Debt/Net Debt and Equity)
(All $ are Australian denominated unless stated otherwise.)
2 NEWCREST MINING ANNUAL REPORT 2009
Group Gold Production
(thousand ounces)
Group Copper Production
(thousand tonnes)
2,000
1,500
1,000
500
0
1,200
900
600
300
0
60
50
40
30
20
10
0
1
8
7
7 1
1
6
,
,
1
1
3
6
,
1
0
3
5
,
1
6
2
1
,
1
1
0
7 1
9
9
8
0
7 9
8
120
100
80
60
40
20
0
FY
05
FY
06
FY
07
FY
08
FY
09
FY
05
FY
06
FY
07
FY
08
FY
09
Cash Flow from Operations
($ million)
Underlying Profit
($ million)
600
500
400
300
200
100
0
800
600
400
200
0
9
.
3
9
4
1
.
3
8
4
2
.
1
9
0 1
9
3
1
.
2
.
8
4
1
FY
05
FY
06
FY
07
FY
08
FY
09
Gross Cash Margin
($ per ounce)
4
2
7
8
6
6
9
2
4
2
0
4
0
3
3
FY
05
FY
06
FY
07
FY
08
FY
09
* FY05 – FY07 is Achieved
and FY08 – FY09 is Spot Price.
1
.
8
1
0
,
1
1
.
4
2
0
,
1
.
4
7
8
8 3
3
6
2
.
.
0
9
5
2
FY
05
FY
06
FY
07
FY
08
FY
09
Gearing (Net Debt/
Net Debt & Equity) (%)
5
5
0
5
6
4
8
FY
05
FY
06
FY
07
FY
08
2
FY
09
This page
Ore Haulage Truck
The past year, 2008–09, was a successful
and important one for Newcrest as
it consolidated its position following
the significant changes of the preceding
two years.
CHairMan’S report
The past year, 2008–09, was a successful and important
one for Newcrest as it consolidated its position following the
significant changes of the preceding two years. The further
strengthening of the balance sheet combined with sustained
high gold and copper production and prices have provided the
Company with a robust operational and financial platform from
which it will be able to deliver sustained returns for investors
and pursue future growth.
The continued uplift in Newcrest’s gold and copper resources,
the advancement of the very large Cadia East development,
and the emergence of the Namosi copper deposit in Fiji and
the O’Callaghans tungsten deposit at Telfer as deposits of
future significance, were also key achievements for the period.
In time, those opportunities are expected to deliver important
enhancements to the Company’s portfolio of existing mines
and provide an even more extensive platform for future growth.
The strong performance during the year of our mines, from
which all gold and copper was sold at spot prices following
the decision in 2007 to de-hedge, resulted in a record statutory
profit, improved operating margins and more than A$1 billion
of operational cash flow. This has enabled us to accelerate
major opportunities, especially at Cadia Valley and Telfer, and
give extra impetus to the Company’s five year growth outlook.
In February 2009, Newcrest successfully undertook an
institutional share placement and share purchase plan, which
together raised a further $800 million in equity. The proceeds
were used to fund its 50 percent share of the development
and construction costs of the Hidden Valley mine in PNG
and further reduce its already modest level of gearing.
The Company has the financial capacity to aggressively pursue
its growth strategy. There is an even greater commitment
to exploration around existing mine areas and in new regions.
Good value acquisitions with further potential are also of
interest. We saw this at Hidden Valley where by year-end
construction was nearing completion and first gold had
been produced. Looking ahead, that mine and its surrounding
exploration opportunities are expected to contribute not only
additional gold production, but also further growth options.
Newcrest remains committed to the use of leading technologies
in the identification, development and efficient operation
of its mines. As an emerging world leader in underground
bulk mining methods, this commitment is expected to drive
further improvements in its safety performance and overall
cost competitiveness.
As a result of the Company’s strong cash flow, the full
year dividend has been increased by 50 percent from
10 to 15 cents unfranked.
At a corporate level, the two longest serving Directors on the
Board, Bryan Davis and Mick O’Leary, both retired during the
year. They each served with distinction over many years and
made significant contributions to the Company’s development.
Following their retirement, Vince Gauci joined the Board,
thereby completing the process of Board renewal that
began in 2006.
During the year in review, the outlook for gold remained
positive and in Australian dollar terms reached a record high
of A$1,545 per ounce in February 2009. While demand for
jewellery and gold products has been relatively flat, world
gold production has decreased. The uncertainties of the global
financial crisis have reinforced gold’s value as a store of wealth,
and in relative terms Newcrest’s share price performed well
during the upheaval of the global financial markets.
4 NEWCREST MINING ANNUAL REPORT 2009
The achievements of the past year have only been possible
through the dedication and hard work of all of the people who
work at Newcrest. The Company’s human resources are key to
its future success, and it will continue to nurture and invest in
them. On behalf of shareholders, the Board acknowledges and
thanks them for their contribution.
With the uncertainty of the economic and financial outlook
ahead, Newcrest’s strategy of positioning itself as a large-scale,
low-cost producer with a strong track record of organic growth
through exploration and a significant pipeline of new major
projects remains sound.
Your Board is confident that the Company is strongly based
and well positioned to continue to provide competitive returns
for shareholders into the future.
Donald P. Mercer
Non-Executive Chairman
Left
Telfer Processing Facility
Right
Cadia Valley Processing Facility
NEWCREST MINING ANNUAL REPORT 2009 5
During the year, strong progress
continued on many fronts towards
delivering Newcrest’s vision of being
‘The Miner of Choice’.
Managing DireCtor’S
reVieW
During the year, strong progress continued on many
fronts towards delivering Newcrest’s vision of being the
‘Miner of Choice’.
Particularly pleasing were the advances made at the Company’s
mining operations at Cadia Valley, Telfer, Gosowong and
Cracow, which continued to deliver against their production
and cost targets. Full year gold production of 1.63 million
ounces was in line with guidance and copper production
of 89.9 thousand tonnes exceeded guidance, while site
costs were at the lower end of guidance.
Underpinned by the Lean and Six Sigma processes, business
improvement initiatives across the Group continued to deliver
significant cost savings and performance improvements.
At Telfer, important improvements in mill utilisation rates
and metallurgical recoveries were achieved.
Group financial performance was also a highlight, with
an 85 percent increase in statutory profit to a record
$248.1 million and record cash flow from operations
of $1,024.1 million. Newcrest’s balance sheet was further
strengthened during the year by an institutional and retail
capital raising. The proceeds were used to reduce gearing
from approximately 16 percent to 2 percent and fund
the acceleration of capital projects.
Against the backdrop of those achievements, the Company’s
drive towards near-term and long-term growth continued
to accelerate.
In August 2008, the Morobe Mining Joint Venture was
established with the acquisition of an initial 30.01 percent
interest in Harmony Gold Mining Company’s exploration and
mining assets in the Morobe province of Papua New Guinea.
By year’s end, Newcrest had completed its 50 percent earn-in
for US$532 million and the Hidden Valley mine had achieved
a key project milestone of the first gold pour on schedule in
June. An active drilling program has been conducted at both
Wafi Golpu and around Hidden Valley, where several near
mine targets have been identified.
The Gosowong Expansion Project was approved to proceed
to development. This involves extension of the existing
Kencana underground mine into the K Link and K2 orebodies
and increasing process plant throughput. One of the two
grinding vertimills planned for the expansion was successfully
commissioned, with initial results materially exceeding
expectations in terms of both higher gold recovery and
increased mill throughput.
Newcrest completed its initial $21.5 million of expenditure in
the Namosi Joint Venture (Fiji) earning a 65 percent interest.
An additional 4.94 percent interest in the Joint Venture was
also accepted from Nittetsu, bringing Newcrest’s interest in
the Joint Venture to 69.94 percent. Throughout the year studies
continued to assess the technical and economic feasibility of
mining the Waisoi West and Waisoi East deposits, while drilling
continued in both the Waisoi and Waivaka areas.
In Australia, development of the Ridgeway Deeps block cave
mine continued on schedule with the first ore introduced
to the crusher in June. Production from Ridgeway Deeps
will progressively increase to reach full capacity in the March
quarter 2010 as production transitions from the Ridgeway
sublevel cave mine to the Ridgeway Deeps mine. Ridgeway
Deeps is expected to exceed feasibility study capacity during
the second half of financial year 2010.
The Cadia East pre-feasibility study was completed and
the project proceeded to the feasibility phase. An additional
development option, with the potential to improve economic
outcomes and reduce the project’s development risk profile,
was identified. This option leverages the rapid mine
development rates being achieved to access the higher-grade
ore at the base of the known resource. A formal commitment
to proceed, with an anticipated capital expenditure of almost
$2 billion is expected during the March quarter 2010.
Newcrest’s exploration strategy of growing the quality and
quantity of resources and reserves around existing provinces
and systematic evaluation and target testing in emerging
provinces remained the key exploration focus.
6 NEWCREST MINING ANNUAL REPORT 2009
Left
Ore haulage from Telfer Open Pit
Right
Telfer headframe
Growth in Mineral Resources and Ore Reserves was maintained
during the year with gold and copper reserves up 7 percent
to 42.8 million ounces and 13 percent to 4.67 million tonnes
respectively. Significant new resources were added for the
Vertical Stockwork Corridor and at the polymetallic
O’Callaghans deposit at Telfer and at Waisoi in Fiji.
At Telfer, we are building on our existing benefits agreements
with the Martu people and have commenced discussions
with the Martu people on an Indigenous Land Use Agreement.
At Cracow, work has progressed with the local government
and the community to establish a permanent reticulated water
supply for the town.
The strong focus on safety continued with a program to refresh
key aspects of the ‘Target Zero, No Accidents Today’ initiative.
The Company recorded a significant reduction in Lost Time
Injury Frequency Rate (LTIFR – the rate of lost time injuries
per million hours of exposure) of 0.8, down from 1.3 in the
previous year and a Total Recordable Injury Frequency Rate
of 7.0 for the year, down from 8.3 in the previous year.
A comprehensive review of safety and health systems
was conducted, updating standards and procedures where
appropriate to ensure that they are aligned with industry best
practice. In the risk area, a detailed assessment of all major
health and safety hazards was completed and controls to
effectively manage these hazards were enhanced.
The Company further improved its environmental performance
during the year with no major environmental incidents reported.
The environmental incident frequency rate (the rate of
environmental incidents per million hours of exposure) declined
by almost 50 percent to 2.2 from 4.3 the previous year.
Newcrest has registered with the Federal Department of
Climate Change under the National Greenhouse and Energy
Reporting Act 2007 and will now be submitting energy and
greenhouse data as required by the Act. We continue to
actively evaluate energy efficiency and greenhouse gas
reduction opportunities while at the same time protecting
the Company’s international competitiveness.
Newcrest also continued to support a wide variety of
community initiatives through its community partnership
programs and funding for local infrastructure projects.
The Corporate Social Responsibility program at Gosowong
continues to be successfully implemented with a key objective
of delivering at least 80 percent of the projects under this
program, based on sustainable development principles, by 2012.
A detailed report on Newcrest’s approach to sustainability,
and all elements of its performance, are contained in its
separate Sustainability Report, which is available on the
Company’s website.
As foreshadowed last year, significant progress has been made
rolling out the ‘Creating our Future’ workshops across all of
Newcrest. This is an important initiative designed to equip
all employees with the competence and confidence to build
Newcrest’s future together as a team. The planned roll-out
program is scheduled to be completed by December 2009.
Over recent years, Newcrest has undergone significant transition
in all key areas of the business. I am pleased to report that
Newcrest is now in a robust position, well placed for future
growth, with a strong pipeline of exploration and development
assets underpinned by the business systems and commitment
of our people to deliver the Newcrest vision to be the
‘Miner of Choice’.
Ian K. Smith
Managing Director and
Chief Executive Officer
NEWCREST MINING ANNUAL REPORT 2009 7
tHe boarD
Don Mercer
NON-ExECuTivE CHaiRMaN
Bachelor of Science (Hons)
and Master of Arts (Econ)
Appointed to the Board
on 26 October 2006
Ian Smith
MaNagiNg DiRECTOR aND
CHiEf ExECuTivE OffiCER
Bachelor of Engineering (Hons),
University of New South Wales,
Bachelor of Financial Administration,
University of New England
Appointed to the Board
on 19 July 2006
Don is a former Chairman of the Australian Institute of Company Directors
Limited, and a former Managing Director and Chief Executive Officer
of ANZ Banking Group. He was appointed Non-Executive Chairman of
Newcrest Mining Limited in October 2006 and is Chairman of the
Human Resources and Remuneration Committee.
Other Directorships:
Don is Chairman of Orica Limited, Air Liquide Australia Limited and
Orchestra Victoria and a former Chairman of Australia Pacific Airports
Corporation Limited.
Ian was formerly the Global Head of Operational and Technical Excellence
of Rio Tinto plc, based in London, and prior to that was the Managing
Director – Aluminium Smelting within the Rio Tinto Group. He commenced
as CEO of Newcrest Mining Limited on 14 July 2006 and was appointed
Managing Director on 19 July 2006. Ian is Chairman of the Minerals Council
of Australia, Vice President of the Australian Mines and Metals Association
and a member of the Australian Institute of Company Directors.
Greg Robinson
DiRECTOR fiNaNCE
Bachelor of Science (Hons)
Geology, Monash University
and MBA, Columbia University
Appointed to the Board
on 23 November 2006
John Spark
NON-ExECuTivE DiRECTOR
Bachelor of Commerce
and Fellow of the Institute
of Chartered Accountants
Appointed to the Board
on 26 September 2007
Greg is responsible for the Group’s Finance function and leads Newcrest’s
strategy, planning and business development activities. Prior to joining
Newcrest Mining Limited he was with the BHP Billiton Group for the
period 2001–2006 where he held the positions of Project Director of
the Corporation Alignment Project, Chief Finance and Chief Development
Officer, Energy and Chief Financial Officer, Petroleum. He was also
a member of the Energy Executive Committee and Group Executive
Committee. Before joining BHP Billiton, he was Director of Investment
Banking at Merrill Lynch & Co and headed the Asia Pacific Metals and
Mining Group.
John is a registered company auditor and former Managing Partner of Ferrier
Hodgson, Melbourne. He is Chairman of the Audit and Risk Committee and
a member of the Safety, Health and Environment Committee.
Other Directorships:
John is a Director of Ridley Corporation Limited and a former Director
of ANL Limited and Baxter Group Limited.
Rick Lee
NON-ExECuTivE DiRECTOR
Bachelor of Chemical Engineering
(Hons), University of Sydney
and Master of Arts (Econ) as
a Rhodes Scholar, Oxford University
Appointed to the Board
on 14 August 2007
Rick is a former Chief Executive of NM Rothschild Australia Group.
He is a member of the Audit and Risk Committee and a member
of the Human Resources and Remuneration Committee.
Other Directorships:
Rick is Chairman of Salmat Limited and C. Czarnikow Limited and
Deputy Chairman of Ridley Corporation Limited. He is a Director of CSR
Limited, Wesfarmers Insurance Division, Australian Rugby Union Limited
and Australian Institute of Company Directors and a former Director
of Cash Services Australia Pty Ltd.
Right
SAG Mill, Cadia Valley Operations
8 NEWCREST MINING ANNUAL REPORT 2009
Tim Poole
NON-ExECuTivE DiRECTOR
Bachelor of Commerce,
University of Melbourne
and a Chartered Accountant
Appointed to the Board
on 14 August 2007
Tim is a former Managing Director of Hastings Fund Management.
He is a member of the Audit and Risk Committee and a member of
the Human Resources and Remuneration Committee.
Other Directorships:
Tim is Chairman of Asciano Group and Director of Lifestyle Communities
Limited and Victoria Racing Club. Tim is also a member of the Investment
Committee of the industry superannuation fund AustralianSuper and
a member of the LEK Consulting Advisory Board.
Richard Knight
NON-ExECuTivE DiRECTOR
Bachelor of Science
(Engineering), Master
of Science (Engineering)
and Chartered Engineer
Appointed to the Board
on 13 February 2008
Richard has extensive experience in the international mining industry.
He is a former Executive Director of North Limited and was President
and CEO of the Iron Ore Company of Canada. He is Chairman of the
Safety, Health and Environment Committee and a member of the
Audit and Risk Committee.
Other Directorships:
Richard is a former Director of OZ Minerals Limited, Zinifex Limited,
St Barbara Limited, Portman Limited, Northern Orion Resources Inc
and Asia Pacific Resources.
Vince Gauci
NON-ExECuTivE DiRECTOR
Bachelor of Engineering (Mining)
Appointed to the Board
on 10 December 2008
Vince has over 40 years experience in the global mining industry
and was formerly Managing Director of MIM Holdings Limited. He is
a member of the Safety, Health and Environment Committee and the
Human Resources and Remuneration Committee.
Other Directorships:
Vince is currently the Chairman of Runge Ltd, a Director of Liontown
Resources Ltd and Chairman of the Broken Hill Community Foundation.
Total Mineral Resources for the group, after
mining depletion, increased by 9.4 million
ounces of gold to 80.0 million ounces of
gold and by 5.18 million tonnes of copper
to 14.36 million tonnes of copper. Total Ore
Reserves, after mining depletion, increased
by 2.8 million ounces of gold to 42.8 million
ounces of gold and by 0.52 million tonnes
of copper to 4.67 million tonnes of copper.
Mineral reSourCeS
anD ore reSerVeS
Total Mineral Resources for the Group, after mining depletion,
are estimated at 80.0 million ounces of gold and 14.36 million
tonnes of copper. This represents a year-on-year increase
of 9.4 million ounces of gold (13 percent) and an increase
of 5.18 million tonnes of copper (56 percent). This result was
driven by additions to the Cadia East deposit (5.2 million ounces
of gold and 1.02 million tonnes of copper) and an initial resource
estimate at Waisoi in Fiji (4.0 million ounces of gold and
3.83 million tonnes of copper attributable). Additionally, new
resources were estimated at Telfer in the Vertical Stockwork
Corridor (0.6 million ounces of gold and 0.07 million tonnes of
copper) and at Nambonga in the Morobe Mining Joint Venture
(MMJV) in Papua New Guinea (0.5 million ounces of gold and
0.04 millions tonnes of copper attributable). An initial resource
has been estimated at the O’Callaghans polymetallic skarn
deposit south of Telfer (0.17 million tonnes of tungsten trioxide,
0.16 million tonnes of copper, 0.46 million tonnes of zinc and
0.23 million tonnes of lead). Elsewhere, changes were relatively
minor and related to metal price increases and mining depletion.
Total Ore Reserves, after mining depletion, are estimated at
42.8 million ounces of gold and 4.67 million tonnes of copper.
This represents a year-on-year increase of 2.8 million ounces of
gold (7 percent) and 0.52 million tonnes of copper (13 percent).
This result was driven by additions at Cadia East (2.9 million
ounces of gold and 0.48 million tonnes of copper) and inclusion
of a second block cave lift at Ridgeway (0.68 million ounces
of gold and 0.1 million tonnes of copper). Elsewhere, changes
were relatively minor and related to metal price increases
and mining depletion.
Metal price assumptions for all Newcrest Mineral Resources
are US$700/oz for gold US$2.00/lb for copper and US$13/oz
for silver. Price assumptions for Ore Reserves are US$650/oz
for gold, US$1.70/lb for copper and US$11/oz for silver.
Where appropriate, resources are also constrained spatially
by a notional pit shell based on US$1,000/oz for gold and
US$4.00/lb for copper or for underground mining by a shape
based on the marginal cut-off grade used as a conservative
measure to exclude non-contiguous mineralisation. Resources
and reserves are sensitive to metal prices at Cadia Valley,
Marsden, Namosi and Telfer due to the disseminated nature
of the mineralisation and the presence of both gold and copper
as significant value drivers. High-grade discrete veins mined at
Gosowong and Cracow are relatively insensitive to metal prices.
Cost assumptions are based on the latest approved study for
each deposit and are generally in Australian dollars except
at Gosowong (Indonesia) where a US dollar cost base is used.
An exchange rate of US$:AU$ of 0.75 has been used for both
resources and reserves.
MMJV Mineral Resources and Ore Reserves are based on
a Competent Persons statement provided by Harmony Gold
Mining Company Limited on behalf of the Joint Venture and
are quoted at 50 percent interest. These include gold and
silver resources and reserves at Hidden Valley and gold, copper
and molybdenum resources and reserves at Wafi-Golpu and
resources at Nambonga. Metal prices assumptions used by
Harmony to convert resources to reserves are unchanged
from last year at US$750/oz for gold, US$2.40/lb for copper
and US$20/lb molybdenum. Details are available
on www.harmony.co.za.
10 NEWCREST MINING ANNUAL REPORT 2009
Left
Drilling at O’Callaghans
Right
Core samples
Bottom left
Production drilling
at Ridgeway Deeps
Bottom centre
Grinding media used
in SAG & Bore Mills
Bottom right
Chris Murfet,
Production Co-ordinator, Telfer
The accompanying statement of Mineral Resources and Ore
Reserves conforms to the Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves
(The JORC Code) 2004 Edition. Ore Reserves quoted are
a subset of Mineral Resources. Independent external and
internal reviews are conducted on all estimates.
Explanatory notes containing more detailed information
on the methods and parameters used to estimate Mineral
Resources and Ore Reserves are presented on the Company’s
website at www.newcrest.com.au.
CADIA PROVINCE
Mineralisation recognised to date in the Cadia Province is
porphyry-related gold and copper hosted in rocks of Ordovician
age. Ore bodies are typically large tonnage low-grade gold with
strong copper by-product and minor base metal associations.
Ore is sourced by bulk mining methods from open pit and
underground sources. Products include gold in doré recovered
via gravity methods and a gold rich copper concentrate,
which is exported to customers via Port Kembla. Established
processing capacity is in excess of 22 million tonnes per annum.
Notable increases relate to a second consecutive increase in the
resource and reserve estimates for Cadia East, the addition of
reserves in a second deeper caving block at Ridgeway Deeps
and an increase in the Cadia Extended resource resulting from
new drilling at depth.
Cadia Hill Open Pit
The Cadia Hill Open Pit Mineral Resource decreased by
0.36 million ounces of gold and 0.02 million tonnes of copper,
including stockpiles. Mining, including stockpile movements,
accounted for depletion of 0.42 million ounces of gold and
0.04 million tonnes of copper. This was offset by increases of
0.10 million ounces of gold and 0.03 million tonnes of copper
due to revised cut-off grade and metal prices. The Ore Reserve,
including stockpiles, decreased by 0.23 million ounces of gold
and 0.02 million tonnes of copper. Mining depletion accounted
for 0.33 million ounces of gold and 0.03 million tonnes of copper
from the reserves, partially offset by the impact of higher metal
prices and a minor change in the design of ultimate pit.
Cadia Extended
Cadia Extended is a bulk underground resource located to the
northwest of Cadia Hill beneath the backfilled Cadia Extended
pit. The material change to the Mineral Resource compared
with 2008 resulted from the re-evaluation of this resource
using updated metal prices and additions at depth from drilling.
This resulted in a net resource increase of 0.15 million ounces
of gold and 0.03 million tonnes of copper. Reserves have not
been estimated for Cadia Extended underground.
NEWCREST MINING ANNUAL REPORT 2009 11
Main Dome Open Pit
The Telfer Main Dome open pit Mineral Resource, including
stockpiles, decreased by 0.4 million ounces of gold with copper
unchanged. Mining depletion accounted for 0.6 million ounces
of gold and 0.02 million tonnes of copper. This was offset by
increases due to revised recoveries and metal prices, resulting
in the addition of 0.2 million ounces of gold and 0.02 million
tonnes of copper. The Main Dome Ore Reserve decreased
by 0.2 million ounces of gold with copper unchanged. Mining
depletion of reserves accounted for 0.5 million ounces of
gold and 0.02 million tonnes of copper.
Telfer Deeps Underground
The Telfer Deeps Underground consists of the current operating
sublevel cave (SLC) and designs for selective mining of reef
resources. The Telfer Deeps Underground Mineral Resource
decreased by 0.4 million ounces of gold and 0.03 million
tonnes of copper largely from SLC mining depletion and
the impact of mining cost changes on the cut-off. The Telfer
Deeps Ore Reserve decreased by 0.2 million ounces of gold
and 0.02 million tonnes of copper due mainly to SLC depletion
and redesign of the sublevel cave. In addition, a new resource
has been estimated for the Vertical Stockwork Corridor below
the current SLC containing 0.6 million ounces of gold and
0.07 million tonnes of copper.
West Dome Open Pit
No mining activity occurred at West Dome during the period.
Revised metal prices and recovery estimates (based on Main
Dome performance) resulted in an increase in the resource
estimate of 0.15 million ounces of gold and 0.01 million tonnes
of copper. The Ore Reserve estimate for West Dome increased
by 0.05 million ounces of gold due to redesign of the pit based
on revised recoveries and metal prices.
O’Callaghans
O’Callaghans is a polymetallic skarn deposit occurring around
300 metres below surface and located 15 kilometres to the
south of Telfer. O’Callaghans has been drilled broadly to enable
an initial Inferred Resource estimate. The resource estimate
contains 0.16 million tonnes of copper, 0.17 million tonnes of
tungsten trioxide, 0.46 million tonnes of zinc and 0.23 million
tonnes of lead. Investigation of this resource is ongoing.
Exploration
Several known gold and base metal exploration targets exist
at Telfer. These include the Camp Dome area and a number
of satellite deposits in the Telfer Province. Drilling is planned
to systematically test these targets.
MINERAL RESOURCES AND ORE RESERVES
Ridgeway Underground
Ridgeway Underground consists of the sublevel cave operation
and the Ridgeway Deeps block cave development project.
The Mineral Resource decreased by 0.33 million ounces of gold
and 0.02 million tonnes of copper as a result of refinements
to the interpretation of the mineralisation and mining depletion
during the year. The Ore Reserve increased by 0.41 million
ounces of gold and 0.07 million tonnes of copper, net of
depletion. Mining depleted the Ore Reserve by 0.29 million
ounces of gold and 0.04 million tonnes of copper offset by
increases due to the addition of a second planned block cave
lift at depth at Ridgeway.
Big Cadia
The Big Cadia deposit is a near-surface skarn type
mineralisation located to the northeast of the Ridgeway mine.
The Big Cadia resource increased by 0.02 million ounces of
gold and 0.01 million tonnes of copper due to metal price
revisions. Reserves have not been estimated for Big Cadia.
Cadia East Underground
The Cadia East underground project is evaluating the potential
for a large scale panel caving operation. Drilling and data analysis
continued in 2009 as part of the Cadia East Feasibility Study.
The Cadia East Mineral Resource has increased by 5.2 million
ounces of gold and 1.02 million tonnes of copper. The Cadia
East Ore Reserve has increased by 2.9 million ounces of gold
and 0.48 million tonnes of copper. Exploration success resulted
in an increase of 2.4 million ounces of gold and 0.40 million
tonnes of copper in the Mineral Resource. Revised metal prices
added 1.65 million ounces of gold and 0.43 million tonnes
of copper to the Mineral Resource.
Exploration
Exploration drilling activity at Cadia has been reduced based
on current resource inventories and the maturity of the tenements.
Data compilation is ongoing to identify additional opportunities
for future activity.
TELFER PROVINCE
Gold and copper mineralisation identified to date in the Telfer
Province comprises largely of structurally controlled reefs, veins
and stockworks hosted by sedimentary rocks of Proterozoic
age. Deep weathering depleted the copper in the upper parts
of the Main Dome and West Dome orebodies, allowing much of
the historical gold production to be processed using gravity and
cyanide leaching processes. Ore processing facilities established
during the redevelopment of Telfer allow the processing of the
large gold and copper sulphide reserves to produce doré from
a gravity concentrate and a gold rich copper concentrate from
flotation. Concentrate is exported to customers via Port Hedland.
This year, an Inferred Resource for the O’Callaghans polymetallic
skarn deposit was added.
12 NEWCREST MINING ANNUAL REPORT 2009
Marsden (NSW)
Marsden is located on Exploration Licence 5524 (Newcrest
100 percent) between Forbes and West Wyalong in Central
Western NSW, Australia. Marsden is a body of porphyry-style
copper-gold mineralisation hosted in intrusive rocks. The
resource estimate for Marsden has been updated to include
additional drilling completed during the year to improve
resource confidence. This resulted in a resource increase
of 0.08 million ounces of gold (7 percent increase) and
0.07 million tonnes of copper (11 percent increase).
Namosi JV (Fiji)
The Namosi project is a joint venture between Newcrest,
Nittetsu and Mitsubishi Materials, with Newcrest having
a 69.94 percent interest in the joint venture. The Namosi
tenement, which is located about 30 kilometres west of Fiji’s
capital city, Suva, has been periodically explored over the past
40 years. The potential for gold and base metals was established
in the 1960s and exploration led to the discovery of the Waisoi
deposits. Between 1991 and 1995, Placer Pacific defined the
large, low-grade, porphyry copper-gold deposit at Waisoi
as an open pit copper-gold resource. Newcrest has validated
historical data, undertaken additional infill and exploration
drilling and completed a Mineral Resource estimate on behalf
of the Joint Venture. This Mineral Resource estimate satisfies all
criteria for Public Reporting under the JORC Code. Newcrest’s
share of the Mineral Resource contains 4.0 million ounces
of gold and 3.83 million tonnes of copper (69.94 percent).
Exploration drilling is ongoing in the Joint Venture tenement.
Morobe Mining JV (PNG)
The Morobe Mining Joint Venture is a 50:50 joint venture
between Newcrest and Harmony Gold Mining Company.
Joint venture interests include the Hidden Valley and Wafi-
Golpu tenements, as well as significant exploration tenements
on the Morobe coast. Resources have increased by 0.5 million
ounces of gold and 0.04 million tonnes of copper through the
addition of the Nambonga deposit. Reserves have decreased
by 0.04 million ounces of gold, with no change in copper
resulting from revisions to the pit design and the impact
of mining depletion at Hidden Valley and Hamata.
OTHER PROVINCES
Gosowong (Indonesia)
Gosowong is located on the island of Halmahera, located in
North Maluku Province in the eastern part of the Republic of
Indonesia and is owned and operated by PT Nusa Halmahera
Minerals, an incorporated joint venture between Newcrest
(82.5 percent) and PT Aneka Tambang (17.5 percent). For the
purpose of reporting Mineral Resources and Ore Reserves,
Newcrest is reporting 100 percent of the assets. Gosowong
is emerging as a world-class epithermal province with past
production and resources exceeding 5.0 million ounces of gold.
The gold grade is high and is associated with similar levels of
silver. Ore is processed at the on-site plant to produce gold
doré using a cyanide leaching process. Gold recoveries in
excess of 90 percent are typical.
Kencana
The Kencana Mineral Resources increased by 0.03 million
ounces of gold. Similarly, the Ore Reserves increased by
0.04 million ounces of gold. Mining depleted the reserve
by 0.43 million ounces of gold. Additions included extensions
of the K1 deposit at depth and to the north and minor changes
in K2 and K Link following additional drilling and production
experience. All Kencana deposits are now in production. Mine
design is based on either underhand cut-and-fill or sublevel
open stoping mining methods, depending on geometry and
ground conditions.
Gosowong Pit Cutback
A mining concept study to assess the viability of a cutback
in the existing Gosowong open pit resulted in an upgrade
of an earlier resources estimate to an Indicated Resource
of 0.12 million ounces of gold.
Gosowong Tailings Storage Facilities
An Inferred Resource of 0.07 million ounces was estimated at
the Gosowong Tailings Storage Facility. This represents material
processed during a recent period of lower recoveries which
has potential for retreatment through the upgraded grinding
circuit at Gosowong.
Exploration
Significant potential exists to grow the Kencana system and to
discover further high-grade shoots by exploring along known
fertile structures in the Gosowong region. Advanced target
testing is progressing north of the Toguraci pit and elsewhere
within the Contract of Work.
Cracow Joint Venture (QLD)
Cracow is a joint venture between Newcrest Mining Limited
(70 percent) and Lion Selection Limited (30 percent). Newcrest
reports 70 percent of the Mineral Resources and Ore Reserves
at Cracow. The gold shoots are structurally controlled within
steeply dipping epithermal veins. Ongoing exploration is
targeting auriferous structures within the the highly prospective
western side of the Cracow Goldfield.
Mineral Resources increased by 0.09 million ounces of gold
(19 percent increase) while the Ore Reserves increased by
0.04 million ounces of gold (31 percent increase). Mining
depletion of reserves totalled 0.1 million ounces of
gold. Additions arose from shoot extensions following
discovery drilling.
NEWCREST MINING ANNUAL REPORT 2009 13
MINERAL RESOURCES AND ORE RESERVES
2009 MINERAL RESOURCES
Measured Resource
Indicated Resource
Inferred Resource
Total Resource
Contained Metal
Gold and Copper
Resources
(# includes stockpiles)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Gold
(million
ounces)
Copper
(million
tonnes)
Com-
petent
Person
Cadia Hill Open Pit #
221
0.51
0.13
37
0.40
0.13
170
0.34
0.10
427
0.43
0.12
Cadia Extended
53
0.39
0.22
53
0.39
0.22
5.9
0.7
0.51
0.12
Ridgeway Underground #
19
1.1
0.48
109
0.78
0.36
24
0.46
0.46
152
0.77
0.39
3.8
0.59
Big Cadia
37
0.38
0.47
37
0.34
0.47
0.4
0.17
Cadia East Underground
2,246
0.44
0.29
102
0.35
0.18 2,347
0.44
0.28
33.2
6.59
Total Cadia Province – Gold and Copper
44.0
7.98
Main Dome Open Pit #
15
0.53
0.11
288
1.0
0.11
41
0.78
0.11
344
1.0
0.11
10.8
0.37
Telfer Satellite Deposits
0.57
4.2
0.03
Total Telfer Province – Gold and Copper
West Dome Open Pit
Telfer Underground
VSC
O’Callaghans
Gosowong #*
Cracow #**
MMJV – Hidden Valley/
Kaveroi #***
MMJV – Hamata #***
MMJV – Nambonga ***
MMJV – Wafi ***
MMJV – Golpu ***
Namosi JV ****
Marsden
166
0.74
0.06
47
0.68
0.05
213
0.73
0.06
5.0
0.13
57
1.5
0.32
3.3
1.7
0.27
14
59
1.7
1.4
0.49
0.27
2.6
0.08
60
14
59
2.3
1.5
0.32
2.9
0.19
1.4
0.49
0.6
0.07
0.27
N/A
0.16
4.1
0.07
0.3
0.00
0.59
9.5
2.8
0.17
2.2
2.2
3.0
0.29
23
3.9
28
6.7
1.9
2.3
0.67
1.3
15
0.61
3.4
7.9
1.5
2.6
3.7
2.2
24
8.2
41
1.8
4.6
2.4
19.6
0.92
2.8
N/A
0.6
N/A
2.3
N/A
0.4
N/A
20
0.79
0.22
20 0.79
0.22
0.5
0.04
32
2.0
20
1.7
52
1.9
3.1
N/A
44
0.63
1.4
38
0.49
0.72
82
0.57
1.1
1.5
0.88
354
0.16
0.47
556
0.12
0.39
910
0.14
0.42
4.0
3.83
178
0.19
0.37
39
0.07
0.16
216
0.17
0.33
1.2
0.71
1
1
1
1
1
2
2
2
2
2
2
3
4
5
5
6
6
6
7
1
Total Other Provinces – Gold and Copper
Total Gold and Copper
16.4
5.46
80.0 14.36
Measured Resource
Indicated Resource
Inferred Resource
Total Resource
Contained Metal
Silver Resources
(# includes stockpiles)
Gosowong #*
Cracow #**
MMJV – Hidden Valley/
Kaveroi #***
Total Silver
Dry
Tonnes
(million)
Silver
Grade
(g/t Ag)
0.59
6.9
Dry
Tonnes
(million)
3.0
0.29
Silver
Grade
(g/t Ag)
21
4.2
Dry
Tonnes
(million)
0.67
1.3
Silver
Grade
(g/t Ag)
Dry
Tonnes
(million)
5.5
6.0
3.7
2.2
Silver
Grade
(g/t Ag)
18
6.0
2.8
41
23
34
15
27
41
32
Silver
(million
ounces)
Com-
petent
Person
3
4
5
2.2
0.4
42.0
44.6
Inferred Resources
Contained Metal
2009 Polymetallic
Mineral Resources
O’Callaghans
Dry
Tonnes
(millions)
Tungsten
Trioxide
Grade
(% WO3)
59
0.29
Copper
Grade
(% Cu)
0.27
Zinc
Grade
(% Zn)
0.77
Lead
Grade
(% Pb)
0.39
Tungsten
Trioxide
(million
tonnes)
0.17
Copper†
(million
tonnes)
0.16
Zinc
(million
tonnes)
0.46
Lead
(million
tonnes)
0.23
Competent
Person
2
*** The figures shown represent 50% of the Mineral Resource. Newcrest
and Harmony Gold have a 50-50 ownership of the Morobe Mining JV.
**** The figures shown represent 69.94% of the Mineral Resource.
† Copper contribution included in main Mineral Resource table.
1. Geoff Smart, 2. Paul Dunham, 3. Dadan Wardiman, 4. Craig Irvine,
5. Michael Smith (Harmony Gold Ltd), 6. Greg Job (Harmony Gold Ltd),
7. Vik Singh
* The figures shown represent 100% of Mineral Resource. Kencana is owned
and operated by PT. Nusa Halmahera Minerals, an incorporated joint venture
between Newcrest (82.5%) and Pt Aneka Tambang (17.5%).
** The figures shown represent 70% of the Mineral Resource. Cracow is an
unincorporated joint venture between Newcrest (70%) and Lion Selection
Limited (30%).
14 NEWCREST MINING ANNUAL REPORT 2009
Total Cadia Province – Gold and Copper
24.0
3.74
2009 ORE RESERVES
Gold and Copper
Reserves
(# includes stockpiles)
Cadia Hill Open Pit #
Ridgeway Underground #
Cadia East Underground
Main Dome Open Pit #
West Dome Open Pit
Telfer Underground
Total Telfer Province – Gold and Copper
Gosowong #*
Cracow #**
MMJV – Hidden Valley/Kaveroi #***
MMJV – Hamata #***
MMJV – Golpu ***
Total Other Provinces – Gold
Total Gold and Copper
Silver Reserves
(# includes stockpiles)
Gosowong #*
Cracow #**
MMJV – Hidden Valley/Kaveroi #***
Total Silver
Proved Reserve
Probable Reserve
Total Reserve
Contained Metal
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Copper
Grade
(% Cu)
Gold
(million
ounces)
Copper
(million
tonnes)
Com-
petent
Person
131
0.62
0.15
3.4
0.37
0.13
134
0.61
0.15
2.6
0.20
7.2
1.3
0.51
91
0.81
0.38
98
0.84
0.39
2.7
0.38
961
0.61
0.33
961
0.61
0.33
18.7
3.16
15
0.53
0.11
277
1.0
0.10
292
0.94
0.10
8.8
0.30
146
0.66
0.06
146
0.66
0.06
3.1
0.09
0.21
12
1.5
42
1.6
0.34
42
1.6
0.35
2.2
0.14
0.54
1.4
0.10
7.7
2.3
2.1
3.1
0.16
18
1.9
35
24
5.5
2.0
2.7
3.1
0.70
19
2.0
24
7.2
2.0
2.7
14.1
0.53
2.4
0.2
1.2
0.2
NA
NA
NA
NA
0.61
1.1
35
0.61
1.1
0.7
0.40
4.7
0.40
42.8
4.67
Proved Reserve
Probable Reserve
Total Reserve
Contained Metal
Dry
Tonnes
(million)
Silver
Grade
(g/t Ag)
Dry
Tonnes
(million)
Silver
Grade
(g/t Ag)
Dry
Tonnes
(million)
Silver
Grade
(g/t Ag)
0.54
1.4
5.3
39
3.1
0.16
18
16
5.5
37
3.1
0.70
19.0
16
5.3
37
Com-
petent
Person
6,2
7
8
(million
ounces)
1.6
0.1
22.6
24.3
1
2
3
4
4
5
6, 2
7
8
8
9
1. Ellie Burdett, 2. Geoff Dunstan, 3. German Flores, 4. Anton Kruger,
5. Murray Smith, 6. Robbie Whitworth, 7. Justin Woodward,
8. Julian Poniewierski (Harmony Gold Ltd), 9. Greg Job (Harmony Gold Ltd)
* The figures shown represent 100% of the Ore Reserve. Kencana is owned
and operated by PT. Nusa Halmahera Minerals, an incorporated joint venture
between Newcrest (82.5%) and Pt Aneka Tambang (17.5%).
** The figures shown represent 70% of the Ore Reserve. Cracow is an
unincorporated joint venture between Newcrest (70%) and Lion Selection
Limited (30%).
*** The figures shown represent 50% of the Ore Reserve. Newcrest and
Harmony Gold have a 50-50 ownership of the Morobe Mining JV.
Information in this report that relates to Mineral Resources and Ore Reserves
is based on and accurately reflects reports prepared by the Competent
Person named beside the information. All these persons, except Greg Job,
Michael Smith and Julian Poniewierski, are full-time employees of Newcrest
Mining Limited or the relevant subsidiary, who consent to the inclusion
of material in the format and context in which it appears. All the Competent
Persons named are Members of the Australasian Institute of Mining and
Metallurgy and/or the Australian Institute of Geoscientists and posses
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 Exploration Results, Mineral Resources and Ore Reserves
(JORC Code, 2004 Edition).
NEWCREST MINING ANNUAL REPORT 2009 15
Newcrest’s vision is to be the ‘Miner
of Choice’ – to maintain its position
as a leading producer of gold, creating
shareholder wealth in a manner which also
benefits its employees and the communities
and environment in which it operates. The
Newcrest Board believes that adherence
by the Company and its people to the
highest standards of corporate governance
is critical in order to achieve its vision.
Corporate
goVernanCe
1. GOVERNANCE AT NEWCREST MINING LIMITED
Newcrest’s vision is to be the ‘Miner of Choice’ – to maintain
its position as a leading producer of gold, creating shareholder
wealth in a manner which also benefits its employees and
the communities and environment in which it operates. The
Newcrest Board believes that adherence by the Company and
its people to the highest standards of corporate governance
is critical in order to achieve its vision.
The corporate governance practices in place at Newcrest
during the year to 30 June 2009 are described below.
This report includes information required under the ASX
Corporate Governance Council’s Corporate Governance
Principles and Recommendations (August 2007).
2. BOARD OF DIRECTORS
2.1 Role and Responsibilities
On behalf of the shareholders, the Board:
– sets the Company’s strategic goals and objectives
– oversees the management and performance of the
Company’s business.
These and other functions of the Board, have been formalised
through the adoption of a formal Board Charter. The Board
Charter can be found at www.newcrest.com.au/corporate.asp.
The Board Charter defines the Board’s role and responsibilities
in relation to strategic, financial, operational and governance
matters. It makes it clear that the role of the Board is not to
manage the Company but to set, on behalf of the shareholders,
the strategic direction of the Company and to review, oversee
and monitor the management and performance of the business
by the Company’s senior executive team.
In the context of the Board Charter, the Company’s senior
executive team is charged with responsibility and authority
for the day-to-day management of the Company and its
operations. Its remit is formally set out, and agreed with
the Board, in a Statement of Management Authorities and
Responsibilities which is supported by a comprehensive
framework of approval and authority limits.
16 NEWCREST MINING ANNUAL REPORT 2009
2.2 Board Composition
Newcrest’s Board currently comprises eight Directors –
the Managing Director, Ian Smith, the Director Finance,
Greg Robinson and six Non-Executive Directors, being
Don Mercer (Chairman) and Tim Poole, Rick Lee, John Spark,
Richard Knight and Vince Gauci. Details of each Director’s skills,
experience and relevant qualifications and expertise, as well
as the term of office held by that Director as at the date of
this Report, are set out on pages 8–9. The Board has determined
that as a general rule a Non-Executive Director will not serve
on the Board for more than 10 years.
2.3 Selection and Appointment of Directors
The Board regularly reviews its membership to ensure that
it offers the range of business skills and expertise demanded
by the Company’s operations.
When a Board position becomes vacant or additional
Directors are required, candidates are identified, using external
professional advisers if necessary. Candidates are considered
and appointed by the full Board. Appointment of the Managing
Director is made by the full Board, with professional advice
taken if necessary. All Board appointments are subject
to shareholder approval.
2.4 Board Committees
To facilitate the execution of its responsibilities, the Board
operates three standing Committees. The operation of the
Committees provides a forum for more detailed analysis
of key issues. In addition, the Board operates an ad hoc
Executive Committee which is convened as required. All
Directors receive all Committee papers and minutes and are
welcome to attend any Committee meeting. Each Committee
reports its deliberations to the next Board meeting.
The Board does not have a nominations committee as that
role is dealt with by the Board itself. The Board took this
step having determined that it was best placed to undertake
the work of that committee having regard to the size of the
Company, and that all decision making authorities in relation to
the work of a nominations committee rest with the Board itself.
The Board has structured its annual program of business to
ensure that nomination matters are fully dealt with by it.
In February 2009 the role of the Remuneration Committee,
which was undertaken by all non-executive members of
the Board, was expanded to cover not only remuneration
but also broader human resources issues. It was renamed
the Human Resources and Remuneration Committee and four
non-executive Board members were appointed to take on its
expanded role and workload. Executive Directors are invited
to attend as appropriate.
The current Committees of the Newcrest Board, their
membership and functions are as follows. Each of the Audit
and Risk Committee, Human Resources and Remuneration
Committee and Safety, Health and Environment Committee
has its own charter.
2.4.1 Audit and Risk Committee
Members: John Spark (Chairman), Rick Lee, Tim Poole
and Richard Knight.
Function: ensures compliance with all accounting and financial
reporting obligations of the Group and reviews internal
financial controls and the role of the internal and external
auditors, including the independence of the external auditors,
and the Company’s risk management activities.
2.4.2 Human Resources and Remuneration Committee
Members: Don Mercer (Chairman), Rick Lee, Tim Poole and
Vince Gauci (Executive Directors, Ian Smith and Greg Robinson
may attend by invitation).
Function: deals with all matters relating to the Company’s
Human Resources Policy, including executive and employee
remuneration levels and remuneration matters generally.
2.4.3 Safety, Health and Environment Committee
Members: Richard Knight (Chairman), Vince Gauci
and John Spark.
Function: monitors the Company’s safety, health and
environmental management practices and ensures that
the Company has appropriate policies in place to provide
a framework for compliance with all relevant laws, regulations
and standards, and oversees safety, health and environment
risk management.
2.4.4 Board Executive Committee
Members: Don Mercer (Chairman), Ian Smith (Managing
Director) and at least one Non-Executive Director.
Function: acts as a delegate for the Board to make decisions
where it is not practical or reasonable to convene the Board.
The Charter for each Board Committee can be found at
www.newcrest.com.au/corporate.asp. Details of the number
of meetings of the Board and of each Committee held during
the financial year, and of each Director’s attendance at those
meetings (as relevant), are set out on page 23.
2.5 Board Independence
The Board has determined that all Non-Executive Directors
are independent and free of any relationship which might
conflict with the interests of the Company. All Directors are
required to disclose their relevant interests and to give notice
of any potential conflict of interest. The Board has in place
processes for dealing with a conflict of interest or loss
of independence by a Director, should that situation arise.
The Board will continue to monitor the independence of each
Director and will periodically review its approach to assessing
Director independence to ensure that it remains appropriate.
2.6 Access to Independent Advice and Information
All Directors have direct access to all relevant Company
information and to the Company’s senior executives.
The Board has adopted a formal policy which ensures that
Directors also have access to independent legal, accounting,
or other professional advice, when necessary, at the
Company’s expense.
3. RESPONSIBLE AND ETHICAL BEHAVIOUR
3.1 Code of Conduct and Values
The Company has a formal Code of Conduct, which all
Newcrest Directors, employees and contractors are required
to observe. The Code of Conduct sets out standards for
appropriate ethical and professional behaviour for Directors
and employees of the Company, and confirms the values that
underpin all of Newcrest’s relationships with its stakeholders.
The Company also has a comprehensive range of corporate
policies which detail the framework for acceptable corporate
behaviour. These set out the procedures which personnel are
required to follow in a range of areas including share trading,
employment practices and compliance. The Company policies
are reviewed periodically.
Newcrest has formulated and adopted five key values to
guide its Directors and employees in the conduct of the
Company’s activities.
– We act with integrity and honesty.
– We seek high performance in ourselves and others.
– We work together.
– We value innovation and problem solving.
– We care about people.
An extensive training program has been developed to educate
employees in the Newcrest values and to encourage them
to conduct themselves in all of these dealings in accordance
with these values.
3.2 Speak-Out Service
Newcrest has in place a Speak-Out Policy which encourages
employees and contractors to raise concerns or to report
instances of misconduct or suspected misconduct if necessary,
on an anonymous basis. Complaints are referred to an
independent third-party service provider for initial consideration.
Issues identified are then reported to Newcrest management
so that concerns can be addressed and, where appropriate,
investigated further.
3.3 Securities Dealing Policy
Directors’ and employees’ shareholdings and share trading
are subject to the Company’s Securities Dealing Policy, which
restricts the times when a Director or employee can purchase
or sell Company securities, and prohibits short-term trading.
A copy of the Securities Dealing Policy, as well as the
Company’s Code of Conduct and other policies, can
be found online at www.newcrest.com.au/corporate.asp.
NEWCREST MINING ANNUAL REPORT 2009 17
CORPORATE GOVERNANCE
4. RISK MANAGEMENT AND INTERNAL CONTROLS
The Board recognises that risk management and internal
controls are fundamental to sound management, and that
oversight of such matters is a key responsibility of the Board.
Newcrest has a detailed risk management and internal control
framework incorporating policies and procedures, which set
out the roles, responsibilities and guidelines for identifying
and managing material business risks.
The Board is responsible for satisfying itself that management
has developed a sound system of risk management and internal
controls. The Board reviews the effectiveness of management’s
implementation of risk management and of the internal control
systems at least annually. The Audit and Risk Committee assists
the Board with respect to oversight of risk management policy
and of effective internal controls and risk management processes.
The design and implementation of the risk management and
internal control systems in relation to material business risks
are the responsibility of management.
4.1 Management of Risk
Newcrest’s Risk Management Framework is used to identify
and evaluate risk events, establish robust controls and
mitigation strategies, and to provide an assurance process
in relation to effectiveness and implementation of these
controls and mitigants. The aim is to provide an overarching,
uniform and consistent framework for identifying, assessing,
monitoring and managing material business risks.
The framework covers the entire business by developing
risk profiles for:
– strategic risk;
– corporate and commercial risk;
– major hazard risks (including operational,
safety and environmental); and
– project management risk.
The risk profiles, including identification and assessment of
related controls, are reviewed and updated by management
and reported to the Audit and Risk Committee at least annually.
4.2 Internal Control Framework
Newcrest has controls in place that are designed to support
the risk management framework, safeguard the Company’s
interests and ensure the integrity of its financial reporting.
Key controls in place include:
– An integrated, robust planning and budgeting process
delivering a 5 year strategic plan and linked detailed budget
annually (both subject to the approval of the Board). Progress
against performance targets is reported against monthly and
supplemented regularly with forecast updates.
– A comprehensive capital approval process controlling
the authorisation of capital expenditure and investments.
Key capital decisions are subject to independent technical
and commercial review.
– A system of delegated authorities that cascades authority
levels for expenditure and commitments from the Board,
the delegation to the CEO and the further cascading of
authorities from the CEO to the rest of the organisation.
– Appropriate due diligence procedures for acquisitions
and divestments.
– The annual preparation of a capital strategy document setting
out the key capital structure, liquidity and cash flow at risk
objectives of the company. In addition, Treasury has detailed
policies for the management of debt and currency, investment
of surplus cash and interest rate risk management.
– A system of financial control processes to ensure the integrity
of financial reporting.
– The completion half-yearly by management of a detailed
internal control questionnaire covering financial stewardship,
legal and risk issues.
– Regularly reviewed and tested crisis management and
emergency management systems.
4.3 Internal Audit
The Company has an independent internal audit function,
currently resourced by KPMG and reporting to the Director
Finance, which undertakes audits of critical finance and business
processes and tests key internal controls. The annual audit
plan, which is approved by the Audit and Risk Committee, is
structured to cover all material operating sites and processes on
a rolling program. Findings are reported to senior management
and the Audit and Risk Committee and corrective actions are
monitored, reviewed and reported. Material findings are reported
to the Board. The Audit and Risk Committee meets with the
internal auditors on a regular basis without management
being present.
4.4 Management Assurance
At the Board meeting to approve Newcrest’s annual and
half-yearly results in 2008–09, the Board received and
considered statements in writing from the Managing Director
and Chief Executive Officer and Director Finance in relation
to Newcrest’s system of risk oversight and management and
internal compliance with internal controls. These assurance
statements were supported by an internal process of compliance
confirmations by Executive General Managers and General
Managers responsible for operations and key functions.
The certificate of assurance stated that the financial statements
have been prepared in conformity with generally accepted
accounting principles and that they gave a true and fair view
of the state of affairs of the Company.
The certificate of assurance also stated that the risk
management and internal compliance and control systems
were operating effectively in all material respects in relation
to the reporting of financial risks.
5. SHAREHOLDER COMMUNICATION, CONTINUOUS
DISCLOSURE AND MARKET COMMUNICATIONS
The Board recognises the importance of keeping the
market fully informed of the Company’s activities and
of communicating openly and clearly with all stakeholders.
The Company has a formal Continuous Disclosure Policy
in place to ensure that this occurs, a copy of which is available
at www.newcrest.com.au/corporate.asp. Pursuant to the Policy,
Company information considered to be material is announced
immediately through the ASX and key presentations given
by Company personnel to investors and institutions are also
lodged with the ASX. The Company Secretary has primary
responsibility for coordinating disclosure in accordance
with the Policy.
18 NEWCREST MINING ANNUAL REPORT 2009
All key communications are placed immediately on the
Company website and, when necessary, provided directly to
all shareholders. General and historical information about the
Company and its operations is also available on the website.
It is the Board’s policy that the Company implements effective
communication with its shareholders. Under the guidance
of Newcrest’s Company Secretary and its EGM People,
Communication and Environment, this is achieved through:
– complying with ASX listing rules and Corporations Act
reporting requirements;
– webcasting half-year and full-year financial results
presentations;
– ensuring continuous disclosure compliance;
– holding an accessible and informative
Annual General Meeting; and
– posting on the Company’s website all other ASX
announcements including briefings to investors and analysts
and presentations by the Company to public forums.
Shareholders have the option to receive the annual report
and other key shareholder communications, including notices
of meeting, electronically.
At its Annual General Meeting the Company’s auditors are
available to answer questions relating to the audit of the
Company’s financial statements and the accounting policies
adopted by the Company in the preparation of its financial
statements. Newcrest’s Chairman encourages shareholder
questions at the Company’s Annual General Meeting and
shareholders unable to attend are given the opportunity
to submit questions to the Chairman prior to the meeting.
6. BOARD AND EXECUTIVE PERFORMANCE
6.1 Board Performance Evaluation
The Board undertakes an annual review of its own performance
effectiveness and that of its Committees and individual
Directors. This process is led by the Chairman based on a formal
questionnaire and evaluation provided to each Board member.
The outcomes of the evaluation are reviewed and considered
by the Board and changes effected where required.
The Board completed its most recent review, which it undertook
with the assistance of external specialist advisers, in December
2008. As a result, the size of the Board was increased, the
Board Committee structure was reviewed and a number
of Board internal processes refined.
6.2 Executive Performance Evaluation
The Company has in place a performance appraisal system for
executives that is designed to encourage performance. Details
regarding the Newcrest performance management system for
the period 2008–09 are set out in the Remuneration Report
on pages 32–51.
Each of the Company’s senior executives (including the
Managing Director and Chief Executive Officer and the Director
Finance) have undergone performance evaluation during the
2008–09 reporting period in accordance with the Company’s
Work Performance System.
7. DIRECTORS’ FEES AND EXECUTIVE REMUNERATION
7.1 Directors’ Fees
The Company’s Human Resources and Remuneration
Committee deals with all matters relating to the Company’s
remuneration policy, executive and employee remuneration
levels and remuneration matters generally. A copy of the
Human Resources and Remuneration Committee Charter is
available on the website at www.newcrest.com.au/corporate.asp.
Remuneration of the Non-Executive Directors is fixed rather
than variable. It is determined so that Board membership of
an appropriate calibre is maintained and is in accordance with
remuneration trends in the marketplace. Remuneration levels
and trends are assessed every 2 years with the assistance
of professional independent remuneration consultants and
adjusted where necessary to align with Board remuneration
levels in comparable Australian listed companies.
Total annual remuneration paid to all Non-Executive Directors
may not exceed the maximum amount authorised by the
shareholders in a general meeting (currently $1,800,000).
7.2 Executive Remuneration
The Board has a formal Remuneration Policy in place which
defines and directs the Company’s remuneration practices.
The Remuneration Policy recognises the different levels
of contribution within management to the short-term and
long-term success of the Company. A key element of the
Remuneration Policy is the principle of reward for performance,
with a significant proportion of each senior manager’s
remuneration placed ‘at risk’ – that is, dependent upon both
personal and Company performance. Every employee undergoes
a formal performance appraisal each year which is used, in part,
to determine that employee’s remuneration in the year ahead.
The Board has established with the Managing Director and
Chief Executive Officer appropriate and specific personal and
corporate performance objectives for the short and long-term.
The performance of the Managing Director is formally assessed
against these objectives annually. The assessment is used to
determine, in part, the level of ‘at risk’ remuneration paid to
the Managing Director.
Details of the Company’s policies and practices in relation
to both Director and employee remuneration, and how
they relate to Company performance, are set out in the
Remuneration Report on pages 32–51.
8. SUSTAINABILITY
Sustainability is an important part of Newcrest’s vision
to develop successful mining operations through balancing
economic prosperity, environmental quality and social
responsibility. Newcrest is a signatory to the AMI Code for
Environmental Management (2000). A Sustainability Report
detailing the Company’s environmental and social performance
is prepared each year. A copy of the report can be found on
the website at www.newcrest.com.au/sus_report.asp.
NEWCREST MINING ANNUAL REPORT 2009 19
financial
report
FOR THE YEAR ENDED 30 JUNE 2009
21 Directors’ Report
24 Management Discussion and Analysis
32 Remuneration Report
53 Auditor’s Independence Declaration
54
Income Statement
55 Balance Sheet
56 Statement of Changes in Equity
59 Statement of Cash Flows
60 Notes to the Financial Statements
111 Directors’ Declaration
112
Independent Auditor’s Report
20 NEWCREST MINING ANNUAL REPORT 2009
directors’ report
The Directors present their report together with the financial
report of Newcrest Mining Limited (‘the Company’) and of the
Group, being the Company and its controlled entities, for the
year ended 30 June 2009 and the Auditor’s Report thereon.
Directors
The Directors of the Company at any time during the financial
year were, and until the date of this report are:
Don Mercer
Non-Executive Chairman
Ian Smith
Managing Director and Chief Executive Officer
Greg Robinson
Director Finance
John Spark
Non-Executive Director
Rick Lee
Non-Executive Director
Tim Poole
Non-Executive Director
Richard Knight
Non-Executive Director
Vince Gauci
Non-Executive Director
(appointed 10 December 2008)
Bryan Davis
Non-Executive Director
(resigned 30 October 2008)
Mick O’Leary
Non-Executive Director
(resigned 30 October 2008)
All Directors held their position as a Director throughout the entire
year and up to the date of this Report except as indicated above.
company secretary
Bernard Lavery
Bachelor of Laws and Bachelor of Jurisprudence.
Bernard has been the Company Secretary of Newcrest
Mining Limited since 1995.
principal activities
The principal activities of the Group 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 profit of the Group for the year ended 30 June 2009 after
income tax and minority interest amounted to $248.1 million
(2008: $134.3 million). The net profit for 2009 includes a negative
$235.0 million impact due to losses on restructured hedges and
closed out hedge contracts (2008: $359.6 million).
The Underlying Profit (1) of the Group attributable to
members of the parent entity amounted to $483.1 million
(2008: $493.9 million).
(1) Underlying Profit excludes the after tax impact of losses on restructured
hedges and hedge close out costs.
DiviDenDs
The following dividends of the Group have been paid, declared
or recommended since the end of the preceding year:
– Final unfranked dividend for the year ended 30 June 2008
of 10 cents per share, amounting to $45.3 million was paid
on 17 October 2008.
– Dividend of $19.9 million (2008: $21.9 million) was paid
to the minority interest.
– Final unfranked dividend for the year ended 30 June 2009
of 15 cents per share, amounting to $72.5 million has been
declared and will be paid on 16 October 2009 to shareholders
registered by close of business on 25 September 2009.
operating anD Financial review anD signiFicant
changes in the state oF aFFairs
Refer to the Management Discussion and Analysis for the operating
and financial review and for the significant changes in the state
of affairs of the Group.
Future Developments
Refer to the Management Discussion and Analysis for information
on likely developments and future prospects of the Group. Any
further information of this nature has been omitted as it would
unreasonably prejudice the interests of the Group.
subsequent events
On 17 August 2009, the Directors of Newcrest Mining Limited
declared a final unfranked dividend on ordinary shares in respect
of the 2009 financial year. The total amount of the dividend is
$72.5 million, which represents an unfranked dividend of 15 cents
per share. The dividend has not been provided for in the 30 June
2009 financial statements.
In the 2008 financial year, the NSW Supreme Court found in
favour of Newcrest as plaintiff with respect to the obligation to pay
mineral royalties on production from the Cadia Valley operations.
The Supreme Court ordered the State of NSW to refund Newcrest
$10.9 million in royalty and interest payments relating to the 2008
and prior financial years. The decision was appealed by the State of
NSW and the matter went to the NSW Court of Appeal (‘the Court’).
Subsequent to year end, the Court upheld the State of NSW’s
appeal. Newcrest has sought leave to appeal this matter in the
High Court of Australia. The financial impact of the Court’s decision
is considered to be a 2010 financial year transaction and has not
been provided for in the 30 June 2009 financial statements, but
instead has been disclosed as a contingent liability.
There are no other matters or circumstances which have arisen
since 30 June 2009 that have significantly affected or may
significantly affect the operations of the Group, the results of
those operations or the state of affairs of the Group in subsequent
financial years.
NEWCREST MINING ANNUAL REPORT 2009 21
2008 – No. of incidents
2009 – No. of incidents
ii
45
43
iii
4
2
iv
1
0
v
0
0
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 Group. The Directors
are not aware of any environmental matters which would have a
materially adverse impact on the overall business of the Group.
Newcrest will be required to report on its greenhouse gas emissions,
energy consumption and energy production for the 2009 financial
year under the National Greenhouse and Energy Reporting Act
2007 (Cth). Newcrest has registered pursuant to the Act and
will be required to submit its first report by 31 October 2009.
Newcrest is closely following the developments of the Federal
Government’s proposed Carbon Pollution Reduction Scheme.
Proposed legislation was introduced into Federal Parliament
in May 2009 and is proposed to come into operation in July 2011
if the legislation is passed in its current form.
share rights anD options
During the year an aggregate of 638,308 rights and options were
exercised, resulting in the issue of 638,308 ordinary shares of the
Company at an aggregate consideration of $6.3 million. At the date
of this report there were 1,161,323 unissued shares under rights and
options (1,167,735 at 30 June 2009).
In order to prevent dilution of its share capital through the exercise
of rights and options the Company has determined that it will
buy the corresponding number of shares on market as and
when required.
rounDing oF amounts
Newcrest Mining Limited is a company of the kind referred to in
ASIC Class Order 98/100, and in accordance with that Class Order
amounts in the Directors’ Report and the Financial Report are
rounded to the nearest $100,000, except where otherwise indicated.
inFormation on Directors
Details of the Directors’ qualifications, experience and special
responsibilities are set out on pages 8–9.
Directors’ report
auDitor inDepenDence anD non-auDit services
category
A copy of the Auditor’s Independence declaration as required under
section 307C of the Corporations Act 2001 is set out on page 53.
During the year, additional accounting advice and other assurance
related services were provided by Ernst & Young (auditor to the
Company) – refer Note 33 to the financial statements. The Directors
are satisfied that the provision of these services did not impair
the auditor’s independence.
inDemniFication anD insurance
oF Directors anD oFFicers
Newcrest maintains a Directors’ and Officers’ insurance policy that,
subject to some exceptions, provides insurance cover to past, present
or future Directors, Secretaries or Executive Officers of the Group
and its subsidiaries. The Company has paid an insurance premium
for the policy. The contract of insurance prohibits disclosure of the
amount of the premium and the nature of the liabilities insured.
environmental regulation anD perFormance
The operations of the Group in Australia are subject to environmental
regulation under the laws of the Commonwealth and the States in
which those operations are conducted. It is the policy of the Group
to comply with all relevant environmental regulations in all countries
in which it operates including Indonesia, Papua New Guinea and Fiji.
The Group releases an annual Sustainability Report.
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 Group. The
environmental laws and regulations generally address the potential
impact of the Group’s activities in relation to water and air quality,
noise, surface disturbance and the impact upon flora and fauna.
The Group 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 Group.
The number of events reported in each category during the year
is shown in the accompanying table. In all cases environmental
authorities were notified of those events where required and
remedial action undertaken. No major environmental incidents
were recorded during the year and there was a small decrease
in the number of environmental incidents across the Group
compared with the previous year.
22 NEWCREST MINING ANNUAL REPORT 2009
Directors’ meetings
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each
of the Directors of the Company during the financial year are:
Director
Don Mercer
Ian Smith
Greg Robinson
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Bryan Davis (Resigned 30 October 2008)
Mick O’Leary (Resigned 30 October 2008)
Directors’ meetings
audit and risk
committee meetings
human resources
and remuneration
committee meetings
safety, health
and environment
committee meetings
a
10
9
10
10
10
10
10
7
2
3
b
10
10
10
10
10
10
10
7
3
3
a
–
–
–
4
4
4
3
–
–
–
c
–
–
–
4
4
4
3
–
–
–
a
4
–
–
2
4
4
1
2
2
2
c
4
–
–
2
4
4
2
2
2
2
a
–
–
–
3
–
–
4
3
1
1
c
–
–
–
3
–
–
4
3
1
1
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.
Directors’ interests
The relevant interest of each Director in the shares and rights of the Company, as at the date of this Report, is as follows:
chief entity or
related body corporate
number of
ordinary shares
nature of interest
number of rights
over ordinary shares
Director
Don Mercer
Ian Smith
Newcrest Mining Limited
Newcrest Mining Limited
Greg Robinson
Newcrest Mining Limited
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Newcrest Mining Limited
Newcrest Mining Limited
Newcrest Mining Limited
Newcrest Mining Limited
Newcrest Mining Limited
15,546
Direct and Indirect
4,235
4,235
18,105
16,185
4,235
10,185
–
Direct
Direct
Direct and Indirect
Indirect
Indirect
Indirect
–
–
359,593
80,053
–
–
–
–
–
NEWCREST MINING ANNUAL REPORT 2009 23
Directors’ report
MANAGEMENT DISCUSSION AND ANALYSIS (2)
1. overview
The 2009 financial year has been an eventful time with the
global economic contraction and subsequent financial market
destabilisation leading to extreme commodity price and currency
fluctuations. During this period Newcrest remained unhedged to all
major economic value drivers, namely gold, copper and oil prices
and the AUD:USD exchange rate. Over the 2009 financial year
Newcrest delivered a strong operational performance, completed
the purchase of a 50% share of Papua New Guinea (PNG) assets
from Harmony, issued $792.7 million in new equity and continued
on schedule with all project construction. Newcrest finished the
year with strong Underlying Profit (3) of $483.1 million and operating
cash flow (4) of $1,024.1 million.
The record Statutory Profit (5) for the year of $248.1 million was
an increase of $113.8 million on the prior year.
The production performance was robust and, overall, in line
with expectations for gold, producing 1.631 million ounces, and
higher for copper, producing 89,877 tonnes. The price for gold
increased in both USD and AUD terms but copper prices were
lower. Operating costs increased due in part to a falling AUD:USD
exchange rate and input cost prices remaining at higher levels
for most of the year. Although commodity prices and exchange
rates adjusted quickly to the economic turmoil, most input costs
adjust over a longer time period due to contract terms and lower
market liquidity.
During February and March 2009, Newcrest raised $792.7 million
of equity. The equity placement was conducted at a fixed price of
$27.00 per share, which represented a 12.9% discount to Newcrest’s
closing price on 30 January 2009. The funds raised were used
to reduce gearing. At the end of the financial year gearing reduced
to 2%. Newcrest is now in a position to increase project expenditure
and has some added capacity to consider growth opportunities.
During the year, Newcrest acquired a 50% interest in the
Morobe Mining Joint Venture in PNG for total consideration of
US$532.1 million (A$677.3 million). Combined with project spend,
principally on Ridgeway Deeps, the full year investing cash flows
were $1,381.6 million. Both Ridgeway Deeps and Hidden Valley
(PNG) are expected to be in production in the first quarter of
the next financial year. The major projects in pre-feasibility also
progressed well. The development of the second underground
deposit at Gosowong (Kencana 2) was approved for execution
and Cadia East has been advanced to feasibility. Prefeasibility and
concept work for Namosi (Fiji) and Wafi-Golpu (PNG) respectively,
continued with very positive results.
Exploration activity has increased during the year with more
expenditure on existing province potential and greenfield
investigation. There are many promising results that will require
continued focus in the year ahead. Exploration activity is in
Australia, Fiji, Indonesia, PNG, Peru, Canada and Nevada (USA).
(2) All figures in this report relate to businesses of the Newcrest Mining
Limited Group (‘Newcrest’ or ‘the Company’) for the 12 months ended
30 June 2009 (‘2009’) compared with the 12 months ended 30 June 2008
(the ‘prior year’ or ‘2008’), except where otherwise stated. All reference to
$ is a reference to Australian dollars unless specifically marked otherwise.
(3) Underlying Profit is profit after tax before hedge restructure and
close-out impacts attributable to members of the parent entity.
(4) Represents net cash provided from operating activities as disclosed
in the Cash Flow Statement.
(5) Statutory Profit is profit after tax attributable to members of
the parent entity. Record profit relates to continuing operations.
24 NEWCREST MINING ANNUAL REPORT 2009
2. Discussion anD analysis oF operating results
anD the income statement
2.1 profit overview
For the year ended 30 June 2009 Newcrest reported Underlying
Profit of $483.1 million, a decrease of 2% over the corresponding
year result of $493.9 million.
Statutory Profit for the year of $248.1 million was a record for
Newcrest and an increase of 85% on the corresponding year’s
result of $134.3 million. The Statutory Profit includes hedge
restructure and close-out impacts resulting from Newcrest’s
September 2007 equity raising and subsequent hedge book
close-out and debt repayment. These are non-cash items
that accounting rules require to be amortised over the original
hedge designation period.
Profit before tax, restructure and close-out impacts of $745.4
million was marginally higher than the prior year ($713.7 million),
however a higher effective tax rate in the current period resulted
in the reduction in Underlying Profit after tax.
Revenue increased by 7% for the year to $2,530.8 million, driven
principally by higher gold prices. Gold revenue was 18% higher
with higher gold prices compensating for lower production and
sales. The average gold price for the current period of A$1,169
per ounce was 28% higher than the same period last year. Copper
revenue decreased by 18% to $593.2 million. Overall copper sales
were 11% higher than the previous year but prices were substantially
lower. The average copper price for the year of A$2.89 per pound
was 26% lower than the corresponding period. The movement
in USD prices for gold and copper were mixed in the current year.
The average spot USD gold price was US$934 per ounce (2008:
US$821 per ounce) while copper dropped to US$2.36 per pound
(2008: US$3.53 per pound).
In the prior period, Newcrest incurred losses on delivered gold
hedges of $33.8 million. Newcrest closed out all of its remaining
gold hedge contracts in the 2008 financial year and consequently
there were no gold hedge impacts in Underlying Profit for the
current year.
Mine production costs were higher mainly due to increased
input costs and USD exchange effects. Many input costs did not
immediately react to the global financial crisis due to contract
terms and longer term pricing mechanisms. Diesel price fell
immediately but the falling AUD reduced this benefit substantially.
Other cost inputs increased with the dramatic slide in the AUD
against the USD but are now starting to reduce as contract terms
require repricing. The Varanus Island gas incident interrupted
Telfer’s contract gas supply resulting in an additional cost impact
in the current period of $8.6 million net of insurance proceeds.
Exploration expenditure charged to profit increased during the
current period in line with Newcrest’s greater exploration activity.
During the period Newcrest increased the focus on PNG, Fiji, Cadia,
Telfer and Gosowong.
The table below outlines the key differences between the current year and the corresponding period last year, described in more
detail later in this report.
underlying profit for the year ended 30 June 2008
changes in revenues:
Volume:
Gold
Copper
Price:
Gold
Copper
Silver
changes in mine costs:
Mine cost of sales:
Mine production cost
Deferred mining and inventory movement
Treatment, realisation and royalty
Telfer gas disruption costs
Depreciation
other costs:
Corporate administration
Exploration
Other revenue and Other income/(expense)
Losses on delivered hedges
Finance costs – ordinary activities
tax and minority interest:
Income tax expense
Minority interest
underlying profit for the year ended 30 June 2009
2.2 revenue
production volumes
Gold*
Copper
sales volumes
Gold
Copper
realised prices
Gold
Copper
average auD:usD
revenue
Gold
Copper
Silver
total sales revenue
* Includes pre-production ounces from Morobe Mining JV (225ozs).
$m
(116.8)
79.5
413.3
(207.5)
(0.8)
(78.4)
(63.7)
(0.7)
(8.6)
10.7
(11.7)
(11.4)
(14.5)
33.8
8.5
(37.6)
(4.9)
$m
493.9
167.7
(140.7)
4.7
(42.5)
483.1
12 months to
30 June 2009
30 June 2008
% change
oz
t
oz
t
A$/oz
A$/lb
$m
$m
$m
$m
1,631,183
89,877
1,637,385
93,077
1,169
2.89
0.7487
1,914.4
593.2
23.2
2,530.8
1,781,182
87,458
1,764,730
83,843
912
3.88
0.8964
1,617.9
721.2
24.0
2,363.1
(8.4)
2.8
(7.2)
11.0
28.2
(25.9)
(16.5)
18.3
(17.7)
(3.3)
7.1
NEWCREST MINING ANNUAL REPORT 2009 25
Directors’ report
MANAGEMENT DISCUSSION AND ANALYSIS
The USD gold price increases, coupled with a lower AUD:USD exchange rate, resulted in a significant increase in AUD gold revenue.
USD copper prices were significantly lower, and while partly mitigated by the lower AUD:USD exchange rate still resulted in a decline
in AUD copper revenue. Gold revenue represents 75.6% of Newcrest’s overall sales revenue (2008: 68.5%).
gold production and sales by site:
ounces
Cadia
Ridgeway
Gosowong
Cracow
Telfer
Morobe Mining JV
total
copper production and sales by site:
tonnes
Cadia
Ridgeway
Telfer
total
12 months to 30 June 2009
12 months to 30 June 2008
gold
production
297,889
234,298
400,220
69,443
629,108
225
1,631,183
gold
sales
gold
production
301,539
239,355
401,160
67,326
628,005
–
1,637,385
414,171
301,417
400,202
75,175
590,217
–
1,781,182
gold
sales
409,316
294,384
397,627
75,569
587,834
–
1,764,730
12 months to 30 June 2009
12 months to 30 June 2008
copper
production
28,083
28,889
32,905
89,877
copper
sales
28,643
29,662
34,772
93,077
copper
production
26,352
34,335
26,771
87,458
copper
sales
25,731
33,323
24,789
83,843
Total gold production decreased 8.4% to 1.631 million ounces, with
a subsequent reduction of 7.2% in sales volumes to 1.637 million
ounces. The overall production decrease of 149,999 ounces was
in line with guidance and mine plan expectations. Movements
by operation were:
– consistent production at Gosowong, with higher mill throughput
due to improved mill utilisation and ongoing grinding circuit
optimisation, offsetting lower grades and recovery. Significant
recovery improvements were experienced in June, following
the commissioning of the vertimill; and
– a 28.1% decrease of 116,282 ounces at Cadia Hill due to lower
grades and lower recoveries, consistent with the mine plan.
Cadia Hill open pit is expected to finish production in 2012;
– a 22.3% decrease of 67,119 ounces at Ridgeway due to lower
grade and recoveries. As anticipated, grade has continued
to decline with mine depth. The sublevel cave is now almost
exhausted and the ramp-up of Ridgeway Deeps has commenced;
– a 6.6% increase of 38,391 ounces from Telfer due to higher mill
throughput and improved recoveries, especially in the second
half of the year. Successful implementation of the shutdown
optimisation project, debottlenecking components of the
processing circuit and improved power station reliability
resulted in higher mill utilisation and mill throughput;
– a 7.6% decrease of 5,732 ounces from Cracow due to
lower-grade ore, offset by improved recoveries.
Total gold revenue increased by 18.3% to $1,914.4 million
(2008: $1,617.9 million) as a result of higher prices, partly offset
by the lower sales volumes. The average gold price of A$1,169 per
ounce was 28.2% higher than the prior year (A$912 per ounce).
Group copper production for the year was higher by 2.8% on the
prior period. Telfer performed strongly due to improved recoveries,
however Cadia Valley had slightly lower production due to lower
copper grades and associated recoveries.
Copper revenue reduced by 17.7% to $593.2 million due to lower
spot prices, partially offset by higher sales volumes from Telfer.
The average copper price of A$2.89 per pound was 25.9% lower
than the A$3.88 per pound in the prior year.
Silver revenue decreased by $0.8 million.
26 NEWCREST MINING ANNUAL REPORT 2009
2.3 costs
mine production costs – 2008/09
$m
mine production costs
– Employee Salaries
– Maintenance incl Contract Labour
– Mining Contracts
– Fuel & Lubes
– Utilities & Power
– Liners & Grinding Media
– Other Input Costs
Deferred mining costs
Inventory movements
Telfer gas disruption costs*
* Net of insurance proceeds.
Financial year 2008/2009
half-year comparison
31 Dec 2008
(h1)
30 Jun 2009
(h2)
555.6
93.6
134.4
52.1
66.6
39.1
34.8
135.0
50.4
(6.8)
3.9
542.1
85.4
129.2
70.1
43.2
27.2
48.3
138.7
10.1
5.8
4.7
Full year
2008/2009
30 June
2009
1,097.7
179.0
263.6
122.2
109.8
66.3
83.1
273.7
60.5
(1.0)
8.6
%
change
Fy08 v
Fy09
7.7
7.7
7.2
4.7
(8.5)
(2.1)
31.7
14.1
%
change
Fy09
h1 v h2
(2.4)
(8.8)
(3.9)
34.5
(35.1)
(30.4)
38.8
2.7
Mine production costs increased 7.7% to $1,097.7 million. Within
the financial year there were two distinct periods; the first half
year reflected an increasing cost environment whilst the second
half showed the start of lower costs (overall 2.4% lower H2 v H1).
In addition, the benefits of cost reduction initiatives implemented
are evident in the second half.
Newcrest’s cash costs continue to be in the lowest cost quartile
for global gold producers. Newcrest’s cash costs for the year
were US$350 per ounce ($A468 per ounce) compared with the
recent global average of US$489 (6) per ounce ($A653 per ounce).
The first half’s costs reflected the previous financial year’s agreed
labour rate increases, cost increases for key inputs including diesel,
power and maintenance coupled with the dramatic depreciation
of the AUD. The second half of the financial year started to show
a fall in most commodity cost inputs, with the exception of steel
parts, liners and grinding media. The supplier agreements in place
for these inputs generally take longer than six months to reflect
current market price conditions.
Labour costs in the second half were 8.8% lower reflecting
the discipline of managing workforce and contractor numbers.
Partly offsetting these were increases in contract mining costs
at Gosowong, Telfer and Ridgeway primarily due to increased
mining and crushing activity.
Telfer’s first-half costs were impacted by increased maintenance
in the process plant associated with the shutdown optimisation
project. An additional shutdown in December 2008 allowed Telfer
to adopt a new quarterly shutdown sequence which significantly
improved mill utilisation in the second half.
A significant contributor to the full-year cost increase was
the depreciation of the AUD against the USD. Gosowong’s costs
are predominantly USD based and around 25% of the Australian
operations costs before realisation charges are USD based
(FY08 average AUD:USD 0.90 versus FY09 average AUD:USD 0.75).
The impact for the Group in FY09 is approximately $50 million,
including approximately $20 million relating to Gosowong’s costs.
The second half declining cost input trend is expected to continue
for the remainder of 2009 calendar year as supplier agreements
are progressively renewed to reflect current market prices.
Costs drawn from the deferred mining account were $60.5 million
in 2009 compared to $24.5 million in 2008. This was the result
of lower waste movements at Telfer from the open pit and
an increased level of production from underground.
The inventory valuation credit of $1.0 million was the combined
impact of higher ore stockpiled from Telfer open pit offsetting
the drawdown of concentrate inventory at year end.
The Varanus Island gas incident interrupted Telfer’s contract gas
supply resulting in an additional $38.6 million cost for replacement
gas and diesel in financial year 2009. The total cost of the incident
which occurred on 3 June 2008 was $44.9 million. The net impact
after insurance proceeds is $8.6 million for the current financial
year. Newcrest is working with its insurers to pursue recovery
of the remaining costs associated with the incident.
Treatment, realisation and royalty costs
Realisation costs for the year of $153.6 million was an increase
of $2.4 million due to increased volumes of concentrate shipped
and the depreciation of the AUD versus the USD. Realisation costs
include shipping, TC/RCs, off the top metal deductions and price
participation. All these costs are priced in USD and declined during
the financial year. In AUD terms costs marginally increased.
Royalties of $56.1 million for the year were $1.7 million lower due
mostly to the lower revenues at Cadia Valley offsetting the impact
of the higher gold price.
Depreciation
Depreciation expense, included in cost of sales, decreased
by $10.7 million to $262.5 million, as the useful lives of assets
at Cadia Valley and Gosowong were reviewed and increased
in line with reserve increases. On a unit rate basis depreciation
expense increased due to the lower production levels.
(6) Source: GFMS Limited Precious Metals Cost Service.
NEWCREST MINING ANNUAL REPORT 2009 27
Directors’ report
MANAGEMENT DISCUSSION AND ANALYSIS
Corporate administration costs
Corporate expenses of $69.8 million (2008: $58.1 million) were higher in the current year due to increased salary costs and implementation
costs associated with two key company wide initiatives. The first initiative is a training program to lift the capability and competence
of all employees. The second is the restructure and streamlining of the organisation’s IT systems.
Exploration
Total exploration expenditure for the year was $109.3 million (2008: $76.8 million) with $57.8 million charged against income compared
to $46.4 million in the prior year. (Details of the nature and location of exploration expenditure is provided below in the cash flow section.)
Losses on delivered hedges
Due to Newcrest closing out its gold hedge book following the equity raising in September 2007, there were no losses incurred on delivered
hedges in the current year. In the prior year, there was a loss of $33.8 million relating to the period July 2007 to September 2007.
2.4 other revenue and other income/(expense)
Other Revenue and Other Income/(Expense) was $15.1 million (2008: $29.6 million).
$m
other income/(expense)
Profit/(loss) on sale of non-current assets
Net foreign exchange gain/(loss)
Fair value gain/(loss) on gold and copper derivatives
Fair value loss on gold lease rate swaps
Royalty refund
Other income/(expenses)
other revenue
other revenue and other income/(expense)
12 months ended
6 months ended
30 June 09
30 June 08
31 Dec 08
0.9
(32.6)
34.0
–
–
4.5
6.8
8.3
15.1
(0.6)
(20.3)
17.1
1.5
6.4
5.1
9.2
20.4
29.6
1.3
16.8
(4.1)
–
–
4.3
18.3
3.2
21.5
The foreign exchange loss of $32.6 million is due to the effect
of the AUD:USD exchange rate on USD denominated concentrate
debtors. Newcrest recorded a foreign exchange gain of $16.8 million
for the first half of the financial year as the AUD depreciated against
the USD. However, as the AUD strengthened in the second half
a loss of $49.4 million was incurred.
The fair value gain on gold and copper derivatives relates to
the movements in spot prices impacting the quotational period
adjustments in sales. Newcrest locks in the copper price for certain
concentrate shipments at the time of sale to minimise this impact.
Gold prices are not locked in at the time of shipment due to the
shorter quotational period for gold (usually one month for gold
versus three or four months for copper).
Other Revenue mainly comprises of interest revenue.
The decrease was due to falling interest rates and a reduced amount
of cash compared to the corresponding period.
2.5 Finance costs
As a result of the Equity Raisings in February and March 2009,
Newcrest reduced its debt levels resulting in lower gross
borrowing costs of $39.5 million (2008: $45.6 million). Interest of
$34.9 million (2008: $43.4 million) was expensed and $4.6 million
(2008: $2.2 million) was capitalised. The interest capitalised in
the current year relates to the Hidden Valley development project.
2.6 income tax expense
The income tax expense in the current year on Underlying
Profit was $228.3 million, resulting in an effective tax rate of
30.6%. The prior year tax expense on Underlying Profit was
$190.7 million with an effective tax rate of 26.7%. The effective
tax rate in the prior year benefited from a higher research and
development allowance.
28 NEWCREST MINING ANNUAL REPORT 2009
2.7 hedge restructure and close-out impacts
Losses on Restructured and Closed-Out Hedges
During the 2008 financial year, Newcrest closed out its gold hedge book and realised the gold hedging losses and extinguished any future
obligation with respect to the hedge contracts.
Accounting standards require the accumulated losses on the contracts closed out to remain deferred in the Hedge Reserve within equity.
The losses in the Hedge Reserve will then be transferred to the Income Statement in future periods in line with the original sales to which
they were designated. This resulted in a loss release profile as noted below. A pre-tax loss on restructured and closed out hedge contracts
of $352.0 million has been recognised in the year (2008: $314.1 million).
There are no liabilities remaining for the closed-out contracts and the profit impacts on the current and future periods are all non-cash.
current
2009
352.0
(105.6)
246.4
to be released in future periods
2010
294.9
(88.5)
206.4
2011
152.8
(45.8)
107.0
2012
total
7.2
(2.2)
5.0
454.9
(136.5)
318.4
$m
Total hedge losses
Tax effect
After tax hedge losses
Other close-out related gains/(losses)
The other close-out related impacts include:
– fair value loss of $25.1 million on gold put options (2008:
$39.0 million). Newcrest purchased the gold put options
following the close out of the gold hedge book in September
2007 in order to manage its exposure to commodity price risk;
– in the prior year, there was a loss on gold forward sales contracts
of $178.7 million. These contracts were all closed out in 2008
and had no impact in the current year and will have no impact
in future years; and
– a foreign exchange gain of $41.4 million (2008: $39.0 million)
on US Dollar denominated borrowings designated as cash flow
hedges. This relates to the gain crystallised on the repayment
of US Dollar denominated borrowings using proceeds from the
equity raising undertaken in September 2007. The total gain
(some of which was released in prior years) is being released
to the Income Statement over the original designated repayment
profile, as shown below:
$m
FX gains on US dollar borrowings
Tax effect
After tax deferred FX gains
current
to be released
in future periods
2009
41.4
(12.4)
29.0
2010
12.0
(3.6)
8.4
total
12.0
(3.6)
8.4
NEWCREST MINING ANNUAL REPORT 2009 29
Directors’ report
MANAGEMENT DISCUSSION AND ANALYSIS
3. Discussion anD analysis oF the
cash Flow statement
3.1 cash Flow – operating activities
The Group generated operating cash flows in excess of $1 billion for
the second consecutive year. Strong operational performance and
high gold prices drove the operating cash flow of $1,024.1 million,
which was slightly higher than the prior year ($1,018.1 million).
The falling copper price and higher cost environment partly
mitigated this result.
Higher tax instalments have been paid in Indonesia during the
year reflecting increased profitability from Gosowong.
3.2 cash Flow – investing activities
Net cash used in investing activities for the year of $1,381.6 million
was an increase of $887.7 million on the prior year. The increased
expenditure was associated with the acquisition of 50% of the
Morobe Joint Venture from Harmony for $677.3 million (US$532.1
million), and construction in Cadia Valley of $250.0 million. Both
Hidden Valley and Ridgeway Deeps will be completed during the
first half of the 2010 financial year. Gosowong’s Kencana 2 project
is now in construction and Cadia Underground is heading towards
final feasibility approval. The investing cash flows during the
year were:
12 months ended 30 June 2009
Capital Expenditure:
Sustaining
Development
Projects – Constructions (i)
Projects – Studies (ii)
Morobe Mining JV: (iii)
Acquisition payments
Construction
Exploration
Other investing activities
total
$m
103.1
25.5
344.0
136.4
609.0
470.6
190.7
661.3
109.3
2.0
1,381.6
(i) Includes $250.0 million for Ridgeway Deeps development and
$59.7 million on underground development at Kencana.
Exploration expenditure
In line with guidance provided by Newcrest for FY2009, exploration
expenditure has increased over the prior period. Greenfield
exploration has focused on areas in USA, Australia, Fiji and PNG.
The brownfields exploration effort included $13.4 million in the
Gosowong area and $4.7 million in the Morobe province in PNG.
Reserve definition expenditure is focused on opportunities to
improve existing resource positions and converting these resources
to reserves. During the year this included:
– Cadia – Exploration drilling to extend the Cadia East
mineralisation and drilling of the Ridgeways Deeps Lift 2
to confirm the mineralisation below the current block cave;
– Telfer – Underground drilling on the Vertical Stockwork
Corridor and further drilling of the O’Callaghans deposit
(tungsten/molybdenum); and
– Gosowong – Continued drilling at Kencana to extend
mineralisation below the existing mine and north of the
K1 deposit.
A breakdown of exploration expenditure by nature was:
12 months ended 30 June 2009
Greenfields
Brownfields
Reserve Definition
– Cadia
– Cracow
– Telfer
– Gosowong
– Marsden
– Namosi, Fiji
– Morobe, PNG
total
A breakdown of exploration expenditure by region was:
12 months ended 30 June 2009
Australia
Indonesia
Papua New Guinea
Fiji
Americas
$m
25.4
37.5
11.4
2.2
8.9
8.6
1.2
7.7
6.4
109.3
$m
51.8
22.1
16.0
9.9
9.5
109.3
(ii) Includes pre-feasibility and feasibility for the Cadia East project
total
of $115.1 million.
(iii) Total payments of $661.3 million (US$520.8 million) represent Newcrest’s
investment in the Morobe Mining Joint Venture and for the Group’s
share of construction expenditure at Hidden Valley. The Group share
of exploration expenditure of $16.0 million (US$11.3 million) is included
in Exploration.
3.3 cash Flow – Financing activities
Cash flows from financing activities were $634.2 million inflow
(2008: $480.3 million outflow) with major movements in cash
flows including:
– $792.7 million net proceeds from the equity raising in February
and March 2009; and
– $40.1 million dividend payment to members of Newcrest
and $19.9 million dividend payment to the minority interest.
30 NEWCREST MINING ANNUAL REPORT 2009
4. Discussion anD analysis oF the balance sheet
The gearing ratio of net debt to net debt plus equity decreased
to 2% (30 June 2008: 8%) as shown below:
$m
Total debt
Less cash and cash equivalents
Net debt
Equity
Net debt and equity
Gearing (net debt/net debt and equity)
30 June
2009
450.5
(366.4)
84.1
4,358.4
4,442.5
2%
30 June
2008
368.6
(77.5)
291.1
3,251.9
3,543.0
8%
4.3 liquidity and Debt Facilities
As at 30 June 2009, Newcrest has undrawn bilateral debt
facilities of US$969.0 million (30 June 2008: US$969.0 million)
with 14 banks. These facilities mature in the second half of the
2010 financial year. Refinancing these loans will commence during
the first half of the 2010 financial year. The facility and number
of banks will be reduced due to an assessment of required liquidity,
the conservative balance sheet structure and the cost of undrawn
facilities. Newcrest aims to effectively ‘roll over’ these debt facilities
(subject to market pricing) maintaining them as bilateral facilities,
predominantly with existing bilateral banks.
Newcrest has US$350 million of long-term senior unsecured
notes issued into the North American Private Placement market.
The notes, comprising 5 tranches, have a repayment profile
from May 2012 to May 2020. The current plan is for this facility
to continue until maturity.
4.1 net assets and total equity
Newcrest’s Net Assets and Total Equity increased during the period
by $1,106.5 million to $4,358.4 million. This was mostly due to the
proceeds from the equity raising and the net profit for the year.
Property, plant and equipment and exploration, evaluation
and development had a combined value on the balance sheet
of $3,911.2 million as at 30 June 2009 representing an increase
of $1,036.0 million on the prior year. This was mostly due to
the assets acquired as part of the Morobe Mining Joint Venture
and expenditure on construction of the Ridgeway Deeps mine.
Total deferred mining expenditure on the balance sheet at 30 June
2009 was $302.8 million with the majority relating to the Cadia Hill
open pit, which is expected to amortise over the next 3 years.
Newcrest also has carry forward tax losses of $403.5 million
recognised as an asset as at balance date. This is a reduction
of $87.2 million from last year. These relate to the Australian
tax-consolidated group and include the hedge losses realised
with the close-out of the hedge book and gold bullion forward
sales contracts in the 2008 financial year. At the current level
of profitability, we expect operating tax losses to be fully utilised
in the next 3 to 4 years.
4.2 net Debt and gearing
Net debt, comprising total borrowings less cash, of $84.1 million
(30 June 2008: $291.1 million) decreased by $207.0 million as
shown below:
net debt at 30 June 2008
Retranslation of USD debt
Increase in cash balances
Net movement in finance leases
net debt at 30 June 2009
$m
291.1
68.4
(288.9)
13.5
84.1
The increase in cash balances was as a result of the Equity Raising
in February and March 2009. A portion of these funds was used
to repay the drawdown on the USD Bilateral Loan which was used
to fund the acquisition of the Morobe Mining Joint Venture.
NEWCREST MINING ANNUAL REPORT 2009 31
Directors’ report
REMUNERATION REPORT
contents
1.
Introduction
2. Remuneration Overview 2008–09
3. Human Resources and Remuneration Committee
4. Non-Executive Directors’ Remuneration
5. Executive Directors’ and Key Management
Personnel Remuneration
6. Relationship of Incentives to Newcrest’s
Financial Performance
7. Executive Service Agreements
8. Remuneration Details
9. Options and Rights Held by Executive Directors
and Key Management Personnel
32
32
33
34
34
43
44
46
48
1. introDuction
1.1 about this report
This Remuneration Report forms part of the Directors’ Report.
It outlines the overall remuneration strategy, framework and
practices adopted by Newcrest Mining Limited (the Company)
for the period 1 July 2008 – 30 June 2009 and has been prepared
in accordance with Section 300A of the Corporations Act 2001
and its regulations. This entire Remuneration Report is designated
as audited.
In accordance with the Corporations Act 2001, remuneration
details are disclosed for the Group’s Key Management Personnel
which includes the five most highly remunerated executives
of the Company and the Group.
Key Management Personnel are those persons having authority
and responsibility for planning, directing and controlling the major
activities of the Company and the Group, directly or indirectly,
being the Company’s Directors, whose names appear in Table 10,
and the Executive General Managers whose names appear
in Table 11.
In sections of this report where remuneration arrangements
are dealt with separately for Directors and for Executive General
Managers, the term Directors is used to refer to all directors,
Executive Directors refers to the Managing Director and Director
Finance and the term Key Management Personnel refers to
Executive General Managers only.
1.2 executive summary
In 2008–09, the Company’s remuneration policy was:
– to provide market competitive levels of remuneration
to employees;
– to encourage, recognise and reward high performance;
– to adopt Company and personal performance measures
which align performance incentives with the interests of
shareholders; and
– to adopt a remuneration structure that provides the appropriate
balance in risk and reward sharing, between each participating
employee and the Company.
32 NEWCREST MINING ANNUAL REPORT 2009
page no.
Key developments during the year in the implementation and
administration of the remuneration policy were:
1.2.1 The Board reviewed the membership and expanded the
role of the Human Resources and Remuneration Committee
(previously referred to as the Remuneration Committee)
in recognition of the increasing importance of these matters
to achievement of the Company’s goals.
1.2.2 The fixed component of remuneration, as a proportion
of overall remuneration for Executive Directors, Key
Management Personnel and senior management, was reduced,
and at-risk remuneration related to incentives – both short
and long term – as a proportion of overall remuneration were
increased, in accordance with the principles outlined above.
1.2.3 Key changes were introduced to the Company’s employee
incentive programs. The Medium Term Incentive and Salary
at Risk programs previously offered to employees by the
Company were terminated – in effect replaced by the new
Short Term Incentive Deferral Plan, designed to provide
a combination of up-front and deferred cash and equity
remuneration to participants, based on both Company
and personal performance-related measures.
1.2.4 The Long Term Incentive employee share plan was again
offered, as in previous years, but (in view of the deferred
equity component available under the Short Term Incentive
Deferral Plan), participation was limited to a smaller
number of senior executive employees, with newly adopted
performance measures related to Company performance
in the areas of reserves growth, comparative costs and
return on capital employed.
2. remuneration overview 2008–09
2.1 Key changes in 2008–09
In 2008–09, the Board introduced changes to the structure,
role and responsibilities of the Company’s Remuneration
Committee, and to the Company’s cash and equity incentive
remuneration schemes.
Changes to the Remuneration Committee have been introduced
to ensure that the Company through the Board continues to
consider and determine remuneration issues in accordance
with the Company’s remuneration policy and strategy, with an
appropriate balance of Board and Board Committee involvement.
Details of the role and composition of the newly formed Human
Resources and Remuneration Committee are set out in section 3
of this Remuneration Report.
Changes to cash and equity incentive remuneration have been
introduced to ensure that the Company continues to implement
its remuneration policy and strategy, outlined below in section 2.2
of this Remuneration Report. Details of changes to the Company’s
cash and equity incentive schemes are set out in section 5.4.
2.2 remuneration policy and strategy
The Company’s remuneration policy and strategy is to provide
market-competitive levels of remuneration for all employees,
including Executive Directors and Key Management Personnel,
having regard to both the level of work and the impact that
those employees can potentially have on Company performance.
The policy also seeks to align the interests of employees and
shareholders by linking incentives and performance measures
to both Company and individual performance, to encourage
retention of capable employees and to achieve an appropriate
balance of risk and reward.
2.3 non-executive Directors
Non-Executive Directors’ fees are set based upon the need
to attract and retain individuals of appropriate calibre, reflecting
the demands of the role and prevailing market conditions.
3.2 Duties and responsibilities
Duties and Responsibilities are set out in the Committee Charter
(Charter). The Charter is available on the Company’s website
www.newcrest.com.au.
Non-Executive Directors’ fees, which are reviewed every 2 years,
were reviewed by the Board in December 2008 and adjusted with
effect from 1 January 2009. Details of these changes are set out
in section 4 of this Report.
In order to maintain independence and impartiality, Non-Executive
Directors do not receive any performance-related remuneration.
2.4 executive Directors and Key management personnel
Executive Directors’ and Key Management Personnel
remuneration comprises both a fixed and variable component.
Fixed remuneration is set with reference to fixed remuneration
paid by a comparator group of companies for comparable roles.
Equity remuneration in 2008–09 was awarded under the
Long Term Incentive employee share plan which was offered
as in previous years, but with newly adopted performance
measures representing a significant change to the basis on
which the incentive is performance-measured and awarded.
The Short Term Incentive Deferral Plan which is designed to
provide a combination of up-front and deferred cash and equity
remuneration to participants, was offered for the first time.
The Company’s Medium Term Incentive and the Salary at
Risk cash incentives were discontinued for Executive Directors
and Executive General Managers in 2008–09.
Details of the above incentive schemes and key changes are
set out in section 5.4 of this Report.
3. human resources anD remuneration committee
3.1 role of the human resources and remuneration committee
In 2008–09 the Board reviewed and revised the role and
composition of its Remuneration Committee, now called the
Human Resources and Remuneration Committee, and adopted a
new Charter setting out the Committee’s duties and responsibilities.
Prior to the Board implementing the above changes, the former
Remuneration Committee comprised all Non-Executive Directors
and was chaired by the Chairman of the Board. In this form, the
Committee made all key decisions on behalf of the Board with
delegated authority within the terms of its Charter.
The newly formed Human Resources and Remuneration Committee
has a smaller number of members and does not hold the Board’s
delegated authority in relation to remuneration and other matters.
Its current role is to review, advise and formulate recommendations
to the Board in relation to matters within its Charter, to refer
these to the Board for determination, and to oversee implementation
by management of the Board’s decisions on remuneration and
related matters.
The Human Resources and Remuneration Committee
continues to have responsibility for approving and overseeing
the implementation of the Company’s human resources and
remuneration policies and practices. However, its role has been
expanded to cover wider employee and human resource issues
including recruitment, retention, the Company’s behavioural and
cultural framework and performance management practices.
The key duties and responsibilities of the Committee are to assist
the Board in the discharge of its responsibilities for oversight
and approval of the human resources policies and practices of
the Company through considering and making recommendations
to the Board in relation to:
– the oversight of organisational design and human capability
at Newcrest commensurate and consistent with its strategic
goals including:
a. its recruitment strategies and practices;
b. the identification of talent including training and development;
c. retention and succession; and
d. diversity;
– the behavioural and cultural framework and practices
of the Company;
– the human resources and remuneration strategies, policies
and practices of the Company;
– the remuneration framework for all employees including,
in particular, Key Management Personnel, Executive Directors
and Non-Executive Directors;
– the remuneration levels for Directors and Key Management
Personnel and contract terms, incentive arrangements, retirement
and termination entitlements for all Key Management Personnel;
– the implementation and administration of major components
of the Company’s remuneration strategy such as superannuation,
share plans, incentive and bonus payments; and
– performance management practices and outcomes.
3.3 composition
The Human Resources and Remuneration Committee is appointed
by the Board. It comprises four Non-Executive Directors: the
Chairman of the Board, Don Mercer, who acts as the Committee
Chairman; Vince Gauci; Rick Lee and Tim Poole. The Executive
Directors, the Executive General Manager People, Communication
and Environment and specialist external consultants (as required)
attend by invitation.
Non-Executive Directors are permitted to consider remuneration
arrangements applicable to themselves pursuant to an ASIC
relief order. However, they do not participate in any discussions
or decisions taken by the Committee relating to their personal
remuneration arrangements.
A minimum of two Committee members is required for a quorum.
3.4 meetings
The Committee meets as required but must meet at least three
times a year to review the structure and implementation of the
Company’s remuneration strategy including:
– fixed remuneration;
– at risk remuneration including:
– short-term incentive (STI) plans; and
– equity-based remuneration.
Each of these components of remuneration is described
later in this Remuneration Report.
NEWCREST MINING ANNUAL REPORT 2009 33
Directors’ report
REMUNERATION REPORT
4. non-executive Directors’ remuneration
– following the expansion of the role of the Human Resources
4.1 policy – independence and impartiality
In order to maintain impartiality and independence, Non-Executive
Directors do not receive any performance-related remuneration
and are not entitled to participate in the Company’s employee
cash and equity remuneration schemes.
4.2 Fixed Fees
Non-Executive Directors, including the Chairman, are paid fixed
fees for their services to the Company. Those fees are inclusive of
any contribution to superannuation that a Non-Executive Director
wishes to make or which the Company is required by law to make
on behalf of a Non-Executive Director. The level and structure
of fees is based upon:
– the need for the Company to be able to attract and
retain Non-Executive Directors of an appropriate calibre;
– the demands of the role; and
– prevailing market conditions.
The aggregate amount of fees paid is within the overall
amount approved by shareholders in general meeting. The last
determination made was at the Annual General Meeting held on
1 November 2007, at which shareholders approved an aggregate
amount of $1,800,000 per annum.
Fixed Fees paid to Non-Executive Directors in 2008–09 are set
out in Table 10.
4.3 additional services
Under the Company’s Constitution, Non-Executive Directors
may be remunerated for additional services, for example, if
they undertake specialist or consulting work on behalf of the
Company outside the scope of their normal Director’s duties.
No fees for such services were paid to Non-Executive Directors
during 2008–09, other than Committee membership fees which
are discussed below. Rule 59 of the Company’s Constitution
expressly states that committee work undertaken by a Director
constitutes additional services.
In addition to fixed fees, Non-Executive Directors are paid for
participation on Board Committees. Details of Board Committee
fees paid during 2008–09 are included under the heading
‘Committee Fees’ in Table 10.
4.4 review of non-executive Director Fees
In line with the Company’s practice of reviewing Non-Executive
Director remuneration every 2 years, the Company undertook
a review of its Non-Executive Directors’ fees in December 2008
and determined to adjust those fees based on benchmarking
against independent Non-Executive Director fees paid by other
ASX Top 40 Companies.
As a result of this review, the following adjustments were
made to Non-Executive Director remuneration, effective
from 1 January, 2009:
– the base fees payable to the Board Chairman and each
Non-Executive Director were increased to $480,000
(from $450,000) and $160,000 (from $150,000) per
annum respectively;
– fees payable to Audit and Risk Committee members were
increased to $35,000 (from $30,000) and $17,500 (from $15,000)
for the Committee chair and Committee members respectively;
– fees payable to the Safety Health and Environment
Committee Chair and Committee members remained
unchanged at $30,000 and $15,000 respectively; and
34 NEWCREST MINING ANNUAL REPORT 2009
and Remuneration Committee, members are paid at the same
level as for the Safety Health and Environment Committee,
namely $30,000 for the Chair and $15,000 for each member.
In line with the Company’s practice, the Board Chairman will
not receive any additional remuneration for work undertaken
as Chair of the Human Resources and Remuneration Committee.
4.5 requirement for Directors to hold shares
All Directors are required to hold shares in the Company. The
number of shares to be held and the timeframe in which they
are to be acquired are determined by the Board. Acquisition
must comply with the Company’s Securities Dealing Policy.
4.6 retirement benefits
During 2003, the Board made a decision to discontinue the
practice of paying Non-Executive Directors a retirement benefit
with effect from 31 December 2003. Each of the Non-Executive
Directors in office at that time, agreed to have those benefits,
consisting of a cash payment and the amount of each individual’s
Company-funded superannuation, frozen at 31 December 2003.
In 2008–09, the last frozen benefits were paid to Bryan Davis
($221,289) upon his retirement from the Board. No other Non-
Executive Directors are eligible to receive a retirement benefit.
5. executive Directors’ anD Key management
personnel remuneration
5.1 executive reward structure
The Company’s executive reward structure consists of the following
three elements:
– fixed remuneration;
– at-risk cash remuneration; and
– at-risk equity-based remuneration.
In 2008–09, the Company retained the remuneration elements
outlined above for Executive Directors and Key Management
Personnel. However, significant changes were made to how
they were delivered, compared with recent years.
5.1.1 Salary at Risk (SaR)
SaR was an annual cash incentive plan, under which a cash amount
calculated as a percentage of each participant’s fixed remuneration
was payable, dependent on Company and personal performance
measures in the preceding financial year (1 July–30 June). It was
offered to Executive Directors, Key Management Personnel and
senior managers for the last time in relation to the 2007–08
performance period and has been discontinued as an incentive
scheme. A summary of key elements of the SaR is set out in
Table 1 of this Report.
5.1.2 Medium Term Incentive (MTI)
The MTI equity incentive scheme, which offered participants
conditional rights to receive ordinary fully paid shares in the
Company after a 3 year vesting period – based on the Company’s
Total Shareholder Return (TSR) performance against a comparator
group of companies in the financial year immediately prior to the
date of grant of those rights – was not offered to Executive Directors
and Executive General Managers in 2008–09. It has now been
discontinued as an incentive scheme. Restricted rights issued
to Executive Directors and Key Management Personnel under
the MTI in prior periods are unaffected by this decision.
Table 3 contains a summary of the MTI’s key features.
5.1.3 Long Term Incentive (LTI)
The LTI equity incentive scheme was offered to Executive
Directors and Key Management Personnel in 2008–09. However,
the Company performance measures in 2008–09 changed from
the Company’s comparative Total Shareholder Return (TSR) over
a 3 year vesting period, to three equally weighted performance
measures, being:
– Reserves Growth;
– Comparative Cost Position; and
– Return on Capital Employed (ROCE).
Each LTI measure was chosen by the Board as it is a key driver
of Company performance. Reserves Growth and Comparative
Cost Position being drivers of shareholder value in a gold mining
company, and ROCE being a direct measure of capital efficiency.
These changes only apply to any new grants made under the
LTI. The previous TSR-based performance measures continue
to apply to rights issued under the LTI plans in prior years.
Table 4 contains a summary of the LTI’s key features.
5.1.4 Short Term Incentive (STI) Deferral Plan
The STI Deferral Plan is a new incentive plan, introduced by
the Board following an independent review of the Company’s
reward strategy in 2008 and is applicable from the 2008–09
year. The aim of the STI Deferral Plan is to help drive performance
within the Company by providing a vehicle for short-term
management and executive reward and through the deferred
component, retention and continuing performance. The STI
Deferral Plan combines elements of each of the Salary
at Risk and the Medium Term Incentive plans.
Under the Plan, eligible employees are granted an up-front
entitlement (two thirds) and deferred entitlement (one-third),
the amount of which is based on a percentage range of each
participant’s fixed remuneration, and is performance-tested
against a combination of personal and Company performance
measures. The up-front component is awarded to participants
without any restriction. The deferred component is subject
to restrictions for a period of 2 years after it is conferred.
The Plan provides that the up-front component and deferred
component may be taken at each participant’s election as either
cash or shares or as a combination of cash and shares. The Board
has determined, however, that entitlements under the Plan offered
for the 2008–09 year will be restricted to cash entitlements, and
that no shares and no entitlement to elect to take shares rather
than cash will be offered due to continuing uncertainty with respect
to future treatment and in particular deferral of tax, on options and
rights to shares under employee incentive schemes, following the
Federal Government’s Budget announcement on 12 May 2009.
In respect of the 2008–09 year, STI at-target performance
for Key Management Personnel, was set at sixty percent of fixed
remuneration. Fifty percent of the target depended on Company
performance and fifty percent on personal performance against
a set of Key Performance Indicators established with the Managing
Director for Key Management Personnel. The Company performance
measures and outcomes for 2008–09 are set out in Table 8.
Table 5 contains a summary of key features of the STI Deferral Plan.
5.2 board policy and strategy on executive remuneration
The Board has adopted a policy and strategy on remuneration
which apply to Key Management Personnel and the Executive
Directors. The structure of remuneration arrangements for
these Company employees is, in broad terms, no different
from those for other senior management in the Company.
The main differences relate to the weighting and trigger points
for the receipt of different components of their remuneration.
The key principles of the Executive reward strategy during
2008–09 were:
– to provide market competitive levels of remuneration
to employees having regard both to the level of work
and to the impact those employees can potentially
have on the Company’s performance;
– to reward and recognise the personal performance
of employees;
– to adopt performance measures which align performance
incentives of employees with the interests of shareholders;
– to retain capable employees; and
– to adopt a remuneration structure that provides the appropriate
balance in risk and reward sharing, between each participating
employee and the Company.
5.3 Determining Fixed remuneration
The Board annually reviews and determines fixed remuneration
for the Executive Directors. The Managing Director does the same
with respect to Key Management Personnel, who in turn review
and recommend fixed remuneration for other senior management,
to the Managing Director.
The Company drew on the services of independent and specialist
remuneration consultants in formulating recommendations
on fixed remuneration for Executive Directors and Key
Management Personnel.
Newcrest’s policy is to encourage employees to strive for high
performance by aligning personal reward with performance.
In 2008–09, the Board’s remuneration policy was to position
Newcrest as highly competitive in the market for fixed
remuneration, and to use variable remuneration as the key
differentiator – both to attract and retain high performers.
5.4 Determining variable remuneration
The Board takes the view that employee incentive schemes
are important elements of remuneration which provide tangible
incentives to employees to improve the Company’s performance
in both the short term and the longer term, for the benefit
of shareholders.
To ensure that Newcrest’s remuneration policy fully supports
the Company’s commitment to high performance, and that
high-calibre talent continues to be attracted, remuneration
levels must be competitive – but oriented more towards
variable, performance-based incentives.
Accordingly, the proportion of total remuneration related to
incentives – both short and long term – was increased in 2008–09.
At the same time, the proportion of fixed remuneration fell.
Newcrest’s policy is to remain competitive with fixed remuneration
levels against comparative companies – major listed companies
in Australia and global mining companies – but to differentiate the
company via its performance-related incentives. We thus expect
to attract more people – particularly senior executives – who seek
to deliver high performance, recognising the higher levels of risk
and reward that this entails.
NEWCREST MINING ANNUAL REPORT 2009 35
Directors’ report
REMUNERATION REPORT
5. executive Directors’ anD Key management personnel remuneration (continued)
The MTI and SaR programs were terminated, and replaced by the new STI Deferral plan (see 5.1.4 above).
The STI Deferral Plan is a short-term incentive program, based on both company and performance related measures (similar to
those contained in the previous SaR), and incorporating a deferral element: one-third of the awarded STI each year will be deferred
for 2 years, held either as cash or shares.
The STI Deferral Plan will apply in respect of both individual and Company performance for the 2008–09 financial year, with incentive
payments (on the two-thirds upfront entitlement) expected to be made in October 2009.
The new LTI (see 5.1.3 above) complements the STI Deferral Plan with measures that help further drive performance within Newcrest.
5.4.1 Salary at Risk (SaR)
Table 1 summarises key features of SaR offered in 2007–08. As noted elsewhere in this Report, SaR has been discontinued as an incentive
and has been succeeded by the STI Deferral Plan.
table 1: salary at risk
summary of sar
What is SaR?
An annual cash incentive plan linked to both personal performance and Company
performance measures.
Who participates in the SaR?
Employees in permanent full-time management positions, Senior Management, Executive General
Managers, the Director Finance and the Managing Director.
Why does the Board consider the
SaR an appropriate incentive?
Company and individual performance criteria were chosen so that each SaR participant has an
incentive to achieve high personal performance and to contribute to high Company performance.
What are the key features of the SaR?
Award of cash incentives dependent on achievement (1) Company performance measures
and (2) personal performance measures in each case known as SMART (Specific, Measurable,
Achievable, Relevant and Time-bounded) objectives.
Actual award of SaR results directly from the actual measured performance achieved at year’s
end, and is paid in November each year in relation to the prior year’s financial performance.
What are the Performance Conditions?
Company performance measures relate to:
– safety:
– earnings; and
– costs; plus
– one further discretionary Company performance measure determined annually.
Personal performance measures relate to:
– three SMART objectives in key areas not being part of an employee’s day to day job; and
– a fourth discretionary SMART objective developed by each participant’s manager.
These four objectives are agreed annually between participant and manager under the
Company’s Work Performance System (WPS) and/or documented on a SaR Calculation
Worksheet held in a secure environment on the Newcrest HR Portal. Each performance measure
(other than the discretionary measure) has an upper limit that caps the performance measure
and a threshold below which the measured performance is zero.
Is SaR awarded when Company
performance falls below the minimum
threshold performance level?
An award may be made in these circumstances if a participating employee has satisfied the one
discretionary Company performance measure and achieved a positive outcome in their personal
performance measures.
What percentage of base salary may
be awarded as SaR?
The Executive Directors, and Key Management Personnel may receive between 0% and 120%
of Fixed Remuneration depending on performance. Senior management and other participating
employees receive varying percentages set according to the strategic value and seniority
of their roles.
What is the performance measurement
testing period?
1 (financial) year.
How is a participant’s entitlement
to SaR calculated?
Performance against Company SMART objectives is measured in the range of 0% to 125%
and a minimum performance threshold must be exceeded to achieve a positive outcome.
Overall Company performance is measured as the simple average of achieved performance
against the four Company SMART objectives.
Performance against each personal performance objective is measured on a scale of 0%–160%
and the overall personal performance is measured as the simple average of the outcomes on the
above four personal measures.
Overall performance is calculated as Company performance multiplied by personal performance.
The actual award of SaR is calculated by multiplying the overall performance rating by a
participating employee’s target SaR.
36 NEWCREST MINING ANNUAL REPORT 2009
5.4.2 Equity-Based Remuneration
The Board reviews and adjusts on an annual basis the content and balance of equity-based remuneration to sharpen the effectiveness
of equity incentives and to recognise the potential impact on the Company of very senior employees.
All equity-based remuneration is ‘at risk’ and will lapse or be forfeited, in the event that minimum prescribed performance conditions
are not met by the Company or individual employees, as applicable.
The amount of equity remuneration received by employees is performance dependent and will vary according to the extent to which
applicable Company and individual performance measures are met.
The Board has directed that all shares forming part of the Company’s equity remuneration are to be bought on-market by the Company
(rather than being issued by the Company as new capital) to avoid any dilution of shareholder value.
Newcrest’s Securities Dealing Policy prohibits the use by employees of derivatives such as caps, collars, warrants or similar products in
relation to Newcrest securities, including shares acquired under the Company’s equity incentive schemes, whether or not they are vested.
The Directors and the Company Secretary are not permitted to enter into margin loans in relation to Newcrest securities at any time
and other designated employees must notify the Company if they intend to enter into such transactions. The Securities Dealing Policy
forms part of each employee’s terms of employment and is binding upon each employee. Compliance by Executive Directors and Key
Management Personnel is monitored through the Company’s Compliance Assurance Questionnaires and certification process each year.
Table 2 shows the composition of equity-based remuneration for 2008–09.
table 2: equity-based remuneration as a percentage of Fixed remuneration for executive Directors and Key management personnel
Total Equity-based Remuneration
(maximum award)
100%
100%
60%
managing
Director
Director
Finance
Key management
personnel
table 3: medium term incentive (mti)
summary of mti
What is the MTI?
An annual incentive plan under which eligible employees are granted rights to receive
ordinary fully paid shares in the Company (Restricted Rights). The award of Restricted Rights
is determined by the Company’s performance in the financial year immediately prior to the date
the award is granted. Once awarded, the Restricted Rights vest at the end of 3 years provided
the employee is employed by the Company throughout the vesting period (subject to limited
exceptions outlined below) and achieves minimum acceptable personal performance.
Who participates in the MTI?
The Executive Directors, Key Management Personnel, senior management and other selected
high-performance personnel.
Why does the Board consider the
MTI an appropriate incentive?
The MTI is designed to link Company performance, individual performance and retention
by putting a significant proportion of participating employees’ remuneration at risk.
What are the key features of the MTI?
– Restricted Rights under the MTI are conditional entitlements for the holder to subscribe
for fully paid ordinary shares in the Company.
– No amount is payable by the participant upon grant of the Restricted Rights (unless the Board
determines otherwise), or upon exercise of the Restricted Rights once vested.
– Each Restricted Right entitles the holder to subscribe for one ordinary share.
– Unvested Restricted Rights are forfeited upon cessation of employment, except in limited
circumstances including death, incapacity, redundancy or retirement in which case participants
(or in case of death, their representatives) are entitled to exercise those Restricted Rights
on a pro-rata basis according to the amount of the vesting period which has elapsed.
What are the Performance Conditions
under the MTI?
– Performance is measured according to the Company’s Total Shareholder Returns (TSR)
measured against the TSR of a comparator group of companies over the previous financial year.
– The award of the MTI in 2007 was based on the comparator group listed below in this table.
– For participants to receive any grant of Restricted Rights, the Company’s TSR performance
must be at or above the median performance of the TSR of the comparator group.
– The TSR results are obtained by an independent third party, from data provided
by Standard & Poor’s.
table continued over page
NEWCREST MINING ANNUAL REPORT 2009 37
Directors’ report
REMUNERATION REPORT
table 3: medium term incentive (mti) (continued)
summary of mti
What is the relationship between
Company performance and allocation
of Restricted Rights?
What is the period over which Company
performance is assessed?
Are MTIs awarded where performance
falls below a minimum threshold?
In terms of the relationship between Company performance and the allocation of Restricted Rights:
– 0% allocation occurs if the Company TSR performance is below the threshold 50th percentile
of the TSR for the comparator group;
– 30% allocation occurs if the Company TSR performance is at the 50th percentile of the TSR
for the comparator group;
– 100% allocation occurs where the 75th percentile (or greater) is achieved; and
– Straight line allocation between the 50th and 75th percentile occurs.
The financial year immediately prior to the date of grant of Restricted Rights.
No, MTI is awarded if (1) Newcrest’s performance based on TSR in the relevant period falls below
the 50th percentile of the TSR for the comparator group; and/or (2) a participant’s performance
is ranked below ‘Meets Most Requirements’ in the Company’s Work Performance System (WPS).
How are shares provided to participants
under the MTI?
Once Restricted Rights have vested, shares are either bought on market or transferred to eligible
MTI participants.
Why did the Board select
a TSR performance hurdle?
Is the benefit of participation in the MTI
affected by changes in the share price?
Are the performance conditions
retested?
What is the maximum number
of Restricted Rights that may be
granted to an MTI participant?
Which companies are in the
TSR Comparator Group?
TSR was chosen as a performance hurdle for the MTI because it incorporates capital returns
as well as dividends notionally reinvested and was therefore considered as the most appropriate
means of measuring Company performance.
Yes, participants in the MTI will be affected in the same way as all other shareholders by changes
in the Company’s share price. The value participants receive through participation in the MTI will
be reduced if the share price falls during the vesting period and will increase if the share price
rises over the period.
No, the performance conditions are only tested once, at the end of the 1-year performance period.
The maximum number of Restricted Rights that may be granted is determined by the level
of Equity-based Remuneration applicable to each participant. This component is determined
as a percentage of base salary commencing at 15%, 30% for senior management, and 50% for
Key Management Personnel including the Director Finance and 75% for the Managing Director.
The TSR comparator group is comprised of a select group of companies in the FTSE Gold Mine
Index at the time of any award of MTI. In the case of the MTI award made in November 2007
this group comprised Barrick Gold, Newmont, AngloGold Ashanti, Gold Fields, Gold Corp,
Polyus Gold, Harmony, Zijin Mining Group H, Kinross Gold, Buenaventura ADR, Meridian Gold,
Lihir Gold, Centerra Gold, IAMGOLD, DRD Gold and Randgold.
38 NEWCREST MINING ANNUAL REPORT 2009
table 4: long term incentive (lti)
summary of lti
What is the LTI?
An incentive plan under which eligible employees are granted rights to receive ordinary fully
paid shares in the Company (Performance Rights). The entitlement is contingent on the Company
achieving a performance hurdle over a set performance period.
Who participates in the LTI?
The Executive Directors, Key Management Personnel and Senior Management participate
in the LTI.
Why does the Board consider the LTI
an appropriate incentive?
The LTI is designed to reward participants for Company performance and to align the long-term
interests of shareholders, senior and executive management and the Company, by linking a
significant proportion of participating employees’ remuneration at risk, to the Company’s future
performance, currently over a 3-year period from the date of grant of Performance Rights.
What are the key features of the LTI?
– Performance Rights issued under the LTI are conditional entitlements for the holder to subscribe
What are the performance conditions
under the LTI?
for fully paid ordinary shares in the Company.
– No amount is payable by the participant upon grant of the Performance Rights (unless the
Board determines otherwise), or upon the exercise of the Performance Rights once vested.
– Each Performance Right entitles the holder to subscribe for one ordinary share.
– Unvested Performance Rights are forfeited upon cessation of employment with the Company,
except in limited circumstances including death, incapacity, redundancy or retirement in which
case participants (or in the case of death, their representatives) are entitled to exercise those
Rights pro-rated according to the amount of the performance period which has elapsed and
the extent to which the performance hurdle has been met.
Rights issued under the Plan are subject to three performance measures based on:
– Reserves Growth;
– Comparative Costs; and
– Return on Capital Employed.
Performance against each of these measures over the 3 year vesting period accounts
for one-third of any grant made to participants.
Reserves Growth refers to the growth in total in situ ore reserves at the end of each performance
period, net of mining depletion. Reserves growth is an absolute and objective measure, based on
independently reviewed reserves figures which are reported in the Company’s annual accounts.
Broadly, the percentage increase in reserves will determine the number of rights granted.
Comparative Costs are the Company’s cash cost of production after any by-product credits,
compared to other global producers. The GFMS Precious Metals Cost Service is an independent
web-based service, updated quarterly, which offers access to industry cost and production
data. The gold section of the GFMS Service captures cost and production data for around
200 operating mines controlled by 90 companies, accounting for 1,400 tonnes of annual gold
mine production (approximately two-thirds of global gold production annually). GFMS data
is used for performance measurement over the LTI’s 3-year vesting period. The comparison is
made by ranking the Company’s performance against all other producers included in the GFMS
Precious Metals Cost Service in accordance with their cash costs of production. All measurements
are verified by an independent third party.
Return on Capital Employed (ROCE) is defined as underlying earnings before interest and
tax (EBIT), divided by Capital Employed, being shareholders’ equity plus net debt. One-third
of LTI rights vest to the extent to which the ROCE performance condition is satisfied each year
of the performance period. As this is an internal Newcrest performance measure all results
are verified by an independent third party.
table continued over page
NEWCREST MINING ANNUAL REPORT 2009 39
Directors’ report
REMUNERATION REPORT
table 4: long term incentive (lti) (continued)
summary of lti
What is the relationship between
Company performance and allocation
of Performance Rights?
reserves growth
Performance against this measure accounts for one-third of Rights which may vest in any
grant of LTI entitlements.
– Less than 10% growth leads to a zero award of these Rights.
– 10% growth leads to a 50% award of these Rights.
– Greater than 10% growth up to 30% growth. Award of these rights is calculated pro-rata
with an additional 2.5% of Rights vesting for each percentage point above 10% growth.
– 30% growth or more leads to a 100% award of these Rights.
comparative cost position
Performance against this measure accounts for one third of Rights which may vest in any grant
of LTI entitlements.
– Comparative costs at or above the 50th percentile leads to a zero award of these Rights.
– Comparative costs below the 50th percentile and at or above the 25th percentile leads
to a 50% award of Rights plus an additional 2.5% of these Rights vesting for each percentage
point below the 50th percentile down to the 25th percentile.
– Below the 25th percentile and at or above the 10th percentile leads to an 80% award of
these Rights plus an additional 1.33% of Rights vesting for each percentage point below
the 25th percentile down to the 10th percentile.
– Below the 10th percentile leads to a 100% award of these Rights.
roce
Performance against this measure accounts for one-third of Rights which may vest in any grant
of LTI entitlements.
– ROCE below 7% leads to a zero award of these Rights.
– ROCE from 7% and below 17% leads to an award of 10% of these Rights per percentage point.
– ROCE at or above 17% leads to 100% of these Rights vesting.
What is the vesting period for the LTI?
Performance Rights vest in participants (i.e. may be exercised) 3 years after the date of grant,
provided performance conditions are met.
What is the period over which Company
performance is assessed?
The assessment period is 3 years following the date of grant of Performance Rights.
How are shares provided to participants
under the LTI?
Once Performance Rights have vested, shares are either bought on market or transferred
to eligible LTI participants.
Why did the Board choose the above
performance hurdles?
The Board considers that these performance measures are key factors which impact on
the share price and which drive the value of the Company over the long term.
Is the benefit of participation in the LTI
affected by changes in the share price?
Yes, participants in the LTI will be affected in the same way as all other shareholders by changes
in the Company’s share price. The value participants receive through participation in the LTI will
be reduced if the share price falls during the vesting period and will increase if the share price
rises over the period.
Are the performance conditions retested? No, the performance conditions are only tested once at the end of the 3-year performance period.
What is the maximum number of
Performance Rights that may be granted
to an LTI participant?
The maximum number of Performance Rights that may be granted is determined
by the level of equity-based remuneration applicable to each participant. See Table 2.
40 NEWCREST MINING ANNUAL REPORT 2009
table 5: short term incentive Deferral plan
summary of short term incentive Deferral plan
What is the Short Term Incentive
Deferral Plan?
An incentive plan under which eligible employees are granted an Upfront Component (two-thirds)
and a Deferred Component (one-third) the amount of which is based on a percentage range of
each participant’s fixed remuneration. Both the upfront component and deferred component may
be taken at each participant’s election as either cash or shares or as a combination of cash and
shares. Note as outlined in Section 5.1.4 of this Report that cash only and no shares are being
offered to STI Deferral Plan participants in relation to the 2008–09 year.
How is the Upfront Component treated?
– The upfront component if cash is elected will be paid to each participant at or near the time
How is the Deferred Component treated?
of grant and will not be subject to any further restrictions.
– If a participant elects to take the upfront component as shares, these will be transferred
into that participant’s name and will vest in each participant upon grant, but will be subject
to a ‘lock’ on disposal or other dealings for 2 years from the grant date. These are known
as Voluntary Deferred Shares. These shares will attract a right to dividends, to vote at AGMs
and to participate in rights issues where eligible.
– If a participant elects to take the deferred component as shares, these will be transferred
into that participant’s name upon grant, but will be subject to a ‘lock’ on disposal or other
dealings and will not vest in the participant for 2 years from the grant date. These are known as
Compulsory Deferred Shares. These shares will attract a right to dividends, to vote at AGMs and
to participate in rights issues where eligible.
– If a participant elects to take the deferred component as cash, that cash will not vest/be paid
to each participant for 2 years from the grant date. This component is known as Compulsory
Deferred Cash. Interest will accrue on that cash at a notional rate determined by the Board.
Who participates in the STI?
The Executive Directors, Key Management Personnel and Senior Management participate in the STI.
Why does the Board consider the
STI an appropriate incentive?
What consideration is payable to
the Company by STI participants?
In what circumstances are
STI entitlements forfeited?
What happens to STI Deferred
Entitlements upon a change of
control in the Company?
A STI is a globally recognised form of reward for management, aimed at ensuring focus and
alignment with company goals and strategy. Based on both group and individual measures
– and in conjunction with other factors – it helps encourage and reward high performance.
No amount is payable by participants to the Company with respect to the STI Upfront
Component or the Deferred Component upon grant, vesting or disposal or other dealings
by a participant.
– Compulsory Deferred Cash and Compulsory Deferred Shares are forfeited upon cessation
of employment with the Company during the 2-year deferral period, except in limited
circumstances including death, incapacity, redundancy or retirement in which case participants
(or in case of death, their representatives) are entitled to Compulsory Deferred Cash and
Compulsory Deferred Shares pro-rated according to the amount of the deferral period
which has elapsed.
– Voluntary Deferred Shares will not be forfeited upon cessation of employment with
the Company, having vested at grant, and will be transferred in full to participants upon
the above events occurring.
– Voluntary and Compulsory Deferred entitlements will be forfeited by a participant
guilty of fraud.
– Under the new STI, unlike the former MTI and the LTI pre 2008, where pro-rated vesting
was triggered by change of control, the vesting of Compulsory Deferred Entitlements upon
change of control is not automatic under the 2009 STI. Newcrest’s Board must determine
at the relevant time whether this is the appropriate outcome in all the circumstances.
– Voluntary Deferred Components will be paid out in full upon change of control.
What are the performance conditions
under the STI?
– Performance metrics are as for the 2007–08 SaR (see Table 1) measured in the financial year
immediately preceding the date of grant of the relevant STI entitlements.
– In addition, participants must meet a minimum prescribed performance in the 2 years from the
grant date to vesting in relation to the Compulsory Deferred Component. (This does not apply
to the Voluntary Deferred Component.)
What is the relationship between Company
performance and allocation of STI?
– As for the 2007–08 SaR. (See Table 1.)
What is the period over which Company
performance is assessed?
The assessment period is the financial year preceding the grant date of the Upfront Component
and the Deferred Component.
How are shares provided to participants
under the STI?
Shares are bought on market.
Are the performance conditions retested? No, the performance conditions are only tested once at the end of the 1-year performance period.
NEWCREST MINING ANNUAL REPORT 2009 41
Directors’ report
REMUNERATION REPORT
table 6: executive share/option plan performance hurdles 2003–2008
The following is a summary of Performance Hurdles that relate to Option and Share Plan awards for the period 2003 to 2008.
Note: 2009 awards are scheduled to be made in November 2009.
year
grant Date
performance hurdle
2008 (lti)
11 Nov 2008
The performance hurdles are based on Reserves Growth, Comparative Cost Position
and ROCE. (Refer to Table 4 for details).
2007 (mti)
2006 (mti)
2005 (mti)
9 Nov 2007
3 Nov 2006
8 Nov 2005
The performance hurdle is based on the TSR ranking of the Company. If at a Grant Date
the TSR Ranking of the Company is:
(a) less than the 50th percentile of the TSR for the comparator group, the number of rights
which is granted is zero;
(b) equal to the 50th percentile of the TSR for the comparator group, the number of rights
which is granted is 30% (except for the 2005 MTI plan which is 50%) of the rights
comprised in the grant;
(c) equal to or greater than the 75th percentile of the TSR for the comparator group,
the number of rights which is granted is 100% of the Rights comprised in the grant;
(d) greater than the 50th percentile and less than the 75th percentile, then in addition to the
rights exercisable under paragraph (b) above, further Rights are granted, the number being
calculated on a straight-line basis.
2007 (lti)
2006 (lti)
9 Nov 2007
3 Nov 2006
The performance hurdle is based on the TSR Ranking of the Company over a 3-year period.
If at a Performance Measurement Date the TSR Ranking of the Company is:
(a) less than the 50th percentile of the TSR for the comparator group, the number of rights
which is granted is zero;
(b) equal to the 50th percentile of the TSR for the comparator group, the number of rights
which is granted is 50% of the rights comprised in the grant;
(c) equal to or greater than the 75th percentile of the TSR for the comparator group, the
number of rights which is granted is 100% of the rights comprised in the grant;
(d) greater than the 50th percentile and less than the 75th percentile, then in addition to the
rights exercisable under paragraph (b) above, further rights are granted with the number
being calculated on a straight-line basis.
The performance hurdle is the achievement of initial performance objectives by Ian Smith during
the first 180 days in his role as Managing Director and Chief Executive Officer and was agreed
with Ian Smith upon his employment with the Company. In February 2007 the Board reviewed
Ian Smith’s performance against his initial performance objectives and determined that the
performance hurdle had been met. As a result the Rights have vested, in accordance with their
terms and became convertible to ordinary shares in the Company on the third anniversary
of his appointment.
The performance hurdle is based on the TSR ranking of the Company. If at a Performance Date
the TSR Ranking of the Company is:
(a) less than the 50th percentile of the TSR for the comparator group, the number of options
comprised in the relevant tranche which may be exercised is zero;
(b) equal to the 50th percentile of the TSR for the comparator group, the number of options which
may be exercised is 50% of the total number of options comprised in the relevant tranche;
(c) equal or greater than the 75th percentile of the TSR for the comparator group, the number
of options which may be exercised is 100% of the total number of options comprised
in the relevant tranche;
(d) greater than the 50th percentile and less than the 75th percentile, the number of options
which may be exercised is calculated on a pro-rata, straight-line basis between 50% to
100% of the total number of options comprised in the relevant tranche.
2006 (mD & ceo)
14 July 2006
2003 (options)
2 Dec 2003
42 NEWCREST MINING ANNUAL REPORT 2009
6. relationship oF incentives to newcrest’s Financial perFormance
Prior to 2008, LTI performance was measured against Total Shareholder Returns (TSR) ranking of the Company against a comparator
group of companies. Performance measures for the November 2008 LTI are based on a combination of the Company’s Reserves Growth,
Comparative Cost Position and Return on Capital Employed over a 3-year performance period.
Table 7 sets out the Company’s performance in TSR for the period 30 June 2005 to 30 June 2009. LTI and MTI outcomes (for allocations
prior to 2008) have been aligned to, and reflect, TSR performance.
table 7: newcrest’s Financial performance
year ended 30 June
Basic Earnings Per Share (EPS) (1) (cents)
Dividends (cents)
Share Price at 30 June ($)
Share Price Increase (2) ($)
Total Shareholder Returns (3) (%)
2005
39.4
5.0
17.38
3.60
32.8
2006
39.6
5.0
21.08
3.70
38.4
2007
19.4
5.0
22.85
1.77
2.0
2008
30.8
10.0
29.30
6.45
57.0
2009
53.0
15.0
30.51
1.21
(4.4)
(1) Basic EPS is calculated as net profit after tax and minority interests divided by the weighted average number of ordinary shares.
(2) Share Price movement during the financial year.
(3) Defined as the growth in the share price over the financial year ending 30 June plus dividends notionally reinvested. The share price is measured
as the volume weighted average share price for the six months ending 30 June compared with the same period a year earlier.
In relation to STI awarded for 2008–09, the Company’s performance against the Company performance objectives for Executive Directors
and Key Management Personnel is set out in Table 8. It shows that overall, the Company’s performance was at 113% of the target, reflecting
above-target performance for earnings and safety and below-target performance in relation to costs. Performance above or below target
results in a percentage of target outcome based on a scale of pro-rating pre-determined by the Board. The outcome for each of the
Executive Directors and Key Management Personnel for 2008–09 has been determined by the overall personal performance multiplied
by the Company’s overall performance.
table 8: performance objective for year ending 30 June 2009 (executive Directors and Key management personnel)
performance objective
safety
Total Recordable Injuries and Frequency Rate (TRIFR) for Newcrest
as a whole (Total recordable injuries per million work hours)
Safety Risk List (% Action) (1)
earnings
target
outcome
percentage of
target achieved
<8.0
113%
(50% weighting)
7.0
100%
Primary
100% Primary &
1/3rd Secondary
125%
(50% weighting)
(Adjusted Net Profit after Tax and Minority Interest) (2)
A$391.0 million
A$452.0 million
125%
costs
(Total Production Costs per ounce before by-product revenue credits
divided by total gold production)
Discretionary component (3)
overall company performance (including discretionary component)
A$961/oz
A$975/oz
96%
110%
113%
(1) The Safety List comprises a number of identified safety initiatives where an improvement in Newcrest’s risk profile can be achieved by undertaking
certain actions. Primary Actions are risk reduction actions identified as having a direct impact on the risk profile. Secondary Actions are risk reduction
actions identified as having an indirect impact on the risk profile.
(2) Actual earnings are adjusted to remove 70% of the revenue differential between actual and budget commodity prices and exchange rates
when compared to Target Earnings. In addition, an adjustment has been made in respect to the hedgebook restructure and close-out impacts.
(3) The discretionary component is a discretionary assessment by the Board of the overall performance of the Company in areas other than safety,
earnings and costs.
NEWCREST MINING ANNUAL REPORT 2009 43
Directors’ report
REMUNERATION REPORT
7. executive service agreements
7.1 overview and summary
Remuneration and other key terms of employment for the Executive Directors and Key Management Personnel are formalised
in service agreements. The terms of the service agreements for current Executive Directors and Key Management Personnel
are summarised in the following table.
table 9: executive service agreements
name
ian smith
Managing Director and
Chief Executive Officer
greg robinson
Director Finance
bernard lavery
Executive General Manager
Corporate Services
ron Douglas
Executive General Manager
Development and Projects
geoff Day
Executive General Manager Operations
(Commenced 10 November 2008)
colin moorhead
Executive General Manager Minerals
Debra stirling
Executive General Manager People,
Communication and Environment
term of
agreement
Fixed annual
remuneration
$
(1)
notice period
by executive
notice period
by newcrest
termination
payment
(2)
Open
2,200,000
3 months
12 months
Open
Open
1,100,000
3 months
12 months
605,000
3 months
24 months
Open
680,000
3 months
12 months
Open
680,000
3 months
12 months
Open
Open
680,000
3 months
12 months
630,000
3 months
12 months
1.0 times total annual
remuneration
1.0 times total annual
remuneration
2.0 times total annual
remuneration
1.0 times total annual
remuneration
1.0 times total annual
remuneration
1.0 times total annual
remuneration
1.0 times total annual
remuneration
(1) Fixed salary, inclusive of the required superannuation contribution amount, is reviewed annually by the Board following the end of the financial year.
The amounts set out above are the Executive’s fixed annual remuneration as at 30 June 2009.
(2) Termination payment if Newcrest terminates the Executive’s employment other than for cause. Annual remuneration includes all elements
of remuneration including cash and equity incentives.
44 NEWCREST MINING ANNUAL REPORT 2009
7.2 executive service agreements entered into in 2008–09
– He was offered a sign-on award of 165,000 Performance
Geoff Day
Geoff commenced employment with the Company on
10 November 2008, pursuant to a letter of appointment
and has entered into a Service Agreement the terms of
which are summarised below.
– The appointment is for an indefinite duration. Geoff Day may
resign at any time on giving three (3) months written notice,
and the Company may terminate his employment on giving
twelve (12) months written notice, or payment in lieu of notice.
– The Agreement sets out Geoff Day’s duties and responsibilities.
– Base salary of $680,000 per annum to be reviewed annually.
– STI of up to 120% of base salary dependent upon Geoff Day
meeting specified personal and Company performance targets,
where 120% is only achievable for ‘outstanding’ performance.
– Geoff Day will also be offered an annual award in accordance
with the Company’s Remuneration Policy in relation to the LTI
equal to 60% of base salary.
– Statutory entitlements apply upon termination of employment
of accrued annual and long service leave together with any
superannuation benefits.
7.3 executive Director service agreements
Ian Smith
Ian Smith commenced employment with the Company as
Chief Executive Officer on 14 July 2006 and was appointed
to the Board as Managing Director on 19 July 2006, pursuant
to a letter of appointment and has entered into a Service
Agreement the terms of which are summarised below.
– The appointment is for an indefinite duration. Ian Smith may
resign at any time on giving three (3) months written notice,
and the Company may terminate his employment on giving
twelve (12) months written notice, or payment in lieu of notice.
– The Agreement sets out Ian Smith’s duties and responsibilities.
– Base salary of $2,200,000 per annum to be reviewed annually.
– STI of up to 120% of base salary dependent upon Ian Smith
meeting specified personal and Company performance targets,
where 120% is only achievable for ‘outstanding’ performance.
Rights under the Company’s 2004 Executive Performance Share
Plan, as an incentive to join the Company. The performance
hurdle for those Rights was the achievement of initial
performance objectives determined in advance by the Board.
The performance hurdle was measured as part of an interim
review of his performance undertaken by the Board in February
2007. The initial performance objectives were determined by
the Board to have been achieved and the Performance Rights
vested and became convertible to Newcrest ordinary shares
on the third anniversary of his appointment. The deferred vesting
of Performance Rights provided alignment between his interests
and those of shareholders during the 3-year period. The award
of the initial Performance Rights was approved by shareholders
at the 2006 Annual General Meeting.
– Ian Smith will also be offered an annual award in accordance
with the Company’s Remuneration Policy in relation to LTI
equal to 100% of base salary.
– Statutory entitlements apply upon termination of employment
of accrued annual and long service leave together with any
superannuation benefits.
Greg Robinson
Greg Robinson commenced employment with the Company as
Executive General Manager Finance and Chief Financial Officer
on 3 November 2006 and was appointed to the Board as Director
Finance on 23 November 2006, pursuant to a letter of appointment
and has been provided with a Service Agreement the terms of
which are summarised below.
– The appointment is for an indefinite duration. Greg Robinson
may resign at any time on giving three (3) months written notice,
and the Company may terminate his employment on giving
twelve (12) months written notice, or payment in lieu of notice.
– The Agreement sets out Greg Robinson’s duties and
responsibilities.
– Base salary of $1,100,000 per annum to be reviewed annually.
– STI of up to 120% of base salary dependent upon him meeting
specified personal and Company performance targets, where
120% is only achievable for ‘outstanding’ performance.
– Greg Robinson will also be offered an annual award in accordance
with the Company’s Remuneration Policy in relation to LTI equal
to 100% of base salary.
– Statutory entitlements apply upon termination of employment
of accrued annual and long service leave together with any
superannuation benefits.
NEWCREST MINING ANNUAL REPORT 2009 45
Directors’ report
REMUNERATION REPORT
8. remuneration Details
8.1 Directors
Details of the nature and amount of each major element of the remuneration of each Director of the Company are as follows:
table 10: Directors’ remuneration
short term
post-
employment
share-based
payments
Salary
& Fees
(A)
$’000
Committee
Fees
(B)
$’000
Salary
at Risk
(C)
$’000
Other
Benefits/
Services
(D)
$’000
Super-
annuation
(E)
$’000
Value of Rights
(G)
$’000
Total
$’000
Equity
Compensation
Value
(I)
%
Performance-
Related
Remuneration
(J)
%
2,136
1,061
451
141
141
141
141
82
45
45
–
–
–
41
24
24
33
16
5
10
1,835
932
–
–
–
–
–
–
–
–
6
6
–
–
2
–
–
–
2
5
14
14
14
14
14
14
14
7
4
5
2,196
6,187
35.5
65.2
448
2,461
18.2
56.1
–
–
–
–
–
–
–
–
465
196
181
179
188
105
56
65
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,384
153
2,767
21
114
2,644
10,083
1,912
949
437
42
137
137
23
121
121
107
57
–
–
–
46
20
30
3
10
12
20
6
2,068
983
–
–
–
–
–
–
–
–
–
6
6
–
3
1
–
–
2
–
–
–
13
13
13
9
13
13
2
11
12
8
–
1,638
5,637
181
2,132
29.1
8.5
65.7
54.6
–
–
–
–
–
–
–
–
–
450
100
171
180
28
144
145
135
63
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Directors
2008–09
executive Directors
Ian Smith
Managing Director and
Chief Executive Officer
Greg Robinson
Director Finance
non-executive Directors
Don Mercer
Chairman
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Appointed 10 Dec 2008
Bryan Davis
Resigned 30 Oct 2008
Mick O’Leary
Resigned 30 Oct 2008
2007–08
executive Directors
Ian Smith
Managing Director and
Chief Executive Officer
Greg Robinson
Director Finance
non-executive Directors
Don Mercer
Chairman
Ron Milne
Resigned 1 Nov 2007
Bryan Davis
Mick O’Leary
Nora Scheinkestel
Resigned 31 Aug 2007
Rick Lee
Appointed 14 Aug 2007
Tim Poole
Appointed 14 Aug 2007
John Spark
Appointed 26 Sep 2007
Richard Knight
Appointed 13 Feb 2008
See Table 11 for explanation of notes (A)–(J)
4,043
147
3,051
18
107
1,819
9,185
46 NEWCREST MINING ANNUAL REPORT 2009
8.2 Key management personnel
Details of the nature and amount of each major element of remuneration for the Company’s Key Management Personnel are as follows:
table 11: Key management personnel remuneration
short term
Salary
& Fees
(A)
$’000
Salary
at Risk
(C)
$’000
Other
Benefits/
Services
(D)
$’000
post-
employment
share-based
payments
Super-
annuation
(E)
$’000
Value of
Options
(F)
$’000
Value of
Rights
(G)
$’000
Termination
Benefits
(H)
$’000
Total
$’000
Equity
Compensation
Value
(I)
%
Performance-
Related
Remuneration
(J)
%
581
659
630
616
492
507
507
534
430
280
175
228
–
–
6
4
6
6
4
–
2
14
14
14
14
9
3
5
33
220
–
7
–
–
33
17
162
162
154
79
47
43
–
–
–
–
–
1,346
1,346
1,326
1,324
18.8
12.0
12.7
11.6
55.3
49.7
51.0
52.0
802
9.9
44.8
476
734
10.9
10.9
1,170
1,465
4.1
4.1
Key Management Personnel
2008–09
executives
Bernard Lavery
EGM Corporate Services
Ron Douglas
EGM Development & Projects
Colin Moorhead
EGM Minerals
Debra Stirling
EGM People, Communication
and Environment
Geoff Day
EGM Operations
Commenced 10 Nov 2008
Former executives
Dan Wood
Exploration Executive
Retired 30 Sep 2008
Tim Lehany
EGM Operations
Resigned 31 Oct 2008
3,319
2,320
28
73
90
867
1,646
8,343
2007–08
executives
Bernard Lavery
EGM Corporate Services
Ron Douglas
EGM Development & Projects
Tim Lehany
EGM Operations
Colin Moorhead
EGM Minerals
Debra Stirling
EGM People and Communication
Dan Wood
Exploration Executive
542
625
602
396
287
625
402
403
303
367
154
523
6
5
3
6
3
5
13
13
13
13
8
13
120
–
70
24
–
147
48
100
62
47
120
169
3,077
2,152
28
73
334
573
–
–
–
–
–
–
–
1,230
1,094
1,091
868
499
1,455
6,237
21.7
4.4
15.6
9.9
9.4
19.9
54.4
41.2
43.4
52.2
40.3
55.8
NEWCREST MINING ANNUAL REPORT 2009 47
Directors’ report
REMUNERATION REPORT
Notes to Tables 10 and 11:
(A) Salary & Fees comprise cash salary and available salary package options grossed-up by related fringe benefits tax, where applicable.
The Company’s minimum required superannuation contributions made on behalf of Directors and Key Management Personnel are
disclosed separately.
(B) Represents fees paid to Non-Executive Directors for participation in Board Committees and other Committees.
(C) Short Term Incentive relates to the Executive Directors and Key Management Personnel performance in the 2008–09 year (of which
one third is deferred for 2 years) and for comparatives, Salary at Risk (SaR). The SaR in 2007–08 includes the actual payment in respect
of 2007–08 plus the difference between the actual payment and the estimated payment (as disclosed in the 2006–07 Remuneration
Report) for the SaR in respect of 2006–07.
(D) Represents non-monetary benefits to Directors and Key Management Personnel such as non-business travel, parking and applicable
fringe benefits tax payable on benefits.
(E) Represents Company contributions to superannuation under the Superannuation Guarantee legislation (SGC).
(F)(G) The total value of options and rights included in remuneration for the year is calculated as follows:
– The fair value of options is calculated at the grant date using an option pricing model which combines both Black-Scholes and
binomial methodologies. To determine the amount disclosed as remuneration, the fair value is allocated evenly over the period
from the grant date to the vesting date.
– The fair value of rights, comprising rights over unissued shares, granted under the Restricted Share Plan and Executive Performance
Share Plan has been valued using an option pricing model.
– The following factors and assumptions were used in determining the fair value of options and rights on the grant date:
rights lti
nov 2008
rights lti
nov 2007
rights mti
nov 2007
rights lti
nov 2006
rights mti
nov 2006
rights mD &
ceo Jul 2006
rights mti
nov 2005
options –
Dec 2003
Fair Value*
Exercise Price
Estimated Volatility
Risk–free Interest Rate
Dividend Yield
Expected life of Award/Option
$22.00
$23.38
$35.64
–
40%
3.97%
0.20%
3 years
–
36%
6.69%
0.20%
3 years
–
36%
6.69%
0.20%
3 years
$18.19
–
36%
5.99%
0.40%
3 years
$23.81
$19.52
$18.78
–
36%
5.99%
0.40%
3 years
–
36%
5.99%
0.40%
3 years
–
34%
5.42%
0.40%
3 years
$4.11
$12.29
37%
6.33%
0.39%
5 years
* Fair Value has been calculated by an independent third party.
(H) Termination benefits include payments in lieu of notice, applicable STI and LTI, and payments for statutory and accrued annual leave
and long service leave entitlements.
(I) Represents the value of options and rights included in remuneration as a percentage of total remuneration.
(J) Represents performance related remuneration as a percentage of total remuneration.
9. options anD rights helD by executive Directors anD Key management personnel
9.1 options
All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the Executive
Share Option Plan. There were no new options granted during the 2008–09 year.
The movements during the year in the number of options over ordinary shares in the Company held by each Executive Director
and each of the Key Management Personnel, as part of their remuneration, are as follows:
table 12: movement in options for executive Directors and Key management personnel 2008–09
Refer to Table 15 for details of the percentage of Options which vested or lapsed.
Key Management
Personnel
Grant
Date
Expiry
Date
Exercise
Price
Balance
at 1 July
2008
Option
Exercised
Amount
paid to
Exercise
Options
Options
Lapsed
Balance at
30 June
2009
Dan Wood
2 Dec 2003 2 Dec 2008
Bernard Lavery 2 Dec 2003 2 Dec 2008
2 Dec 2003 2 Dec 2008
Tim Lehany
Colin Moorhead 2 Dec 2003 2 Dec 2008
$10.42 94,000
$10.42 94,000
17,500
$10.42
18,800
$10.42
(94,000) $979,480
(94,000) $979,480
$182,350
(17,500)
(18,800) $195,896
–
–
–
–
–
–
–
–
Options
Vested
During
the Year
25,000
25,000
17,500
5,000
Vested and
Exercisable
at 30 June
2009
Non-
Vested
–
–
–
–
–
–
–
–
movement During the year
48 NEWCREST MINING ANNUAL REPORT 2009
9.2 rights
All conditional entitlements refer to Restricted Rights and Performance Rights over ordinary shares of the Company,
which are exercisable on a one-for-one basis.
The movements in the year in the number of Rights over ordinary shares in the Company held by each Executive Director
and Key Management Personnel, as part of their remuneration, are as follows:
table 13: movement in restricted rights and performance rights for executive Directors and Key management personnel 2008–09
Grant
Date
Type
Share
Price at
Grant Date
Balance at
1 July 2008
Rights
Granted
Rights
Exercised
Rights
Lapsed
Balance at
30 June
2009
Vested &
Exercisable at
30 June 2009 Non-Vested*
Executive
Directors and
Key Management
Personnel
Ian Smith
Greg Robinson
Dan Wood
Bernard Lavery
Tim Lehany
Colin Moorhead
Ron Douglas
Debra Stirling
14 Jul 2006
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
9 Nov 2007
9 Nov 2007
11 Nov 2008
9 Nov 2007
9 Nov 2007
11 Nov 2008
LTI
MTI
LTI
MTI
LTI
LTI
MTI
LTI
MTI
LTI
LTI
MTI
MTI
LTI
MTI
LTI
MTI
MTI
LTI
MTI
LTI
LTI
MTI
MTI
LTI
MTI
LTI
MTI
MTI
LTI
MTI
LTI
LTI
MTI
LTI
LTI
MTI
LTI
LTI
LTI
$19.52
$24.10
$24.10
$35.85
$35.85
$22.13
$24.10
$24.10
$35.85
$35.85
$22.13
$18.98
$24.10
$24.10
$35.85
$35.85
$18.98
$24.10
$24.10
$35.85
$35.85
$22.13
$18.98
$24.10
$24.10
$35.85
$35.85
$18.98
$24.10
$24.10
$35.85
$35.85
$22.13
$35.85
$35.85
$22.13
$35.85
$35.85
$22.13
$22.13
165,000
8,845
42,881
7,373
35,446
–
4,245
12,007
4,915
8,862
–
–
–
–
–
–
100,048
–
–
–
–
50,024
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,720)
(2,554)
–
(951)
–
(170)
(1,459)
(2,651)
(2,244)
(4,045)
4,890
4,013
7,294
3,195
5,760
4,251
3,489
6,340
2,777
5,007
–
2,047
2,650
1,375
3,342
6,026
582
1,932
1,005
3,768
1,941
–
3,195
5,760
–
3,097
5,583
–
–
–
–
–
–
16,508
–
–
–
–
–
–
–
–
–
–
18,554
–
–
18,554
–
–
17,190
–
–
–
–
–
–
(2,034)
(1,762)
–
(1,090)
–
(582)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13)
(888)
(461)
(2,252)
(4,061)
–
–
–
–
–
–
–
–
–
–
–
–
–
165,000
8,845
42,881
7,373
35,446
100,048
4,245
12,007
4,915
8,862
50,024
–
–
4,643
–
1,715
4,251
3,489
6,340
2,777
5,007
16,508
–
–
914
–
1,965
–
1,932
1,005
3,768
1,941
18,554
3,195
5,760
18,554
3,097
5,583
17,190
18,554
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,251
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
165,000
8,845
42,881
7,373
35,446
100,048
4,245
12,007
4,915
8,862
50,024
–
–
4,643
–
1,715
–
3,489
6,340
2,777
5,007
16,508
–
–
914
–
1,965
–
1,932
1,005
3,768
1,941
18,554
3,195
5,760
18,554
3,097
5,583
17,190
18,554
Geoff Day
11 Nov 2008
–
18,554
* All equity-based remuneration is ‘at risk’ and will lapse or be forfeited, in the event that minimum prescribed performance conditions are not met
by the Company or individual employees, as applicable.
NEWCREST MINING ANNUAL REPORT 2009 49
Directors’ report
REMUNERATION REPORT
9.3 performance conditions for options and rights
table 14: value of options, restricted rights and performance rights
executive Directors
and Key management
personnel
Ian Smith
Greg Robinson
Bernard Lavery
Ron Douglas
Colin Moorhead
Debra Stirling
Geoff Day
Dan Wood
Tim Lehany
value at
grant Date
(a)
$’000
value at
exercise Date
(b)
$’000
value at
lapsed Date
(c)
$’000
2,201
1,101
363
408
408
378
408
–
–
–
–
1,300
–
307
–
–
1,668
368
–
–
–
–
–
–
–
(292)
(160)
Table 14 above shows the total value of any Restricted Rights, Performance Rights or Options granted, exercised and lapsed in 2008–09
in relation to Executive Directors and Key Management Personnel based on the following assumptions:
(A) The value of Performance Rights at grant date reflects the fair value of a right multiplied by the number of performance or restricted rights granted
during 2008–09. (Refer footnotes F&G to Tables 10 and 11.)
(B) The value at exercise date has been determined by the Company’s share price at the close of business on the exercise date less
the option or right exercise price multiplied by the number of options or rights exercised during 2008–09.
(C) The value at lapse date has been determined by the share price at the close of business on the date the Restricted Right, Performance Right or Option
lapsed, less the exercise price multiplied by the number of performance or restricted rights or options that lapsed during the year.
Performance conditions for Restricted Rights, Performance Rights and Options are set out in Table 15 below.
table 15: executive Directors and Key management personnel –
options granted on 2 December 2003 and rights granted between the 2004–05 and 2008–09 years
Note: Refer Table 6 for a summary of the applicable Performance Hurdles.
grant
Date
expiry
Date
comparator
group
11 Nov 2008
(LTI)
9 Nov 2007
(LTI)
9 Nov 2007
(MTI)
3 Nov 2006
(LTI)
3 Nov 2006
(MTI)
11 Nov 2013
Performance Conditions
referred to in the Plan Rules
9 Nov 2012
9 Nov 2012
3 Nov 2011
3 Nov 2011
Newcrest’s TSR ranking
against FTSE Gold Index
Select Group referred to
in the Performance Condition
(TSR ranking on sliding scale)
Newcrest’s TSR ranking
against FTSE Gold Index
Select Group referred to
in the Performance Condition
(TSR ranking on sliding scale)
14 Jul 2006
(MD & CEO)
14 Jul 2009
Performance objectives
agreed with Board
8 Nov 2005
(MTI)
8 Nov 2010
2 Dec 2003
2 Dec 2008
Select Group referred to
in the Performance Condition
(TSR ranking on sliding scale)
S&P/ASX 100 Index
(TSR ranking on sliding scale)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
performance
Date (for options
and lti) or vesting
Date (for mti)
strike
price
performance achieved
percentage
vested
11 Nov 2011
To be determined
9 Nov 2010
To be determined
9 Nov 2010
69th percentile resulting
in 83.2% of the maximum
award of Rights
N/A
N/A
100%
3 Nov 2009
To be determined
N/A
3 Nov 2009
14 Jan 2007
8 Nov 2008
69th percentile resulting
in 82.5% of the maximum
award of Rights
Fully achieved became
convertible to ordinary
shares on 14 Jul 2009
53rd percentile resulting
in 38.2% of the maximum
award of Rights
$10.42
Adj (1)
($12.29
Orig)
2 Dec 2005
2 Dec 2006
2 Dec 2007
4 Sep 2008
71st percentile
70th percentile
72nd percentile
>75th percentile
100%
100% on
14 Jul 2009
100% on
8 Nov 2008
92%
90%
94%
100%
(1) In accordance with the Rules of the Newcrest Executive Option Plan, outstanding options in the December 2003 tranches had their exercise price recalculated
as a result of the Equity Raising undertaken in September 2007.
50 NEWCREST MINING ANNUAL REPORT 2009
table 16: short term incentive and allocation of the november 2008 equity grant
short term incentive (a)
as a percentage of
maximum sti
long term incentive (b)
estimates of the maximum remuneration amounts which could be
received under the nov 2008 performance rights grants in future years
Executive Directors and
Key Management Personnel
Percentage
Awarded
Percentage
Forfeited
2009–10
$’000
2010–11
$’000
2011–12
$’000
Maximum Total
$’000
Ian Smith
Greg Robinson
Bernard Lavery
Ron Douglas
Colin Moorhead
Debra Stirling
Geoff Day
69.5
70.6
67.8
62.2
62.2
70.6
53.7
30.5
29.4
32.2
37.8
37.8
29.4
46.3
734
367
121
136
136
126
136
734
367
121
136
136
126
136
306
153
50
57
57
53
57
1,174
887
292
329
329
305
329
(A) To be awarded a STI of 120% an Executive has to have met outstanding personal performance and Company performance must be at or above the maximum
level pre-determined by the Board. Personal performance and Company performance each at target will result in an award of 50% of the maximum STI.
(B) The maximum value in future years has been determined in relation to the grant of performance rights in November 2008, based on the valuation performed
at grant date and amortised in accordance with applicable accounting standard requirements. The minimum value of the grant is $nil if the performance
conditions are not met.
NEWCREST MINING ANNUAL REPORT 2009 51
Directors’ report
This Report is signed in accordance with a resolution of the Directors.
Don mercer
Chairman
17 August 2009
Melbourne
ian smith
Managing Director and
Chief Executive Officer
17 August 2009
Melbourne
52 NEWCREST MINING ANNUAL REPORT 2009
auditor’s independence
declaration
5988 NEW_AR09_fins.indd 53
18/9/09 3:53:42 PM
NEWCREST MINING ANNUAL REPORT 2009 53
incoMe stAteMent
FOR THE YEAR ENDED 30 JUNE 2009
Operating sales revenue
Cost of sales
gross profit
Exploration expenses
Corporate administration expenses
operating profit
Other revenue
Other income/(expenses)
Losses on delivered hedges
Finance costs – ordinary activities
profit before tax, restructure and close-out impacts
Losses on restructured and closed-out hedge contracts
Other close out related costs
Finance costs – close-out and restructure
Foreign exchange gain on US dollar borrowings
profit/(loss) before income tax
Income tax (expense)/benefit
profit/(loss) after income tax
Attributable to:
Minority interest
Members of the parent entity
profit/(loss) after tax attributable to members of the parent entity comprises:
Profit/(loss) after tax attributable to members of the parent entity
Losses on restructured and closed-out hedge contracts (after tax)
Other close-out related costs (after tax)
Finance costs – close-out and restructure (after tax)
Foreign exchange gain on USD borrowings (after tax)
profit after tax before hedge restructure and close out impacts
attributable to members of the parent entity (‘underlying profit’)
earnings per share (eps) (cents per share) 6
Basic earnings per share
Diluted earnings per share
Earnings per share on Underlying Profit:
Basic earnings per share
Diluted earnings per share
consolidated
parent
Note
3(a)
3(b)
2009
$m
2008
$M
2,530.8
(1,638.0)
2,363.1
(1,497.3)
2009
$m
689.8
(585.8)
892.8
865.8
104.0
13
3(c)
(57.8)
(69.8)
(46.4)
(58.1)
(3.8)
(70.1)
2008
$M
524.7
(511.7)
13.0
(6.0)
(57.2)
765.2
761.3
30.1
(50.2)
8.3
6.8
–
(34.9)
20.4
9.2
(33.8)
(43.4)
82.1
(4.7)
– –
(2.3)
1.9
(1.3)
(2.7)
745.4
713.7
105.2
(52.3)
(352.0)
(25.1)
–
41.4
(314.1)
(217.7)
(20.9)
39.0
– –
– –
– –
– –
3(d)
3(e)
3(f)
3(g)
3(k)
3(l)
3(m)
3(n)
409.7
200.0
105.2
(52.3)
4(b)
(127.6)
(36.6)
17.0
33.7
282.1
163.4
122.2
(18.6)
21
3(k)
3(l)
3(m)
3(n)
34.0
248.1
282.1
248.1
246.4
17.6
–
(29.0)
29.1
134.3
163.4
134.3
219.9
152.4
14.6
(27.3)
– –
122.2
122.2
122.2
– –
– –
– –
– –
(18.6)
(18.6)
(18.6)
483.1
493.9
122.2
(18.6)
53.0
52.9
103.2
103.0
30.8
30.7
113.2
112.9
10.0
Dividends per share (cents per share)
5
15.0
The Income Statement should be read in conjunction with the accompanying notes.
54 NEWCREST MINING ANNUAL REPORT 2009
BAlAnce sHeet
AS AT 30 JUNE 2009
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Financial derivative assets
Other
total current assets
non-current assets
Other receivables
Inventories
Other financial assets
Property, plant and equipment
Exploration, evaluation and development
Intangible assets
Deferred tax assets
Financial derivative assets
Other
total non-current assets
total assets
current liabilities
Trade and other payables
Borrowings
Financial derivative liabilities
Income tax payable
Provisions
Other
total current liabilities
non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Other
total non-current liabilities
total liabilities
net assets
equity
Issued capital
Retained earnings
Reserves
parent entity interest
minority interest
total equity
The Balance Sheet should be read in conjunction with the accompanying notes.
Note
7(a)
8
9
24(e)
10
8
9
11
12
13
14
4
24(e)
10
15
16
24(e)
17
16
4
17
18
19
20
21
consolidated
parent
2009
$m
366.4
272.6
272.8
13.5
156.0
2008
$M
77.5
218.2
219.6
6.9
161.5
2009
$m
2008
$M
0.3
692.5
117.6
1.6 –
33.8
3.1
1,021.4
95.3
84.5
1,081.3
683.7
845.8
1,204.3
9.1
–
–
1,470.0
2,441.2
32.5
403.5
14.8
163.6
0.3
1.4
–
1,405.0
1,470.2
–
490.7
37.6
235.0
1,081.5 –
– –
541.0
606.3
562.3
32.0 –
403.5
– –
12.7 –
288.8
623.2
610.3
490.7
4,534.7
3,640.2
3,239.3
2,013.0
5,616.0
4,323.9
4,085.1
3,217.3
212.6
5.0
6.8
1.1
93.9
1.1
320.5
445.5
414.5
76.6
0.5
937.1
177.7
2.6
6.1
21.5
43.3
–
251.2
366.0
385.4
62.5
6.9
820.8
1,257.6
1,072.0
48.6
– –
–
– –
63.5
– –
112.1
– –
98.7
28.4
– –
127.1
239.2
63.5
2.4
36.0
101.9
111.6
27.0
138.6
240.5
4,358.4
3,251.9
3,845.9
2,976.8
3,641.6
1,031.8
(357.4)
4,316.0
42.4
2,857.4
829.0
(461.2)
3,225.2
26.7
3,641.6
176.7
27.6
3,845.9
– –
2,857.4
99.8
19.6
2,976.8
4,358.4
3,251.9
3,845.9
2,976.8
NEWCREST MINING ANNUAL REPORT 2009 55
stAteMent oF cHAnGes in eQuitY
FOR THE YEAR ENDED 30 JUNE 2009
consolidated
balance at 1 July 2008
Foreign exchange gain/(loss) on US dollar debt
cash flow hedge deferred in equity
Foreign exchange gain/(loss) on foreign currency
contract cash flow hedge deferred in equity
Losses on restructured hedge contracts
transferred to the Income Statement (refer Note 3(k))
Foreign exchange gains on US dollar borrowings
transferred to the Income Statement (refer Note 3(n))
Foreign currency translation
Net gain/(loss) on hedge of net investment
Deferred tax on items taken directly to/
transferred from equity
total income/(expense) recognised directly in equity
Net profit for the year
total recognised income/(expense) for the year
attributable to equity holders of the parent
Issued
Capital
$M
FX
Translation
Reserve*
$M
Equity
Hedge Settlements
Reserve*
$M
Reserve*
$M
Retained
Earnings
$M
minority
interest
Total
$M
$M
Total
$M
2,857.4
(20.0)
(460.8)
19.6
829.0 3,225.2
26.7 3,251.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4.4)
(76.9)
(68.4)
(0.3)
352.0
(41.4)
–
–
7.7
(72.5)
(73.6)
–
169.4
–
(73.6)
169.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(68.4)
(0.3)
–
–
(68.4)
(0.3)
352.0
–
352.0
(41.4)
(4.4)
(76.9)
–
1.6
–
(41.4)
(2.8)
(76.9)
(64.8)
–
(64.8)
–
248.1
95.8
248.1
1.6
34.0
97.4
282.1
248.1
343.9
35.6
379.5
Share-based payments
Exercise of options
Shares issued – Dividend Reinvestment Plan
Shares issued – Equity Raising
Share buy-back
Dividends paid
–
6.3
5.2
797.8
(25.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
8.0
–
–
–
–
–
–
–
–
–
–
(45.3)
8.0
6.3
5.2
797.8
(25.1)
(45.3)
–
–
–
–
–
(19.9)
8.0
6.3
5.2
797.8
(25.1)
(65.2)
balance at 30 June 2009
3,641.6
(93.6)
(291.4)
27.6
1,031.8 4,316.0
42.4 4,358.4
* Refer Note 20 for description of reserves.
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
56 NEWCREST MINING ANNUAL REPORT 2009
stAteMent oF cHAnGes in eQuitY
FOR THE YEAR ENDED 30 JUNE 2009
consolidated
balance at 1 July 2007
Foreign exchange gain/(loss) on US dollar debt
cash flow hedge deferred in equity
Net fair value gains/(losses) on gold forward
cash flow hedges deferred in equity
Net impact of prior period restructures
transferred to equity
Losses on restructured hedge contracts transferred
to the Income Statement (refer Note 3(k))
Foreign exchange gains on US dollar borrowings
transferred to the Income Statement (refer Note 3(n))
Net cash flow hedge losses transferred to the
Income Statement (refer Note 3(f))
Foreign currency translation
Deferred tax on items taken directly to/
transferred from equity
total income/(expense) recognised directly in equity
Net profit for the year
total recognised income/(expense) for the year
attributable to equity holders of the parent
FX
Translation
Reserve*
$M
Equity
Hedge Settlements
Reserve*
$M
Reserve*
$M
Retained
Earnings
$M
minority
interest
Total
$M
$M
Total
$M
(10.6)
(630.2)
14.1
711.5
919.3
21.5 940.8
Issued
Capital
$M
834.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78.5
(205.7)
57.8
314.0
(39.0)
–
(13.5)
33.8
–
4.1
(70.0)
(9.4)
–
169.4
–
(9.4)
169.4
–
–
–
–
–
–
–
–
–
–
–
–
78.5
–
78.5
–
(205.7)
–
(205.7)
–
–
–
–
–
–
57.8
314.0
(39.0)
–
–
–
57.8
314.0
(39.0)
33.8
(13.5)
–
(2.9)
33.8
(16.4)
(65.9)
0.9
(65.0)
–
134.3
160.0
134.3
(2.0)
29.1
158.0
163.4
134.3
294.3
27.1
321.4
Share-based payments
Exercise of options
Shares issued – Dividend Reinvestment Plan
Shares issued – Equity Raising
Share buy-back
Dividends paid
–
4.9
2.0
2,022.6
(6.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
5.5
–
–
–
–
–
5.5
–
4.9
–
–
2.0
– 2,022.6
(6.6)
–
(16.8)
(16.8)
5.5
–
4.9
–
–
2.0
– 2,022.6
(6.6)
–
(38.7)
(21.9)
balance at 30 June 2008
2,857.4
(20.0)
(460.8)
19.6
829.0 3,225.2
26.7 3,251.9
* Refer Note 20 for description of reserves.
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
NEWCREST MINING ANNUAL REPORT 2009 57
stAteMent oF cHAnGes in eQuitY
FOR THE YEAR ENDED 30 JUNE 2009
balance at 1 July 2008
Net profit for the year
total recognised income/(expense) for the year
Share-based payments
Exercise of options
Shares issued – Dividend Reinvestment Plan
Shares issued – Equity Raising
Share buy-back
Dividends paid
parent
Equity
Settlements
Reserve*
$M
Issued
Capital
$M
Retained
Earnings
$M
Total
$M
2,857.4
19.6
99.8
2,976.8
–
–
–
6.3
5.2
797.8
(25.1)
–
–
–
8.0
–
–
–
–
–
122.2
122.2
–
–
–
–
–
(45.3)
122.2
122.2
8.0
6.3
5.2
797.8
(25.1)
(45.3)
balance at 30 June 2009
3,641.6
27.6
176.7
3,845.9
balance at 1 July 2007
Net profit/(loss) for the year
total recognised income/(expense) for the year
Share-based payments
Exercise of options
Shares issued – Dividend Reinvestment Plan
Shares issued – Equity Raising
Share buy-back
Dividends paid
balance at 30 June 2008
834.5
14.1
135.2
983.8
–
–
–
4.9
2.0
2,022.6
(6.6)
–
–
–
5.5
–
–
–
–
–
(18.6)
(18.6)
–
–
–
–
–
(16.8)
(18.6)
(18.6)
5.5
4.9
2.0
2,022.6
(6.6)
(16.8)
2,857.4
19.6
99.8
2,976.8
* Refer Note 20 for description of reserves.
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
58 NEWCREST MINING ANNUAL REPORT 2009
stAteMent oF cAsH FloWs
FOR THE YEAR ENDED 30 JUNE 2009
cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Losses on delivered hedges
Interest received
Interest paid
Dividends received
Income taxes paid
consolidated
parent
Note
2009
$m
2008
$M
2009
$m
2008
$M
2,517.0
(1,368.2)
–
7.7
(29.9)
–
(102.5)
2,456.8
(1,295.6)
(52.5)
18.9
(50.8)
–
(58.7)
638.0
(531.1)
– –
–
(0.5)
80.0 –
– –
585.3
(551.6)
0.1
(2.7)
net cash provided by operating activities
7(b)
1,024.1
1,018.1
186.4
31.1
cash flows from investing activities
Payments for property, plant and equipment
Mine under construction and development expenditure
Feasibility expenditure
Exploration and evaluation expenditure
Software expenditure
Acquisition of interest in joint venture
Interest capitalised to development projects
Proceeds from sale of non-current assets
Purchase of gold put options
(114.3)
(533.3)
(123.8)
(109.3)
(28.3)
(470.6)
(4.6)
2.6
–
(111.2)
(174.9)
(49.6)
(76.8)
–
–
(2.2)
0.3
(79.5)
(40.1)
(4.5)
(5.4) –
(9.6)
(28.2) –
– –
– –
0.1
– –
(25.4)
(7.6)
(5.8)
0.1
29(b)
net cash (used in) investing activities
(1,381.6)
(493.9)
(87.7)
(38.7)
cash flows from financing activities
Proceeds from borrowings:
– US dollar bilateral debt
Repayment of borrowings:
– Gold loan
– US dollar bilateral debt
Loans from/(to) controlled entities
Repayment of finance lease principal
Proceeds from equity issue net of costs
Proceeds from other share issues
Share buy-back
Dividends paid:
– Members of the parent entity
– Minority interests
Purchase of gold to close out gold forward contracts
570.1
70.1
– –
–
(647.0)
–
(2.8)
792.7
6.3
(25.1)
(150.6)
(825.4)
–
(1.1)
2,014.4
4.9
(6.6)
(40.1)
(19.9)
–
(14.9)
(21.8)
(1,549.3)
– –
– –
(835.3)
– –
792.7
6.3
(25.1)
(40.1)
– –
– –
19(c)
19(e)
net cash (used in)/provided by financing activities
634.2
(480.3)
(101.5)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash held
276.7
77.5
12.2
cash and cash equivalents at the end of the financial year
7(a)
366.4
The Statement of Cash Flows should be read in conjunction with the accompanying notes.
43.9
34.3
(0.7)
77.5
(2.8)
3.1
– –
0.3
(1,987.2)
2,014.4
4.9
(6.6)
(14.9)
10.6
3.0
0.1
3.1
NEWCREST MINING ANNUAL REPORT 2009 59
notes to tHe FinAnciAl stAteMents
FOR THE YEAR ENDED 30 JUNE 2009
1. corporate inFormation
The financial report of Newcrest Mining Limited for the year
ended 30 June 2009 was authorised for issue in accordance
with a resolution of the Directors on 17 August 2009.
Newcrest Mining Limited is a company limited by shares, domiciled
and incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange. The registered office of
Newcrest Mining Limited is Level 9, 600 St Kilda Road, Melbourne,
Victoria 3004, Australia.
The nature of operations and principal activities of Newcrest Mining
Limited and its controlled entities are exploration, development,
mining and the sale of gold and gold/copper concentrate.
2. summary oF signiFicant accounting policies
The significant accounting policies adopted in the preparation
of this financial report are:
(a) basis of preparation and statement of compliance
The financial report is a general purpose financial report which
has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and
other authoritative pronouncements of the Australian Accounting
Standards Board. The financial report has been prepared on
a historical cost basis, except for derivative financial instruments
which have been measured at fair value.
The financial report also complies with International Financial
Reporting Standards (IFRS) including interpretations as issued
by the International Accounting Standards Board.
The financial report has been presented in Australian dollars
and all values are rounded to the nearest $100,000 unless
otherwise stated.
(b) basis of consolidation
The consolidated financial statements include the financial
statements of the parent entity, Newcrest Mining Limited, and
its controlled entities (referred to as ‘the Consolidated Entity’
or ‘the Group’ in these financial statements). A list of controlled
entities is presented in Note 27.
Controlled entities are all those entities over which the Group
has the power to govern the financial and operating policies
so as to obtain benefits from their activities. Controlled entities
are consolidated from the date on which control commences
until the date that control ceases. All intercompany balances
and transactions, including unrealised gains and losses arising
from intra-group transactions, have been eliminated in preparing
the consolidated financial statements.
Minority interest in the results and equity of the entity that is
controlled by the Group are shown separately in the consolidated
Income Statement and Balance Sheet respectively.
Investments in controlled entities are recorded in the
financial statements of the Company at the lower of cost
and recoverable amount.
(c) interest in Jointly controlled assets
Where the Group’s activities are conducted through unincorporated
Joint Ventures that are jointly controlled assets, its proportionate
share of the assets, liabilities, gold production and related
operating costs are included in the financial statements. Details
of the Group’s interests in jointly controlled assets are shown
in Note 29.
60 NEWCREST MINING ANNUAL REPORT 2009
(d) Foreign currency
Functional and Presentation Currency
Both the functional and presentation currency of Newcrest
Mining Limited and its Australian controlled entities is Australian
dollars ($). Each entity in the Group determines its own functional
currency and items included in the financial statements of each
entity are measured using that functional currency. The functional
currency of the majority of the Group’s foreign operations
is US dollars (US$).
Transactions and Balances
Transactions in foreign currencies are initially recorded in the
functional currency at the exchange rates ruling at the date of the
transaction. The subsequent payment or receipt of funds related
to a transaction is translated at the rate applicable on the date
of payment or receipt. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the rate of exchange ruling
at the balance sheet date. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using
the exchange rate as at the date of the initial transaction.
All exchange differences in the consolidated financial report are
taken to the Income Statement with the exception of differences
on certain US dollar denominated borrowings where the foreign
currency components are designated as cash flow hedges of future
US dollar denominated sales. These are taken directly to the hedge
reserve in equity until the forecast sales used to repay the debt
occur, at which time they are recognised in the Income Statement.
Translation of Foreign Operations
The assets and liabilities of controlled entities incorporated
overseas with functional currencies other than Australian dollars
are translated into the presentation currency of Newcrest Mining
Limited (Australian dollars) at the rates of exchange ruling
at balance sheet date and the income statements are translated
at the weighted average exchange rates for the period. Exchange
differences arising on translation are taken directly to the foreign
currency translation reserve in equity.
On consolidation, exchange differences arising from the translation
of net investments in foreign operations and of the borrowings
designated as hedges of the net investment are taken to the
foreign currency translation reserve (refer Note 2(s)). If the
foreign operation were sold, the proportionate share of exchange
differences would be transferred out of equity and recognised
in the Income Statement.
(e) cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at
bank and in hand and short-term deposits with an original maturity
of three months or less.
For the purpose of the Cash Flow Statement, cash and cash
equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
(f) trade and other receivables
Trade receivables comprising Metal in Concentrate receivables
and Bullion Awaiting Settlement are initially recorded at the fair
value of contracted sale proceeds expected to be received only
when there has been a passing of significant risks and rewards
of ownership to the customer. Collectability of debtors is reviewed
on an ongoing basis. Receivables which are known to be
uncollectable are written off and an allowance for doubtful debts
is raised where objective evidence exists that the debt will not
be collected.
Other receivables are initially measured at fair value then
subsequently at amortised cost, less an allowance for impairment.
(g) inventories
Gold in solution form, ore and work in progress is physically
measured or estimated and valued at the lower of cost and net
realisable value. Cost represents the weighted average cost and
includes direct costs and an appropriate portion of fixed and variable
production overhead expenditure, including depreciation and
amortisation, incurred in converting materials into finished goods.
By-products inventory on hand obtained as a result of the
production process to extract gold are valued at the lower
of cost and net realisable value.
Materials and supplies are valued at the lower of cost and net
realisable value. Any provision for obsolescence is determined by
reference to specific stock items identified. A regular and ongoing
review is undertaken to establish the extent of surplus items
and a provision is made for any potential loss on their disposal.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale.
(h) Deferred mining expenditure
The Group defers mining costs incurred during the production
stage of its operations, as part of determining the cost of
inventories. This is generally the case where there are fluctuations
in deferred mining costs over the life of the mine, and the effect
is material. The amount of mining costs deferred is based on
the ratio obtained by dividing the amount of waste tonnes mined
by the quantity of gold ounces contained in the ore. Mining costs
incurred in the year are deferred to the extent that the current year
waste to contained gold ounce ratio exceeds the life of mine waste
to ore ratio (‘life of mine’) ratio. Deferred mining costs are then
charged against reported profits to the extent that, in subsequent
years, the current year ratio falls below the life of mine ratio. The
life of mine ratio is based on economically recoverable reserves
of the operation.
The life of mine ratio is a function of an individual mine’s design and
therefore changes to that design will generally result in changes to
the ratio. Changes in other technical or economic parameters that
impact reserves will also have an impact on the life-of-mine ratio
even if they do not affect the mine’s design. Changes to the life
of mine ratio are accounted for prospectively.
In the production stage of some operations, further developments
of the mine require a phase of unusually high overburden removal
activity that is similar in nature to pre-production mine development.
The costs of such unusually high overburden removal activity
are deferred and charged against reported profits in subsequent
years on a unit-of-production basis. This accounting treatment is
consistent with that for overburden removal costs incurred during
the development phase of a mine, before production commences.
In some operations underground mining occurs progressively
on a level-by-level basis. In these operations an estimate is made
of the life-of-level average underground mining cost per tonne
of ore mined to expense underground mining costs in the Income
Statement. Underground mining costs incurred during the year are
deferred to the extent that the actual cost per tonne of ore mined
on a level in the year, exceeds the life-of-level average. Previously
deferred underground mining costs are released to the income
statement to the extent that the actual cost per tonne of the
ore mined in the year is less than the life-of-level average.
Deferred mining costs that relate to the production phase of the
operation are included in ‘Other Assets’ (refer Note 10). These costs
form part of the total investment in the relevant cash-generating
unit to which they relate, which is reviewed for impairment in
accordance with the accounting policy described in Note 2(n). The
release of deferred mining costs is included in site operating costs.
(i) property, plant and equipment
Cost
Property, plant and equipment is carried at cost less accumulated
depreciation and any accumulated impairment losses. Financial
costs incurred directly in relation to major capital works are
capitalised up to the time of commissioning the asset. Freehold
land is held for extractive industry operations and its value is
wholly dependent upon those operations. The net carrying values
of property, plant and equipment are reviewed at a cash-generating
unit level half-yearly by Directors to determine whether there
is any indication of impairment (refer Note 2(n)).
Depreciation and Amortisation
Items of property, plant and equipment, including buildings
but excluding freehold land, are depreciated over their estimated
useful lives.
The Group uses the unit-of-production basis when depreciating
mine specific assets which results in a depreciation/amortisation
charge proportional to the depletion of the anticipated remaining
life of mine production. Each item’s economic life has due regard
to both its physical life limitations and to present assessments
of economically recoverable reserves of the mine property at
which it is located.
For the remainder of assets the straight line method is used,
resulting in estimated useful lives between 3–20 years, the
duration of which reflects the useful life depending on the nature
of the asset. Estimates of remaining useful lives and depreciation
methods are reviewed half-yearly for all major items of plant
and equipment.
Major spares purchased specifically for particular plant are capitalised
and depreciated on the same basis as the plant to which they relate.
Assets are depreciated or amortised from the date they are installed
and are ready for use, or in respect of internally constructed assets,
from the time the asset is completed and deemed ready for use.
The cost of improvements to leasehold properties is amortised
over the unexpired period of the lease or the estimated useful
life of the improvement, whichever is the shorter.
Leased Plant and Equipment
Leases of plant and equipment under which the Group assumes
substantially all the risks and benefits incidental to ownership
are classified as finance leases. Other leases are classified
as operating leases.
Finance leases are capitalised, with a lease asset and a lease
liability equal to the fair value of the leased asset or, if lower,
at the present value of the minimum lease payments determined
at the inception of the lease. Lease payments are apportioned
between the finance charges and reduction of the lease liability.
The finance charge component within the lease payments
is expensed. Capitalised leased assets are depreciated over
the shorter of the estimated useful life of the asset and the
lease term if there is no reasonable certainty that the Group
will obtain ownership by the end of the lease term.
Payments made under operating leases are expensed on a
straight-line basis over the lease term, except where an alternative
basis is more representative of the pattern of benefits to be derived
from the leased property.
NEWCREST MINING ANNUAL REPORT 2009 61
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
2. summary oF signiFicant accounting policies
(continued)
(j) exploration, evaluation and Feasibility expenditure
Exploration and Evaluation
Exploration and evaluation expenditure related to areas of interest
is capitalised and carried forward to the extent that:
(i) Rights to tenure of the area of interest are current; and
(ii) (a) Costs are expected to be recouped through successful
development and exploitation of the area of interest
or alternatively by sale; or
(b) Where activities in the area of interest have not yet
reached a stage which permits a reasonable assessment
of the existence or otherwise of economically recoverable
reserves, active and significant operations in, or in relation
to, the area are continuing.
Such expenditure consists of an accumulation of acquisition
costs and direct net exploration and evaluation costs incurred
by or on behalf of the Group, together with an appropriate
portion of directly related overhead expenditure.
Deferred Feasibility
Feasibility expenditure represents costs related to the preparation
and completion of a feasibility study to enable a development
decision to be made in relation to an area of interest.
At the commencement of production, all past exploration,
evaluation and feasibility expenditure in respect of an area of
interest is transferred to mine development where it is amortised
over the life of the area of interest to which they relate
on a unit-of-production basis.
When an area of interest is abandoned or the Directors decide
it is not commercial, any accumulated costs in respect of that
area are written off in the year the decision is made. Each area
of interest is reviewed at the end of each reporting period and
accumulated costs written off to the extent they are not expected
to be recoverable in the future.
(k) mine construction and Development
Mines Under Construction
Expenditure incurred in constructing a mine by or on behalf of,
the Group is accumulated separately for each area of interest
in which economically recoverable reserves have been identified.
This expenditure includes net direct costs of construction,
borrowing costs capitalised during construction and an appropriate
allocation of attributable overheads. Once a development decision
has been taken, all aggregated costs of construction are transferred
to non-current assets as either mine development or buildings,
plant and equipment as appropriate.
Mine Development
Mine development represents expenditure in respect of exploration,
evaluation, feasibility and development incurred by or on behalf
of the Group, including overburden removal and construction costs,
previously accumulated and carried forward in relation to areas
of interest in which mining has now commenced. Such expenditure
comprises net direct costs and an appropriate allocation of directly
related overhead expenditure.
All expenditure incurred prior to commencement of production
from each development property is carried forward to the extent
to which recoupment out of future revenue from the sale of
production, or from the sale of the property, is reasonably assured.
When further development expenditure is incurred in respect
of a mine property after commencement of production,
such expenditure is carried forward as part of the cost of the
mine property only when future economic benefits are reasonably
assured, otherwise the expenditure is classified as part of the
cost of production and expensed as incurred. Such capitalised
development expenditure is added to the total carrying value
of mine development being amortised.
Amortisation of costs is provided using the unit-of-production
method. The net carrying values of mine development expenditure
carried forward are reviewed half-yearly by Directors to determine
whether there is any indication of impairment (refer Note 2(n)).
(l) mineral rights
Mineral rights comprise identifiable exploration and evaluation
assets, mineral resources and ore reserves, which are acquired
as part of a business combination or a joint venture acquisition
and are recognised at fair value at date of acquisition. Mineral
rights are attributable to specific areas of interest and are
classified within exploration, evaluation and development assets.
Mineral rights attributable to each area of interest are amortised
when commercial production commences on a unit-of-production
basis over the estimated economic reserve of the mine to which
the rights relate.
(m) intangible assets
Costs incurred in developing information technology systems
and acquiring software are capitalised as intangible assets.
Costs capitalised include external costs of materials and services
and the cost of employee benefits. Amortisation is calculated
on a straight- line basis over the useful life, ranging from 3
to 7 years.
(n) impairment of non-Financial assets
The carrying amounts of all non-financial assets are reviewed
half-yearly to determine whether there is an indication of
impairment. Where an indicator of impairment exists, a formal
estimate of the recoverable amount is made. Recoverable amount is
the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their
present value using pre-tax discount rates that reflect current market
assessments of the time value of money and the risks specific to
the asset.
If the carrying amount of an asset exceeds its estimated recoverable
amount, the asset is written-down to its recoverable amount and an
impairment loss is recognised in the Income Statement. Individual
assets are grouped for impairment purposes at the lowest level for
which there are separately identifiable cash inflows that are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units ‘CGUs’). Generally, this results in
the Group evaluating its mine properties on a geographical basis.
62 NEWCREST MINING ANNUAL REPORT 2009
(o) trade and other payables
Liabilities for trade and other payables are initially recorded
at the fair value of the consideration to be paid in the future for
goods and services received, whether or not billed to the Group,
and then subsequently at amortised cost.
The cost of these equity-settled transactions with employees is
measured by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
by an external valuer using an option pricing model, further details
of which are given in Note 23.
(p) borrowings
Bank loans are initially recognised at fair value and subsequently
at amortised cost.
(q) employee benefits
Wages, Salaries, Salary at Risk, Annual Leave and Sick Leave
Liabilities arising in respect of wages and salaries, salary at risk,
annual leave and any other employee benefits expected to be
settled within 12 months of the reporting date are measured at their
nominal amounts based on remuneration rates which are expected
to be paid when the liabilities are settled. These amounts are
recognised in ‘Trade and other payables’ (for amounts other than
annual leave and salary at risk) and ‘Current provisions’ (for annual
leave and salary at risk) in respect of employees’ services up to
the reporting date. Costs incurred in relation to non-accumulating
sick leave are recognised when leave is taken and are measured
at the rates paid or payable.
Long Service Leave and Retention Initiative Payments
The liabilities for long service leave and retention initiative
payments are measured at the present value of the estimated
future cash outflows to be made by the Group resulting from
employees’ services provided up to the reporting date.
Liabilities for long service leave benefits and retention initiative
payments not expected to be settled within twelve months are
discounted using the rates attaching to national government
securities at balance date, which most closely match the terms
of maturity of the related liabilities. In determining the liability
for these long-term employee benefits, consideration has been
given to expected future increases in wage and salary rates, the
Group’s experience with staff departures and periods of service.
Related on-costs have also been included in the liability.
Defined Contribution Superannuation Plan
Contributions to defined contribution superannuation plans
are expensed when incurred.
Defined Benefit Superannuation Plan
For defined benefit superannuation plans, the cost of providing
benefits is determined using the Projected Unit Credit Actuarial
Valuation Method, with actuarial valuations being carried
out annually. Actuarial gains and losses are recognised in the
Income Statement. During the year, the Group’s defined benefit
superannuation plan was closed.
Share-Based Payments
The Group provides benefits to employees (including Executive
Directors) in the form of share-based compensation, whereby
employees render services in exchange for shares or rights
over shares (‘equity-settled transactions’).
Currently the Group operates the Executive Performance
Share Plan, the Restricted Share Plan and the Employee
Share Acquisition Plan.
The fair value of the options granted is adjusted to reflect market
vesting conditions, but excludes the impact of non-market vesting
conditions, such as performance conditions. Non-market conditions
are included in the assumptions about the number of options
that are expected to become exercisable. At each reporting
date the Group revises its estimate of the number of options
that are expected to become exercisable. The cumulative expense
recognised for equity-settled transactions at each reporting date
until vesting date reflects the extent to which the vesting period
has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The Income Statement charge
or credit for a period represents the movement in cumulative
expense recognised at the beginning and end of that period.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending
on the date on which the relevant employees become fully entitled
to the award (‘vesting period’).
Upon the exercise of the options, the balance of the equity
settlements reserve relating to those options remains in the Equity
Settlements Reserve and the proceeds received, net of any directly
attributable transaction costs, are credited to Share Capital.
Under the Newcrest Employee Share Acquisition Plan, shares
are issued to employees for no cash consideration and vest
immediately on grant date. On this date, the market value of
the shares issued is recognised as an employee benefits expense.
(r) provision for rehabilitation
The Group records the present value of the estimated cost
of legal and constructive obligations (such as those under the
Group’s Environmental Policy) to restore operating locations
in the period in which the obligation is incurred. The nature of
restoration activities includes dismantling and removing structures,
rehabilitating mines, dismantling operating facilities, closure
of plant and waste sites and restoration, reclamation and
revegetation of affected areas.
Typically the obligation arises when the asset is installed or the
ground/environment is disturbed at the production location. When
the liability is initially recorded, the present value of the estimated
cost is capitalised by increasing the carrying amount of the related
mining assets. Over time, the discounted liability is increased for
the change in the present value based on the discount rates that
reflect the current market assessments and the risks specific to the
liability. Additional disturbances or changes in rehabilitation costs
will be recognised as additions or changes to the corresponding
asset and rehabilitation liability when incurred.
The unwinding of the effect of discounting the provision is
recorded as a finance cost in the Income Statement. The carrying
amount capitalised as a part of mining equipment is depreciated/
amortised over the life of the related asset.
Costs incurred that relate to an existing condition caused
by past operations, but do not have a future economic benefit
are expensed as incurred.
NEWCREST MINING ANNUAL REPORT 2009 63
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
2. summary oF signiFicant accounting policies
(continued)
(s) Derivative Financial instruments and hedging
The Group uses derivative financial instruments to manage
its risk to commodity prices. The instruments used by the
Group include forward sale contracts, gold put options and
foreign currency contracts.
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The resulting gain or
loss is recognised in the Income Statement immediately unless
the derivative is designated and effective as a hedging instrument,
in which event, the timing of recognition in the Income Statement
depends on the nature of the hedge relationship.
The fair value of forward sale contracts is calculated by reference
to current forward commodity prices. The fair value of gold put
options is calculated by reference to an option pricing model.
At the inception of the transaction, the Group formally designates
and documents the relationship between hedging instruments
and hedged items, as well as its risk management objective and
strategy for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are used in hedging
transactions have been and will continue to be highly effective
in offsetting changes in fair values or cash flows of hedged items.
For the purposes of hedge accounting, hedges are classified as:
– fair value hedges, when they hedge the exposure to changes
in the fair value of a recognised asset or liability;
– cash flow hedges, when they hedge exposure to variability
in cash flows that are either attributable to a particular risk
associated with a recognised asset or liability or a highly
probable forecast transaction;
– hedges of a net investment in a foreign operation.
Cash Flow Hedges
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges are recognised
directly in equity in the Hedge Reserve. The gain or loss relating
to the ineffective portion is recognised immediately in the Income
Statement. Amounts accumulated in equity are transferred to the
Income Statement in the periods when the hedged item affects
the Income Statement, for instance when the forecast sale that
is hedged takes place.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting. At that point in time, any cumulative gain
or loss on the hedging instrument recognised in equity remains
deferred in equity until the original forecasted transaction occurs.
When the forecasted transaction is no longer expected to occur,
the cumulative gain or loss that was deferred in equity is
recognised immediately in the Income Statement.
If a hedging instrument being used to hedge a commitment for
the purchase or sale of gold or copper is redesignated as a hedge
of another specific commitment and the original transaction is still
expected to occur, the gains and losses that arise on the hedging
instrument prior to its redesignation are deferred and included
in the measurement of the original purchase or sale when it
takes place. If the hedging instrument is redesignated as a hedge
of another commitment because the original purchase or sale
transaction is no longer expected to occur, the gains and losses
that arise on the hedge prior to its redesignation are recognised
in the Income Statement at the date of the redesignation.
64 NEWCREST MINING ANNUAL REPORT 2009
Copper Forward Sales Contracts
Copper forward sales contracts have been entered into by
the Group to provide certainty of cash flows from certain copper
concentrate sales. These derivative instruments are not designated
into hedge relationships and as such changes in fair value are
immediately recognised as ‘Other income/expenses’ in the
Income Statement.
Gold Put Options
The Group entered into gold put options for a portion of its future
gold production in order to manage its exposure to downward
price risk. These options allow the Group to maintain full exposure
to any upward movements in the gold price, by providing it with
the right, but not the obligation, to deliver gold at the stated strike
price (minimum price). These options comprise an extrinsic and
intrinsic value. The total premium paid for these options represents
the ‘extrinsic value’. The ‘intrinsic value’ is calculated as the strike
price less the forward price and where the forward price is greater
than the strike price, the intrinsic value is zero.
Unlike other hedging instruments, the hedging provisions of AASB
139 Financial Instruments: Recognition and Measurement permits
the intrinsic value and extrinsic value of an option to be separated.
Only the intrinsic value of the option is designated into the cash
flow hedge relationship. Therefore, the only instance where hedge
accounting impacts the financial statements is if the gold forward
price falls below the strike price, giving the options an intrinsic
value due to them coming ‘into the money’.
The premium paid on the purchase of put options (i.e. its
extrinsic value) is initially recognised as a financial asset and
is not designated into a hedge relationship. It is remeasured
to fair value, using an option pricing model, at each subsequent
reporting date, with fair value changes recognised immediately
in the Income Statement. Fair value changes in the intrinsic value
of the put options which have been designated into a hedge
relationship, are recognised directly in the hedge reserve in
equity to the extent that the hedge is effective. These fair value
movements are then transferred to the Income Statement as
the forecast sales to which they are designated, occur. Fair value
changes relating to changes in the intrinsic value of the option
to the extent that the hedge is ineffective, are recognised
immediately in the Income Statement.
Hedges of a Net Investment
Hedges of a net investment in a foreign operation, including
a hedge of a monetary item that is accounted for as part of the net
investment, are accounted for in a similar way to cash flow hedges.
Gains or losses on the hedging instrument relating to the effective
portion of the hedge are recognised directly in equity while any
gains or losses relating to the ineffective portion are recognised
in the Income Statement. On disposal of the foreign operation,
the cumulative value of any such gains or losses recognised directly
in equity is transferred to the Income Statement.
(t) issued capital
Issued ordinary share capital is classified as equity and
is recognised at the fair value of the consideration received
by the Company. Any transaction costs arising on the issue of
ordinary shares and the associated tax are recognised directly
in equity as a reduction of the share proceeds received.
(u) earnings per share (eps)
Basic EPS is calculated as net profit attributable to members,
adjusted to exclude costs of servicing equity (other than dividends)
and preference share dividends, divided by the weighted average
number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members,
adjusted for:
– costs of servicing equity (other than dividends) and preference
share dividends;
– the after tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognised
as expenses; and
– other non-discretionary changes in revenues or expenses
during the period that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.
(v) revenue recognition
Revenue from the sale of goods is recognised when there has
been a transfer of risks and rewards to the customer and no
further processing is required by the Group, the quality and
quantity of the goods has been determined with reasonable
accuracy, the price is fixed or determinable, and collectability
is probable. The point at which risk and title passes for the
majority of the Group’s commodity sales is upon receipt of
the bill of lading when the commodity is delivered for shipment.
Revenue is measured at the fair value of the consideration
received or receivable.
Gold and Silver Bullion Sales
Revenue from gold and silver bullion sales, is brought to
account when the significant risks and rewards of ownership
have transferred to the buyer and selling prices are known
or can be reasonably estimated.
Gold, Copper and Silver in Concentrate Sales
Contract terms for the Group’s sale of gold, copper and silver in
concentrate (‘metal in concentrate’) allow for a price adjustment
based on final assay results of the metal in concentrate by the
customer to determine content. Recognition of sales revenue
for these commodities is based on the most recently determined
estimate of metal price in concentrate (which is considered to
be the spot price) with a subsequent adjustment made upon
final determination and presented as part of ‘Other income’.
The terms of metal in concentrate sales contracts with third parties
contain provisional pricing arrangements whereby the selling price
for metal in concentrate is based on prevailing spot prices on a
specified future date after shipment to the customer (‘quotation
period’). Adjustments to the sales price occur based on movements
in quoted market prices up to the date of final settlement
The period between provisional invoicing and final settlement
is typically between one and six months.
The provisionally priced sales of metal in concentrate contain
an embedded derivative that is required to be separated from
the host contract for accounting purposes. Accordingly the
embedded derivative, which does not qualify for hedge accounting,
is recognised at fair value, with subsequent changes in fair value
recognised in the Income Statement each period until final
settlement, and presented as ‘Other income’. Changes in fair
value over the quotation period and up until final settlement
are estimated by reference to forward market prices.
Interest Revenue
Interest revenue is recognised as it accrues using the
effective interest method.
Dividend Revenue
Dividend revenue is recognised when the right to receive
the payment is established.
(w) government royalties
Royalties under existing regimes are payable on sales
and are therefore recognised as the sale occurs.
(x) borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready
for their intended use, are added to the cost of those assets, until
such time as the assets are substantially ready for their intended
use. The capitalisation rate used to determine the amount of
borrowing costs to be capitalised is the weighted average interest
rate applicable to the Group’s outstanding borrowings during
the year used to develop the qualifying asset.
All other borrowing costs are recognised as expenses in the period
in which they are incurred.
(y) income taxes
Current Income Tax
Current tax assets and liabilities for the current and prior year are
measured at the amount expected to be recovered from or paid to
the taxation authorities based on the current year’s taxable income.
The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance sheet date.
Deferred Income Tax
Deferred income tax is provided on all temporary differences
(except as noted below) at the balance sheet date between
the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Deferred tax assets and liabilities are not recognised
if the temporary differences giving rise to them:
– Arise from the initial recognition of an asset or liability
in a transaction that is not a business combination and that,
at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss.
– Are associated with investments in subsidiaries, associates
or interests in joint ventures, and the timing of the reversal
of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse
in the foreseeable future.
Deferred tax assets are recognised for deductible temporary
differences, carry-forward of unused tax credits and unused
tax losses to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences
and the carry-forward of unused tax credits and unused tax losses
can be utilised.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available
to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each balance
sheet date and are recognised to the extent that it has become
probable that future taxable profit will allow the deferred tax
asset to be recovered.
NEWCREST MINING ANNUAL REPORT 2009 65
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
2. summary oF signiFicant accounting policies
(continued)
(y) income taxes (continued)
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date.
Current and deferred taxes attributable to amounts recognised
directly in equity are also recognised directly in equity.
Tax Consolidation Legislation
The Company and its wholly-owned Australian controlled entities
implemented the tax consolidation legislation as of 1 July 2003.
The head entity, Newcrest Mining Limited and the controlled
entities in the tax-consolidated group continue to account for their
own current and deferred tax amounts. The Group has applied the
‘group allocation’ approach in determining the appropriate amount
of current taxes and deferred taxes to allocate to members of the
tax-consolidated group.
In addition to its own current and deferred tax amounts, the
Company also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses
and unused tax credits assumed from controlled entities
in the tax-consolidated group.
Assets or liabilities arising under tax funding arrangements with
the tax-consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group. Details of the
tax funding arrangement are disclosed in Note 4.
(z) goods and services tax (gst)
Revenues, expenses and assets are recognised net of the amount
of GST except:
– where the GST incurred on a purchase of goods and services
is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable; and
– receivables and payables are stated with the amount
of GST included.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the Balance Sheet.
Cash flows are included in the Cash Flow Statement on a gross
basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to,
the taxation authority is classified as part of operating cash flows.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
(aa) critical accounting Judgements, estimates and assumptions
Judgements, estimates and assumptions are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. The Group makes assumptions
concerning the future. All judgements, estimates and assumptions
made are believed to be reasonable based on the most current
set of circumstances available to management. The resulting
accounting estimates will, by definition, seldom equal the related
actual results. The judgements, estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year are discussed below.
i. Mine Rehabilitation Provision
The Group assesses its mine rehabilitation provision half-yearly
in accordance with the accounting policy Note 2(r). Significant
judgement is required in determining the provision for mine
rehabilitation as there are many transactions and other factors
that will affect the ultimate liability payable to rehabilitate the mine
sites. Factors that will affect this liability include future disturbances
caused by further development, changes in technology, changes
in regulations, price increases and changes in discount rates.
When these factors change or become known in the future,
such differences will impact the mine rehabilitation provision
in the period in which they change or become known.
ii. Unit-of-Production Method of Depreciation/Amortisation
The Group uses the unit-of-production basis when depreciating/
amortising life of mine specific assets which results in a
depreciation/amortisation charge proportional to the depletion
of the anticipated remaining life of mine production. Each item’s
economic life, which is assessed annually, has due regard to both its
physical life limitations and to present assessments of economically
recoverable reserves of the mine property at which it is located.
These calculations require the use of estimates and assumptions.
iii. Impairment of Assets
The Group assesses each cash-generating unit half-yearly, to
determine whether there is any indication of impairment. Where an
indicator of impairment exists, a formal estimate of the recoverable
amount is made, which is deemed as being the higher of the fair
value less costs to sell and value in use calculated in accordance
with accounting policy Note 2(n). These assessments require
the use of estimates and assumptions such as discount rates,
exchange rates, commodity prices, future operating development
and sustaining capital requirements and operating performance
(including the magnitude and timing of related cash flows).
iv. Share-Based Payments
The Group measures the cost of equity settled transactions with
employees by reference to the fair value of equity instruments
at the date at which they are granted. The fair value is determined
by an external valuer using an option pricing model, using the
assumptions detailed in Note 23.
66 NEWCREST MINING ANNUAL REPORT 2009
(ab) new accounting standards and interpretations
Adoption of New Accounting Standards and Interpretations
Since 1 July 2008 the Group has adopted the following
Standards and Interpretations, mandatory for annual periods
beginning on or after 1 January 2008. Adoption of these Standards
and Interpretations did not have any effect on the financial position
or performance of the Company or the Group.
– AASB 2008-10 – Amendments to Australian Accounting
Standards – Reclassification of Financial Assets
– Interpretation 12 – Service Concession Arrangements
– Interpretation 14 – AASB 119 – The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction.
New Accounting Standards and Interpretations Not Yet Adopted
The following standards, amendments to standards and
interpretations have been identified as those which may
impact the Group in the period of initial application. They
have been issued but are not yet effective and are available
for early adoption at 30 June 2009, but have not been applied
in preparing this financial report.
v. Deferred Mining Expenditure
The Group defers mining costs incurred during the production
stage of its operations which are calculated in accordance with
accounting policy Note 2(h). Changes in an individual mine’s
design will generally result in changes to the life of mine waste
to contained gold ounce (‘life of mine’) ratio. Changes in other
technical or economic parameters that impact reserves will also
have an impact on the life of mine ratio even if they do not affect
the mine’s design. Changes to the life of mine are accounted
for prospectively.
vi. Recovery of Deferred Tax Assets
Deferred tax assets are recognised for deductible temporary
differences as management considers that it is probable
that future taxable profits will be available to utilise those
temporary differences.
vii. Ore Reserve Estimates
The Group estimates its ore reserves and mineral resources
based on information compiled by Competent Persons as defined
in accordance with the Australasian Code for Reporting Exploration
Results, Mineral Resources and Ore Resources of December
2004 (JORC Code). The estimated quantities of economically
recoverable reserves are based upon interpretations of geological
models and require assumptions to be made regarding factors such
as estimates of short and long-term exchange rates, estimates of
short and long-term commodity prices, future capital requirements
and future operating performance. Changes in reported reserves
estimates can impact the carrying value of property, plant and
equipment, provision for rehabilitation obligations, the recognition
of deferred tax assets, as well as the amount of depreciation and
amortisation charged to the Income Statement.
viii. Capitalisation of Exploration and Evaluation Costs
The Group’s accounting policy for exploration and evaluation
expenditure is set out in Note 2(j). The application of this policy
requires management to make certain estimates and assumptions
as to future events and circumstances, in particular, the assessment
of whether economic quantities of reserves will be found. Any
such estimates and assumptions may change as new information
becomes available.
NEWCREST MINING ANNUAL REPORT 2009 67
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
2. summary oF signiFicant accounting policies (continued)
(ab) new accounting standards and interpretations (continued)
reference
title
Details of new standard/amendment/interpretation
AASB 123 (Revised),
AASB 2007-6
AASB 3 (Revised),
AASB 2008-3
Borrowing Costs
Business Combinations
AASB Int. 16
Hedges of a Net
Investment in a
Foreign Operation
AASB 8,
AASB 2007-3
Operating Segments
AASB 101 (Revised),
AASB 2007-8,
AASB 2008-10
Presentation of
Financial Statements
AASB 1039 (Revised)
Concise Reporting
AASB 2009-2
AASB 127 (Revised)
AASB 2008-7
Improving Disclosures
about Financial
Instruments
Consolidated and
Separate Financial
Statements
Cost of an Investment
in a Subsidiary, Jointly
Controlled Entity
or Associate
AASB 2008-1
Share-based Payment:
Vesting Conditions
and Cancellations
The amendments to AASB 123 require that all borrowing
costs associated with a qualifying asset be capitalised.
The revised standard introduces a number of changes
to the accounting for business combinations, one of
the most significant of which includes the requirement
to expense transaction costs.
This interpretation requires that the hedged risk in
a hedge of a net investment in a foreign operation
is the foreign currency risk arising between the
functional currency of the net investment and the
functional currency of any parent entity.
New standard replacing AASB 114 Segment Reporting,
which adopts a management reporting approach to
segment reporting.
Introduces a statement of comprehensive income. Other
revisions include impacts on the presentation of items
in the statement of changes in equity, new presentation
requirements for restatements or reclassifications of items
in the financial statements, changes in the presentation
requirements for dividends and changes to the titles
of the financial statements.
AASB 1039 was revised to achieve consistency with
AASB 8 Operating Segments. The revisions include changes
to terminology and descriptions to ensure consistency with
the revised AASB 101 Presentation of Financial Statements.
The main amendment to AASB 7 requires fair value
measurements to be disclosed by the source of inputs,
using a three-level hierarchy. It also introduces new
liquidity disclosures.
There are a number of changes arising from the revision
to AASB 127 relating to changes in ownership interest
in a subsidiary without loss of control, allocation of
losses of a subsidiary and accounting for the loss
of control of a subsidiary.
The main amendments are those made to AASB 127
deleting the ‘cost method’ and requiring all dividends
from a subsidiary, jointly controlled entity or associate
to be recognised in profit or loss in an entity’s separate
financial statements. AASB 127 has also been amended
to effectively allow the cost of an investment in a subsidiary,
in limited reorganisations, to be based on the previous
carrying amount of the subsidiary rather than its fair value.
The amendments clarify the definition of ‘vesting
conditions’, introducing the term ‘non-vesting conditions’
for conditions other than vesting conditions as specifically
defined and prescribes the accounting treatment of an
award that is effectively cancelled because a non-vesting
condition was not satisfied.
impact
on group
application Date
for the group
(i)
(ii)
1 July 2009
1 July 2009
(ii)
1 July 2009
(iii)
1 July 2009
(iii)
1 July 2009
(iii)
1 July 2009
(iii)
1 July 2009
(ii)
1 July 2009
(ii)
1 July 2009
(iii)
1 July 2009
Amendments to IFRS
Amendments to IFRS 2
The amendments clarify the accounting for group
cash-settled share-based payment transactions.
(ii)
1 July 2009
(i) The Group’s current accounting policy complies with the requirements of the amendment.
(ii) The adoption of this new standard, amendment or interpretation will not have a material impact on the Group’s financial statements.
(iii) This standard, amendment or interpretation will change the disclosures currently made in the Group’s financial report but will have no impact
of the amounts recognised in the financial statements.
Apart from the above, other accounting standards, amendments and interpretations that will be applicable in future periods
have been considered however, their impact is considered insignificant to the Group.
68 NEWCREST MINING ANNUAL REPORT 2009
3. revenue anD expenses
specific items
Profit/(loss) before income tax includes the following revenues,
income and expenses whose disclosure is relevant in explaining
the performance of the Group:
(a) sales revenue
Gold
Copper
Silver
total operating sales revenue
(b) cost of sales
Mine production costs
Royalty
Concentrate treatment and realisation
Depreciation
Deferred mining adjustment
Inventory movements
Gas disruption costs (1)
total cost of sales
(c) corporate administration expenses
Corporate costs
Corporate depreciation
Equity settled share-based payments
total corporate administration expenses
(d) other revenue
Interest from other persons
Joint venture management fees
Dividends
total other revenue
(e) other income/(expenses)
Profit/(loss) on sale of non-current assets
Net foreign exchange gain/(loss)
Royalty refund
Fair value gain on gold lease rate swaps
Fair value gain on gold and copper derivatives
Other
total other income/(expenses)
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
1,914.4
593.2
23.2
1,617.9
721.2
24.0
2,530.8
2,363.1
1,097.7
56.1
153.6
262.5
60.5
(1.0)
8.6
1,019.3
57.8
151.2
273.2
24.5
(28.7)
–
528.3
156.0
5.5
689.8
388.6
17.6
53.3
108.0
19.2
(6.9)
6.0 –
371.0
149.4
4.3
524.7
375.3
15.8
45.5
102.3
(10.5)
(16.7)
1,638.0
1,497.3
585.8
511.7
57.5
4.3
8.0
69.8
7.7
0.6
–
8.3
0.9
(32.6)
–
–
34.0
4.5
6.8
47.2
5.4
5.5
58.1
18.9
1.5
–
20.4
(0.6)
(20.3)
6.4
1.5
17.1
5.1
9.2
58.4
3.7
8.0
70.1
0.1
2.0
80.0 –
82.1
–
(10.2)
– –
– –
7.5
(2.0)
(4.7)
47.9
3.8
5.5
57.2
0.1
1.8
1.9
(0.2)
(0.8)
5.7
(6.0)
(1.3)
(1) Represents the additional costs, net of insurance proceeds, associated with securing alternative sources of gas for Telfer as a result of the
Varanus Island gas plant explosion in June 2008.
NEWCREST MINING ANNUAL REPORT 2009 69
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
3. revenue anD expenses (continued)
(f) losses on delivered hedges (1)
Gold hedge losses
total losses on delivered hedges
(1) These relate to losses realised on hedge contracts that were settled
by physical delivery prior to the hedge book close out in September 2007.
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
–
–
(33.8)
(33.8)
– –
– –
(g) Finance costs – ordinary activities
Interest costs:
Interest on loans
Finance leases
Other:
Facility fees and other costs
Discount unwind on provisions
Less: Capitalised borrowing costs
total finance costs – ordinary activities
(h) Depreciation and amortisation
Property, plant and equipment
Mine development
Intangible assets
Add/(Less):
Capitalised to inventory on hand or mines under construction
total depreciation and amortisation expense
Included in:
Cost of sales depreciation
Corporate depreciation
total depreciation and amortisation expense
(i) employee benefits expense
Defined benefit plan expense (Note 22)
Equity settled share-based payments
Termination benefits expense
Defined contribution plan expense
Other employment benefits
total employee benefits expense
(j) other items:
Operating lease rentals
Stores obsolescence
70 NEWCREST MINING ANNUAL REPORT 2009
31.8
0.2
3.7
3.8
39.5
(4.6)
34.9
151.0
130.5
0.9
282.4
38.1
0.7
2.7
4.1
45.6
(2.2)
43.4
150.4
128.1
–
278.5
(15.6)
0.1
266.8
278.6
262.5
4.3
266.8
0.8
8.0
1.6
18.3
219.7
273.2
5.4
278.6
0.5
5.5
–
20.9
199.6
–
– –
0.6
1.7
2.3
– –
2.3
57.8
57.1
0.8 –
0.5
0.2
2.0
2.7
2.7
57.1
48.3
115.7
105.4
(4.0)
111.7
108.0
3.7
111.7
0.8
8.0
1.6 –
9.2
108.6
0.7
106.1
102.3
3.8
106.1
0.5
5.5
8.9
87.2
102.1
4.9
4.9
248.4
226.5
128.2
5.4
0.6
6.0
6.8
0.4
7.2
4.1
0.4 –
4.5
3. revenue anD expenses (continued)
(k) losses on restructured and closed-out hedge contracts
Losses on restructured and closed-out hedge contracts
transferred from reserves (Note 20)
Applicable income tax (benefit)
total losses on restructured and closed-out hedges (after tax)
(l) other close-out related costs
Fair value loss on gold forward sales contracts
Fair value loss on gold put options (Note 24(e)(ii))
total other close-out related costs
Applicable income tax (benefit)
total other close-out related costs (after tax)
(m) finance costs – close-out and restructure
Gold loan break costs
Discount unwind – hedge restructure liability (1)
total finance costs – close-out and restructure
Applicable income tax (benefit)
total finance costs – close-out and restructure (after tax)
(1) This relates to the unwind of the discount on the hedge restructure
liability, established as part of the November 2006 hedgebook restructure,
from 1 July 2007 to 10 September 2007.
(n) Foreign exchange gain on us dollar borrowings
Foreign exchange gain/(loss) on US dollar borrowings
transferred from reserves (Note 20)
Applicable income tax (expense)
total foreign exchange gain on us dollar borrowings (after tax)
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
352.0
(105.6)
246.4
–
25.1
25.1
(7.5)
17.6
–
–
–
–
–
314.1
(94.2)
219.9
178.7
39.0
217.7
(65.3)
152.4
13.1
7.8
20.9
(6.3)
14.6
41.4
(12.4)
29.0
39.0
(11.7)
27.3 –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
–
NEWCREST MINING ANNUAL REPORT 2009 71
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
4. income tax
(a) income tax expense comprises:
income statement
Current income tax
Current income tax expense/(benefit)
Under/(over) provision in respect of prior years
Deferred tax
Relating to origination and reversal of temporary differences
Under/(over) provision in respect of prior years
Income tax expense/(benefit) per the Income Statement
(b) reconciliation of prima facie income tax expense/(benefit)
to income tax expense/(benefit) per the income statement
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
188.9
(24.5)
(229.6)
(29.1)
164.4
(258.7)
(53.4)
16.6
(36.8)
127.6
292.7
2.6
295.3
36.6
9.6
(18.8)
(9.2)
(1.8)
(6.0)
(7.8)
(10.2)
(14.8)
(25.0)
(9.2)
0.5
(8.7)
(17.0)
(33.7)
Accounting profit/(loss) before tax
409.7
200.0
105.2
(52.3)
Income tax expense calculated at 30% (2008: 30%)
– Research and development allowance
– Non-deductible share-based payment expense
– Effect of higher tax rates in foreign jurisdictions
– Foreign tax losses not brought to account
– Other non-deductible expenses
– Dividend from controlled entity
– (Over) provided in prior years (1)
Income tax expense/(benefit) per the Income Statement
122.9
(3.8)
2.0
12.0
1.4
1.0
–
(7.9)
127.6
60.0
(10.5)
1.7
10.2 –
1.3
0.4
–
(26.5)
31.6
(2.1)
2.0
–
– –
0.3
(24.0) –
(24.8)
36.6
(17.0)
(15.7)
(5.7)
1.7
0.3
(14.3)
(33.7)
(1) The over provision for the Group predominantly relates to higher actual research and development allowance claimed for prior years.
72 NEWCREST MINING ANNUAL REPORT 2009
4. income tax (continued)
(c) movement in deferred taxes
2009
Deferred tax assets
Carry forward revenue losses recognised
Deferred tax liabilities
Temporary differences:
– Property, plant and equipment
and deferred mining
– Financial instruments
– Provisions
– Other
consolidated
Balance
at 1 July
$M
Charged/
(Credited)
to Income
$M
Charged/
(Credited)
to Equity
$M
Balance at
30 June
$M
Balance
at 1 July
$M
parent
Charged/
(Credited)
to Income
$M
Charged/
(Credited)
to Equity
$M
Other*
$M
Balance at
30 June
$M
490.7
(87.2)
–
403.5
490.7
9.2
–
(96.4)
403.5
(360.9)
(12.2)
16.2
(28.5)
(385.4)
(17.7)
72.4
7.8
(25.7)
36.8
–
(378.6)
(129.4)
(64.8)
–
(1.1)
(65.9)
(4.6)
24.0
(55.3)
–
12.4
5.4
(414.5)
(111.6)
24.5
–
4.6
(21.3)
7.8
17.0
–
–
–
5.1
5.1
–
–
–
–
–
(104.9)
–
17.0
(10.8)
(98.7)
5.1
(96.4)
304.8
net deferred taxes
105.3
(50.4)
(65.9)
(11.0)
379.1
2008
Deferred tax assets
Carry forward revenue losses recognised
Deferred tax liabilities
Temporary differences:
– Property, plant and equipment
and deferred mining
– Financial instruments
– Provisions
– Other
net deferred taxes
158.2
332.5
–
490.7
158.2
25.0
–
307.5
490.7
(381.1)
319.8
40.6
(19.4)
(40.1)
118.1
20.2
(262.0)
(24.4)
(29.1)
(295.3)
–
(360.9)
(136.9)
(70.0)
–
20.0
(12.2)
16.2
(28.5)
–
13.4
(5.0)
(50.0)
(385.4)
(128.5)
7.5
–
(1.0)
2.2
8.7
–
–
–
8.2
8.2
–
–
–
–
–
37.2
(50.0)
105.3
29.7
33.7
8.2
307.5
(129.4)
–
12.4
5.4
(111.6)
379.1
* Represents the assumption of tax losses attributable to controlled entities in the tax-consolidated group by the Head Entity.
(d) unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of carry forward capital losses of $295.7 million (2008: $292.8 million) because
it is not probable that the Group will have future capital gains available against which carry forward capital losses could be utilised as
the Group has no current intention to dispose of capital assets.
(e) tax consolidation
Effective 1 July 2003, for the purposes of income taxation, Newcrest Mining Limited and its wholly-owned Australian resident controlled
entities formed a tax-consolidated group. Newcrest Mining Limited is the head entity of the tax-consolidated group.
Entities within the tax-consolidated group have entered into a tax funding arrangement with the head entity. Under the tax funding
arrangement, each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity,
based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable
to other entities in the tax-consolidated group.
Entities within the tax-consolidated group have entered into a tax sharing agreement which sets out the allocation of income tax liabilities
between the entities should the head entity default on its tax payment obligations and treatment of entities leaving the tax-consolidated
group. At the balance date, no amounts have been recognised in the financial statements in respect of this agreement on the basis that
the possibility of default is remote.
NEWCREST MINING ANNUAL REPORT 2009 73
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
5. DiviDenDs
Dividends recognised in the current year by the Company are:
2009 – Dividend paid during the year for the 30 June 2008 year
Final – ordinary
2008 – Dividend paid during the year for the 30 June 2007 year
Final – ordinary
subsequent events
Dividend proposed and not recognised as a liability:
Since the end of the financial year, the Directors declared the following dividends:
Final – ordinary
cents per
share
total
amount
$m
Franked/
unfranked
Date of
payment
10.0
45.3
Unfranked
17 Oct 2008
5.0
16.8
Unfranked 27 Sep 2007
15.0
72.5
Unfranked
16 Oct 2009
Dividend franking account balance
Franking credits at 30% available for the subsequent financial year
6. earnings per share (eps)
eps (cents per share)
Basic EPS
Diluted EPS
earnings per share on underlying profit:
Basic EPS
Diluted EPS
The following reflects the income used in the calculation of basic and diluted EPS:
Profit after income tax attributable to ordinary equity holders of the Parent
Earnings attributable to ordinary equity holders of the parent used in calculating basic and diluted EPS
The following reflects the income used in the calculation of basic and diluted EPS on Underlying Profit:
Profit after tax before hedge restructure and close out impacts
Earnings attributable to ordinary equity holders of the parent used in calculating underlying basic and diluted EPS
parent and consolidated
2009
$m
2008
$M
0.0
0.1
consolidated
2009
2008
53.0
52.9
103.2
103.0
30.8
30.7
113.2
112.9
consolidated
2009
$m
248.1
248.1
483.1
483.1
2008
$M
134.3
134.3
493.9
493.9
The following reflects the share data used in the calculation of basic and diluted EPS:
Weighted average number of ordinary shares used in calculating basic EPS
Effect of dilutive securities:
Share options
no. of shares no. of shares
467,951,049 436,396,091
1,167,735
1,108,181
Adjusted weighted average number of ordinary shares used in calculating diluted EPS
469,118,784 437,505,082
restatement of comparatives
The EPS calculations for the 2008 financial year have been restated to include the impact of the Equity Raising undertaken
in February 2009, in accordance with accounting standards.
74 NEWCREST MINING ANNUAL REPORT 2009
7. cash anD cash equivalents
(a) components of cash and cash equivalents
Cash at bank
Short-term deposits
total cash and cash equivalents
(b) reconciliation of net profit/(loss) after income tax
to net cash flow from operating activities
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
46.4
320.0
366.4
77.5
–
77.5
0.3
– –
0.3
3.1
3.1
profit/(loss) after income tax
282.1
163.4
122.2
(18.6)
Non-cash items:
Depreciation and amortisation
Hedge restructure and close out expense
Net fair value change on derivatives
Share-based payments
Other non-cash items
Items presented as investing or financing activities:
(Profit)/loss on disposal of non-current assets
Exploration expenditure written off
Changes in assets and liabilities:
(Increase)/decrease in:
Trade and other receivables
Inventories
Deferred mining
Prepayments current
Prepayments non-current
Deferred tax assets
(Decrease)/increase in:
Trade and other payables
Provisions current
Provisions non-current
Current tax liabilities
Deferred tax liabilities
Deferred income
266.8
310.6
(8.2)
8.0
(7.0)
(0.9)
57.8
(62.6)
(50.2)
54.2
30.2
(7.5)
87.2
(2.9)
49.7
13.4
(20.4)
29.1
(5.3)
278.6
517.3
9.1
5.5
(6.2)
0.6
46.4
57.5
(56.0)
24.4
(34.6)
–
24.1
(38.7)
11.0
14.6
16.7
(11.3)
(4.3)
111.7
– –
(1.6)
8.0
1.7
–
3.8
(162.8)
(22.3)
18.7
24.0
(5.3) –
87.2
(14.9)
27.5
1.4
– –
(12.9)
– –
106.1
2.4
5.5
(0.2)
0.2
6.0
18.5
(23.7)
(21.8)
(26.3)
(332.5)
313.6
11.7
7.1
(16.9)
net cash from operating activities
1,024.1
1,018.1
186.4
31.1
(c) non-cash financing and investing activities
Dividends paid by the issue of shares under
the Dividend Reinvestment Plan
5.2
2.0
5.2
2.0
NEWCREST MINING ANNUAL REPORT 2009 75
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
8. traDe anD other receivables
Current
Metal in concentrate receivables(i)
Bullion awaiting settlement(ii)
GST receivable(iii)
Other receivables(iii)
Amounts due from controlled entities(iv)
total current receivables
Non-current
Amounts due from controlled entities(iv)
Other receivables(v)
total non-current receivables
consolidated
parent
2009
$m
170.4
18.9
27.0
56.3
–
272.6
–
9.1
9.1
2008
$M
132.2
31.3
8.7
46.0
–
218.2
–
0.3
0.3
2009
$m
68.1
4.0 –
4.2 –
25.1
591.1
2008
$M
27.1
9.6
984.7
692.5
1,021.4
1,072.8 –
8.7 –
1,081.5 –
(i) Are non-interest bearing and are generally expected to settle within 1 to 6 months, refer Note 2(f).
(ii) Are non-interest bearing and are generally expected to settle within 7 days, refer Note 2(f).
(iii) Recorded at amortised cost, are non-interest bearing and are generally expected to settle within 1 to 2 months.
(iv) For terms and conditions relating to related party receivables, refer Note 31.
(v) Comprises of security deposits and are carried at amortised cost.
9. inventories
Current
Gold in circuit
Concentrate
Ore
Materials and supplies
Provision for obsolescence of materials and supplies
total current inventories
Non-current
Ore
total non-current inventories
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
26.4
16.8
98.5
132.9
(1.8)
22.1
39.0
56.6
103.1
(1.2)
10.4
6.4
55.5
45.7
(0.4) –
9.8
17.3
32.1
36.1
272.8
219.6
117.6
95.3
–
–
1.4
1.4
– –
– –
76 NEWCREST MINING ANNUAL REPORT 2009
10. other assets
Current
Prepayments
Deferred mining expenditure
total current other
Non-current
Prepayments
Deferred mining expenditure
total non-current other
11. other Financial assets
Shares in controlled entities at cost
Provision for diminution
total other financial assets
consolidated
parent
2009
$m
9.3
146.7
156.0
7.5
156.1
163.6
2008
$M
39.5
122.0
161.5
–
235.0
235.0
2009
$m
3.3
30.5
33.8
5.3 –
7.4 –
12.7 –
2008
$M
27.3
57.2
84.5
consolidated
parent
2009
$m
2008
$M
– –
–
–
–
–
2009
$m
845.6
(304.6)
2008
$M
593.4
(304.6)
541.0
288.8
percentage holding
carrying value
Entity
Australmin Holdings Ltd
Cadia Holdings Pty Ltd
Cadia Mines Pty Ltd
Cracow Holdings Pty Ltd
Horskar Pty Ltd
Newcrest Finance Pty Ltd
Newcrest Insurance Pte Ltd
Newcrest International Pty Ltd
Newcrest Operations Ltd
Newgen Pty Ltd
Principal Activity
Dormant
Mining
Dormant
Dormant
Dormant
Treasury
Captive insurance entity
Holding company
Mining
Mining
Place of
Incorporation
2009
%
2008
%
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100 –
100
100
100
100
100
100
100
100
100
2009
$m
–
40.0
– –
– –
– –
10.0
0.6
298.1
192.3
– –
2008
$M
40.0
10.0
0.6
45.9
192.3
541.0
288.8
NEWCREST MINING ANNUAL REPORT 2009 77
consolidated
buildings,
plant and
equipment
$m
leased
plant and
equipment
$m
Freehold
land
$m
total
$m
32.7
–
32.7
26.3
6.4
–
–
–
–
–
32.7
26.3
–
26.3
25.5
0.8
–
–
–
–
26.3
2,510.2
(1,095.0)
29.8
(7.7)
2,572.7
(1,102.7)
1,415.2
22.1
1,470.0
1,375.2
134.6
25.8
(2.6)
(150.6)
4.0
28.8
1,415.2
2,327.4
(952.2)
1,375.2
1,441.7
85.8
(0.9)
(149.1)
(2.6)
0.3
1,375.2
3.5
–
19.9
–
(0.4)
–
(0.9)
1,405.0
141.0
45.7
(2.6)
(151.0)
4.0
27.9
22.1
1,470.0
14.5
(11.0)
2,368.2
(963.2)
3.5
1,405.0
4.8
–
–
(1.3)
–
–
3.5
1,472.0
86.6
(0.9)
(150.4)
(2.6)
0.3
1,405.0
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
12. property, plant anD equipment
at 30 June 2009
Cost
Accumulated depreciation
year ended 30 June 2009
Carrying amount at 1 July 2008
Additions
Acquisition of joint venture (Note 29(b))
Disposals at written-down value
Depreciation charge for the year
FX translation
Reclassifications/transfers
carrying amount at 30 June 2009
at 30 June 2008
Cost
Accumulated depreciation
year ended 30 June 2008
Carrying amount at 1 July 2007
Additions
Disposals at written-down value
Depreciation charge for the year
FX translation
Reclassifications/transfers
carrying amount at 30 June 2008
78 NEWCREST MINING ANNUAL REPORT 2009
12. property, plant anD equipment (continued)
at 30 June 2009
Cost
Accumulated depreciation
year ended 30 June 2009
Carrying amount at 1 July 2008
Additions
Disposals at written-down value
Depreciation charge for the year
Reclassifications/transfers
carrying amount at 30 June 2009
at 30 June 2008
Cost
Accumulated depreciation
year ended 30 June 2008
Carrying amount at 1 July 2007
Additions
Disposals at written-down value
Depreciation charge for the year
Reclassifications/transfers
carrying amount at 30 June 2008
parent
buildings,
plant and
equipment
$m
total
$m
936.1
(329.8)
936.1
(329.8)
606.3
606.3
623.2
40.0
–
(57.8)
0.9
623.2
40.0
–
(57.8)
0.9
606.3
606.3
910.3
(287.1)
623.2
664.5
15.8
(0.3)
(57.1)
0.3
623.2
910.3
(287.1)
623.2
664.5
15.8
(0.3)
(57.1)
0.3
623.2
Reclassifications/transfers:
– Expenditure included in mine development has been reclassified upon initial utilisation of the assets to buildings, plant and equipment.
NEWCREST MINING ANNUAL REPORT 2009 79
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
13. capitaliseD exploration, evaluation anD Development expenDitures
at 30 June 2009
Cost
Accumulated depreciation
year ended 30 June 2009
Carrying amount at 1 July 2008
Expenditure during the year
Capitalised borrowing costs (1)
Acquisition of joint venture (Note 29(b))
Expenditure written off during the year
Depreciation charge for the year
FX translation
Reclassifications/transfers
carrying amount at 30 June 2009
at 30 June 2008
Cost
Accumulated depreciation
year ended 30 June 2008
Carrying amount at 1 July 2007
Expenditure during the year
Capitalised borrowing costs (1)
Expenditure written off during the year
Depreciation charge for the year
FX translation
Reclassifications/transfers
carrying amount at 30 June 2008
Exploration
and Evaluation
Expenditure
$M
consolidated
Deferred
Feasibility Mines Under
Expenditure Construction
$M
$M
Mine
Development
$M
Total
$M
233.7
–
233.7
77.5
109.3
–
126.0
(54.1)
–
(6.4)
(18.6)
233.7
77.5
–
77.5
53.0
76.8
–
(46.4)
–
0.3
(6.2)
227.4
–
227.4
164.6
123.8
–
–
(3.7)
–
0.3
(57.6)
227.4
164.6
–
164.6
143.3
47.8
1.1
–
–
–
(27.6)
911.5
–
911.5
137.8
434.0
–
315.3
–
–
(13.4)
37.8
1,739.3
(670.7)
3,111.9
(670.7)
1,068.6
2,441.2
1,090.3
96.2
4.6
–
–
(130.5)
4.1
3.9
1,470.2
763.3
4.6
441.3
(57.8)
(130.5)
(15.4)
(34.5)
911.5
1,068.6
2,441.2
137.8
–
137.8
–
117.3
1.1
–
–
–
19.4
1,673.5
(583.2)
2,053.4
(583.2)
1,090.3
1,470.2
1,155.6
56.2
–
–
(128.1)
(7.5)
14.1
1,351.9
298.1
2.2
(46.4)
(128.1)
(7.2)
(0.3)
77.5
164.6
137.8
1,090.3
1,470.2
Reclassifications/transfers:
– Expenditure included in mines under construction has been reclassified from/to mine development or buildings plant and equipment,
as appropriate, upon initial utilisation of the assets.
(1) Borrowing costs were capitalised on qualifying assets at a weighted average rate of 3.0% (2008: 6.2%).
80 NEWCREST MINING ANNUAL REPORT 2009
13. capitaliseD exploration, evaluation anD Development expenDitures (continued)
at 30 June 2009
Cost
Accumulated depreciation
year ended 30 June 2009
Carrying amount at 1 July 2008
Expenditure during the year
Expenditure written off during the year
Depreciation charge for the year
Reclassifications/transfers
carrying amount at 30 June 2009
at 30 June 2008
Cost
Accumulated depreciation
year ended 30 June 2008
Carrying amount at 1 July 2007
Expenditure during the year
Expenditure written off during the year
Depreciation charge for the year
Reclassifications/transfers
carrying amount at 30 June 2008
Areas of interest in the exploration phase at cost:
Cadia Valley, NSW
Telfer, WA
Cracow, QLD
Gosowong, Indonesia
Marsden, NSW
Fiji
Morobe Province, PNG
Exploration
and Evaluation
Expenditure
$M
parent
Deferred
Feasibility Mines Under
Expenditure Construction
$M
$M
Mine
Development
$M
9.8
–
9.8
2.1
9.6
(1.4)
–
(0.5)
9.8
2.1
–
2.1
–
8.1
(6.0)
–
–
2.1
3.5
–
3.5
–
5.4
(2.4)
–
0.5
3.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
764.1
(215.1)
549.0
608.2
4.5
–
(57.1)
(6.6)
549.0
767.5
(159.3)
608.2
653.5
3.3
–
(48.3)
(0.3)
608.2
consolidated
parent
2009
$m
63.6
12.9
4.7
0.9
4.7
16.3
130.6
233.7
2008
$M
52.8
1.3
3.5
8.7
3.7
7.5
–
77.5
2009
$m
– –
9.0
– –
– –
– –
0.8
– –
9.8
Total
$M
777.4
(215.1)
562.3
610.3
19.5
(3.8)
(57.1)
(6.6)
562.3
769.6
(159.3)
610.3
653.5
11.4
(6.0)
(48.3)
(0.3)
610.3
2008
$M
0.9
1.2
2.1
Recoverability of the carrying amount of the exploration and evaluation assets is dependent upon the successful development and continuing
commercial exploitation, or alternatively, sale of the respective area of interest.
NEWCREST MINING ANNUAL REPORT 2009 81
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
14. intangible assets
at 30 June 2009
Cost
Accumulated amortisation
year ended 30 June 2009
Carrying amount at 1 July 2008
Reclassifications
Expenditure during the year
Disposals at written-down value
Amortisation charge for the year
carrying amount at 30 June 2009
information systems
Development
consolidated
$m
parent
$m
49.0
(16.5)
32.5
–
4.9
28.5
–
(0.9)
32.5
44.8
(12.8)
32.0
–
4.4
28.4
–
(0.8)
32.0
2008
$M
19.3
44.2
63.5
Reclassifications:
Information systems development previously classified as property, plant and equipment has been reclassified as intangible assets.
The written-down values as at 30 June 2008 for the:
– Group of $4.9 million comprised cost of $20.5 million and accumulated amortisation of $15.6 million.
– Parent of $4.4 million comprised cost of $16.4 million and accumulated amortisation of $12.0 million.
15. traDe anD other payables
Unsecured:
Trade payables(i)
Other payables and accruals(i)
total trade and other payables
(i) All payables are non-interest bearing and are normally settled on 30–60 day terms.
consolidated
parent
2009
$m
42.5
170.1
212.6
2008
$M
66.7
111.0
177.7
2009
$m
12.8
35.8
48.6
16. borrowings
Current
Secured:
Finance lease liabilities
Unsecured:
US dollar bilateral debt
total current borrowings
Non-current
Secured:
Finance lease liabilities
Unsecured:
US dollar private placement notes
total non-current borrowings
82 NEWCREST MINING ANNUAL REPORT 2009
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
(i)
(ii)
(i)
(iii)
5.0
–
5.0
2.6
–
2.6
13.3
2.2
432.2
445.5
363.8
366.0
– –
– –
– –
– –
– –
– –
16. borrowings (continued)
(i) Finance Lease Facility
The Group’s lease liabilities are secured by the assets leased. In the event of default, the assets revert to the lessor.
(ii) US Dollar Bilateral Debt
During the year ended 30 June 2009, the US dollar bilateral debt facilities were drawn down to acquire the interest in the Morobe Mining
Joint Venture. The debt was subsequently repaid using the proceeds from the equity raising in February 2009.
The Group still has available bilateral debt facilities of US$969.0 million with 14 banks. These are unsecured 5-year revolving facilities,
individually negotiated and documented with each bank but with similar terms and conditions. Interest is based on LIBOR plus a margin
which varies among the lenders.
(iii) US Dollar Private Placement Notes
During the year ended 30 June 2005, the Group issued US$350.0 million of long-term senior unsecured notes into the North American
Private Placement market. The proceeds of the placement were received on 11 May 2005 and comprised five tranches:
Fixed 7 years (11/5/2012)
Fixed 10 years (11/5/2015)
Fixed 12 years (11/5/2017)
Fixed 15 years (11/5/2020)
Floating 7 years (11/5/2012)
USD
$M
95.0
105.0
100.0
25.0
25.0
350.0
Interest on the fixed-rate notes is payable semi-annually at an average of 5.62%. Floating rate interest is based on LIBOR plus a margin
and is payable quarterly at an average of 1.74% (2008: 5.13%).
These notes were fully drawn as at 30 June 2009 and have been restated to the spot exchange rate at balance sheet date.
(iv) Hedging: US Dollar Denominated Debt
Where considered appropriate the foreign currency component of US dollar denominated debt is designated either as a cash flow hedge
of future US dollar denominated commodity sales or a net investment in foreign operations. Refer Note 24(d) for further details.
(v) Financial Arrangements
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
the group has access to the following financing arrangements:
Unsecured bank overdrafts (payable at call)
Unsecured USD bilateral facilities (US$969M)
Unsecured USD private placement notes (US$350M)
Facilities utilised at reporting date:
Unsecured bank overdrafts (payable at call)
Unsecured USD bilateral facilities
Unsecured USD private placement notes (US$350M)
Facilities not utilised at reporting date:
Unsecured bank overdrafts (payable at call)
Unsecured USD bilateral facilities (US$969M)
Unsecured USD private placement notes
1.5
1,196.4
432.2
1,630.1
–
–
432.2
432.2
1.5
1,196.4
–
1,197.9
1.5
1,007.2
363.8
1,372.5
–
–
363.8
363.8
1.5
1,007.2
–
1,008.7
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
NEWCREST MINING ANNUAL REPORT 2009 83
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
17. provisions
Current
Employee benefits
Mine rehabilitation and restoration
Other
total current provisions
Non-current
Employee benefits
Mine rehabilitation and restoration
Other
total current provisions
(i) Employee benefits
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
(i)
(ii)
(i)
(ii)
88.0
2.0
3.9
93.9
5.4
71.2
–
76.6
40.2
–
3.1
43.3
15.6
46.8
0.1
62.5
62.5
1.0 –
–
63.5
5.2
23.2
– –
28.4
35.9
0.1
36.0
8.6
18.4
27.0
Represents annual leave, long service leave, salary at risk and other retention incentive payments (refer Note 2 (q)).
(ii) Mine rehabilitation and restoration
The Group recognises that it has an obligation to restore its mine sites to their original condition at the end of the life of mine. Mine
rehabilitation costs are provided for at the present value of future expected expenditure when the liability is incurred. Although the ultimate
cost to be incurred is uncertain, the Group has estimated its costs based on feasibility and engineering studies using current restoration
standards and techniques. When this liability is recognised a corresponding asset is also recognised as part of the development costs
of the mine and is amortised across the same useful life.
movements in mine rehabilitation and restoration provision
At 1 July 2008
Increase/(decrease) in provision
Paid during the year
Acquisition of interest in joint venture
Unwinding of discount
FX translation
At 30 June 2009
split between:
Current
Non-current
18. other liabilities
Current
Deferred income
Non-current
Deferred income
84 NEWCREST MINING ANNUAL REPORT 2009
consolidated
$M
parent
$M
46.8
23.4
(1.6)
0.7
3.5
0.4
73.2
2.0
71.2
73.2
18.4
5.5
(1.1)
–
1.4
–
24.2
1.0
23.2
24.2
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
1.1
1.1
0.5
0.5
–
–
6.9
6.9
– –
– –
– –
– –
19. issueD capital
Opening balance
Shares issued under:
– Share option and rights plans
– Dividend Reinvestment Plan
– New shares – Equity Raising
Less: Transaction Costs
Add: Tax effect of transaction costs
– Share buy-back
total issued capital
movement in issued ordinary shares for the year
Opening number of shares
Shares issued under:
– Share option and rights plans
– Dividend Reinvestment Plan
– New shares – Equity Raising
– Employee share acquisition plan
– Share buy-back
(a)
(b)
(c)
(c)
(e)
consolidated
parent
2009
$m
2,857.4
6.3
5.2
809.8
(17.1)
5.1
(25.1)
2008
$M
834.5
4.9
2.0
2,042.0
(27.6)
8.2
(6.6)
2009
$m
2,857.4
6.3
5.2
809.8
(17.1)
5.1
(25.1)
2008
$M
834.5
4.9
2.0
2,042.0
(27.6)
8.2
(6.6)
3,641.6
2,857.4
3,641.6
2,857.4
2009
number of ordinary shares
2009
2008
2008
453,365,629
335,276,614
453,365,629
335,276,614
(a)
(b)
(c)
(d)
(e)
638,308
200,328
29,991,655
43,632
(894,908)
798,556
79,340
117,358,390
28,536
(175,807)
638,308
200,328
29,991,655
43,632
(894,908)
798,556
79,340
117,358,390
28,536
(175,807)
closing number of shares
483,344,644
453,365,629
483,344,644
453,365,629
(a) Represents options and rights exercised under the Company’s share-based payments plans. Refer Note 23.
(b) The Dividend Reinvestment Plan provides shareholders with an opportunity to reinvest all or part of their dividend entitlements at the
market price at the time of issue.
(c) On 2 February 2009, Newcrest announced an Equity Raising at an issue price of $27.00 per share which represented a 12.9% discount
to Newcrest’s closing price on 30 January 2009. The Equity Raising resulted in 29,991,655 new ordinary shares being issued, resulting
in cash proceeds of $809.8 million. Transaction costs associated with the Equity Raising were $17.1 million, resulting in net cash proceeds
of $792.7 million.
On 10 September 2007, Newcrest announced a 7 for 20 accelerated renounceable entitlement offer to shareholders at an issue price of
$17.40 per share. As a result, 117,358,390 new ordinary shares were issued, resulting in cash proceeds of $2,042.0 million. Transaction costs
associated with the Equity Raising were $27.6 million, resulting in net cash proceeds of $2,014.4 million.
(d) The Employee Share Acquisition Plan is a broad based employee share plan. During the year, the Plan offered eligible employees fully paid
shares for $Nil consideration.
(e) Comprises of the following on-market buy-backs:
Date
28 August 2008
7 October 2008
8 October 2008
16 June 2009
17 June 2009
shares bought back and cancelled
Average
Price
$26.45
$24.68
$24.50
$31.46
$30.94
Low
High
$26.44
$24.25
$23.20
$31.00
$30.42
$26.45
$24.96
$25.43
$31.86
$31.24
No
13,700
212,683
212,682
209,112
246,731
894,908
The total cost of $25.1 million has been deducted from issued capital.
In order to prevent dilution of its share capital through the issue of shares under the Company’s share-based payments plans and
the Dividend Reinvestment Plan (DRP), the Company has determined that it will buy the corresponding number of shares on market as
and when required. It is anticipated that on market buy-backs will be undertaken periodically in response to exercise of options or rights,
or operation of the DRP. The share buy-back plan will only be used to purchase shares that are issued under the abovementioned plans.
NEWCREST MINING ANNUAL REPORT 2009 85
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
20. reserves
Equity Settlements Reserve
Foreign Currency Translation Reserve
Hedge Reserve
total reserves
(a) Equity Settlements Reserve
consolidated
parent
2009
$m
27.6
(93.6)
(291.4)
2008
$M
19.6
(20.0)
(460.8)
(357.4)
(461.2)
2009
$m
27.6
– –
– –
27.6
2008
$M
19.6
19.6
(a)
(b)
(c)
The Equity Settlements Reserve is used to recognise the fair value of rights and options issued to employees, including Key Management
Personnel in relation to equity-settled share based payments.
(b) Foreign Currency Translation Reserve
The Foreign Currency Translation Reserve is used to record exchange differences arising from the translation of the financial statements
of foreign subsidiaries. It is also used to record gains and losses on hedges of the net investment in foreign operations (refer Note 2(s)).
During the year, the Group drew down on its USD Bilateral debt facility. The loan proceeds were used to fund the acquisition of the Morobe
Mining Joint Venture. This loan was designated as a hedge against the net assets of the foreign subsidiaries which hold the joint venture
assets. The exchange gains or losses upon subsequent revaluation of the effective portion of this US dollar denominated debt from
the historical drawdown rate to the period end spot exchange rate were deferred in equity in the foreign currency translation reserve,
up until the bilateral debt facility was repaid. These cumulative gains or losses will remain deferred in equity until the disposal of the
foreign operation, at which point they will be transferred to the Income Statement.
(c) Hedge Reserve
The hedge reserve is used to record the effective portion of changes in the fair value of cash flow hedges (refer Note 2(s)).
The components of the hedge reserve at year end were as follows:
30 June 2009
30 June 2008
Gross
Gains/
(Losses)
$M
Tax
Impact
$M
Net
Gains/
(Losses)
$M
Gross
Gains/
(Losses)
$M
Tax
Net
Gains/
Impact (Losses)
$M
$M
FX gains on US dollar denominated borrowings:
– USD Bilateral debt (ii)
– USD Private placement notes
Losses on hedge contracts (i)
Other cash flow hedges
12.0
26.8
38.8
(454.9)
(0.3)
(3.6)
(8.0)
(11.6)
136.5
0.1
8.4
18.8
53.4
95.2
(16.0)
(28.6)
37.4
66.6
27.2
(318.4)
(0.2)
148.6
(806.9)
–
(44.6)
242.1
–
104.0
(564.8)
–
(416.4)
125.0
(291.4)
(658.3)
197.5
(460.8)
(i) Losses on hedge contracts
Losses on hedge contracts incurred in previous years (which were restructured/closed out in previous years) will be released to the
Income Statement in line with the original sales to which they were designated. This has resulted in the following release profile:
Hedge losses deferred in Equity
Tax effect
after tax hedge losses
current year
2009
$M
to be released in Future years
2010
$M
2011
$M
2012
$M
Total
$M
352.0
(105.6)
294.9
(88.5)
152.8
(45.8)
7.2
(2.2)
454.9
(136.5)
246.4
206.4
107.0
5.0
318.4
86 NEWCREST MINING ANNUAL REPORT 2009
20. reserves (continued)
(ii) FX gains on USD bilateral debt
Part of the proceeds from the September 2007 Equity Raising were used to repay US dollar denominated bilateral debt in full in 2008.
This crystallised a cumulative foreign exchange gain on these borrowings, which had been designated as cash flow hedges of future
US dollar denominated commodity sales. The foreign currency gains will be released to the Income Statement in line with the following
release profile:
FX gains on US dollar borrowings
Tax effect
after tax deferred Fx gains
21. minority interest
minority interest in pt nusa halmahera minerals comprises:
Interest in share capital
Interest in Foreign Currency Translation Reserve
Interest in retained earnings
total minority interest
movement in interest in retained earnings
Balance at the beginning of the year
Add: Interest in profit after income tax
Less: Interest in dividends paid
Balance at the end of the financial year
22. employee beneFits
Defined benefit superannuation plan
current year
2009
$M
41.4
(12.4)
29.0
to be released
in Future years
2010
$M
12.0
(3.6)
8.4
Total
$M
12.0
(3.6)
8.4
consolidated
2009
$M
2008
$M
5.8
(2.5)
39.1
42.4
25.0
34.0
(19.9)
39.1
5.8
(4.1)
25.0
26.7
17.8
29.1
(21.9)
25.0
The Group contributed to a defined benefit plan which was closed to new members. The defined benefit plan provided lump sum
benefits based on years of service and final average salary. During the year the remaining employees of the plan retired or left the
Group and the plan was subsequently closed.
The net benefit expense recognised in the Company and consolidated Income Statement during the year was $0.8m (2008: $0.5m).
23. share-baseD payments
(a) newcrest employee share acquisition plan
Under the Newcrest Employee Share Acquisition Plan (ESAP or the plan), eligible employees are granted shares in Newcrest Mining
Limited (the Company) for no cash consideration. All Australian resident permanent employees who have been continuously employed
by the Group for a period of at least 1 year are eligible to participate in the plan. Employees may elect not to participate in the plan.
Under the plan, eligible employees may be granted up to $1,000 worth of fully paid ordinary shares in the Company for no consideration.
The market value of shares issued under the plan, measured at the weighted average market price of the shares on the Australian Stock
Exchange over a period of a week prior to the acquisition date, is recognised in the equity section of the Balance Sheet and as part
of employee benefit costs, as equity settled share-based payments, in the Income Statement in the period the shares are granted.
Members of the plan receive all the rights of ordinary shareholders. Unrestricted possession of these shares occurs at the earliest of, 3 years
from the date of issue or the date employment ceases. During 2009, 1,212 employees participated in the plan (2008: 951 employees).
Shares issued under the plan
consolidated
parent
2009
$m
1.2
2008
$M
1.0
2009
$m
1.2
2008
$M
1.0
NEWCREST MINING ANNUAL REPORT 2009 87
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
23. share-baseD payments (continued)
(b) restricted share plan and executive performance share plan
(i) Restricted Share Plan (MTI Plan)
The Restricted Share Plan (also referred to as the Medium Term Incentive (MTI) plan) is an annual incentive plan under which eligible
employees are granted rights to receive ordinary fully paid shares in the Company (restricted rights). The amount of the award is
determined by the Company’s performance in the financial year immediately prior to the date the award is granted. Once awarded, the
restricted rights vest at the end of 2 years (2008: 3 years), provided that the participating employee has been employed throughout the
vesting period and achieves minimal acceptable personal performance. Each restricted right granted, initially entitles the holder to subscribe
for one ordinary share. Company performance in relation to the award is measured according to the Company’s Total Shareholder Returns
(TSR) measured against a comparator group of companies over the previous financial year, taken from the FTSE Gold Mine Index.
In 2008 and 2009, managers and other selected High Performance Personnel participated in the MTI plan. In 2008, Executive Directors,
executive general managers (being Key Management Personnel) and Senior Executives also participated in this plan. Due to changes
in the Executive Performance Share Plan in 2009 (discussed below), the MTI plan was not offered to Executive Directors, executive general
managers and senior executives in 2009.
(ii) Executive Performance Share Plan (LTI Plan)
The Executive Performance Share Plan (also referred to as the Long Term Incentive (LTI) plan) also entitles participants to receive
rights to ordinary fully paid shares in the Company (performance rights). The Executive Directors, executive general managers and
senior executives participate in this plan. The performance measures under the LTI plan changed during the year.
In the 2008 and prior financial years, the entitlement to receive performance rights was contingent on the Company achieving
a performance hurdle over a 3 year forward period commencing on the date on which the performance rights were granted. As for the
MTI Plan, Company performance is measured against the TSR of the same comparator group of companies. If TSR performance of the
Company is below the threshold 50th percentile of TSR for the comparator group, then no award will be made. If the Company’s TSR
performance is at the 75th percentile of the comparator group, a 100% allocation will be made with a straight-line allocation occurring
between the 50th and 75th percentile.
In the 2009 financial year, the performance measures for the performance rights granted in the 2009 financial year comprised
of three equally weighted measures, being:
– Reserves growth;
– Comparative cost position; and
– Return on Capital Employed (‘ROCE’).
Each LTI measure was chosen by the Board as it is a key driver of company performance. Reserves growth and comparative cost
Position being key drivers of shareholder return in a gold mining company, and ROCE being a direct measure of returns per unit of capital.
Performance against each of these measures over the 3 year vesting period accounts for one third of any grant made to participants.
There is no ability to re-test performance under either Plan after the performance period.
(iii) Fair Value of Share Rights Granted
The assessed fair value at grant date of the share rights granted during the year ended 30 June 2009 was:
– $22.04 per share right for the MTI plan issue (2008: $35.64) and
– $22.00 per share right for the LTI plan issue (2008: $23.38).
The fair value is independently determined using a Black-Scholes option pricing model (2008: Monte Carlo simulation option pricing
model). The model inputs for share rights granted during the year ended 30 June 2009 included:
– Exercise price: Nil (2008: Nil)
– Expected volatility: 40% (2008: 36%)
– Risk-free interest rate: 3.64% for MTI and 3.97% for LTI (2008: 6.69%)
– Expected life of right (years): 2 years for MTI and 3 years for LTI (2008: 3 years)
– Share price at grant date: $22.13 (2008: $35.85)
– Expected dividend yield: 0.2% (2008: 0.2%)
The expected volatility is based on historical volatility and is not necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the
actual outcome.
(c) executive share option plan
The Newcrest Executive Share Option Plan provided for the allocation of 5 year options with performance hurdles and exercised
conditions. This plan was replaced by the Restricted Share Plan and Executive Performance Share Plan during the 2004 financial year.
No options were granted in the 2009 financial year (2008: Nil) under this plan. All remaining options granted under this plan vested
during the year and were exercised.
88 NEWCREST MINING ANNUAL REPORT 2009
23. share-baseD payments (continued)
(d) movements in the number of rights and options
Detailed information of share rights and employee options over unissued ordinary shares, proceeds received and the fair value
of options exercised is set out below:
Grant Date
Exercise Date
On or After
Expiry Date
2009 – consolidated and company
movement in number of options/rights During the year
Exercise
Price $ (1)
Number at
Beginning
of Year
Granted
Forfeited
Exercised
Number
at End
of Year
Number
Exercisable
at End
of Year
options
2 Dec 2003
shares rights
8 Nov 2005
14 Jul 2006
3 Nov 2006
8 Nov 2007
11 Nov 2008
11 Nov 2008
total
weighted average
exercise price
2008 – consolidated and company
2 Dec 2005
2 Dec 2008
$10.42
593,900
8 Nov 2008
8 Nov 2010
14 Jul 2009
3 Nov 2009
8 Nov 2010
11 Nov 2010
11 Nov 2011
14 Jul 2011
3 Nov 2011
8 Nov 2012
11 Nov 2012
11 Nov 2013
62,008
165,000
251,919
265,684
–
–
–
–
–
–
–
–
–
–
–
–
–
162,931
385,730
–
(593,900)
–
–
(3,371)
(35,754)
22,883
22,883
–
–
165,000
(28,731)
(34,657)
(8,995)
(5,375)
(6,016)
(2,638)
–
–
217,172
228,389
153,936
380,355
–
2,265
1,011
–
–
1,338,511
548,661
(81,129)
(638,308)
1,167,735
26,159
$5.45
$0.00
$0.00
$9.70
$0.00
$0.00
options
6 Feb 2003
2 Dec 2003
share rights
5 Nov 2004
8 Nov 2005
14 Jul 2006
3 Nov 2006
8 Nov 2007
total
weighted average
exercise price
6 Feb 2005
2 Dec 2005
6 Feb 2008
2 Dec 2008
$4.75
$10.42
620,000
890,350
5 Nov 2007
5 Nov 2009
8 Nov 2008
8 Nov 2010
14 Jul 2009
14 Jul 2011
3 Nov 2009
8 Nov 2010
3 Nov 2011
8 Nov 2012
–
–
–
–
–
176,119
79,695
165,000
274,557
–
–
–
–
–
–
(37,500)
(582,500)
–
–
(87,250)
(209,200)
593,900
311,400
(176,119)
(13,502)
–
4,732
275,881
(24,959)
(9,948)
–
–
(4,185)
62,008
–
(2,411)
(249)
165,000
251,919
265,684
–
–
–
–
–
2,205,721
280,613 (349,278)
(798,545)
1,338,511
311,400
$6.82
$0.00
$3.78
$8.05
$5.45
$12.29
(1) In accordance with the Rules of the Newcrest Executive Option Plan, outstanding options in the February 2003 and December 2003 tranches
had their exercise price recalculated as a result of the Equity Raising undertaken in September 2007.
NEWCREST MINING ANNUAL REPORT 2009 89
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
24. Financial anD capital risK management
(a) Financial risk management objectives and policies
The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to:
– Withstand significant changes in cash flow at risk scenarios and still meet all financial commitments as and when they fall due;
– Maintain the capacity to fund its forecasted project developments and exploration and acquisition strategies; and
– Maintain the equivalent of an investment grade credit rating of BBB to BBB+.
The Group continually monitors and tests its forecast financial position against these criteria. The Group has a detailed planning process
that forms the basis of all cash flow forecasting and updates these plans through a monthly estimation process. The cash flow forecast
is then used to stress test financial risk and forms the basis for the Capital Management Plan.
Credit, liquidity and market risk (including foreign exchange risk, commodity price risk and interest rate risk) arise in the normal course
of the Group’s business. These are managed under Board approved directives which underpin Group Treasury policies and processes.
The Group’s principal financial instruments, other than derivatives, comprise interest-bearing debt, finance leases, cash and short-term
deposits. Other financial instruments include trade receivables and trade payables which arise directly from operations.
The Group’s forecast financial risk position with respect to key financial objectives and compliance with treasury policy are regularly
reported to the Board.
The following table discloses the carrying amounts of each class of financial asset and financial liabilities at year end.
category
Financial assets
Cash and cash equivalents
Loans and receivables
Derivatives at fair value through profit or loss
Financial liabilities
Trade and other payables
Borrowings
Derivatives at fair value through profit or loss
consolidated
parent
2009
$m
366.4
281.7
28.3
212.6
450.5
6.8
2008
$M
77.5
218.5
44.5
177.7
368.6
6.1 –
2009
$m
2008
$M
0.3
1,774.0
1.6 –
48.6
– –
3.1
1,021.4
63.5
2.4
(b) credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables
and derivative financial instruments. The Group’s exposure to credit risk arises from the potential default of the counter party with
a maximum exposure equal to the carrying amount of these financial assets as recorded in the financial statements.
It is the Group’s policy that all customers who wish to trade on credit terms and providers of capital or financial counter parties are
subject to a credit risk analysis including assessment of credit rating, short term liquidity and financial position. The Group obtains
sufficient collateral (such as letter of credits) where appropriate from customers, as a means of mitigating the risk of financial loss
from defaults. At the reporting date the value of collateral held was $34.8 million (2008: $3.6 million).
Receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
There were no material impairments of receivables as at 30 June 2009 or 30 June 2008.
The majority of the Group’s receivables are due from concentrate customers in Japan, China, Europe and Korea however as a result of the
Group’s credit policy, this credit risk is believed to be minimal. At balance date there were no other significant concentrations of credit risk.
The Group limits its counterparty credit risk on liquid funds and derivative financial instruments by dealing only with banks or financial
institutions with credit ratings of at least A equivalent.
90 NEWCREST MINING ANNUAL REPORT 2009
24. Financial anD capital risK management (continued)
The ageing of trade and other receivables at the reporting date was as follows:
consolidated
2009
Metal in concentrate receivables
Bullion awaiting settlement
GST receivable
Other receivables
2008
Metal in concentrate receivables
Bullion awaiting settlement
GST receivable
Other receivables
parent
2009
Metal in concentrate receivables
Bullion awaiting settlement
GST receivable
Other receivables
Amounts due from controlled entities
2008
Metal in concentrate receivables
Other receivables
Amounts due from controlled entities
Not
Past Due
$M
past Due but not impaired
Between
Less than
30 Days 30 & 90 Days
$M
$M
170.4
18.9
27.0
65.1
281.4
132.2
31.3
8.7
44.6
216.8
68.1
4.0
4.2
33.8
1,663.9
1,774.0
27.1
9.6
984.7
1,021.4
–
–
–
0.3
0.3
–
–
–
1.3
1.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
0.4
–
–
–
–
–
–
–
–
–
–
Total
$M
170.4
18.9
27.0
65.4
281.7
132.2
31.3
8.7
46.3
218.5
68.1
4.0
4.2
33.8
1,663.9
1,774.0
27.1
9.6
984.7
1,021.4
NEWCREST MINING ANNUAL REPORT 2009 91
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
24. Financial anD capital risK management (continued)
(c) liquidity risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet the Group’s financial commitments
in a timely and cost-effective manner. The Group undertakes stress testing of operational cash flows which are matched with capital
commitments to assess liquidity requirements. The Capital Management Plan is the formal record of the analysis and actions required
in the next 12 months.
The Group maintains a balance between continuity of funding and flexibility through the use of loans and committed available credit lines.
Included in Note 16 is a list of undrawn facilities that the Group has at its disposal to manage liquidity risk.
The following table reflects all contractually fixed repayments and interest resulting from recognised financial liabilities, including derivative
financial instruments. For derivative financial instruments the market value is presented, whereas for the other obligations the respective
undiscounted cash flows for the respective upcoming financial years are presented.
consolidated
2009
Payables
Borrowings
Derivatives
2008
Payables
Borrowings
Derivatives
parent
2009
Payables
2008
Payables
Less
than 6
Months
$M
Between
6–12
Months
$M
Between Between
2–5
Years
$M
1–2
Years
$M
Greater
than
5 Years
$M
Total
$M
212.3
11.6
6.8
0.3
14.5
–
–
28.9
–
–
342.0
–
–
193.8
–
212.6
590.8
6.8
230.7
14.8
28.9
342.0
193.8
810.2
174.5
13.3
6.1
3.2
11.1
–
–
22.8
–
–
184.3
–
–
282.5
–
177.7
514.0
6.1
193.9
14.3
22.8
184.3
282.5
697.8
46.4
46.4
63.5
63.5
2.2
2.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48.6
48.6
63.5
63.5
(d) Foreign currency risk
The Group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. The majority
of the Group’s revenue is denominated in US dollars whereas the majority of costs (including capital expenditure) are in Australian dollars.
The Group’s Balance Sheet can be affected significantly by movements in the USD:AUD exchange rate. The Group also has exposure to
other foreign currencies such as the Indonesian Rupiah, Papua New Guinea Kina and Fiji Dollar. However, these exposures are not significant.
Measuring the exposure to foreign exchange risk is achieved by regularly monitoring and performing sensitivity analysis
on the Group’s financial position.
92 NEWCREST MINING ANNUAL REPORT 2009
24. Financial anD capital risK management (continued)
The carrying amounts of the Group’s US dollar denominated financial assets and liabilities in entities which do not have
a US Dollar functional currency at the reporting date are as follows:
consolidated
parent
us denominated balances
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivatives
Financial liabilities
Payables
Borrowings
Derivatives
net exposure
2009
a$m
48.4
150.3
12.9
211.6
2.6
432.2
6.8
441.6
2008
A$M
18.2
132.2
–
150.4
3.2
363.8
6.1
373.1
2009
a$m
2008
A$M
– –
68.1
– –
68.1
– –
– –
–
–
21.8
21.8
2.4
2.4
19.4
(230.0)
(222.7)
68.1
The Group seeks to mitigate the effect of its foreign currency exposure by borrowing in US dollars. Where considered appropriate
the foreign currency component of the US dollar denominated debt is designated either as a:
– Cash flow hedge of future US dollar denominated commodity sales. Exchange gains or losses upon subsequent revaluation of
US Dollar denominated borrowings from the historical drawdown rate to the period end spot exchange rate are deferred in equity
in the Hedge Reserve and will be released to the Income Statement as the anticipated hedged US dollar denominated commodity
sales to which the deferred gains/(losses) are designated, occur.
– Net investment in foreign operations. Exchange gains or losses upon subsequent revaluation of US dollar denominated borrowings
from the historical drawdown rate to the period end spot exchange rate are deferred in equity in the Foreign Currency Translation
Reserve and will be released to the Income Statement when the foreign operation is disposed.
Sensitivity Analysis
The following table details the Group’s sensitivity to a 5% movement (i.e. increase and decrease) in the Australian dollar against
the US dollar at the reporting date, with all other variables held constant.
consolidated
AUD/USD +5%
AUD/USD –5%
parent
AUD/USD +5%
AUD/USD –5%
impact on profit after tax
higher/(lower)
impact on equity
higher/(lower)
2009
$m
2008
$M
2009
$m
2008
$M
(6.3)
7.0
(2.2)
2.4
(4.7)
5.2
(0.6)
0.7
8.1
(9.0)
(2.2)
2.4
7.4
(8.2)
(0.6)
0.7
Significant assumptions used in the foreign currency exposure sensitivity analysis above include:
– Reasonably possible movements in foreign exchange rates were determined based on a review of the last 5 years historical movements.
– The reasonably possible movement of 5% was calculated by taking the USD spot rate as at balance date, moving this spot rate by 5%
and then reconverting the USD into AUD with the ‘new spot-rate’. This methodology reflects the translation methodology undertaken
by the Group.
– The translation of the net assets in subsidiaries with a functional currency other than AUD has not been included in the sensitivity analysis
as part of the equity movement.
– The net exposure at balance date is representative of what the Group was and is expecting to be exposed to in the next 12 months from
balance date.
– The sensitivity analysis includes only the impact on the balance of financial assets and financial liabilities at balance date.
NEWCREST MINING ANNUAL REPORT 2009 93
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
24. Financial anD capital risK management (continued)
(e) commodity price risk
The Group’s revenue is exposed to commodity price fluctuations, in particular to gold and copper prices. The Group has entered into
copper forward sales contracts and gold put options to manage its exposure to movements in commodity prices. The carrying amount
of the Group’s derivative financial instruments as at the reporting date is as follows:
Financial Derivative instruments
Financial derivative assets
Gold put options
Quotational period derivatives(1)
Disclosed as:
Current
Non-current
Financial derivative liabilities
Foreign exchange contracts
Copper forward sales contracts
Disclosed as:
Current
Non-current
consolidated
parent
Note
2009
$m
2008
$M
2009
$m
2008
$M
(ii)
(i)
15.4
12.9
28.3
13.5
14.8
28.3
0.3
6.5
6.8
6.8
–
6.8
40.5
4.0
44.5
6.9
37.6
44.5
–
6.1
6.1
6.1
–
6.1
– –
1.6 –
1.6 –
1.6 –
– –
1.6 –
– –
–
–
–
– –
–
2.4
2.4
2.4
2.4
(1) Represents the embedded derivatives relating to quotational period movements on commodity sales. Refer Note 2(v).
(i) Copper Forward Sales Contracts
The Group enters into copper forward sales contracts to effectively fix the US dollar cash flows receivable on the sale of certain copper
concentrate. Copper forward sales contracts are not designated into hedge relationships and therefore fair value adjustments on these
contracts are recognised in the Income Statement as ‘Other income/expense’.
The following table details the copper forward sale contracts outstanding as at the reporting date for the Group and the Parent:
2009
2008
Weighted
Average
Price US$
Tonnes
Fair
Value
A$M
Weighted
Average
Price US$
Tonnes
Fair
Value
A$M
17,276
4,664
(6.5)
28,814
8,272
(6.1)
–
–
–
8,200
8,205
(2.4)
copper forward sale contracts
consolidated
Maturing:
Less than 3 months
parent
Maturing:
Less than 3 months
94 NEWCREST MINING ANNUAL REPORT 2009
24. Financial anD capital risK management (continued)
(ii) Gold Put Options
In September 2007, the Group entered into put options for a portion of its gold production in order to manage its exposure to commodity
price risk. The put options allow the Group to maintain full exposure to any upwards movement in the gold price, providing it the right,
but not the obligation, to deliver gold at the stated strike price.
The following table details the A$ gold put options outstanding as at the reporting date for the Group:
consolidated
Maturing:
Less than 1 year
Between 1–2 years
Between 2–3 years
Between 3–4 years
2009
Strike
Price
A$
Ounces
500,000
500,000
500,000
–
800
800
800
–
Fair
Value
A$M
0.7
5.1
9.6
–
2008
Strike
Price
A$
Ounces
500,000
500,000
500,000
500,000
800
800
800
800
1,500,000
15.4 2,000,000
Fair
Value
A$M
2.9
9.4
13.2
15.0
40.5
The total premium paid for these options was $79.5 million which represented the fair value at the date entered. The fair value of these
options is estimated using an option pricing model. The movement in fair value has been recognised in the Income Statement. Refer Note 3(l).
Sensitivity Analysis
The following table summarises the sensitivity of financial assets and financial liabilities held at balance date to movement in gold and
copper commodity prices, with all other variables held constant. The 10% movement for gold and 10% movement for copper are based
on reasonably possible changes, over a financial year, using an observed range of actual historical rates for the preceding 5-year period.
post-tax gain/(loss) $
gold (2)
Gold +10%
Gold –10%
copper
Copper +10%
Copper –10%
impact on profit (1)
higher/(lower)
impact on equity (3)
higher/(lower)
consolidated
parent
consolidated
parent
2009
m
2008
$M
2009
$m
2008
$M
2009
$m
2008 2
$M
009
$m
2008
$M
6.7
(6.7)
0.7
(0.7)
(6.3)
13.0
3.6
(3.6)
2.4
(2.4)
6.7
(6.7)
(6.3)
13.0
3.6
(3.6)
2.4
(2.4)
(1.7)
1.7
0.4
(0.4)
(1.2)
1.2
0.7
(0.7)
(1.7)
1.7
0.4
(0.4)
(1.2)
1.2
(1) Represents the impact of the movement in commodity prices on the balance of the financial assets and financial liabilities at year end.
(2) The impact on profit predominantly relates to the change in value of the gold put options and the embedded derivative relating to quotational
period movements on gold sales (refer Note 2(v)).
(3) As the majority of these derivatives are not in hedging relationships, all fair value movements are recognised in the Income Statement
and therefore the impact on equity only represents retained earnings impacts.
NEWCREST MINING ANNUAL REPORT 2009 95
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
24. Financial anD capital risK management (continued)
(f) interest rate risk
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk
is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings which is evaluated regularly
to align with interest rate views and defined risk appetite. Details of the Group’s types and levels of debt are included in Note 16.
Interest rate exposure
The Group’s interest rate exposure together with the effective interest rate for each class of financial assets and financial liabilities
at balance date is summarised as follows:
consolidated
Financial assets
Cash and cash equivalents
Financial liabilities
Lease liabilities – floating
Lease liabilities – fixed
Private placement – floating
Private placement – fixed
2009
Fixed
Interest
$M
–
–
–
2.1
–
401.3
403.4
Effective
Interest
Rate
%
2.57
1.97
6.85
1.74
5.62
2008
Fixed
Interest
$M
–
–
–
4.8
–
337.8
342.6
Effective
Interest
Rate
%
5.24
–
6.85
5.13
5.62
Floating
Interest
$M
77.5
77.5
–
–
26.0
–
26.0
Floating
Interest
$M
366.4
366.4
16.2
–
30.9
–
47.1
319.3
(403.4)
51.5
(342.6)
The other financial instruments of the Group not included in the above tables are non-interest bearing and not subject to interest rate risk.
The Parent does not have any material exposure to interest rate risk as the Group’s bank bills and borrowings are held by subsidiaries.
Sensitivity Analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the
reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting
period. A 100 basis point increase or decrease is used and represents management’s assessment of the reasonably possible change
in interest rates over a financial year using an observed range of actual historical rates for the preceding 3-year period.
consolidated
post-tax gain/(loss)
+1% (100 basis points)
– 1% (100 basis points)
impact on profit
higher/(lower)
2009
$m
2008
$M
2.2
(2.2)
0.4
(0.4)
impact on equity
higher/(lower)
2009
$m
2.2
(2.2)
2008
$M
0.4
(0.4)
The Group’s sensitivity to interest rates has increased during the current year due to higher cash balances resulting from
the Equity Raising in February 2009.
There is no material impact on the Parent’s net profit or other equity reserves from a 100 basis point increase or decrease
in interest rates.
96 NEWCREST MINING ANNUAL REPORT 2009
24. Financial anD capital risK management (continued)
(g) Fair value
Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities approximate their fair value.
consolidated
Financial liabilities
borrowings:
Fixed rate debt (1)
carrying amount
Fair value
2009
$m
2008
$M
2009
$m
2008
$M
(401.3)
(337.8)
(366.5)
(320.8)
(1) Amount recorded at amortised cost and the movements in the fair valuation are not recorded on the Balance Sheet.
(h) capital management
The Group’s objectives when managing capital are to maintain a strong capital base capable of withstanding significant cash flow variability,
while providing the flexibility to pursue its growth aspirations. The Group aims to maintain an optimal capital structure to reduce the cost
of capital and maximise shareholder returns. The Group has a Capital Management Plan which is reviewed, updated and approved by the
Board on an annual basis
The capital structure of the Group consists of debt, which includes borrowings as disclosed in Note 16, cash and cash equivalents and equity.
The Group will balance its overall capital structure through the issue of new shares, share buy-backs, capital returns and the payment
of dividends, as well as the issue of new debt or redemption of existing debt.
During 2009, the Group undertook an Equity Raising to reduce debt. Refer Note 19 for further details.
The Group is not subject to any externally imposed capital requirements.
Gearing Ratio
The Group’s gearing ratio is monitored and maintained at a level that is appropriate for its growth plans and in line with industry peers.
The Group’s strategy is to maintain gearing in a range below 20% and maintain the equivalent of an investment grade credit rating
of BBB to BBB+. In the current financial and economic environment, the Group will look to hold gearing below 10%.
The Group’s gearing has decreased from the prior year as a result of the Equity Raising and debt redemption in February 2009. The gearing
ratio at year end was as follows:
Total debt
Less: Cash and cash equivalents
Net debt
Equity
Total capital (net debt and equity)
gearing ratio
2009
$m
450.5
(366.4)
84.1
2008
$M
368.6
(77.5)
291.1
4,358.4
3,251.9
4,442.5
3,543.0
2%
8%
NEWCREST MINING ANNUAL REPORT 2009 97
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
25. commitments
(a) Finance lease commitments
Finance leases were entered into as a means of financing the acquisition of mining equipment. Rental payments are fixed and
no leases have escalation clauses. No lease arrangements create restrictions on other financing transactions. Lease payments
under finance leases are as follows:
consolidated
parent
Within 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Total minimum lease payments
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as borrowings (Note 16):
Current
Non-current
(b) capital expenditure commitments
Capital expenditure contracted but not provided for,
all of which is payable as follows:
Within 1 year
total
This represents contracted mining development expenditure.
(c) operating lease commitments
Future minimum rentals payable on non-cancellable operating leases due:
Within 1 year
Later than 1 year but not later than 5 years
Later than 5 years
total
2009
$m
5.3
13.4
–
18.7
(0.4)
18.3
5.0
13.3
18.3
2008
$M
2.8
2.6
–
5.4
(0.6)
4.8
2.6
2.2
4.8
2009
$m
2008
$M
– –
– –
– –
– –
– –
– –
– –
– –
– –
102.6
102.6
98.0
98.0
13.2
13.2
12.3
9.3
0.8
22.4
9.2
3.9
1.6
14.7
3.3
5.3
0.8
9.4
2.4
2.4
5.1
3.7
1.5
10.3
The Group leases assets for operations including forklifts, light vehicles and office equipment. These leases have an average life of
6 years with no renewal options included in the contracts. There are no restrictions placed upon the lessee by entering into these leases.
(d) mineral and exploration leases
Expenditure of $5.0 million (2008: $8.4 million) is required in the next financial year to satisfy mineral leases and exploration
licences conditions. These amounts are subject to negotiation depending on exploration results and are cancellable at any time
by the Group at no cost.
(e) other commitments
The Group has contractual obligations for various expenditures such as royalties, exploration and the cost of goods and services supplied
to the Group. Such expenditures are predominantly related to the earning of revenue in the ordinary course of business.
98 NEWCREST MINING ANNUAL REPORT 2009
26. contingent liabilities
Following a tax audit of PT Nusa Halmahera Minerals, an 82.5%
owned Indonesian subsidiary, the Indonesian tax office denied the
tax deductibility of a number of items relating to the fiscal years
1997–2002. The majority of the claim related to the rejection by the
tax office of the deductibility of pre-Contract of Work expenditure.
The Company defended this claim, and was successful in October
2007 at the Tax Court. Taxes and interest on underpaid tax
of US$12.5 million plus interest income on overpaid tax of
US$4.8 million were refunded/paid by the tax office to PT Nusa
Halmahera Minerals. The tax office has appealed this decision to
the Supreme Court (final court of appeal), and a decision by the
Supreme Court may possibly occur during the year to 30 June 2010.
Based on independent advice, the Company believes it will be
successful in defending this claim.
PT Nusa Halmahera Minerals has been named as a defendant
in proceedings in a local Indonesian court regarding customary
ownership of land situated within the Gosowong Contract of
Work. The proceedings have been initiated by five local residents
seeking compensation. PT Nusa Halmahera Minerals has received
independent legal advice and believe the claim is without merit.
In the 2008 financial year, the NSW Supreme Court found in
favour of Newcrest as plaintiff with respect to the obligation
to pay mineral royalties on production from the Cadia Valley
operations. The Supreme Court ordered the State of NSW
to refund Newcrest $10.9 million in royalty and interest payments
relating to the 2008 and prior financial years. The decision was
appealed by the State of NSW and the matter went to the NSW
Court of Appeal (‘the Court’). Subsequent to year end, the Court
upheld the State of NSW’s appeal. Newcrest has sought leave
to appeal this matter in the High Court of Australia. The financial
impact of the Court’s decision is considered to be a 2010 financial
year transaction and has not been provided for in the 30 June
2009 financial statements.
In addition to the above matters, companies in the Group are
recipients of or defendants in certain claims, suits and complaints
made, filed or pending. In the opinion of the Directors all matters
are of such a kind, or involve such amounts, that they would not
have a material effect on the financial position of the Group if
disposed of unfavourably, or are at a stage which does not permit
a reasonable evaluation of the likely outcome of the matter.
The Group has negotiated a number of bank guarantees in
favour of various government authorities and service providers.
The total nominal amount of these guarantees at balance date
is $117.4 million (2008: $80.5 million).
During the year ended 30 June 1998 the Group granted put
options over land to a number of land holders in the Orange area
in New South Wales, which have various expiry dates. If exercised
the Group would be required to purchase land subject to the put
option agreements. No account has been taken of these options
as at 30 June 2009 as there is no certainty of their exercise.
The total value of unexpired land options at 30 June 2009
is $3.0 million (2008: $3.0 million).
Under the terms of a Deed of Cross Guarantee, described in
Note 28, the Company and controlled entities party to the deed
have guaranteed any deficiency which might arise in relation to
the Company or any of the controlled entities party to the deed
on winding-up of that entity.
NEWCREST MINING ANNUAL REPORT 2009 99
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
27. controlleD entities
entity
Notes
newcrest mining limited
Newcrest Operations Limited
Cadia Mines Pty Ltd
Cadia Holdings Pty Ltd
Contango Agricultural Co. Pty Ltd
Newcrest Finance Pty Ltd
Horskar Pty Limited
Australmin Holdings Limited
Cracow Holdings Pty Ltd
Newgen Pty Ltd
Newcrest International Pty Ltd
Newcrest Exploration Holdings Pty Ltd
Sulawesi Investments Pty Ltd
Newcrest Resources Inc
Newroyal Resources Inc
600 Holdings Inc
Newmont Pty Ltd
Newcrest Singapore Holdings Pte Limited
Newcrest Insurance Pte Ltd
PT Nusa Halmahera Minerals
PT Puncakbaru Jayatama
Newcrest Chile Holdings 1
Newcrest Chile Holdings 2
Newcrest Peru Holdings 1
Newcrest Peru Holdings 2
Minera Newcrest Chile SRL
Minera Newcrest Peru SAC
Newcrest (Fiji) Ltd
Newcrest PNG 1 Ltd
Newcrest PNG 2 Ltd
Newcrest PNG 3 Ltd
(a)
(b)
(a)
(b)
(a)
(b)
(e)
(b)
(b)
(a)
(a)
(a)
(b)
(b)
(b)
(b)
(d)
(c)
(c)
(c)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(d)
(d)
(d)
Place of
Incorporation
Australia (Vic)
Australia (WA)
Australia (Vic)
Australia (NSW)
Australia (NSW)
Australia (Vic)
Australia (Vic)
Australia (ACT)
Australia (Vic)
Australia (Vic)
Australia (Vic)
Australia (Vic)
Australia (Vic)
USA
USA
USA
USA
Singapore
Singapore
Indonesia
Indonesia
Bermuda
Bermuda
Bermuda
Bermuda
Chile
Peru
Fiji
Papua New Guinea
Papua New Guinea
Papua New Guinea
percentage holding
2008
2009
% %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
82.5
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
82.5
100
100
100
100
100
100
100
100
100
100
100
(a) These controlled entities have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418
issued by the Australian Securities and Investments Commission. (Refer Note 28 for further information.)
(b) Not required to prepare audited accounts.
(c) Audited by affiliates of the Parent entity auditors.
(d) Audited by auditors other than Parent entity auditors.
(e) Audited by Parent entity auditors.
100 NEWCREST MINING ANNUAL REPORT 2009
28. DeeD oF cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned controlled entities detailed in Note 27 are
relieved from the Corporations Act 2001 requirements for preparation, audit, and lodgement of financial reports, and Directors’ Report.
It is a condition of the Class Order that the Company and each of the controlled entities enter into a Deed of Cross Guarantee. The effect
of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the controlled
entities under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will
only be liable in the event that after six months any creditor has not been paid in full. The controlled entities have also given similar
guarantees in the event that the Company is wound up.
A consolidated Income Statement and consolidated Balance Sheet, comprising the Company and controlled entities which are a party
to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 30 June 2009 are set out below.
income statement
Operating sales revenue
Cost of sales
gross profit
Exploration costs
Corporate administration costs
operating profit
Other revenue
Other income/(expenses)
Losses on delivered hedges
Finance costs
profit before tax, restructure and close-out impacts
Losses on restructured and closed-out hedge contracts
Other close-out related costs
Finance costs – close-out and restructure
Foreign exchange gain on US dollar borrowings
Profit/(loss) before income tax
Income tax (expense)/benefit
profit/(loss) after income tax
consolidated
2009
$m
2008
$M
2,057.2
(1,460.2)
1,986.3
(1,359.0)
597.0
(30.0)
(66.4)
627.3
(29.4)
(57.2)
500.6
540.7
230.6
3.1
–
(39.5)
13.7
18.0
(33.8)
(43.3)
694.8
495.3
(352.0)
(25.1)
–
41.4
(314.1)
(217.7)
(20.9)
39.0
359.1
(18.4)
(38.7)
320.4
45.6
27.2
NEWCREST MINING ANNUAL REPORT 2009 101
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
28. DeeD oF cross guarantee (continued)
balance sheet
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Financial derivative assets
Other
total current assets
non-current assets
Other receivables
Inventories
Other financial assets
Property, plant and equipment
Exploration, evaluation and development expenditure
Intangible assets
Deferred tax assets
Financial derivative assets
Other
total non-current assets
total assets
current liabilities
Trade and other payables
Borrowings
Financial derivative liabilities
Provisions
Other
total current liabilities
non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Other
total non-current liabilities
total liabilities
net assets
equity
Issued capital
Retained earnings
Reserves
total equity
102 NEWCREST MINING ANNUAL REPORT 2009
consolidated
2009
$m
285.8
590.3
219.5
13.5
153.3
2008
$M
25.6
70.7
190.5
38.3
77.3
1,262.4
402.4
8.7 –
–
356.0
1,338.9
1,679.8
32.5 –
403.5
14.7 –
157.5
1.4
37.1
1,382.7
1,401.1
490.7
316.7
3,991.6
3,629.7
5,254.0
4,032.1
145.2
0.7
6.8 –
77.1
1.1 –
152.9
2.6
40.6
230.9
196.1
433.6
387.4
58.0
0.5
879.5
1,110.4
366.0
371.1
54.3
6.9
798.3
994.4
4,143.6
3,037.7
3,641.6
884.9
(382.9)
2,857.4
631.7
(451.4)
4,143.6
3,037.7
29. interests in unincorporateD Joint venture assets
(a) interests
The Group has an interest the following unincorporated joint ventures:
Name
Country
Principal Activity
Cracow JV
Morobe Mining JV
Namosi JV
Australia
Papua New Guinea
Fiji
Gold production and mineral exploration
Gold production and mineral exploration
Mineral exploration
ownership interest
2008
2009
70.0%
50.0% –
65.0% (i)
70.0%
–
(i) During the year, Newcrest completed its initial $21.5 million of expenditure and earned a 65.0% interest in the Namosi Joint Venture. On 15 May 2009,
Newcrest accepted the transfer of an additional 4.94% interest in the Joint Venture. This transfer is subject to Fiji government approval.
For operating and capital expenditure commitments and contingent liability disclosures relating to the joint ventures refer to Note 25
and Note 26 respectively.
Included in the assets of the Group are the following items which represent the Group’s material interest in the assets employed in the
joint ventures, recorded in accordance with the accounting policy described in Note 2(c).
Joint ventures
current assets
Cash assets
Receivables
Inventories
Other assets
non-current assets
Property, plant and equipment
Exploration, evaluation and development
Other assets
consolidated
parent
2009
$m
2008
$M
2009
$m
2008
$M
12.1
0.5
23.1
4.0
39.7
86.9
666.5
8.4
761.8
801.5
0.5
–
2.3
4.9
7.7
20.4
38.3
–
58.7
66.4
– –
– –
– –
– –
– –
– –
– –
– –
– –
(b) acquisition of interest in the morobe mining Joint venture
During the year Newcrest acquired a 50% interest in the Papua New Guinea (PNG) gold assets of Harmony Gold Mining Ltd (Harmony)
via unincorporated joint venture structures. The joint venture assets comprise:
– The Hidden Valley mining operation, a gold and silver project, expected to produce over 250,000 ounces of gold and 4 million ounces
of silver per annum over a 14-year mine life;
– The highly prospective Wafi-Golpu gold-copper deposit and its surrounding exploration tenements; and
– Extensive exploration tenements in the Morobe province of PNG.
The acquisition of the interest in the joint ventures comprised two stages:
– In the first stage, which was completed on 7 August 2008, Newcrest acquired an initial 30.01% interest for cash consideration
of US$228.0 million (A$249.4 million) consisting of an initial payment of US$180.0 million together with a reimbursement to
Harmony of US$48.0 million in project expenditure incurred between 1 January 2008 and 7 August 2008.
– The second stage represented a farm-in commitment for the remaining 19.99% interest. In this stage, Newcrest solely funded all project
expenditure up to 30 June 2009 which totalled US$297.7 million (A$420.8 million).
NEWCREST MINING ANNUAL REPORT 2009 103
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
29. interests in unincorporateD Joint venture assets (continued)
Newcrest’s 50% interest in the net assets of the Morobe Mining JV at 7 August 2008 is detailed below.
current assets
Trade and other receivables
Inventory
non-current assets
Exploration, evaluation and development assets
Property, plant and equipment
current liabilities
Borrowings
Provisions
non-current liabilities
Borrowings
Provisions
net assets
Cash outflow from the acquisition of and subsequent expenditure on the Morobe Mining JV is reconciled to the
Cash Flow Statement as follows:
cash outflow
Stage 1 Payments
Stage 2 Payments
Stamp duty and acquisition costs
Total cash outflow
included in the cash flow statement as follows:
Acquisition of interest in joint venture
Payments for mines under construction and development
Exploration and evaluation expenditure
7 aug 2008
$m
0.6
1.6
441.3
45.7
3.3
0.9
13.7
0.7
470.6
30 Jun 2009
$m
(249.4)
(420.8)
(7.1)
(677.3)
(470.6)
(190.7)
(16.0)
(677.3)
104 NEWCREST MINING ANNUAL REPORT 2009
segment result (ii)
Finance costs
Income tax expense
consolidated net profit
Segment assets
Segment liabilities
other segment information
Acquisition of segment assets
30. segment inFormation
The Group’s primary segment reporting format is geographical segments as the Group’s risk and rates of return are affected predominantly
by the location of the mine sites. The operating businesses are organised and managed separately according to their location. Cadia Valley
Operations, Telfer and Cracow are located in Australia. Gosowong is located in Indonesia and Morobe is located in Papua New Guinea.
Geographical Segments (Primary Reporting Format based on location of mine sites)
Cadia Valley
Operations
$M
Gosowong
$M
Telfer (iii)
$M
Cracow Morobe
$M
$M
2009
External sales revenue (ii)
Other revenue
Total segment revenue
Segment EBITDA
991.5
–
991.5
473.6
–
985.4
–
473.6
985.4
474.5
332.3
302.8
80.3
–
80.3
44.9
Depreciation and amortisation
(53.0)
(40.8)
(162.4)
(13.8)
421.5
291.5
140.4
31.1
–
–
–
–
–
–
Group and
Unallocated (i)
$M
–
8.3
8.3
Total
$M
2,530.8
8.3
2,539.1
(443.1)
711.4
3.2
(266.8)
(439.9)
444.6
(34.9)
(127.6)
(34.9)
(127.6)
282.1
1,571.4
102.0
314.0
71.1
2,135.2
100.9
75.9
6.8
749.6
65.7
769.9
911.1
5,616.0
1,257.6
388.6
131.4
82.4
35.4
740.4
46.1
1,424.3
(i) Includes eliminations, hedging, interest, income tax, financing, restructure and close-out impacts.
(ii) Segment sales revenue and segment results by mine location includes gold and copper sales at unhedged prices.
Mine results do not include allocation of hedging and interest costs. These are included in Group and Unallocated.
(iii) Includes gas disruption costs of $8.6 million.
Cadia Valley
Operations
$M
Gosowong
$M
Telfer (iii)
$M
Cracow Morobe
$M
$M
2008
External Sales revenue (ii)
Other revenue
Total segment revenue
Segment EBITDA
1,166.9
2.9
1,169.8
376.8
4.4
749.6
–
381.2
749.6
665.9
275.3
164.8
69.8
–
69.8
33.0
Depreciation and amortisation
(69.2)
(36.9)
(153.6)
(13.5)
segment result (ii)
Finance costs
Income tax expense
consolidated net profit
Segment assets
Segment liabilities
other segment information
Acquisition of segment assets
596.7
238.4
11.2
19.5
1,284.3
259.5
216.2
65.4
2,172.1
104.7
73.7
5.2
209.0
58.0
52.8
8.4
(i) Includes eliminations, hedging, interest, income tax, financing, restructure and close-out impacts.
(ii) Segment sales revenue and segment results by mine location includes gold and copper sales at unhedged prices.
Mine results do not include allocation of hedging and interest costs. These are included in Group and Unallocated.
–
–
–
–
–
–
–
–
–
Group and
Unallocated (i)
$M
–
13.1
13.1
Total
$M
2,363.1
20.4
2,383.5
(596.1)
542.9
(5.4)
(278.6)
(601.5)
264.3
(64.3)
(36.6)
(64.3)
(36.6)
163.4
577.6
637.2
4,323.9
1,072.0
55.3
383.5
NEWCREST MINING ANNUAL REPORT 2009 105
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
30. segment inFormation (continued)
Geographical Segments (based on location of customers)
bullion
Australia
Other Asia
concentrate
Japan
Korea
China
Europe (1)
USA (1)
total sales revenue
sales revenue from
external customers
2009
$m
2008
$M
858.2
1.8
989.7
134.6
103.8
364.2
78.5
752.3
12.2
919.1
95.2
18.3
360.2
205.8
2,530.8
2,363.1
(1) The majority of concentrate sales to customers in Europe and the USA are shipped to smelters in Japan, Korea and China.
Business Segments (Secondary Reporting Format)
The Group operates predominantly in one business segment being the gold mining industry and derives its revenue from the sale
of gold and gold/copper concentrate.
31. relateD parties
Transactions with controlled entities
The Company is the ultimate parent entity of all entities detailed in Note 27, undertaking transactions with those controlled entities,
the effects of which are eliminated in the consolidated financial statements. Details of amounts due from controlled entities are disclosed
in Note 8. These amounts are unsecured and interest-free, and settlement occurs in cash.
Transactions with joint venture
The Group advanced $49.2 million (2008: $43.6 million) to the Cracow Mining Joint Venture of which it has an interest of 70%. The Group
then received its 70% share of the gold bullion output which was 67,326oz (2008: 75,569oz) which is then sold and received $80.3 million
(2008: $69.8 million) in sales revenue.
106 NEWCREST MINING ANNUAL REPORT 2009
32. Key management personnel
(a) Details of Directors and Key management personnel
Key Management Personnel as defined in AASB 124 Related Party Disclosures, comprise the Company Directors and executive general
managers. Herein Directors are referred to as Directors and the term Key Management Personnel refers to the executive general managers
who are members of the Company’s Executive Committee along with the Director Finance and the Managing Director. The members of this
Executive Committee exercise the greatest control over the management and strategic direction of the Group and are also the highest-paid
individuals in both the Parent entity and Group.
name
position
Directors
Ian Smith
Greg Robinson
Don Mercer
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Bryan Davis
Mick O’Leary
executives
Bernard Lavery
Ron Douglas
Colin Moorhead
Debra Stirling
Geoff Day
Tim Lehany
Dan Wood
Managing Director and Chief Executive Officer
Director Finance
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (Appointed 10 December 2008)
Non-Executive Director (Resigned 30 October 2008)
Non-Executive Director (Resigned 30 October 2008)
Executive General Manager Corporate Services and Company Secretary
Executive General Manager Development and Projects
Executive General Manager Minerals
Executive General Manager People, Communication and Environment
Executive General Manager Operations (Appointed 10 November 2008)
Executive General Manager Operations (Resigned 31 October 2008)
Exploration Executive (Resigned 30 September 2008)
(b) remuneration of Directors and Key management personnel
Short-term
Post-employment
Termination benefits
Share-based payments
consolidated
parent
2009
$’000
12,992
187
1,646
3,601
2008
$’000
11,827
170
–
2,626
2009
$’000
12,992
187
1,646 –
3,601
18,426
14,623
18,426
2008
$’000
11,827
170
2,626
14,623
(c) loans to Directors and Key management personnel
There are no loans made to Directors and Key Management Personnel, or their related entities, by the Company or its controlled entities.
(d) options held by Directors and Key management personnel
All options refer to options over ordinary shares of Newcrest, which are exercisable on a one-for-one basis under the Executive Share Option
Plan. (refer Note 23(c).) At year end, all options granted under this plan had vested and were exercised. No new options were granted.
The movements during the year in the number of options over ordinary shares in Newcrest, held directly, indirectly or beneficially, by each
Key Management Personnel, including their personally related entities are shown in the following table.
Key
Management
Personnel
Grant
Date
Dan Wood
Bernard Lavery
Tim Lehany
Colin Moorhead
2 Dec 2003
2 Dec 2003
2 Dec 2003
2 Dec 2003
Expiry
Date
2 Dec 2008
2 Dec 2008
2 Dec 2008
2 Dec 2008
Exercise
Price
Balance at
1 July 2008
Options
Exercised
$10.42
$10.42
$10.42
$10.42
94,000
94,000
17,500
18,800
(94,000)
(94,000)
(17,500)
(18,800)
Amount
Paid to
Exercise
Options
$979,480
$979,480
$182,350
$195,896
Balance at
30 June
2009
Options
Lapsed
–
–
–
–
–
–
–
–
Options
Vested
During
the year
25,000
25,000
17,500
5,000
movement During the year
NEWCREST MINING ANNUAL REPORT 2009 107
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
32. Key management personnel (continued)
(e) rights held by Directors and Key management personnel
All conditional entitlements refer to rights over ordinary shares of Newcrest, which are exercisable on a one-for-one basis under the
Executive Performance Plans (including the Restricted Share Plan and the Executive Performance Share Plan). The movements in the
year in the number of rights over ordinary share in Newcrest, held directly, indirectly or beneficially, by each Director and Key Management
Personnel, including their personally related entities is shown in the following table.
Directors and
Key Management
Personnel
Grant
Date
Share
Price
at Grant
Date
Type
Balance at
1/07/08
Rights
Granted
Rights
Exercised
Rights
Lapsed
Balance at
30/06/09
Vested &
Exercisable
30/06/09 Non-Vested
movements During the year
Ian Smith
Greg Robinson
14 Jul 2006
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
Bernard Lavery 8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
Colin Moorhead 8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
11 Nov 2008
Ron Douglas
Debra Stirling
9 Nov 2007
9 Nov 2007
11 Nov 2008
9 Nov 2007
9 Nov 2007
11 Nov 2008
Geoff Day
11 Nov 2008
Former KMP
Dan Wood
Tim Lehany
8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
8 Nov 2005
3 Nov 2006
3 Nov 2006
9 Nov 2007
9 Nov 2007
LTI
MTI
LTI
MTI
LTI
LTI
MTI
LTI
MTI
LTI
LTI
MTI
MTI
LTI
MTI
LTI
LTI
MTI
MTI
LTI
MTI
LTI
LTI
MTI
LTI
LTI
MTI
LTI
LTI
LTI
MTI
MTI
LTI
MTI
LTI
MTI
MTI
LTI
MTI
LTI
$19.52
$24.10
$24.10
$35.85
$35.85
$22.13
$24.10
$24.10
$35.85
$35.85
$22.13
$18.98
$24.10
$24.10
$35.85
$35.85
$22.13
$18.98
$24.10
$24.10
$35.85
$35.85
$22.13
$35.85
$35.85
$22.13
$35.85
$35.85
$22.13
$22.13
$18.98
$24.10
$24.10
$35.85
$35.85
$18.98
$24.10
$24.10
$35.85
$35.85
165,000
8,845
42,881
7,373
35,446
–
4,245
12,007
4,915
8,862
–
4,251
3,489
6,340
2,777
5,007
–
582
1,932
1,005
3,768
1,941
–
3,195
5,760
–
3,097
5,583
–
–
–
–
–
–
100,048
–
–
–
–
50,024
–
–
–
–
–
16,508
–
–
–
–
–
18,554
–
–
18,554
–
–
17,190
–
18,554
4,890
4,013
7,294
3,195
5,760
2,047
2,650
1,375
3,342
6,026
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(582)
–
–
–
–
–
–
–
–
–
–
–
–
(4,720)
(2,554)
–
(951)
–
(2,034)
(1,762)
–
(1,090)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(170)
(1,459)
(2,651)
(2,244)
(4,045)
(13)
(888)
(461)
(2,252)
(4,061)
165,000
8,845
42,881
7,373
35,446
100,048
4,245
12,007
4,915
8,862
50,024
4,251
3,489
6,340
2,777
5,007
16,508
–
1,932
1,005
3,768
1,941
18,554
3,195
5,760
18,554
3,097
5,583
17,190
18,554
–
–
4,643
–
1,715
–
–
914
–
1,965
–
–
–
–
–
–
–
–
–
–
4,251
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
165,000
8,845
42,881
7,373
35,446
100,048
4,245
12,007
4,915
8,862
50,024
–
3,489
6,340
2,777
5,007
16,508
–
1,932
1,005
3,768
1,941
18,554
3,195
5,760
18,554
3,097
5,583
17,190
18,554
–
–
4,643
–
1,715
–
–
914
–
1,965
108 NEWCREST MINING ANNUAL REPORT 2009
32. Key management personnel (continued)
(f) shareholdings of Directors and Key management personnel
Shares held in Newcrest Mining Limited
Directors and Key management personnel
balance at
1 July
2008
received as
remuneration
acquired
on exercise
rights of
& options
net
other
changes
balance at
30 June
2009
Directors
Ian Smith
Greg Robinson
Don Mercer
John Spark
Rick Lee
Tim Poole
Richard Knight
Bryan Davis
Mick O’Leary
executive general managers
Bernard Lavery
Ron Douglas
Colin Moorhead
Debra Stirling
Geoff Day
Dan Wood
Tim Lehany
4,050
4,050
15,176
17,550
11,000
4,050
10,000
22,629
19,636
100,000
–
32,750
5,603
–
250,325
3,330
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
94,000
–
19,382
–
–
102,225
22,386
185
185
370
555
5,185
185
185
(22,629)
(19,636)
(183,815)
–
(19,815)
–
–
(352,550)
(25,716)
4,235
4,235
15,546
18,105
16,185
4,235
10,185
–
–
10,185
–
32,317
5,603
–
–
–
(g) other transactions of Directors and Key management personnel
Transactions are conducted by entities within the Group with Directors and KMP that occur within a normal employee, customer or supplier
relationship on terms and conditions no more favourable than those with which it is reasonable to expect the entity would have adopted
if dealing with an unrelated person.
NEWCREST MINING ANNUAL REPORT 2009 109
notes to the Financial statements
FOR THE YEAR ENDED 30 JUNE 2009
33. remuneration oF auDitors
(a) Amounts received, or due and receivable, for the audit and review
of the financial reports of the entity by:
– Ernst & Young (Australia)
– Related practices of Ernst & Young (Australia)
total audit fees
(b) Amounts receivable, or due and receivable for other services
in relation to the entity: (i)
– Ernst & Young (Australia)
– Other firms
total other service fees
total remuneration of auditors
(i) Other services comprised:
consolidated
2009
$ $
2008
$
parent
2008
2009
$
650,158
107,729
711,665
44,309
618,612
– –
670,460
757,887
755,974
618,612
670,460
375,113
–
1,314,147
–
375,113
– –
1,314,147
375,113
1,314,147
375,113
1,314,147
1,133,000
2,070,121
993,725
1,984,607
– Advice and assurance services in relation to information technology systems development, $295,802 (2008: $912,608);
– Assurance services in relation to the Equity Raising, $20,000 (2008: $401,539); and
– Assurance services in respect of acquisitions, $59,311 (2008: Nil).
34. events subsequent to reporting Date
In the 2008 financial year, the NSW Supreme Court found in favour of Newcrest as plaintiff with respect to the obligation to pay mineral
royalties on production from the Cadia Valley operations. The Supreme Court ordered the State of NSW to refund Newcrest $10.9 million
in royalty and interest payments relating to the 2008 and prior financial years. The decision was appealed by the State of NSW and the
matter went to the NSW Court of Appeal (‘the Court’). Subsequent to year end, the Court upheld the State of NSW’s appeal. Newcrest
has sought leave to appeal this matter in the High Court of Australia. The financial impact of the Court’s decision is considered to be
a 2010 financial year transaction and has not been provided for in the 30 June 2009 financial statements, but instead has been disclosed
as a contingent liability.
On 17 August 2009, the Directors of Newcrest Mining Limited declared a final unfranked dividend on ordinary shares in respect of the
2009 financial year. The total amount of the dividend is $72.5 million, which represents an unfranked dividend of 15c per share. The dividend
has not been provided for in the 30 June 2009 financial statements.
There are no other matters or circumstances which have arisen since 30 June 2009 that have significantly affected or may significantly
affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
110 NEWCREST MINING ANNUAL REPORT 2009
directors’ declArAtion
In accordance with a resolution of the Directors of Newcrest Mining Limited, we state that:
1. In the opinion of the Directors:
(a) The financial statements, notes and additional disclosures included in the Directors’ Report designated as audited,
of the Company and of the Group are in accordance with the Corporations Act 2001, including:
(i)
Giving a true and fair view of the Company’s and Group’s financial position as at 30 June 2009 and of their performance
for the year ended on that date; and
(ii) Complying with Australian Accounting Standards and Corporations Regulations 2001.
(b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A
of the Corporations Act 2001 for the financial year ended 30 June 2009.
3. In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members of
the Closed Group identified in Note 28 will be able to meet any obligations or liabilities to which they are or may become subject,
by virtue of the Deed of Cross Guarantee.
On behalf of the Board
Don mercer
Chairman
17 August 2009
Melbourne, Victoria
ian smith
Managing Director and
Chief Executive Officer
17 August 2009
Melbourne, Victoria
NEWCREST MINING ANNUAL REPORT 2009 111
independent auditor’s report
112 NEWCREST MINING ANNUAL REPORT 2009
5988 NEW_AR09_fins.indd 112
18/9/09 3:53:48 PM
5988 NEW_AR09_fins.indd 113
18/9/09 3:53:49 PM
NEWCREST MINING ANNUAL REPORT 2009 113
sHAreHolder inForMAtion
share capital at 31 august 2009
Ordinary shareholders
Shareholdings with less than a marketable parcel of $500 worth of ordinary shares
Market price
shareholDer breaKDown at 31 august 2009
International Institutions
Domestic Institutions
Retail & Other
newcrest top 20 investors at 31 august 2009
name
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
ANZ Nominees Limited
Cogent Nominees Pty Limited
Queensland Investment Corporation
AMP Life Limited
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Cogent Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 3
ANZ Nominees Limited
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
Mr Damon Wells
Suncorp Custodian Services Pty Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
total
substantial shareholDers at 31 august 2009
Blackrock
Commonwealth Bank of Australia
Fidelity
The Bank of New York Mellon Corporation
investor categories
ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and Over
total
114 NEWCREST MINING ANNUAL REPORT 2009
483,351,056
36,593
788
$30.01
%
69
16
15
current
balance
issued
capital %
161,780,390
115,098,410
61,695,153
38,994,025
25,902,050
4,425,974
4,171,050
4,069,712
2,818,008
2,219,133
1,305,347
1,115,733
986,340
863,495
861,629
682,239
610,342
598,667
588,695
558,746
429,345,138
50,428,140
45,676,675
44,047,889
23,757,042
33.47
23.81
12.76
8.07
5.36
0.92
0.86
0.84
0.58
0.46
0.27
0.23
0.20
0.18
0.18
0.14
0.13
0.12
0.12
0.12
88.83
10.47
9.45
9.10
5.24
investors
securities
issued capital %
25,785
9,548
789
411
60
36,593
9,643,006
20,021,624
5,522,392
9,768,382
438,395,652
483,351,056
2.00
4.14
1.14
2.02
90.70
100.00
sHAreHolder inForMAtion
voting rights
Each ordinary shareholder is entitled to one vote for each
share held.
The Company encourages shareholders to express their views
on the conduct of business by speaking at shareholder meetings
or by writing to the Chairman of the Board of Directors.
DiviDenDs
The Company has declared an unfranked dividend of 15 cents
per share. The dividend is payable to shareholders on 16 October
2009. Shareholders registered as at the close of business on
25 September 2009 will be eligible for the dividend. The Dividend
Reinvestment Plan remains in place and will be offered to
shareholders at market price.
us investor inFormation
Newcrest may also be traded in the form of American Depositary
Receipts (ADRs). Each ADR represents one Newcrest ordinary
share. The program is administered on behalf of the Company by
The Bank of New York and enquiries should be directed in writing
to: BNY–Mellon Shareowner Services, PO Box 358516 Pittsburgh,
PA 15252-8516.
ADR holders are not members of the Company, but may instruct
The Bank of New York as to the exercise of voting rights pertaining
to the underlying shareholding.
During the year the net movement for ADRs was negative 238,227
and at year end a net 9,115,117 ADRs were outstanding.
reporting to shareholDers
Newcrest is committed to clear reporting and disclosure of the
Company’s activities to our shareholders.
share registry inFormation
you can do so much more online
Did you know that you can access – and even update – information
about your holdings in Newcrest Mining Limited via the internet?
Visit Link Market Services’ website www.linkmarketservices.com.au
and access a wide variety of holding information, make some
changes online or download forms. You can:
– Check your current and previous holding balances
– Elect to receive financial reports electronically
– Update your address details
– Update your bank details
– Confirm whether you have lodged your Tax File Number (TFN),
Australian Business Number (ABN) or exemption
– Check transaction and dividend history
– Enter your email address
– Check the share prices and graphs
– Download a variety of instructions forms.
You can access this information via a security login using your
Securityholder Reference Number (SRN) or Holder Identification
Number (HIN) as well as your surname (or company name) and
postcode (must be the postcode recorded on your holding record).
Don’t miss out on your dividends
Dividend cheques that are not banked are required to be handed
over to the State Trustee under the Unclaimed Monies Act. You are
reminded to bank cheques immediately.
better still, why not have us bank your dividend payments for you
How would you like to have immediate access to your dividend
payment? Your dividend payments can be credited directly
into nominated bank, building society or credit union accounts
in Australia.
Not only can we do your banking for you, but dividends paid by
direct credit hit your account as cleared funds, thus allowing you
to access them on payment date.
contact information
You can also contact the Newcrest Mining Limited share registry by
calling 1300 554 474 or from outside Australia +61 (0)2 8280 7111.
Share registry contact details are contained in the Corporate
Directory of this Report on the inner back cover.
NEWCREST MINING ANNUAL REPORT 2009 115
FiVe YeAr suMMArY
For the 12 months ended 30 June
2005
2006
2007
2008
2009
Gold Production (ounces)
Cash costs ($ per ounce)
Total costs (1) ($ per ounce)
Net profit after tax from continuing operations: (2)
– Statutory profit ($M)
– Underlying profit (3) ($M)
Cash flow from operations ($M)
gold production – newcrest share (ounces)
Cadia Hill
Ridgeway
Cracow
Telfer
Gosowong
Morobe
Total
1,157,520*
150
275
1,529,866*
245
365
1,617,251*
280
419
1,781,182
261
416
1,631,183*
468
632
130
148
259
131
139
264
72
191
387
134
494
1,018
248
483
1,024
308,516
382,034
26,128*
217,740*
223,102
–
248,312
366,520
77,702
650,016*
187,316
–
1,157,520
1,529,866
246,661
314,028
81,678
627,077*
347,807
–
1,617,251
414,171
301,417
75,175
590,217
400,202
–
1,781,182
297,889
234,298
69,443
629,108
400,220
225*
1,631,183
copper production (tonnes)
96,785
100,521
88,940
87,458
89,877
costs per ounce (after by-product credits)
Cash costs ($ per ounce)
Total costs (1) ($ per ounce)
cash Flow ($m)
Cash flow from operations
Exploration expenditure
Capital expenditure
profit and loss ($m)
Sales revenue
Depreciation and amortisation
Income tax expense from continuing operations
Net profit after tax from continuing operations: (2)
– Statutory profit
– Underlying profit (3) ($M)
Earnings per share (EPS) on continuing operations:
– Basic EPS on statutory profit (cents per share)
– Basic EPS on underlying profit (cents per share)
Dividend (cents per share)
Financial position ($m)
Total assets
Total liabilities
Shareholders’ equity
ratios (percent)
Gearing (4) (percent)
Return on Capital Employed (5) (percent)
150
275
259
46
641
972
(134)
(61)
130
148
39.4
44.9
5.0
3,104
1,973
1,131
55
8
245
365
264
57
488
1,393
(187)
(47)
131
139
39.6
42.0
5.0
4,257
4,096
161
50
9
280
419
387
60
341
2,127
(224)
(10)
72
191
19.4
51.6
5.0
4,623
3,682
941
46
12
261
416
1,018
77
338
2,363
(279)
(37)
134
494
30.8
113.2
10.0
4,324
1,072
3,252
8
21
468
632
1,024
109
1,270
2,531
(267)
(128)
248
483
53.0
103.2
15.0
5,616
1,258
4,358
2
17
issued capital (million shares) at year end
330.6
333.1
335.3
453.4
483.3
gold inventory (million ounces)
Reserves
Resources
33
61
33
59
33
55
40
71
43
80
* Includes commissioning production.
(1) Comprises cash costs plus depreciation and amortisation.
(2) Excludes gain on disposal of discontinued operations (Boddington) in 2006.
(3) Represents statutory profit before hedge restructure and close-out impacts.
(4) Calculated as Net Debt to Capital (Capital comprises equity plus net debt). In 2006 and 2007, equity was adjusted by the balance of the Hedge Reserve
to remove the impact of the gold hedge book mark to market.
(5) Calculated as Underlying EBIT to Capital.
116 NEWCREST MINING ANNUAL REPORT 2009
Annual General
Meeting
The 29th Annual General Meeting
of Newcrest Mining Limited will
be held at the Grand Waldorf
Ballroom, The Sebel Albert Park,
65 Queens Road, Melbourne,
Victoria, on Thursday, 29 October
at 10.30am
Newcrest is Australia’s largest gold
producer and one of the world’s top 10 gold
mining companies by production, reserves
and market capitalisation.
COMPANY SNAPSHOT
Newcrest provides investors with exposure to a portfolio
of low-cost, long-life operating mines, a strong pipeline of
growth projects and highly prospective brownfields and
greenfields exploration projects. The Company has a substantial
reserve and resource base, with reserves representing more
than 20 years production. Newcrest has the financial strength
coupled with extensive technical skills to deliver both organic
growth and external opportunities. Key components of the
value chain are:
– Exploration – the team is acknowledged as one of the best
and lowest cost gold discoverers in the world today.
– Projects – the current portfolio of development projects and
advanced exploration opportunities represent greater than
50 percent of the Group’s Mineral Resource.
– Operations – comprise a portfolio of seven mines, five mines
in Australia, one in Indonesia and one in Papua New Guinea.
Gosowong
Telfer
Operations
Projects
† Morobe JV includes
Hidden Valley and Wafi Golpu
Namosi
Morobe JV
†
Cracow
Cadia Valley
This page
Crushed Ore Stockpiles, Cadia Valley
CORPORATE DIRECTORY
Investor Information
Registered and Principal Office
Newcrest Mining Limited
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004 Australia
Telephone: +61 (0)3 9522 5333
Facsimile: +61 (0)3 9525 2996
corporateaffairs@newcrest.com.au
www.newcrest.com.au
Company Secretary
Bernard Lavery
Newcrest Mining Limited
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004 Australia
Telephone: +61 (0)3 9522 5333
Facsimile: +61 (0)3 9521 3564
bernard.lavery@newcrest.com.au
Head of Investor Relations
Karen McRae
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004 Australia
Telephone: + 61 (0)3 9522 5316
Facsimile: + 61 (0)3 9522 5505
Stock Exchange Listings
Australian Stock Exchange
(Ticker NCM)
New York ADRs
(Ticker NCMGY)
Share Registry
Link Market Services Limited
Level 1, 333 Collins Street
Melbourne, Victoria 3000 Australia
Postal Address
Locked Bag A14
Sydney South,
New South Wales 1235 Australia
Telephone: 1300 554 474
+61 (0)2 8280 7111
Facsimile: +61 (0)2 9287 0303
+61 (0)2 9287 0309*
*For faxing of Proxy Forms only.
registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
ADR Depositary
BNY Mellon Shareowner Services
PO Box 358516
Pittsburgh, PA 15252-8516
Telephone:
Toll free for domestic callers:
1-888-BNY-ADRS or 1-888-269-2377
International Callers: +1 201-680-6825
shrrelations@bnymellon.com
www.bnymellon.com\shareowner
Other Offices
Brisbane Office
Newcrest Mining Limited
20 Hudson Road
Albion, Queensland 4010 Australia
Telephone: +61 (0)7 3624 6100
Facsimile: +61 (0)7 3262 7200
Perth Office
Newcrest Mining Limited
Hyatt Business Centre
Level 2, 30 Terrace Road
East Perth, Western Australia 6004
Australia
Telephone: +61 (0)8 9270 7070
Facsimile: +61 (0)8 9221 7346
Annual General Meeting
29 October 2009 at 10.30am
Grand Waldorf Ballroom
The Sebel Albert Park
65 Queens Road
Melbourne, Victoria 3004
Visit our website at
www.newcrest.com.au to
view our key dates and features;
current share price, market releases,
annual, quarterly and financial
reports; operations, project and
exploration information; corporate,
shareholder, hedging, employment
and sustainability information.
This page
Sunny Tan (Plant Metallurgist) and Steve Baker
(Plant Metallurgist) inspecting material movement
on the pebble crusher feed conveyor at Telfer
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8
3
6
2
5
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
9
ANNUAL REPORT 2009