Newcrest Mining Limited Annual Report 2012
A$1,117M
record statutory
profit for the 2012
financial year
A$1,726M
of operating cash flow
generated in the 2012
financial year
Newcrest is entering an exciting period in
its history, with major expansion projects
at the Company’s two most significant
operations on track for delivery by the end
of 2012. The Cadia East underground mine
and the Lihir plant expansion are expected
to underpin significant production growth
over the next five years.
Contents
Corporate Governance
About Newcrest
Results at a Glance
Chairman’s Report
Managing Director’s Review
The Board
Our Business
2
4
6
8
10
12
22 Mineral Resources and Ore Reserves
32
38 Diversity
Financial Report
42
43 Directors’ Report
45 Management Discussion and Analysis
55
71
72
73
74
75
76
77 Notes to the Financial Statements
119 Directors’ Declaration
120
122 Shareholder Information
124 Five Year Summary
IBC Corporate Directory
Independent Auditor’s Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
(cid:2)newcrest mining annual report 2012(cid:5)1
About Newcrest
We are the largest
gold producer listed
on the Australian
Stock Exchange
We are one of the
top five gold mining
companies globally by
market capitalisation
2(cid:2)newcrest mining annual report 2012
We have interests in six
production provinces in
four countries, focusing
on Australia, the Pacific
region and Asia
Our assets are
predominantly low-cost,
long-life mines and we
have a strong pipeline
of future growth
1 Cadia Valley
2 Telfer
3 Lihir
4 Gosowong
5 Wafi-Golpu
6 Hidden Valley
7 Bonikro
8 Namosi
7
4
2
3
56
1
8
(cid:2)newcrest mining annual report 2012(cid:5)3
Results at a Glance
Gold Production
(thousand ounces)
Copper Production
(thousand tonnes)
FY08
FY09
FY10
FY11
FY12
1,781
1,631
1,762
FY08
FY09
FY10
2,527
FY11
2,286
FY12
Statutory Profit
($ million)
FY08
134
248
557
FY09
FY10
FY11
FY12
87
90
87
76
76
908
1,117
10%
decrease
0.5%
increase
23%
increase
Record Statutory Profit up 23% to A$1,117 million
Record Underlying Profit up 2% to A$1,084 million
Full year ordinary dividends increased 17% to 35 cents per share
Operating cash flow exceeded A$1.7 billion
Strong EBITDA and EBIT margins of 49% and 36% respectively
Two major growth projects nearing completion:
the Cadia East project and the Lihir plant expansion
Strong financial position with gearing low at 12.5% and
undrawn debt facilities of US$780 million as at 30 June 2012
Group Mineral Resources from ongoing operations up 2.6%
to 149.7 million ounces of gold and up 0.7% to 20.0 million
tonnes of copper
Group Ore Reserves from ongoing operations up 0.3%
to 79.1 million ounces of gold and up 1.2% to 8.46 million
tonnes of copper
4(cid:2)newcrest mining annual report 2012
Operating Cash Flow
($ million)
Gearing (%) (Net Debt/
Net Debt and Equity)
Ordinary Dividends
(cents per share)
FY08
FY09
FY10
FY11
FY12
1,018
1,024
FY08
FY09
1.9
8.2
1,303
FY10
(4.5)
1,729
FY11
4.2
1,726
FY12
12.5
10
15
FY08
FY09
FY10
FY11
FY12
25
30
35
0.2%
decrease
8%
higher
17%
increase
12 months to
30 June 2012
12 months to
%
30 June 2011(1) Change
Gold produced
Copper produced
Gold price realised
Sales revenue
EBITDA(2)(7)
EBIT (2)(7)
Statutory Profi t (3)
Underlying Profi t (4)(7)
Operating cash fl ow
Capital expenditure
Gearing (5)
Return on capital employed(6)
Earnings Per Share on Statutory Profi t
Ordinary Dividends
(ounces)
(tonnes)
(A$ per ounce)
(A$ million)
(A$ million)
(A$ million)
(A$ million)
(A$ million)
(A$ million)
(A$ million)
(percent)
(percent)
(A$ cents per share)
(A$ cents per share)
2,285,917
2,527,352
76,015
1,609
4,416
2,151
1,590
1,117
1,084
1,726
2,556
12.5
10.1
146
35
75,631
1,378
4,102
2,059
1,544
908
1,058
1,729
1,890
4.2
12.4
126
30
(10)
0.5
17
8
4
3
23
2
(0.2)
35
198
(19)
16
17
(1) Results from the former LGL operations included from the acquisition date of 30 August 2010.
(2) EBITDA is ‘Earnings before interest, tax, depreciation, amortisation, hedge restructure and other signifi cant items’. EBIT is ‘Earnings before interest,
tax, hedge restructure and other signifi cant items’. EBITDA and EBIT are used to measure segment performance and have been extracted from Note 36
‘Segment Information’ on page 114.
(3) Statutory Profi t is profi t after tax attributable to owners of the parent.
(4) Underlying Profi t is profi t after tax before hedge restructure and other signifi cant items attributable to owners of the parent. Refer to page 47 for further details.
(5) Gearing is calculated as net debt to net debt and equity. Refer to page 54.
(6) Return On Capital Employed is calculated as EBIT divided by average capital employed.
(7) EBIT, EBITDA and Underlying Profi t are non-IFRS fi nancial information and have not been subject to audit by the Company’s external auditor.
(cid:2)newcrest mining annual report 2012(cid:5)5
Chairman’s
Report
Don Mercer Chairman
6(cid:2)newcrest mining annual report 2012
Despite a record profit, this year has been challenging for
Newcrest, with production impacted by several short-term,
one-off issues that are now well on the way to being
rectified. The pre-commissioning production ore sourced
from Cadia East was lower than the rates initially expected
and the underinvested old plant at Lihir required repair
sooner than anticipated. Both of these situations affected
production and delayed cash income.
Notwithstanding these challenges, it has been a year
of significant progress. The Newcrest portfolio has been
consolidated into a suite of predominantly long-life, low-cost
mines and a pipeline of further growth options. The two
smaller mines in Queensland, Cracow and Mt Rawdon,
were sold. Excellent progress was made on the two major
projects, the Cadia East project and the plant expansion
at Lihir, which will underpin production for future decades.
These two projects are slated for completion in the December
2012 quarter. The Pre-Feasibility Study and new Ore Reserve
determination for Golpu in the Morobe Province of Papua
New Guinea were announced at the end of August 2012,
confirming it to be a world-class mineral endowment.
The focus of our operations remains in the Asia Pacific
Region, where five of our six mines are located in Australia,
Papua New Guinea and Indonesia. Our operations in Côte
d’Ivoire in West Africa enjoyed a full year of production
and a return to exploration in the region following elections
in the country.
Tragically, a helicopter accident occurred on 3 August 2011 near
Manado in Indonesia, where eight employees and contractors
and the two helicopter crew members were killed. The accident
profoundly affected Newcrest and your Board of Directors.
Two important appointments were made during the year,
with Gerard Bond joining the Company as Finance Director
and Chief Financial Officer in January 2012, followed by his
appointment to the Board in February. Scott Langford joined
the Company as General Counsel in July 2012 and was formally
appointed Company Secretary in August 2012.
Scott takes over from Stephen Creese who has been
General Counsel and Company Secretary since November
2009. Stephen will continue with his Corporate Affairs role,
focusing on external affairs and social responsibility until
his retirement mid next year. On behalf of the Board, I thank
Stephen for his counsel and significant contribution.
Of note during the year was the raising of US$1 billion in
the United States bond market in November 2011. The capital
raising provides Newcrest with long-term, low-cost funds.
On 2 March 2012, Newcrest’s shares were listed on the Toronto
Stock Exchange, the TSX, one of the most active markets
for gold producers.
Pleasingly in 2012, Newcrest’s statutory profit grew 23 percent
to A$1,117 million and underlying profit, which excludes the
profit from the sale of Cracow and Mt Rawdon, grew 2 percent
to A$1,084 million. The Company generated operating cash
flow of A$1,726 million – an important achievement in light
of the capital expenditure required on the two major projects.
Members were paid an interim dividend of 12 cents per share
in April 2012. The Board has determined that a final dividend
of 23 cents, 15 percent franked, will be paid in October 2012.
This represents a 17 percent increase in ordinary dividends paid
over the prior year. In addition, a special dividend of 20 cents
was paid in December 2011.
The Company’s balance sheet remains strong, with gearing
at 12.5 percent as at 30 June 2012. Peak capital spend occurs
in financial years 2012 and 2013, but gearing is expected to
remain within our internal target level of a maximum of around
15 percent. As well as the US corporate bonds, our debt funding
comes from bilateral facilities with several major banks.
During the year, global financial markets remained volatile
as weakness continued to be experienced in European
economies as well as in the United States, while China
continued to enjoy growth, albeit at a more moderate rate.
Overall, gold stocks weakened during the year, despite a more
resilient gold price. Newcrest’s share price was no exception,
partly due to two production revisions during the year as well
as the general sector sentiment. We are confident that gold
stocks will recover relative to other forms of gold investments.
Looking ahead, the European debt crisis and the slow US
recovery, along with further economic stimulus in those
regions, are conditions that are likely to be conducive to
a continued robust gold price environment over the short
to mid term. Underlying demand fundamentals arising
from jewellery and investment demand, especially in China
and India are also supportive.
In the near term, the Company is firmly focused on delivering
predictable production across all sites and completing the
two major projects, the Lihir plant expansion and the Cadia
East project. Thereafter, the Company has a pipeline of
development opportunities, including the Wafi-Golpu project,
and there is extensive exploration underway in the Company’s
highly prospective exploration acreage.
We continue to place a high priority on our employee
safety, community relationships and environmental
management. Our activities and record in this regard are
documented in the annual Sustainability Report available
via http://www.newcrest.com.au//sustainability/
current-sustainability-report.
We seek to be a welcome guest and a good neighbour in
the communities in which we operate. Much of our external
support is influenced by the behaviour, enthusiasm, attitude
and hard work of our employees who every day live the
Company’s values. We thank them for their contribution
to the success of the Company.
Don Mercer
Chairman
(cid:2)newcrest mining annual report 2012(cid:5)7
Managing
Director’s
Review
Greg Robinson
Managing Director and Chief Executive Officer
8(cid:2)newcrest mining annual report 2012
After five years as Finance Director, the 2012 financial year was
my first as Managing Director and Chief Executive Officer of
Newcrest. The year was a challenging one with two production
downgrades and external pressure from increasing industry
costs. However, we produced strong financial results, increased
dividends, made impressive progress on our key project
deliveries and had excellent exploration results. Your company
is well positioned on its key value driver objectives: focus on
gold; own low-cost, long-life mines; continue to grow through
our exploration activities; maintain a conservative balance
sheet and reward shareholders.
Financially, Newcrest produced a record statutory profit
of A$1,117 million and strong operating cash flow of
A$1,726 million. During the year, we spent A$2.6 billion of
capital, mainly on project construction and studies, with the
majority of that on our two major projects at Cadia East and
Lihir. At the end of the financial year, the balance sheet is in a
strong position, with gearing of 12.5 percent and good excess
liquidity. We will continue to maintain a conservative gearing
position with a maximum gearing of around 15 percent.
Overall, higher gold prices and solid cost control resulted in
a strong financial profit and cash flow. Gold prices were higher,
increasing 17 percent to A$1,609 per ounce. Cost increases
included energy (power and diesel) and wages. A strong
Australian dollar added to this cost pressure. Newcrest does
not take long-term hedge positions on revenue or costs.
We believe the trend of increasing costs peaked during
2012 with weaker global economic conditions impacting
commodity demand and reducing cost pressures.
This trend looks likely to continue this financial year.
Newcrest is tactically focused on its contracting strategy
to ensure costs reflect market opportunities.
Our production performance during the latter half of the
year was disappointing, impacted by plant reliability issues
at Lihir and by very high rainfall events in Papua New Guinea
and the east coast of Australia. Lihir’s production was lower
than expected due to continued reliability issues in the
processing plant resulting from long-term underinvestment
in fixed plant maintenance. A revised refurbishment plan
for the plant was developed and good progress was made
on operational asset reliability. This program of reliability
improvement remains a priority for 2013.
2012 was a year of significant investment in growth. Substantial
progress was made at our two major projects. At year end,
the US$1.3 billion Lihir plant expansion remained on budget and
schedule and was over 90 percent complete. It is on schedule
for completion in the December 2012 quarter. The A$1.9 billion
Cadia East project, which will be Australia’s largest underground
mine, is on schedule to achieve first commercial production
in the December 2012 quarter. It is a credit to our project and
operations teams that they have successfully managed the
challenges of integrating ongoing operations with major project
construction and commissioning.
In early August 2011, we were all deeply saddened by
the crash near Manado of a helicopter chartered to support
the Gosowong Mine in Indonesia, killing all 10 people
on board. The health and safety of our employees
remains paramount in our vision as ‘the Miner of Choice’.
We continue to focus on listening to our employees
and improving our safety performance.
During the year, we sold our interests in Cracow and
Mt Rawdon to Evolution Mining and now have a 33 percent
interest in the company. We have two directors appointed
to the Evolution Board. This sale is consistent with our
strategy to pursue long-life, low-cost operations.
Newcrest also completed a secondary listing on the Toronto
Stock Exchange (TSX). We have a substantial investor base
in North America and this listing is a cost effective way
of creating better visibility and greater demand for
Newcrest shares.
In line with our objectives on capital management of strength,
flexibility and diversity of funding sources, Newcrest achieved
investment grade credit ratings of BBB+ from Standard &
Poor’s and Baa2 from Moody’s. These credit ratings enabled
Newcrest to raise US$1,000 million of 10 year and 30 year
debt maturities through the issue of corporate bonds in
the United States bond market. Funds were used to repay
short-term debt and increase our debt maturity profile.
We continue to allocate significant capital to our exploration
activities. Last year we spent A$158 million on exploration,
balanced between greenfield (higher risk) and brownfield
(near existing production) targets. Our exploration team has
contributed substantial value to Newcrest over a long time
period. Notable exploration successes during the year include
Golpu, where the continuity of high-grade mineralisation was
demonstrated, and at Lihir where the presence of a new zone
of high-grade mineralisation was confirmed. A significant
increase in the Wafi-Golpu resource was announced during the
year and a Golpu reserve increase was announced in August
2012. Newcrest’s exploration activities in the 2013 financial year
continue to focus on the Asia Pacific and West African regions,
including regional exploration at Gosowong, underground
targets at Telfer and regional prospects in Côte d’Ivoire.
A number of changes were made to the executive group.
Gerard Bond started in January as Finance Director and
Chief Financial Officer, Scott Langford joined in July this year
as General Counsel and Company Secretary, Stephen Creese
expanded his Corporate Affairs role to include the important
community relations portfolio and Craig Jones, who was
the General Manager Projects, was promoted to Executive
General Manager Projects.
I would like to acknowledge the dedication and drive of our
employees and their commitment to delivering the Newcrest
vision to be ‘the Miner of Choice’. I look forward to the year
ahead as we deliver our two major projects, the Lihir plant
expansion and the Cadia East project, and affirm our position
as a reliable low-cost gold producer with a robust pipeline
of exploration and growth opportunities.
Greg Robinson
Managing Director and
Chief Executive Officer
(cid:2)newcrest mining annual report 2012(cid:5)9
The Board
The Board believes that adherence by the Company
and its people to the highest standard of corporate
governance is critical in order to achieve its vision
1
2
3
1 Don Mercer
NON-EXECUTIVE CHAIRMAN
Bachelor of Science (Hons) and Master of Arts (Econ)
Mr Mercer was appointed Non-Executive
Chairman of Newcrest on 26 October
2006. He is also Chairman of Air Liquide
Australia Limited.
Mr Mercer is a former Managing Director
and Chief Executive Officer of ANZ Banking
Group and is a former Chairman of the
Australian Institute of Company Directors
Limited, The State Orchestra of Victoria,
Australia Pacific Airports Corporation
Limited and Orica Limited.
2 Greg Robinson
MANAGING DIRECTOR AND CHIEF EXECUTIVE
OFFICER (FROM 1 JULY 2011)
Bachelor of Science (Hons) Geology and MBA
from Columbia University
Mr Robinson was appointed Managing
Director and Chief Executive Officer
of Newcrest in July 2011. He served
as Director Finance of Newcrest from
2006 to 2011. Prior to joining Newcrest,
Mr Robinson was with the BHP Billiton
Group from 2001 to 2006 in various
executive roles, including Chief Finance
and Chief Development Officer, Energy,
and Chief Financial Officer, Petroleum.
Mr Robinson was also a member
of the Energy Executive Committee
and Group Executive Committee.
Before joining BHP Billiton, he was
a Director of Investment Banking at
Merrill Lynch & Co and headed Asia-Pacific
Metals and Mining Group. Mr Robinson
is a Director of the Minerals Council
of Australia, the World Gold Council
and St Vincent’s Institute, and a
member of the Australian Institute
of Company Directors.
3 Gerard Bond
FINANCE DIRECTOR AND CHIEF FINANCIAL
OFFICER (FROM 1 JANUARY 2012)
Bachelor of Commerce, Chartered Accountant and
Graduate Diploma in Applied Finance and Investment
Mr Bond commenced as Finance Director
and Chief Financial Officer in January
2012 and was appointed to the Board
as an Executive Director on 8 February
2012. He has 23 years’ experience in the
global financial and resources industry
with BHP Billiton, Coopers & Lybrand
and Price Waterhouse. Prior to joining
Newcrest, Mr Bond was with BHP Billiton
for over 14 years where he held a number
of senior executive roles including
Deputy CFO of the Aluminium business,
CFO and then Acting President of the
Nickel business, and most recently was
BHP Billiton’s Head of Group Human
Resources. Mr Bond is a Fellow of the
Financial Services Institute of Australia
and an Alternate Director of the World
Gold Council.
10(cid:2)newcrest mining annual report 2012
4
5
6
7
8
9
4 Vince Gauci
NON-EXECUTIVE DIRECTOR
Bachelor of Engineering (Mining)
Member of the Safety, Health and Environment
Committee and the Human Resources and
Remuneration Committee
Mr Gauci has over 40 years’ experience
in the global mining industry and was
formerly the Managing Director of
MIM Holdings Limited. He is Chairman
of the Broken Hill Community Foundation,
was a former Chairman of Runge
Limited and a former Director
of Liontown Resources Limited.
5 Lady Winifred Kamit
NON-EXECUTIVE DIRECTOR
Bachelor of Arts and Bachelor of Laws
Member of the Human Resources and
Remuneration Committee and the Safety,
Health and Environment Committee
Lady Kamit has extensive business
experience and broad community
knowledge of Papua New Guinea.
Lady Kamit is a former Senior Partner,
and currently a Consultant at Gadens
Lawyers in Port Moresby and served
as a Director of Lihir Gold Limited (LGL)
from October 2004 until completion
of Newcrest’s acquisition of LGL in
September 2010. She is a Director of
Post Courier Limited, Nautilus Minerals
Niugini Limited, Australia and New Zealand
Banking Group (PNG) Limited and
Steamships Trading Company Limited.
She is a Councillor of the Papua New
Guinea Institute of National Affairs and
Chairperson of Coalition for Change PNG,
an initiative against violence against
women and children.
6 Richard Knight
NON-EXECUTIVE DIRECTOR
Bachelor of Science (Mining Engineering),
Master of Science (Mine Production Management)
and Chartered Engineer
Chairman of the Safety, Health and Environment
Committee and a member of the Audit and
Risk Committee
Mr Knight has extensive experience
in the international mining industry.
He is a former Executive Director of
North Limited, and was Chairman and
CEO of the Iron Ore Company of Canada
and CEO of Energy Resources of Australia
Limited. Mr Knight is a former Director
of OZ Minerals Limited, Zinifex Limited,
St Barbara Limited, Portman Limited,
Northern Orion Resources Inc. and
Asia Pacific Resources.
7 Rick Lee
NON-EXECUTIVE DIRECTOR
Bachelor of Chemical Engineering (Hons)
and Master of Arts (Econ) as a Rhodes Scholar,
from Oxford University
Chairman of the Human Resources and
Remuneration Committee and a member
of the Audit and Risk Committee
Mr Lee is Chairman of Salmat Limited
and the Australian Institute of Company
Directors, Deputy Chairman of Ridley
Corporation Limited and a Director of Oil
Search Limited. He is a former Chairman of
C. Czarnikow Limited and a former Director
of CSR Limited and the Australian Rugby
Union Limited. Mr Lee was Chief Executive
Officer of NM Rothschild Australia Group.
Prior to this he spent 16 years in the
CSR sugar division.
8 Tim Poole
NON-EXECUTIVE DIRECTOR
Bachelor of Commerce and Chartered Accountant
Member of the Audit and Risk Committee and the
Human Resources and Remuneration Committee
Mr Poole is Non-Executive Chairman of
Westbourne Credit Management Limited,
Continuity Capital Partners Pty Limited,
the Investment Committee of the industry
superannuation fund AustralianSuper and
the LEK Consulting Advisory Board. He is
also a Non-Executive Director of Lifestyle
Communities Limited, Victoria Racing
Club Limited and AustralianSuper Pty Ltd.
Mr Poole is a former Managing Director
of Hastings Fund Management and
was Chairman of Asciano Limited.
9 John Spark
NON-EXECUTIVE DIRECTOR
Bachelor of Commerce and Fellow of the
Institute of Chartered Accountants
Chairman of the Audit and Risk Committee
and a member of the Safety, Health and
Environment Committee
Mr Spark is a registered company auditor
and former Managing Partner of Ferrier
Hodgson, Melbourne. He is the Chairman
of Ridley Corporation Limited and a former
Director of ANL Limited, Baxter Group
Limited and MacArthur Coal Limited.
He has an extensive background in
accounting, profit improvement and
financial analysis.
(cid:2)newcrest mining annual report 2012(cid:5)11
Our Business
Australia
Cadia Valley
Telfer
Queensland
12(cid:2)newcrest mining annual report 2012
Cadia Valley
The Cadia East underground mine is expected
to increase Cadia Valley production to around
800,000 ounces of gold per year within four
years and drive a reduction in unit cash costs.
The Cadia Valley mines are located in central western
New South Wales, Australia, 25 kilometres south-south-west
of the city of Orange and 250 kilometres west of Sydney.
The Cadia Valley mines are 100 percent owned by Newcrest.
Production for the year ended June 2012 was 473,195
ounces of gold and 44,778 tonnes of copper at a cash cost
of A$423 per ounce. As at 31 December 2011, the Cadia Valley
Mineral Resource contained 43.2 million ounces of gold
and 7.97 million tonnes of copper, including an Ore Reserve
containing 26.6 million ounces of gold and 4.27 million
tonnes of copper.
The Cadia Hill gold-copper porphyry deposit was discovered
by Newcrest in 1992. Gold was first produced in 1998 and after
14 years of operation the Cadia Hill open pit mine was placed
in care and maintenance at the end of June 2012. Milling of
stockpiled open pit material will continue. Technical studies
of future mining options for the remaining Cadia Hill Ore
Reserve will also continue.
The Ridgeway gold-copper mine is located three kilometres
from the Cadia Hill open pit. The top of the Ridgeway
deposit lies approximately 500 metres below the surface
and was discovered in 1996. Production commenced from
the underground sub-level cave in April 2002. In 2010
Ridgeway transitioned from the original sub-level cave
operation to a block cave operation known as Ridgeway
Deeps, located beneath the sub-level cave.
473 ounces of gold
produced (thousands)
2012 Cadia Valley Statistics
Mining Method
Resources† – Gold
– Copper
Reserves† – Gold
– Copper
Total Mine Production
Total Ore Treated
Production – Gold
– Copper
Cash Cost
Total Cost
EBIT Margin
Open Pit and Underground
million ounces
43.2
million tonnes
8.0
million ounces
26.6
4.3
million tonnes
16.0 million tonnes
20.9 million tonnes
473.2
44.8
423 A$ per ounce of gold produced
663 A$ per ounce of gold produced
thousand ounces
thousand tonnes
40 percent
† Resources and Reserves are at 31 December 2011
The Cadia East deposit is a porphyry zone of gold-copper
mineralisation adjacent to the eastern edge of the Cadia Hill
orebody and extending up to 2.5 kilometres east. The system
is up to 600 metres wide and extends approximately
1.9 kilometres below the surface. It was discovered before
Ridgeway and is one of the world’s largest gold deposits.
The Cadia Valley Mineral Resource includes a Cadia East
Mineral Resource containing 33.1 million ounces of gold
and 6.58 million tonnes of copper, which includes an
Ore Reserve containing 22.2 million ounces of gold and
3.67 million tonnes of copper.
The Cadia East underground panel cave mine will be
Australia’s largest underground mine and is expected to
underpin production from the Cadia Valley province for at
least the next 30 years. The Cadia East Project commenced
in April 2010 and involves the development of the Cadia East
deposit into an underground panel cave mine, as well as
the expansion of the existing Cadia Valley processing plant
capacity from 24 million tonnes per year to 26 million tonnes
per year. Commercial production levels are expected to be
achieved by the end of 2012, with annual production from
Cadia Valley operations expected to increase to around
800,000 ounces of gold and 90,000 tonnes of copper
from the 2016 financial year.
(cid:2)newcrest mining annual report 2012(cid:5)13
The operation now comprises two mines, Telfer Open Pit
and Telfer Underground. The Telfer Open Pit includes the
Main Dome and the West Dome pits. Telfer Underground
is located beneath the Main Dome open pit, with ore
transported to the surface via a shaft hoisting system
with a capacity of 6 million tonnes per year. Ore from
the mining operations is combined in a large, twin train,
flotation treatment plant, which produces gold doré
and a copper-gold concentrate.
In addition to the existing mining operations at Telfer Open
Pit and Telfer Underground, Newcrest has identified a number
of mineral deposits within its granted mining tenements
proximate to the existing operations, including the O’Callaghans
tungsten and base metal deposit and a collection of gold
and copper-gold deposits known collectively as the Telfer
satellite deposits.
Our Business
Australia
Telfer
Newcrest has identified a number of mineral
deposits proximate to the Telfer operation,
including the O’Callaghans tungsten and
base metal deposit and a collection of gold
and copper-gold deposits.
The Telfer gold-copper mines are located in the
Great Sandy Desert in the Paterson Province of Western
Australia, approximately 400 kilometres east-south-east
of Port Hedland and 1,900 kilometres by road from Perth.
The Telfer mines are 100 percent owned by Newcrest.
Production for the year ended June 2012 was 540,114 ounces
of gold and 31,237 tonnes of copper at a cash cost of A$783 per
ounce. As at 31 December 2011, the Telfer Province Mineral
Resource contained 21.3 million ounces of gold and 1.22 million
tonnes of copper, including an Ore Reserve of 11.7 million ounces
of gold and 0.63 million tonnes of copper.
An intensive exploration and resource drilling program on
Telfer was undertaken from 1972 to 1975 and mining reached
full production in 1977. Ongoing exploration identified the
potential for a large, low-grade oxide Mineral Resource in
Main Dome and to the north-west in West Dome, resulting
in the introduction of a mill expansion in 1986 and a dump
leach operation from 1988. Exploration during the 1990s
delineated additional reefs on the eastern flank of Main
Dome, which were mined using narrow vein underground
mining methods.
With the gold price around A$300, the operation was
suspended in October 2000 due to escalating costs.
A comprehensive feasibility study on Telfer, completed
in November 2002, established an optimum strategy for
the mining and processing of the Main Dome and West
Dome ore from the surface and Telfer Underground ore
from underground and construction of the new operation
commenced in early 2003.
540 ounces of gold
produced (thousands)
2012 Telfer Statistics
Mining Method
Resources† – Gold
– Copper
Reserves† – Gold
– Copper
Total Mine Production
Total Ore Treated
Production – Gold
– Copper
Cash Cost
Total Cost
EBIT Margin
21.3
1.2
11.7
0.6
Open Pit and Underground
million ounces
million tonnes
million ounces
million tonnes
86.6 million tonnes
21.5 million tonnes
thousand ounces
thousand tonnes
540.1
31.2
783 A$ per ounce of gold produced
1,116 A$ per ounce of gold produced
24 percent
† Resources and Reserves are at 31 December 2011
14(cid:2)newcrest mining annual report 2012
Queensland
Newcrest recognised an after tax gain
of A$46 million on the divestment of Cracow
and Mt Rawdon to Evolution Mining during
the year. Newcrest retains a 32.68 percent
interest in Evolution Mining.
On 2 November 2011, Newcrest sold its 70 percent interest
in the two unincorporated joint ventures that held the Cracow
mine and surrounding exploration interests and its 100 percent
interest in the Mt Rawdon mine and surrounding exploration
interests to Evolution Mining Limited (Evolution Mining),
an ASX-listed company formed through the merger of Catalpa
Resources Ltd and Conquest Mining Ltd. As consideration,
Newcrest acquired an initial equity interest of approximately
38.95 percent in Evolution Mining. Newcrest’s interest has
subsequently been diluted and is now 32.68 percent following
a rights issue in which Newcrest agreed not to participate.
Newcrest recognised an after tax gain of A$46 million on the
divestment. Following completion of the sale, Newcrest has no
direct interests in Cracow or Mt Rawdon and has ceased to be
the operator of the Cracow and Mt Rawdon mining operations
and related exploration activities.
As part of the transaction, Newcrest has nominated two
directors to the Board of Evolution Mining. Collectively,
Cracow and Mt Rawdon contributed 47,985 ounces
of gold to Newcrest’s total gold production in the
year ended June 2012 prior to their disposal.
48 ounces of gold
produced (thousands)
2012 Queensland Statistics
Mining Method
Gold Production
Open Pit and Underground
48.0 thousand ounces
(cid:2)newcrest mining annual report 2012(cid:5)15
Our Business
Papua New Guinea
Lihir
Hidden Valley
Wafi-Golpu
16(cid:2)newcrest mining annual report 2012
Lihir
Lihir is one of the world’s largest gold deposits.
The major expansion of the Lihir process plant
is nearing completion and will underpin significant
production growth at Lihir over the next five years.
The Lihir operation is located on the island of Niolam,
900 kilometres north-east of Port Moresby in the New Ireland
Province of Papua New Guinea (PNG). Lihir is located within
the Luise Volcano Caldera on the east coast of Niolam Island.
The Luise Caldera is an extinct volcanic crater that is
geothermally active.
Lihir is one of the world’s largest gold deposits, with an
operational life projected to exceed more than 30 years.
The Lihir operation is 100 percent owned by Newcrest following
the acquisition of Lihir Gold Limited in August 2010.
Production for the year ended June 2012 was 604,336 ounces
of gold at a cash cost of A$560 per ounce. As at 31 December
2011, the Lihir Province Mineral Resource contained
56.6 million ounces of gold, including an Ore Reserve
of 31.5 million ounces of gold.
The Lihir deposit was discovered in 1982 and extensively drilled
prior to mine construction in 1995 and the commencement
of gold production in May 1997. The operation employs
a conventional open pit mining method comprising drill, blast,
load and haul, and comprises a single orebody with three
linked open pits: Minifie, Lienetz and Kapit. Ore is predominantly
refractory sulphide ore, which is treated using autoclaves
and a pressure oxidisation process before the gold can be
recovered by a conventional leach process. The commissioning
of a flotation circuit and additional milling capacity in 2007
enabled the processing plant to treat more than 7 million
tonnes of ore per year.
56.6 million ounces
of gold resources
2012 Lihir Statistics
Mining Method
Gold Resources†
Gold Reserves†
Total Mine Production
Total Ore Treated
Gold Production
Cash Cost
Total Cost
EBIT Margin
Open Pit
56.6 million ounces
31.5 million ounces
31.3 million tonnes
6.0 million tonnes
604.3 thousand ounces
560 A$ per ounce of gold produced
725 A$ per ounce of gold produced
57 percent
† Resources and Reserves are at 31 December 2011
A major expansion of the Lihir process plant, known as
the Million Ounce Plant Upgrade (MOPU), is currently nearing
completion with the objective of increasing gold production to
around one million ounces per year. The project is expected to
be completed by the end of calendar year 2012. The expansion
involves substantially replicating the existing process stream,
including installation of an additional autoclave and milling
equipment, oxygen production capacity and leaching capacity.
The potential for resource and reserve growth at Lihir remains
strong. An exploration drilling program designed to grow the
open pit gold resource is underway and continues to deliver
strong results. The limits of the mineralisation have not been
completely defined and remain open to the north and east.
(cid:2)newcrest mining annual report 2012(cid:5)17
Our Business
Papua New Guinea
Hidden Valley
Wafi-Golpu
The Morobe Province covers a portion of the
Papuan Orogenic belt, which hosts a number
of world-class gold and copper-gold deposits.
Exploration is ongoing.
Hidden Valley is a gold and silver mine located approximately
90 kilometres south-west of Lae in the Morobe Province,
PNG. Regionally, the goldfields district of the Morobe Province
covers a portion of the Papuan Orogenic belt, which hosts
a number of world-class gold and copper-gold deposits,
including Porgera and Ok Tedi. Hidden Valley is part of the
Morobe Mining Joint Ventures (MMJV), which are owned
50 percent by Newcrest and 50 percent by Harmony
Gold Mining Company Limited.
Newcrest’s 50 percent share of production for the year ended
June 2012 was 88,801 ounces of gold and 857,540 ounces
of silver at a cash cost of A$1,259 per ounce. As at 31
December 2011, the Hidden Valley Mineral Resource contained
6.2 million ounces of gold and 113.2 million ounces of silver
(100 percent), including an Ore Reserve of 3.6 million ounces
of gold and 69.2 million ounces of silver (100 percent).
The Hidden Valley Mine consists of the Hidden Valley Kaveroi
and Hamata open pits located approximately 6 kilometres
apart, and an ore processing facility situated in steep, heavily
forested mountainous terrain. Both pits employ conventional
load and haul mining techniques. The ore treatment plant was
commissioned in August 2009. In May 2010, construction and
commissioning of the Hidden Valley operation was completed
and the production ramp-up commenced.
At full capacity, the mine is expected to produce over
250,000 ounces of gold and 3.6 million ounces of silver
per year (100 percent terms) over a projected 14-year mine
life. Discovery drilling in the Hidden Valley-Wau district
is continuing.
Wafi-Golpu is a world-class deposit in a highly
prospective mineralised belt. A significant
increase in the Golpu Ore Reserve was announced
in August 2012 and drilling continues on a number
of regional targets.
Wafi-Golpu, located in the Morobe Province of PNG
approximately 65 kilometres south-west of the town of Lae,
is an advanced exploration project that forms part of the
MMJV (Newcrest 50 percent share).
As announced on 29 August 2012, the Wafi-Golpu Mineral
Resource contained 28.5 million ounces of gold and
9.06 million tonnes of copper (100 percent), including an
Ore Reserve of 12.4 million ounces of gold and 5.44 million
tonnes of copper (100 percent).
It comprises an extensive body of gold-only epithermal style
mineralisation (Wafi) and deeper porphyry related copper-gold
mineralisation (Golpu and Nambonga). Spatially, the Golpu
and Wafi deposits are located in close proximity to each other.
The Golpu deposit is located immediately north of and below
the Wafi deposit. The Nambonga porphyry mineralisation
is located to the west of the Wafi-Golpu diatreme.
The presence of a new gold zone, referred to as the Northern
Zone, was confirmed west of Golpu during the 2012 financial
year. Mineralisation has been identified over 200 metres strike
and remains open in all directions. The emergence of the
Northern Zone demonstrates the potential of the Wafi-Golpu
complex for new gold discoveries.
A significant upgrade to the Golpu Ore Reserve estimate
was announced in August 2012, following the completion
of a technical Pre-Feasibility Study. The study confirms Golpu
as a world-class deposit with an expected mine life of 26 years
and projected cash costs at the bottom of the industry curve.
Development of Golpu is expected to underpin production
growth at Newcrest beyond the next five years.
89
ounces of gold
produced* (thousands)
28.5
ounces of mineral
resource* (millions)
2012 Hidden Valley Statistics*
2012 Wafi-Golpu Statistics*
Mining Method
Resources† (100 percent)
Open Pit
Mining Method
Resources† – Gold
– Copper
Reserves† – Gold
– Copper
Potential Open Pit
and Underground
million ounces
million tonnes
million ounces
million tonnes
28.5
9.06
12.4
5.44
* 100 percent share
† Resources and Reserves as announced on 29 August 2012
– Gold
– Silver
6.2
113.2
million ounces
million ounces
Reserves† (100 percent)
– Gold
– Silver
Total Mine Production
Total Ore Treated
Production – Gold
– Silver
Cash Cost
Total Cost
EBIT Margin
million ounces
3.6
69.2
million ounces
10.5 million tonnes
1.8 million tonnes
thousand ounces
thousand ounces
88.8
857.5
1,259 A$ per ounce of gold produced
1,676 A$ per ounce of gold produced
(2) percent
* 50 percent Newcrest share unless stated
† Resources and Reserves are at 31 December 2011
18(cid:2)newcrest mining annual report 2012
Our Business
Other Regions
Gosowong
Bonikro
Namosi
(cid:2)newcrest mining annual report 2012(cid:5)19
Our Business
Other Regions
Gosowong
Bonikro
The Gosowong operation was Newcrest’s
highest margin mine for the 2012 financial
year, and strong recent exploration
results increase the probability of future
extensions to the mine life.
Newcrest’s tenements in Côte d’Ivoire cover
approximately 17,000 square kilometres within
the Birimian Greenstone belt, known to host
a large number of significant gold deposits
in the West African region.
The Gosowong gold mine is located on Halmahera Island,
Indonesia, and is operated by PT Nusa Halmahera Minerals,
which is owned by Newcrest (82.5 percent interest) and
PT Aneka Tambang (17.5 percent interest), a company listed
on the Indonesia Stock Exchange and the ASX.
Production for the year ended June 2012 was 439,384
ounces of gold and 271,342 ounces of silver at a cash cost
of A$406 per ounce. As at 31 December 2011, the Gosowong
Mineral Resource contained 2.5 million ounces of gold
and 3.4 million ounces of silver, including an Ore Reserve
of 2.0 million ounces of gold and 2.6 million ounces of silver.
Gold mineralisation at Gosowong was discovered by
Newcrest geologists in 1993 and comprises multiple high-grade
epithermal deposits. Mining operations commenced in 1999,
initially from the Gosowong open pit and subsequently from
the Toguraci open pit. Kencana was the third mine and the
first underground project to be developed at Gosowong.
Decline development at Kencana commenced in July 2005
and the first underground ore was mined in March 2006.
Production continues at the present time. A cutback of the
Gosowong open pit to deepen the pit to recover additional
ore commenced in October 2010 and first ore was mined
in the March 2012 quarter. It is expected to produce moderate
grade feed over a short mine life. The Toguraci underground
mine is the second underground project to be developed
at Gosowong. The feasibility study was completed in August
2011, and first ore production commenced shortly thereafter.
The processing plant at Gosowong has a capacity in excess
of 800,000 tonnes per year.
The Gosowong province remains highly prospective,
and exploration activity to identify further epithermal
vein structures and link zones is ongoing.
439
ounces of gold
produced (thousands)
2012 Gosowong Statistics*
Mining Method
Resources† (100 percent)
Open Pit and Underground
– Gold
– Silver
Reserves† (100 percent)
– Gold
– Silver
Total Mine Production
Total Ore Treated
Production – Gold
– Silver
Cash Cost
Total Cost
EBIT Margin
2.5
3.4
million ounces
million ounces
million ounces
2.0
2.6
million ounces
7.1 million tonnes
0.7 million tonnes
thousand ounces
thousand ounces
493.4
271.3
406 A$ per ounce of gold produced
559 A$ per ounce of gold produced
65 percent
* 100 percent share
† Resources and Reserves are at 31 December 2011
20(cid:2)newcrest mining annual report 2012
The Bonikro operation is located in the central-southern portion
of the West African nation of Côte d’Ivoire, approximately
250 kilometres north-west of the commercial capital of Abidjan.
Newcrest acquired an 89.9 percent interest in the Bonikro gold
project, along with a large exploration portfolio in Côte d’Ivoire,
in August 2010 following the acquisition of Lihir Gold Limited.
Production for the year ended June 2012 was 92,102 ounces
of gold at a cash cost of A$898 per ounce. As at 31 December
2011, the Bonikro Mineral Resource contained 2.9 million ounces
of gold, including an Ore Reserve of 1.1 million ounces of gold.
Construction of the Bonikro mine began in May 2007, with
gold production commencing in October 2008. The operation
employs a conventional open pit mining method comprising
drill, blast, load and haul. The predominant method of gold
recovery is via carbon in leach technology, with some gold
recovered via a gravity circuit.
Newcrest is currently exploring numerous prospects within
30 kilometres of the Bonikro mine that have the potential
to supplement the present mine plan. In addition, Newcrest
hold rights to a very large package of exploration tenements
in Côte d’Ivoire. These tenements cover approximately
17,000 square kilometres within the Birimian Greenstone
belt, which is known to host a large number of significant
gold deposits in the West African region.
92
ounces of gold
produced (thousands)
2012 Bonikro Statistics*
Mining Method
Gold Resources†
Gold Reserves†
Total Mine Production
Total Ore Treated
Gold Production
Cash Cost
Total Cost
EBIT Margin
Open Pit
2.9 million ounces
1.1 million ounces
21.8 million tonnes
1.9 million tonnes
92.1 thousand ounces
898 A$ per ounce of gold produced
1,239 A$ per ounce of gold produced
20 percent
* 100 percent share
† Resources and Reserves are at 31 December 2011
Namosi
Namosi is one of the largest porphyry copper
systems in the Pacific Islands, with a resource
containing 8.0 million ounces of gold and
8.0 million tonnes of copper.
The Namosi project, which is located approximately
30 kilometres west of Fiji’s capital city, Suva, is centred
on a district that has been periodically explored over the
past 40 years and is highly prospective for copper-gold
porphyry systems. Namosi is one of the largest porphyry
copper systems in the Pacific Islands.
In late 2007, Newcrest signed a definitive joint venture
agreement with Nittetsu Mining Co. Ltd and Mitsubishi
Materials Corporation to establish the Namosi Joint
Venture to explore for porphyry copper-gold and epithermal
style gold mineralisation in the Namosi region of Fiji.
Newcrest has a 69.94 percent interest in the Namosi Joint
Venture and is the manager of the exploration activities.
As at 31 December 2011, the Namosi Mineral Resource contained
8.0 million ounces of gold and 8.0 million tonnes of copper
(100 percent), along with an Ore Reserve of 4.0 million ounces
of gold and 3.8 million tonnes of copper (100 percent).
A pre-feasibility study to evaluate the development
alternatives for the Namosi project is currently on hold,
with discussions between the government, landowners
and the joint venture continuing.
8.0 ounces of mineral
resources* (millions)
2012 Namosi Statistics*
Mining Method
Resources*† – Gold
– Copper
Reserves*† – Gold
– Copper
Potential Open Pit
million ounces
million tonnes
million ounces
million tonnes
8.0
8.0
4.0
3.8
* 100 percent share
† Resources and Reserves are at 31 December 2011
(cid:2)newcrest mining annual report 2012(cid:5)21
Mineral Resources
and Ore Reserves
2012 Mineral Resources
AS AT 31 DECEMBER 2011
149.7 ounces of gold
(millions)
20.0 tonnes of copper
(millions)
2.6%
increase*
* From ongoing operations
22(cid:9)newcrest mining annual report 2012
0.7%
increase
2012 Ore Reserves
AS AT 31 DECEMBER 2011
79.1 ounces of gold
(millions)
8.46 tonnes of copper
(millions)
0.3%
increase*
* From ongoing operations
1.2%
increase
(cid:9)newcrest mining annual report 2012(cid:2)23
Mineral Resources and Ore Reserves
Newcrest Mining Limited has updated
its Mineral Resource and Ore Reserve
estimates for the six month period
ending 31 December 2011. Mineral
Resource and Ore Reserve estimates
were previously reported for the
year ending 30 June 2011. Transition
to the 31 December reporting date
is in accordance with advice provided
to the market in August 2011.
The following numbers do not include the updated Wafi-Golpu
resource and reserve figures announced on 29 August 2012
unless otherwise stated.
Principal changes during the period from July 2011 to December
2011 included divestment of Mt Rawdon and Newcrest’s
interest in Cracow, production depletion at operating mines
and revisions to commodity prices applied when estimating
resources and reserves.
Group Mineral Resources are estimated at 149.7 million ounces
of gold and 20.0 million tonnes of copper!(1). This represents
a net increase of 3.8 million ounces of gold (2.6 percent) and
0.13 million tonnes of copper (0.7 percent) after adjusting for
the impact of the divestment of Mt Rawdon and Newcrest’s
interest in Cracow, which together accounted for 1.6 million
ounces of gold in Mineral Resources. Silver Mineral Resources
are estimated at 116.8 million ounces.
The result was driven by additions at Lihir (0.6 million ounces
of gold), Telfer West Dome (1.9 million ounces of gold and
0.07 million tonnes of copper), Telfer Main Dome (1.2 million
ounces of gold and 0.04 million tonnes of copper) and Namosi
(0.2 million ounces of gold and 0.04 million tonnes of copper)(2).
These additions largely reflect the impact of increased metal
prices on pit shells and cut-off grades.
Group Ore Reserves, after mining depletion, are estimated at
79.1 million ounces of gold and 8.46 million tonnes of copper (3).
This represents a net increase of 0.2 million ounces of gold
(0.3 percent) and 0.09 million tonnes of copper (1.2 percent)
after adjusting for the impact of the divestment of Mt Rawdon
and Newcrest’s interest in Cracow, which together accounted
for 1.1 million ounces of gold in Ore Reserves. Silver Ore Reserves
are estimated at 59.4 million ounces.
This result was driven by additions at Lihir (0.5 million ounces
of gold) and Cadia East (0.1 million ounces of gold and
0.04 million tonnes of copper).
Mineral Resources are quoted inclusive of Ore Reserves.
Metal price assumptions used for Newcrest Mineral
Resources are US$1100/oz for gold, US$2.70/lb for copper
and US$20/oz for silver. Price assumptions for Ore Reserves
are US$950/oz for gold, US$2.30/lb for copper and US$15.00/oz
for silver. In the case of Gosowong, a gold price of US$1400/oz
has been used to estimate Mineral Resources and Ore Reserves,
acknowledging the shorter life of the deposits. Where appropriate,
resources are also constrained spatially by a notional pit shell
based on US$1400/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. Cost assumptions are based
on the latest approved study for each deposit.
Mineral Resources and Ore Reserves for the Morobe Mining
Joint Ventures (MMJV) are based on Competent Persons
statements provided by the Morobe Mining Joint Ventures
and Harmony Gold Mining Company Limited and are quoted
as Newcrest’s 50 percent interest.
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.
CADIA VALLEY (NSW)
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. Minor molybdenum and silver
mineralisation is also present. Ore is sourced by bulk mining
methods from open pit and underground operations.
Exploration is ongoing within the Cadia Province, targeting
large-scale alteration systems located within the regional
tenement package.
Cadia Hill Open Pit
Cadia Hill is porphyry related sheeted vein deposit. Since
December 2011, the Mineral Resource has been depleted by
0.052 million ounces of gold and 2.1 kilotonnes of copper and
the Ore Reserve has been depleted by 0.052 million ounces
of gold and 2.1 kilotonnes of copper. Cadia Hill stockpiles have
decreased by 0.030 million ounces and 0.004 kilotonnes
of copper.
Open pit mining at Cadia Hill was suspended in June 2012
when the current phase of mining was completed.
Cadia Extended
The Cadia Extended underground resource is located to the
north-west of Cadia Hill beneath the backfilled Cadia Extended
pit. The Cadia Extended Mineral Resource is unchanged
since December 2011. No Ore Reserve has been estimated
for Cadia Extended.
Ridgeway Underground
Ridgeway Underground is a large-scale underground mine
using sub-level cave extraction and Block Caving (Ridgeway
Deeps) below the sub-level cave. Since December 2011, the
Mineral Resource has been depleted by 0.14 million ounces
of gold and 10.2 kilotonnes of copper and the Ore Reserve
has been depleted by 0.13 million ounces of gold and
8.1 kilotonnes of copper.
(1) Excludes the update to Wafi and Golpu Mineral Resources as announced 29 August 2012.
(2) Newcrest’s 69.94 percent share.
(3) Excludes update to Golpu Ore Reserves as announced on 29 August 2012.
24(cid:2)newcrest mining annual report 2012
Big Cadia
Big Cadia is centred on an area of shallow historic workings
located north of the Cadia Hill open pit and east of the
Ridgeway Mine cave zone. The mineralisation is skarn style
and has been evaluated as a gold and copper bearing Mineral
Resource for future development by open pit mining. The Big
Cadia Mineral Resource and Ore Reserve are unchanged since
December 2011.
West Dome Open Pit
The West Dome deposit is located 2 kilometres north-west
of the Main Dome deposit and is a continuation of the folded
sedimentary sequence in a second sub-parallel structure.
Since December 2011, the Mineral Resource has been depleted
by 0.19 million ounces of gold and 10.4 kilotonnes of copper
and the Ore Reserve has been depleted by 0.15 million ounces
of gold and 8.1 kilotonnes of copper.
Cadia East Underground
Cadia East is a low-grade, porphyry related gold and copper
deposit located immediately east of Cadia Hill. Construction
of the Cadia East mine is on track for commercial production
in December quarter 2012. The planned mine is based on
bulk underground extraction by panel caving methods.
Since December 2011, the Mineral Resource has been depleted
by 7 kilo-ounces of gold and 0.70 kilotonnes of copper and
the Ore Reserve has been depleted by 7 kilo-ounces of gold
and 0.70 kilotonnes of copper.
TELFER (WA)
Gold and copper mineralisation in the Telfer Province is largely
structurally controlled reefs, veins and stockwork hosted by
sedimentary rocks.
The Telfer operation is comprised of Telfer Open Pit (Main Dome
and West Dome) and Telfer Underground. Open Pit mining is a
conventional truck and hydraulic excavator operation. Selective
mining techniques are used for excavation of the high-grade
reefs, while stockwork ore and waste are mined using bulk
methods. The limited quantities of near-surface oxidised
stockwork are also bulk mined.
Since December 2011, exploration has continued in the
Telfer region. Exploration is focussed on:
– Growth of lower strip ratio open pit reserves around
West Dome and Main Dome;
– Discovering additional higher grade underground
resources; and
Telfer Deeps Underground
The Telfer Underground comprises the operating sub-level
cave (SLC) mine and selective high-grade reef mining external
to the SLC. Mineralisation includes stratabound reefs, cross
cutting veins and stockwork zones around the reefs. Since
December 2011, the Mineral Resource has been depleted by
0.12 million ounces of gold and 8.2 kilotonnes of copper and
the Ore Reserve has been depleted by 0.10 million ounces
of gold and 7.2 kilotonnes of copper.
Vertical Stockwork Corridor (VSC)
The VSC deposit lies directly below the existing Telfer Deeps
Underground SLC. The VSC Mineral Resource and Ore Reserve
are unchanged since December 2011.
O’Callaghans
The O’Callaghans poly-metallic deposit is located approximately
10 kilometres south of the Telfer Gold Mine. The mineralisation
contains tungsten, copper, zinc and lead as a sub-horizontal
layer of poly-metallic skarn (altered limestone). The O’Callaghans
Mineral Resource and Ore Reserve are unchanged since
December 2011.
Satellite Deposits
The Telfer Satellite deposits lie within a zone located
approximately 30 kilometres from the Telfer Gold Mine.
The ‘Satellites’ are a group of structurally controlled
gold deposits, including Backdoor West, Dolphy, Big Tree
and Camp Dome. The Telfer Satellite Mineral Resource is
unchanged since December 2011. No Ore Reserve has been
estimated for Telfer Satellites.
– Advancing targets within regional tenements.
LIHIR (PNG)
Telfer is currently the subject of various technical studies
ranging from evaluating optimal mining solutions for
individual deposits through to province-scale evaluations.
Main Dome Open Pit
The Main Dome deposit is the largest in the Telfer area
and comprises a series of stacked stratabound reefs
and discordant stockwork within a folded dome structure.
Since December 2011, the Mineral Resource has been depleted
by 0.14 million ounces of gold and 5.8 kilotonnes of copper.
The Ore Reserve has been depleted by 0.051 million ounces
of gold and 3.0 kilotonnes of copper.
Since December 2011, the contained metal in ‘Open Pit’
stockpiles (including Main Dome and West Dome) has increased
by 0.15 million ounces of gold and 7.5 kilotonnes of copper.
The Lihir Gold Mine is located on Niolam Island, 900 kilometres
north of Port Moresby in the New Ireland Province of Papua
New Guinea. Lihir is a volcanic sea mount that rises steeply
from sea level to approximately 600 metres above sea level.
The Luise Caldera, in which all of the known ore deposits
are located, is on the east coast of the island.
The Lihir Gold Mine consists of three linked open pits,
Minifie, Lienetz and Kapit, that will be mined over the life
of the project. Mining is by conventional open pit methods.
Since December 2011, the insitu pit Mineral Resource has
been depleted by 0.80 million ounces of gold and the insitu
Ore Reserve has been depleted by 0.76 million ounces of gold.
The contained metal in Lihir stockpiles has increased by
0.29 million ounces of gold.
Since December 2011, extensional drilling has continued at Lihir.
Drilling has confirmed additional mineralisation to the east
and northeast of the current Mineral Resource. The optimal
extraction of mineralisation (both inside and outside current
resources) are the subject of various technical studies.
(cid:2)newcrest mining annual report 2012(cid:5)25
Mineral Resources and Ore Reserves
GOSOWONG (INDONESIA)
Gosowong is located on Halmahera island in North Maluku
Province in the eastern part of the Republic of Indonesia.
Gosowong 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 reports 100 percent of the assets. Economic
mineralisation in the Gosowong province is low sulphidation
gold-silver epithermal veining.
The Gosowong operation includes the Kencana, Toguraci
underground mines and the Gosowong open pit.
Newcrest has an active exploration program in place
at Gosowong. The program is focused on:
1. Defining additional resources within the vicinity of
the current operations at Toguraci and Kencana; and
2. Discovering a major new (+1 million ounces) deposit within
the broader Contract of Work area.
Kencana
The Kencana mineralised system is a complex intersecting
network of structures consisting of well developed epithermal
veins and link structures. Since December 2011, the Mineral
Resource has been depleted by 0.246 million ounces of gold
and the Ore Reserve has been depleted by 0.204 million ounces
of gold.
Toguraci
Toguraci is a group of low sulphidation epithermal deposits
located 2 kilometres south-west of the Gosowong mine.
Since December 2011, the Mineral Resource has been depleted
by 0.017 million ounces of gold and the Ore Reserve has been
depleted by 0.014 million ounces of gold.
Gosowong Pit Cut-Back
The Gosowong Pit Mineral Resource is located in the walls and
floor of the existing Gosowong open pit. Since December 2011,
the Mineral Resource has been depleted by 0.015 million
ounces of gold and the Ore Reserve has been depleted
by 0.015 million ounces of gold.
Gosowong Tailings Storage Facilities and Stockpiles
The Gosowong Tailings Mineral Resource and Ore Reserve
comprise reclaimed tailings deposited during the earlier
processing of high-grade ore from the Kencana deposit.
Since December 2011, minor amounts of the Gosowong
Tailings have been regularly processed.
Since December 2011, the Gosowong ‘operational’ stockpiles
(including Kencana, Toguraci and Gosowong Pit) have increased
by 2 kilo-ounces of gold.
MOROBE MINING JOINT VENTURES (PNG)
The Morobe Mining Joint Ventures is a 50:50 joint venture
between Newcrest and Harmony Gold Mining Company.
The joint venture interests are located in the Morobe Province
of Papua New Guinea and include the Hidden Valley and
Wafi-Golpu deposits.
Hidden Valley
The Hidden Valley Mine is located 90 kilometres
south-south-west of Lae in the Morobe Province of
Papua New Guinea. Mineralisation is structurally controlled
epithermal gold – silver stockwork veining hosted in granite
and metasedimentary rocks.
The Hidden Valley Mine consists of the Hidden Valley Kaveroi
and Hamata open pits located approximately 6km apart.
Since December 2011, the Mineral Resource has been depleted
by 0.16 million ounces of gold and the Ore Reserve has been
depleted by 0.11 million ounces of gold (100 percent terms).
There has been no material change in stockpiles.
The key objective of the current exploration program
is to identify additional mining fronts within the
Hidden Valley – Wau district.
Wafi-Golpu
Wafi-Golpu comprises the Golpu porphyry deposit, the Wafi
high sulphidation epithermal deposit and the Nambonga
porphyry deposit. The deposits are situated 60 kilometres
west-southwest of Lae, on the western flanks of the Timini
Range, Morobe Province, Papua New Guinea.
Wafi-Golpu (continued)
On 29 August 2012, the Mineral Resource estimates for Wafi and Golpu were updated following additional drilling, modelling
and technical studies. The Nambonga Mineral Resource is unchanged since December 2011. This update has not been incorporated
into the December 2011 Group Mineral Resource table.
Mineral Resource Estimate for Nambonga and Updated Mineral Resource
Estimates for the Wafi and Golpu Deposits (100 percent)
Indicated Resource
Golpu (Porphyry Au/Cu)
Wafi (Epithermal Au/Ag)
Nambonga (Porphyry Au/Cu)
Total Indicated Resource
Tonnes
(Mt)
810
110
–
920
Gold
(g/t)
0.64
1.7
–
–
Copper
(%)
Silver
(g/t)
Contained
Gold
(Moz)
Contained
Copper
(Mt)
Contained
Silver
(Moz)
0.92
–
–
–
1.1
3.6
–
–
16.6
6.3
–
22.9
7.46
–
–
7.46
29.4
13.0
–
42.4
26(cid:2)newcrest mining annual report 2012
Mineral Resource Estimate for Nambonga and Updated Mineral Resource
Estimates for the Wafi and Golpu Deposits (100 percent) (continued)
Inferred Resource
Golpu (Porphyry Au/Cu)
Wafi (Epithermal Au/Ag)
Nambonga (Porphyry Au/Cu)
Total Inferred Resource
Tonnes
(Mt)
190
23
40
250
Total Mineral Resources
1,200
Gold
(g/t)
0.61
1.3
0.79
–
–
Rounding may cause some computational discrepancies in totals.
Copper
(%)
Silver
(g/t)
Contained
Gold
(Moz)
Contained
Copper
(Mt)
Contained
Silver
(Moz)
0.80
–
0.22
–
–
1.0
2.5
–
–
–
3.7
0.9
1.0
5.7
28.5
1.52
–
0.09
1.60
9.06
6.3
1.8
–
8.1
50.6
On 29 August 2012, the Golpu Ore Reserve estimate was updated following a pre-feasibility study, and is based on a block
cave design for the deposit. No Ore Reserves have been estimated for the Wafi or Nambonga deposits. This update has not
been incorporated in the December 2011 Group Ore Reserves table.
Updated Ore Reserve Estimate for the Golpu Deposit (100 percent)
Probable Reserve
Tonnes
(Mt)
450
Gold
(g/t)
0.86
Copper
(%)
1.2
Silver
(g/t)
1.4
Contained
Gold
(Moz)
Contained
Copper
(Mt)
Contained
Silver
(Moz)
12.4
5.44
19.7
Note: These updated Mineral Resource and Ore Reserve estimates for the Wafi and Golpu deposits are not refl ected in the December 2011 tables. Newcrest’s
share is 50 percent. Competent Persons are as follows: Golpu Mineral Resource, Wafi Mineral Resource and Nambonga Mineral Resource – James Francis;
Golpu Ore Reserve – German Flores. At the time of this report, James Francis was employed by the Morobe Mining JVs. German Flores is a full-time employee
of Newcrest Mining Limited.
NAMOSI JOINT VENTURE (FIJI)
OTHER REGIONS
The Namosi tenement is located about 30 kilometres
west of Fiji’s capital city, Suva. The Namosi project is a joint
venture between Newcrest, Nittetsu and Mitsubishi Materials.
Newcrest holds a 69.94 percent interest in the joint venture
and is manager of project activities.
Waisoi
The Waisoi deposit is characterised by copper-gold-molybdenum
mineralisation hosted in and adjacent to porphyry intrusions.
The deposit includes two broad overlapping mineralised zones;
Waisoi East and Waisoi West. The Waisoi Mineral Resource and
Ore Reserve are unchanged since December 2011.
Further growth opportunities exist for Waisoi in the next
five years. The deposit is the subject of a pre-feasibility study.
The Waisoi deposit is to be extracted via bulk open cut
mining methods.
Wainaulo
The Wainaulo deposit lies in the Waivaka Corridor, which is
a 5 kilometres long east-north-east trending zone of
porphyry-related mineralisation. The Wainaulo Mineral
Resource is unchanged since December 2011. No Ore Reserve
has been estimated for the Wainaulo deposit.
Marsden (NSW)
The Marsden copper-gold porphyry deposit is located between
the NSW towns of Forbes and West Wyalong, approximately
150 kilometres south-west of the Cadia Valley Operations.
The Marsden Mineral Resource and Ore Reserve are unchanged
since December 2011.
Côte d’Ivoire (West Africa)
The Côte d’Ivoire operations and projects (CI) includes
Bonikro, Hiré and Dougbafla-East deposits, as well as various
exploration tenements. Gold mineralisation occurs primarily
in two modes: as structurally controlled shear zones and
as stockwork veining.
The Bonikro open pit mine and the Dougbafla deposit are
located within the Oumé Project area in central to southern
Côte d’Ivoire. The Hiré deposit is located approximately
10 kilometres south-east of Bonikro. Hiré is the focus of a
feasibility study to evaluate its potential as an open pit mine
(with processing at the nearby Bonikro processing facility).
Since December 2011, the Bonikro Mineral Resource has
been depleted by 0.093 million ounces of gold and the Ore
Reserve has been depleted by 0.064 million ounces of gold.
Since December 2011, contained metal in Bonikro stockpiles
has increased by 0.032 million ounces of gold. The Hiré
and Dougbafla-East Mineral Resources are unchanged since
December 2011. No Ore Reserves have been estimated for
the Hiré and Dougbafla-East deposits.
Newcrest has an active exploration program in place within
Côte d’Ivoire. The program is focused on:
1. Defining extensions to the current resources; and
2. Greenfields exploration outside the mine and project areas.
(cid:2)newcrest mining annual report 2012(cid:5)27
2012 Mineral Resources
AS AT 31 DECEMBER 2011
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)
Insitu
Gold
(million
ounces)
Insitu
Copper
(million
tonnes)
Com-
petent
Person
Cadia East Underground
–
–
– 2,200
0.44
0.29
100
0.35
0.18 2,300
0.44
0.28
33.1
6.58
Ridgeway Underground#
0.12
1.1
0.41
120
0.76
0.35
27
0.47
0.44
150
0.70
0.37
3.3
0.54
Other#
180
0.45
0.13
160
0.37
0.24
230
0.31
0.10
570
0.37
0.15
6.8
0.84
Total Cadia Province – Gold and Copper
43.2
7.97
Total Telfer Province – Gold and Copper
Main Dome Open Pit#
West Dome Open Pit
Telfer Underground
Other
O’Callaghans
Lihir#
Gosowong#*
Bonikro#
Namosi JV (69.94%)
Marsden
MMJV – Hidden Valley
Operations (50%)#
MMJV – Wafi /Golpu/
Nambonga (50%)
17
0.43
0.05
420
0.62
0.07
59
0.50
0.06
500
0.60
0.07
9.6
0.36
–
–
–
–
–
–
–
–
94
2.4
–
–
2.0
0.96
–
–
–
–
4.0
1.6
–
–
–
–
–
–
–
500
0.46
0.05
30
0.49
0.07
530
0.46
0.05
7.8
0.27
81
1.2
0.32
21
0.76
0.25
100
1.10
0.31
3.7
0.31
0.57
4.2
0.03
16
0.28
0.34
16
0.42
0.33
0.2
0.05
69
–
0.29
9.0
–
0.24
78
–
0.29
–
0.22
700
2.0
4.8
37
15
1.5
–
–
–
87
1.7
0.32
9.3
29
1.1
–
–
–
880
2.0
5.1
67
15
1.3
–
–
–
56.6
2.5
2.9
–
–
–
21.3
1.22
– 1,400
0.11
0.33
280
0.10
0.38 1,600
0.11
0.34
5.6
5.58
–
–
190
0.19
0.37
26
0.08
0.18
220
0.18
0.35
1.2
0.76
53
1.5
–
10
1.1
–
68
1.4
–
3.1
–
–
–
–
410
0.76
0.94
99
1.0
0.70
510
0.82
0.89
13.3
4.52
Total Other Provinces – Gold and Copper
Total Gold and Copper
85.1
10.9
149.7
20.0
Group Resources: 149.7 million ounces
of gold, increased by 2.6% and 20.0 million
tonnes of copper, increased by 0.7%
28(cid:2)newcrest mining annual report 2012
1
1
1
2
2
2
2
2
3
4
5
6
1
7
8
Silver Resources
(# = includes stockpiles)
Cadia Valley Operations#
Gosowong#*
MMJV – Hidden Valley/
Hamata/Kaveroi (50%)#
MMJV – Wafi /Golpu/
Nambonga (50%)
Total Silver
Measured Resource
Indicated Resource
Inferred Resource
Total Resource
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)
Dry
Tonnes
(million)
Silver
Grade
(g/t Ag)
Insitu Silver
(million ounces)
Com-
petent
Person
2,400
0.50
0.12
–
4.0
1.2
–
27
4.8
50
–
–
370
21
29
1.3
130
0.32
9.9
0.29
2,500
0.49
20
21
5.1
64
21
27
39.3
3.4
56.6
60
1.3
430
1.3
17.5
1
4
7
8
116.8
O’Callaghans
Polymetallic Resources
(# = includes stockpiles)
Measured
Indicated
Inferred
Total Polymetallic
Tonnes
Grade
Contained Metal
Dry
Tonnes
(million)
–
69
9.0
78
Tungsten
Trioxide
Grade
(% WO3)
–
0.34
0.25
0.33
Zinc
Grade
(% Zn)
–
0.55
0.15
0.50
Lead
Grade
(% Pb)
Insitu Tungsten
Trioxide
(million tonnes)
–
0.27
0.07
0.25
–
0.24
0.02
0.26
Insitu
Zinc
(million
tonnes)
–
0.38
0.01
0.39
Insitu
Lead
(million
tonnes)
Com-
petent
Person
–
0.18
0.01
0.19
2
Note: Rounding may cause some computational discrepancies in totals.
* The fi gures shown represent 100 percent of the Mineral Resource. Gosowong 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).
Newcrest and Harmony Gold Mining Company Limited have a 50/50 ownership
of the Morobe Mining Joint Ventures. Newcrest has a 69.94 percent share of the
Namosi Joint Venture.
Competent Person
1. Stephen Perkins, 2. Paul Dunham, 3. Geoff Smart,
4. Colin McMillan, 5. Craig Irvine, 6. Vik Singh,
7. James Francis (MMJVs), 8. Stuart Hayward (MMJVs).
(cid:2)newcrest mining annual report 2012(cid:5)29
2012 Ore Reserves
AS AT 31 DECEMBER 2011
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)
Insitu Gold
(million
ounces)
Insitu
Copper
(million
tonnes)
Com-
petent
Person
1,200
0.58
0.31
1,200
0.58
0.31
22.2
Gold and Copper Reserves
(# = includes stockpiles)
Cadia East Underground
Ridgeway Underground#
Other#
–
–
–
–
–
–
90
0.53
0.14
Total Cadia Province – Gold and Copper
Main Dome Open Pit#
17
0.43
0.05
West Dome Open Pit
Telfer Underground
O’Callaghans
–
–
–
–
–
–
Total Telfer Province – Gold and Copper
Lihir#
Gosowong#*
Bonikro#
Namosi JV (69.94%)
Marsden
MMJV – Hidden Valley
Operations (50%)#
MMJV – Wafi /Golpu/
Nambonga (50%)
94
–
2.4
–
2.0
0.96
–
–
3.2
–
–
1.7
–
–
Total Other Provinces – Gold and Copper
Total Gold and Copper
–
–
–
–
–
–
–
–
–
–
100
33
0.77
0.41
0.36
0.37
100
120
0.77
0.50
0.36
0.20
230
190
45
51
330
5.1
24
0.80
0.10
0.63
0.06
1.2
0.33
–
0.28
2.3
12
1.3
–
–
–
250
190
45
51
420
5.1
26
0.77
0.09
0.63
0.06
1.2
0.33
–
0.28
2.3
12
1.3
–
–
–
660
0.13
0.41
660
0.13
0.41
98
31
0.29
0.48
1.6
–
98
34
0.29
0.48
1.6
–
3.67
0.35
0.25
4.27
0.23
0.12
0.15
0.14
2.5
2.0
26.6
6.1
3.8
1.8
–
11.7
0.63
31.5
2.0
1.1
2.8
0.9
1.8
–
–
–
2.68
0.47
–
35
0.61
1.1
35
0.61
1.1
0.7
0.40
40.8
3.55
79.1
8.46
1
1
2
3
3
3
8
4
5
6
6
2
6
7
Group Reserves: 79.1 million ounces
of gold, increased by 0.3% and 8.46 million
tonnes of copper, increased by 1.2%
30(cid:2)newcrest mining annual report 2012
Silver Reserves
(# = includes stockpiles)
Cadia Valley Operations#
Gosowong#*
MMJV – Hidden Valley/
Hamata/Kaveroi (50%)#
Total – Silver
Proved Reserve
Probable Reserve
Total Reserve
Contained Metal
Dry
Tonnes
(million)
–
–
3.2
Silver
Grade
(g/t Ag)
–
–
29
Dry
Tonnes
(million)
1,300
5.1
29
Silver
Grade
(g/t Ag)
0.53
16
34
Dry
Tonnes
(million)
1,300
5.1
32
Silver
Grade
(g/t Ag)
0.53
16
34
Insitu Silver
(million ounces)
Com-
petent
Person
22.2
1, 2
5
6
2.6
34.6
59.4
Tonnes
Grade
Contained Metal
O’Callaghans
Polymetallic Reserves
(# = includes stockpiles)
Proved
Probable
Total Polymetallic
Dry
Tonnes
(million)
–
51
51
Tungsten
Trioxide
Grade
(% WO3)
–
0.34
0.34
Zinc
Grade
(% Zn)
–
0.61
0.61
Lead
Grade
(% Pb)
–
0.30
0.30
Insitu
Tungsten
Trioxide
(million tonnes)
Insitu Zinc
(million tonnes)
Insitu Lead
(million tonnes)
–
0.17
0.17
–
0.31
0.31
–
0.15
0.15
Com-
petent
Person
8
Note: Rounding may cause some computational discrepancies in totals.
* The fi gures shown represent 100 percent of the Ore Reserve.
Information in this report that relates to Mineral Resources and Ore Reserves is based
on and accurately refl ects reports prepared by the Competent Person named beside
the information. All these persons, except Greg Job, James Francis and Stuart Hayward
are full-time employees of Newcrest Mining Limited or the relevant subsidiary.
Greg Job is a full time employee of Harmony Gold Mining Company Limited. At the
time of the December 2011 report, James Francis and Stuart Hayward were employed
by the Morobe Mining JVs. Each Competent Person consents to the inclusion of
material in the form 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 possess relevant experience
in relation to the mineralisation being reported on by them to qualify as Competent
Persons as defi ned in the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (The JORC Code, 2004 Edition).
Competent Person
1. Lino Manca, 2. Steven Butt, 3. Brett Cuthbert, 4. David Grigg, 5. Allan Blair,
6. Anton Kruger, 7. Greg Job (Harmony), 8. Andrew Logan.
(cid:2)newcrest mining annual report 2012(cid:5)31
Corporate Governance
The Board believes that adherence
by the Company and its people to
the highest standard of corporate
governance is critical in order
to achieve its vision.
The Company’s corporate
governance practices during the
year to 30 June 2012 are described
in this section. This includes
information required under the
ASX Corporate Governance Council’s
Corporate Governance Principles
and Recommendations (2nd edition)
(the ASX Principles)
1. BOARD OF DIRECTORS
Role and Responsibilities
The Board sets the Company’s strategic goals and objectives
and oversees the management and performance of the
Company’s business. The Board is ultimately accountable to
Newcrest’s shareholders for the performance of the business.
The role of the Board is described in the Board Charter, which
is available on the Company’s website.
Responsibility for the day-to-day management of the business
is delegated to the Managing Director and Chief Executive Officer
and the Executive Committee. The Board has approved a formal
Statement of Management Authorities and Responsibilities.
The Statement is supported by a comprehensive financial
control framework of delegated authorities, including
authorities delegated to individual executives.
Board Composition
Newcrest’s Board currently comprises nine Directors:
two executive Directors (the current Managing Director
and Chief Executive Officer (CEO) – Greg Robinson, and
the Finance Director and Chief Financial Officer (CFO) –
Gerard Bond) and seven non-executive Directors.
The names, skills, and experience of each Director, and their
terms of office are set out on pages 10 and 11 of this Report.
Mr Robinson was appointed as Managing Director and Chief
Executive Officer on 1 July 2011 after Mr Ian Smith stepped
down. Mr Bond was appointed as Finance Director and
Chief Financial Officer on 1 January 2012 and was appointed
to the Board on 8 February 2012. Details of changes to
the Board during 2011–12 reporting period and the current
financial year are set out in the Directors’ Report on page 43.
The Board has determined that as a general rule
a non-executive Director will not serve on the Board
for more than 10 years. Non-executive Directors are
required to submit themselves for re-election every
three years and at least one Director must stand
for election each year.
Selection and Appointment of Directors
Directors regularly review the Board’s structure, size and
composition to ensure that it has the range of skills, expertise
and experience demanded by the Company’s operations.
Nominations to the Board are dealt with by the full Board,
as Directors consider that it is the most efficient way to deal
with the selection and appointment practices of the Company.
Further, ultimate responsibility for decision-making in this
area rests with the Board. For these reasons, the Board does
not have a separate nomination committee.
When considering new appointments to the Board,
suitable candidates are identified, using external professional
advisers if necessary. The Board considers the range of skills,
experience, gender and broader diversity in considering
candidates for appointment.
Appointment of the Managing Director and CEO is made
by the full Board, with professional advice sought as required.
32(cid:2)newcrest mining annual report 2012
Board Committees
There are three standing committees of the Board, which
assist the Board by providing detailed analysis of key issues.
The Board also operates a Board Executive Committee on
an ad hoc basis. Each Director receives all committee papers
and minutes and is invited to attend any committee meeting.
In practice, all Directors attend each committee meeting other
than in exceptional circumstances. Each committee reports
its deliberations to the next Board meeting.
Each committee has its own charter which can be viewed in
the corporate governance section on the Company’s website,
www.newcrest.com.au/about-us/corporate-governance).
Each committee charter was reviewed in 2012.
Audit and Risk Committee
Members: John Spark (Chairman), Richard Knight,
Rick Lee and Tim Poole.
Function: assists the Board to fulfil its responsibilities,
including with respect to the integrity of the Company’s
financial statements, compliance with all accounting and
financial reporting obligations and applicable legal and
regulatory requirements, risk management and internal
control processes and effectiveness, and internal and
external audit. The Committee oversees, reviews and makes
recommendations to the Board with respect to the above
matters. The Committee is chaired by and is comprised
of non-executive Directors. The Committee’s role is to
review and advise the Board.
Human Resources and Remuneration Committee
Members: Rick Lee (Chairman), Lady Winifred Kamit,
Vince Gauci and Tim Poole (the executive Directors: the
Managing Director and CEO, and the Finance Director and
CFO, may attend by invitation).
Function: assists the Board to fulfil its responsibilities
with respect to the remuneration framework and levels
for all employees, including executive managers, executive
and non-executive Directors, the human resources and
remuneration strategies, policies and practices of the
Company, the behavioural and cultural framework and
practices of the Company, and oversight of organisational
design and human capability, performance management
practices and outcomes, appointment of remuneration
consultants, and oversight of industrial relations policies,
practices and strategies. The Committee also considers
the Company’s practices in relation to diversity, including
gender diversity.
The Committee’s role is to review and advise the Board,
and it holds no delegated authorities from the Board.
The four members of the Human Resources and
Remuneration Committee are independent, non-executive
Directors. This composition avoids potential conflict on
the part of executive Directors and enhances investor
and community confidence in the Committee’s decisions.
Safety, Health and Environment Committee
Members: Richard Knight (Chairman), Lady Winifred Kamit,
Vince Gauci, and John Spark.
Function: assists the Board in its role of monitoring
and reviewing, from a corporate governance perspective,
the Company’s practices in the areas of safety, health and
environmental management practices. It monitors and reviews
the Company’s performance and approach to compliance with
its policies and legal requirements in these areas, it reviews
the Company’s response on issues of concern or material
non-compliance and recommendations from management
in relation to industry trends and world standards and
reports and makes recommendations to the Board based
on the Committee’s work and findings. The Committee’s role
is to review and advise the Board, and it holds no delegated
authorities from the Board.
Board Executive Committee
Members: The Chairman, Managing Director and CEO
(or in his absence the Finance Director and CFO) and
one other non-executive Director.
In practice, all Directors are invited to attend meetings
of the Committee.
Function: acts as a delegate of the Board to facilitate Board
processes and decisions between scheduled Board meetings
and at short notice. The Committee holds the full delegated
authority of the Board in relation to matters referred to it
by the Board.
Board Committee charters can be found on the Company
website. Details of the number of Board and Committee
meetings held during the financial year and each Director’s
attendance, are set out on page 44 of this Report.
The Board and the Company Secretary
Mr Stephen Creese was appointed as Company Secretary
in November 2009. He has stepped down from that role in
August 2012, as part of a transitional arrangement announced
in March 2012, prior to his proposed retirement in July 2013.
Mr Scott Langford, whose appointment as General Counsel
and Company Secretary was announced in March 2012, was
appointed as Company Secretary by the Board in August 2012.
All Directors have access to the services and advice of
the Company Secretary. The appointment and removal
of the Company Secretary is a matter for decision
by the Board as a whole. Details of the qualifications
and experience of Messrs Creese and Langford are
set out on page 44 of this Report.
(cid:2)newcrest mining annual report 2012(cid:5)33
Corporate Governance
1. BOARD OF DIRECTORS (continued)
3. DIRECTORS’ FEES AND EXECUTIVE REMUNERATION
Board Independence
All non-executive Directors are independent, in accordance
with ASX requirements, and free of any relationship that
might conflict with the interests of the Company, based
on application of predetermined materiality thresholds,
adopted by the Board.
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 continues to monitor the
independence of each Director and periodically reviews
its approach to assessing Director independence.
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 policy that ensures that Directors
also have access to independent legal, accounting or other
professional advice as necessary, at the Company’s expense.
2. BOARD AND EXECUTIVE PERFORMANCE
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. Periodically, an external party is retained to assist in
the process. The outcomes of the evaluation are reviewed and
considered by the Board and changes effected where required.
The Board completed its most recent review in October 2011.
The Chairman concluded that the Board and its committees
were operating well, with no areas of concern to be addressed
at that time. Consideration to improve the functionality
and performance of the Board and its committees occurs
at regular intervals and the practice of having all Directors
present at all committees is strongly supported.
Executive Performance Evaluation
The Company has in place a performance appraisal system
for executives that is designed to optimise performance.
Details regarding the Newcrest performance management
system for the period 2011–12 are set out in the Remuneration
Report on pages 55–69.
Each of the Company’s senior executives (including the
Managing Director and CEO, and the Finance Director and CFO)
have undergone performance evaluation during the 2011–12
reporting period in accordance with the Company’s Work
Performance System.
Directors’ Fees
The Human Resources and Remuneration Committee deals
with all matters relating to remuneration policy, and Director,
senior executive and employee remuneration levels.
Remuneration of non-executive Directors is fixed rather
than variable so that Board membership of a high standard
is maintained and market remuneration trends reflected.
Remuneration levels and trends are customarily assessed
every two years with the assistance of professional
independent remuneration consultants as required, and
adjusted where necessary to align with Board remuneration
levels in comparable Australian listed companies.
The total annual remuneration paid to all non-executive
Directors may not exceed the maximum amount authorised
by the shareholders in general meeting. The total ‘fee pool’
is currently $2,700,000 and was approved by shareholders
in 2010.
Newcrest includes superannuation contributions made
for the benefit of non-executive Directors, and fees that
a non-executive Director agrees to salary sacrifice (pre-tax)
are included in calculating the total amount of Directors’
fees payable, in accordance with ASX requirements.
Executive Remuneration
The Company’s Remuneration Policy recognises the
different levels of contribution within management to
the short-term and long-term success of the Company.
A significant proportion of each senior manager’s
remuneration is placed ‘at risk’ and is dependent upon
both personal and Company performance formally
appraised each year.
The Board has established with the Managing Director
and CEO, specific personal and corporate performance
objectives for the short and long term. The performance
of the Managing Director and CEO is formally assessed
against these objectives annually. The assessment helps
determine the level of ‘at risk’ remuneration paid to the
Managing Director and CEO. Following amendments in 2011
to the Corporations Act 2001 (Cth), the Human Resources
and Remuneration Committee must approve contracts with
remuneration consultants. Remuneration recommendations
by remuneration consultants in relation to Key Management
Personnel (KMP) must be made to the non-executive Directors.
The remuneration consultant must include with the
recommendation, a declaration that the consultant’s
recommendation is made free from undue influence
by the member or members of the KMP to whom the
recommendation relates.
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.
34(cid:2)newcrest mining annual report 2012
4. RESPONSIBLE AND ETHICAL BEHAVIOUR
Code of Conduct and Values
The Code of Conduct, which was revised and rewritten in 2011,
and approved by the Board, reflects the Company’s values
and provides a framework within which its entire workforce
functions, including in its interaction with stakeholders.
The Code is designed to ensure the appropriate degree
of integrity in the Company’s dealings.
The Company also has a comprehensive range of corporate
policies that detail the framework for acceptable corporate
behaviour and these are subject to periodical review.
Speak Out Policy
The Company has in place a Speak Out Policy, which encourages
employees and contractors to raise concerns or to report
instances of misconduct or suspected misconduct on an
anonymous basis. Complaints are referred to an independent
third party service provider for initial consideration. Issues
identified are then reported to Company management
so that concerns can be addressed and, where appropriate,
investigated further.
Securities Dealing Policy
The Company has a Securities Dealing Policy which was
revised in April 2012.
It provides for ‘prohibited periods’ (or ‘blackout periods’) when
staff must not deal in the Company’s securities. The blackout
periods, around the half year and full year results, commence
immediately following the close of the half year and full year
periods. A blackout period also applies from the date two
weeks prior to the release of the production results each
quarter, and to the AGM. These blackout periods end directly
following the announcement of the Company’s quarterly,
half year and full year results, and AGM results, at the
conclusion of the AGM.
The Code and the above policies can be found on the
Company’s website.
5. SHAREHOLDER COMMUNICATION, CONTINUOUS
DISCLOSURE AND MARKET COMMUNICATIONS
The Board recognises the importance of keeping the markets
in which it is listed, fully informed of the Company’s activities
and of stakeholder communication in a timely, balanced and
transparent manner. In this respect, the Company complies with
the ASX Listing Rule requirements concerning analyst briefings.
The Company’s Continuous Disclosure Policy establishes
a system and procedures to ensure that Company information
considered to be material is announced immediately to the
market through the Australian Securities Exchange (ASX),
Port Moresby Stock Exchange (POMSoX) and the Toronto
Stock Exchange (TSX) and key presentations given by Company
personnel to investors and institutions are also lodged with
the ASX, POMSoX and TSX.
The Company’s Public Announcements, Investor Relations
and External Communications Policy establishes a procedure
and controls around internal reviews and approval processes
for public announcements and communications.
All releases made to the ASX, POMSoX and TSX are
placed immediately on the Company’s website. Other key
communications are also placed immediately on the website,
and provided directly to all shareholders as necessary.
General and historical information about the Company
and its operations is also available on its website.
Board policy is to achieve effective communication with
its shareholders through compliance with ASX Listing
Rules (and as required by the other exchanges on
which Newcrest is listed) and Corporations Act reporting
requirements, webcasting half year and full year financial
results presentations and the four production results at
the end of each quarter. All other ASX announcements and
presentations (including investor, analyst and public forums)
are placed on the Company’s website. The Company provides
advance notice to analysts in respect of the briefings and
posts the relevant corporate dates for the year on its website.
The Managing Director and CEO, Finance Director and CFO and
the Head of Investor Relations regularly meet with investors.
The Company maintains a record of meetings with analysts,
including the date, location and persons attending.
Shareholders may receive electronic versions of the annual
report, other key shareholder communications and notices
of meeting.
The Company holds an accessible and informative AGM.
The full text of the notice of meeting and explanatory material
is placed on the website.
The Company’s auditors are available at the AGM to answer
questions relating to the conduct of the audit, the preparation
and content of the auditor’s report, the accounting policies
adopted by the Company in the preparation of its financial
statements and the independence of the auditor in relation
to the conduct of the audit. Shareholder questions at the
AGM are encouraged by the Chairman. Any shareholders
unable to attend may submit questions to the Chairman
prior to the meeting. Shareholders also have the opportunity
to meet informally with Directors and executive management
after the meeting.
6. DIVERSITY
Newcrest places a high value on diversity. A full report
on diversity and the Company’s practices, initiatives and
performance against its stated objectives can be found
on pages 38 to 41.
(cid:2)newcrest mining annual report 2012(cid:5)35
Corporate Governance
7. RISK AND AUDIT MANAGEMENT
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 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.
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.
The aim is to provide an overarching, uniform and consistent
framework for identifying, assessing, monitoring and managing
material business risks across the spectrum, being:
‘strategic, corporate and commercial, major hazard
(including operational, safety and environmental), and project
management risks’.
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.
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 include:
– An integrated, robust planning and budgeting process
delivering a five-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 technical and
commercial review.
– A system of delegated authorities that cascades authority
levels for expenditure and commitments from the Board,
the delegation to the Managing Director and CEO and the
further cascading of authorities from the Managing Director
and 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, Newcrest’s
Treasury department 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.
– Management provide the Board with a regular report
on External Affairs and Community in addition to regular
reporting to the Board.
– Each half year, the completion 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.
Internal Audit
The Company has an internal audit function, which is managed
by the Manager Internal Audit who ultimately reports to the
Finance Director and CFO, and supported by internal resources
and external consultants. The function undertakes audits
of critical finance, business and operational processes and
tests key internal controls. The annual internal audit plan is
structured to cover all material operating sites and processes
on a rolling program. It is also based on an evaluation of all the
risks to Newcrest. 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 internal audit function and the
Audit and Risk Committee have direct access to each other
and have the necessary access to management to seek
information and explanations.
36(cid:2)newcrest mining annual report 2012
Management Assurance
At the Board meetings to approve Newcrest’s half yearly
and annual financial statements for the financial year ended
30 June 2012, the Board received and considered written
statements from the Managing Director and CEO, and Finance
Director and CFO in relation to Newcrest’s system of risk
oversight and management and 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 management assurance stated that the
financial statements had 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 management 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.
The Directors made appropriate enquiries of management,
the Audit and Risk Committee and other relevant parties
as to the content of the proposed financial statements and
applied their knowledge of the affairs of the Company
in reading and approving the accounts.
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 Australian
Minerals Industry Sustainability Code ‘Enduring Value’ and
integrates environmental and social management into all
facets of the business. A Sustainability Report detailing the
Company’s environmental and social performance is prepared
each year. A copy of the report for 2011 can be found on t he
Company’s website.
(cid:2)newcrest mining annual report 2012(cid:5)37
Diversity
Diversity at Newcrest is driven
by recognition that an inclusive
culture and diverse workforce
support high performance.
38(cid:2)newcrest mining annual report 2012
Newcrest recognises the benefits of bringing together
talented people of different gender, age, ethnicity, cultural
backgrounds and thinking styles who possess a diverse
range of experiences and perspectives. In particular,
this helps create an environment where innovative ideas
are generated and problem-solving capability is enhanced
to help Newcrest realise its potential and strategic objectives
in a global market. Diversity at Newcrest is led by the Board
and the Executive Committee (ExCo), together with the
ExCo Diversity Sub-committee, and is driven by recognition
that an inclusive culture and diverse workforce supports
high performance. Diversity also better enables the Company
to foster enhanced community connections and increased
morale, motivation and engagement.
Diversity at Newcrest incorporates differences that relate
to gender, age, ethnicity and cultural background. It also
extends across differences in background and life experience,
communication styles, interpersonal skills, education,
functional expertise and problem-solving styles. Our approach
recognises that individuals are important and that each
person has a unique contribution to make. The benefits
of diversity are maximised when each person feels included
and able to participate fully.
Diversity and inclusion at Newcrest are thus business
imperatives. The Company’s approach is based on four
key drivers:
– our vision to be the ‘ Miner of Choice’;
– our desire to attract, recruit, engage, develop and retain
diverse talent;
– our belief that our workforce should reflect the communities
in which Newcrest operates; and
– a high performance culture – to deliver leading industry
performance by encouraging our people to incorporate
creativity, innovation, continuous improvement and
a high standard of ethics and effort into their work.
The Diversity Policy is published on the Newcrest website
at www.newcrest.com.au//about-us/company-policies and
was communicated to all employees via a Company-wide
Newcrest and You bulletin email and also via the internal
portal and formal training programs.
Underpinned by the Company’s values, the Policy outlines
how Newcrest supports a diverse workforce – including
treating employees fairly, setting measurable targets,
ensuring legislative compliance and supporting diversity
in its communities. The Policy actively promotes a culture
that values difference. The Company’s standards and
procedures are reviewed and updated annually to ensure
they support the aims of the Policy.
MEASURES
The Board has set clear objectives to support the
achievement of greater diversity across Newcrest. More than
20 measures are in place to track gender, age and cultural
diversity. Many of these measures, and the programs that
support them, are discussed in this Report. Progress is
monitored monthly and assessed quarterly by the ExCo
Diversity Sub-committee and annually by the Board. The Board
Human Resources & Remuneration Committee, which has its
diversity responsibilities reflected in its Charter, also regularly
reviews progress. The commitment of the Board and senior
management, together with the internal review mechanisms
and procedures to support the process, are anticipated
to deliver significant achievements against the Company’s
diversity measures over the next four years.
A number of these objectives, approved by the Board
in 2010, relate to gender and are shown in the table below.
These measures drive the three main focus areas for
increasing the representation of women in the Company’s
workforce: attraction, retention and promotion.
31 Dec 2013
Target
30 June
2012
30 June
2011
33.3%
27.2%
25%
33.3%
29.5%
26%
Established
in mid-2011
and meets
quarterly.
Diversity Measure
That 33.3% of succession
plans for all level 2 to
level 5 roles will have at
least one female included
by 31 December 2013.
To increase the
proportion of women
selected for the graduate
program from 25%
as of 31 December 2010
to 33.3% as at
31 December 2013.
Establish a Diversity
Sub-committee to
provide oversight and
report bi-annually to ExCo
and the Board on the
Company’s diversity
initiatives and programs.
A new measure, established in relation to the FY13 year,
addresses the number of women in management levels 2 to 4,
i.e. from Supervisor (Level 2) to General Manager (Level 4).
Currently, 12 percent of these roles across Newcrest are held
by women, up from 10 percent two years ago. Our objective
is to lift this proportion by 15 percent by 31 December 2013.
The proportion of women employees across the organisation
and women in senior roles are shown below:
Number of
Women
Representation
as a Percentage
at 30 June 2012
Representation
as a Percentage
at 30 June 2011
Board
Senior Executives
Management
levels 2–4
Other employee
groups
1
1
242
815
11.1%*
10%#
12%
12.5%
12.5%
10%
13%
13%
* The percentage change is due to the appointment of Gerard Bond
as Finance Director.
# The apparent decrease in the representation rate of women is due to
a restructure that saw the promotion of two employees to Executive
General Manager level.
Women represent 13 percent of the Company’s Australian
workforce, with seven percent in site-based roles. A high
proportion of our workforce engaged in fly-in fly-out (FIFO)
employment arrangements at site, this compares favourably
with the Equal Opportunity for Women in the Workplace
Agency 2012 (EOWA) industry representation rate of
14.5 percent overall, but only three percent in site-based roles.
An extensive list of other measures, along with detailed action
plans, are assisting the Company to further increase diversity
in the areas of age, gender, ethnicity and cultural diversity.
EMPLOYEE FEEDBACK
Employee consultation, communication and feedback are also
important in identifying and addressing issues and maintaining
a positive relationship with all our employees at Newcrest.
The December 2011 Employee Engagement Survey invited
responses to a number of questions regarding diversity
and inclusion. These included:
– My immediate manager works effectively with people
who are different from him or her (in gender, racial/ethnic
background, lifestyle, etc);
– My work area is accepting of gender difference; and
– Women and men have the same opportunities to advance
in this company.
The diversity results indicated a score significantly ahead
of mining industry norms. The results are encouraging and
provide valuable information regarding employees’ views
on equity of opportunity, inclusion and organisational culture.
Externally, Newcrest was voted ‘Most Attractive Employer
of the Year’, in the highly regarded 2012 Randstad Awards,
following a random survey of 7,000 people across Australia,
based on 10 factors ranging from long-term job security
to training and development. Diversity was one of the
factors considered.
(cid:2)newcrest mining annual report 2012(cid:5)39
Diversity
INITIATIVES
Our Diversity Action Plan includes specific initiatives to
encourage and support the employment of a diverse workforce,
including gender, generational and cultural diversity.
The purpose of many of the activities undertaken during the
reporting period has been to raise awareness of diversity and
inclusion issues, the Company’s diversity approach and our
diversity objectives. Key indicators suggest that activities are
generally proving successful. Overall, diversity is more visible
in the organisation than it has been previously. The Company’s
Senior Diversity Specialist, appointed to manage these
programs across the Company, has provided a focal point
to drive the identification of barriers and potential solutions,
while managing projects that embed diversity and inclusion.
The ExCo Diversity Sub-committee provides support and
feedback on activities and approaches to address barriers,
as well as providing an increased focus and profile for diversity.
A Diversity Dashboard report prepared for the Sub-committee
provides key data to track our progress. Diversity data is also
included in the monthly report to ExCo and the Board.
Diversity has had an increased profile at significant internal
events, including the Managing Director’s Conference (held
semi-annually for all General Managers) and the Human
Resources Community of Practice workshop, further ensuring
that diversity and inclusion is being addressed in key forums.
The Newcrest Diversity Working Group has been established
and met during the reporting period, and has been effective
in supporting activities, contributing ideas and feedback.
Internal communication has also played an important role
in elevating awareness. There have been a number of articles
focused on gender diversity and the diversity policy published
in the Company’s newsletters and bulletins over the reporting
period. These have been effective in raising the profile and
delivering important messages about Newcrest’s commitment
to diversity.
AN INTERNAL AND EXTERNAL FOCUS
The Company ensures that its commitment to diversity
and inclusion is focused both internally and externally.
A range of communication channels are used to promote
Newcrest as an employer and to advertise employment
opportunities available. All advertising includes the Newcrest
diversity tagline: ‘At Newcrest, we value diversity of thought,
style and working arrangements’.
While most people working with the Company are looking
for a permanent role, increasingly people – particularly older
workers and women – are looking for flexibility. The Newcrest
Professional Network was established in 2011. The Network is
a pool of talent and experience Newcrest can access to provide
specific skills, development, coaching and training, assist with
a project or to fill limited tenure positions, such as parental
leave, long service leave or to assist with a peak workload.
The Network provides alternative employment opportunities
for former employees or those who are on long-term leave
and have an interest in working with Newcrest on a project
or short-term contract. The Newcrest Professional Network
enables Newcrest to access knowledge and skills required
and also to provide some flexibility to employees and former
employees wanting to work in an alternative capacity
to permanent, full time or part time work.
Internally, we promote diversity and inclusion and raise
awareness through a range of programs, projects and activities.
Newcrest provided a number of employees with the
opportunity to participate in a film workshop, focused on
them telling their own story. The aim was to produce stories
for both internal and external use that would provide an
insight into the level of diversity and inclusion within the
organisation and to allow potential employees to gain
an insight into the Newcrest culture.
The project resulted in 11 very different stories, which may
be used to promote Newcrest and the broader resources
sector as a potential employment option, particularly for
diversity target groups, including women, Aboriginal and
Torres Strait Islander people and older workers.
OUR DIVERSITY REFLECTS OUR COMMUNITIES
The Company recognises the importance of diversity in
contributing to the local communities in which it operates
by creating and providing training and employment
opportunities within the local communities. This also reflects
our commitment to building capability in our local communities.
Newcrest is committed to developing its people across the
Group and to building a workforce – including the leadership
teams – that reflect the communities in which we operate.
The overwhelming majority of employees at the Company’s
Indonesian, Papua New Guinean, West African and Fijian
operations are nationals and locals. Work continues to
improve access to roles at all levels in the organisation
for employees from local communities.
At Lihir Island, the Company conducts a Business
Administration Program on site. This course aims to bring
10 young Lihirian women into a workplace each year from
the villages around the Island. This program, initiated by one
of our senior Lihirian women, is a key pathway for females into
other roles on site. In 2011–12, eight women participated and
we expanded the program to include English language skills
– identified as critical to improve the ability to be promoted.
Graduate, Traineeship and Apprenticeship programs at Lihir
currently provide access to formal employment training for
around 325 people from the local and broader community,
from within a total employment population of 2,215 employees.
Extensive and ongoing on-the-job training is also provided
across the board.
40(cid:2)newcrest mining annual report 2012
There are significant barriers to participation in training and
employment for the Martu people. These include language
and educational barriers, family and social responsibilities
and the distance between the communities in which they
live and the mine site. The Company has sought to identify
alternative models of employment that provide flexibility
for participants to help them meet family and community
commitments while building employment skills, gaining
experience and contributing to the Company.
In partnership with the Western Australia Department
of Sport and Recreation, Newcrest also provides a sport
and recreation program for the Martu communities,
promoting a healthy lifestyle.
At Cadia, in Orange, New South Wales, traineeships have
provided access to training and employment to 35 people,
many of whom are older workers. The program has provided
an entry point to the industry for people with no previous
training or experience in mining. Around 40 adult
apprenticeships are enabling people without formal
qualifications to qualify as tradespeople.
Through a variety of opportunities, Newcrest also demonstrates
its commitment to diversity and inclusion in the community.
Newcrest actively supports events hosted by the Women in
Mining state-based groups in Western Australia, Victoria and
New South Wales. These events have facilitated access to
high-profile presenters and women across Newcrest have
been encouraged and supported to attend these events,
accessing both professional development and broader
industry networking opportunities.
In PNG, the Company established with the University of PNG
a Resource Centre to provide assistance and training to people
undertaking external studies. Through the Resource Centre,
support and assistance is provided to members of the local
community and the university through the supervision
of examinations, administration of grants and liaising
with multiple organisations associated with education.
Work continues at Gosowong and Lihir on the implementation
of the Nationalisation Development Plan. This approach is
developing future leaders by increasing participation of
nationals in supervisory and management levels. An important
part of this strategy is providing nationals with the training
and development required to progress and take up professional
and managerial roles. At Gosowong, more than 69 percent of
the management team are Indonesian, up from 59 percent in
2011. At Lihir, 11 percent of the management team are nationals,
while 57 percent of our supervisor and superintendent level
employees (which provide our pipeline of future leaders)
are nationals.
Newcrest has a number of programs supporting managerial
leadership development, including ongoing investment in
the Frontline Manager, Superintendent, Manager and Senior
Leader Programs. These programs are well populated with
talented national employees and contribute to building
capability within the communities in which Newcrest operates.
This in turn contributes to achieving the Company’s diversity
objectives and to its Vision of being ‘Miner of Choice’.
At Telfer, in Western Australia, the Company supports
more than 60 indigenous people working under various
employment arrangements, including full time and part time
employment for Newcrest or contractors Pilbara Logistics,
ESS Remote and Birra Personnel Resources. Critical to the
success achieved has been the support provided to Aboriginal
and Torres Strait Islander people, including via the Telfer
Aboriginal mentors, who are part of the Community Relations
Team. This approach has contributed to improved workforce
participation for the Martu and wider Aboriginal and
Torres Strait Islander community at Telfer.
Through the Telfer Aboriginal Training & Employment Strategy
(TATES), Newcrest has provided more than 400 Aboriginal
and Torres Strait Islander people with participation in targeted
programs that provide access to training, work experience
and employment.
Over the past 12 months, 30 people have participated in
TATES training provided in areas including numeracy and
literacy, pre-employment, driving training, heritage monitoring,
horticulture, health and hygiene, safety, food handling, food
safety, hygiene, environmental and exploration field work
skills, mine entry programs and safety. A number of participants
have also completed formal qualifications at Certificate II
level in Hospitality (Kitchen Operation) and Resources and
Infrastructure. The Company partners with Pundulmurra
Campus of the Pilbara Institute to deliver programs offered.
Participants have been predominantly the indigenous
community located closest to the Telfer mine – Martu men
and women from the Western Desert, Marble Bar, Nullagine,
Port Hedland and very remote parts of Western Australia.
A key objective of TATES is to prepare participants for
employment in the Telfer mine or village. A significant number
of the Martu participants have been employed following
completion of training either by Newcrest, on site with
contractors that provide services to the Company, other
resource companies, government and non-government
agencies or within their own communities.
(cid:2)newcrest mining annual report 2012(cid:5)41
Financial Report
FOR THE YEAR ENDED 30 JUNE 2012
Remuneration Report
Auditor’s Independence Declaration
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
43 Directors’ Report
45 Management Discussion and Analysis
55
71
72
73
74
75
76
77 Notes to the Financial Statements
119 Directors’ Declaration
120
Independent Auditor’s Report
42 newcrest mining annual report 2012
Directors’ Report
The Directors present their report together with the consolidated
financial report of the Newcrest Mining Limited Group, comprising
the Company and its controlled entities, for the year ended
30 June 2012 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
Greg Robinson
Managing Director and Chief Executive Officer
Gerard Bond
Finance Director and Chief Financial Officer
(appointed 8 February 2012)
John Spark
Non-Executive Director
Rick Lee
Tim Poole
Non-Executive Director
Non-Executive Director
Richard Knight
Non-Executive Director
Vince Gauci
Non-Executive Director
Winifred Kamit
Non-Executive Director
All Directors held their position as a Director throughout the entire
year and up to the date of this Report except as stated above.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were
exploration, mine development, mine operations and the sale
of gold and gold/copper concentrate. There were no significant
changes in those activities during the year.
CONSOLIDATED RESULT
The profit after tax attributable to Newcrest shareholders
(‘Statutory Profit’) for the year ended 30 June 2012 was
$1,117 million (2011: $908 million).
The Statutory Profit for 2012 includes a net positive $33 million
after tax (2011: negative $150 million after tax) impact due to the:
– Transfer of losses on restructured hedges and closed-out
hedge contracts associated with the restructure in the 2007
financial year, from equity reserves to the Income Statement;
– Other close-out related costs associated with the 2007
hedge restructure;
– Integration costs associated with the acquisition of
Lihir Gold Limited on 30 August 2010; and
– Gain on the divestment of Cracow and Mt Rawdon operations
on 2 November 2011.
DIVIDENDS
The following dividends of the Company have been paid,
determined or recommended since the end of the preceding year:
– Final unfranked dividend for the year ended 30 June 2011
of 20 cents per share, amounting to $153 million, was paid
on 21 October 2011.
– Special unfranked dividend for the year ended 30 June 2011
of 20 cents per share, amounting to $153 million, was paid
on 16 December 2011.
– Interim unfranked dividend for the year ended 30 June 2012
of 12 cents per share, amounting to $92 million, was paid
on 17 April 2012.
– Final (15% franked) dividend for the year ended 30 June 2012
of 23 cents per share, amounting to approximately $176 million,
has been determined and is proposed to be paid on 19 October
2012 to shareholders registered by close of business on
28 September 2012.
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
There are no other matters or circumstances which have
arisen since 30 June 2012 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.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
A copy of the Auditor’s Independence Declaration as required
under section 307C of the Corporations Act 2001 is attached.
During the year, accounting advice, other assurance-related
services and advisory services were provided by Ernst & Young
(auditor to the Company) – refer Note 25 to the financial
statements. The Directors are satisfied that the provision
of these services did not impair the Auditor’s Independence.
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 $1,000,000 except where
otherwise indicated.
ENVIRONMENTAL REGULATION AND PERFORMANCE
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 that
would have a materially adverse impact on the overall business
of the Group.
The operations of the Group are subject to environmental
regulation under the jurisdiction of the countries in which
those operations are conducted, including Australia, Indonesia,
Papua New Guinea, Côte d’Ivoire and Fiji. The Group releases
an annual Sustainability Report.
Each mining operation is subject to particular environmental
regulations specific to the activities undertaken at that site as
part of the licence or approval for that operation. There is also
a broad range of industry specific environmental codes of practice
that 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. The two major environmental incidents
recorded during the year both involved a fauna incident at the
Telfer operation.
Category
2011 – Number of incidents
2012 – Number of incidents
II
63
97
III
14
23
IV
1
2
V
0
0
newcrest mining annual report 2012 43
Directors’ Report
SHARE RIGHTS
During the year, an aggregate of 379,568 rights were exercised,
resulting in the issue of 379,568 ordinary shares of the Company
for nil consideration. At the date of this report, there were
1,108,181 unissued shares under rights (1,108,181 at 30 June 2012).
In order to minimise dilution of its share capital through the
exercise of rights under the Company’s share-based payments
plans and the Dividend Reinvestment Plan, the Company intends
to buy the corresponding number of shares on market as and
when required. During the year, 1,062,040 shares were bought
back and cancelled.
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.
INFORMATION ON DIRECTORS
Details of the Directors’ qualifications, experience and special
responsibilities are set out on pages 10–11.
INFORMATION ON COMPANY SECRETARIES
Stephen Creese Executive General Manager, Corporate Affairs
Bachelor of Laws (Hons) and Bachelor of Arts
Mr Creese joined Newcrest Mining Limited as General Counsel
and Company Secretary in November 2009. He was subsequently
appointed as Executive General Manager, Corporate Affairs
in September 2010, with responsibility for government, media,
legal and the company secretarial function. In July 2012
Mr Creese formally assumed responsibility for the Community
Affairs function and transferred responsibility for the legal
and company secretarial functions to Scott Langford.
Prior to joining Newcrest, he was with the Rio Tinto group
for 29 years where he worked in various legal and commercial
roles, including that of General Counsel of Rio Tinto Limited
between 1995 and 2008, and subsequently as Managing
Director – Rio Tinto Australia. Mr Creese is also the independent
chair of the National Employment Services Association (NESA)
and a part-time member of the Australian Takeovers Panel.
Scott Langford General Counsel and Company Secretary
Bachelor of Laws (Hons) and Bachelor of Science
Mr Langford joined Newcrest in July 2012 as General Counsel.
He was formally appointed as Company Secretary in August
this year. He is responsible for the Group’s legal and company
secretarial function.
Prior to joining Newcrest, Mr Langford was a Partner at Allens,
a leading commercial law firm. He joined Allens in 1987, and
became a partner there in 1995. At Allens, he was a key legal
adviser to major international mining and resource companies,
including Rio Tinto and Newcrest, and was co-head of the firm’s
Energy and Resources Practice Group.
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:
Directors’ Meetings
Audit & Risk
Committee Meetings
Human Resources
& Remuneration
Committee Meetings
Safety, Health
& Environment
Committee Meetings
Director
Don Mercer
Greg Robinson
Gerard Bond
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Winifred Kamit
A
8
8
3
8
8
8
8
8
7
B
8
8
3
8
8
8
8
8
8
A
–
–
–
4
4
4
4
–
–
C
–
–
–
4
4
4
4
–
–
A
–
–
–
–
4
4
–
4
4
C
–
–
–
–
4
4
–
4
4
A
–
–
–
4
–
–
4
4
4
C
–
–
–
4
–
–
4
4
4
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.
Details of the functions and memberships of the Committees of the Board are presented in the Statement of Corporate Governance.
DIRECTORS’ INTERESTS
As at the date of this report, the interest of each Director in the shares and rights of Newcrest Mining Limited were:
Director
Don Mercer
Greg Robinson
Gerard Bond
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Winifred Kamit
44 newcrest mining annual report 2012
Number of
Ordinary Shares
Nature of
Interest
Number of Rights Nature of
Interest
Over Ordinary Shares
15,546
20,487
–
18,105
22,447
4,235
20,000
3,400
326
Direct and Indirect
Direct and Indirect
N/A
Direct and Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
–
184,382
23,884
N/A
Direct
Direct
–
–
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
Directors’ Report
MANAGEMENT DISCUSSION AND ANALYSIS(1)
1. FINANCIAL AND OPERATING HIGHLIGHTS
Key financial data
Revenue
EBITDA(2)(9)
EBIT(2)(9)
Statutory Profit(3)
Underlying Profit(4)(9)
Earnings per share (basic)
Dividends per share – in respect of financial year
Interim and final dividend
Special dividend
Operating cash flow
Capital expenditure
Exploration expenditure
Dividends paid(5)
Gearing(6)
ROCE(7)
Operational
Total material mined
Total material milled
Gold produced
Gold sales
Realised gold price
Copper produced
Copper sales
Realised copper price
Cash costs(8)(9)
AUD:USD (average)
Measure
2012
2011
Change
Change %
For the years ended 30 June
A$ million
A$ million
A$ million
A$ million
A$ million
A$ cents/share
A$ cents/share
A$ cents/share
A$ million
A$ million
A$ million
A$ million
%
%
000’s tonnes
000’s tonnes
000’s ounces
000’s ounces
A$/oz
000’s tonnes
000’s tonnes
A$/lb
A$ million
A$
4,416
2,151
1,590
1,117
1,084
146.0
35.0
N/A
1,726
2,556
158
362
12.5
10.1
179,235
54,034
2,286
2,333
1,609
76.0
78.5
3.58
2,031
1.032
4,102
2,059
1,544
908
1,058
126.4
30.0
20.0
1,729
1,890
126
187
4.2
12.4
154,162
56,095
2,527
2,478
1,378
75.6
73.9
3.93
1,958
0.987
314
92
46
209
26
19.6
5.0
–
(3)
666
32
175
8.3
(2.3)
25,073
(2,061)
(241)
(145)
231
0.4
4.6
(0.35)
73
0.045
8
4
3
23
2
16
17
–
–
35
25
94
198
(19)
16
(4)
(10)
(6)
17
1
6
(9)
4
5
(1) 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 2012
(‘2012’) compared with the 12 months ended 30 June 2011 (the ‘prior year’ or ‘2011’), except where otherwise stated. All references to $ or A$ are to
Australian dollars unless specifically marked otherwise.
(2) EBITDA is ‘Earnings before interest, tax, depreciation, amortisation, hedge restructure and other significant items’. EBIT is ‘Earnings before interest,
tax, hedge restructure and other significant items’. EBITDA and EBIT are used to measure segment performance and have been extracted from Note 36
‘Segment Information’.
(3) Statutory Profit is profit after tax attributable to owners of the parent.
(4) Underlying Profit is profit after tax before hedge restructure and other significant items attributable to owners of the parent. Refer to section 2.1
for further details.
(5) A special dividend of 20 cents per share was determined in relation to the 2011 financial year and paid during the 2012 financial year.
(6) Gearing is calculated as net debt to net debt and equity. Refer to section 4.2 for further details.
(7) ROCE is ‘Return On Capital Employed’ and is calculated as EBIT divided by average capital employed.
(8) Cash costs represent cost of sales minus finished goods inventory movements and depreciation.
(9) EBIT, EBITDA, Underlying Profit and Cash Costs are non-IFRS financial information and have not been subject to audit by the Company’s external auditor.
newcrest mining annual report 2012 45
Directors’ Report
MANAGEMENT DISCUSSION AND ANALYSIS
1. FINANCIAL AND OPERATING HIGHLIGHTS (continued)
The 2012 financial year for Newcrest produced strong financial
results, with the key challenges during the year being the
integration of Lihir into Newcrest, continued construction of two
major projects and planning around production disruptions due
to reliability and weather issues. Newcrest is now well positioned
with two major projects nearing completion, a strong focus on
reliable low-cost operations, a well developed focus on training
and capability enhancement of its people, and an outstanding
resource base and exploration opportunities. Due to the strong
financial results and careful capital deployment, Newcrest
continues to have a robust balance sheet with low gearing
and good liquidity. Accordingly, the Newcrest Board has again
increased ordinary dividends.
Newcrest delivered a record Statutory Profit of A$1,117 million
and generated a strong Operating Cash Flow of A$1,726 million
from higher gold revenue for the year ended 30 June 2012.
Statutory Profit was 23% higher than the previous year,
driven primarily by a higher realised gold price. Underlying
Profit increased 2% to A$1,084 million. Newcrest continued its
progressive increase in dividends to shareholders with an increase
to 12 cents per share (unfranked) in its interim ordinary dividend
determined on 9 February 2012 and an increase to 23 cents per
share for the final ordinary dividend (15% franked) determined
on 13 August 2012. Total ordinary dividends in respect of the
2012 financial year of 35 cents per share were 17% higher than the
ordinary dividends determined in relation to the 2011 financial year.
The Company’s progressive dividend policy seeks to increase the
dividend in line with profitability and subject to gearing capacity.
When gearing was low at the end of the prior year (4.2% as at
30 June 2011), there was capacity for a 20 cents per share special
dividend, paid in December 2011. With the investment in major
projects in the current year (at Lihir and Cadia East), gearing has
increased to 12.5% as at 30 June 2012. Whilst within Newcrest’s
target gearing of around 15%, the combination of an increasingly
uncertain commodity market and the capital expenditure planned
for the 2013 financial year, the Board has decided not to pay
a special dividend for the 2012 financial year.
Company revenue increased by A$314 million, or 8%, in 2012,
notwithstanding lower gold sales volumes, primarily due to an
increase in the gold price. Gold sales of 2,333,214 ounces in the
current year were 6% lower than the prior year, while copper sales
of 78,513 tonnes were 6% higher. The average realised gold price of
A$1,609 per ounce for the year ended 30 June 2012 was an increase
of 17% on the prior year of A$1,378 per ounce. The average realised
copper price for the current year of A$3.58 per pound was 9%
lower than the prior year price of A$3.93 per pound.
The Australian dollar strengthened against the US dollar by 5%,
with an average A$:US$ rate in 2012 of $1.032 compared to the
prior year rate of $0.987. A higher A$ exchange rate reduced
the Company’s profit margins by reducing the A$ value of the
Company’s US$ denominated revenue.
Newcrest’s EBITDA and EBIT margins of 49% and 36% respectively
were slightly lower than the prior year (2011: 50% and 38%
respectively). Notwithstanding the higher gold price, EBITDA and
EBIT margins were adversely impacted primarily by operational
interruptions during the year at Lihir, Hidden Valley and Cadia;
lower grades at Gosowong; lower copper prices; higher labour,
fuel and energy costs; and a stronger Papua New Guinea kina
relative to the Australian dollar.
2012 was a year of significant investment in growth, with total
capital expenditure in the year of A$2,556 million, $666 million,
or 35%, higher than the prior year. Significant progress was
made on advancing the two major growth projects of the
Company: the US$1.3 billion Lihir Million Ounce Plant Expansion
(‘MOPU’) was approximately 91% complete and the A$1.9 billion
Cadia East project was approximately 80% complete at 30 June
2012. The successful delivery of these two projects underpins
Newcrest’s future production growth profile, and both projects
remain on schedule for completion (Lihir MOPU) and first
commercial production (Cadia East) in the December 2012
quarter. 2012 represented a peak level of total capital expenditure
for Newcrest due to the investment associated with the two major
growth projects. Lower capital expenditure is expected going
forward as these major projects are completed. In addition to the
capital expenditure in the year, there was considerable investment
in future production through elevated mining activity that
resulted in a net increase in deferred stripping of A$178 million
(particularly at Telfer and Bonikro) and a A$282 million increase
in ore inventory (predominantly at Lihir and Telfer). Over the next
five years, the increase in deferred stripping at Telfer and Bonikro
will be largely reversed as the stripping ratio reduces. Ore inventories
at Lihir will reduce as the stripping ratio normalises and expanded
processing capacity assists accelerated utilisation of ore inventory.
The Wafi-Golpu pre-feasibility study is nearing completion and
the joint venture parties are currently reviewing the study findings.
Subject to joint venture partner approval, an announcement of
the resulting reserves for the project is likely to be provided on
29 August 2012.(1)
Exploration continued, with total expenditure for the year of
A$158 million, A$32 million, or 25%, higher than the prior year.
The focus of exploration is on the Asia Pacific region, with strong
drilling results in the period experienced at Lihir, Gosowong and
Telfer. Drilling at Wafi-Golpu continued to assist the completion
of the pre-feasibility study, whilst initial drilling of regional targets
in Côte d’Ivoire and around Morobe confirmed the prospectivity
of these regions. Early stage joint ventures are also underway
at Tandai (Indonesia), Manus Island (Papua New Guinea, or ‘PNG’)
and Mt Andewa (PNG).
Newcrest remains in a strong financial position at 30 June 2012,
with gearing low at 12.5% and undrawn bilateral debt facilities
of US$780 million. This balance sheet strength combined
with strong Operating Cash Flow ensures the Company is able
to fund its sustaining capital, growth projects and ongoing
exploration activities.
Newcrest raised US$1,000 million in November 2011 through
the issue of corporate bonds in the United States Rule 144A
and Regulation S bond market. US$750 million of these bonds
are due for repayment in 2021 and have an interest cost of 4.45%
per annum, with the remaining US$250 million due for repayment
in 2041, with an interest cost of 5.75% per annum. The proceeds
of this bond raising were used to repay existing unsecured
short-term indebtedness and to fund a portion of Newcrest’s
major growth projects.
On 2 November 2011, Newcrest completed the sale of the Cracow
and Mt Rawdon assets (‘Queensland assets’) to Evolution Mining
Limited (‘Evolution’). As consideration, Newcrest acquired a
38.95% interest in Evolution, which was subsequently diluted
to 32.68% following an equity raising in which Newcrest did not
participate.(2) Newcrest recognised a gain of A$46 million after
tax on the divestment.
(1) On 29 August 2012, subsequent to the signing of the Directors’ Report on 13 August 2012, Newcrest released the findings of the pre-feasibility study
along with an increase in Wafi-Golpu Mineral Resources and Ore Reserves. Refer to Page 26.
(2) Newcrest received A$10 million from its non-participation in the rights issue.
46 newcrest mining annual report 2012
2. DISCUSSION AND ANALYSIS OF OPERATIONS AND THE INCOME STATEMENT
2.1 Profit Overview
The Statutory Profit in 2012 of A$1,117 million was a record profit outcome for Newcrest and 23% higher than the prior year result
of A$908 million. Underlying Profit of A$1,084 million in 2012 was also a record, up 2% from the prior year result of A$1,058 million.
The differences between Statutory Profit and Underlying Profit are quantified in the table below and are provided to assist the
assessment of the relative performance of the Company. The adjustments reflect:
– Non-cash impacts of Newcrest’s September 2007 equity raising and subsequent gold hedge book close-out and debt repayment;
– Acquisition and integration costs related to the LGL acquisition in August 2010; and
– Profit on the divestment of Newcrest’s Queensland assets in November 2011.
A$ million
Profit after tax attributable to Newcrest shareholders (‘Statutory Profit’)
Loss on restructured and closed-out hedge contracts (after tax)
Other close-out related losses (after tax)
Business acquisition and integration costs (after tax)
Business divestment gain (after tax)
Profit after tax before hedge restructure and other significant items
attributable to Newcrest shareholders (‘Underlying Profit’)
A$ million
Underlying profit for the year ended 30 June 2011
Changes in revenues:
Volume
Gold
Copper
Silver
Price
Gold
Copper
Silver
Changes in mine cost of sales:
Mine production cost
Deferred mining
Inventory movements
Treatment, realisation and royalty
Depreciation
Other costs/income:
Corporate administration
Exploration
Other income/expense
Net finance costs
Share of profit of associate
Tax:
Income tax expense
Underlying profit for the year ended 30 June 2012
For the years ended
30 June
2012
1,117
5
–
8
(46)
2011
908
107
2
41
–
1,084
1,058
1,058
(149)
463
(206)
(67)
(15)
1,084
(194)
42
3
525
(67)
5
(408)
178
78
(13)
(41)
(47)
(25)
(5)
(5)
15
(15)
The increase in Underlying Profit in 2012 from the prior year is primarily due to higher realised gold prices. The average realised gold price
for 2012 of A$1,609 per ounce was 17%, or A$231, per ounce higher than the prior year. Gold sales of 2.333 million ounces in 2012 were
6% lower than achieved in 2011, primarily due to production being 10% lower in the year, partially offset by inventory sales.
newcrest mining annual report 2012 47
Directors’ Report
MANAGEMENT DISCUSSION AND ANALYSIS
2.2 Revenue
Revenue (1)(2)
Production Volumes (1)(2)
Gold
Copper
Silver
Sales Volumes
Gold
Copper
Silver
Realised Prices
Gold
Copper
Silver
Average AUD:USD
Revenue
Gold
Copper
Silver
Total Sales Revenue
For the years ended 30 June
2012
2011
Change %
Company
Company
oz
t
oz
oz
t
oz
A$/oz
A$/lb
A$/oz
$m
$m
$m
$m
2,285,917
76,015
1,997,247
2,527,352
75,631
1,895,610
2,333,214
78,513
1,997,294
2,477,632
73,930
1,891,811
1,609
3.58
31.55
1.0319
3,740
613
63
4,416
1,378
3.93
29.04
0.9871
3,409
638
55
4,102
For the years ended 30 June
2012
2011
(10)
1
5
(6)
6
6
17
(9)
9
5
10
(4)
15
8
Gold production and sales (ounces)(2)(3)
Production
Sales
Production
Sales
Cadia Hill
Ridgeway
Cadia East
Telfer
Gosowong
Hidden Valley
Lihir
Bonikro
Cracow
Mt Rawdon
Total
241,430
223,314
8,451
540,114
439,384
88,801
604,336
92,102
23,787
24,198
262,458
225,149
8,451
569,640
439,446
89,290
595,184
91,654
24,686
27,256
364,196
147,904
3,320
621,291
463,218
100,232
639,256
41,235
71,206
75,494
353,575
151,297
3,320
588,724
465,900
102,689
635,610
29,867
71,006
75,644
2,285,917
2,333,214
2,527,352
2,477,632
(1) The 12 months’ production and sales data to 30 June 2012 includes 8,451 pre-production gold ounces and 801 copper tonnes for the Cadia East project.
The 12 months’ production and sales data to 30 June 2011 includes 3,320 pre-production gold ounces and 316 copper tonnes for the Cadia East project.
These ounces have been capitalised and excluded from the unit cost calculations and profit and loss reporting.
(2) Production and sales from Cracow and Mt Rawdon in the 12 months to June 2012 contains approximately four months of production only, up to the
date of divestment of 2 November 2011.
(3) All figures are 100% other than Cracow sales and production shown at 70% and Hidden Valley sales and production shown at 50%.
Copper production and sales (tonnes)
Production
Sales
Production
Sales
For the years ended 30 June
2012
2011
Cadia Hill
Ridgeway
Cadia East
Telfer
Total
14,076
29,901
801
31,237
76,015
15,060
30,050
801
32,602
78,513
23,449
19,788
316
32,078
75,631
23,708
19,811
316
30,095
73,930
48 newcrest mining annual report 2012
Silver production and sales (ounces)(1)(2)
Production
Sales
Production
Sales
For the years ended 30 June
2012
2011
Cadia Hill
Ridgeway
Telfer
Gosowong
Hidden Valley
Lihir
Bonikro
Cracow
Mt Rawdon
Total
196,108
224,816
366,945
271,342
857,540
10,558
13,187
16,843
39,908
198,806
224,816
366,945
275,837
830,705
10,558
9,654
16,517
63,456
244,641
177,389
373,101
284,139
673,031
–
3,145
38,170
101,994
244,641
177,389
391,301
290,782
665,892
–
–
38,125
83,681
1,997,247
1,997,294
1,895,610
1,891,811
(1) Production and sales from Cracow and Mt Rawdon in the 12 months to June 2012 contains approximately four months of production only, up to the date
of divestment of 2 November 2011.
(2) All figures are 100% other than Cracow sales and production shown at 70% and Hidden Valley sales and production shown at 50%.
Total gold revenue in 2012 increased by 10% to A$3,740 million
(2011: A$3,409 million), primarily due to a 17% increase in the
realised gold price to A$1,609 per ounce (2011: A$1,378 per ounce).
Gold sales volumes of 2,333,214 ounces were 6% lower than the
prior year as a result of 2012 production of 2,285,917 ounces being
10% lower than the prior period, partially offset by higher inventory
sales. The US$ gold price reached a record high US$1,921 per ounce
during the 2012 financial year. The impact on A$ revenue of the
higher US$ gold price was moderated by the continued strength
of the A$ against the US$, with an average rate of exchange for
the 12 months ending 30 June 2012 of $1.032 compared to the
prior year average rate of $0.987.
Copper revenue in 2012 decreased by A$25 million, or 4%,
to A$613 million, reflecting a 9% decrease in realised prices
partially offset by an increase in sales volumes. Copper sales
increased by 6% to 78,513 tonnes (2011: 73,930 tonnes), as a
result of higher levels of production associated with the ramp-up
of the Ridgeway Deeps mine.
Silver revenue increased by 15% from A$55 million to A$63 million
due to higher silver prices and higher silver ounces sold. The average
realised silver price of A$31.55 per ounce was 9% higher than
the A$29.04 per ounce compared to the prior year. Sales volumes
increased by 6% to 1,997,294 ounces primarily due to increased
silver production at Hidden Valley.
Consistent with Newcrest’s stated strategy, gold revenue continues
to dominate Newcrest’s activities, accounting for 85% of total
sales revenue in the 2012 financial year (2011: 83%).
Gold production of 2,285,917 ounces in 2012 was 241,435 ounces,
or 10%, lower than the prior period, with the key drivers of this
difference period-on-period being:
– Cadia Hill production decreased by 122,766 ounces, or 34%,
in line with lower rates of production and planned lower gold
grades as mining of cutback 3 was completed. The Cadia Hill
open pit ceased operation on 30 June 2012 and was placed
on care and maintenance.
– Ridgeway production increased by 75,410 ounces, or 51%,
reflecting the first full year of post-commissioning production
at Ridgeway Deeps. Increased block cave ore production,
higher grade ore and higher mill throughput all contributed
to this increase.
– Cadia East development production increased by 5,131
development ounces, or 155%. Revenue and costs of production
are capitalised as part of the project.
– Telfer production decreased by 81,177 ounces, or 13%, due to
planned lower feed grade and associated recoveries, together
with lower mill throughput.
– Gosowong production decreased by 23,834 ounces, or 5%,
due to an expected reduction in gold grade. The grade impact
was mostly offset by record mill throughput, delivering a 20%
increase in volume milled over the prior year.
– Lihir production decreased by 34,920 ounces, or 5%. The current
period included a full 12 months of ownership, while the prior
period included 10 months. Production in the current period was
adversely impacted by heavy rainfall and subsequent flooding in
the open pit, reducing access to higher-grade ore. Mill throughput
was also restricted due to a major planned maintenance
shutdown in August 2011 and plant reliability issues throughout
the year. Production for the June 2012 quarter was 9% higher
than that achieved in the March 2012 quarter, reflecting
improvements in reliability and mine dewatering capacity.
– Hidden Valley production (Newcrest 50% share) decreased by
11,431 ounces, or 11%, primarily due to high rainfall experienced
over the six months to June 2012 constraining mining rates
and ore feed grade.
– Bonikro production increased by 50,867 ounces, or 123%,
reflecting higher mining and mill throughput and a full year
of production (2011 represents approximately six months
of production).
– Cracow production decreased by 47,419 ounces. As Newcrest
divested this asset on 2 November 2011, only four months
of production in the current period have been reported.
– Mt Rawdon production decreased by 51,296 ounces. Newcrest
also divested this asset on 2 November 2011, therefore only four
months of production in the current period have been reported.
2.3 Cost of Sales
Cash costs(1)
A$ million
Cadia Valley
Telfer
Lihir
Gosowong
Bonikro
Hidden Valley
Mt Rawdon
Cracow
2012
560
678
339
186
83
140
25
20
For the years ended 30 June
2011
Change
Change %
548
706
266
161
52
121
56
48
12
(28)
73
25
31
19
(31)
(28)
73
2
(4)
27
16
60
16
(55)
(58)
4%
Total
2,031
1,958
(1) Total cash costs represent cost of sales excluding finished goods
inventory movements and depreciation.
newcrest mining annual report 2012 49
Directors’ Report
MANAGEMENT DISCUSSION AND ANALYSIS
2.3 Cost of Sales (continued)
Cash costs increased by A$73 million, or 4%, in 2012, with the major increase being at Lihir reflecting inclusion of operations for a full
12 months compared with 10 months in the prior year.
Cadia Valley cash costs increased by A$12 million, or 2%, reflecting higher electricity prices and higher labour rates.
Telfer cash costs decreased by A$28 million, or 4%, reflecting a 5% reduction in milling volumes. Total material moved in 2012 was 66%,
or 35Mt (million tonnes), higher than the prior year, primarily due to waste stripping of Main Dome Stage 4 (an increase of 30Mt moved
at a cost of A$117 million) and West Dome Stage 1 (an increase of 2.6Mt moved at a cost of $11 million). This elevated level of mining activity
and associated expenditure related to future gold production and therefore was capitalised as deferred mining costs in the current period.
Lihir cash costs increased by A$73 million, or 27%, reflecting an additional two months of operation and the adverse impact of a 14%
weakening of the Australian dollar against the PNG kina. In addition, maintenance activity increased during 2012 to improve the reliability
in the processing plant, while lower geothermal power generation increased the reliance on higher cost heavy fuel oil power generation.
Gosowong cash costs increased by A$25 million, or 16%, reflecting a 20% increase in tonnes milled and Indonesian labour market
pressures increasing labour costs, partially offset by a 6% strengthening of Australian dollar against the Indonesian rupiah.
Bonikro cash costs increased by A$31 million, or 60%, reflecting a full 12 months of operation. In the 2011 financial year, Newcrest acquired
the asset from 30 August 2010 and shortly afterwards temporarily suspended operations as a precaution against the possibility of civil
unrest following presidential elections in Côte d’Ivoire.
Hidden Valley cash costs increased by A$19 million, or 16%, as a result of higher ore haulage costs resulting from the restricted capacity of the
overland conveyor, increased mining and treatment volumes, and a 14% weakening of the Australian dollar against the PNG kina in the period.
Lower cash costs at Cracow and Mt Rawdon reflect their divestment to Evolution on 2 November 2011.
For the years ended
30 June
% Change
Increase/
(Decrease)
% Change
attributable
to price
% Change
attributable
to activity
A$ million
Employee costs
Maintenance including contract labour
Mining contracts
Fuel and lubes
Utilities and power
Liners and grinding media
Mining consumables
Other input costs
Mine Production Costs
Deferred mining costs
Ore inventory movements
Royalties
Treatment and realisation
Cash Costs
Finished goods inventory movements
Depreciation
Cost of Sales(2)(3)
8
5
5
22
17
(4)
5
4
7
8
10
91
16
6
9
10
5
16
2012
352
498
298
146
211
119
287
310
2,221
(178)
(282)
130
140
2,031
34
542
2,607
2011(1)
304
433
152
106
171
113
249
285
1,813
–
(112)
121
136
1,958
(58)
501
2,401
16
15
96
38
23
5
15
9
23
152
7
3
4
8
9
(1) The prior year comparatives have been restated in line with any cost classification adjustments made for the current year.
(2) Costs of Cracow and Mt Rawdon included to the date of divestment on 2 November 2011.
(3) Costs from the former LGL operations included from the acquisition date of 30 August 2010.
Cost of sales for the year ended 30 June 2012 increased by A$206 million, or 9%, compared to the prior year. As detailed earlier,
comparability between periods is impacted by different periods of ownership and activity of the following assets:
– The current period includes a full 12 months of activity for Lihir and Bonikro compared with 10 months of Lihir and six months of Bonikro
in the prior year; and
– Ownership of Cracow and Mt Rawdon for four months of the current period only compared with 12 months for Cracow and 10 months
for Mt Rawdon in the prior year.
Cost pressures remain in the industry. The level of activity in the resources industry in the regions in which Newcrest operates, results in
supply-side constraints and higher prices than what might otherwise be experienced, particularly in labour, fuel, energy and consumables.
The strengthening of the PNG kina against the Australian dollar has further negatively impacted costs by approximately A$36 million
in 2012 at the Lihir and Hidden Valley operations. This was partially offset by the Australian dollar strengthening against the Indonesian
rupiah, positively impacting costs at Gosowong by approximately A$4 million.
Mine production costs were characterised by elevated levels of mining activity at Telfer and Bonikro in particular, with both being necessary
to secure ore sources integral to their respective five-year production profiles and – in the case of Telfer – to address underinvestment in
this activity in prior years. As these stripping costs relate to future production, they are accounted for as deferred mining. These deferred
mining balances will unwind over the coming five-year period as the stripping ratio reduces. Ore inventories increased, predominantly at
Lihir and Telfer. Ore inventories at Lihir will reduce as the stripping ratio normalises and expanded processing capacity assists accelerated
utilisation of ore inventory.
50 newcrest mining annual report 2012
Employee costs increased by A$48 million, or 16%, in the year.
Approximately half of this increase is attributable to tight labour
markets, particularly in Australia and Indonesia, and the impact
of a stronger PNG kina against the Australian dollar on the Lihir
and Hidden Valley operations. The main activity-related impacts
on employee costs comprise inclusion of a full year of operation
at Lihir and revised maintenance and roster arrangements at Telfer.
Maintenance costs in 2012 were A$65 million, or 15%, higher than
the prior period. More than two thirds of this increase occurred
at Lihir, reflecting both an additional two months of operations
in 2012 compared with 2011, and increased maintenance activity
in 2012 to improve the reliability in the processing plant. Cadia and
Telfer costs were adversely impacted by longer term, lower-cost
contracts rolling off.
Mining contract costs increased by A$146 million, or 96%,
compared with the prior period. This has been predominantly
activity-driven, due to the major open pit waste stripping projects
at Telfer (Main Dome Stage 4) and Bonikro (Pushback 4) as follows:
– At Telfer, mining contractors have been engaged to undertake
waste stripping in Main Dome Stage 4, with this activity scheduled
to continue in the 2013 financial year before the exposed ore
becomes a major ore source in the 2014 financial year.
– Similarly, a mining contractor commenced waste stripping of
Stage 4 during the year at Bonikro, with this activity scheduled
to continue during the 2013 financial year, as Stage 4 is the major
ore source in Bonikro’s five-year production profile.
The majority of these mining contract costs relate to future gold
production and do not impact cash costs in relation to current
year production as they have been capitalised in deferred mining.
Fuel and lubes costs increased by A$40 million, or 38%. Price was a
key driver, with diesel prices more than 20% higher in 2012 relative
to 2011. Increased stripping activity at Telfer (Main Dome Stage 4)
and Bonikro (Stage 4) further contributed to the cost increase.
Utilities and power costs increased by A$40 million, or 23%.
Two thirds of the increase occurred at Lihir, reflecting a full year
of operation, an increase in tonnes milled of 16%, an increase in
the price of heavy fuel oil of more than 20%, and lower geothermal
steam supply in the 2012 year increasing the reliance on higher
cost heavy fuel oil power generation. Higher contract electricity
prices at Cadia also contributed to increased power costs relative
to the prior year.
Liners and grinding media costs have increased by A$6 million,
or 5%. The increase was driven by higher throughput and a
full year of operation at Lihir, and increased mill reline activities
at Cadia. These activity-driven increases were partially offset
by a decline in contract prices for grinding media.
Mining consumables – which includes reagents, tyres and
explosives – increased by A$38 million, or 15%, in the year.
More than three quarters of the increase was attributable to the
Telfer and Bonikro operations and reflect increased mining activity.
The other main increase was at Lihir where mill throughput was
higher. On average, there were moderate price increases during
the year.
Other input costs, including mine site overheads, have increased
by A$25 million, or 9%, this period. In addition to the impact of
a full year of costs from Lihir, flight and accommodation costs at
Telfer have been higher, with increased numbers on-site due to the
Stage 4 cutback and amended roster arrangements. On average,
there were moderate price increases during the year.
Total mine production costs have increased by A$408 million,
or 23%, which, in addition to the different periods of ownership
referred to above (particularly Lihir), is primarily associated
with increased waste stripping activity at Telfer and Bonikro,
combined with continued price increases for labour, fuel,
energy and consumables.
Deferred Mining
The net cost associated with waste stripping and capitalised as
Deferred Mining during the period was A$178 million, significantly
higher than the amount capitalised in the prior year (2011: a net
amount of nil). Major components of this Deferred Mining were:
– Telfer A$127 million (an increase of A$102 million on the prior
period) – comprising A$117 million for 30Mt of Main Dome
Stage 4 waste deferred and A$10 million for 2.6Mt of West Dome
Stage 1 waste deferred. The elevated level of stripping in 2012
addressed underinvestment in prior periods in this activity;
– Bonikro A$31 million (an increase of A$27 million) – comprising
A$35 million for 10Mt of waste deferred in relation to Stage 4,
offset by A$4 million of Stage 2 waste expensed; and
– Hidden Valley A$17 million (an increase of A$12 million) –
comprising the Newcrest share of deferring 4Mt of Hamata
waste and 6Mt of waste in relation to Hidden Valley Stage 3.
Lihir and Gosowong collectively deferred A$12 million of waste
(a decrease of A$8 million compared to 2011), while a further
A$11 million was deferred by the Queensland assets prior
to divestment (a decrease of A$8 million).
These increases in deferred stripping were partially offset by
a deferred waste expense of A$20 million at Cadia Valley relating
to ore sourced from the open pit. This charge was A$53 million
lower than 2011, reflecting lower production from the open pit
and a lower charge per ounce.
Inventory Movements
Inventory movements for the purpose of calculating cost of sales
occur in relation to both ore inventory and finished goods inventory.
An increase in ore and finished goods inventories reduced cost
of sales by A$248 million during the period (2011: A$170 million),
comprising a A$282 million increase in ore inventories offset
by a A$34 million drawdown of Telfer and Cadia Valley finished
goods (concentrate) inventory.
At Lihir, ore mined (20Mt) exceeded ore milled (6Mt) by 14Mt
in the year. This inventory build-up reduced cost of sales by
A$204 million (2011: A$151 million). The high amount of ore mined
reflected the low ratio of waste (11Mt) to ore (20Mt) in 2012, with
the majority of mining activity occurring in the Lienetz pit where
stripping activity has occurred in prior periods. At 30 June 2012,
Lihir had approximately 100Mt of ore inventory containing 5.94Mt
of gold with a carrying value of A$1,078 million, at an average
cost of A$181/oz. Over the next five years, Lihir’s ore inventory
will decline as the enhanced processing capacity from MOPU
accelerates production and as mining activity increasingly focuses
on waste stripping.
Ore inventory accumulation also occurred at Telfer in the period,
reducing cost of sales by A$57 million (an increase of A$83 million
from 2011). This increase reflects the ore mined from open pit and
underground sources (24Mt) exceeding ore milled (21Mt), together
with an increase in dump leach inventories of A$34 million.
Treatment, Realisation and Royalty Costs
Treatment charges and refining costs (‘TC/RC’) of A$140 million
have increased by A$4 million, or 3%, on the prior year,
predominantly due to higher concentrate sales volume and
increased TC/RC unit rates. The net impact of this rate increase
has been reduced as TC/RC rates are priced in US$ and have
benefited on translation to A$ due to the strengthening of
the A$ against the US$.
Royalties expense was A$9 million, or 7%, higher in the period,
consistent with the increase in sales revenue and realised
gold price.
newcrest mining annual report 2012 51
Directors’ Report
MANAGEMENT DISCUSSION AND ANALYSIS
2.3 Cost of Sales (continued)
Depreciation
Depreciation expense increased by A$41 million, or 8%. The increase
was primarily driven by Cadia Valley, reflecting higher levels of
production from Ridgeway Deeps, and production from Bonikro.
Overall Company depreciation costs of A$240 per ounce sold
accordingly increased from the A$208 per ounce in the prior year.
2.4 Corporate Administration Costs
Corporate administration costs of A$140 million in 2012 were
A$47 million higher than the prior year. Key drivers of this increase
were as follows:
– A full 12 months of Newcrest owning the Lihir assets in 2012
compared with 10 months in 2011;
– A A$6 million increase in expenditure on innovation and
technology, targeting the future generation of significant step
change improvements in production. Effort has focused on
mining methods to accelerate the ramp-up of underground
production rates, earlier waste rejection to improve mill
throughput and reduce energy consumption, and composite
gravity test work targeting improved metallurgical recoveries;
– A$4 million more was spent on safety and health initiatives
during 2012, including major hazard management and an
extensive review of transportation arrangements following
the tragic helicopter accident in Indonesia in August 2011;
– A$5 million on pursuing operational efficiencies via projects
directed to enhancing total material movement, asset reliability
and metallurgy;
– A$7 million on establishing operational control hubs in Australia
and enhancing the representative office arrangements in PNG;
– A$8 million on supporting larger, more standardised
information systems including depreciation on recent
systems implementations; and
– A$11 million on higher insurance costs, higher legal and securities
exchange registration and compliance costs, and new industry
body memberships.
2.5 Exploration
Exploration expenditure during the year of A$158 million
(2011: A$126 million) was focused on greenfields exploration
in Côte d’Ivoire, Papua New Guinea and Indonesia, as well as
increasing exploration in existing project and production areas.
Of this amount, A$80 million was expensed (2011: A$55 million)
resulting in a capitalisation rate of 49%, reflecting the proportion
of exploration effort on brownfields and reserve definition activity.
2.6 Other Income/(Expense)
For the years ended
30 June
A$ million
Net foreign exchange gain/(loss)
Net fair value gain/(loss)
on gold & copper derivatives
Net gain/(loss) on sale of non-current assets
Cadia Valley royalty dispute
Other
Other Income/(Expense)
2012
(14)
16
(3)
0
(13)
(14)
2011
(26)
15
–
11
(9)
(9)
Other Income/(Expense) was a net expense of A$14 million
(2011: net expense of A$9 million).
The net fair value gain on gold and copper derivatives relates
to the movement in spot prices impacting the quotational period
adjustments on sales. Newcrest locks in the copper price for
concentrate shipments at the time of shipment 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). With the realised
gold price increasing during the year, the one-month quotational
period adjustments were positive.
In 2011, the Company received a favourable ruling by the High Court
of Australia in respect of a mineral royalties dispute at Cadia Valley,
resulting in a reversal of previously expensed royalties.
52 newcrest mining annual report 2012
2.7 Finance Costs
Total finance costs of A$43 million in 2012 were A$2 million
lower than the prior year.
Gross finance costs in 2012 of A$83 million increased by
A$36 million over that of 2011 due to a higher level of debt
drawdown during the period.
Interest of A$40 million was capitalised during the 2012 year in
relation to the Cadia East development project and the Lihir MOPU
project. Interest of A$2 million was capitalised in the prior year.
2.8 Income Tax Expense
The income tax expense in the current period was A$402 million
(2011: A$334 million), resulting in an effective tax rate of 26%
(2011: 26%). This is lower than the Australian company tax rate
of 30%, primarily due to research and development benefits in
relation to previous financial years, the utilisation of capital losses
and the recognition of Australian tax losses.
2.9 Hedge Restructure and Other Significant Items
A$ million
Losses on restructured and
closed-out hedge contracts
Other close-out related losses
Business acquisition and integration costs
Gain on business divestment
Hedge Restructure and
Other Significant Items (pre-tax)
Income tax benefit/(expense)
Hedge Restructure and
Other Significant Items (post-tax)
For the years ended
30 June
2012
2011
(7)
–
(11)
46
28
5
33
(153)
(3)
(52)
–
(208)
58
(150)
Hedge Restructure and Other Significant Items resulted in
a A$28 million pre-tax gain (2011: A$208 million pre-tax loss).
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 are transferred
to the Income Statement in future periods in line with the original
sales to which they were designated. A pre-tax loss on restructured
and closed-out hedge contracts of A$7 million has been recognised
in the current period (2011: A$153 million). This Hedge Reserve
has now been fully released to the Income Statement.
There are no liabilities remaining for the closed-out contracts.
The profit impact in the current period is a non-cash item.
Business acquisition and integration costs
The LGL acquisition resulted in transaction and integration costs
of A$11 million for the period (2011: A$52 million). These costs relate
primarily to the standardisation of key processes and systems.
Business divestment
The Company recognised a gain of A$46 million after tax on the
disposal of the Cracow and Mt Rawdon assets during the period
as summarised below. The proceeds from the sale were non-cash,
taking the form of a share investment in the acquirer of those
assets, Evolution. Following Newcrest’s non-participation in
a capital raising by Evolution, Newcrest holds a 32.68% interest
in Evolution.
For the year ended 30 June
A$ million
Consideration received
Carrying value of assets sold
Disposal costs
Gain on Business Divestment
2012
390
(336)
(8)
46
3. DISCUSSION AND ANALYSIS OF CASH FLOWS
3.1 Cash flow – Operations
For the years ended 30 June
A$ millions
2012
2011
Change Change %
Cash flow from operations
Cash flow related to
investing activities
Cash flow related to
financing activities
1,726
1,729
(3)
(2,755)
(2,294)
(461)
–
20
1,090
131
959
732
Net Movement in Cash
61
(434)
Cash at the beginning
of the period
Effects of exchange rate
changes on cash held
Cash at the End of the Period 242
185
643
(4)
(24)
185
Operating cash flow for the 2012 financial year of A$1,726 million
was in line with the prior year operating cash flow of A$1,729 million.
The benefit of increased sales revenue in the current period
was offset by higher operating costs and an increase in income
tax payments.
Projects – Construction and Studies
Major projects capital expenditure was primarily focused on the
following projects:
– Cadia East (A$1,108 million in the period) remains on schedule
to achieve first commercial production in the December 2012
quarter, being approximately 80% complete at 30 June 2012.
Capital costs to the first commercial production milestone are
within 10% above the A$1.9 billion budget, with this increase in
capital cost due to lower production from the block cave before
commercial commissioning (resulting in a lower revenue credit);
– Lihir Million Ounce Plant Upgrade (‘MOPU’) (US$440 million in
the period) was approximately 91% complete at 30 June 2012,
with commissioning activities approximately 54% complete.
The project is expected to increase total annual gold production
from Lihir by approximately 240,000 ounces per year and is
on schedule for ramp-up of production in the December 2012
quarter; and
– The pre-feasibility study at Wafi-Golpu (A$54 million in the
period) is nearing completion and the joint venture parties are
currently reviewing the study findings. Subject to joint venture
partner approval, an announcement of the resulting reserves
for the project is likely to be provided on 29 August 2012.
Exploration
For the years ended 30 June
3.2 Cash flow – Investing Activities
A$ millions
2012
2011
Change Change %
A$ millions
2012
2011
Change Change %
For the years ended 30 June
Capital expenditure
– Sustaining
– Development
– Projects – construction
and studies
Total Capital Expenditure
Exploration
Payment for LGL
(net of cash acquired)
Payment for investments
Interest capitalised to
development projects
Other
Total Cash Outflow from
Investing Activities
445
138
359
97
1,973
1,434
2,556
158
1,890
126
86
41
539
666
32
24
42
38
35
25
–
3
40
(2)
272
4
2
–
(272)
(1)
(100)
(25)
1,900
38
(2)
2,755
2,294
461
20%
Net cash used in investing activities increased by A$461 million,
or 20%, to A$2,755 million.
Sustaining capital
Total sustaining capital expenditure increased by A$86 million
to A$445 million, predominantly driven by:
– Corporate capital investment increasing by A$40 million,
primarily due to the business process and systems
development (i.e. SAP) projects undertaken as part of the
strategy to provide a platform of standard, technology-enabled
business processes to help deliver operational benefits across
the Newcrest business;
– Telfer increasing by A$30 million due to expenditure on
mobile equipment, tailings dam raising and pipe and tank
refurbishments; and
– Cadia increasing by A$10 million, including expenditure
on mobile equipment and the tailings storage facility.
The majority of sustaining capital was incurred at the Lihir operation
(A$188 million, or 42%, of the 2012 total), with expenditure
predominantly on plant reliability, upgraded dewatering capacity,
mobile equipment and power generation.
Expenditure by nature
Greenfields
Brownfields
Reserve definition
Telfer
Gosowong
Hidden Valley
and Wafi-Golpu
Lihir
West Africa
Other
Expenditure by region
Australia
Indonesia
Papua New Guinea
West Africa
Fiji
44
42
17
5
25
14
10
1
33
32
10
10
24
13
3
1
158
126
41
32
57
21
7
41
22
48
11
4
158
126
11
10
7
(5)
1
1
7
–
32
–
10
9
10
3
32
33
31
70
(50)
4
8
233
–
25
–
45
19
91
75
25
Exploration expenditure during the period has been focused
on existing operations and projects, including:
– Wafi-Golpu – infill drilling to support the pre-feasibility study
data collection process and facilitate a reserve estimate update;
– Telfer – continued drilling of the Vertical Stockwork Corridor
located below the Telfer Deeps sub-level cave mine, and
West Dome to expand the underground mine life;
– Gosowong – drilling to the north and south of the previously
mined Toguraci open pit to identify future ore sources; and
– Lihir – continued resource definition drilling at Lihir.
Initial results from greenfields exploration programs in
Côte d’Ivoire and at Manus Island in Papua New Guinea have
been encouraging.
newcrest mining annual report 2012 53
4.2 Net Debt and Gearing
As at 30 June 2012, Newcrest had net debt, comprising total
borrowings less cash, of A$2,166 million, A$1,551 million higher
than the 30 June 2011 net debt position of A$615 million, as outlined
in the table below. The primary driver of the movement during the
period was funding of the Company’s major growth projects.
A$ million
As at 30 June
Net debt at 30 June 2011
Issue of USD corporate bonds
Net drawdown on USD bilateral facility
Repayment of USD private placement
Retranslation of USD denominated debt
Increase in cash balances
Net movement in finance leases
Net movement in 2012
Net debt at 30 June 2012
615
963
699
(119)
69
(57)
(4)
1,551
2,166
The gearing ratio (net debt to net debt plus equity) as at
30 June 2012 was 12.5% (30 June 2011: 4.2%).
A$ million
Total debt
Less cash and cash equivalents
Net debt
Equity
Net Debt and Equity
As at 30 June
2012
2,408
(242)
2,166
2011
800
(185)
615
15,094
13,875
17,260
14,490
Gearing (net debt/net debt and equity)
12.5%
4.2%
4.3 Liquidity and Debt Facilities
In November 2011, Newcrest issued US$1,000 million in US dollar
Corporate Bonds (‘notes’). The notes were sold in accordance with
Rule 144A and Regulation S of the Securities Act of the United
States. The notes consist of:
– US$750 million Senior Unsecured Notes due 15 November 2021
with a coupon of 4.45%; and
– US$250 million Senior Unsecured Notes due 15 November 2041
with a coupon of 5.75%.
Newcrest has US dollar bilateral facilities of US$2,000 million,
with US$1,220 million drawn down as at 30 June 2012. These are
unsecured revolving facilities, with maturities ranging between
December 2012 and February 2013. Interest is based on LIBOR
plus a margin.
At the date of this report, the Company is in the process of
renewing its bilateral debt facilities with a number of banks. It is
expected that this renewal process will be completed no later than
30 September 2012, with facility terms of three years or more.
Newcrest also has US$230 million of long-term senior unsecured
notes issued into the North American Private Placement market.
The notes comprise three tranches and the vast majority of the
notes are at an average fixed interest rate of 5.7% per annum.
The notes have a repayment profile from May 2015 to May 2020,
and have been classified as non-current borrowings.
Directors’ Report
MANAGEMENT DISCUSSION AND ANALYSIS
3. DISCUSSION AND ANALYSIS OF CASH FLOWS
(continued)
3.3 Cash flow – Financing Activities
Cash flows provided by financing activities were an inflow
of A$1,090 million compared with an inflow of A$131 million
in the prior year. For the current year, this included:
– Net proceeds from the issue of US Corporate Bonds
of A$963 million;
– Net drawdown of A$699 million on the US$ bilateral facility;
– Repayment of notes issued into the North American Private
Placement market of A$119 million; and
– Dividend payments to Shareholders of Newcrest
of A$362 million.
4. DISCUSSION AND ANALYSIS OF THE BALANCE SHEET
4.1 Net Assets and Total Equity
A$ millions
2012
2011
Change Change %
As at 30 June
Assets
Cash and cash equivalent
Inventories
Receivables
Property, plant
and equipment
Exploration, feasibility
and development
Intangibles
Deferred tax assets
Investments in associate
Other assets
242
1,843
251
185
1,401
441
57
442
(190)
31
32
(43)
4,364
3,310
1,054
8,795
3,852
259
395
508
7,675
3,682
230
–
358
1,120
170
29
395
150
Total Assets
20,509
17,282
3,227
Liabilities
Payables
Borrowings
Derivative financial liabilities
Provisions
Tax liabilities
(482)
(2,408)
(18)
(508)
(1,999)
(432)
(800)
(7)
(402)
(1,766)
(50)
(1,608)
(11)
(106)
(233)
Total Liabilities
(5,415)
(3,407)
(2,008)
Net Assets
15,094
13,875
1,219
Equity
Equity – Newcrest interest
Non-controlling interests
(14,975)
(119)
(13,776)
(99)
(1,199)
(20)
Total Equity
(15,094)
(13,875)
(1,219)
32
15
5
13
42
19
12
201
157
26
13
59
9
9
20
9
Newcrest’s Net Assets and Total Equity increased by A$1,219 million
during the year to A$15,094 million. The increase in equity
was driven by the record profit for the period and the effect
of translation of US$ functional currency entities into A$.
The increase in Net Assets reflects the capital expenditure on
Newcrest’s key growth projects, Cadia East and Lihir MOPU.
54 newcrest mining annual report 2012
Directors’ Report
REMUNERATION REPORT
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)
and the Group for the period 1 July 2011 – 30 June 2012 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, this Remuneration
Report discloses prescribed remuneration details for the Group’s
Key Management Personnel.
Key Management Personnel are those persons having authority
and responsibility for planning, directing and controlling the
activities of the Company and the Group, directly or indirectly,
being the Company’s Directors whose names appear in Table 8,
and the Executive Managers whose names appear in Table 9.
In this Report, the term Directors is used to refer to all directors of
the Company. The term Executive Directors refers to the Managing
Director and the Finance Director, and the term Executive Managers
refers to Key Management Personnel who are not Directors.
1.2 Overview of Contents
Section
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
Introduction
Remuneration Overview 2011–12
Human Resources and Remuneration Committee
Non-Executive Directors’ Remuneration
Executive Director and Executive
Manager Remuneration
Relationship of Incentives to Newcrest’s
Financial Performance
Executive Service Agreements
Remuneration Details
Rights held by Executive Directors
and Executive Managers
1.3 Executive Summary
In 2011–12, the Board continued to oversee implementation of its
remuneration strategy, supported by the Human Resources and
Remuneration Committee. The key elements of the remuneration
strategy are:
– to provide market-competitive levels of remuneration
to employees having regard both to the level of work
and to the impact those employees could potentially
have on the Company’s and the Group’s performance;
– to encourage, recognise and reward high performance
with appropriate levels of at-risk performance pay;
– to adopt Group performance measures which align
performance incentives with the interests of shareholders;
– to retain capable and high performing employees; and
– to adopt a remuneration structure that provides the
appropriate balance in risk and reward sharing between
each participating employee and the Group.
Key developments during the reporting period in the
implementation and administration of the remuneration
policy are outlined below.
1.3.1 As in previous years, the Board determined that the Short
Term Incentive (STI) Plan would again operate as a ‘cash only’
plan in 2011–12 and that as in 2010–11, the STI Plan would
be offered without a deferred component. See section 5.4.1
for details.
1.3.2 With respect to the LTI, in previous years LTI participants have
been permitted to hold and exercise their LTI performance
rights for a period of up to two years following the relevant
vesting date. The Board has determined in relation to the
2012 LTI grant that exercise of performance rights should
occur automatically on the vesting date, simplifying the
operation of the LTI. The Board proposes to adopt the
same approach in relation to LTI grants in future years.
See section 5.5.1 for details.
1.3.3 In accordance with the requirements introduced into
the Corporations Act 2001 by the Corporations (Improving
Accountability on Director and Executive Remuneration)
Act 2011 and the recommendation of the Human Resources
and Remuneration Committee, the Board appointed
PricewaterhouseCoopers (PwC) as a remuneration consultant,
to provide advice on remuneration matters during 2011–2012.
See sectio n 5.3 for details.
2. REMUNERATION OVERVIEW 2011–12
2.1 Key Changes in 2011–12
Key changes to the Company’s remuneration practices in 2011–12
are set out in sectio ns 5 .3, 5.4.1 and 5.5.1. Following the extensive
review and changes effected in relation to remuneration of
Key Management Personnel and more widely throughout the
Company in 2010–11, the Company made few changes to its
remuneration practices in 2011–12.
2.2 Remuneration Policy
The Board’s remuneration policy continues to be to provide
market-competitive levels of remuneration for all employees,
including Non-Executive Directors, Executive Directors and
Executive Managers, having regard to both the size and complexity
of the Group, and the level of work and the impact that those
employees can potentially have on Group performance.
The policy also seeks to align the interests of employees and
shareholders by ensuring an appropriate level of at-risk performance
pay across the company, linking incentives and performance
measures to both Group and individual performance.
Performance linked compensation includes both short- and
long-term incentives, and is designed to reward employees
for increasing shareholder value by meeting or exceeding
their Group and, where applicable, individual objectives.
2.3 Non-Executive Directors
Non-Executive Directors’ fees are set based upon the need to
attract individuals of appropriate calibre, reflecting the demands
of the role and fairness in relation to prevailing market conditions.
Non-Executive Directors’ fees are reviewed every two years
and were reviewed by the Board in December 2010 and adjusted
with effect from 1 January 2011. Details of current Non-Executive
Directors’ fees are set out in se ction 4.4 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 Executive Managers
Executive Director and Executive Manager remuneration comprises
both fixed and variable components. Fixed remuneration is set
with reference to fixed remuneration paid by a comparator group
of companies for comparable roles.
Variable equity and cash remuneration in 2011–12 were offered
respectively under the Long Term Incentive employee share plan
and the Short Term Incentive Plan.
Details of the above incentive schemes are set out in se ctions 5.4
and 5.5 of this Report.
3. HUMAN RESOURCES AND REMUNERATION COMMITTEE
3.1 Role of the Human Resources and
Remuneration Committee
The role of the Human Resources and Remuneration Committee
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
and administration of major components of the Company’s
Board approved remuneration strategy. For further details of the
Human Resources and Remuneration Committee, its membership,
functions and operation, see the Corporate Governance section
of the annual report. The Human Resources and Remuneration
Committee Charter is available on the Company’s website
www.newcrest.com.au.
newcrest mining annual report 2012 55
Directors’ Report
REMUNERATION REPORT
4. NON-EXECUTIVE DIRECTORS’ REMUNERATION
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 Group’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 Group. Those fees are inclusive of
any contribution to superannuation that a Non-Executive Director
wishes to make or which the Group is required by law to make
on behalf of a Non-Executive Director. The level and structure
of fees are based upon:
– the need for the Group to attract 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 a general meeting. The last
determination made was at the Annual General Meeting held
on 28 October 2010, at which shareholders approved an aggregate
amount of $2,700,000 per annum. The Board considered this
aggregate amount during 2011–2012 and determined that
no further change to it was required.
Fixed fees paid to Non-Executive Directors in 2011–12 are set out
in Table 8.
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 Group outside the scope of their normal Director’s duties.
Details of all Board Committee fees paid during 2011–12 are
included under the heading ‘Committee Fees’ in Table 8. No other
fees were paid to Non-Executive Directors during 2011–12.
4.4 Review of Non-Executive Directors’ Fees
The Group’s practice is to review Non-Executive Director
remuneration every two years. A review by an independent
specialist remuneration consultant was undertaken in November
2010, including a process of benchmarking against independent
Non-Executive Director fees paid by other ASX Top 20, Top 25
and Top 30 companies respectively. The review concluded and
recommended that Board and Committee fees should be adjusted
to be positioned around the median for ASX Top 30 companies
and that recommendation was adopted.
Current Non-Executive Director remuneration (effective from
1 January 2011), comprises:
– base fees payable to the Board Chairman of $600,000 and to
each Non-Executive Director of $200,000 per annum respectively;
– fees payable to Audit and Risk Committee Chair and Committee
members of $50,000 and $25,000 respectively;
– fees payable to the Safety, Health and Environment Committee
Chair and Committee members of $40,000 and $20,000
respectively; and
– fees payable to the Human Resources and Remuneration
Committee Chair and Committee members of $40,000
and $20,000 respectively
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.
4.6 Retirement Benefits
Non-Executive Directors are not entitled to receive
a retirement benefit.
56 newcrest mining annual report 2012
5. EXECUTIVE DIRECTOR AND EXECUTIVE
MANAGER REMUNERATION
5.1 Executive Reward Structure
The Group’s executive reward structure consists of the following
three elements:
– fixed remuneration;
– at-risk cash remuneration; and
– at-risk equity-based remuneration.
5.2 Board Policy and Strategy on Executive Remuneration
In 2011–12 the Board retained the remuneration elements
outlined above for Executive Directors and Executive Managers.
The structure of remuneration arrangements for Executive
Directors and Executive Managers is, in broad terms, no different
from those for other members of management across the
Group. The main differences relate to the weighting for different
components of their remuneration, with the proportion of at-risk
remuneration increasing with seniority.
Newcrest’s policy is to offer a highly competitive total
remuneration package for Executive Directors and Executive
Managers, benchmarked against comparable companies
in Australia and global mining companies.
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 his direct reports, the Executive Management
group, subject to the Board’s oversight. The Executive Management
group reviews and recommends fixed remuneration for other
senior management, for the Managing Director’s approval.
The Group engages the services of independent and specialist
remuneration consultants from time to time and as required
in formulating recommendations on fixed remuneration
for Executive Directors and Executive Managers. Under the
Corporations Act 2001, remuneration consultants must be
engaged by the Non-Executive Directors and reporting of
any remuneration recommendations must be made directly
to the Human Resources and Remuneration Committee.
With respect to 2011–12, the Board on the recommendation of
the Human Resources and Remuneration Committee resolved to
appoint PwC as the Company’s remuneration consultants for the
reporting period. Neither the Board nor the Human Resources and
Remuneration Committee has sought or received remuneration
recommendations from PwC or any other remuneration consultant
during 2011–12. As noted in section 2.1 of this Report, few changes
were made during this period to the Group’s remuneration
systems, structures or strategy. Fixed remuneration paid to
Executive Directors in 2011–12 is set out in Table 8 of this Report.
Fixed remuneration paid in 2011–12 to Executive Managers
is set out in Table 9 of this Report.
5.4 Determining Variable Cash Remuneration
The Board takes the view that employee incentive schemes
provide tangible incentives to employees to improve the Group’s
performance in both the short term and the longer term. In turn,
improved performance benefits shareholders.
To ensure that Newcrest’s remuneration policy fully supports
the Group’s commitment to high performance and to continue to
attract high calibre talent, remuneration levels must be competitive,
but oriented more towards variable, performance-based incentives
that provide reward only where robust performance hurdles are
met to increase shareholder value.
The STI P lan (see 5.4.1 below) is a short-term incentive program,
based on both Group and individual employee performance-related
measures. Incentive payments in relation to performance over
the 2011–2012 performance period are to be made in October 2012.
The LTI Plan (see 5.5.1 below) complements the STI Plan
with measures that help further drive long-term performance
within Newcrest.
5.4.1 Short Term Incentive (STI) Plan
The STI Plan is designed to help drive performance within the Group by providing a vehicle for rewarding employees including Executive
Managers and Executive Directors. The performance measures are a combination of Group and individual measures, with a slight
weighting towards individual performance, chosen to align directly the individual’s reward to the Group’s strategy, performance
and resultant shareholder value.
The amount of the entitlement is based on a percentage range of each participant’s fixed remuneration. The total potential STI available
is set at a level so as to provide sufficient incentive to individuals to achieve and exceed operational targets and group objectives.
In 2011–12, the Board determined that, consistent with the Group’s practice in recent years, the STI offered for the 1 July 2011 to
30 June 2012 performance period would be ‘cash only’. Equity continues to be offered to senior management and Executive Managers
through the LTI Plan.
The Board also resolved to award the 2011–12 STI without a deferred component, consistent with changes made to the STI Plan in
2010–11. At that time, the Board reviewed the purpose and effectiveness of deferral under the STI and concluded that it created a temporal
disconnect for participating Executive Directors and Executive Managers between satisfaction of performance measures and receiving the
award, and also because the nature of the performance measures for the STI are such that the Board is able to measure the performance
accurately, shortly following the end of the relevant performance period.
Payment of the STI is not accelerated on cessation of employment, but instead is paid in the normal STI cycle, and pro-rated for the
portion of the performance period completed prior to cessation. This is to ensure that STI is only paid where performance over the period
meets, or exceeds, the agreed performance measures. Pro-rata treatment extends to all STI participants other than those who resign
or are dismissed for cause.
In respect of the 2011–12 STI, at target performance for participating Executive Directors and Executive Managers was set at 60% of fixed
remuneration. At maximum, around 44% of the outcome depends on Group performance and around 56% on personal performance
measured against a set of Key Performance Indicators established with the Managing Director. The Group performance measures
and outcomes for 2011–12 are set out in Table 6.
Table 1 contains a summary of key features of the STI Plan.
Table 1: 2012 Short Term Incentive Plan
Summary of the 2012 Short Term Incentive Plan
What is the 2012 Short Term
Incentive Plan?
An incentive plan under which eligible employees are (subject to satisfaction of specified performance
measures) granted a cash amount, which is based on a percentage range of each participant’s
fixed remuneration (determined according to seniority and ability to influence the performance
of the Group). Performance is assessed against a combination of Group and individual measures,
with a slight weighting towards individual performance.
When is the 2012 STI grant paid
to eligible employees?
The STI amount will be paid to each participant who satisfies applicable performance measures
in October 2012, following assessment of performance against the applicable measures during
the 2011–12 performance period.
Who participates in the 2012 STI?
The Executive Directors, Executive Managers, management and supervisory employees participate
in the 2012 STI. In 2011–12, the Board determined to extend the STI to supervisor level employees
to encourage and reward high performance.
Why does the Board consider the
2012 STI an appropriate incentive?
An STI is a globally recognised form of reward for management, aimed at ensuring focus and alignment
with Group goals and strategy. Based on both Group and individual measures, and in conjunction
with other factors, the Board believes that it helps encourage and reward high performance.
In what circumstances are 2012
STI entitlements forfeited?
Where, prior to conclusion of the relevant performance period, a participant is dismissed for cause,
or resigns from employment, prior to conclusion of the performance period, the STI amount will be
forfeited upon cessation of employment. Where a participant ceases to be employed by the Group
prior to the end of the performance period, other than due to those reasons, payment of the STI
is pro-rated for the portion of the performance period completed prior to cessation.
What happens to 2012 STI
entitlements upon a change
of control in the Group?
Upon a change of control event (as described in the plan rules), the Board must determine the
extent, if any, to which early vesting on a full or a pro-rated basis is the appropriate outcome
in all the circumstances.
What are the performance
conditions under the 2012 STI?
The performance conditions under the 2012 STI comprise group performance measures and
personal performance measures.
Group performance measures relate to:
– safety;
– earnings;
– costs; and
– one further discretionary Group performance measure determined annually.
The ‘Safety’ measure is based 50% on Total Recordable Injury Frequency Rate (TRIFR) and 50% on
actioning of the safety risk list. The measures quantify how much of the primary and secondary safety
risk lists must be actioned to achieve the measures. The safety measure is seen as critical to the
successful operation of the Group’s business.
‘Earnings’ relates to targets for net profit after tax and minority interests before significant items.
The earnings target is a direct financial measurement of the Company’s performance. The results are
adjusted for the effect of commodity prices, foreign exchange rates, significant items and other items
as agreed with the Board of Directors.
‘Costs’ relates to unit production costs before credits, being total production costs before by-product
revenue credits divided by total gold production. The cost measurement is intended to improve the
profitability of the business. The results are adjusted for the effect of commodity prices, foreign
exchange rates, significant items and other items as agreed with the Board of Directors.
newcrest mining annual report 2012 57
Directors’ Report
REMUNERATION REPORT
Table 1: 2012 Short Term Incentive Plan (continued)
Summary of the 2012 Short Term Incentive Plan
What are the performance
conditions under the 2012 STI?
(continued)
What is the relationship
between Group performance
and allocation of STI?
What is the period over which
Group performance is assessed?
Personal performance measures relate to:
– three objectives in key areas of an employee’s broader area of responsibility; and
– a fourth discretionary objective developed by each participant’s manager.
These four objectives are agreed annually between participant and manager under the Group’s Work
Performance System (WPS) and/or documented on a STI 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 minimum threshold below
which the measured performance is zero.
The performance measures will generally be role-specific and focus on areas or projects most
closely related to the role, but above and beyond the performance expected on a day-to-day basis.
The key area objectives aim to encourage exceptional performance in the areas that will help drive
the Company’s longer-term strategy. The discretionary component is generally based on achievement
of personal goals and overall work performance.
Performance against Group objectives is measured in the range of 0% to 125% and a minimum
performance threshold must be exceeded to achieve a positive outcome. Overall Group performance
is measured as the simple average of achieved performance against the four Group objectives.
Performance against each personal performance objective is measured on a scale of 0% to 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 Group performance multiplied by personal performance.
The actual award of STI is calculated by multiplying the overall performance rating by a participating
employee’s target STI.
The assessment period is the financial year preceding the payment date of the STI (i.e. 1 July to 30 June).
5.5 Determining Variable Equity-Based Remuneration
The Board reviews and adjusts on an annual basis the content and balance of equity-based remuneration to ensure the effectiveness
of equity incentives and to recognise the potential impact on the Group of Executive Managers and Executive Directors.
The amount of equity remuneration received by employees is performance-dependent and will vary according to the extent to which
the related Group performance measures are achieved.
All equity-based remuneration is ‘at risk’ and will lapse or be forfeited, if the prescribed performance conditions are not met by the Group.
The Company’s Securities Dealing Policy, in compliance with the requirements of the Corporations Act and the ASX, 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 Group’s equity incentive schemes, whether or not they are vested. The policy also prohibits the entry into transactions in
associated products which operate to limit the economic risk of their security or interest holdings in the Company. 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 seek approval from the Company Secretary if they intend to enter into such transactions. The Securities Dealing
Policy forms part of each employee’s terms of employment, and is available on the Company’s website. Table 2 shows the composition
of equity-based remuneration for 2011–12.
Table 2: Equity-based Remuneration as a percentage of Fixed Remuneration for
Executive Directors and Executive Managers in 2011–12
Total Equity-based Remuneration (maximum award)
Managing
Director
100%
Director
Finance
100%
Executive
Managers
60%
5.5.1 Long Term Incentive (LTI)
Participation in the LTI plan was offered to Executive Directors and Executive Managers in 2011–12. The Group performance measures,
assessed over a three-year performance period, were three equally weighted performance measures, being:
– Comparative Cost Position;
– Reserves Growth; and
– Return on Capital Employed (ROCE).
Each LTI measure was chosen by the Board as it is a key driver of Group 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. The measures were
selected after extensive consultation with shareholders.
Following completion of Newcrest’s acquisition by Scheme of Arrangement of Lihir Gold Limited in September 2010, the Board undertook
a full review of the suitability of these measures going forward, given Newcrest’s increased size and changed financial and production
profile. The Board concluded that the Comparative Cost Position and ROCE measures remained appropriate in their present form,
but that the Reserves Growth measure should:
– be based on an absolute increase in reserves after depletions as opposed to the previous measure of a percentage increase in reserves; and
– to allow a proportion of the reserves growth to be contributed by copper reserve growth (in gold equivalent ounces).
The Board reviewed the LTI performance measures as outlined above during 2011–12 and concluded that they remained appropriate
for the 2012 LTI.
58 newcrest mining annual report 2012
Table 3: 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). Vesting and exercise of the Performance Rights
is contingent on the Group achieving certain performance hurdles over a set performance period.
Who participates in the LTI?
The Executive Directors, Executive Managers and management participate in the LTI.
Why does the Board consider
the LTI an appropriate incentive?
The LTI is designed to reward participants for Group performance and to align the long-term
interests of shareholders, participating Executive Directors, Executive Managers and management
and the Group, by linking a significant proportion of participating employees’ at-risk remuneration
to the Group’s future performance, currently assessed over a three-year period from the date of grant
of the Performance Rights.
What are the key features
of the LTI?
– Performance Rights issued under the LTI are conditional rights for the holder to subscribe
for fully paid ordinary shares in the Company.
In what circumstances are
LTI entitlements forfeited?
What are the performance
conditions under the LTI?
What is the relationship
between Group performance
and allocation of
Performance Rights?
– No amount is payable by a 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.
Performance Rights generally do not vest (and are not exercisable) if the minimum performance
conditions are not met.
The LTI amount will be forfeited upon cessation of employment prior to conclusion of the performance
period in circumstances where a participant is either dismissed for cause, resigns from employment,
or is guilty of fraud.
Performance Rights issued under the LTI Plan are subject to three performance measures based on:
– Comparative Cost Position;
– Reserves Growth; and
– Return on Capital Employed (ROCE).
Performance against each of these measures over the three-year vesting period accounts for
one third of any grant made to participants.
Comparative Cost Position is a relative measure of the Group’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 three-year vesting period. The comparison is made by
ranking the Group’s performance against all other producers included in the GFMS Precious Metals
Cost Service in accordance with their cash costs of production.
Reserves Growth is an absolute performance measure that 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 the Company’s reserves figures. Broadly, the increase
in reserves will determine the number of rights granted. See below for further information on the
Reserves Growth measure.
Return on Capital Employed (ROCE) is an absolute measure, defined as underlying earnings before
interest and tax, divided by average capital employed, being shareholders’ equity plus net debt.
ROCE for each of the three years of the performance period is averaged to determine the number
of Performance Rights that may be exercised in relation to this performance measure.
All outcomes of the three LTI performance measures are independently reviewed and verified.
The methods for assessing satisfaction of these performance measures were selected because
they provide an accurate tool by which to assess performance against the relevant measure.
Comparative Cost Position
Performance against this measure accounts for one third of a participant’s Performance Rights
which may vest in any grant of LTI entitlements:
– at or above the 50th percentile leads to a zero award of these Performance Rights;
– less than the 50th percentile but at or above the 25th percentile leads to a 50% award
of these Performance Rights;
– below the 25th percentile but at or above the 10th percentile leads to an 80% award
of these Performance Rights;
– below the 10th percentile leads to a 100% award of these Performance Rights; and
– straight-line vesting occurs between each of these thresholds.
newcrest mining annual report 2012 59
Directors’ Report
REMUNERATION REPORT
Table 3: Long Term Incentive (LTI) (continued)
Summary of LTI
What is the relationship
between Group performance
and allocation of
Performance Rights?
(continued)
Reserves Growth
Performance against this measure accounts for one-third of Performance Rights, which may vest
in any grant of LTI entitlements.
The performance measure for Reserves Growth applicable for the 2008 LTI and 2009 LTI was:
– Less than 10% growth leads to a zero award of these Performance Rights;
– 10% growth leads to a 50% award of these Performance Rights; and
– Greater than 10% growth up to 30% growth. Award of these Performance 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.
The performance measure for Reserves Growth was amended by the Board for the 2010 LTI
and subsequent LTI grants. The amendment allowed a proportion of the reserves growth to be
contributed by growth in copper reserves after depletion. (The copper contribution is measured
in equivalent gold ounces). The amendment also resulted in the performance measure being based
on an absolute growth in reserves (as opposed to a percentage increase). This remains a challenging
performance measure, particularly given the Company’s historical and current preferred strategy
of growth through exploration discoveries, rather than acquisition.
– Zero gold Reserves Growth after depletion leads to a zero award of these Rights;
– Gold Reserve Growth after depletions at or above 15 million ounces leads to a 100% vesting
of these Performance Rights; and
– Straight-line vesting occurs between these thresholds.
A proportion of the Reserves Growth target can be contributed by copper Reserve Growth after
depletion (in gold equivalent ounces). The contribution from copper reserves growth is capped
at 30% of the total Reserves Growth performance target of 15 million ounces (or 4.5 million ounces).
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 Performance Rights.
– ROCE from 7% and below 17% leads to an award of 10% of these Performance Rights per percentage
point above 7%.
– ROCE at or above 17% leads to 100% of these Performance Rights vesting.
When do the Performance
Rights vest?
Performance Rights vest (i.e. may be exercised) three years after the date of grant, provided
performance conditions are met. Under the 2011 LTI grant, Performance Rights will be exercised
automatically upon vesting.
What is the period over which
Group performance is assessed?
How are shares provided to
participants under the LTI?
The assessment period is the three financial years commencing on 1 July in the year the grant is issued.
Once Performance Rights have vested and are exercised, shares are either issued by the Company
to eligible LTI participants as new capital, or transferred from the Company’s share plan trust,
having previously been bought on market by the trustee.
Why did the Board choose the
above performance hurdles?
The Board considers that these performance measures are key factors which impact on the
Company’s share price and which drive the value of the Group 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 performance period and will increase if the share price rises over the
performance period.
Are the performance
conditions re-tested?
What is the maximum number
of Performance Rights that may
be granted to an LTI participant?
No, the performance conditions are only tested once at the end of the three year performance period.
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.
Table 4: LTI Performance Hurdles 2009 and 2010
The following is a summary of performance hurdles that relate to the 2009 and 2010 Share Plan awards that are yet to vest. Table 13 provides
detail of all Share Plan awards, including those that have vested, but have not yet been exercised.
Calendar Year
Grant Date
Performance Hurdle
2010 (LTI)
10 Nov 2010
2009 (LTI)
10 Nov 2009
The performance hurdles are based on Reserves Growth, Comparative Cost Position and ROCE.
(Refer to Table 3 for details).
The performance hurdles are based on Reserves Growth, Comparative Cost Position and ROCE.
(Refer to Table 3 for details).
60 newcrest mining annual report 2012
5.6 Medium Term Incentive (MTI)
The MTI scheme offered participants restricted rights to receive
ordinary fully paid shares in the Company after a three year
vesting period – based on the Company’s Total Shareholder
Return performance against a comparator group of companies
in the financial year immediately prior to the date of grant of
those rights. The MTI has not been offered to Executive Directors
and Executive Management since 2007 and has been discontinued
as an incentive scheme. All restricted rights issued to Executive
Directors and Executive Managers under the MTI in prior periods
have now vested. The exercise period for these restricted rights
will expire on 9 November 2012.
6. RELATIONSHIP OF INCENTIVES TO NEWCREST’S
FINANCIAL PERFORMANCE
As described above, LTI performance measures since November
2008 have been based on a combination of the Group’s Reserves
Growth, Comparative Cost Position and Return on Capital
Employed (ROCE) over a three year performance period.
The LTI performance measures are based on key business drivers
intended to result in superior financial performance over the long
term. Each measure was selected after an extensive consultation
process with shareholders, which produced strong general
agreement on which measures should create long-term shareholder
value. Since 2008, the Company has generally performed strongly
on these measures, although the $9.3 billion acquisition of
Lihir Gold Limited in 2010 impacted ROCE, and production costs
across the Group have risen strongly over the past two years.
In FY12, challenged by the rising Australian dollar, and significant
increases in labour, energy and other commodity costs, the
Company has not held its position within the lowest cost quartile
of the global industry.
The Board, in assessing the achievement of LTI performance
measures, incorporates performance of the Group both in the
current year and the two preceding years. Accordingly, the level
of performance targets achieved in any one year will impact three
consecutive years of LTI performance, and thus the proportion
of LTI awarded to executives.
Over the past five years, basic earnings per share has grown at
an average rate per annum of approximately 50%. Over the same
period, there has been a continued increase in total annual dividend
payments per share from 10 cents in 2008 to 35 cents in 2012.
The final FY12 dividend determined, to be paid on 19 October 2012,
has also been increased by 15%. In addition a special dividend of
20 cents per share was paid in December 2011. The Company share
price increased strongly from 2008 to 2011 (from $29.30 as at
30 June 2008 to $37.71 as at 30 June 2011), but faced significant
downward pressures in 2012, along with equity markets around
the world and global gold mining stocks generally.
The Company believes that the continuing focus on the key
long-term drivers of shareholder value will see a return to
share price growth.
Table 5 below reflects the underlying financial performance
of the Company for the period 30 June 2008 to 30 June 2012.
Table 5: Newcrest’s Financial Performance
Year Ended 30 June
Basic Earnings Per Share (EPS) (cents)(1)
Dividends (cents)(2)
Special dividends (cents)
Share price at 30 June ($)
Share price increase/(decrease) ($)(3)
2008
30.8
10.0
–
29.30
6.45
2009
53.0
15.0
–
30.51
1.21
2010
115.2
25.0
–
35.10
4.59
2011
126.4
30.0
20.0
37.71
2.61
2012
146.0
35.0
–
22.61
(15.10)
(1) Basic EPS is calculated as net profit after tax and non-controlling interests (statutory profit) divided by the weighted average number of ordinary shares.
(2) Dividends exclude special dividends.
(3) Share price movement during the financial year.
In relation to the STI awarded for 2011–12, the Group’s performance against the Group performance objectives for Executive Directors and
Executive Managers is set out in Table 6. It shows that overall, the Group’s performance was at 71.5% of the target, reflecting above-target
performance for safety, but below target for earnings and 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 Executive
Managers for 2011–12 has been determined by the overall personal performance multiplied by the Group’s overall performance.
Table 6: Performance objective for year ended 30 June 2012 (Executive Directors and Executive Managers)
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
(Adjusted net profit after tax and significant Items)(2)
Costs
(Total production costs per ounce before by-product
revenue credits divided by total gold production)(3)
Discretionary Component(4)
Overall Company Performance
(including discretionary component)
Target
Outcome
Percentage of
target achieved
<3.5
3.3
125%
(50% weighting)
90% Risk Reduction 99% Risk Reduction
Actions on Time
Actions On Time
125%
(50% weighting)
A$1,200 million
A$1,091 million
A$998/oz
A$1,094/oz
55%
56%
50%
71.5%
(1) The Safety List comprises risk reduction actions that have been developed as part of the risk assessment process conducted on the major safety hazards
across the Group.
(2) Actual earnings are adjusted for the effect of commodity prices, foreign exchange rates, significant items and other items as agreed with the Board of Directors.
(3) Actual costs are adjusted for the effect of commodity prices, foreign exchange rates, significant items and other items as agreed with the Board of Directors.
(4) 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 2012 61
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 Executive Managers are formalised in the
Executive Service Agreements.
Table 7 lists each of the executives who was party to an Executive Service Agreement during 2011–12 and provides a high level overview
of some key terms.
Table 7: Executive Service Agreements
Name
Fixed Annual
Term of Remuneration
$
Agreement
Notice Period
by Executive
Notice Period
by Newcrest
Termination
Payment
Greg Robinson(1)
Managing Director and Chief Executive Officer
Gerard Bond(2)
Finance Director and Chief Financial Officer
Lawrie Conway(3)
Executive General Manager
Commercial and West Africa
Stephen Creese
Executive General Manager
Corporate Affairs
Ron Douglas(4)
Executive General Manager
Projects
Brett Fletcher
Executive General Manager
PNG and Indonesian Operations
Greg Jackson
Chief Operating Officer
Andrew Logan(5)
Executive General Manager
Strategy, Innovation and Technology
Colin Moorhead
Executive General Manager
Minerals
Peter Smith
Executive General Manager
Australian Operations
Debra Stirling
Executive General Manager
People and Communication
Open
2,000,000
3 months
12 months
Open
900,000
3 months
12 months
Open
714,000
3 months
12 months
Open
820,000
3 months
12 months
Open
795,600
3 months
12 months
Open
795,600
3 months
12 months
Open
918,000
3 months
12 months
Open
714,000
3 months
12 months
Open
785,400
3 months
12 months
Open
795,600
3 months
12 months
Open
765,000
3 months
12 months
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
12 month average
base salary
(1) Appointed MD and CEO on 1 July 2011, upon Ian Smith stepping down from that role on 30 June 2011. As announced to the market on 11 February 2011,
Mr Smith continued to be employed by the Company from 1 July to 31 December 2011, but was not a member of the Executive Management Team during
that period. Details of Mr Smith’s remuneration arrangements upon stepping down as CEO and during the following six months, including forfeiture
of the deferred components of his 2010 STI and 2009 and 2010 LTI entitlements, are set out in the Company’s 2011 Remuneration Report.
(2) Appointed Finance Director and CFO on 1 January 2012 (and appointed as a Director of Newcrest Mining Limited on 8 February 2012).
(3) Appointed EGM Commercial and West Africa on 1 July 2011.
(4) Resigned from Newcrest on 13 July 2012.
(5) Appointed EGM Strategy, Innovation and Technology on 1 July 2011.
Subject to compliance with other conditions as set out in the Corporations Act 2001, the maximum termination payment for
Key Management Personnel is calculated as being the employee’s average annual base salary over the previous three years.
On 1 July 2012 (subsequent to the reporting period) the Company appointed Mr Scott Langford to the position of General Counsel
and Company Secretary. On 17 July 2012 the Company appointed Mr Craig Jones to the position of Executive General Manager Projects.
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 each Executive Director’s and each Executive Manager’s fixed annual
remuneration as at 30 June 2012.
62 newcrest mining annual report 2012
7.2 Executive Service Agreements entered into in 2011–12
7.2.1 Lawrie Conway
Lawrie Conway commenced in the role of Executive General Manager
– Commercial and West Africa on 1 July 2011, having previously
been employed with the Company in a number of roles including
Head of Commercial and Planning immediately prior to the
above appointment.
The appointment is for an indefinite duration. Lawrie Conway
may resign at any time by giving three months written notice,
and the Company may terminate his employment on giving
twelve months written notice, or payment in lieu of notice.
The Agreement sets out Lawrie Conway’s duties and responsibilities.
The terms of remuneration payable to Lawrie Conway include:
– Base salary of $714,000 per annum to be reviewed annually;
– STI of 60% at target with a maximum of up to 120% of
base salary dependent upon meeting specified personal
and Group performance targets, where 120% is achievable
only for ‘outstanding’ performance; and
– LTI in accordance with the Group’s LTI plan, equal to 60%
of base salary.
Compensation for statutory entitlements of accrued annual and
long service leave and any superannuation benefits, are payable
upon termination of employment.
7.2.2 Andrew Logan
Andrew Logan commenced in the role of Executive General
Manager – Strategy, Step Change and Technology on 1 July 2011,
having previously been employed with the Company in a number
of roles including General Manger – Development, immediately
prior to the above appointment.
The appointment is for an indefinite duration. Andrew Logan
may resign at any time by giving three months written notice,
and the Company may terminate his employment on giving
twelve months written notice, or payment in lieu of notice.
The Agreement sets out Andrew Logan’s duties and responsibilities.
The terms of remuneration payable to Andrew Logan include:
– Base salary of $714,000 per annum to be reviewed annually;
– STI of 60% at target with a maximum of up to 120% of
base salary dependent upon meeting specified personal
and Group performance targets, where 120% is achievable
only for ‘outstanding’ performance; and
– LTI in accordance with the Group’s LTI plan, equal to 60%
of base salary.
Compensation for statutory entitlements of accrued annual and
long service leave and any superannuation benefits, are payable
upon termination of employment.
7.3 Executive Retention Arrangements
In 2010–11, following the acquisition of Lihir Gold Limited,
the growth of the Group and the departure of Ian Smith meant the
Board were concerned with retaining a number of key executives.
At that time, Stephen Creese, Ron Douglas, Colin Moorhead and
Debra Stirling were each offered a retention payment in three
parts comprising $75,000 paid in June 2011; $100,000 paid in
June 2012; and $125,000 payable in June 2013. The entitlement
to receive each tranche of the retention payment is conditional on
each executive maintaining at least a ‘satisfactory’ rating in his or
her performance reviews, throughout the periods outlined above,
as well as continuing to be employed at least at their current level
by the Company at the relevant payment date.
7.4 Executive Director Service Agreements
7.4.1. 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.
Effective 1 July 2011, Greg Robinson was appointed Managing
Director and Chief Executive Officer. The terms of the Service
Agreement under which Greg Robinson is employed in that
capacity are summarised below.
The appointment is for an indefinite duration. Greg Robinson
may resign at any time by giving three months written notice,
and the Company may terminate his employment on giving
twelve months written notice, or payment in lieu of notice.
The Service Agreement sets out Greg Robinson’s duties
and responsibilities.
The terms of remuneration payable to Greg Robinson include:
– Base salary of $2,000,000 per annum to be reviewed annually;
– STI of 60% at target with a maximum of up to 120% of
base salary dependent upon meeting specified personal
and Group performance targets, where 120% is achievable
only for ‘outstanding’ performance; and
– LTI in accordance with the Group’s LTI plan, equal to 100%
of base salary.
Compensation for statutory entitlements of accrued annual and
long service leave and any superannuation benefits, are payable
upon termination of employment.
7.4.2 Gerard Bond
Gerard Bond commenced employment with the Company
as Finance Director and Chief Financial Officer on 1 January 2012
and was appointed to the Board on 8 February 2012.
The appointment is for an indefinite duration. Gerard Bond
may resign at any time by giving three months written notice,
and the Company may terminate his employment on giving
twelve months written notice, or payment in lieu of notice.
The Agreement sets out Gerard Bond’s duties and responsibilities.
The terms of remuneration payable to Gerard Bond include:
– Base salary of $900,000 per annum to be reviewed annually;
– STI of 60% at target with a maximum of up to 120% of
base salary dependent upon meeting specified personal
and Group performance targets, where 120% is achievable
only for ‘outstanding’ performance;
– LTI in accordance with the Group’s LTI plan, equal to 100%
of base salary; and
– Two equity grants of $750,000 (market value) in Newcrest
ordinary shares, to be provided as compensation for equity
foregone upon Gerard Bond resigning from his previous
employment to take up his role as Finance Director and
Chief Financial Officer with Newcrest. These grants will
be made in October 2012 and October 2013, respectively,
subject to ongoing satisfactory performance and continuing
employment at the relevant grant dates.
Compensation for statutory entitlements of accrued annual and
long service leave and any superannuation benefits, are payable
upon termination of employment.
newcrest mining annual report 2012 63
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 8: Directors’ Remuneration
Short Term
Employment Payments
Post-
Share-
Based
Equity
Salary Committee
Fees
& Fees
(B)
(A)
$’000s
$’000s
Salary
at Risk
(C)
$’000s
Other
Non
cash Monetary
Benefits
(E)
$’000s
benefits
(D)
$’000s
Super-
annuation
(F)
$’000s
Value
of Rights
(G)
$’000s
Termination
Benefit
(H)
$’000s
Compen- Performance
sation
Related
Value Remuneration
(J)
%
(I)
%
Total
$’000s
1,984
442
600
184
184
184
200
184
184
–
–
–
70
65
45
65
40
40
686
65
221
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
4
–
–
–
–
–
–
–
16
936
–
3,695
25.3
43.9
8
966
–
1,641
58.9
20.9
–
16
16
16
–
16
16
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
600
270
265
245
265
240
240
7,461
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,146
325
907
65
12
104
1,902
2,302
–
965
750
1,274
–
1,153
–
527
166
166
166
178
166
77
–
95
66
56
56
35
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
6
–
–
–
–
–
4
–
15
15
13
16
16
16
7
15
6
377
2,250
6,665
5.7
20.1
910
–
3,358
27.1
61.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
540
277
248
238
241
220
96
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Directors
2011–12
Executive Directors
Greg Robinson
Managing Director
and CEO
Gerard Bond
Finance Director
and CFO
Non-Executive Directors
Don Mercer
Chairman
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Winifred Kamit
2010–11
Executive Directors
Ian Smith
Managing Director
and CEO
Greg Robinson
Director Finance
and CFO
Non-Executive Directors
Don Mercer
Chairman
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Winifred Kamit
5,022
321
2,118
750
16
119
1,287
2,250
11,883
See notes to tables 8 and 9 at page 66 for explanation of notes (A)–(J) above.
64 newcrest mining annual report 2012
8.2 Executive Managers
Details of the nature and amount of each major element of remuneration for the Company’s Executive Managers are as follows:
Table 9: Executive Managers’ Remuneration
Executive Managers
2011–12
Colin Moorhead
EGM Minerals
Ron Douglas(1)
EGM Projects
Debra Stirling
EGM People & Communication
Stephen Creese
EGM Corporate Affairs
Greg Jackson
Chief Operating Officer
Peter Smith
EGM Australian Operations
Brett Fletcher
EGM PNG &
Indonesian Operations
Lawrie Conway
EGM Commercial & West Africa
Andrew Logan
EGM Strategy, Innovation
& Technology
2010–11
Colin Moorhead
EGM Minerals
Ron Douglas
EGM Projects
Debra Stirling
EGM People & Communication
Stephen Creese
EGM Corporate Affairs
Greg Jackson
Chief Operating Officer
Peter Smith
EGM Australian &
African Operations
Commenced 30 Aug 10
Brett Fletcher
EGM PNG &
Indonesian Operations
Commenced 28 Mar 11
Short Term
Post-
Employment
Salary
& Fees
(A)
$’000s
Salary
at Risk
(C)
$’000s
Other
cash
benefits
(D)
$’000s
Non
Monetary
Benefits
(E)
$’000s
Super-
annuation
(F)
$’000s
766
776
745
812
898
776
776
695
695
317
273
328
387
315
273
273
306
306
131
130
131
114
7
–
–
6
9
8
8
8
7
8
8
8
8
8
16
16
16
16
16
16
16
16
16
Share-
Based
Payments
Value
of Rights
(G)
$’000s
292
294
278
250
276
168
167
125
149
1,530
1,497
1,506
1,586
1,520
1,241
1,240
1,156
1,183
6,939
2,778
528
71
144
1,999
12,459
15
15
15
15
15
13
332
343
321
186
198
67
1,724
1,703
1,619
1,681
1,571
1,039
713
721
686
713
821
640
483
443
416
586
481
313
200
114
175
175
175
175
50
–
–
–
6
6
6
6
6
6
2
4
Equity
Compensation
Value
(I)
%
Total
$’000s
Performance
Related
Remuneration
(J)
%
19.1
19.6
18.5
15.8
18.2
13.5
13.5
10.8
12.6
19.3
20.1
19.8
11.1
12.6
6.4
39.8
37.9
40.2
40.2
38.9
35.5
35.5
37.3
38.5
47.3
46.2
45.5
45.9
43.2
36.6
4
37
357
10.4
42.3
8
(295)
(30)
n/a
n/a
Former Executive Manager
Geoff Day(2)
COO Offshore Operations
Resigned 4 Feb 2011
465
(212)
4,959
2,624
750
42
100
1,189
9,664
(1) Ron Douglas resigned on 13 July 2012. The share-based payments expense for 2011–12 of $294,000 includes $45,000 for rights that vested during the year
and $249,000 for rights that had not vested at 30 June 2012. The non-vested rights were subsequently forfeited upon resignation on 13 July 2012.
(2) Geoff Day resigned on 4 February 2011 and forfeited his rights to shares and his deferred component of his Short Term Incentive (‘STI’). Any share-based
payments expense previously recognised under AASB 2 in respect of the rights to shares has been reversed. The deferred component of his STI in respect
of FY2009 and FY2010 has been reversed.
newcrest mining annual report 2012 65
Directors’ Report
REMUNERATION REPORT
Notes to Tables 8 and 9:
(A) Sa lary and 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 other 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 Executive Managers’ performance in the 2011–12 year and for comparatives,
performance in 2010–11.
The amount disclosed for Ian Smith in 2010–11 is net of the forfeiture of $704,000 of the deferred component of the short-term
incentive relating to the 2009–10 year. This amount was disclosed as remuneration in 2009–10.
(D) Comprises:
– Amounts paid to Executive Managers as retention bonuses, as outlined in section 7.3.
– Interest in respect to the deferred component of the 2008–09 and 2009–10 STI plans.
– For 2010–11, it includes amounts paid to the Chief Executive Officer and Executive Managers for work in relation to the acquisition
of Lihir Gold Limited.
(E) Represents non-monetary benefits such as non-business travel, parking, insurance and applicable fringe benefits tax payable on benefits.
(F) Represents Company contributions to superannuation under the Superannuation Guarantee legislation (SGC).
(G) The fair value of rights, comprising rights over unissued shares, granted under the LTI plan has been valued using a Black-Scholes
option pricing model. The following factors and assumptions were used in determining the fair value of rights on the grant date:
Table 10: Fair Value of Rights
Fair value(1)
Exercise price
Estimated volatility
Risk-free interest rate
Dividend yield
Expected life of award/option
LTI
Sep 2011
LTI
Nov 2010
LTI
Nov 2009
LTI
Nov 2008
LTI
Nov 2007
MTI
Nov 2007
$31.83
$41.66
$34.63
$22.00
$23.38
$35.64
–
30%
3.16%
1.50%
3 years
–
30%
5.09%
0.50%
3 years
–
40%
5.04%
0.50%
3 years
–
40%
3.97%
0.20%
3 years
–
36%
6.69%
0.20%
3 years
–
36%
6.69%
0.20%
3 years
(1) Fair value has been calculated by an independent third party.
The value of rights for Gerard Bond also includes a pro-rata of the equity grants to be awarded in October 2012 and 2013 as outlined
in section 7.4.2.
(H) Represents amounts paid to Ian Smith as Chief Executive Officer, details of which are set out in the Company’s 2011 Remuneration Report.
(I) Represents the value of rights included in remuneration as a percentage of total remuneration.
(J) Represents performance-related remuneration as a percentage of total remuneration.
9. RIGHTS HELD BY EXECUTIVE DIRECTORS AND EXECUTIVE MANAGERS
All conditional entitlements refer to Restricted Rights and Performance Rights over fully paid ordinary shares of the Company,
which are exercisable on a one-for-one basis. As noted in section 5, no payment is required by a participant on the grant or exercise
of any such conditional entitlement.
The movements in the reporting period in the number of Rights over ordinary shares in the Company held by each Executive Director
and Executive Manager, as part of their remuneration, are as follows:
66 newcrest mining annual report 2012
Table 11: Movement in Rights for Executive Directors and Executive Managers 2011–12
Executive
Directors and
Executive Managers Grant Date
G. Robinson
3-Nov-06
3-Nov-06
9-Nov-07
9-Nov-07
11-Nov-08
10-Nov-09
10-Nov-10
23-Sep-11
Share
Price at
Grant Date
$24.10
$24.10
$35.85
$35.85
$22.13
$35.15
$42.29
$33.18
Type
MTI
LTI
MTI
LTI
LTI
LTI
LTI
LTI
G. Bond
23-Sep-11
LTI
$33.18
C. Moorhead
D. Stirling
S. Creese
G. Jackson
P. Smith
B. Fletcher
L. Conway
A. Logan
R. Douglas(3)
3-Nov-06
3-Nov-06
9-Nov-07
9-Nov-07
11-Nov-08
10-Nov-09
10-Nov-10
23-Sep-11
9-Nov-07
9-Nov-07
11-Nov-08
10-Nov-09
10-Nov-10
23-Sep-11
10-Nov-09
10-Nov-10
23-Sep-11
10-Nov-09
10-Nov-10
23-Sep-11
10-Nov-10
23-Sep-11
10-Nov-10
23-Sep-11
9-Nov-07
9-Nov-07
11-Nov-08
10-Nov-09
10-Nov-10
23-Sep-11
3-Nov-06
3-Nov-06
9-Nov-07
9-Nov-07
11-Nov-08
10-Nov-09
10-Nov-10
23-Sep-11
11-Nov-08
10-Nov-09
10-Nov-10
23-Sep-11
MTI
LTI
MTI
LTI
LTI
LTI
LTI
LTI
MTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
MTI
LTI
LTI
LTI
LTI
LTI
MTI
LTI
MTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
$24.10
$24.10
$35.85
$35.85
$22.13
$35.15
$42.29
$33.18
$35.85
$35.85
$22.13
$35.15
$42.29
$33.18
$35.15
$42.29
$33.18
$35.15
$42.29
$33.18
$42.29
$33.18
$42.29
$33.18
$35.85
$35.85
$22.13
$35.15
$42.29
$33.18
$24.10
$24.10
$35.85
$35.85
$22.13
$35.15
$42.29
$33.18
$22.13
$35.15
$42.29
$33.18
Movements During 2011–12
As at 30 June 2012
Balance at
1/07/11
Rights
granted
Rights
exercised
Rights
lapsed
Balance at
30/06/12
Vested(1)
and
Exercisable
Non-
Vested(2)
4,245
12,007
4,915
8,508
50,024
31,988
33,793
–
145,480
–
–
1,932
1,005
3,768
1,863
18,554
11,864
10,814
–
49,800
3,097
5,360
17,190
10,992
10,513
–
47,152
11,864
10,814
–
22,678
11,864
12,766
–
24,630
10,964
–
10,964
9,845
–
9,845
1,578
780
4,359
2,787
2,662
–
12,166
2,449
1,270
1,937
958
6,130
3,920
3,642
–
20,306
18,554
11,864
10,964
–
41,382
–
–
–
–
–
–
–
58,406
58,406
23,884
23,884
–
–
–
–
–
–
–
13,762
13,762
–
–
–
–
–
13,404
13,404
–
–
14,368
14,368
–
–
16,085
16,085
13,940
13,940
–
13,940
13,940
–
–
–
–
–
12,510
12,510
–
–
–
–
–
–
–
12,510
12,510
–
–
–
13,940
13,940
(4,245)
(12,007)
–
–
–
–
–
–
(16,252)
–
–
(1,932)
(1,005)
(3,768)
(1,863)
–
–
–
–
(8,568)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,578)
(780)
–
–
–
–
(2,358)
(2,449)
(1,270)
–
–
–
–
–
–
(3,719)
(17,348)
–
–
–
(17,348)
–
–
–
–
(3,252)
–
–
–
(3,252)
–
–
–
–
–
–
(1,206)
–
–
–
(1,206)
–
–
(1,117)
–
–
–
(1,117)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(283)
–
–
–
(283)
–
–
–
–
(398)
–
–
–
(398)
(1,206)
–
–
–
(1,206)
–
–
4,915
8,508
46,772
31,988
33,793
58,406
184,382
23,884
23,884
–
–
–
–
17,348
11,864
10,814
13,762
53,788
3,097
5,360
16,073
10,992
10,513
13,404
59,439
11,864
10,814
14,368
37,046
11,864
12,766
16,085
40,715
10,964
13,940
24,904
9,845
13,940
23,785
–
–
4,076
2,787
2,662
12,510
22,035
–
–
1,937
958
5,732
3,920
3,642
12,510
28,699
–
11,864
10,964
13,940
36,768
–
–
4,915
8,508
46,772
–
–
–
60,195
–
–
–
–
–
–
17,348
–
–
–
17,348
3,097
5,360
16,073
–
–
–
24,530
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,076
–
–
–
4,076
–
–
1,937
958
5,732
–
–
–
8,627
–
–
–
–
–
–
–
–
–
–
31,988
33,793
58,406
124,187
23,884
23,884
–
–
–
–
–
11,864
10,814
13,762
36,440
–
–
–
10,992
10,513
13,404
34,909
11,864
10,814
14,368
37,046
11,864
12,766
16,085
40,715
10,964
13,940
24,904
9,845
13,940
23,785
–
–
–
2,787
2,662
12,510
17,959
–
–
–
–
–
3,920
3,642
12,510
20,072
–
11,864
10,964
13,940
36,768
(1) During the year, the 11 November 2008 LTI plan vested. See Table 13 for details.
(2) 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.
(3) Ron Douglas forfeited the non-vested share rights at 30 June 2012 upon his resignation on 13 July 2012.
newcrest mining annual report 2012 67
Directors’ Report
REMUNERATION REPORT
9.1 Performance Conditions for Rights
Table 12: Value of Rights
Executive Directors and Executive Managers
Greg Robinson
Gerard Bond
Colin Moorhead
Ron Douglas
Debra Stirling
Stephen Creese
Greg Jackson
Peter Smith
Brett Fletcher
Lawrie Conway
Andrew Logan
Value at
Grant Date
Value at
Exercise Date
Value at
Lapse Date
(A)
$’000
1,859
760
438
444
427
457
512
444
444
398
398
(B)
$’000
(C)
$’000
550
–
347
580
–
–
–
–
–
95
144
120
–
45
45
41
–
–
–
–
10
15
The LTI grant date for each Executive Director and Executive Manager listed above is 23 September 2011. Table 12 above shows the
total value of any Rights granted, exercised and lapsed in 2011–12 in relation to Executive Directors and Executive Managers based
on the following assumptions:
(A) The value of Rights at grant date reflects the fair value of a right multiplied by the number of Rights granted during 2011–12.
(Refer footnote G to Tables 8 & 9).
(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 exercise price multiplied by the number of rights exercised during 2011–12.
(C) The value at lapse date has been determined by the share price at the close of business on the date the Restricted Right
or Performance Right lapsed, less the exercise price multiplied by the number of Rights that lapsed during the year.
Performance conditions for Rights are set out in Table 13 below.
Table 13: Executive Directors and Executive Managers – Rights granted between the 2007–08 and 2011–12 years
Note: Refer Table 4 for a summary of the applicable performance hurdles.
Grant Date
Expiry Date
Comparator Group
Strike
Price
Vesting Date
(for LTI and MTI)
Performance Achieved
Percentage
Vested(1)
23 Sep 2011
(LTI)
10 Nov 2010
(LTI)
10 Nov 2009
(LTI)
11 Nov 2008
(LTI)
23 Sep 2014
Performance conditions
referred to in the Plan Rules
10 Nov 2015
Performance conditions
referred to in the Plan Rules
10 Nov 2014
Performance conditions
referred to in the Plan Rules
11 Nov 2013
Performance conditions
referred to in the Plan Rules
Nil
Nil
Nil
Nil
23 Sep 2014
To be determined
10 Nov 2013
To be determined
10 Nov 2012
To be determined
11 Nov 2011
Cost: 85%
Reserves: 100%
ROCE: 96%
9 Nov 2007
(LTI)
9 Nov 2012
Newcrest’s TSR ranking
against FTSE Gold Index
Nil
9 Nov 2010
9 Nov 2007
(MTI)
9 Nov 2012
Select Group referred to in
the Performance Condition
(TSR ranking on sliding scale)
Nil
9 Nov 2010
(1) The percentage vested is the same for all Key Management Personnel.
73rd percentile resulting
in 96% of the maximum
award of Rights
69th percentile resulting
in 83.2% of the maximum
award of Rights
N/A
N/A
N/A
93.5%
100%
100%
68 newcrest mining annual report 2012
Table 14: 2011–12 Short Term Incentive Grant and allocation of the September 2011 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 Sep 2011 performance rights grants in future years
Executive Directors
and Executive Managers
Percentage
Awarded
Percentage
Forfeited
2012/13
$’000
2013/14
$’000
2014/15
$’000
Greg Robinson
Gerard Bond
Colin Moorhead
Ron Douglas(1)
Debra Stirling
Stephen Creese
Greg Jackson
Peter Smith
Brett Fletcher
Lawrie Conway
Andrew Logan
28.6%
41.1%
33.6%
28.6%
35.8%
39.3%
28.6%
28.6%
28.6%
35.8%
35.8%
71.4%
58.9%
66.4%
71.4%
64.3%
60.7%
71.4%
71.4%
71.4%
64.3%
64.3%
620
253
146
–
142
152
171
148
148
133
133
620
253
146
–
142
152
171
148
148
133
133
155
63
37
–
36
38
43
37
37
33
33
Maximum
Total
$’000
1,395
569
329
–
320
342
385
333
333
299
299
(1) Ron Douglas resigned from Newcrest on 13 July 2012 and forfeited all performance rights and future entitlements upon resignation. As a result he will not
receive any further remuneration.
(A) To be awarded a STI of 120% an Executive has to have met outstanding personal performance and Group performance must be at
or above the maximum level pre-determined by the Board. Personal performance and Group 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 September 2011, 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 2012 69
Directors’ Report
This report is signed in accordance with a resolution of the Directors.
Don Mercer
Chairman
13 August 2012
Melbourne
Greg Robinson
Managing Director and
Chief Executive Offi cer
70 newcrest mining annual report 2012
Auditor’s Independence Declaration
newcrest mining annual report 2012 71
Consolidated Income Statement
FOR THE YEAR ENDED 30 JUNE 2012
Operating sales revenue
Cost of sales
Gross profit
Exploration expenses
Corporate administration expenses
Other income/(expenses)
Share of profit of associate
Losses on restructured and closed-out hedge contracts
Other close-out related costs
Business acquisition and integration costs
Gain on business divestment
Profit before interest and income tax
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit after income tax
Profit after tax attributable to:
Owners of the parent
Non-controlling interest
Earnings per share (cents per share)
Basic earnings per share
Diluted earnings per share
The above statement should be read in conjunction with the accompanying notes.
Consolidated
2012
$M
4,416
(2,607)
1,809
(80)
(140)
(14)
15
(7)
–
(11)
46
1,618
2
(43)
1,577
(402)
1,175
1,117
58
1,175
146.0
145.8
2011
$M
4,102
(2,401)
1,701
(55)
(93)
(9)
–
(153)
(3)
(52)
–
1,336
9
(45)
1,300
(334)
966
908
58
966
126.4
126.2
Note
4(a)
4(b)
14
4(c)
4(d)
17
4(i)
4(j)
4(k)
4(l)
4(e)
5(b)
7
7
72 newcrest mining annual report 2012
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2012
Profit after income tax
Other comprehensive income
Cash flow hedges
Losses on restructured hedge contracts transferred to the Income Statement
Foreign exchange gains on US dollar borrowings transferred to the Income Statement
Other cash flow hedges deferred in equity
Income tax expense/(benefit)
Available-for-sale investments
Net loss on available-for-sale financial assets
Foreign currency translation
Foreign currency translation
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) attributable to:
Owners of the parent
Non-controlling interest
The above statement should be read in conjunction with the accompanying notes.
Note
4(i)
24(c)
5
24(b)
Consolidated
2012
$M
1,175
7
(10)
(1)
2
(2)
(2)
(2)
488
488
484
1,659
1,596
63
1,659
2011
$M
966
153
–
1
(47)
107
–
–
(1,926)
(1,926)
(1,819)
(853)
(887)
34
(853)
newcrest mining annual report 2012 73
Consolidated Statement of Financial Position
AS AT 30 JUNE 2012
Note
8(a)
9
10
11
12
10
13
14
15
16
5
11
17
12
18
19
20
21
19
20
5
22
23
24
Consolidated
2012
$M
242
251
748
11
212
2011
$M
185
441
691
15
210
1,464
1,542
1,095
4,364
8,795
3,759
93
259
8
395
277
19,045
20,509
482
1,200
200
18
92
1,992
1,208
308
1,907
3,423
5,415
15,094
13,561
2,890
(1,476)
14,975
119
15,094
710
3,310
7,675
3,621
61
230
9
–
124
15,740
17,282
432
116
170
7
92
817
684
232
1,674
2,590
3,407
13,875
13,569
2,171
(1,964)
13,776
99
13,875
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative and other financial assets
Other assets
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Exploration, evaluation and development
Goodwill
Other intangible assets
Deferred tax assets
Derivative and other financial assets
Investment in associate
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Derivative financial liabilities
Income tax payable
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Reserves
Parent entity interest
Non-controlling interest
Total equity
The above statement should be read in conjunction with the accompanying notes.
74 newcrest mining annual report 2012
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2012
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Mine under construction, development and feasibility expenditure
Exploration and evaluation expenditure
Information systems development
Proceeds from non-participation in rights issue
Payments for business divestment transaction costs
Acquisition of subsidiary, net of cash acquired
Payment for investments
Interest capitalised to development projects
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from borrowings:
– US dollar bilateral debt
– US dollar corporate bonds
Repayment of borrowings:
– US dollar bilateral debt
– US dollar private placement
– Other debt
Net repayment of finance lease principal
Share issue costs
Share buy-back
Payment for treasury shares
Dividends paid:
– Members of the parent entity
– Non-controlling interest
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash held
Cash and cash equivalents at the end of the year
The above statement should be read in conjunction with the accompanying notes.
Consolidated
2012
$M
4,624
(2,648)
2
(33)
(219)
1,726
(436)
(2,075)
(158)
(45)
10
(8)
–
(3)
(40)
(2,755)
1,785
963
(1,086)
(119)
–
(4)
–
(35)
(9)
(362)
(43)
1,090
61
185
(4)
242
2011
$M
4,013
(2,157)
12
(32)
(107)
1,729
(356)
(1,531)
(126)
(3)
–
–
(272)
(4)
(2)
(2,294)
614
–
(135)
–
(52)
(5)
(2)
(28)
(30)
(187)
(44)
131
(434)
643
(24)
185
Note
8(b)
34
34
35(b)
22
22
22
8(a)
newcrest mining annual report 2012 75
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2012
Attributable to Owners of the Parent
Consolidated
Issued
Capital
$M
$M
FX
Translation
Equity
Hedge Settlement
Reserve*
Reserve*
Reserve*
Fair
Value
Reserve*
$M
Retained
Earnings
$M
Non-
controlling
Interest
$M
Total
$M
Balance at 1 July 2011
13,569
(2,026)
Profit for the period
Other comprehensive income
for the period
Total comprehensive income
for the period
Transactions with owners
in their capacity as owners
Share-based payments
Shares issued –
Dividend reinvestment plan
Share buy-back
Treasury shares
Dividends paid
–
–
–
–
36
(35)
(9)
–
–
483
483
–
–
–
–
–
Balance at 30 June 2012
13,561
(1,543)
* Refer Note 24 for description of reserves.
$M
17
–
(2)
(2)
–
–
–
–
–
15
Consolidated
Balance at 1 July 2010
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Issued
Capital
$M
3,640
–
–
–
Transactions with owners in their capacity
as owners
Acquisition of Lihir Gold Limited,
net of share issue costs (Note 35)
Share-based payments
Shares issued –
Dividend reinvestment plan
Share buy-back
Treasury shares
Dividends paid
9,945
–
42
(28)
(30)
–
$M
(124)
–
(1,902)
(1,902)
–
–
–
–
–
–
$M
45
–
–
–
9
–
–
–
–
$M
(90)
–
107
107
–
–
–
–
–
–
17
–
–
(2)
(2)
–
–
–
–
–
$M
36
–
–
–
–
9
–
–
–
–
2,171
1,117
–
13,776
1,117
479
99
58
5
Total
$M
13,875
1,175
484
1,117
1,596
63
1,659
–
9
–
–
–
(398)
36
(35)
(9)
(398)
–
–
–
–
(43)
119
9
36
(35)
(9)
(441)
15,094
1,492
4,954
908
–
908
908
(1,795)
(887)
–
–
9,945
9
–
–
–
(229)
42
(28)
(30)
(229)
Total
$M
5,010
966
(1,819)
(853)
9,998
9
42
(28)
(30)
(273)
13,875
56
58
(24)
34
53
–
–
–
–
(44)
99
54
(2)
2,890
14,975
The above statement should be read in conjunction with the accompanying notes.
Attributable to Owners of the Parent
FX
Translation
Equity
Hedge Settlement
Reserve*
Reserve*
Reserve*
Retained
Earnings
$M
Non-
controlling
Interest
$M
Total
$M
Balance at 30 June 2011
13,569
(2,026)
* Refer Note 24 for description of reserves.
45
2,171
13,776
The above statement should be read in conjunction with the accompanying notes.
76 newcrest mining annual report 2012
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
1. CORPORATE INFORMATION
Newcrest Mining Limited is a company limited by shares,
domiciled and incorporated in Australia whose shares are publicly
traded on the Australian Securities Exchange (ASX). 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,
mine development, mine operations and the sale of gold
and gold/copper concentrate.
The financial report of Newcrest Mining Limited for the year
ended 30 June 2012 was authorised for issue in accordance
with a resolution of the Directors on 13 August 2012.
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, prepared
by a for-profit entity, 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 and
available-for-sale assets, 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 $1,000,000 dollars
unless otherwise stated.
(b) Basis of Consolidation
The consolidated financial statements include the financial
statements of the parent entity, Newcrest Mining Limited, and
its controlled entities (referred to as ‘the Consolidated Entity’
or ‘the Group’ in these financial statements). A list of controlled
entities is presented in Note 30.
Controlled entities are all those entities over which the Group
has the power to govern the financial and operating policies
so as to obtain benefits from their activities. Controlled entities
are consolidated from the date on which control commences
until the date that control ceases. All intercompany balances
and transactions, including unrealised gains and losses arising
from intra-group transactions, have been eliminated in preparing
the consolidated financial statements.
Non-controlling interest in the results and equity of the entity
that is controlled by the Group is shown separately in the Income
Statement, Statement of Comprehensive Income, Statement of
Financial Position and Statement of Changes in Equity respectively.
(c) Interest in Jointly Controlled Assets
Where the Group’s activities are conducted through
unincorporated joint ventures that are jointly controlled assets,
its proportionate share of the assets, liabilities, gold production
and related operating costs are included in the financial
statements. Details of the Group’s interests in jointly controlled
assets are shown in Note 33.
(d) Foreign Currency
Functional and Presentation Currency
Both the functional and presentation currency of Newcrest
Mining Limited and its Australian controlled entities is Australian
dollars ($). 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 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 reporting 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
the reporting 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(w)). 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 Statement of Financial Position
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 Statement of Cash Flows, 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
uncollectible, 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 allowance 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
an allowance 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.
newcrest mining annual report 2012 77
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Ore stockpiles, which are not scheduled to be processed in the
12 months after the reporting date, are classified as non-current
inventory. The Group believes the processing of these stockpiles
will have a future economic benefit to the Group and accordingly
values these stockpiles at the lower of cost and net realisable value.
(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’. 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(o). 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(o)).
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.
78 newcrest mining annual report 2012
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.
Leases
The determination of whether an arrangement is or contains
a lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement
is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
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.
(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, and active and significant operations in, or
in relation to, the area of interest 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 and
capitalised as incurred.
At the commencement of production, all past exploration,
evaluation and feasibility expenditure in respect of an area
of interest that has been capitalised is transferred to mine
development where it is amortised over the life of the area
of interest to which it relates 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.
Depreciation and Amortisation
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(o)).
(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) Goodwill
Goodwill acquired in a business combination is initially measured
at cost of the business combination being the excess of the
consideration transferred over the fair value of the Group’s
net identifiable assets acquired and liabilities assumed. If this
consideration transferred is lower than the fair value of the net
identifiable assets of the subsidiary acquired, the difference
is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated
to each of the Group’s Cash-Generating Units (CGU), or groups
of CGUs, that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities
of the Group are assigned to those units or groups of units.
Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes,
and is not larger than an operating segment determined
in accordance with AASB 8.
Impairment is determined by assessing the recoverable amount
of the CGU (group of CGUs), to which the goodwill relates. The
recoverable amount is the higher of the CGUs:
– 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 a pre-tax
discount rate that reflects current market assessments of the
time value of money and the risks specific to the CGU.
The Group performs its impairment testing annually as at
30 June each year.
When the recoverable amount of the CGU (group of CGUs) is
less than the carrying amount, an impairment loss is recognised.
When goodwill forms part of a CGU (group of CGUs) and an
operation within that unit is disposed of, the goodwill associated
with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal
of the operation. Goodwill disposed of in this manner is measured
based on the relative values of the operation disposed of and
the portion of the CGU retained.
Impairment losses recognised for goodwill are not
subsequently reversed.
(n) Other 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 three to seven years.
(o) 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.
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 (CGUs). Generally, this results
in the Group evaluating its mine properties on a geographical basis.
(p) Available-for-Sale Financial Assets
The Group’s investment in listed equity securities are designated
as available-for-sale financial assets. Subsequent to initial
recognition, available-for-sale financial assets are measured
at fair value, with gains or losses being recognised as a separate
component of equity until the investment is derecognised or until
the investment is determined to be impaired, at which time the
cumulative gain or loss previously reported in equity is recognised
in the Income Statement.
The fair values of listed equity securities are determined
by reference to quoted market price.
(q) Investment in Associate
The Group’s investment in an associate is accounted for using
the equity method. An associate is an entity in which the Group
has significant influence.
Under the equity method, the investment in the associate
is carried on the Statement of Financial Position at cost plus
post-acquisition changes in the Group’s share of net assets
of the associate. Goodwill relating to the associate is included
in the carrying amount of the investment and is neither amortised
nor individually tested for impairment.
The Income Statement reflects the Group’s share of the results of
operations of the associate. When there has been a change recognised
directly in the equity of the associate, the Group recognises its share
of any changes and discloses this, when applicable, in the Statement
of Changes in Equity. Unrealised gains and losses resulting from
transactions between the Group and the associate are eliminated
to the extent of the interest in the associate.
newcrest mining annual report 2012 79
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
The Group’s share of profit of an associate is included in the
Income Statement. This is the profit attributable to equity
holders of the associate and, therefore, is profit after tax and
non-controlling interests in the subsidiaries of the associate.
After application of the equity method, the Group determines
whether it is necessary to recognise an additional impairment
loss on its investment in its associate. The Group determines
at each reporting date whether there is any objective evidence
that the investment in the associate is impaired. If this is the case,
the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate and its carrying
value and recognises the amount in the Income Statement.
Upon loss of significant influence over the associate, the Group
measures and recognises any retaining investment at its
fair value. Any difference between the carrying amount of
the associate upon loss of significant influence and the fair
value of the retained investment and proceeds from disposal
is recognised in profit or loss.
(r) Non-Current Assets and Disposal Groups Held for Sale
Non-current assets and disposal groups are classified as held for
sale and measured at the lower of their carrying amount and fair
value less costs to sell if their carrying amount will be recovered
principally through a sale transaction instead of use. They are not
depreciated or amortised. For an asset or disposal group to be
classified as held for sale, it must be available for immediate sale
in its present condition and its sale must be highly probable.
An impairment loss is recognised for any initial or subsequent
write-down of the asset (or disposal group) to fair value less costs
to sell. A gain is recognised for any subsequent increases in fair
value less costs to sell of an asset (or disposal group), but not in
excess of any cumulative impairment loss previously recognised.
A gain or loss not previously recognised by the date of the sale
of the non-current asset (or disposal group) is recognised at
the date of derecognition.
(s) 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.
(t) Borrowings and Borrowing Costs
Borrowings are initially recognised at fair value and subsequently
at amortised cost.
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.
(u) 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.
80 newcrest mining annual report 2012
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 12 months are
discounted using the rates attaching to national government
securities at the reporting 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.
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 and the Employee Share Acquisition Plan.
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
using an option pricing model, further details of which are given
in Note 26.
The fair value of the rights 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 rights that are expected to become exercisable. At each
reporting date the Group revises its estimate of the number of
rights 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 rights, the balance of the equity settlements
reserve relating to those rights 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.
(v) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
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
a discount rate that reflects current market assessments.
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.
(w) 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, diesel forward contracts and
foreign currency forward 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, diesel forward contracts
and foreign currency forward contracts are calculated by reference
to current forward commodity prices.
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; or
– 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.
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.
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 in the Foreign Currency Translation Reserve 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.
(x) Issued Capital
Issued ordinary share capital is classified as equity and is
recognised at the fair value of the consideration received by
the Group. 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.
Treasury Shares
The Group’s own equity instruments, which are reacquired
on market for later use in employee share-based payment
arrangements (treasury shares), are deducted from equity.
No gain or loss is recognised in profit or loss on the purchase,
sale, issue or cancellation of the Group’s own equity instruments.
(y) 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;
– 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.
(z) 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.
newcrest mining annual report 2012 81
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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, 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.
(aa) Government Royalties
Royalties under existing regimes are payable on sales and are
therefore recognised as the sale occurs.
(bb) 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 reporting date.
Deferred Income Tax
Deferred income tax is provided on all temporary differences
(except as noted below) at the reporting 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.
82 newcrest mining annual report 2012
The carrying amount of deferred tax assets is reviewed at each
reporting 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 reporting 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.
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 reporting date.
Current and deferred taxes attributable to amounts recognised
directly in equity are also recognised directly in equity.
(cc) 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 Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows 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.
(dd) Business Combinations
Business combinations are accounted for using the acquisition
method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the
acquisition date fair values of the:
– assets transferred by the Group;
– liabilities incurred by the acquirer to former owners of the acquiree;
– equity issued by the Group;
and the amount of any non-controlling interest in the acquiree.
For each business combination, the Group measures the
non-controlling interest in the acquiree either at fair value or at
the proportionate share of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
When the Group acquires a business, it assesses the financial assets
and liabilities assumed for appropriate classification and designation
in accordance with the contractual terms, economic conditions,
the Group’s operating or accounting policies and other pertinent
conditions as at the acquisition date. This includes the separation
of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition
date fair value of the acquirer’s previously held equity interest
in the acquiree is remeasured at fair value as at the acquisition
date through profit or loss.
Any contingent consideration to be transferred by the Group will
be recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration, which is
deemed to be an asset or liability, will be recognised in accordance
with AASB 139 either in profit or loss or in other comprehensive
income. If the contingent consideration is classified as equity,
it is not remeasured.
(ee) New Accounting Standards and Interpretations
Adoption of New Standards and Interpretations
The Group did not adopt any new and/or revised standards,
amendments and interpretations from 1 July 2011 that had an
effect on the financial position or performance of the Group.
New Accounting Standards and Interpretations Not Yet Adopted
The following standards, amendments to standards and interpretations have been identified as those that 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 2012, but have
not been applied in preparing this financial report.
Reference and Title
Details of New Standard/Amendment/Interpretation
Impact
on Group
Application date
for the Group
AASB 9
Financial Instruments
AASB 2010–7 and
AASB 2009–11
Amendments to AAS’s
arising from AASB 9
The revised standard introduces a number of changes to the accounting
for financial assets, the most significant of which includes:
(ii)
1 July 2013
– two categories for financial assets being amortised cost or fair value;
– removal of the requirement to separate embedded derivatives
in financial assets;
– reclassifications between amortised cost and fair value no longer
permitted unless the entity’s business model for holding the asset
changes; and
– changes to the accounting and additional disclosures for equity instruments
classified as fair value through other comprehensive income.
AASB 10
Consolidated Financial
Statements
AASB 10 establishes a new control model that applies to all entities.
The new control model broadens the situations when an entity
is considered to be controlled by another entity.
AASB 11 replaces AASB 1031. The standard uses the principle of control
in AASB 10 to define joint control, and therefore the determination
of whether joint control exists may change.
AASB 12 includes all disclosures relating to an entity’s interests in
subsidiaries, joint arrangements, associates and structured entities.
New disclosures have been introduced about the judgements made
by management to determine whether control exists, and to require
summarised information about these entities.
AASB 13 establishes a single source of guidance under AASB for
determining the fair value of assets and liabilities. It includes guidance
on how to determine fair value under AASB and expands the disclosure
requirements for all assets or liabilities carried at fair value.
This standard establishes a differential financial reporting framework
consisting of two tiers of reporting requirements for preparing general
purpose financial statements.
This standard requires the grouping of items presented in other
comprehensive income on the basis of whether they are potentially
reclassifiable to profit or loss subsequently (reclassification adjustments).
(ii)
(ii)
1 July 2013
1 July 2013
(iii)
1 July 2013
(ii)
1 July 2013
(i)
(i)
1 July 2013
1 July 2012
AASB 11
Joint Arrangements
AASB 12
Disclosure of Interests
in Other Entities
AASB 13
Fair Value Measurement
AASB 1053
Application of
Tiers of Australian
Accounting Standards
AASB 2011–9
Amendment –
Presentation of Other
Comprehensive Income
AASB 119
Employee Benefits
This revised standard amends the:
(ii)
1 July 2013
– definition of short-term benefits, meaning some annual entitlements
may become long term in nature with a revised measurement; and
– timing for recognising a provision for termination benefits, such that
provisions can only be recognised when the officer cannot be withdrawn.
Interpretation 20
Stripping Costs in
the Production Phase
of a Surface Mine
This interpretation applies to stripping costs incurred during the production
phase of a surface mine. Production stripping costs (also known as deferred
mining costs) are to be capitalised as part of an asset if:
– an entity can demonstrate that is it probable future economic benefits
(iv)
1 July 2013
will be realised;
– the costs can be reliably measured; and
– the entity can identify the component of an ore body for which access
has been improved.
The stripping activity asset shall be amortised on a systematic basis,
over the expected useful life of the identified component of the ore body
that becomes more accessible as a result of the stripping activity.
(i) The adoption of this new standard, amendment or interpretation will not have a material impact on the Group’s financial statements.
(ii) The Group has not yet determined the extent of the impact, if any.
(iii) This new standard will result in additional disclosures in the financial statements.
(iv) This interpretation will have an impact on the Group’s financial statements. The recognition and measurement of this asset
under the interpretation differs from the Group’s current accounting policy. The Group has not yet determined the full financial
impact of this difference.
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.
newcrest mining annual report 2012 83
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
(f) Recovery of Deferred Tax Assets
Deferred tax assets, including those arising from unutilised
tax losses, require management to assess the likelihood that
the Group will comply with the relevant tax legislation and will
generate sufficient taxable earnings in future periods in order
to recognise and utilise those deferred tax assets. Estimates
of future taxable income are based on forecast cash flows from
operations and existing tax laws in each jurisdiction. To the extent
that cash flows and taxable income differ significantly from
estimates, the ability of the Group to realise the net deferred
tax assets reported at the reporting date could be impacted.
Additionally, future changes in tax laws in the jurisdictions
in which the Group operates could limit the ability of the Group
to obtain tax deductions in future periods.
(g) 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.
(h) 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.
(i) Investment in Associates
Included in the carrying value of the investment in Evolution
Mining Limited (Evolution) is the Group’s share of profit of the
associate for the period 2 November 2011 to 30 June 2012. As at
the date of this report, Evolution has not released its full financial
statements for the year ended 30 June 2012. The Group’s share
of profit of the associate has been estimated based on publically
available information, including the associate’s half-year accounts
for the period ended 31 December 2011 and quarterly production
reports to 30 June 2012. This estimate may change when full
financial statements become available and this may impact
the carrying value of the investment.
Judgement is required in assessing whether there is objective
evidence that the investment in Evolution is impaired. At the
reporting date, the market value of the investment in Evolution
was below its carrying amount. The Group has determined that
the decline in market value is not significant or prolonged nor is
the Group aware of other objective evidence that the investment
in Evolution is impaired.
3. 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.
(a) Mine Rehabilitation Provision
The Group assesses its mine rehabilitation provision annually
in accordance with the accounting policy Note 2(v). 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.
(b) Unit-of-Production Method
of Depreciation/Amortisation
The Group uses the unit-of-production basis when
depreciating/amortising 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.
(c) Impairment of Assets
The Group assesses each Cash-Generating Unit (CGU),
including CGUs with Goodwill as listed in Note 15, at least annually,
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(o). These assessments
require the use of estimates and assumptions such as discount
rates, exchange rates, commodity prices, gold multiple values,
future operating development and sustaining capital requirements
and operating performance (including the magnitude and timing
of related cash flows).
(d) 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 26.
(e) 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 deferred mining resulting from
a change in life of mine ratios are accounted for prospectively.
84 newcrest mining annual report 2012
4. REVENUE AND EXPENSES
Specific items
Profit before income tax includes the following revenues, income and expenses
whose disclosure is relevant in explaining the performance of the Group:
Consolidated
2012
$M
2011
$M
(a) Operating Sales Revenue
Gold
Copper
Silver
Total operating sales revenue
Total revenue
(b) Cost of Sales
Mine production costs
Royalty
Concentrate treatment and realisation
Deferred mining adjustment
Inventory movements
Depreciation
Total cost of sales
(c) Corporate Administration Expenses
Corporate costs
Corporate depreciation
Equity-settled share-based payments
Total corporate administration expenses
(d) Other Income/(Expenses)
Joint venture management fees
Net foreign exchange gain/(loss)
Net fair value gain/(loss) on gold and copper derivatives
Net gain/(loss) on sale of non-current assets
Royalty dispute(1)
Other
Total other income/(expenses)
(e) Finance Costs
Interest costs:
Interest on loans
Finance leases
Other:
Facility fees and other costs
Discount unwind on provisions
Less: Capitalised borrowing costs
Total finance costs
(f) 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
3,740
613
63
4,416
4,416
2,221
130
140
(178)
(248)
2,065
542
2,607
112
19
9
140
–
(14)
16
(3)
–
(13)
(14)
58
–
17
8
83
(40)
43
316
291
19
626
(65)
561
542
19
561
3,409
638
55
4,102
4,102
1,813
121
136
–
(170)
1,900
501
2,401
70
14
9
93
1
(26)
15
–
11
(10)
(9)
22
1
13
11
47
(2)
45
269
306
17
592
(77)
515
501
14
515
(1) In 2010, the Group received an unfavourable ruling by the NSW Court of Appeal in respect to Mineral Royalties dispute at Cadia Valley, and the Group had
accrued for this exposure. The ruling was subsequently overturned by the High Court of Australia on Appeal by the Group, and the accrual was released in 2011.
newcrest mining annual report 2012 85
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
4. REVENUE AND EXPENSES (continued)
Consolidated
(g) Employee Benefits Expense
Defined contribution plan expense
Equity-settled share-based payments
Other employment benefits
Total employee benefits expense
(h) Other Items
Operating lease rentals
(i) Losses on Restructured and Closed-Out Hedge Contracts
Losses on restructured and closed-out hedge contracts transferred from reserves (Note 24(c))
Applicable income tax/(benefit)
Total losses on restructured and closed-out hedges (after tax)
(j) Other Close-Out Related Costs
Fair value loss on gold put options
Applicable income tax/(benefit)
Total other close-out related costs (after tax)
(k) Business Acquisition and Integration Costs
Acquisition-related costs
Integration costs(1)
Applicable income tax expense/(benefit)
Total business acquisition and integration costs (after tax)
(l) Gain on Business Divestment
Consideration received
Written down value of net assets sold
Disposal costs
Applicable income tax expense/(benefit)
Gain on business divestment(2)
2012
$M
37
9
458
504
8
7
(2)
5
–
–
–
–
11
11
(3)
8
390
(336)
(8)
–
46
(1) Represents costs associated with the acquisition of Lihir Gold Limited on 30 August 2010. Refer Note 35.
(2) Represents gain on the divestment of Cracow and Mt Rawdon operations on 2 November 2011. Refer Note 34.
5. INCOME TAX
Consolidated
(a) Income Tax Expense Comprises:
Current income tax
Current income tax expense
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 per the Income Statement
(b) Reconciliation of Prima Facie Income Tax Expense
to Income Tax Expense per the Income Statement
Accounting profit before tax
Income tax expense calculated at 30% (2011: 30%)
– Research and development allowance in respect to:
– Current year
– Prior year
– Gain on business divestment
– Recognition of tax losses
– Other
– (Over) provided in prior years
Income tax expense per the Income Statement
86 newcrest mining annual report 2012
2012
$M
278
(94)
184
195
23
218
402
1,577
473
(4)
(27)
(14)
(35)
18
(9)
402
2011
$M
33
9
431
473
8
153
(46)
107
3
(1)
2
15
37
52
(11)
41
–
–
–
–
–
2011
$M
410
(41)
369
(30)
(5)
(35)
334
1,300
390
(7)
(43)
–
–
(3)
(3)
334
5. INCOME TAX (continued)
(c) Movement in Deferred Taxes
2012
Deferred tax assets
Carry forward revenue losses recognised:
– Australian entities
– Overseas entities
Deferred tax liabilities
Temporary differences:
– Fixed assets(1)
– Deferred mining
– Financial instruments
– Provisions
– Other
Net deferred taxes
2011
Deferred tax assets
Carry forward revenue losses recognised:
– Australian entities
– Overseas entities
Deferred tax liabilities
Temporary differences:
– Fixed assets(1)
– Deferred mining
– Financial instruments
– Provisions
– Other
Net deferred taxes
Balance
at 1 July
$M
Acquisitions
and
divestments
$M
Consolidated
(Charged)/
credited
to income
$M
(Charged)/
credited
to equity
$M
Translation
$M
Balance
at 30 June
$M
205
25
230
(1,595)
(70)
(3)
56
(62)
(1,674)
(1,444)
250
21
271
(380)
(65)
(7)
21
(57)
(488)
(217)
–
–
–
34
17
–
(1)
1
51
51
126
31
157
(1,476)
(13)
–
31
(4)
(1,462)
(1,305)
24
4
28
(88)
(99)
4
7
(42)
(218)
(190)
(171)
(21)
(192)
(18)
7
51
7
(12)
35
(157)
–
–
–
–
–
2
–
–
2
2
–
–
–
–
–
(47)
–
10
(37)
(37)
–
1
1
(66)
(2)
–
1
(1)
(68)
(67)
–
(6)
(6)
279
1
–
(3)
1
278
272
229
30
259
(1,715)
(154)
3
63
(104)
(1,907)
(1,648)
205
25
230
(1,595)
(70)
(3)
56
(62)
(1,674)
(1,444)
(1) Comprises property, plant and equipment; exploration, evaluation and development; and other intangible assets.
(d) Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of carry forward capital losses of $286 million (2011: $296 million) because
it is not probable that the Group will have future capital gains available against which carry forward capital losses could be utilised.
newcrest mining annual report 2012 87
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
6. DIVIDENDS
(a) Dividend Determined and Paid
The following dividends (unfranked) on ordinary shares were determined and paid:
2011 Financial Year
Final – In respect to the year ended 30 June 2010
Interim – In respect to the year ended 30 June 2011
2012 Financial Year
Final – In respect to the year ended 30 June 2011
Special – In respect to the year ended 30 June 2011
Interim – In respect to the year ended 30 June 2012
Participation in the Dividend Reinvestment Plan reduced the cash amount paid
to owners of the parent to $362 million (2011: $187 million).
(b) Dividend Proposed and Not Recognised as a Liability
Subsequent to the end of the year, the Directors determined the following dividend
(15% franked) be paid:
Final – In respect to the year ended 30 June 2012
Cents
per share
Total
amount
$M
Date of
payment
20.0
10.0
30.0
20.0
20.0
12.0
52.0
22 Oct 2010
15 Apr 2011
21 Oct 2011
16 Dec 2011
17 Apr 2012
153
76
229
153
153
92
398
23.0
176
19 Oct 2012
(c) Dividend Franking Account Balance
Franking credits at 30% as at 30 June 2012 available for the subsequent financial year is $20 million (2011: nil).
7. EARNINGS PER SHARE (EPS)
Consolidated
EPS (cents per share)
Basic EPS
Diluted EPS
Earnings used in calculating EPS
Earnings used in the calculation of basic and diluted EPS:
Profit after income tax attributable to owners of the parent
Weighted average number of shares
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 rights(1)
2012
¢
146.0
145.8
2012
$M
2011
¢
126.4
126.2
2011
$M
1,117
908
2012
No. of shares
2011
No. of shares
765,048,302
718,079,536
1,108,181
1,176,963
Adjusted weighted average number of ordinary shares used in calculating diluted EPS
766,156,483
719,256,499
(1) Rights granted to employees (including Key Management Personnel) as described in Note 26 are considered to be potential ordinary shares and have
been included in the determination of diluted earnings per share to the extent they are dilutive. These rights have not been included in the determination
of basic earnings per share.
88 newcrest mining annual report 2012
8. CASH AND CASH EQUIVALENTS
Consolidated
(a) Components of Cash and Cash Equivalents
Cash at bank
Short-term deposits
Total cash and cash equivalents
(b) Reconciliation of Net Profit after Income Tax
to Net Cash Flow from Operating Activities
Profit after income tax
Non-cash items:
Depreciation and amortisation
Hedge restructure and close-out expense
Net fair value change on derivatives
Share-based payments
Discount unwind on provisions
Share of profit of associate
Non-cash component of gain on business divestment
Other non-cash items
Items presented as investing or financing activities:
Exploration expenditure written off
Changes in assets and liabilities, net of effects from business acquisitions and divestments:
(Increase)/Decrease in:
Trade and other receivables
Inventories
Deferred mining
Prepayments
Deferred tax assets
(Decrease)/Increase in:
Trade and other payables
Provisions
Current tax liabilities
Deferred tax liabilities
Deferred income
Net cash from operating activities
(c) Non-cash Financing and Investing Activities
Dividends paid by the issue of shares under the Dividend Reinvestment Plan
9. TRADE AND OTHER RECEIVABLES
Current
Metal in concentrate receivables(1)
Bullion awaiting settlement(2)
GST receivable(3)
Other receivables(3)
Total current receivables
(1) Are non-interest bearing and are generally expected to settle within one to six months, refer Note 2(f).
(2) Are non-interest bearing and are generally expected to settle within seven days, refer Note 2(f).
(3) Recorded at amortised cost, are non-interest bearing and are generally expected to settle within one to two months.
2012
$M
100
142
242
2011
$M
40
145
185
1,175
966
561
7
15
9
8
(15)
(54)
(11)
80
190
(452)
(177)
(35)
(29)
50
120
–
284
–
1,726
515
153
18
9
11
–
–
43
55
(144)
(70)
(42)
78
198
64
77
76
(276)
(2)
1,729
36
42
Consolidated
2012
$M
100
46
61
44
251
2011
$M
277
56
60
48
441
newcrest mining annual report 2012 89
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
10. INVENTORIES
Consolidated
Current
Ore
Gold in circuit
Concentrate
Materials and supplies
Total current inventories
Non-Current
Ore
Total non-current inventories
2012
$M
240
32
94
382
748
1,095
1,095
11. DERIVATIVE AND OTHER FINANCIAL ASSETS
Consolidated
Current
Quotational period derivatives(1)
Copper forward sales contracts
Other financial derivatives
Total current derivative and other financial assets
Non-Current
Available-for-sale financial assets(2)
Total non-current derivative and other financial assets
2012
$M
–
10
1
11
8
8
(1) Represents the embedded derivatives relating to quotational period movements on commodity sales. Refer note 2(w).
(2) Represents investments in listed companies.
12. OTHER ASSETS
Consolidated
Current
Prepayments
Deferred mining expenditure
Total current other assets
Non-Current
Prepayments
Deferred mining expenditure
Total non-current other assets
2012
$M
91
121
212
5
272
277
13. PROPERTY, PLANT AND EQUIPMENT
Consolidated
At 30 June
Cost
Accumulated depreciation
Year ended 30 June
Carrying amount at 1 July
Business divestment (Note 34)
Acquisition of Lihir Gold Ltd (Note 35)
Additions
Depreciation charge for the year
FX translation
Reclassifications/transfers
Carrying amount at 30 June
2012
$M
6,516
(2,152)
4,364
3,310
(52)
–
436
(316)
31
955
4,364
Included in property, plant and equipment are leased assets with a carrying amount of $12 million (2011: $14 million).
90 newcrest mining annual report 2012
2011
$M
232
25
136
298
691
710
710
2011
$M
6
6
3
15
9
9
2011
$M
55
155
210
6
118
124
2011
$M
5,172
(1,862)
3,310
1,764
–
1,565
357
(269)
(362)
255
3,310
14. CAPITALISED EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURES
Exploration and
Evaluation
Expenditure
$M
Deferred
Feasibility
Expenditure
$M
Consolidated
Mines
Under
Construction
$M
Mine
Development(1)
$M
At 30 June 2012
Cost
Accumulated depreciation
Year ended 30 June 2012
Carrying amount at 1 July 2011
Business divestment (Note 34)
Expenditure during the year(2)
Expenditure written off during the year
Depreciation charge for the year
FX translation
Reclassifications/transfers
Carrying amount at 30 June 2012
At 30 June 2011
Cost
Accumulated depreciation
Year ended 30 June 2011
Carrying amount at 1 July 2010
Acquisition of Lihir Gold Ltd (Note 35)
Expenditure during the year(2)
Expenditure written off during the year
Depreciation charge for the year
FX translation
Reclassifications/transfers
Carrying amount at 30 June 2011
797
–
797
775
(16)
158
(80)
–
36
(76)
797
775
–
775
285
565
126
(55)
–
(142)
(4)
775
174
–
174
74
–
130
–
–
2
(32)
174
74
–
74
20
–
32
–
–
–
22
74
1,731
–
1,731
1,376
–
1,815
–
–
56
(1,516)
1,731
1,376
–
1,376
477
672
1,411
–
–
(168)
(1,016)
1,376
7,532
(1,439)
6,093
5,450
(213)
249
–
(291)
235
663
6,093
6,720
(1,270)
5,450
1,774
3,748
178
–
(306)
(696)
752
5,450
Total
$M
10,234
(1,439)
8,795
7,675
(229)
2,352
(80)
(291)
329
(961)
8,795
8,945
(1,270)
7,675
2,556
4,985
1,747
(55)
(306)
(1,006)
(246)
7,675
Reclassifications/transfers:
Expenditure included in mines under construction has been reclassified from/to mine development or property, plant and equipment, as appropriate,
upon initial utilisation of the assets.
(1) Includes acquired Mineral Rights.
(2) Borrowing costs were capitalised on qualifying assets at a weighted average interest rate of 3% (2011: 2%).
Areas of interest in the exploration phase at cost:
Consolidated
Cadia Valley, NSW
Telfer, WA
Cracow and Mount Rawdon, QLD
Marsden, NSW
Gosowong, Indonesia
Namosi, Fiji
Hidden Valley, PNG
Wafi-Golpu, PNG
Morobe Province, PNG
Lihir, PNG
Côte d’Ivoire, West Africa
2012
$M
6
69
–
5
28
20
5
143
6
227
288
797
2011
$M
54
52
15
5
22
20
13
115
6
199
274
775
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 2012 91
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
15. GOODWILL
Consolidated
Opening balance
Divestments (Note 34)
Acquisition of Lihir Gold Limited (Note 35)
Foreign currency translation
Closing balance
(a) Allocation of Goodwill to Cash-Generating Units
Goodwill arose through the acquisition of Lihir Gold Limited on 30 August 2010 and has been allocated
to the following cash-generating units (CGUs):
Mt Rawdon
West Africa
Lihir
2012
$M
3,621
(53)
–
191
3,759
–
184
3,575
3,759
2011
$M
–
–
4,370
(749)
3,621
53
175
3,393
3,621
(b) Impairment Test
Goodwill recognised as a result of the acquisition of Lihir Gold Limited (LGL) has been allocated to Cash-Generating Units (CGUs) as noted
above in Note 15(a).
The goodwill on acquisition reflects the following aspects:
– The unique financial characteristics of gold assets, where they generally trade at a premium to underlying discounted cash flows;
– The value implicit in the ability to sustain and/or grow the Newcrest group by increasing reserves and resources through exploration
at the acquired assets, as well as the increased optionality available for the total asset portfolio; and
– The requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of assets acquired
and liabilities assumed in the acquisition.
In assessing whether goodwill has been impaired, the carrying amount of the CGU is compared with its recoverable amount. In accordance
with the Group’s accounting policy, recoverable amount is assessed as the higher of fair value less costs to sell and value in use. The Group
has used fair value less costs to sell, as it is higher.
Fair value less costs to sell was determined by using a discounted cash flow methodology, then application of a CGU specific gold multiple.
The discounted cash flow valuations are based on the latest CGU life-of-mine (LOM) planning information, market-based commodity price
and exchange assumptions and country specific discount rates.
The LOM plans reflect Newcrest’s assessment of the relevant characteristics of the ore body (including recoverable reserves and
resources) and processing activities to estimate overall production levels, future cash costs of production and required levels of capital
expenditure for each mine. LOM plans are updated annually.
The key assumptions in addition to the LOM plans used in the discounted cash flow valuations are gold prices, the Australian dollar
exchange rate against the US dollar, discount rates and CGU specific gold multiple.
Gold price and AUD:USD exchange rate assumptions are estimated by management, with reference to external market forecasts, and
updated at least annually. For this most recent review, long-term gold price is estimated at US$1,100 per ounce (2011: US$1,000 per ounce)
and the long-term US to Australian dollar exchange rate of US$0.80 per A$1.00 (2011: $0.80).
The discount rate applied to discount the estimated cash flows is based upon Newcrest’s real weighted average cost of capital, with an
appropriate adjustment for the risks associated with the relevant cash flows based on the functional currency and geographic location
of the CGU. The real after tax discount rates used were Papua New Guinea 5.5% and Côte d’Ivoire 6% (2011: Papua New Guinea 7% and
Côte d’Ivoire 7%); in both cases the functional currency is US dollars.
Newcrest applies a gold multiple to the discounted cash flow valuation in order to assess the CGU’s estimated fair value. Gold companies
typically trade at a market capitalisation that is based on a multiple of their underlying discounted cash flow valuation. Similarly, in an
asset sale scenario, a gold multiple would generally be applied when estimating the fair value of an operating gold mine. In determining
the appropriate gold multiples for CGUs, we took into consideration the mine life, reserve/resource addition potential, average annual
production level and operating cost profile. In addition, the external market view of Newcrest’s overall gold multiple was taken into
consideration. The following range of gold multiples for each CGU was determined: Lihir 1.4 (2011: 1.7 – 2.0) and West Africa 1.1 (2011: 1.3 – 1.7).
In the assessment of goodwill impairment, Newcrest also undertook sensitivity analysis using the following scenarios:
(i) Long-term gold price of US$1,300 per ounce, AUD:USD exchange rate of $0.85, with all other key assumptions held constant; and
(ii) Spot prices for commodities for all future periods, including gold price at US$1,575 per ounce, AUD:USD exchange rate of $1.025,
with no gold multiple applied. All other key assumptions held constant.
Lihir and West Africa at 30 June 2012 each had an excess of fair value over carrying value in all three valuation scenarios.
It should be noted that the CGU valuations are subject to variability in key assumptions including, but not limited to, long-term gold
prices, discount rates, CGU specific gold multiples, production and cost performance. A material adverse change in one or more of these
assumptions could result in a material reduction in the excess of valuation over book value.
92 newcrest mining annual report 2012
16. OTHER INTANGIBLE ASSETS
Information Systems Development
At 30 June
Cost
Accumulated amortisation
Year ended 30 June
Carrying amount at 1 July
Acquisition of Lihir Gold Limited (Note 35)
Additions
Amortisation charge for the year
Reclassifications/transfers
Carrying amount at 30 June
Consolidated
2012
$M
154
(61)
93
61
–
45
(19)
6
93
17. INVESTMENT IN ASSOCIATE
Consolidated
Investment in Evolution Mining Ltd
Opening balance
Acquisitions (Note 34)
Share of profit of associate
Non-participation in rights issue
Closing balance
The Group has a 32.68% (2011: nil) interest in Evolution Mining Limited (Evolution), which is an Australian
gold mining company listed on the Australian Securities Exchange (ASX). The market value of the Group’s
interest in Evolution as 30 June 2012 was $341 million based on the closing market bid price of $1.48
on the ASX on 29 June 2012.
The following table discloses summarised financial information of the Group’s investment in Evolution:
Share of the associate’s statement of financial position
Total assets
Total liabilities
Net assets
Share of the associate’s revenue and profit
Revenue
Profit
2012
$M
–
390
15
(10)
395
445
(50)
395
126
15
18. TRADE AND OTHER PAYABLES
Consolidated
Trade payables(1)
Other payables and accruals(1)
Total trade and other payables
(1) All payables are unsecured, non-interest-bearing and are normally settled on 30–60 day terms.
2012
$M
120
362
482
2011
$M
103
(42)
61
83
3
1
(17)
(9)
61
2011
$M
–
–
–
–
–
–
–
–
–
–
2011
$M
91
341
432
newcrest mining annual report 2012 93
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
19. BORROWINGS
Consolidated
Current
Finance lease liabilities – secured
US dollar bilateral debt – unsecured
US dollar private placement notes – unsecured
Total current borrowings
Non-Current
Finance lease liabilities – secured
US dollar bilateral debt – unsecured
US dollar private placement notes – unsecured
US dollar corporate bonds – unsecured
Total non-current borrowings
(i) Finance lease facility
2012
$M
3
1,197
–
1,200
1
–
226
981
1,208
(i)
(ii)
(iii)
(i)
(ii)
(iii)
(iv)
2011
$M
4
–
112
116
4
466
214
–
684
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
The Group has bilateral debt facilities of US$2,000 million (2011: US$1,100 million) with eight banks. These are committed unsecured
revolving facilities, with maturities ranging between December 2012 and February 2013, individually negotiated and documented with
each bank, but with similar terms and conditions. Interest is based on LIBOR plus a margin, which varies amongst the lenders.
At the date of this report, the Group is in the process of renewing its bilateral debt facilities with a number of banks. It is expected that
this renewal process will be completed no later than 30 September 2012, with facility terms of three years or more.
(iii) US dollar private placement notes
During the year ended 30 June 2005, the Group issued US$350 million of long-term senior unsecured notes into the North American
private placement market. The proceeds of the placement were received on 11 May 2005 and comprised five tranches:
Floating 7 years
Fixed 7 years
Fixed 10 years
Fixed 12 years
Fixed 15 years
Maturity
11/5/2012
11/5/2012
11/5/2015
11/5/2017
11/5/2020
2012
US$M
–
–
105
100
25
230
2011
US$M
25
95
105
100
25
350
Interest on the fixed rate notes is payable semi-annually at an average of 5.7% (2011: 5.6%). Floating rate interest was based on LIBOR
plus a margin and was payable quarterly at an average of 1.2% (2011: 1.2%).
These notes were fully drawn as at 30 June 2012 and have been restated to Australian dollars, using the spot exchange rate at the
reporting date.
(iv) US dollar corporate bonds
In November 2011, Newcrest issued US$1,000 million in US dollar Corporate Bonds (notes). The notes were sold in accordance with
Rule 144A and Regulation S of the Securities Act of the United States. The notes consist of:
– US$750 million Senior Unsecured Notes due 15 November 2021 with a coupon of 4.45%.
– US$250 million Senior Unsecured Notes due 15 November 2041 with a coupon of 5.75%.
(v) 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 with a US dollar functional
currency. Refer Note 27(d) for further details.
94 newcrest mining annual report 2012
19. BORROWINGS (continued)
(vi) Financial arrangements
The Group has access to the following unsecured financing arrangements.
Facilities utilised at reporting date:
US dollar bilateral facilities
US dollar private placement notes
US dollar corporate bonds
Facilities not utilised at reporting date:
US dollar bilateral facilities
Total facilities
US dollar bilateral facilities (2012: US$2,000M, 2011: US$1,100M)
US dollar private placement notes (2012: US$230M, 2011: US$350M)
US dollar corporate bonds (2012: US$1,000M, 2011: nil)
Consolidated
2012
$M
1,197
226
981
2,404
765
765
1,962
226
981
3,169
2011
$M
466
326
–
792
558
558
1,024
326
–
1,350
20. PROVISIONS
Consolidated
Current
Employee benefits
Mine rehabilitation and restoration
Other
Total current provisions
Non-Current
Employee benefits
Mine rehabilitation and restoration
Other
Total non-current provisions
2012
$M
134
6
60
200
29
279
–
308
2011
$M
109
5
56
170
24
206
2
232
(i)
(ii)
(iii)
(i)
(ii)
(iii)
(i)
Employee benefits
Represents annual leave, long service leave, salary at risk and other incentive payments (refer Note 2 (u)).
(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.
(iii) Other provisions
Comprises onerous contracts, community obligations and other miscellaneous items.
Movements in provisions
Movements in provisions (excluding employee benefits) during the year were as follows:
At 1 July 2011
Charged during the year
Movements in discount rates
Paid/utilised during the year
Business divestment
Unwinding of discount
FX translation
At 30 June 2012
Split between:
Current
Non-current
Mine
Rehabilitation
& Restoration
$M
Other
Provisions
$M
211
4
71
–
(12)
8
3
285
6
279
285
58
8
–
(9)
–
–
3
60
60
–
60
newcrest mining annual report 2012 95
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
21. FINANCIAL DERIVATIVE LIABILITIES
Consolidated
Current
Quotational period derivatives(1)
Other financial derivatives
Total current financial derivative liabilities
(1) Represents the embedded derivatives relating to quotational period movements on commodity sales. Refer note 2(z).
22. ISSUED CAPITAL
(a) Movements in Issued Capital
Opening balance
Shares issued during the year:
– Dividend reinvestment plan
– Acquisition of Lihir Gold Limited
– Share issue costs
– Share buy-back
– Shares repurchased and held in treasury
Total issued capital
(b) Number of Issued Ordinary Shares
Comprises:
– Shares held by the public
– Treasury shares
Total issued capital
Movement in issued ordinary shares for the year
Opening number of shares
Shares issued under:
– Share plans
– Dividend reinvestment plan
– Acquisition of Lihir Gold Limited
– Employee share acquisition plan
– Share buy-back
– Purchases by the Newcrest Employee Share Trust
Closing number of shares
Movement in treasury shares for the year
Opening number of shares
– Purchases
– Issued pursuant to share plans
Closing number of shares
2012
$M
18
–
18
Consolidated
2012
$M
2011
$M
6
1
7
2011
$M
(ii)
(iii)
(iii)
(v)
(vi)
13,569
3,640
36
–
–
(35)
(9)
42
9,947
(2)
(28)
(30)
13,561
13,569
2012
No.
2011
No.
764,561,477
438,523
764,412,847
587,153
765,000,000
765,000,000
764,412,847
483,498,777
(i)
(ii)
(iii)
(iv)
(v)
(vi)
379,568
1,062,040
–
39,062
(1,062,040)
(270,000)
343,086
1,085,162
280,987,564
39,257
(754,621)
(786,378)
764,561,477
764,412,847
587,153
270,000
(418,630)
–
786,378
(199,225)
438,523
587,153
(i) Represents rights exercised under the Company’s share-based payments plans. Refer Note 26.
(ii)
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.
(iii) Represents issue of shares on 13 September 2010 pursuant to the Scheme of Arrangement between Lihir Gold Limited and its ordinary
shareholders, which became effective on 30 August 2010. Refer Note 35 for further details. Transaction costs associated with the
issue amounted to $2 million.
(iv) 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.
96 newcrest mining annual report 2012
22. ISSUED CAPITAL (continued)
(v) Comprises of the following on-market buy-backs:
Date
17 Nov 2011
25 Nov 2011
21 Dec 2011
26 Apr 2012
27 Apr 2012
Shares Bought Back and Cancelled
No.
Average Price
432,056
63,560
394,195
108,800
63,429
1,062,040
36.74
33.62
31.49
25.47
25.81
Low
36.36
33.29
30.86
25.43
25.69
High
37.01
34.23
31.69
25.49
25.90
The total cost of $35 million has been deducted from Issued Capital.
In order to minimise 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 intends to 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 rights, or operation
of the DRP. The share buy-back plan will only be used to purchase shares that are issued under the above-mentioned plans.
(vi) During the year, $9 million of shares (2011: $30 million) were purchased by the Newcrest Employee Share Trust on behalf
of Newcrest Mining Limited to satisfy future share rights and awards as they vest.
23. RETAINED EARNINGS
Opening balance
Profit after tax (attributable to owners of the parent)
Dividends paid
Closing balance
24. RESERVES
Equity Settlements Reserve
Foreign Currency Translation Reserve
Hedge Reserve
Fair Value Reserve
Total Reserves
(a) Equity Settlements Reserve
Consolidated
2012
$M
2,171
1,117
(398)
2,890
2011
$M
1,492
908
(229)
2,171
Consolidated
2012
$M
54
(1,543)
15
(2)
(1,476)
2011
$M
45
(2,026)
17
–
(1,964)
Note
(a)
(b)
(c)
(d)
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. The reserve is also used to record gains and losses on hedges of the net investment in foreign operations
(refer Note 2(w)).
During the current year, the Group issued US$1,000 million in US denominated corporate bonds. This debt has been designated as
a hedge of the net investment in a foreign operation (Lihir Gold Limited). The exchange gains or losses upon subsequent revaluation
of this US dollar denominated debt, in an effective hedge relationship, from the historical drawdown rate to the period-end spot
exchange rate are deferred in equity in the Foreign Currency Translation Reserve. These cumulative gains or losses will remain deferred
in equity and will only be transferred to the Income Statement in the event of the disposal of the foreign operation. During the year
$7 million (net of tax) was deferred to the reserve in respect of this net investment hedge.
The Group’s foreign operations have a US dollar functional currency. The decrease in the reserve during the year was mainly due to
the depreciation of the Australian dollar against the US dollar, which represented a movement of 5%. The Group’s foreign operations
were translated at a rate of 1.0191 at 30 June 2012 compared with 1.0739 at 30 June 2011.
newcrest mining annual report 2012 97
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
24. RESERVES (continued)
(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(w)).
The components of the Hedge Reserve at year end were as follows:
Components
FX gains on US dollar
denominated borrowings(1)
Losses on hedge contracts(2)
Other cash flow hedges
30 June 2012
30 June 2011
Gross
Gains/(Losses)
$M
Net
Tax impact Gains/(Losses)
$M
$M
Gross
Gains/(Losses)
$M
Tax impact
$M
Net
Gains/(Losses)
$M
20
–
1
21
(6)
–
–
(6)
14
–
1
15
30
(7)
2
25
(9)
2
(1)
(8)
21
(5)
1
17
(1) FX Gains on US dollar private placement notes
The foreign currency component of this US dollar denominated debt was designated as a cash flow hedge of future US dollar denominated commodity
sales. During the 2010 year, this hedge was de-designated. As a result of this de-designation, foreign exchange differences on the retranslation of this
debt, from the date of de-designation are recorded in the Income Statement.
At the date of de-designation, the balance of this cash flow hedge deferred in equity was $21 million (net of tax). This balance will continue to remain
deferred in equity and will be released to the Income Statement, in the same period as the anticipated hedged US dollar denominated commodity sales.
During the year, $7 million (gross of $10 million less tax of $3 million) was transferred to the Income Statement (2011: nil).
(2) Losses on hedge contracts
Losses on hedge contracts incurred in previous years (which were restructured/closed out in previous years) were released to the Income Statement
in line with the original sales to which they were designated. These losses have now been fully released to the Income Statement.
(d) Fair Value Reserve
The Fair Value Reserve records movements in the fair value of available-for-sale financial assets. Where a revalued financial asset
is sold or is determined to be impaired, the cumulative gain or loss included in the reserve is recognised in profit or loss.
25. AUDITOR’S REMUNERATION
(a) Amounts Received or Due and Receivable by Ernst & Young (Australia) for:
Audit or review of financial reports of the company and subsidiaries
Other services:
– Assurance services in respect of acquisitions
– Assurance services in respect of divestments
– Accounting advice and other assurance-related services
– Assurance services in relation to USD corporate bonds issue
– Advisory services in relation to business management processes
(b) Amounts Received or Due and Receivable by Related Practices
of Ernst & Young (Australia) for:
Audit or review of financial reports of subsidiaries
(c) Amounts Received or Due and Receivable by Other Auditors for:
Audit or review of the financial report of subsidiaries
Other non-audit services
Consolidated
2012
$’000
2011
$’000
1,834
1,805
–
40
128
319
413
58
185
6
–
–
2,734
2,054
193
41
–
41
91
415
148
563
26. 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 one 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 is measured at the weighted average market price of the shares on the ASX over a period
of a week prior to the grant date. The fair value of shares issued under the Plan during the year was $1.4 million (2011: $1.5 million).
Members of the Plan receive all the rights of ordinary shareholders. Unrestricted possession of these shares occurs at the earliest of three
years from the date of issue or the date employment ceases. During 2012, 1,396 employees participated in the Plan (2011: 1,501 employees).
(b) Executive Performance Share Plan (LTI Plan)
The Executive Performance Share Plan (also referred to as the Long Term Incentive (LTI) Plan) 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.
98 newcrest mining annual report 2012
26. SHARE-BASED PAYMENTS (continued)
The performance measures for the Performance Rights granted in the 2011 and 2012 financial years 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 group 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 three-year vesting period accounts for one-third of any grant made to participants.
There is no ability to re-test performance under the Plan after the performance period.
The assessed fair value at grant date of the share rights granted under the Plan during the 2012 year was $31.83 (2011: $41.66) per right.
The fair value is independently determined using a Black-Scholes option pricing model. The model inputs for share rights granted included:
– Exercise price:
– Risk-free interest rate:
– Expected life of right (years):
– Share price at grant date:
– Expected dividend yield:
nil
3.16%
3 years
$33.18
1.5%
(2011: nil)
(2011: 5.09%)
(2011: 3 years)
(2011: $42.29)
(2011: 0.5%)
(c) Restricted Share Plan (MTI Plan)
The Restricted Share Plan (also referred to as the Medium Term Incentive (MTI) Plan) was an annual incentive plan under which eligible
employees were granted rights to receive ordinary fully paid shares in the Company (Restricted Rights).
The MTI Plan was last awarded to:
– Managers and other selected high performing personnel in 2009.
– Executive Directors, Executive General Managers (being Key Management Personnel) and Senior Executives in 2008.
The amount of the award was determined by the Group’s performance in the financial year immediately prior to the date the award
was granted. Once awarded, the Restricted Rights vested at the end of two or three years (depending on the level of the employee),
provided that the participating employee had been employed throughout the vesting period and achieved minimal acceptable personal
performance. Each Restricted Right granted initially entitled the holder to subscribe for one ordinary share. Group performance in relation
to the award was measured according to the Group’s Total Shareholder Return (TSR) measured against a comparator group of companies
over the previous financial year, taken from the FTSE Gold Mine Index.
Outstanding Restricted Rights at the end of 2012 have an expiry date of 11 November 2013.
(d) Movements in the Number of Rights
Detailed information of share rights over unissued ordinary shares is set out below:
Grant
date
Exercise date
on or after
Expiry date
2012
3 Nov 06
9 Nov 07
11 Nov 08
11 Nov 08
10 Nov 09
10 Nov 10
23 Sep 11
Total
2011
8 Nov 05
14 Jul 06
3 Nov 06
9 Nov 07
11 Nov 08
11 Nov 08
10 Nov 09
10 Nov 10
Total
3 Nov 09
9 Nov 10
11 Nov 10
11 Nov 11
10 Nov 12
10 Nov 13
23 Sep 14
8 Nov 08
14 Jul 09
3 Nov 09
9 Nov 10
11 Nov 10
11 Nov 11
10 Nov 12
10 Nov 13
3 Nov 11
9 Nov 12
11 Nov 12
11 Nov 13
10 Nov 14
10 Nov 15
23 Sep 14
8 Nov 10
14 Jul 11
3 Nov 11
9 Nov 12
11 Nov 12
11 Nov 13
10 Nov 14
10 Nov 15
All share rights have a nil exercise price.
Movement in Number of Rights During the Year
Granted
Exercised
Forfeited
Number at
end of year
Number
Exerciseable
at end of year
–
–
–
–
–
–
517,564
(102,787)
(70,989)
(34,240)
(171,552)
–
–
–
(642)
(633)
(4,857)
(47,008)
(83,256)
(68,257)
(2,125)
–
53,280
42,242
133,569
170,553
193,098
515,439
–
53,280
42,242
133,569
–
–
–
Number at
beginning
of year
103,429
124,902
81,339
352,129
253,809
261,355
–
1,176,963
517,564
(379,568)
(206,778)
1,108,181
229,091
11,166
165,000
140,804
220,971
146,272
361,206
264,079
–
–
–
–
–
–
–
–
261,355
(11,166)
(165,000)
(35,561)
(79,497)
(51,862)
–
–
–
–
–
(1,814)
(16,572)
(13,071)
(9,077)
(10,270)
–
–
–
103,429
124,902
81,339
352,129
253,809
261,355
–
–
103,429
124,902
81,339
–
–
–
1,309,498
261,355
(343,086)
(50,804)
1,176,963
309,670
newcrest mining annual report 2012 99
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
27. 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 around 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 and available-for-sale assets, 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 assets and financial liabilities at year end.
Consolidated
Category
Financial assets
Cash and cash equivalents
Loans and receivables
Derivatives at fair value through profit or loss
Derivatives in designated hedge accounting relationship
Available-for-sale financial assets
Financial liabilities
Trade and other payables
Borrowings
Derivatives at fair value through profit or loss
Derivatives in designated hedge accounting relationship
2012
$M
242
251
10
1
8
482
2,408
18
–
2011
$M
185
441
12
3
9
432
800
6
1
(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 counterparty,
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 $14 million (2011: nil).
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 2012 or 30 June 2011.
The majority of the Group’s receivables are due from concentrate customers in Japan, China, Europe and Korea. There have been
no credit defaults with these customers in recent history. Newcrest’s Treasury department evaluates credit risk on a continual basis.
At the reporting 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.
100 newcrest mining annual report 2012
27. FINANCIAL AND CAPITAL RISK MANAGEMENT (continued)
The ageing of trade and other receivables at the reporting date was as follows:
Trade and other receivables
2012
Metal in concentrate receivables
Bullion awaiting settlement
GST receivable
Other receivables
2011
Metal in concentrate receivables
Bullion awaiting settlement
GST receivable
Other receivables
Not
Past Due
$M
Past due but not impaired
Less than
30 days
$M
Greater than
30 days
$M
100
46
61
29
236
277
56
60
40
433
–
–
–
9
9
–
–
–
3
3
–
–
–
6
6
–
–
–
5
5
Total
$M
100
46
61
44
251
277
56
60
48
441
(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 detail for the next 12 months and longer term to five years.
The Group maintains a balance between continuity of funding and flexibility through the use of loans and committed available credit lines.
Included in Note 19 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
2012
Payables
Borrowings
Derivatives
2011
Payables
Borrowings
Derivatives
Less than
6 months
$M
Between
6–12 months
$M
Between
1–2 years
$M
Between
2–5 years
$M
Greater than
5 years
$M
482
319
18
819
432
13
7
452
–
936
–
936
–
123
–
123
–
60
–
60
–
480
–
480
–
369
–
369
–
130
–
130
–
1,503
–
1,503
–
127
–
127
Total
$M
482
3,187
18
3,687
432
873
7
1,312
At the date of this report, the Group is in the process of renewing its bilateral debt facilities with a number of banks. It is expected that
this renewal process will be completed no later than 30 September 2012, with facility terms of three years or more.
(d) Foreign Currency Risk
The Group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. The majority
of the Group’s revenue is denominated in US dollars whereas the majority of costs (including capital expenditure) are in Australian dollars.
The Group’s Statement of Financial Position can be affected significantly by movements in the USD:AUD exchange rate. The Group also
has exposure to other foreign currencies such as the Indonesian rupiah, Papua New Guinea kina, CFA franc and Fiji dollar; however, these
exposures are less significant.
Newcrest hedges certain non-functional currency capital commitment exposures to provide some budget certainty in the functional currency.
Measuring the exposure to foreign exchange risk is achieved by regularly monitoring and performing sensitivity analysis on the Group’s
financial position.
newcrest mining annual report 2012 101
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
27. FINANCIAL AND CAPITAL RISK MANAGEMENT (continued)
The carrying amounts of the Group’s US dollar denominated financial assets and liabilities in entities which do not have a US dollar
functional currency at the reporting date are as follows:
US dollar denominated balances
Financial assets
Cash and cash equivalents
Trade and other receivables
Related party receivables
Derivatives
Financial liabilities
Payables
Borrowings
Derivatives
Net exposure
2012
A$M
49
100
947
11
1,107
10
2,404
18
2,432
(1,325)
2011
A$M
16
277
407
12
712
4
792
6
802
(90)
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 draw-down 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 draw-down 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 if the foreign operation is sold. As at 30 June 2012 US dollar borrowings of A$1,472 million
were designated as a net investment in foreign operations (2011: nil).
Forward Foreign Exchange Contracts
The following table details the forward foreign currency contracts outstanding as at reporting date:
Outstanding contracts
Buy EUR/Sell AUD
Buy EUR/Sell USD
Average Exchange
Rate
Contract Value
A$M
2012
–
0.72
2011
0.71
–
2012
–
1
1
2011
44
–
44
Fair Value
A$M
2012
2011
–
–
–
(1)
–
(1)
The above contracts are for periods less than 12 months.
Sensitivity Analysis
The following table details the Group’s sensitivity to a 15% movement (2011: 15%) (i.e. increase and decrease) in the Australian dollar
against the US dollar at the reporting date, with all other variables held constant. The 15% sensitivity is based on reasonably possible
changes, over a financial year, using the observed range of actual historical rates for the preceding five-year period.
AUD/USD +15%
AUD/USD -15%
Impact on Profit After Tax
Higher/(Lower)
Impact on Equity
Higher/(Lower)
2012
$M
(13)
18
2011
$M
(27)
36
2012
$M
134
(182)
2011
$M
45
(62)
Significant assumptions used in the foreign currency exposure sensitivity analysis above include:
– Reasonably possible movements in foreign exchange rates.
– The reasonably possible movement of 15% (2011: 15%) was calculated by taking the US dollar spot rate as at the reporting date, moving
this spot rate by 15% (2011:15%) and then re-converting the US dollar into the Australian dollar 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 the Australian dollar has not been included
in the sensitivity analysis as part of the equity movement.
– The net exposure at the reporting date is representative of what the Group was and is expecting to be exposed to in the next 12 months
from the reporting date.
– The sensitivity analysis includes only the impact on the balance of financial assets and financial liabilities at the reporting date.
102 newcrest mining annual report 2012
27. 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, gold put options and diesel forward contracts 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 are disclosed in Notes 11 and 21.
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:
Copper Forward Sale Contracts
Tonnes
2012
Weighted
Average
Price US$
Fair Value
A$M
Tonnes
2011
Weighted
Average
Price US$
Fair Value
A$M
Maturing:
Less than 6 months
21,784
8,053
10
19,020
9,497
6
Gold Put Options
In September 2007, the Group entered into put options for a portion of its gold production in order to manage its exposure to commodity
price risk. The put options allow the Group to maintain full exposure to any upwards movement in the gold price, providing it the right,
but not the obligation, to deliver gold at the stated strike price.
The following table details the Australian dollar gold put options outstanding as at the reporting date:
Gold put options
Maturing:
Less than 1 year
2012
Strike
Price A$
Ounces
Fair Value
A$M
Ounces
–
–
–
–
500,000
500,000
2011
Strike
Price US$
800
Fair Value
A$M
–
–
The total premium paid for these options in September 2007 was $79 million, which represented the fair value at the date entered.
The fair value of these options was subsequently estimated using an option pricing model. As at 30 June 2011, the options had
a fair value of nil. These options fully expired during the 2012 year.
Diesel/Fuel Forward Contracts
The Group undertakes short-term diesel/fuel hedging in line with budget to fix certain Australian dollar diesel/fuel costs.
Maturing in less than 12 months
Diesel forward contracts (barrels)
Heavy fuel forward contracts (tonnes)
Quantity
539,355
51,749
2012
Weighted
Average
Price US$
111
579
Fair Value
A$M
–
1
Quantity
1,190,071
79,724
2011
Weighted
Average
Price US$
127
606
Fair Value
A$M
1
2
Sensitivity Analysis
The following table summarises the sensitivity of financial assets and financial liabilities held at the reporting date to movement in
gold and copper commodity prices, with all other variables held constant. The 15% (2011: 15%) movement for gold and 15% (2011: 15%)
movement for copper are based on reasonably possible changes, over a financial year, using an observed range of actual historical
rates for the preceding five-year period.
Post-tax gain/(loss)
Gold(3)
Gold +15%
Gold -15%
Copper
Copper +15%
Copper -15%
Impact on profit(1)
Higher/(Lower)
Impact on Equity(2)
Higher/(Lower)
2012
$M
23
(23)
1
(1)
2011
$M
31
(31)
1
(1)
2012
$M
23
(23)
1
(1)
2011
$M
31
(31)
1
(1)
(1) Represents the impact of the movement in commodity prices on the balance of the financial assets and financial liabilities at year end.
(2) 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.
(3) The impact on profit predominantly relates to the change in value of the embedded derivative relating to quotational period movements on gold sales
(refer note 2(z)).
newcrest mining annual report 2012 103
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
27. 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 risk profile. Details of the Group’s types and levels of debt are included in Note 19.
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 the reporting date is summarised as follows:
Consolidated
Financial assets
Cash and cash equivalents
Financial liabilities
Lease liabilities – floating
Lease liabilities – fixed
Bilateral debt
Corporate bonds
Private placement – floating
Private placement – fixed
Floating
Interest
$M
2012
Fixed
Interest
$M
Effective
Interest Rate
%
Floating
Interest
$M
2011
Fixed
Interest
$M
Effective
Interest Rate
%
242
242
3
–
1,197
–
–
–
–
–
–
1
–
981
–
226
1,200
(958)
1,208
(1,208)
0.3
3.1
5.0
2.1
4.8
–
5.7
185
185
7
–
466
–
23
–
496
–
–
–
1
–
–
–
303
304
(311)
(304)
0.5
1.9
6.8
2.0
–
1.1
5.6
The other financial instruments of the Group not included in the above table are non-interest bearing and not subject to interest rate risk.
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.
Post-tax gain/(loss)
+1% (100 basis points)
-1% (100 basis points)
Impact on Profit
Higher/(Lower)
Impact on Equity
Higher/(Lower)
2012
$M
(7)
7
2011
$M
(2)
2
2012
$M
(7)
7
2011
$M
(2)
2
The Group’s sensitivity to interest rates has increased during the current year due to the drawdown on the bilateral debt facility.
(g) Fair Value
(i) Fair Value of Financial Instruments Carried at Amortised Cost
Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities recognised at amortised cost
in the financial statements approximate their fair value.
Financial assets/(liabilities)
Borrowings
Fixed rate debt:(1)
– Private placement
– Corporate bonds
Carrying amount
Fair value
2012
$M
2011
$M
2012
$M
(226)
(981)
(1,207)
(303)
–
(303)
(249)
(1,008)
(1,257)
2011
$M
(328)
–
(328)
(1) Amount recorded at amortised cost and the movements in the fair valuation are not recorded on the Statement of Financial Position.
104 newcrest mining annual report 2012
27. FINANCIAL AND CAPITAL RISK MANAGEMENT (continued)
(ii) Fair Value Measurements Recognised in the Statement of Financial Position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (as prices) or indirectly (derived from prices).
– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
Financial assets/(liabilities)
2012
Financial assets
Copper forward sales contracts
Other financial derivatives
Available-for-sale financial assets
Financial liabilities
Quotational period derivatives
2011
Financial assets
Quotational period derivatives
Copper forward sales contracts
Other financial derivatives
Available-for-sale financial assets
Financial liabilities
Quotational period derivatives
Other financial derivatives
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
–
–
8
–
–
–
–
9
–
–
10
1
–
(18)
6
6
3
–
(6)
(1)
–
–
–
–
–
–
–
–
–
–
10
1
8
(18)
6
6
3
9
(6)
(1)
(h) Capital Management
Newcrest’s objectives when managing capital are to maintain a strong capital base capable of withstanding significant cash flow
variability, whilst providing the flexibility to pursue its growth aspirations. Newcrest aims to maintain an optimal capital structure
to reduce the cost of capital and maximise shareholder returns. Newcrest has a Capital Management Plan, which is reviewed,
updated and approved by the Board on an annual basis.
The capital structure of Newcrest consists of debt, which includes borrowings as disclosed in Note 19, cash, cash equivalents and equity.
Newcrest balances its overall capital structure through the issue of new shares, share buy-backs, capital returns, the payment of
dividends as well as the issue of new debt or redemption of existing debt.
The Group is not subject to any externally imposed capital requirements.
Gearing Ratio
Newcrest’s gearing ratio is monitored and maintained at a level that is appropriate for financial risk and growth plans. Newcrest’s strategy
is to have maximum gearing of around 15% and maintain the equivalent of an investment grade credit rating around BBB+.
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
2012
$M
2,408
(242)
2,166
15,094
17,260
12.5%
2011
$M
800
(185)
615
13,875
14,490
4.2%
newcrest mining annual report 2012 105
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
28. COMMITMENTS
(a) Finance Lease Commitments
Within one year
Later than one year but not later than five years
Total minimum lease payments
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as borrowings (Note 19):
Current
Non-current
Finance leases were entered into as a means of financing the acquisition of mining equipment.
No lease arrangements create restrictions on other financing transactions.
(b) Operating Lease Commitments
Future minimum rentals payable on non-cancellable operating leases due:
Within one year
Later than one year but not later than five years
Later than five years
Total
The Group leases assets for operations including plant and office premises. The leases have an average life
ranging from 1 to 10 years. There are no restrictions placed upon the lessee by entering into these leases.
(c) Capital Expenditure Commitments
Capital expenditure commitments
This represents contracted mining development expenditure.
29. CONTINGENT LIABILITIES
Consolidated
2012
$M
2011
$M
3
1
4
–
4
3
1
4
6
17
8
31
4
4
8
–
8
4
4
8
5
12
10
27
446
743
(a) Legal proceedings were commenced in December 2010 against the Hidden Valley mine unincorporated joint venture (in which Newcrest
holds a 50% interest) in Papua New Guinea over alleged damage to the Watut River (which runs adjacent to the Hidden Valley gold mine)
alleged to have been caused by waste rock and overburden from the mine. The damages sought by the plaintiffs are not specified.
At this stage, it is not practicable to make any reasonable assessment of the prospects of the plaintiffs succeeding in their claim,
nor the potential liability of the Hidden Valley mine unincorporated joint venture parties were the plaintiffs to succeed. The defendants
are defending the claims. Accordingly, no provision has been recognised in the financial statements for this matter.
(b) In addition to the above matter, 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 will 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.
(c) The Indonesian Tax Office (ITO) is conducting tax audits of PT Nusa Halmahera Minerals (PTNHM), which is owned 82.5% by the Group.
The audits cover the 2005, 2007, 2008, 2010 and 2011 financial years. The Group considers that PTNHM has made adequate provision
for its taxation liabilities and is taking appropriate steps to address issues raised by the ITO. There would be a tax impact on the Group
if any of the ITO audits result in an adjustment that increases PTNHM’s taxation liabilities.
(d) 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 the reporting date is $163 million (2011: $159 million).
30. CONTROLLED ENTITIES
Entity
Parent Entity
Newcrest Mining Limited
Subsidiaries
Newcrest Operations Ltd
Australmin Holdings Ltd
Cadia Holdings Pty Ltd
Contango Agricultural Co. Pty Ltd
Horskar Pty Limited
Newcrest Exploration Holdings Pty Ltd
Newcrest Finance Pty Ltd
Newcrest International Pty Ltd
Newcrest Services Pty Ltd
106 newcrest mining annual report 2012
Notes
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
(a)
(d)
(a)
(d)
(a)
(a)
(a)
(d)
Percentage Holding
2012
%
100
100
100
100
100
100
100
100
100
2011
%
100
100
100
100
100
100
100
100
100
30. CONTROLLED ENTITIES (continued)
Entity
Newcrest Technology Pty Ltd
Newgen Pty Ltd
Sulawesi Investments Pty Ltd
Niugini Mining Australia Pty Ltd
LGL Australian Holdings Pty Ltd
LGL Services Australia Pty Ltd
LGL Ballarat Operations Pty Ltd
New Resource Pty Ltd
Berringa Resources Pty Ltd
Ballarat West Goldfields Pty Ltd
LGL Mount Rawdon Operations Pty Ltd
LGL Mount Rawdon Property Holdings Pty Ltd
LGL CDI Investments Pty Ltd
LGL CDI Exploration Pty Ltd
Newcrest Holdings (Investments) Pty Ltd
Newcrest Singapore Holdings Pte Ltd
Newcrest Insurance Pte Ltd
Newcrest Singapore (Tandai) Pte Ltd
Newcrest Fiji Holdings 1 Pte Ltd
Newcrest Fiji Holdings 2 Pte Ltd
Newcrest Fiji Exploration Holdings 1 Pte Ltd
Newcrest Fiji Exploration Holdings 2 Pte Ltd
Newcrest Trading Pte Ltd
PT Nusa Halmahera Minerals
PT Puncakbaru Jayatama
PT Bengkulu Utara Gold
Newcrest (Fiji) Ltd
Newcrest Exploration (Fiji) Ltd
Newcrest PNG 1 Ltd
Newcrest PNG 2 Ltd
Newcrest PNG 3 Ltd
Newcrest PNG Exploration Ltd
Newcrest PNG Andewa Ltd
Lihir Gold Ltd
Niugini Mining Ltd
Lihir Management Company Ltd
LGL PNG Holdings Ltd
600 Holdings Inc
Newcrest Resources Inc
Newcrest USA Inc
Newroyal Resources Inc
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 Mining BC Ltd
LGL Holdings CI SA
LGL Development CI SA
LGL Exploration CI SA
LGL Mines CI SA
LGL Resources CI SA
Notes
(d)
(a) (d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(c)
(b)
(c)
(c) (d)
(c) (d)
(c) (d)
(c) (d)
(d)
(b)
(b)
(c)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b) (d)
(b) (d)
(b) (d)
(d)
(e)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Indonesia
Indonesia
Indonesia
Fiji
Fiji
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
USA
USA
USA
USA
Bermuda
Bermuda
Bermuda
Bermuda
Chile
Peru
Canada
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Percentage Holding
2012
%
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
70
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
89.89
99.89
2011
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
–
82.5
100
70
100
–
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
89.89
98.00
Notes:
(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 & Investments Commission. (Refer Note 32 for further information).
(b) Audited by affiliates of the parent entity auditors.
(c) Audited by auditors other than parent entity auditors.
(d) Dormant entities.
(e) Formerly Newmont Pty Ltd.
newcrest mining annual report 2012 107
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
31. PARENT ENTITY INFORMATION
The summarised Income Statement and Statement of Financial Position in respect to the parent entity (Company) is set out below.
(a) Income Statement
Profit after income tax
Total comprehensive income for the year
(b) Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Equity settlements reserve
Retained earnings:
Opening balance
Profit after tax
Dividends paid
Closing balance
Total equity
(c) Commitments
Capital expenditure commitments
Capital expenditure contracted but not provided for, all of which is payable as follows:
Within one year
Total
Operating lease commitments
Future minimum rentals payable on non-cancellable operating leases due:
Within one year
Later than one year but not later than five years
Later than five years
Total
Company
2011
$M
29
29
273
13,612
13,885
117
145
262
13,623
13,569
45
209
29
(229)
9
2012
$M
486
486
277
13,811
14,088
165
211
376
13,712
13,561
54
9
486
(398)
97
13,712
13,623
24
24
3
5
–
8
12
12
2
4
–
6
(d) Guarantees and Contingent Liabilities
The Company and certain Australian controlled entities have entered 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. Further details are included in Note 32. At the reporting date, no amounts have been recognised
in the financial information of the Company in respect of this Deed on the basis that the possibility of default is remote.
108 newcrest mining annual report 2012
32. 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 30 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 Statement of Financial Position, 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, is set out below.
Income Statement
Operating sales revenue
Cost of sales
Gross profit
Exploration costs
Corporate administration costs
Other revenue
Other income/(expenses)
Losses on restructured and closed-out hedge contracts
Other close-out related costs
Business acquisition and integration costs
Gain on business divestment
Profit before interest and income tax
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit after income tax
Consolidated
2012
$M
2,375
(1,618)
757
(32)
(137)
188
23
(7)
–
(11)
46
827
34
(36)
825
(106)
719
2011
$M
2,249
(1,500)
749
(28)
(82)
249
(6)
(153)
(3)
(48)
–
678
9
(45)
642
(85)
557
newcrest mining annual report 2012 109
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
32. DEED OF CROSS GUARANTEE (continued)
Consolidated
2012
$M
64
144
288
10
91
597
2,135
83
10,096
2,250
3,221
88
229
1
208
18,311
18,908
280
1,197
90
18
20
–
1,605
1,207
173
503
1,883
3,488
15,420
13,561
1,922
(63)
15,420
2011
$M
26
623
364
12
146
1,171
2
–
11,058
1,606
2,540
57
205
2
37
15,507
16,678
226
112
72
8
–
7
425
680
82
380
1,142
1,567
15,111
13,569
1,601
(59)
15,111
Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative and other financial assets
Other assets
Total current assets
Non-current assets
Other receivables
Inventories
Investment in subsidiaries
Property, plant and equipment
Exploration, evaluation and development expenditure
Other intangible assets
Deferred tax assets
Derivative and other financial assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Derivative and other financial liabilities
Income tax payable
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Reserves
Total equity
110 newcrest mining annual report 2012
33. INTERESTS IN UNINCORPORATED JOINT VENTURE ASSETS
(a) Interests
The Group has interests in the following significant unincorporated joint ventures:
Name
Country
Principal Activity
Cracow JV(1)
Namosi JV
Hidden Valley JV
Wafi-Golpu JV(2)
Morobe Exploration JV
Australia
Fiji
Papua New Guinea
Papua New Guinea
Papua New Guinea
Gold production and mineral exploration
Mineral exploration
Gold production and mineral exploration
Mineral exploration
Mineral exploration
Ownership Interest
2012
%
–
69.94
50.0
50.0
50.0
2011
%
70.0
69.94
50.0
50.0
50.0
(1) The Group divested its interest in the Cracow JV on 2 November 2011. Refer Note 34.
(2) Consistent with the current administrative practice, the PNG National Government has reserved the right to take up an equity interest of up to 30% in
a mine developed from Wafi-Golpu. The right is recorded as a condition in exploration licences and is exercisable by the PNG National Government once
at any time prior to the grant of a mining lease or special mining lease. If the PNG National Government exercises this right, the exercise price is a pro-rata
share of the historical exploration costs. Once the right is exercised, the PNG National Government becomes responsible for its proportionate share
of ongoing exploration and project development costs. The PNG National Government has indicated its intention to exercise its option, nominating
government-owned company Petromin PNG Holdings Ltd to take up the interest, although the option has not yet been exercised. In the event the
option is exercised in full, Newcrest’s interest in the Wafi-Golpu joint venture would be reduced to 35%.
(b) Assets Employed in Joint Ventures
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).
Consolidated
Joint Ventures
Current assets
Cash assets
Receivables
Inventories
Other assets
Non-current assets
Property, plant and equipment
Exploration, evaluation and development
Total assets
2012
$M
23
9
58
42
132
394
224
618
750
2011
$M
10
11
43
24
88
376
174
550
638
For operating and capital expenditure commitments and contingent liability disclosures relating to the joint ventures refer to Note 28
and Note 29 respectively.
34. BUSINESS DIVESTMENT
On 2 November 2011, the Group sold its 70% interest in the Cracow gold mine and exploration joint ventures and its 100% interest in the
Mt Rawdon gold mine (the Assets). The Assets were sold to Evolution Mining Limited (Evolution), which was a company formed through
the merger of Catalpa Resources Limited and Conquest Mining Limited.
Newcrest received 231,082,631 shares in Evolution as consideration for the Assets, resulting in an initial 38.95% interest in Evolution.
This interest was subsequently diluted to 32.68% following a 3 for 17 accelerated renounceable entitlement offer (rights issue) undertaken
by Evolution, in which Newcrest had agreed not to take up its entitlement. Newcrest received $10 million from its non-participation
in the rights issue.
Gain on Divestment
The gain on the divestment of the Assets was as follows:
Consideration received
Written down value of net assets sold
Disposal costs
Applicable income tax
Consolidated
Note
(i)
(ii)
(iii)
$M
390
(336)
(8)
–
46
(i) Represents 231,082,631 shares in Evolution at $1.6893 per share, based on the quoted price of Evolution shares at the divestment
date (2 November 2011).
newcrest mining annual report 2012 111
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
34. BUSINESS DIVESTMENT (continued)
(ii) Represents the carrying values of the net assets disposed, as detailed below:
Assets
Inventories
Deferred mining
Property, plant and equipment
Exploration, evaluation and development
Goodwill
Total assets
Liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets divested
Consolidated
Book Value on
Divestment
$M
10
57
52
229
53
401
14
51
65
336
(iii) The Group has utilised previously unrecognised capital losses to offset the taxable capital gain.
35. BUSINESS ACQUISITIONS
Newcrest and Lihir Gold Limited (LGL) entered into a Merger Implementation Agreement on 4 May 2010 to combine the two companies
under a Scheme of Arrangement (Scheme). The Scheme was approved by LGL shareholders on 23 August 2010 and was approved by
the National Court of Papua New Guinea (the Court) on 27 August 2010. In accordance with the Court Order, the Scheme became effective
on 30 August 2010. Newcrest assumed effective management control of LGL on 30 August 2010.
LGL is a gold producer, with operations in Papua New Guinea, West Africa and Australia. LGL has 19 subsidiaries, which are all wholly-owned
except for:
– LGL Mines CI SA (89.89% owned). This company is the holder and operator of the Bonikro operations.
– LGL Resources CI SA (98% owned). This company is the holder of exploration permits in Côte d’Ivoire.
Details of the acquisition are as follows:
(a) Consideration
Equity instruments: 280,987,564 Newcrest shares at $35.40 per share(1)
Cash consideration
Total consideration
(1) The fair value of $35.40 is based on the quoted price of Newcrest shares at the acquisition date (30 August 2010)
(b) Net Cash Flow Attributable to the Acquisition
Cash consideration paid
Less: Cash and cash equivalent balance acquired
Net cash outflow
(c) Acquisition-Related Costs
Costs charged to the Income Statement (Note 4(k)
Share issue costs charged to Equity (Note 22)
Acquisition-related costs incurred in 2011
Costs charged to the Income Statement in 2010
Total acquisition related costs
2011
$M
9,947
533
10,480
533
(261)
272
15
2
17
12
29
112 newcrest mining annual report 2012
35. BUSINESS ACQUISITIONS (continued)
(d) Fair Values
Details of the fair values at the date of acquisition are set out below:
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Exploration, evaluation and development
Other intangible assets
Financial derivative assets
Deferred tax assets
Other assets
Total assets
Liabilities
Trade and other payables
Borrowings
Provisions
Financial derivative liabilities
Deferred tax liabilities
Other liabilities
Total liabilities
Fair value of identifiable net assets
Non-controlling interest in identifiable acquired net assets
Goodwill on acquisition
Fair Value on Acquisition
$M
261
10
911
1,565
4,985
3
8
157
103
8,003
159
58
159
1
1,462
1
1,840
6,163
(53)
4,370
10,480
(e) Pro-Forma Results
The Income Statement for the year ended 30 June 2011 includes sales revenue of $1,037 million and profit after income tax of $325 million,
as a result of the acquisition of LGL.
Had the acquisition of LGL occurred at the beginning of the 2011 reporting period, the Income Statement would have included additional
sales revenue and profit after tax of $220 million and $55 million respectively (representing the pro-forma results for the period 1 July
to 30 August 2010).
In determining the ‘pro-forma’ sales revenue and net profit after income tax of the Group had LGL been acquired at the beginning
of the 2011 reporting period:
– depreciation of plant and equipment, mine development and mineral rights acquired have been calculated on the basis of the
fair values arising in the final accounting for the business combination rather than the carrying amounts recognised in the
pre-acquisition financial statements; and
– synergy benefits have not been taken into account.
36. SEGMENT INFORMATION
The Group’s operating segments are based on the internal management reports that are reviewed and used by the Group’s Executive
Committee (the chief operating decision-makers) in assessing performance. The operating segments represent the Group’s operating
mines and projects, which are organised and managed according to their location.
The Group’s reportable operating segments are:
– Cadia Valley, Australia
– Telfer, Australia
– Cracow JV (70% interest) and Mt Rawdon, Australia (divested on 2 November 2011)
– Gosowong, Indonesia
– Lihir, Papua New Guinea
– Hidden Valley JV (50% interest), Papua New Guinea
– West Africa (includes Bonikro operations and exploration and evaluation activities in Côte d’Ivoire)
– Exploration and Other.
Exploration and Other mainly comprises projects in the exploration, evaluation and feasibility phase and includes Namosi in Fiji,
Wafi-Golpu in PNG, and Marsden and O’Callaghans in Australia.
newcrest mining annual report 2012 113
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
36. SEGMENT INFORMATION (continued)
(a) Segment Results, Segment Assets and Segment Liabilities
The measurement of segment results is in line with the basis of information presented to management for internal management
reporting purposes. The performance of each segment is measured based on their Revenues, Costs, EBITDA and EBIT (Segment result).
Segment Revenues represent gold, copper and silver sales at unhedged prices.
EBITDA is earnings before interest, tax, depreciation, amortisation, hedge restructure and other significant items. EBIT is earnings
before interest, tax, hedge restructure and other significant items. The reconciliation of EBITDA and EBIT to profit before tax is shown
in the following table.
Segment assets exclude deferred tax assets and intercompany receivables.
Segment liabilities exclude intercompany payables.
2012
Cadia
Valley
$M
Cracow &
Hidden West
Total Exploration
Telfer Mt Rawdon(1) Gosowong
$M
$M
$M
Lihir
$M
Valley Africa Operations
$M
$M
$M
Total
& Other Corporate(2) Group
$M
$M
$M
External sales revenue
1,141
1,192
EBITDA
568
Depreciation and amortisation (111)
473
(187)
EBIT (Segment result)
457
286
89
37
(11)
26
711
964
527
(67)
651
(97)
172
32
(36)
147
63
(33)
4,416
2,351
(542)
460
554
(4)
30
1,809
–
(80)
–
(80)
Finance income
Finance costs
Hedge restructure and
other significant items:
Losses on restructured and
closed-out hedge contracts
Business acquisition and
integration costs
Gain on business divestment
Profit before income tax
–
4,416
(120)
(19)
2,151
(561)
(139)
1,590
2
(43)
2
(43)
(7)
(11)
46
(7)
(11)
46
(152)
1,577
Other information
Segment assets
Segment liabilities
Capital expenditure(3)
3,835
230
1,278
2,241
233
279
–
–
8
523 10,669
1,553
86
773
88
679
68
38
960
120
17
18,907
2,290
2,481
638
22
231
964 20,509
5,415
2,833
3,103
121
(1) Segment Result attributable to Mt Rawdon and Cracow is for the period 1 July to 2 November 2011. Refer Note 34.
(2) Includes eliminations.
(3) Represents additions to property, plant and equipment; exploration, evaluation and development; and other intangible assets.
2011
Cadia
Valley
$M
Cracow &
Hidden West
Total Exploration
Telfer Mt Rawdon(1) Gosowong
$M
$M
$M
Lihir(1) Valley Africa(1) Operations
$M
$M
$M
$M
Total
& Other Corporate(2) Group
$M
$M
$M
External sales revenue
1,083
1,065
EBITDA
551
Depreciation and amortisation (77)
409
(172)
EBIT (Segment result)
474
237
209
106
(31)
75
654
887
504
(67)
594
(106)
437
488
162
37
(39)
(2)
42
1
(9)
(8)
4,102
2,202
(501)
1,701
–
(55)
–
(55)
Finance income
Finance costs
Hedge restructure and
other significant items:
Losses on restructured
and closed-out hedge contracts
Other close-out related costs
Business acquisition and
integration costs
Profit before income tax
–
4,102
(88)
(14)
2,059
(515)
(102)
1,544
9
(45)
9
(45)
(153)
(3)
(153)
(3)
(52)
(52)
(346)
1,300
Other information
Segment assets
Segment liabilities
Capital expenditure(3)
2,851
185
1,022
2,007
169
119
388
82
28
432
86
93
9,241
1,346
609
586
58
50
830
99
5
16,335
2,025
1,926
501
12
150
446
1,370
29
17,282
3,407
2,105
(1) Segment Result attributable to Mt Rawdon, Lihir and West Africa is for the period 30 August 2010 to 30 June 2011. Refer Note 35.
(2) Includes eliminations.
(3) Represents additions to property, plant and equipment; exploration, evaluation and development; and other intangible assets.
114 newcrest mining annual report 2012
36. SEGMENT INFORMATION (continued)
(b) Geographical Segments
Revenue from external customers by geographical region is detailed below. Revenue is attributable to geographic location based
on the location of customers.
Sales Revenue from External Customers
Bullion
Australia
Other Asia
Concentrate
Japan
Korea
China
Europe (1)
USA(1)
Total sales revenue
(1) The majority of concentrate sales to customers in Europe and the USA are shipped to smelters in Japan, Korea and China.
Non-current assets
Australia
Indonesia
Papua New Guinea
West Africa
Other
Total non-current assets
2012
$M
2,366
2
730
159
95
762
302
4,416
2012
$M
6,253
283
11,324
864
62
18,786
2011
$M
2,238
6
1,021
53
91
576
117
4,102
2011
$M
4,622
250
9,820
777
41
15,510
Non-current assets for this purpose exclude deferred tax assets.
(c) Major Customer Information
Major customers to which the Group provides goods that are more than 10% of external revenue are as follows:
Customer A(1)
Customer B
Customer C
(1) Represents sales of bullion.
Revenue
Percentage
of external revenue
2012
$M
2,226
598
481
2011
$M
1,945
695
398
2012
%
50
14
11
2011
%
47
17
10
newcrest mining annual report 2012 115
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
37. KEY MANAGEMENT PERSONNEL
(a) Details of Directors and Key Management Personnel
Key Management Personnel (KMP), as defined in AASB 124 Related Party Disclosures, comprise the Company Directors (including Executive
Directors) and Executive Managers. The Managing Director, Finance Director and the Executive Managers are members of the Group’s
Executive Committee (Exco). The members of the Exco exercise the greatest control over the management and strategic direction
of the Group and are also the highest paid individuals in the Group.
Name
Position
Directors
Greg Robinson(1)
Gerard Bond
Don Mercer
John Spark
Rick Lee
Tim Poole
Richard Knight
Vince Gauci
Lady Winifred Kamit
Ian Smith(1)
Executive Managers
Ron Douglas
Colin Moorhead
Debra Stirling
Stephen Creese
Greg Jackson
Peter Smith
Brett Fletcher
Lawrie Conway
Andrew Logan
Geoff Day
Managing Director and Chief Executive Officer
Finance Director and Chief Financial Officer
(commenced 1 January 2012 and appointed as Executive Director on 8 February 2012)
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Former Managing Director and Chief Executive Officer
Executive General Manager – Projects
Executive General Manager – Minerals
Executive General Manager – People and Communication
Executive General Manager – Corporate Affairs
Chief Operating Officer
Executive General Manager – Australian Operations
Executive General Manager – PNG and Indonesian Operations
Executive General Manager – Commercial and West Africa (commenced 1 July 2011)
Executive General Manager – Step Change, Innovation and Technology (commenced 1 July 2011)
Chief Operating Officer – Offshore Operations (resigned 4 February 2011)
(1) Ian Smith stepped down as Managing Director and Chief Executive Officer on 30 June 2011 and Greg Robinson was appointed Managing Director
and Chief Executive Officer, with effect from 1 July 2011.
(b) Remuneration of Key Management Personnel
Short-term
Post-employment
Termination
Share-based payments
2012
$’000
15,771
248
–
3,901
19,920
2011
$’000
16,602
219
2,250
2,476
21,547
116 newcrest mining annual report 2012
37. KEY MANAGEMENT PERSONNEL (continued)
(c) Shareholdings of Key Management Personnel
Shares held in Newcrest Mining Limited:
Key Management Personnel
Directors
G. Robinson
G. Bond
D. Mercer
J. Spark
R. Lee
T. Poole
R. Knight
V. Gauci
W. Kamit
Executive Managers
C. Moorhead
R. Douglas
D. Stirling
S. Creese
G. Jackson
P. Smith
B. Fletcher
L. Conway
A. Logan
Key Management Personnel
Directors
I. Smith
G. Robinson
D. Mercer
J. Spark
R. Lee
T. Poole
R. Knight
V. Gauci
W. Kamit
Executive Managers
C. Moorhead
R. Douglas
D. Stirling
S. Creese
G. Jackson
P. Smith
B. Fletcher
Balance at
1 July 2011
Acquired
on exercise
of Rights
Net Other
Changes
Balance at
30 June 2012
4,235
–
15,546
18,105
22,447
4,235
20,000
3,400
326
32,317
8,725
5,603
–
–
20,964
–
34,829
–
16,252
–
–
–
–
–
–
–
–
8,568
17,348
–
–
–
–
–
2,358
3,719
–
–
–
–
–
–
–
–
–
(23,568)
–
–
–
–
–
–
(12,500)
–
20,487
–
15,546
18,105
22,447
4,235
20,000
3,400
326
17,317
26,073
5,603
–
–
20,964
–
24,687
3,719
Balance at
1 July 2010
Acquired
on exercise
of Rights
Net Other
Changes
Balance at
30 June 2011
4,235
4,235
15,546
18,105
20,000
4,235
20,000
3,400
–
32,317
–
5,603
–
–
–
–
165,000
–
–
–
–
–
–
–
–
–
8,725
–
–
–
–
–
(165,000)
–
–
–
2,447
–
–
–
326
–
–
–
–
–
20,694
–
4,235
4,235
15,546
18,105
22,447
4,235
20,000
3,400
326
32,317
8,725
5,603
–
–
20,694
–
newcrest mining annual report 2012 117
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2012
37. KEY MANAGEMENT PERSONNEL (continued)
(d) Rights held by 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 Plan. The movements in the year in the number of rights over ordinary shares in Newcrest, held directly, indirectly
or beneficially, by each KMP, including their personally related entities is shown in the following table.
Key Management Personnel
G. Robinson
G. Bond
C. Moorhead
R. Douglas(2)
D. Stirling
S. Creese
G. Jackson
P. Smith
B. Fletcher
L. Conway
A. Logan
Total
Key Management Personnel
I. Smith
G. Robinson
C. Moorhead
R. Douglas
D. Stirling
S. Creese
G. Jackson
P. Smith
B. Fletcher
G. Day
Total
Movements During 2012
As at 30 June 2012
Balance at
1/07/11
Rights
granted
Rights
exercised
Rights
lapsed
Balance at
30/06/12
Vested and
Exercisable
Non-
Vested(1)
145,480
–
49,800
41,382
47,152
22,678
24,630
10,964
9,845
12,166
20,306
58,406
23,884
13,762
13,940
13,404
14,368
16,085
13,940
13,940
12,510
12,510
(16,252)
–
(8,568)
(17,348)
–
–
–
–
–
(2,358)
(3,719)
(3,252)
–
(1,206)
(1,206)
(1,117)
–
–
–
–
(283)
(398)
184,382
23,884
53,788
36,768
59,439
37,046
40,715
24,904
23,785
22,035
28,699
60,195
–
17,348
–
24,530
–
–
–
–
4,076
8,627
124,187
23,884
36,440
36,768
34,909
37,046
40,715
24,904
23,785
17,959
20,072
384,403
206,749
(48,245)
(7,462)
535,445
114,776 420,669
Movements During 2011
As at 30 June 2011
Balance at
1/07/10
Rights
granted
Rights
exercised
Rights
lapsed
Balance at
30/06/11
Vested and
Exercisable
Non-
Vested
423,570
112,041
39,064
39,373
36,862
11,864
11,864
–
–
30,418
58,824
33,793
10,814
10,964
10,513
10,814
12,766
10,964
9,845
10,964
(165,000)
–
–
(8,725)
–
–
–
–
–
–
(1,418)
(354)
(78)
(230)
(223)
–
–
–
–
(41,382)
315,976
145,480
49,800
41,382
47,152
22,678
24,630
10,964
9,845
–
93,127
29,675
8,568
–
8,457
–
–
–
–
–
222,849
115,805
41,232
41,382
38,695
22,678
24,630
10,964
9,845
–
705,056
180,261
(173,725) (43,685)
667,907
139,827 528,080
(1) 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 Group or individual employees as applicable.
(2) Ron Douglas subsequently resigned on 13 July 2012 and forfeited the non-vested share rights at 30 June 2012.
(e) Loans to Key Management Personnel
There are no loans made to KMP, or their related entities, by the Group.
(f) 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.
38. EVENTS SUBSEQUENT TO REPORTING DATE
The Directors of Newcrest Mining Limited determined that a final dividend of 23 cents per ordinary share (15% franked) is to be paid
in respect of the 2012 financial year. The total amount of the dividend is $176 million. This dividend has not been provided for in the
30 June 2012 financial statements.
There are no other matters or circumstances which have arisen since 30 June 2012 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.
118 newcrest mining annual report 2012
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 Group
is in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of the Group’s financial position as at 30 June 2012 and of its 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.
(c) The financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the
International Accounting Standards Board.
2.
3.
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 2012.
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 32 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
13 August 2012
Melbourne, Victoria
Greg Robinson
Managing Director and
Chief Executive Officer
newcrest mining annual report 2012 119
Independent Auditor’s Report
120 newcrest mining annual report 2012
newcrest mining annual report 2012 121
Shareholder Information
CAPITAL AT 31 AUGUST 2012
Share Capital
Ordinary shareholders
Shareholders with less than a marketable parcel of $500 worth of ordinary shares
Market price (ASX)
NEWCREST TOP 20 INVESTORS AT 31 AUGUST 2012
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
JP Morgan Nominees Australia Limited
BNP Paribas Noms Pty Ltd
AMP Life Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
BNP Paribas Noms Pty Ltd
QIC Limited
UBS Nominees Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited – GSCO ECA
Suncorp Custodian Services Pty Limited
BNP Paribas Noms Pty Ltd
Bond Street Custodians Limited
SUBSTANTIAL SHAREHOLDERS AT 31 AUGUST 2012
Blackrock
Commonwealth Bank of Australia
INVESTOR CATEGORIES AT 31 AUGUST 2012
Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and Over
Total
765,000,000
81,043
2,973
$24.65
Current
Balance
Issued
Capital %
285,243,166
189,882,456
111,999,701
31,970,572
15,497,674
7,909,595
6,121,417
5,675,929
4,384,630
3,604,814
2,954,317
2,569,514
1,947,693
1,553,250
1,356,173
667,158
612,602
584,100
577,000
519,171
37.29
24.82
14.64
4.18
2.03
1.03
0.80
0.74
0.57
0.47
0.39
0.34
0.25
0.20
0.18
0.09
0.08
0.08
0.08
0.07
675,630,932
88.32
%
11.58
6.82
Issued
Capital %
2.70
4.13
1.19
1.87
90.11
Investors
Securities
63,609
15,408
1,299
649
78
20,587,225
31,622,260
9,120,433
14,302,701
689,367,381
81,043 765,000,000
100.00
122 newcrest mining annual report 2012
VOTING RIGHTS
SHARE REGISTRY INFORMATION
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 a final dividend of 23 cents per share,
75% funded by conduit foreign income, 15% franked and 10%
subject to Australian Dividend Withholding Tax. The dividend
is payable to shareholders on 19 October 2012. Shareholders
registered as at the close of business on 28 September 2012
will be eligible for the dividend. The Dividend Reinvestment Plan
remains in place and will be offered to shareholders according
to the terms of the Plan.
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: The Bank of New York 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 4,152,127
and at year end a net 14,248,072 ADRs were outstanding.
REPORTING TO SHAREHOLDERS
Newcrest is committed to clear reporting and disclosure of the
Company’s activities to our shareholders.
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 Newcrest’s share registry at 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 holding and balances
– Update your electronic communication instructions
– Update your address and 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
– Download a variety of instruction forms
– Add or update Dividend Reinvestment Plan (DRP) instructions
– Lodge your proxy online for the Annual General Meeting (AGM)
– Subscribe to email announcements
You can access this information via a security login using your
Securityholder Reference Number (SRN) or Holder Identification
Number (HIN) and 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
any nominated bank, building society or credit union account
in Australia.
Not only can we do your banking for you, but dividends paid
by direct credit are paid into your account as cleared funds,
allowing you to access them on payment date.
CONTACT INFORMATION
You can also contact the 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 inside back cover.
newcrest mining annual report 2012 123
Five Year Summary
For the 12 months ended 30 June
2012
2011
2010
2009
2008
Gold Production – Newcrest Share (1)(2) (ounces)
Cadia Hill
Ridgeway
Cadia East
Telfer
Gosowong
Hidden Valley
Lihir (1)
Bonikro(1)
Cracow (2)
Mt Rawdon(1)(2)
241,430
223,314
8,451*
540,114
439,384
88,801
604,336
92,102
23,787
24,198
364,196
147,904
3,320*
621,291
463,218
100,232
639,256
41,235
71,206
75,494
325,712
171,974
–
688,909
442,525
61,148*
–
–
71,932
–
297,889
234,298
–
629,108
400,220
225*
–
–
69,443
–
Total
2,285,917
2,527,352
1,762,200
1,631,183
Copper Production (tonnes)
76,015
75,631
86,816
89,877
Costs per ounce (after by-product credits)
Cash costs (A$ per ounce)
Total costs(3) (A$ per ounce)
Cash Flow (A$M)
Operating cash flow
Exploration expenditure
Capital expenditure
Profit and Loss (A$M)
Sales revenue
Depreciation and amortisation
Income tax expense
Net profit after tax:
– Statutory Profit(4)
– Underlying Profit(5)
Earnings per share (EPS):
– Basic EPS on Statutory Profit (cents per share)
– Basic EPS on Underlying Profit (cents per share)
Dividend (cents per share)(6)
Financial Position (A$M)
Total assets
Total liabilities
Shareholders’ equity
Ratios (percent)
Gearing(7)
Return on Capital Employed(8)
Issued Capital (million shares) at year end
Gold Inventory (million ounces)(9)
Ore Reserves
Mineral Resources
603
839
1,726
158
2,556
4,416
(561)
(402)
1,117
1,084
146.0
141.7
35.0
20,509
5,415
15,094
12.5
10.1
765
79
150
493
692
1,729
126
1,890
4,102
(515)
(334)
908
1,058
126.4
147.3
50.0
17,282
3,407
13,875
4.2
12.4
765
80
148
347
523
1,303
101
786
2,802
(309)
(209)
557
776
115.2
160.5
25.0
6,334
1,324
5,010
(4.5)
24.9
484
47
84
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
1.9
20.1
483
43
80
414,171
301,417
–
590,217
400,202
–
–
–
75,175
–
1,781,182
87,458
261
416
1,018
77
338
2,363
(279)
(37)
134
494
30.8
113.2
10.0
4,324
1,072
3,252
8.2
23.1
453
40
71
* Includes pre-commissioning production.
(1) Production from the former LGL operations included from the acquisition date of 30 August 2010. Total gold production from 1 July 2010 to 30 June 2011
was 2,701,918 ounces.
(2) Production from Cracow and Mt Rawdon included to the date of divestment on 2 November 2011.
(3) Comprises cash costs plus depreciation and amortisation.
(4) Statutory Profit is profit after tax attributable to owners of the parent.
(5) Underlying Profit is profit after tax before hedge restructure and other significant items attributable to owners of the parent.
(6) Dividends in 2011 included a special dividend of 20 cents per share.
(7) Calculated as Net Debt to Capital (Capital comprises equity plus net debt).
(8) Calculated as EBIT to Average Capital Employed (Shareholders Equity plus Net Debt).
(9) Reserves and Resources are as at 31 December 2011 for 2012. For 2008 to 2011 Reserves and Resources are at 30 June.
124 newcrest mining annual report 2012
Corporate Directory
Investor Information
Stock Exchange Listings
Other Offices
Brisbane Office
Level 32, 400 George Street
Brisbane, Queensland 4000
Australia
T: +61 (0)7 3318 3300
F: +61 (0)7 3318 9203
Perth and Telfer Office
193 Great Eastern Highway
Belmont, Western Australia 6104
Australia
T: +61 (0)8 9270 7070
F: +61 (0)8 9277 7127
Port Moresby Office
Level 4, Port Tower Building
Hunter Street
Port Moresby, Papua New Guinea
T: +675 321 7711
F: +675 321 4705
Registered and Principal Office
Newcrest Mining Limited
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004
Australia
T: +61 (0)3 9522 5333
F: +61 (0)3 9525 2996
E: corporateaffairs@newcrest.com.au
www.newcrest.com.au
Company Secretary
Scott Langford
Newcrest Mining Limited
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004
Australia
T: +61 (0)3 9522 5333
F: +61 (0)3 9521 3564
E: scott.langford@newcrest.com.au
Investor Relations
North America and Europe
Steve Warner
VP, Investor Relations
100 Park Street, Suite 1649
New York, NY
USA 10017
T: + 1 212 351 5064
F: + 1 212 880 6499
E: steve.warner@newcrest.com.au
Australia and Asia
Kim Kerr
Manager, Investor Relations
Level 9, 600 St Kilda Road
Melbourne, Victoria 3004
Australia
T: +61 (0)3 9522 5316
F: +61 (0)3 9522 5473
E: kim.kerr@newcrest.com.au
Australian Stock Exchange
(Ticker NCM)
Toronto Stock Exchange
(Ticker NM)
Port Moresby 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
T: 1300 554 474
+61 (0)2 8280 7111
F: +61 (0)2 9287 0303
+61 (0)2 9287 0309*
*For faxing of Proxy Forms only.
E: registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
Port Moresby Stock Exchange
PNG Registries Limited
Level 2, AON Haus McGregor Street
Port Moresby
PO Box 1265
Papua New Guinea
T: +675 321 6377
F: +675 321 6379
American Depositary Receipts (ADRs)
The Bank of New York Mellon
Shareowner Services
PO Box 358516
Pittsburgh, PA 15252-8516
T: Toll Free for US domestic callers:
1-888-269-2377
International Callers: +1 201-680-6825
E: shrrelations@bnymellon.com
www.bnymellon.com\shareowner
Company Events
25 October 2012
Annual General Meeting at 10.30am
ANZ Pavilion
100 St Kilda 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, employment and
sustainability information.