2017
ANNUAL REPORT
“ NEWCREST’S VISION IS TO
BE THE MINER OF CHOICE TO
“
ALL OUR STAKEHOLDERS.
SANDEEP BISWAS
MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
10
Value
20
Safety
23
Sustainability
CONTENTS
2
4
6
8
MINER OF
CHOICE
FORGING A
STRONGER
NEWCREST
KEY
ACHIEVEMENTS
FOR FY17
ASSET
OVERVIEW
10
VALUE
PROPOSITION
14
CHAIRMAN’S
REPORT
MANAGING
DIRECTOR’S
REVIEW
15
16
THE
BOARD
SAFETY,
SUSTAINABILITY
& DIVERSITY
MINERAL
RESOURCES &
ORE RESERVES
CORPORATE
GOVERNANCE
STATEMENT
20
28
36
38
DIRECTORS’
REPORT
97
FINANCIAL
REPORT
153
CORPORATE
DIRECTORY
1
OUR VISION
To be the
Miner of
Choice.
We will lead the way in
safe, responsible, efficient
and profitable mining.
OUR MISSION
To deliver superior returns
from finding, developing and
operating gold/copper mines.
Realise full
potential of our
existing assets
Deliver profitable
organic growth
Explore and
acquire where
value accretive
Invest in people
and technology
Focus on strong
balance sheet and
shareholder return
EXTERNAL
STAKEHOLDERS INCLUDE:
INVESTORS
COMMUNITIES
GOVERNMENT
To achieve our Mission of delivering
superior returns from finding, developing
and operating gold/copper mines,
we look to:
• Optimise performance at each phase
of the mining value chain. This value
chain spans exploration, development
and the operation of gold and gold-
copper mines.
• Build a portfolio of gold opportunities
to convert into operating mines.
Opportunities to grow the business
include brownfield and greenfield
exploration; early entry farm-in,
alliances and equity arrangements, and
merger and acquisition activity.
Apply our Performance Edge
improvement program and technical
expertise across all our assets and
opportunities.
•
Newcrest’s mining and exploration
activities have significant potential to
impact the communities where we operate.
A planned, transparent and constructive
approach to community engagement and
development is critical to maintaining
Newcrest’s social licence to operate
and ensuring that communities benefit
from Newcrest’s operations. We are
also conscious of the need to balance
community expectations against a project’s
ability to deliver benefits throughout the
life of the mine. In the longer term, we also
need to ensure that we do not create undue
community dependence upon our mining
operations that is unsustainable once the
operations reach the end of their lives.
Newcrest’s presence provides many direct
and indirect benefits to the countries
and communities in which we operate.
These benefits can potentially include:
•
•
•
•
Improved access to employment,
health, education and training
opportunities;
Investment in community infrastructure
and services, e.g. road access and
maintenance, electricity and clean
water supply;
Income-generating activities, e.g. local
level business development, goods and
services supply and support for local
agricultural businesses; and
Improved community lifestyle, e.g.
religious and sporting facilities and
sponsorship of both local and regional
events and activities.
We believe Newcrest’s activities
positively contribute to the economies
of the jurisdictions where we operate
including through tax, royalties and
other socioeconomic benefits at the
community level.
Newcrest recognises the importance of
developing meaningful relationships with
all levels of government to our long-term
success. We strive to proactively engage with
governments in the jurisdictions where we
operate, or seek to operate in the future, to
understand views about, and expectations of,
our activities, and to share Newcrest’s track
record. To strengthen community services
and support capacity building, Newcrest also
works through a range of partners, including
local governments.
Newcrest acts with integrity and honesty
when conducting business, in a manner
that promotes transparency in business
dealings. Newcrest is a Supporting Member
of the Extractive Industries Transparency
Initiative (EITI), a global coalition of
governments, companies and civil society
working together to improve openness
and accountable management of revenues
from natural resources. As part of this
commitment, Newcrest publishes the
Annual Tax Contribution Report, which
includes mining royalties and taxes paid
across all our operating jurisdictions.
We also actively engage both directly
and indirectly, through industry groups,
with government and other stakeholders
on policy and regulatory reform. Proper
consultation processes are critical to any
reform process and Newcrest seeks to
participate and contribute on relevant
issues to assist with informed discussion
and consideration.
3
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY FORGING A
STRONGER NEWCREST
The health and safety of our
workforce is a core value for
Newcrest. Our clear focus
remains on eliminating
fatalities and life-changing
injuries from our business,
while striving to make continual
progress on reducing all injuries
and health impacts.
We believe that a strong commitment to health and safety
improvement will yield benefits for our workforce and for overall
business performance.
OUR EDGE
A high performance,
no-nonsense culture
focussed on:
Safety
Operational discipline
Cash
Profitable growth
We deliver on our
commitments.
4
WE VALUE...
Caring about
people
Integrity and
honesty
Working
together
Innovation and
problem solving
High-
performance
WE ACHIEVE SUPERIOR
RESULTS THROUGH...
Employee
involvement
Personal
ownership
Bottom-up
innovation
Operational
discipline
Shared
vision
Inspirational
leaders
Talent
development
5
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY KEY ACHIEVEMENTS
FOR FY17
Delivering on operational and
financial commitments
Four years of meeting or
exceeding Group production,
total capital expenditure and
cost guidance.
ACHIEVE PRODUCTION & COSTS GUIDANCE
• Met Group production guidance
• Within or below Group guidance on total capital expenditure
and costs
RECORD MILL THROUGHPUT & PRODUCTION AT LIHIR
• Achieved 13mtpa mill throughput rate target by end
December 2016
• Record annual gold production
All operating sites
free cash flow
positive
LOW COST POSITION
AISC $787/oz (1)
GENERATE FREE CASH FLOW (FCF)
$739m
FCF in FY17
REDUCE NET DEBT
Reduced by
$608m
in FY17
Investment grade rating
WITHIN TARGET FINANCIAL METRICS
•
• Leverage ratio of 1.1x
• Gearing of 16.6%
• Strong cash & liquidity position
PROGRESS PROJECTS & STUDIES
• Cadia East Panel Cave 2 footprint completed
• Wafi-Golpu Feasibility Study progressed
DIVIDEND
Total dividends of 15 cents per share
(1) For this reference and other references to non-IFRS financial measures
throughout this annual report, refer to the information in the Operating and
Financial Review in the Directors’ Report regarding non-IFRS financial measures.
6
GROUP GOLD
PRODUCTION
THOUSAND
OUNCES
EBITDA(1), (2), (3)
FY13
FY14
FY15
FY16
FY17
2,110
2,396
2,423
2,439
2,381
FY13
FY14
FY15
FY16
FY17
$ MILLION
1,507
1,386
1,385
1,292
1,408
$ MILLION
765
748
811
594
719
CASH FLOW FROM
OPERATING ACTIVITIES(1), (2) $ MILLION
1,148
FY13
965
FY14
1,280
FY15
FY16
FY17
FREE CASH FLOW(1), (2), (3)
FY13
FY14
FY15
FY16
FY17
1,241
1,467
$ MILLION
(1,484)
136
854
814
739
TIMES
2.6
2.7
2.1
1.6
1.1
UNDERLYING PROFIT(1), (2), (3) $ MILLION
459
FY13
393
FY14
424
FY15
NET DEBT TO EBITDA(1), (3), (4)
FY13
FY14
FY15
FY16
FY17
323
394
FY16
FY17
EBIT(1), (2), (3)
FY13
FY14
FY15
FY16
FY17
12 months to
30 June 2017
12 months to
30 June 2016
%
Change
(ounces)
(tonnes)
($ per ounce)
($ per pound)
(AUD:USD)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
(percent)
(times)
(percent)
(cents per share)
2,380,630
83,941
1,263
2.44
0.7541
3,477
1,408
719
308
394
1,467
728
739
7.9
1.1
16.6
15.0
2,438,994
83,070
1,166
2.21
0.7285
3,295
1,292
594
332
323
1,241
427
814
6.2
1.6
22.8
7.5
(2%)
1%
8%
10%
4%
6%
9%
21%
(7%)
22%
18%
70%
(9%)
27%
(31%)
(27%)
100%
GROUP COPPER
PRODUCTION
THOUSAND
TONNES
FY13
FY14
FY15
FY16
FY17
ALL-IN
SUSTAINING COST(1), (3)
FY13
FY14
FY15
FY16
FY17
80
86
97
83
84
$/OUNCE
1,318
897
780
762
787
FY17 RESULTS AT A GLANCE(1), (3)
Gold produced
Copper produced
Realised gold price
Realised copper price
Average exchange rate
Sales revenue
EBITDA(3)
EBIT(3)
Statutory profit(5)
Underlying profit(3), (6)
Cash flow from operating activities
Net cash outflow from investing activities
Free cash flow(3)
Return on capital employed (ROCE)(3), (7)
Net debt to EBITDA(3), (4)
Gearing(3), (8)
Total Dividends
(1) All financial data presented in this report is quoted in US dollars unless otherwise stated.
(2) Comparative 2013 information has been restated to reflect the adoption of Interpretation 20 – Stripping Costs in the Production Phase of a Surface Mine.
(3)
AISC, EBIT, EBITDA, Underlying profit, Free cash flow, ROCE, Net debt to EBITDA and Gearing are non-IFRS financial information and have not been subject to audit
by the Company’s external auditor. Refer to the information in the Operating and Financial Review in the Directors' Report regarding non-IFRS financial measures.
(4) Net debt to EBITDA is calculated as net debt divided by EBITDA of the preceding 12 months. Calculated as at 30 June.
(5) Statutory profit is profit after tax attributable to owners of the parent.
(6) Underlying profit is profit after tax before significant items attributable to owners of the parent. Refer to page 64 for further details.
(7) Return on Capital Employed is calculated as EBIT divided by average total capital employed.
(8) Gearing is calculated as net debt to net debt and total equity, as at 30 June. For further details refer to page 62.
7
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY 5 Bonikro
ASSET OVERVIEW
1 CADIA – UNDERGROUND
Located in central west New South Wales, Australia, 25 kilometres
south-west of Orange and 250 kilometres west of Sydney, Cadia
has one of the deepest panel caves in the world and is 100 percent
owned by Newcrest.
2017 STATISTICS
Mineral Resources – Gold⁺
Mineral Resources – Copper⁺
Ore Reserves – Gold⁺
Ore Reserves – Copper⁺
Total Mine Production
Total Ore Milled
Production – Gold
Production – Copper
All-in Sustaining Cost
Free Cash Flow
43
8.7
25
4.4
18,853
24,027
619,606
63,805
241
502
million ounces
million tonnes
million ounces
million tonnes
thousand tonnes
thousand tonnes
ounces
tonnes
$ per ounce of gold
$ millions
2 LIHIR – OPEN PIT
One of the world’s largest gold deposits, Lihir is 100 percent owned
by Newcrest and located on the island of Niolam which is part of the
Lihir group of islands, 900 kilometres north-east of Port Moresby in
the New Ireland Province of Papua New Guinea (PNG).
2017 STATISTICS
Mineral Resources – Gold⁺
Ore Reserves – Gold⁺
Total Mine Production
Total Ore Milled
Production – Gold
All-in Sustaining Cost
Free Cash Flow
56
26
30,069
13,001
940,060
858
353
million ounces
million ounces
thousand tonnes
thousand tonnes
ounces
$ per ounce of gold
$ millions
3 TELFER – OPEN PIT AND UNDERGROUND
Operating since 1977 and 100 percent owned by Newcrest, the Telfer
gold-copper mine is located in the Great Sandy Desert in Western
Australia, approximately 400 kilometres south-east of Port Hedland.
2017 STATISTICS
Mineral Resources – Gold⁺
Mineral Resources – Copper⁺
Ore Reserves – Gold⁺
Ore Reserves – Copper⁺
Total Mine Production
Total Ore Milled
Production – Gold
Production – Copper
All-in Sustaining Cost
Free Cash Flow
9.5
0.75
3.1
0.24
34,144
21,187
386,242
20,136
1,178
70
million ounces
million tonnes
million ounces
million tonnes
thousand tonnes
thousand tonnes
ounces
tonnes
$ per ounce of gold
$ millions
8
⁺ Mineral Resources and Ore Reserves are as at 31 December 2016
4 Gosowong
2 Lihir
6 Wafi-Golpu
7 Namosi
3 Telfer
1 Cadia
4 GOSOWONG – UNDERGROUND
Located on Halmahera Island, Indonesia, Gosowong is operated
by PT Nusa Halmahera Minerals which is owned by Newcrest
(75 percent interest) and PT Aneka Tambang (25 percent interest).
2017 STATISTICS
Mineral Resources – Gold⁺
Mineral Resources – Silver⁺
Ore Reserves – Gold⁺
Ore Reserves – Silver⁺
Total Mine Production
Total Ore Milled
Production – Gold
Production – Silver
All-in Sustaining Cost
Free Cash Flow
* 100 percent (Newcrest share 75%)
1.4
2.3
0.58
0.95
664
565
295,876
361,266
757
142
million ounces
million ounces
million ounces
million ounces
thousand tonnes
thousand tonnes
ounces
ounces
$ per ounce of gold
$ millions
5 BONIKRO – OPEN PIT
Located approximately 250 kilometres north west of Abidjan in Côte
d’Ivoire, Bonikro is a gold mine 89.89 percent owned by Newcrest.
2017 STATISTICS
Mineral Resources – Gold⁺
Ore Reserves – Gold⁺
Total Mine Production
Total Ore Milled
Production – Gold
All-in Sustaining Cost
Free Cash Flow
* 100 percent (Newcrest share 89.89%)
1.2
0.43
19,383
2,732
128,327
1,105
38
million ounces
million ounces
thousand tonnes
thousand tonnes
ounces
$ per ounce of gold
$ millions
6 WAFI-GOLPU – IN STUDY
The Wafi-Golpu deposit is located approximately 60km south-west
of Lae in the Morobe Province of PNG. Newcrest owns 50% of
Wafi-Golpu and a Feasibility study is currently in progress.
2017 STATISTICS
Mineral Resources – Gold⁺
Mineral Resources – Copper⁺
Ore Reserves – Gold⁺
Ore Reserves – Copper⁺
* Newcrest share 50 percent
13
4.4
5.5
2.4
million ounces
million tonnes
million ounces
million tonnes
7 NAMOSI – IN STUDY
The Namosi Joint Venture is exploring for mineral resources in the
Namosi and Naitasiri provinces in Fiji, approximately 30 kilometres
west of Suva, and the Waisoi Project is a copper and gold project in the
pre-feasibility study phase.
2017 STATISTICS
Mineral Resources – Gold⁺
Mineral Resources – Copper⁺
Ore Reserves – Gold⁺
Ore Reserves – Copper⁺
* Newcrest share 70.75 percent
5.4
5.4
3.7
3.5
million ounces
million tonnes
million ounces
million tonnes
⁺ Mineral Resources and Ore Reserves are as at 31 December 2016
9
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
Value
Proposition
1
LARGE GOLD
RESERVES
65moz
GOLD ORE RESERVES
With an estimated 65 million ounces of gold Ore Reserves(1),
Newcrest’s Reserve Life was approximately 27 years at
30 June 2017(2).
(1) See page 34 of this Annual Report
(2)
Reserve life is indicative and calculated as proven and probable gold reserves
(contained metal) as at 31 December 2016 divided by gold production for the
12 months ended 30 June 2017. The reserve life calculation does not take into
account future gold production rates and therefore estimates of reserve life do
not necessarily equate to operating mine life
10
2
LOW COST
PRODUCER
Three years of achieving an
All-In Sustaining Cost below
$800/oz has resulted in
Newcrest averaging an AISC
margin of over $400/oz in each
of FY15, FY16 and FY17.
1400
1200
1000
800
600
400
200
0
FY15
FY16
FY17
AISC $/oz
Realised gold price $/oz
3
DELIVERING
ON COMMITMENTS
4
ORGANIC
GROWTH
US$81m
TOTAL COMMUNITY
EXPENDITURE
Newcrest is focussed on developing strong relationships with
the communities in which it operates.
Newcrest is focussed on
maximising the profitable
production potential of its
existing assets, projects
and exploration prospects.
Lihir
Golpu
Gosowong
Telfer
Cadia
In FY17, this was reflected in $81m of total community expenditure
including native title/landowner agreements, indigenous land use
agreements, investment in local communities, donations made to
charities and community department costs. Newcrest also seeks to
utilise local contractors where possible and commercially viable.
In FY17, Newcrest achieved its target of a sustainable 13mtpa
milling throughput rate at Lihir, completed the Cadia East Panel
Cave 2 footprint and progressed the Wafi-Golpu study.
• Cadia – mine ramp-up and processing increase
• Lihir – increased throughput
• Golpu – in feasibility study
• Telfer – exploration & studies
• Gosowong – exploration focus
11
CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITYKEY ACHIEVEMENTS FOR FY17 5
EXPLORATION &
TECHNICAL CAPABILITY
6
FINANCIALLY
ROBUST
Newcrest’s mines each have
their own characteristics and
challenges which has resulted
in a pool of experience and
talent that gives Newcrest the
ability to find, develop, mine and
process all types of orebodies.
It is Newcrest’s capability in bulk underground mining, particularly
block caving, which truly sets it apart and positions Newcrest to take
advantage of future discoveries.
Indicative schematic of Cadia East Block Caves at August 2017
12
Newcrest’s financial metrics
have improved significantly
over the last three years,
putting Newcrest into a
financially robust position.
Together with strong profitability and the ability to fund near term
growth options, this has enabled the Board to announce dividends
for the past 12 months totalling US 15 cents per share. Newcrest’s
dividend policy continues to balance financial performance and
capital commitments with a prudent leverage and gearing level
for the Company. Newcrest looks to pay ordinary dividends that
are sustainable over time having regard to its financial policy,
profitability, balance sheet strength and reinvestment options in
the business. Going forward, Newcrest is targeting a total annual
dividend payment of at least 10-30% of free cash flow generated
for that financial year, with the dividend being no less than
US 15 cents per share on a full year basis.
IMPROVING
LEVERAGE RATIO
1.1x
IMPROVING GEARING
16.6%
INVESTMENT GRADE
SUBSTANTIAL LIQUIDITY
BBB- / Baa3
$2.5bn
REDUCED NET DEBT
LONG AVERAGE
DEBT MATURITY
$1.5bn
~10 years
All figures as at 30 June 2017, arrows
represent direction since 30 June 2016
13
CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITYKEY ACHIEVEMENTS FOR FY17 CHAIRMAN'S
REPORT
I am pleased to present
our annual report for the
2017 financial year, which
details the significant progress
made over the past year to
strengthen Newcrest’s safety
and operational performance
and financial position.
Nothing that we do as a business is of higher value than the
safety and health of our people. Our good results this year are
led by an improvement in safety performance, including no
fatalities. This is an early testament to the efficacy of the safety
transformation plan we are fully committed to, which is addressing
critical safety and health risks across Newcrest.
The collaborative efforts of Newcrest’s people, working with an
innovative focus on both performance and underlying costs, continues
to deliver improvements with all sites generating positive free
cash flow in FY17. These efforts have delivered a statutory profit
of $308 million and an underlying profit of $394 million, which
was achieved despite a significant unplanned interruption at Cadia
following the seismic event which impacted the mine in April 2017.
The free cash flow generated by the business has enabled the Company
to lower its net debt by a further $608 million (or 29 percent) to
$1.5 billion by the end of June 2017. Our leverage and gearing ratios
at the end of the financial year sit well within the target ranges we
specified at the start of the financial year.
Having regard to our improved debt position and profitability, and after
considering our capital requirements and market conditions, the Board
has determined to pay a US 7.5 cents per share final dividend, taking
our total dividends for the year to US 15 cents per share.
Newcrest’s dividend policy continues to balance financial performance
and capital commitments with a prudent leverage and gearing level for
the Company. We look to pay ordinary dividends that are sustainable
over time having regard to our financial policy, profitability, balance
14
sheet strength and reinvestment options in the business. For the
current and each future year Newcrest is targeting a total dividend
payout of at least 10-30% of annual free cash flow, with the total
annual dividend being no less than US 15 cents per share.
In continuation of the Board ‘s succession strategy, both
Lady Winnie Kamit and John Spark will be retiring from the Board
immediately after this year’s Annual General Meeting. Lady Winnie has
been on the Board for the past 6 years and we thank her for her strong
contribution to the Newcrest Board and its Committees, bringing
to bear her extensive business experience and broad community
knowledge of Papua New Guinea.
John has been on the Newcrest Board and chaired the Audit and
Risk Committee (ARC) for the past 10 years. He has made a very
valuable and significant contribution to the Newcrest Board and
its Committees over these years for which we are very grateful.
Vickki McFadden will assume the role of Chairman of the ARC
following John’s retirement.
Building and maintaining strong relationships with our host
communities and governments is integral to the sustainability of our
operations and realising our vision to be the Miner of Choice. As we
continue to work together to create value for all stakeholders, I extend
my thanks to all our stakeholders who share our progress.
Newcrest is demonstrating how to leverage collaborative innovation
for a further productivity leap as one of the world’s lowest-cost
gold producers. In combination with Newcrest’s comparatively large
resource and reserve base, organic growth opportunities, and proven
ability to deliver on its commitments, the Board has confidence about
the outlook for the Company. I thank our shareholders for their support
as we strive to further build on the progress achieved this year.
PETER HAY
CHAIRMAN
MANAGING DIRECTOR'S
REVIEW
Now more than three years into our transformation journey
I can say we have made significant progress towards our
aim of being the Miner of Choice. This has been achieved
through the three pillars of: safety, operational and financial
performance, and culture change.
THE SAFETY OF OUR PEOPLE REMAINS NEWCREST’S
HIGHEST PRIORITY.
I am very pleased that we achieved a significant safety improvement
during the year. There were no fatalities and a ~10% decrease in
our total recordable injury frequency rate. We will remain relentless
in our efforts to eliminate fatalities and life-changing injuries from
our business.
Our Safety Transformation Plan initiated in 2015 is making our
workplace safer through three drivers: strengthening our safety
leadership and behaviours (our NewSafe program); implementing
critical controls management for every high risk task; and applying
robust process safety management systems at the front line to our
high-energy and hazardous processes.
The NewSafe program was active at all sites during the year, with
approximately 80% of the workforce now having received training.
This has contributed to excellent progress with our safety culture.
New tools developed through our Critical Control Management and
Process Safety systems empower our people at all levels to work
together to conduct thousands of safety checks every day, to make
better risk-based decisions, and to ‘stop the job’ if it is not safe.
Our Edge program remains the means through which we pursue
continued operational and financial performance. By encouraging
an owner’s mindset the Edge program continues to safely deliver
operational discipline, cash and profitable growth. It involves
setting genuine stretch targets for our performance, and
empowering our frontline to take personal ownership of issues and
develop and implement new ideas in a structured and disciplined
way. The process continues to deliver sustainable cost and
capital improvements, business efficiency and value generation
opportunities.
We achieved our Group production guidance for the fourth
consecutive year and generated $739 million in free cash flow.
We delivered this result despite the production interruption at Cadia
following a seismic event on 14 April 2017. I am proud of the Cadia
team’s work in safely remediating and restarting the production
following the event, with all the work having been completed
to Newcrest’s standard with an emphasis on safe, strong and
sustainable operations.
Our two largest sites, Lihir and Cadia, continued to improve
their efficiency through operational discipline, debottlenecking
opportunities and the implementation of new technology.
Lihir achieved its goal of a sustainable 13 million tonnes mill
throughput by the end of December 2016, delivering a record annual
production for the site. At Cadia the team successfully achieved
completion of the Panel Cave 2 footprint and safely managed
the interaction of Panel Caves 1 and 2. These achievements were
testament to the hard work and relentless drive for improvement
that we strive for across all sites.
OUR ABILITY TO DELIVER STRONG RESULTS IS
DEPENDENT ON CONTINUING TO PRIORITISE OUR
PEOPLE AND THE COMMUNITIES IN WHICH WE OPERATE.
Internally we have made progress on our organisational health
and diversity targets. With our communities we have continued to
engage and build strong relationships. With some positive additions
to our executive and general management team during the year, we
are well positioned to continue to improve the business and turn our
attention to growth.
Newcrest continues to develop and progress a pipeline of
growth options at existing operations and projects, and in
geologically prospective regions, in order to optimise our portfolio.
Our approach to portfolio optimisation also led us to divest our
50 per cent share in Hidden Valley in September 2016.
We are focussed on delivering long-term shareholder value through
low-cost production, long reserve life, our strong technical and
exploration capabilities, organic growth opportunities and a strong
financial position. This, plus our underlying commitment to doing
what we say we will do, is what makes Newcrest unique.
I would like to thank everybody at Newcrest for their contribution
to our progress this year, and our host communities, partners and
suppliers who are an integral part of our business. I am looking
forward to the great potential that lies ahead of us, and to working
together to achieve it.
SANDEEP BISWAS
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
15
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
THE BOARD
PETER HAY
SANDEEP BISWAS
GERARD BOND
PHILIP AIKEN AM
BEng (Chem) (Hons), 55
Managing Director and
Chief Executive Officer
Mr Biswas was appointed
Managing Director and Chief
Executive Officer effective
4 July 2014. He joined Newcrest
in January 2014, as an Executive
Director and Chief Operating
Officer.
Skills, Experience and
Expertise
Mr Biswas was previously Chief
Executive Officer of Pacific
Aluminium, a wholly owned
subsidiary within the Rio Tinto
group, which incorporated the
bauxite, alumina, refining and
smelting operations in Australia
and New Zealand. He began his
career with Mount Isa Mines,
working in both Australia and
Europe. Mr Biswas has also
worked for Western Mining
Corporation in Australia
and Rio Tinto in Canada and
Australia. He has experience in
research, operations, business
development and projects, across
commodities including aluminium,
copper, lead, zinc and nickel.
Other Current Directorships/
Appointments
• Director of the Minerals
Council of Australia
• Director of the World Gold
Council
BComm, Graduate Diploma
Applied Finance and
Investment, Chartered
Accountant, F Fin, 49
Finance Director and
Chief Financial Officer
Mr Bond was appointed to the
Board as an Executive Director
in February 2012, after joining
Newcrest as Finance Director
and Chief Financial Officer in
January 2012.
Skills, Experience and
Expertise
Mr Bond has 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 in Europe and
Australia, including in Mergers
and Acquisitions, Treasury, as
Deputy CFO of the Aluminium
business, CFO and then Acting
President of the Nickel business,
and as BHP Billiton’s Head of
Group Human Resources.
Other Current Directorships/
Appointments
• Alternate director of the World
Gold Council
BEng (Chemical),
Advanced Management
Program (HBS), 68
Independent
Non-Executive Director
Mr Aiken was appointed to
the Board in April 2013. He is
Chairman of the Safety and
Sustainability Committee and a
member of the Human Resources
and Remuneration Committee
and the Nominations Committee.
Skills, Experience and
Expertise
Mr Aiken has extensive Australian
and international business
experience, principally in the
engineering and resources
sectors. He was Group President
Energy BHP Billiton, President
BHP Petroleum, Managing
Director BOC/CIG, Chief
Executive of BTR Nylex and
Senior Advisor Macquarie Capital
(Europe).
Current Listed Directorships
• Chairman of Aveva Group plc
(from 2012)
• Chairman of Balfour Beatty plc
(from 2015)
Other Current Directorships/
Appointments
• Business Ambassador, Sydney
Events (from 2016)
Former Listed Directorships
(last three years)
• Senior Independent Director of
Essar Energy plc (2010–2014)
• Director of Essar Oil Limited
(a listed subsidiary of Essar
Energy plc) (2010–2014)
• Director of National Grid plc
(2008–2015)
LLB, FAICD, 67
Independent
Non-Executive Chairman
Mr Hay was appointed as
Non-Executive Chairman of
the Board in January 2014,
after being appointed as a
Non-Executive Director in
August 2013. Mr Hay is also the
Chairman of the Nominations
Committee.
Skills, Experience and
Expertise
Mr Hay has a strong background
and breadth of experience
in business, corporate law,
finance and investment banking
advisory work, with a particular
expertise in relation to mergers
and acquisitions. He has also
had significant involvement
in advising governments and
government-owned enterprises.
Mr Hay was a partner of the legal
firm Freehills until 2005, where
he served as Chief Executive
Officer from 2000.
Current Listed Directorships
• Chairman of Vicinity Centres
(from 2015)
Other Current Directorships/
Appointments
• Member of AICD Corporate
Governance Committee
• Member of the Australian
Government Takeovers Panel
Former Listed Directorships
(last three years)
• Director of GUD Holdings
Limited (2009–2015)
• Director of Novion Limited
(2014–2015)
• Director of Australia and New
Zealand Banking Group Limited
(2008–2014)
• Director of Myer Holdings
Limited (2010–2014)
16
ROGER HIGGINS
LADY WINIFRED KAMIT
RICK LEE AM
BA, LLB, 64
Independent
Non-Executive Director
Lady Kamit was appointed to the
Board in February 2011. She is a
member of the Human Resources
and Remuneration Committee
and the Safety and Sustainability
Committee.
Skills, Experience and
Expertise
Lady Kamit has extensive
business experience and broad
community knowledge of Papua
New Guinea. She is currently a
consultant at Gadens Lawyers in
Port Moresby and was formerly a
senior partner at that firm. Lady
Kamit was a Director of Lihir Gold
Limited from 2004 until 2010.
Current Listed Directorships
• Director of Steamships
Trading Company Limited
(from 2005)
Other Current Directorships/
Appointments
• Chairman of ANZ Banking
Group (PNG) Limited
• Director of Post Courier
Limited
• Director of South Pacific Post
Limited
BEng (Chemical) (Hons), MA
(Econ) (Oxon), FAICD, 67
Independent Non-Executive
Director
Mr Lee was appointed to the Board
in August 2007. He is Chairman
of the Human Resources and
Remuneration Committee and
a member of the Audit and Risk
Committee.
Skills, Experience and Expertise
Mr Lee has extensive resources,
banking, finance and international
commercial experience. His
previous senior executive roles
include 16 years with CSR Limited
and nine years as Chief Executive
Officer of NM Rothschild Australia
Limited. He is a former Chairman of
the Australian Institute of Company
Directors and C. Czarnikow Limited
and is a former Non-Executive
Director of CSR Limited.
Current Listed Directorships
• Chairman of Ruralco Holdings
Limited (from 2016)
• Chairman of Oil Search Limited
(Director from 2012, Chairman
from 2013)
BE (Civil Engineering) (Hons),
MSc (Hydraulics), PhD (Water
Resources), Stanford Executive
Program, FIEAust, FAusIMM, 66
Independent
Non-Executive Director
Dr Higgins was appointed to
the Board in October 2015. He
is a member of the Safety and
Sustainability Committee.
Skills, Experience and
Expertise
Dr Higgins brings extensive
experience leading mining
companies and operations, and has
a deep working knowledge of Papua
New Guinea as a Current Non-
Executive Director and a former
Managing Director of Ok Tedi
Mining Limited in Papua New
Guinea. In his most recent executive
position, Dr Higgins served as Senior
Vice President, Copper at Canadian
metals and mining company, Teck
Resources Limited. Prior to this role
he was Vice President and Chief
Operating Officer with BHP Billiton
Base Metals Customer Sector
Group working in Australia and
also held senior positions with BHP
Billiton in Chile. He also holds the
position of Adjunct Professor with
the Sustainable Minerals Institute,
University of Queensland.
Current Listed Directorships
• Chairman of Minotaur Exploration
Limited (from 2017)
• Director of Metminco Limited
(from 2013)
Other Current Directorships/
Appointments
• Director of Ok Tedi Mining
Limited (Non-Executive Director
from 2014, Managing Director
1997–2002)
• Chairman of the International
River Foundation (from 2014)
Former Listed Directorships
(last three years)
• Blackthorn Resources Limited
(2014)
17
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY THE BOARD
XIAOLING LIU
VICKKI MCFADDEN
JOHN SPARK
BEng (Extractive
Metallurgy), PhD (Extractive
Metallurgy), GAICD,
FAusIMM, 61
Independent
Non-Executive Director
Dr Liu was appointed to the
Board in September 2015.
She is a member of the Human
Resources and Remuneration
Committee and the Audit and
Risk Committee.
Skills, Experience and
Expertise
Dr Liu has extensive executive
experience in leading global
mining and processing
businesses.
Her last executive role was as
President and Chief Executive
Officer of Rio Tinto Minerals
based in Denver, where she ran
integrated mining, processing
and supply chain operations in the
United States, Europe and Asia.
Prior to her last executive role,
Dr Liu held senior management
and operational roles at Rio Tinto
throughout her career including
President – Primary Metal Pacific,
Managing Director – Global
Technical Services and General
Manager Bell Bay Smelter.
Current Listed Directorships
• Director of Iluka Resources
Limited (from 2016)
Other Current Directorships/
Appointments
• Director of Melbourne
Business School (from 2016)
• Member of China Matters
Advisory Council (from 2017)
18
BComm, LLB, 58
Independent
Non-Executive Director
Ms McFadden was appointed as
Non-Executive Director of the
Board in October 2016. She is
a member of the Audit and Risk
Committee.
BComm, FCA, MAICD, 68
Independent
Non-Executive Director
Mr Spark was appointed to the
Board in September 2007. He is
Chairman of the Audit and Risk
Committee and a member of the
Nominations Committee.
Skills, Experience and
Expertise
Skills, Experience and
Expertise
Mr Spark has an extensive
background in company
reconstruction, accounting,
profit improvement and financial
analysis. He is a registered
company auditor and former
Managing Partner of Ferrier
Hodgson, Melbourne. He is a
former Director of ANL Limited,
Baxter Group Limited and
Macarthur Coal Limited and
former Chairman of Ridley
Corporation Limited.
Current Listed Directorships
• Chairman of Murray Goulburn
Co-operative Co. Limited
(from 2017)
Former Listed Directorships
(last three years)
• Chairman of Ridley
Corporation Limited (Director
from 2008, Chairman from
2010–2015)
Ms McFadden has an extensive
background in finance and law
and is a former investment banker
with considerable experience in
corporate finance transactions,
having served as Managing
Director of Investment Banking at
Merrill Lynch in Australia and as a
Director of Centaurus Corporate
Finance. Ms McFadden has broad
experience in several roles as
member or Chairman of audit
committees.
Current Listed Directorships
• Tabcorp Holdings Limited
(from 2017)
Other Current Directorships/
Appointments
• Chairman of eftpos Australia
Payments Pty Ltd (from 2016)
• Director of The Myer
Family Investments Pty Ltd
(from 2011)
• President of the Australian
Takeovers Panel (Member from
2008, President from 2013)
• Member of the Advisory Board
and Executive Committee of
the UNSW Business School
(from 2006)
Former Listed Directorships
(last three years)
• Chairman of Skilled Group
Limited (Director from 2005,
Chairman from 2010–2015)
• Director of Leighton Holdings
Limited (2013–2014)
19
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY Safety
The health and safety of our workforce is a priority for Newcrest.
Our clear focus is on eliminating fatalities and life-changing injuries
from our business, while striving to make continual progress on
reducing all injuries and health impacts. We believe that a strong
commitment to health and safety improvement will yield benefits
for our workforce and for overall business performance.
T he past twelve months have shown a noticeable improvement
in our safety performance. There were no fatalities at Newcrest
and the Total Recordable Injury Frequency Rate (TRIFR)
decreased approximately 10% in FY 17. The continued
commitment to, and implementation of, our Safety Transformation Plan
has been a significant catalyst for this change.
Around 35 SVs and 3,500 FCCCs are planned and conducted every
week. Work to ensure the verifications conducted are completed in a
careful and considered manner, with the engagement of all involved in
the task, is ongoing. A mobile app to be used to undertake CCM checks
has been developed and is in use at Telfer and Cadia, with deployment
at Newcrest’s other sites planned for early FY18.
OUR SAFETY TRANSFORMATION PLAN FOCUSSES
ON THREE KEY PILLARS:
As our first and second pillars progress in their implementation across
our sites, NewSafe and CCM are increasingly complementing each other
in day-to-day activities, strengthening our position on our safety journey.
critical controls for
high-risk tasks; and
PROCESS SAFETY
a strong safety culture;
robust Process Safety
management.
Our three pillars are supported by the right systems and tools that
enable risk-based decision-making and empower our people to
‘stop the job’ if it is not safe.
NEWSAFE
NewSafe is the driving force behind our first pillar, building a strong
safety culture. NewSafe Leadership, Coaching and Behaviours work
together as a cultural program to ensure that safety improvement
opportunities can be shared and addressed in a positive way.
During the year, we completed initial NewSafe implementation at all
our sites, with more than 80% of our people now having taken part in
the NewSafe Leadership program. NewSafe Leadership commenced
at Lihir in August 2016 and Bonikro in March 2017, with NewSafe
Coaching following at Lihir in February 2017 and Bonikro in May 2017.
NewSafe Coaching also commenced at Gosowong in August 2016.
Cadia and Telfer continued their well-established NewSafe programs.
CRITICAL CONTROL MANAGEMENT
The second pillar of our safety transformation is having critical controls
for high-risk tasks. During the reporting period, we continued to roll
out our formal Critical Control Management (CCM) system to provide
a systematic approach to verify that the most important, life saving
controls are known, in place and working.
All three levels of the CCM system checks are now available at all sites
including System Verifications (SVs), Field Critical Control Checks
(FCCCs) and Operator Critical Control Checks (OCCCs). Over 140 high
risk tasks that are common to most sites have been identified and the
critical controls for those tasks documented, road tested in the field,
entered into the CCM system and are now being used in the workplace.
20
The third pillar, robust Process Safety management, aims to
systematically and comprehensively manage the integrity and
containment of high-energy and toxic processes to protect
our people and the environment. It is based on a technical,
engineering-focussed approach with regular reviews of risks and
controls at all sites and the adoption of robust engineering standards
and controls across our operations. Process Safety champions have
been appointed at all sites.
A two-day Process Safety training program has been developed
specifically for Newcrest by the Institution of Chemical Engineers
(IChemE), and training sessions have been conducted at Lihir, Cadia,
Telfer, Melbourne and Gosowong.
A group-wide ‘Management of Change’ process and supporting
online tool has been developed as a component of Process Safety.
Management of Change is a systematic approach to dealing with
changes in the organisation, personnel, processes, procedures,
equipment, infrastructure, products and materials that ensures risks
are managed and that change occurs safely and effectively. The new
online tool is being trialled at Telfer, with roll-out to other sites planned
for FY18.
UPDATED HEALTH, SAFETY AND ENVIRONMENT (HSE)
MANAGEMENT SYSTEM
An updated version of Newcrest’s Health, Safety and Environment
(HSE) Management System was approved by our Executive Committee
in December 2016. All sites are now working towards ensuring they
meet the new streamlined requirements. A revised HSE audit and
governance process was also approved in December 2016 and has
been introduced at Gosowong, Lihir and Telfer.
By continuing to focus on the safety of our people through embedding
our Safety Transformation Plan into our business, we believe that
our vision of eliminating fatalities and life-changing injuries from our
business is achievable.
CASE STUDY
CADIA SEISMIC EVENT
On 14 April 2017, a large
seismic event impacted
the Cadia operation.
F ollowing the event, all personnel working in the
Cadia East underground mine were accounted for
and moved to refuge chambers or safe areas. Over
the course of the night, our geotechnical engineers
assessed the impact of the event and the safe egress points,
and subsequently all personnel were safely evacuated.
Underground mining at Cadia East was temporarily suspended
as Newcrest remediated the damage caused by the event to
a standard consistent with Newcrest’s emphasis on strong,
sustainable operations and safety.
KEY SAFETY TAKEAWAYS:
•
In general, the ground support performed its function
by limiting the size of rockfalls and damage.
• Newcrest’s standard operating procedure for managing
such events was successfully activated.
• No physical injuries were sustained by employees or
contractors.
• Our understanding of the mine’s response to such a
seismic event has increased, resulting in procedures
being enhanced and ground support upgraded where
appropriate.
Production at Cadia East Panel Cave 2 recommenced on
19 July 2017 following completion of the three-week
test and response phase of Panel Cave 2 that commenced
on 28 June 2017. Production at Cadia East Panel Cave 1
recommenced on 13 September 2017. The safety of our
people always remained Newcrest’s primary objective as we
restarted activity, and we are now back into mining Cadia East,
which has the potential for a further 30 years of mine life.
“
HAVING NO RECORDABLE INJURIES DURING
EITHER THE SEISMIC EVENT OR THE
REMEDIATION PERIOD THAT FOLLOWED IS A
GREAT ACHIEVEMENT FOR THE CADIA TEAM
AND TESTAMENT TO THE SAFETY FOCUS OF
NEWCREST AND OUR PEOPLE.
“
SANDEEP BISWAS
MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
21
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWSAFETY, SUSTAINABILITY & DIVERSITYTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENT 22
Sustainability
Newcrest is continuing to make significant progress on
strengthening the sustainability of our activities, and
implementing a wide range of sustainability and community
programs focussed on safety and health, economic, employee
and social development, and environmental management.
We work closely with governments, communities, civil
society organisations and other local stakeholders to
ensure that Newcrest’s sustainability programs are
aligned with local priorities and expectations. We know
that sharing the benefits of mining with our host communities and
managing the impacts from our mines is the right thing to do, and this
philosophy underpins Newcrest’s vision to be the Miner of Choice.
The Safety and Sustainability Committee of the Newcrest Board
provides oversight of strategic safety, health, environment, and
community aspects, complementing the Executive Committee’s
management of our sustainability programs.
The health and safety of our workforce and the wellbeing of
our neighbouring communities continues to be a core priority
and a critical measure of our business success. Our Safety
Transformation Plan is driving progress toward our safety
vision to eliminate fatalities and life-changing injuries from our
business. We recorded no fatalities for the reporting period. The
Safety Transformation Plan has been supported by a revised
HSE Management System and updated internal HSE governance
processes which were applied to Gosowong, Lihir and Telfer
during FY17.
Programs with a focus on workforce health continued across
all sites. Such programs aim to monitor and control potential
occupational exposures (such as diesel particulate matter or
‘DPM’) and fitness for work and wellness programs (such as
fatigue management, mental health, and health and wellbeing).
Newcrest also rolled-out its new health and hygiene monitoring
database, Medgate, during the reporting period. The software
will enable efficient management of occupational hygiene
data, providing Newcrest with the knowledge needed to make
effective, informed risk-based decisions on the management
and control of exposures, in turn influencing the structure of our
health surveillance testing programs.
As a member of the Voluntary Principles on Security and Human
Rights Initiative (VPI), Newcrest has implemented Security Code
of Conduct training for all Newcrest security employees and
contractors. The Code was developed in consultation with the
Geneva-based International Code of Conduct Association. In
addition, all existing Memorandums of Understanding (MOU) with
Public Security (Police, Gendarme and Polda forces) have been
revised to align with the VPI requirements. In early June 2017, the
Police Commissioner – Papua New Guinea, approved and signed
the revised MOU.
We continued our ongoing commitment to environmental
performance through an update to our Environmental Policy,
which is available on the Newcrest website, and release of new
Environmental Standards to drive consistent levels of performance
at our sites, regardless of global region. We continued reviews on
the management of our tailings storage facilities, assessments
on the quality and completeness of our mine closure plans and we
also recertified our Gosowong mine to the voluntary Cyanide Code.
Environmental impact assessment studies were also conducted to
support development of the Wafi-Golpu and Namosi projects.
Newcrest recognises mining as an energy-intensive activity, so we
endeavour to use energy efficiently across all our sites and utilise
our Edge business improvement program to progressively identify
and implement improvements. We annually monitor and report our
Australian greenhouse emissions to the Australian regulator. During
FY17, our Environmental Policy was updated in consideration of
climate change aspects. We continue to establish and document
processes to identify and manage risks and opportunities for
the efficient use of energy and water, manage emissions linked
with climate change and reduce waste generation that lessens
the Company's environmental footprint at our sites. For example,
geothermal energy has been used at our Lihir operation for several
years to supplement the electricity generated to operate the mine
and provide power for local communities.
In addition, we remain an active member of the Extractive Industries
Transparency Initiatives (EITI), and support the EITI principles and
reporting in the countries in which we operate. Newcrest has senior
representatives on the multi-stakeholder groups for EITI Papua New
Guinea and EITI Australia.
Further information about sustainability at Newcrest,
including our Sustainability Reports, can be found on our
website at www.newcrest.com.au/sustainability.
23
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWSAFETY, SUSTAINABILITY & DIVERSITYTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENT Newcrest has trained or employed
more than 500 Martu men and
women over the past 15 years
Newcrest and Western Desert Lands
Aboriginal Corporation (on behalf of the
Martu people) have entered an Indigenous
Land Use Agreement which provides for:
• More than A$18 million over the first
five years for the benefit of the Martu
• Practical support in relation to training
and employment, contracting and
logistical support
• Ongoing heritage protection for areas
of special significance
CASE STUDY
TELFER AND THE
MARTU PEOPLE:
THE ILUA AND BEYOND
Newcrest’s Telfer operation aims to develop strong and
productive relationships with the Martu people, the traditional
owners of the land surrounding Telfer, with the principal aim of
establishing healthier and better educated communities, where
Martu men, women and young adults are provided with training and
employment opportunities.
Newcrest and the Martu people have historically worked together, with
Telfer training or employing more than 500 Martu men and women over
the past 15 years. But the relationship was put on a formal footing
on 4 December 2015 when Newcrest signed an Indigenous Land
Use Agreement (ILUA) with the Western Desert Lands Aboriginal
Corporation (WDLAC), on behalf of the Martu people.
The Agreement provides more than A$18 million over the first five
years for the benefit of the Martu, followed by a revenue-based payment
from mining in the Agreement area. It commits Newcrest to providing
practical support to improve the quality of life for the Martu, including in
the areas of training and employment, contracting, and logistical support.
It is the most significant Agreement with the Martu since mining
operations began at Telfer more than 40 years ago and it consolidates
the programs and projects that Telfer has delivered in the past.
The Agreement is consistent with Newcrest’s continuing commitment
to making a positive economic and social contribution to the
communities in which it operates. The Agreement also provides for
ongoing heritage protection for areas of special significance.
Among other commitments, Newcrest supports a Martu Trainee
Program for eight full-time trainees at Telfer, and it includes the
employment of a Martu Liaison Officer. Additionally the Agreement
encourages Newcrest to give preference to tenders from Martu
contracting companies, and to companies offering training and
employment opportunities for Martu people.
A Relationship Committee has been established with three Martu
members and three Newcrest members. The group meets at least
twice a year to talk about activities in the “project area”.
Cultural Awareness Training is provided to all Newcrest staff and
contractors working in and around Telfer.
Newcrest has also committed to provide logistical support to the
Martu, which is essential in such a remote environment. Telfer regularly
provides flights, accommodation, fuel and vehicle break down
assistance to Martu and community stakeholders.
We aim to exceed our obligations to the Martu community, through
programs such as the award-winning Desert Sport Development
program or ‘Ngurra Kujungka’. Ngurra Kujungka is the five-year-old
program developed out of the former Western Desert Sports Council
and Western Desert League. Both programs have successively
benefited from Newcrest’s significant investment of funds, resources
and infrastructure into Martu health, sport and recreation programs,
events and activities in remote Indigenous communities since 2002.
Beyond Ngurra Kujungka, Newcrest supports a broad range of
additional programs across sport, health, education, infrastructure and
community-building.
24
CASE STUDY
MAKING A DIFFERENCE TO
COMMUNITY HEALTH
Newcrest’s Lihir operation has a strong commitment to
community health, working together with local, provincial and
national governments, business partners and international
agencies, such as the World Health Organisation (WHO),
on a variety of projects to improve the standard of health within the
workforce at Lihir, the local community and in the wider PNG society.
Newcrest’s five-year alliance with the not-for-profit organisation
Medicines for Malaria Venture is responsible for the first attempt
to eliminate malaria within a region of PNG. Newcrest continues to
engage with the PNG National Department of Health, other levels of
government and international experts on the project.
During FY17, the Lihir Malaria Elimination Program (LMEP) supplied
malaria medicines and test kits to all Lihirian community clinics
to ensure that the population has continued access to malaria
diagnosis and treatment services. The community clinics test
around 1,300 people each month for malaria and, of those, treat
around 800 people per month.
The LMEP has also played a critical role over the past year in hosting
Rotarians Against Malaria, who distributed 10,800 treated mosquito
nets by sea and road to local communities.
LMEP is in the initial stages of planning the roll-out of the Home Based
Malaria Management initiative, which will work with communities to
identify people who can be trained in the diagnosis and treatment of
uncomplicated malaria at the community level.
The presence of the mine has enabled the eradication of yaws, a
tropical infection of the skin caused by bacteria, in the Lihir group of
islands. This is being done through a research program, jointly funded
by the WHO, Newcrest and the Nimamar Local Level Government.
A research doctor hired by International SOS, who manages the Lihir
Medical Centre under a contract with Newcrest, has successfully
trialled a new yaws treatment comprising a single tablet of
azithromycin which costs about 13 US cents per tablet. This replaces
the painful injection of the antibiotic, benzathine. The discovery and
success of the new treatment has resulted in the WHO designing a
new strategy to eradicate yaws globally by 2020.
Newcrest spends 18 million PNG Kina a year managing the Lihir
Medical Centre. The services provided by the centre include
dentistry, optometry, anti-natal, malaria and yaws research and
treatment, and a health extension and capacity building program for
the Catholic church-run Palie Hospital. Newcrest also runs a clinic for
its employees at the mine site. The two facilities see around 80,000
patients each year.
During FY17, Newcrest introduced a new Healthy Living program at
Lihir designed to help Lihir’s 4,500 strong workforce take charge of
their personal health, with more than 3,400 of the workforce already
receiving a personal health consultation. The program was launched in
October by three well-known sporting personalities, who visited Lihir
and talked with employees about the importance of living a healthy
lifestyle both on and off site. The group also visited the local Putput
community where many children and young people participated in
coaching clinics with them.
A broader engagement strategy to build a targeted program of
social investment and capacity building at a national level in PNG
also commenced during the year. The initial support programs
focus on four development themes, including national community
health initiatives. For example, recognising the link between
the high maternal mortality rate in PNG and the relatively small
number of supervised births, Newcrest worked with the Australian
Government to launch a partnership with the Australia Awards
Pacific Scholarships Program to deliver midwifery and maternal
health scholarships for Morobe and New Ireland. The partnership
has initially awarded four Newcrest-funded scholarships to nurses
from the two provinces to support critically-needed birthing
services. The recipients, now at St Mary’s School of Nursing in
East New Britain Province and the Pacific Adventist University in
the National Capital District, are due to graduate in early 2018.
Newcrest has also supported an obstetrics training course for New
Ireland community health workers.
Five-year alliance seeking to
eliminate malaria
Eradication of yaws in the
Lihir group of islands
Newcrest funded Lihir Medical Centre and site
clinic treat around 80,000 patients per year
Introduction of the Healthy Living
program for workforce
Partnership with the Australia Awards
Pacific Scholarships program to
deliver midwifery and maternal health
scholarships for Morobe and New Ireland
25
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWSAFETY, SUSTAINABILITY & DIVERSITYTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENT Diversity and Inclusion
At Newcrest, we are committed to building a diverse and inclusive
workplace where each of us contributes to our vision to be the
Miner of Choice. We are particularly focussed on gender diversity
and diversity in the local context of the sites and communities in
which we operate.
Diversity is about having a culture where differences in gender,
ethnicity, religion, language, local customs, age, sexual
preferences and physical abilities are respected and valued.
We recognise that our different backgrounds and perspectives
help us find better ways to solve problems; attract and retain the best
people; explore, develop and produce more gold safely and profitably;
and help make Newcrest a better place to work.
Our Standards and Procedures aim to encourage diversity and
inclusion and address specific barriers to employees. Our Standards
and Procedures comply with all anti-discrimination and equal
opportunity legislation.
NEWCREST’S DIVERSITY AND INCLUSION FRAMEWORK
IS SUPPORTED THROUGH:
HR AND REMUNERATION BOARD COMMITTEE
Actively leads Newcrest’s diversity and inclusion agenda, in particular
by reviewing measurable objectives for achieving diversity and inclusion
and monitoring the Company’s progress towards achieving them.
EXECUTIVE COMMITTEE
Discusses diversity and inclusion on a regular monthly basis, and provides
guidance and input regarding the implementation of Newcrest’s Diversity
and Inclusion framework.
DIVERSITY & INCLUSION POLICY
Updated in September 2016, the Policy includes the following key
principles underpinning our approach to diversity and inclusion:
• Diversity is embraced in recruitment and promotion activities at
all levels;
• We aspire to have our people reflect the communities we operate
within;
• Our culture embraces diversity in which differences are
encouraged, and where leaders across Newcrest demonstrate and
promote inclusive practices;
• Leadership and talent development programs will be structured to
improve the diversity pipeline; and
• We look to encourage flexible work practices to support a
range of professional and personal circumstances aligned with
business requirements.
26
FLEXIBLE WORK PRACTICES STANDARD
Enables employees to adopt flexible work practices to support a range
of professional and personal circumstances.
WORKPLACE BEHAVIOUR STANDARD
Newcrest’s workplace behaviour standard promotes a workplace that
is inclusive and free from discrimination, harassment, bullying and
victimisation. Ensuring employees understand what is appropriate
workplace behaviour, and encouraging them to speak up if they see
inappropriate behaviour, supports Newcrest in building a positive and
productive workplace environment.
DIVERSITY OF NEWCREST’S WORKFORCE
As stated above, Newcrest continues to build the diversity of its
workforce with a focus on gender and the ongoing localisation of
leadership positions particularly within Newcrest’s operations in PNG,
Indonesia and Cote d’Ivoire.
Across Newcrest, as at 30 June 2017 females comprised 12.1* percent
of all employees, an increase from 11.6 percent in 2016.
PROPORTION OF WOMEN (ALL NEWCREST SITES)
AS AT 30 JUNE 2017
NEWCREST
MINING
(ALL SITES)
Board
Senior Executives
(defined as Key
Management
Personnel)
All employees
(excluding Board and
Senior Executives)
TOTAL NO. OF
FEMALES
30 JUNE 2017
PROPORTION OF
FEMALES (%)
30 JUNE 2017
3
2
30.0
22.2
669
12.1*
*excludes employees on leave without pay and casuals
In accordance with the requirements of the Workplace Gender Equality
Act 2012 (Act), Newcrest lodged its 2016–17 public report with the
Workplace Gender Equality Agency (Agency). This report includes the
workplace profile and the reporting questionnaire. Employees can access
the report via Newcrest’s portal or can request to receive a hard copy.
External stakeholders can access the report via Newcrest’s website.
In its Workplace Gender Equality report dated 31 March 2017,
Newcrest reported that 17.2 percent of its Australian workforce
comprised women, compared with 15.7 percent for the previous
reporting period. Newcrest remains committed to significantly
improving the representation of women within its workforce.
ASX EXTERNAL MEASURES – GENDER DIVERSITY
THE OUTCOMES ACHIEVED AGAINST NEWCREST’S
GENDER DIVERSITY MEASURES FOR THE PERIOD ENDING
31 DECEMBER 2016 ARE SET OUT BELOW.
Increase the representation of women in management Levels
2–4(1) to a minimum of 16 percent by 31 December 2016:
As at 31 December 2016, women in management accounted for
17.9 percent (88 women) of Newcrest’s Australian management Levels
2–4. The percentage of women has increased by 4 percentage points
when compared with the start of the reporting period, 30 June 2014.
Increase the proportion of women accessing programs aimed
at accelerating development, by a minimum of 20 percent by
31 December 2016:
As noted in our 2016 Annual Report, since the baseline for this
measure was set in December 2013, Newcrest has changed its talent
management process, including the approach for identifying individuals
for accelerated development. As of 31 December 2016, 28.6 percent
of the accelerated development pool were females. This represents an
increase of 105 percent (against a target increase of 20 percent) from
our baseline of 13.9 percent in 2013.
Increase the representation of women selected for
the graduate program to a minimum of 40 percent by
31 December 2016:
As of 31 December 2016, 50 percent of the eight Graduates
on the Australian Graduate program were women. Newcrest will
continue to ensure women represent a significant proportion of this
program. Newcrest also continues to invest heavily in its Vacation and
Scholarship programs.
THE FOLLOWING TWO MEASURES WERE SET IN 2015 FOR THE
PERIOD ENDING 31 DECEMBER 2017:
Increase the representation of women in management Levels
2–4 to at least 18 percent by 31 December 2017:
As of 30 June 2017, women represent 18.3 percent of management
positions at Levels 2–4. We will aim to continue our momentum beyond
the December 2017 target through attraction and retention initiatives.
A minimum of 50 percent of women in Level 3 and 4 roles
to have completed, or be participating in, a leadership
development program as at 31 December 2017:
As of 30 June 2017, 26.3 percent of the 38 women in Level 3 and 4
roles have completed, or are participating in, one of the three aspects
of a leadership development program (which, for the purpose of this
measure, we have defined as formal Leadership Development Training,
Mentoring/Coaching or Leadership role/stretch assignment). Efforts
will be focussed on prioritising the remainder of this population
for other development initiatives, including the internal leadership
capability development program to be launched in November 2017.
These measures are intended to deliver a larger pool of women from
which Newcrest can identify and develop future leaders. Newcrest will
continue to identify innovative ways to attract, develop and progress
women within the business, while simultaneously building the capability
of people leaders to inclusively lead and leverage the benefits of
diverse teams.
Newcrest remains committed to significantly improving the
representation of women within its workforce. Given our positive
progress in Australia, we will share our learnings across our other sites
with the aim of driving improvements globally.
(1) Levels 2–4 includes Senior Professionals/Supervisors, Managers and
Senior Managers.
27
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWSAFETY, SUSTAINABILITY & DIVERSITYTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENT MINERAL RESOURCES AND ORE RESERVES
Updated mining, metallurgical and long term cost assumptions
were developed with reference to recent performance data. The
revised long term assumptions include performance improvements
consistent with changing activity levels at each site over the life of
the operation and the latest study for each deposit.
Long term metal prices and foreign exchange assumptions for
Mineral Resources and Ore Reserves are set out below.
LONG TERM METAL PRICE ASSUMPTIONS
Mineral Resource Estimates
Gold – USD/oz
Copper – USD/lb
Silver – USD/oz
Ore Reserve Estimates
Gold – USD/oz
Copper – USD/lb
Silver – USD/oz
Long Term Exchange Rate USD:AUD
NEWCREST &
MMJV
1,300.00
3.40
21.00
1,200.00
3.00
18.00
0.80
Gold, copper and silver metal price assumptions remains unchanged
from that used for December 2015 reporting. There has been
no change to the AUD:USD exchange rate assumption since
December 2015 reporting but local currency assumptions for
Indonesian Rupiah and PNG Kina have been updated (the Côte
d’Ivoire Franc remains unchanged). Morobe Mining Joint Ventures
(MMJV) long term metal price and exchange rate assumptions are
aligned to Newcrest assumptions. The Namosi Joint Venture (NJV)
continues to use the joint venture agreed long term metal price and
exchange rate assumptions unchanged from December 2015. NJV
agreed metal price assumptions are USD 1,350/oz gold and USD
3.40/lb copper for Mineral Resources and USD 1,250/oz gold and
USD 3.00/lb copper for Ore Reserves.
Where appropriate, Mineral Resources are also spatially
constrained within notional mining volumes based on metal
prices of USD 1,400/oz for gold and USD 4.00/lb for copper. This
approach is adopted to eliminate mineralisation that does not
have reasonable prospects of eventual economic extraction from
Mineral Resource estimates.
The Annual Statement of Mineral Resources and Ore Reserves,
31 December 2016, has been prepared in accordance with the
2012 Edition of the ‘Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves’ (the JORC Code 2012).
Information prepared and first disclosed under the JORC Code 2004
Edition and not related to a material mining project and which has not
materially changed since last reported has not been updated.
Mineral Resource and Ore Reserve estimates reported for the MMJV
are based on Competent Persons’ statements provided by the
MMJV and are quoted as Newcrest’s 50% interest.
Newcrest Mining Limited releases its Annual Statement of
Mineral Resource and Ore Reserve estimates and Explanatory
Notes as of 31 December each year. The Statement for the period
ending 31 December 2016 was released on 13 February 2017,
and can be found on Newcrest’s website at www.newcrest.com.au.
This section of the Annual Report includes relevant information
set out in that Statement. Changes that have occurred in the six
months ending 30 June 2017 due to mining depletion and other
adjustments are noted below.
For the purposes of the Annual Mineral Resources and Ore Reserves
Statement as at 31 December 2016, Newcrest has completed a
detailed review of all production sources. The review has taken into
account updated long term metal prices, foreign exchange and cost
assumptions, and mining and metallurgy performance to inform
cut-off grades and physical mining parameters.
As at 31 December 2016, Group Mineral Resources are estimated
to contain 130 million ounces of gold, 19 million tonnes of copper
and 95 million ounces of silver. This represents a decrease of
approximately 7 million ounces of gold (~5%), 0.4 million tonnes
of copper (~2%) and 25 million ounces of silver (~21%), compared
with the estimate as at 31 December 2015. The Group Mineral
Resources estimates as at 31 December 2016 are set out in the
Mineral Resource tables. Mineral Resources are reported inclusive
of Ore Reserves.
The Group Mineral Resources as at 31 December 2016 includes
changes at numerous deposits following updated notional
constraining shells and/or resource models. These include:
• Estimated mining depletion of approximately 3 million ounces of
gold, 0.1 million tonnes of copper and 2 million ounces of silver.
• Removal of the Marsden Mineral Resources of 1.1 million
ounces of gold and 0.7 million tonnes of copper following
divestment of the project (refer to market release “Quarterly
Report for 3 months ended 30 September 2016” dated 27
October 2016).
• Removal, post mining depletion, of the Hidden Valley Mineral
Resource by 2 million ounces of gold and 37 million ounces
of silver following divestment of Newcrest’s 50% interest
(refer to market release “Sale of Hidden Valley Interest” dated
19 September 2016).
As at 31 December 2016, Group Ore Reserves are estimated to
contain 65 million ounces of gold, 11 million tonnes of copper
and 38 million ounces of silver. This represents a decrease of
approximately 3.5 million ounces of gold (~5%), 0.2 million tonnes
of copper (~2%) and 9 million ounces of silver (~19%), compared
with the estimate as at 31 December 2015. The Group Ore
Reserves estimates as at 31 December 2016 are set out in the
Ore Reserve tables.
The Group Ore Reserves as at 31 December 2016 includes the
following changes:
• Estimated mining depletion of approximately 3 million ounces of
gold, 0.1 million tonnes of copper and 2 million ounces of silver,
offset by minor additions at operating sites.
• Removal, post mining depletion, of the Hidden Valley Ore
Reserve by 0.7 million ounces of gold and 12 million ounces
of silver following divestment of Newcrest’s 50% interest
(refer to market release “Sale of Hidden Valley Interest” dated
19 September 2016).
28
GOVERNANCE
Newcrest has a policy for the Public Reporting of Exploration
Results, Mineral Resources and Ore Reserves. This policy provides a
clear framework for how Newcrest manages all public reporting of
Exploration Results, Mineral Resources and Ore Reserves, ensuring
compliance with the JORC Code 2012. This policy applies to all
regulatory reporting, public presentations and other publicly released
company information at both local (site) and corporate levels.
Newcrest has in place a Resource and Reserve Steering Committee
(RRSC). The role of the Committee is to ensure the proper
functioning of Newcrest’s Resource and Reserves development
activity and reporting. The Committee’s control and assurance
activities respond to a four-level compliance process:
1. Provision of standards and guidelines, and approvals
consequent to these;
2. Resources and Reserves reporting process, based on well-
founded assumptions and compliant with external standards
(JORC Code 2012, ASX Listing Rules);
3. External review of process conformance and compliance; and
4. Internal assessment of processes around all input assumptions.
Updates to the Mineral Resource and Ore Reserve estimates
at 31 December 2016 were completed in accordance with the
RRSC governance and review process. This included reporting in
compliance with the JORC Code 2012, training and endorsement
of suitably qualified Competent Persons, independent external
review of Mineral Resources and Ore Reserves every three years
(unless agreed by RRSC) or where there is a material change and
endorsement of the Annual Mineral Resources and Ore Reserve
Statement by the RRSC prior to release to the market.
COMPETENT PERSON STATEMENT
1. The information in this Annual Report that relates to Mineral
Resources and Ore Reserves has been approved by Mr K.
Gleeson. Mr Gleeson is the Head of Mineral Resource
Management and a full-time employee of Newcrest Mining
Limited. He holds Newcrest shares and is entitled to participate
in Newcrest’s executive equity long term incentive plan, details
of which are included in Newcrest’s 2017 Remuneration
Report. Replacement of Ore Reserves and Mineral Resources
depletion is one of the performance measures under recent
long term incentive plans. He is a Member of The Australasian
Institute of Mining and Metallurgy. Mr Gleeson has sufficient
experience which is relevant to the styles of mineralisation and
types of deposits under consideration and to the activity which
he is undertaking to qualify as a Competent Person as defined
in the JORC Code 2012. Mr Gleeson consents to the inclusion of
the Mineral Resources and Ore Reserves Statement and other
references to Mineral Resource and Ore Reserves in this Annual
Report in the form and context in which they appear.
2. The information in this Annual Report that relates to Mineral
Resources or Ore Reserves as at 31 December 2016 has been
extracted from the release titled “Annual Mineral Resources
and Ore Reserves Statement – 31 December 2016” dated
13 February 2017 (the original release). Newcrest confirms
that the form and context in which the competent person’s
findings are presented have not been materially modified from
the original release.
3. The information in this Annual Report that relates to
changes in the Mineral Resources or Ore Reserves since
31 December 2016:
a. for each of Gosowong Ore Reserves, Bonikro Mineral
Resources and Ore Reserves and Telfer Ore Reserves, is
based on and fairly represents information and supporting
documentation prepared by the following Competent
Persons: Jimmy Suroto – Gosowong Ore Reserves, Drissa
Sankare – Bonikro Mineral Resources, Emmanuel Kwarfo
– Bonikro Ore Reserves and Brett Ascott – Telfer Ore
Reserves; and
b. for all other Mineral Resources or Ore Reserves, is based
on and fairly represents information and supporting
documentation prepared by the Competent Persons named
in the Mineral Resources and Ore Reserves Tables extracted
from the original release.
Each of the Competent Persons referenced in paragraph (3) above,
other than Mr G. Job, was at the reporting date a full-time employee
of Newcrest Mining Limited or its relevant subsidiaries, holds
options (and in some cases, shares) in Newcrest Mining Limited and
is entitled to participate in Newcrest’s executive equity long term
incentive plan, details of which are included in Newcrest’s 2017
Remuneration Report. Replacement of Ore Reserves and Mineral
Resources depletion is one of the performance measures of
recent long term incentive plans. Mr Job is a full time employee of
Harmony Gold Mining Company Limited, Newcrest’s joint venture
partner in each of the MMJVs.
All the Competent Persons referenced in paragraph (3) above are
Members of The Australasian Institute of Mining and Metallurgy and
/ or The Australian Institute of Geoscientists, and have sufficient
experience which is relevant to the styles of mineralisation and types
of deposits under consideration and to the activity which they are
undertaking to qualify as a Competent Person as defined in the JORC
Code 2012. Each Competent Person, consents to the inclusion in
this report of the matters based on their information in the form and
context in which it appears.
29
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY MINERAL RESOURCES AND ORE RESERVES
CHANGES SINCE 31 DECEMBER 2016 MINERAL
RESOURCE AND ORE RESERVE STATEMENT
Newcrest is not aware of any new information or data that materially
affects the information contained in the Annual Mineral Resource
and Ore Reserve Statement 31 December 2016 other than changes
due to normal mining depletion and other adjustments that occurred
during the six months ended 30 June 2017. These changes are
summarised by province below.
Newcrest’s Annual Statement of Mineral Resources and Ore
Reserves is based upon a number of factors, including (without
limitation) actual exploration and production results, economic
assumptions (such as future commodity prices and exchange
rates) and operating and other costs. No changes were made to
those assumptions during the period to 30 June 2017. However,
in preparing the Annual Statement of Mineral Resources and Ore
Reserves for the period ended 31 December 2017, Newcrest
proposes to review long-term foreign exchange rate, metal price
and cost assumptions. There are also specific ongoing studies to
maximize the value of operations at Gosowong, Lihir, Telfer, Cadia
and the Wafi-Golpu project that may be incorporated into the Mineral
Resource and Ore Reserve assumptions for the period ending
31 December 2017. In addition a strategic review to assess options
for maximising the value of Bonikro to Newcrest shareholders
is considering a range of options including investment in further
cut-backs and divestment of the operation. At this stage, the impact
that the assumption changes or outcomes of the ongoing studies
and strategic Bonikro review will have on Newcrest’s Mineral
Resources and Ore Reserves estimates for the period ending
31 December 2017 has not been determined.
CADIA (NSW)
Mineralisation recognised to date in the Cadia Province is
porphyry related gold and copper, hosted in rocks of Ordovician
age. Orebodies 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 underground operations.
Changes to Mineral Resources and Ore Reserves at Cadia since
31 December 2016 have only occurred in the two producing mines
and Cadia Hill stockpiles detailed below.
Ridgeway Underground
Ridgeway Underground is a large-scale underground mine using the
block caving mining method (Ridgeway Deeps) below the former sub-
level cave. The Ridgeway mine was placed on care and maintenance
on 3 March 2016 following 15 years of operation. The Ridgeway
sub level cave was re-started in June 2017 to temporarily provide
ore feed to the Cadia mill following the seismic event in April 2017.
Cadia East Underground
Cadia East is a low-grade, porphyry related gold and copper deposit
with mining based on bulk underground extraction by panel caving
methods. Commercial production from initial Panel Cave 1 (PC1)
commenced in January 2013. Development and undercutting
activities and bulk extraction continue in the second Panel Cave
(PC2). On 14 April 2017 a seismic event impacted the Cadia
operation. No physical injuries were sustained and in accordance with
standard operating procedure, all personnel working in the Cadia
East underground mine moved to refuge chambers or safe areas,
before being safely evacuated.
Damage to the Cadia East underground mine infrastructure was
minimal with no permanent damage detected. Since the event,
Newcrest has safely remediated and upgraded ground support to
enable ore production to recommence. Surface operations were
not adversely affected by the seismic event and Cadia continued
to operate at a reduced mill throughput rate by processing low
grade stockpiles from the Cadia Hill open pit and restarting the
Ridgeway sub level cave.
Cadia Hill Stockpiles
Cadia Hill low grade stockpiles were reclaimed and processed
following the seismic event in April 2017 while Cadia East
was remediated.
Since 31 December 2016, both the Cadia Province Mineral Resource
and Ore Reserve have been depleted by 0.26 million ounces of gold
and 0.03 million tonnes of copper.
30
TELFER (WA)
Gold and copper mineralisation in the Telfer Province is intrusion
related and occurs as higher-grade stratabound reefs, discordant
veins and lower-grade bulk tonnage stockwork zones. The Telfer
operation is comprised of open pit mining at both Main Dome and
West Dome and underground mining at Main Dome. Open pit mining
is a conventional truck and hydraulic excavator operation. Selective
long hole open stope mining method is used for excavation of the
high-grade reefs, while stockwork ore and waste are mined using
sub level cave bulk mining method. Underground ore is hoisted to the
surface via a shaft. Changes to Mineral Resources and Ore Reserves
at Telfer since 31 December 2016 have only occurred in the two
producing mines detailed below.
Telfer Main Dome and West Dome Open Pits
Open pit mining has continued at both Main Dome and West Dome
open pits (including stockpile reclaim). Since 31 December 2016,
the Mineral Resource has been depleted by 0.14 million ounces of
gold and 0.01 million tonnes of copper and the Ore Reserve has
been depleted by 0.11 million ounces of gold and 0.01 million tonnes
of copper.
Telfer Underground
The Telfer Underground comprises the operating SLC mine
and selective high-grade reef mining and Western Flanks reef and
stockwork mining. Since 31 December 2016, the Mineral Resource
has been depleted by 0.10 million ounces of gold and 0.01 million
tonnes of copper and the Ore Reserve has been depleted by 0.08
million ounces of gold and less than 0.01 million tonnes of copper.
LIHIR (PNG)
The Lihir Gold Mine is located on Niolam Island, 900 kilometres
north-east of Port Moresby in the New Ireland Province of Papua
New Guinea (PNG). 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.
Changes to Mineral Resources and Ore Reserves at Lihir since
31 December 2016 have occurred in both open pit and stockpiles
and have comprised the depletion of 0.52 million ounces of gold.
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 (75 percent) and PT Aneka
Tambang (25 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 epithermal veining containing high-grade gold and
silver. Changes to Mineral Resources and Ore Reserves at Gosowong
since 31 December 2016 have only occurred at the two producing
mines detailed below.
Kencana Underground
Since 31 December 2016, the Mineral Resource has changed
through mining depletion offset by incremental additions from infill
and near mine exploration for overall decrease of 0.01 million ounces
of gold. The Ore Reserve has changed through mining depletion
offset by incremental additions from infill and near mine exploration
drill programs for overall increase of 0.07 million ounces of gold.
Toguraci Underground
Since 31 December 2016, the Mineral Resource has changed
through mining depletion and infill and near mine exploration drill
programs for overall decrease of 0.01 million ounces of gold.
The Ore Reserve has changed through mining depletion offset by
incremental additions from infill and near mine exploration drill
programs for overall decrease of 0.02 million ounces of gold.
CÔTE D’IVOIRE (WEST AFRICA)
The Côte d’Ivoire operations and projects include Bonikro and
Hiré deposits, as well as various exploration tenements. Gold
mineralisation is hosted in Proterozoic greenstone volcanic belts
and occurs primarily in two modes: as structurally controlled shear
zones, and as stockwork veining. Changes to Mineral Resources
and Ore Reserves since 31 December 2016 have only occurred in
the producing open pit mines at Hiré (Chapelle and Akissi-So) and low
grade stockpiles. Since 31 December 2016 both the Mineral Resource
and Ore Reserve have been depleted by 0.06 million ounces of gold.
31
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY MINERAL RESOURCES AND ORE RESERVES
2016 MINERAL RESOURCES AS AT 31 DECEMBER 2016
DEC–16
MINERAL RESOURCES
MEASURED
RESOURCE
INDICATED
RESOURCE
INFERRED
RESOURCE
DEC–16
TOTAL RESOURCE
COMPARISON TO DEC–15
TOTAL RESOURCE
Gold Mineral Resources
(inclusive of Gold
Ore Reserves)
Competent Person
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Insitu
Gold
(million
ounces)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Insitu
Gold
(million
ounces)
36
2.5
4.2
43
1.5
3.6
5.7
0.20
11
57
1.6
1.4
2.1
120
13
5.4
1.1
20
140
Operational Provinces
Cadia East Underground
Ridgeway Underground
Other
Total Cadia Province
Main Dome Open Pit
West Dome Open Pit
Telfer Underground
Other
Total Telfer Province
Lihir
Gosowong (1)
Bonikro (2)
MMJV – Hidden Valley
Operations (50%) (3)
Stephen Guy
James Biggam
Glenn
Patterson-Kane
Rob Taube
Paul Dunham
0.18
–
140
1.1
–
0.47
3,000
110
120
16
–
–
–
0.40
–
–
–
49
180
84
0.44
0.38
0.56
0.38
0.83
0.61
1.2
2.9
–
41
39
–
0.38
0.40
3,000
150
310
0.27
7.7
18
4.4
0.65
0.60
1.5
1.1
64
190
100
4.9
0.38
0.51
0.43
0.72
0.61
1.3
1.3
2,800
150
310
62
170
110
4.9
36
2.4
4.2
43
1.5
3.6
4.1
0.20
9.5
0.40
0.51
0.43
0.74
0.65
1.5
1.3
86
2.1
600
2.2
120
2.1
800
2.2
56
820
2.2
–
8.7
–
0.74
3.1
19
12
1.4
0.62
1.6
8.4
2.0
3.7
29
12
1.3
1.4
1.2
Greg Job
–
–
–
–
–
–
–
–
–
4.1
32
42
12
1.4
1.6
Total Operational Provinces
Non-Operational Provinces
MMJV – Golpu /Wafi &
Nambonga (50%) (3)
Namosi JV (70.75%) (4)
Marsden
Paul Dunham/
Greg Job
Vik Singh
Stephen Guy
Total Non-Operational Provinces
Total Gold Mineral Resources
110
–
–
–
–
–
–
400
0.86
99
0.74
500
0.83
13
500
0.83
1,300
–
0.11
–
220
–
0.10
–
1,500
–
0.11
–
1,500
180
0.11
0.20
5.4
–
19
130
DEC–16
MINERAL RESOURCES
MEASURED
RESOURCE
INDICATED
RESOURCE
INFERRED
RESOURCE
DEC–16
TOTAL RESOURCE
COMPARISON TO DEC–15
TOTAL RESOURCE
Competent Person
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Insitu
Copper
(million
tonnes)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Insitu
Copper
(million
tonnes)
Copper Mineral Resources
(inclusive of Copper
Ore Reserves)
Operational Provinces
Cadia East Underground
Ridgeway Underground
Other
Total Cadia Province
Main Dome Open Pit
West Dome Open Pit
Telfer Underground
Other
O'Callaghans
Total Telfer Province
Total Operational Provinces
Non-Operational Provinces
MMJV – Golpu / Wafi &
Nambonga (50%) (3)
Namosi JV (70.75%) (4)
Marsden
Paul Dunham /
Greg Job
Vik Singh
Stephen Guy
Total Non-Operational Provinces
Total Copper Mineral Resources
–
–
–
–
–
–
32
Stephen Guy
0.18
–
140
0.33
–
0.13
3,000
110
120
0.26
0.30
0.17
–
41
39
–
0.40
0.25
3,000
150
310
0.26
0.33
0.16
James Biggam
10
–
–
–
–
0.10
–
–
–
–
49
180
84
–
69
0.070
0.065
0.28
–
0.29
0.27
7.7
18
14
9.0
0.056
0.075
0.44
0.37
0.24
59
190
100
14
78
0.076
0.065
0.30
0.37
0.29
2,800
150
310
0.26
0.33
0.16
56
170
110
14
78
0.095
0.057
0.31
0.37
0.29
7.8
0.48
0.49
8.7
0.045
0.12
0.31
0.052
0.22
0.75
9.5
7.4
0.49
0.49
8.4
0.053
0.10
0.35
0.052
0.22
0.78
9.2
340
1.1
88
0.71
430
1.0
4.4
430
1.0
4.4
1,300
–
0.34
–
220
–
0.41
–
1,500
–
0.35
–
1,500
180
0.35
0.38
5.4
–
10
19
5.3
0.67
10
20
DEC–16
MINERAL RESOURCES
MEASURED
RESOURCE
INDICATED
RESOURCE
INFERRED
RESOURCE
DEC–16 TOTAL RESOURCE
COMPARISON TO DEC–15
TOTAL RESOURCE
Silver Mineral Resources
(inclusive of Silver
Ore Reserves)
Competent Person
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)
Dry
Tonnes
(million)
Silver
Grade
(g/t Ag)
Insitu
Silver
(million
ounces)
Operational Provinces
Cadia Valley Operations
Gosowong (1)
MMJV – Hidden Valley
Operations (50%) (3)
Stephen Guy
Rob Taube
0.18
–
0.72
–
3,100
3.1
0.68
20
41
0.62
0.43
14
3,100
3.7
0.68
19
69
2.3
3,000
4.1
0.57
20
Greg Job
–
–
–
–
–
–
–
–
–
40
29
Total Operational Provinces
Non-Operational
Provinces
MMJV – Golpu /
Wafi (50%) (3)
Paul Dunham /
Greg Job
Total Non-Operational Provinces
Total Silver Mineral Resources
DEC–16
MINERAL RESOURCES
71
–
–
400
1.6
79
1.3
480
1.6
24
480
1.6
24
95
Polymetallic Mineral Resources
(inclusive of Polymetallic Ore Reserves)
Competent Person
O'Callaghans
Measured
Indicated
Inferred
Total Polymetallic Mineral Resources
Measured
Indicated
Inferred
Comparison to Dec–15
Total Polymetallic Mineral Resources
James Biggam
James Biggam
TONNES
GRADE
CONTAINED METAL
Dry
Tonnes
(million)
Tungsten
Trioxide
Grade
(% WO3)
–
69
9.0
78
–
69
9.0
–
0.34
0.25
0.33
–
0.34
0.25
Insitu
Tungsten
Trioxide
(million
tonnes)
–
0.24
0.023
0.26
–
0.24
0.023
Lead
Grade
(% Pb)
–
0.26
0.11
0.24
–
0.27
0.073
Zinc
Grade
(% Zn)
–
0.53
0.19
0.49
–
0.55
0.15
Insitu
Zinc
(million
tonnes)
Insitu
Lead
(million
tonnes)
–
0.36
0.017
0.38
–
0.38
0.013
–
0.18
0.0097
0.19
–
0.18
0.0066
78
0.33
0.50
0.25
0.26
0.39
0.19
55
2.6
38
95
24
24
120
NOTE: Data is reported to two significant figures to reflect appropriate precision in the estimate and this may cause some apparent discrepancies in totals
(1)
(2)
(3)
(4)
Gosowong (inclusive of Toguraci and Kencana) is owned and operated by PT Nusa Halmahera Minerals, an incorporated joint venture company (Newcrest 75%).
The figures shown represent 100% of the Mineral Resource.
Bonikro is inclusive of mining and exploration interests in Côte d’Ivoire held by LGL Mines CI SA (Newcrest, 89.89%) and Newcrest Hiré CI SA (Newcrest 89.89%).
The figures shown represent 100% of the Mineral Resource.
MMJV refers to projects owned by the Morobe Mining unincorporated joint ventures between subsidiaries of Newcrest (50%) and Harmony Gold Mining Company
Limited (50%). The figures shown represent 50% of the Mineral Resource.
Namosi refers to the Namosi unincorporated joint venture, in which Newcrest has a 70.75% interest. The figures shown represent 70.75% of the Mineral Resource
at December 2016 compared to 70.67% of the Mineral Resource at December 2015.
33
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY MINERAL RESOURCES AND ORE RESERVES
2016 ORE RESERVES AS AT 31 DECEMBER 2016
DEC–16
ORE RESERVES
PROVED
RESERVE
PROBABLE
RESERVE
DEC–16
TOTAL RESERVE
COMPARISON TO DEC–15
TOTAL RESERVE
Gold Ore Reserves
Competent Person
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Insitu
Gold
(million
ounces)
Dry
Tonnes
(million)
Gold
Grade
(g/t Au)
Insitu
Gold
(million
ounces)
Operational Provinces
Cadia East Underground
Ridgeway Underground
Other
Total Cadia Province
Main Dome Open Pit
West Dome Open Pit
Telfer Underground
Total Telfer Province
Lihir
Gosowong (1)
Bonikro (2)
MMJV – Hidden Valley
Operations (50%) (3)
Total Operational Provinces
Non-Operational Provinces
MMJV – Golpu (50%) (3)
Namosi JV (70.75%) (4)
Total Non-Operational Provinces
Total Gold Ore Reserves
Geoff Newcombe
Ron Secis
Steven Butt
Mark Kaesehagen
Daniel Moss
Greg Job
–
–
23
16
–
–
86
–
8.7
–
–
–
0.30
1,500
80
67
0.48
0.54
0.59
1,500
80
90
0.40
–
–
2.1
–
0.74
14
78
19
0.85
0.67
1.4
280
1.9
2.7
2.3
9.7
2.6
–
30
78
19
360
1.9
11
0.48
0.54
0.52
0.61
0.67
1.4
2.3
9.7
1.2
23
1.4
1.5
25
0.58
1.7
0.83
3.1
26
0.58
0.43
1,500
82
90
40
84
24
370
1.8
13
0.47
0.55
0.52
0.63
0.68
1.4
2.3
13
1.3
23
1.4
1.5
26
0.82
1.8
1.1
3.8
28
0.76
0.54
–
–
–
–
–
14
1.7
0.78
Pasqualino Manca
Geoff Newcombe
–
–
–
–
190
940
0.91
0.12
190
940
0.91
0.12
56
5.5
3.7
9.2
65
190
940
0.91
0.12
59
5.5
3.7
9.2
69
DEC–16
ORE RESERVES
PROVED
RESERVE
PROBABLE
RESERVE
DEC–16
TOTAL RESERVE
COMPARISON TO DEC–15
TOTAL RESERVE
Copper Ore Reserves
Competent Person
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Operational Provinces
Cadia East Underground
Ridgeway Underground
Other
Total Cadia Province
Main Dome Open Pit
West Dome Open Pit
Telfer Underground
O'Callaghans
Total Telfer Province
Total Operational Provinces
Non-Operational Provinces
MMJV – Golpu (50%) (3)
Namosi JV (70.75%) (4)
Geoff Newcombe
Ron Secis
–
–
23
10
–
–
–
–
–
0.14
1,500
80
67
0.28
0.28
0.15
1,500
80
90
0.28
0.28
0.14
0.10
–
–
–
14
78
19
44
0.091
0.060
0.24
0.29
24
78
19
44
0.097
0.060
0.24
0.29
Pasqualino Manca
Geoff Newcombe
–
–
–
–
190
940
1.3
0.37
190
940
1.3
0.37
Total Non-Operational Provinces
Total Copper Ore Reserves
Insitu
Copper
(million
tonnes)
4.0
0.23
0.13
4.4
0.023
0.047
0.045
0.13
0.24
4.6
2.4
3.5
5.9
11
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
1,500
82
90
0.27
0.29
0.14
34
84
24
47
0.091
0.058
0.28
0.28
190
940
1.3
0.37
Insitu
Copper
(million
tonnes)
4.2
0.23
0.13
4.5
0.031
0.049
0.067
0.13
0.28
4.8
2.4
3.5
5.9
11
34
DEC–16
ORE RESERVES
PROVED
RESERVE
PROBABLE
RESERVE
DEC–16
TOTAL RESERVE
COMPARISON TO DEC–15
TOTAL RESERVE
Silver Ore Reserves
Competent Person
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)
Dry
Tonnes
(million)
Silver
Grade
(g/t Ag)
Insitu
Silver
(million
ounces)
Operational Provinces
Cadia Valley Operations
Gosowong (1)
MMJV – Hidden Valley
Operations (50%) (3)
Total Operational Provinces
Total Silver Ore Reserves
DEC–16
ORE RESERVES
Geoff Newcombe
Mark Kaesehagen
Greg Job
–
–
–
–
–
–
1,500
1.9
0.74
16
1,500
1.9
0.74
16
37
0.95
1,600
1.8
0.62
19
–
–
–
–
–
13
32
38
38
32
1.1
13
46
46
Polymetallic Ore Reserves
Competent Person
O'Callaghans
Proved
Probable
Total Polymetallic Ore Reserves
Proved
Probable
Ron Secis
Ron Secis
Comparison to Dec–15 Total Polymetallic Ore Reserves
TONNES
GRADE
CONTAINED METAL
Dry
Tonnes
(million)
Tungsten
Trioxide
Grade
(% WO3)
Zinc
Grade
(% Zn)
Lead
Grade
(% Pb)
Insitu
Tungsten
Trioxide
(million
tonnes)
Insitu
Zinc
(million
tonnes)
Insitu
Lead
(million
tonnes)
–
44
44
–
47
47
–
0.36
0.36
–
0.36
0.36
–
0.65
0.65
–
0.71
0.71
–
0.32
0.32
–
0.35
0.35
–
0.16
0.16
–
0.17
0.17
–
0.29
0.29
–
0.33
0.33
–
0.14
0.14
–
0.16
0.16
NOTE: Data is reported to two significant figures to reflect appropriate precision in the estimate and this may cause some apparent discrepancies in totals
(1)
(2)
(3)
(4)
Gosowong (inclusive of Toguraci and Kencana) is owned and operated by PT Nusa Halmahera Minerals, an incorporated joint venture company (Newcrest 75%).
The figures shown represent 100% of the Ore Reserve.
Bonikro is inclusive of mining and exploration interests in Côte d’Ivoire held by LGL Mines CI SA (Newcrest, 89.89%) and Newcrest Hiré CI SA (Newcrest 89.89%).
The figures shown represent 100% of the Ore Reserve.
MMJV refers to projects owned by the Morobe Mining unincorporated joint ventures between subsidiaries of Newcrest (50%) and Harmony Gold Mining Company
Limited (50%). The figures shown represent 50% of the Ore Reserve.
Namosi refers to the Namosi unincorporated joint venture, in which Newcrest has a 70.75% interest. The figures shown represent 70.75% of the Ore Reserve at
December 2016 compared to 70.67% of the Ore Reserve at December 2015.
35
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY CORPORATE GOVERNANCE STATEMENT
The Board believes that adherence by Newcrest and its people
to the highest standards of corporate governance is critical in
order to achieve its vision. Accordingly, Newcrest has a detailed
governance framework, which is regularly reviewed and adapted
to developments in market practice and regulation.
As at the date of lodgement of this Report, Newcrest’s governance
framework complies with the Corporate Governance Principles and
Recommendations (3rd edition) published by the ASX Corporate
Governance Council. Further information in relation to Newcrest’s
governance framework is provided in the Corporate Governance
Statement, which was lodged with ASX on the date of lodgement
of this Annual Report and is available in the corporate governance
section of the Newcrest website at http://www.newcrest.com.au/
about-us/corporate-governance. The corporate governance section
of the Newcrest website also provides further information in relation
to Newcrest’s governance framework, including Board and Board
Committee Charters and key policies.
36
TABLE OF CONTENTS
DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
REMUNERATION REPORT
FINANCIAL REPORT
INDEPENDENT AUDITOR’S REPORT
38
42
74
97
144
E
C
N
A
N
R
E
V
O
G
E
T
A
R
O
P
R
O
C
T
N
E
M
E
T
A
T
S
37
PAGE HEADINGYEAR ENDED 30 JUNE 2016KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESSAFETY, SUSTAINABILITY & DIVERSITY
DIRECTORS’ REPORT
The Directors present their report together with the consolidated financial report of the Newcrest Mining Limited Group, comprising
Newcrest Mining Limited (‘the Company’) and its controlled entities (‘Newcrest’ or ‘the Group’), for the year ended 30 June 2017.
DIRECTORS
The Directors of the Company during the year ended 30 June 2017, and up to the date of this report are set out below. All Directors held their
position as a Director throughout the entire year and up to the date of this report unless otherwise stated.
Peter Hay
Non-Executive Director and Non-Executive Chairman
Sandeep Biswas
Managing Director and Chief Executive Officer
Gerard Bond
Philip Aiken am
Roger Higgins
Winifred Kamit
Richard Knight
Rick Lee am
Xiaoling Liu
Finance Director and Chief Financial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (resigned from the Board 16 August 2016)
Non-Executive Director
Non-Executive Director
Vickki McFadden
Non-Executive Director (appointed to the Board 1 October 2016)
John Spark
Non-Executive Director
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 2017 was
US$308 million (2016: profit of US$332 million).
Refer to the Operating and Financial Review for further details.
The Operating and Financial Review forms part of this Directors’
Report. The financial information in the Operating and Financial
Review includes non-IFRS financial information. Explanations
and reconciliations of non-IFRS financial information to the
financial statements are included in Section 6 of the Operating
and Financial Review.
DIVIDENDS
The following dividends of the Company were paid during the year:
• Final unfranked dividend for the year ended 30 June 2016 of
•
US 7.5 cents per share, amounting to US$57.5 million, was paid
on 18 October 2016.
Interim unfranked dividend for the year ended 30 June 2017 of
US 7.5 cents per share, amounting to US$57.5 million, was paid
on 28 April 2017.
The Directors have determined to pay a final dividend for the year
ended 30 June 2017 of US 7.5 cents per share, which will be 70%
franked. The dividend will be paid on 27 October 2017.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the state of affairs of
the Group.
FUTURE DEVELOPMENTS
Refer to the Operating and Financial Review for information on likely
developments and future prospects of the Group.
SUBSEQUENT EVENTS
Subsequent to year-end, the Directors have determined to pay a
final dividend for the year ended 30 June 2017 of US 7.5 cents
per share, which will be 70% franked. The dividend will be
paid on 27 October 2017. The total amount of the dividend is
US$57.5 million. This dividend has not been provided for in the
30 June 2017 financial statements.
There have been no other matters or events that have occurred
subsequent to 30 June 2017 that have significantly affected or
may significantly affect the operations of the Group, the results of
those operations or the state of affairs of the Group in subsequent
financial years.
OPTIONS
The Company does not have any unissued shares or unissued
interests under option as at the date of this report, nor has it granted,
or issued shares or interests under, any options during or since the
end of the year.
38
NON-AUDIT SERVICES
During the year, Ernst & Young (auditor to the Company), has
provided other services in addition to the statutory audit, as
disclosed in Note 35 to the financial statements.
The Directors are satisfied that the provision of non-audit services
provided by the auditor is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
The Directors are satisfied that these non-audit services do not
compromise the auditor’s independence, based on advice received
from the Audit and Risk Committee, for the following reasons:
• all non-audit services have been reviewed by the Audit and Risk
Committee to ensure they did not impact on the impartiality and
objectivity of the auditor; and
• none of the services undermine the general principles relating
to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants, as they did not involve reviewing
or auditing the auditor’s own work, acting in a management or
decision-making capacity for the Company, acting as an advocate
for the Company or jointly sharing economic risks and rewards.
AUDITOR INDEPENDENCE
A copy of the Auditor’s Independence Declaration, as required
by the Corporations Act 2001, is included after this report.
CURRENCY
All references to dollars in the Directors’ Report and the
Financial Report are a reference to US dollars ($ or US$) unless
otherwise specified.
ROUNDING OF AMOUNTS
Newcrest Mining Limited is a company of the kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that Instrument, amounts in
the Directors’ Report and the Financial Report are rounded to the
nearest million dollars except where otherwise indicated.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Managing Director reports to the Board on all significant safety,
health and environmental incidents. The Board also has a Safety and
Sustainability Committee which has oversight of the safety, health
and environmental performance of the Group and meets at least four
times per year. The Directors are not aware of any environmental
incidents occurring during the 2017 financial year which 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 (‘PNG’)
and Cote d’Ivoire. Each mining operation is subject to particular
environmental regulation specific to their activities as part of their
operating licence or environmental approvals. Each of our sites is
required to also manage its environmental obligations in accordance
with our corporate environmental policies and standards.
The environmental laws and regulations that cover each of our sites,
combined with our policies and standards, address the potential
impact of the Group’s activities in relation to water and air quality,
noise, land disturbance, waste and tailings management, and the
potential impact upon flora and fauna. The Group releases an annual
Sustainability Report in accordance with the Global Reporting
Initiative that details our activities in relation to management of key
environmental aspects.
The Group has a uniform internal reporting system across all sites. All
environmental incidents, including breaches of any regulation or law,
are assessed according to their actual or potential environmental
consequence. Five levels of environmental incidents are tracked
based on factors such as spill volume, incident location (onsite
or offsite) and potential or actual environmental impacts. These
levels include: 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 incidents reported in each category during the year is
shown in the following table. In all cases, environmental authorities
were notified of those events where required and remedial action
was undertaken.
Category
2017 – Number of incidents
2016 – Number of incidents
II
18
24
III
0
3
IV
0
0
V
0
0
INDEMNIFICATION AND INSURANCE OF DIRECTORS
AND OFFICERS
Newcrest indemnifies each Director, Secretary and Executive
Officer of Newcrest and its subsidiaries against any liability
related to, or arising out of, the conduct of the business of Newcrest
or its subsidiaries or the discharge of the Director’s, Secretary’s or
Executive Officer’s duties. These indemnities are given to the extent
that Newcrest is permitted by law and its Constitution to do so.
Newcrest maintains a Directors’ and Officers’ insurance policy
which, subject to some exceptions, provides insurance cover to past,
present or future Directors, Secretaries and Executive Officers of
Newcrest and its subsidiaries. The Company has paid an insurance
premium for the policy.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young, as part of the terms of its audit
engagement agreement against claims by third parties arising from
the audit (for an unspecified amount). No payment has been made to
indemnify Ernst & Young during or since the end of the financial year.
REMUNERATION REPORT
The Remuneration Report is set out on pages 74 to 95 and forms
part of this Directors’ Report.
39
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY INFORMATION ON DIRECTORS
Details of the Directors’ qualifications, experience and special
responsibilities are set out on pages 16 to 18. These details have
been updated since 14 August 2017.
INFORMATION ON FORMER DIRECTORS (1)
Richard Knight
Independent Non-Executive Director
BSc (Mining Engineering), MSc (Mine Production Management),
Chartered Engineer, FAICD, 75
Mr Knight was appointed to the Board in February 2008. He was
a member of the Safety and Sustainability Committee. Mr Knight
resigned from the Board on 16 August 2016.
Skills, experience and expertise
Mr Knight has over 40 years of varied experience across all phases
of the mining industry and in a wide spread of jurisdictions around
the world. He is a former Executive Director of North Limited,
former President and Chief Executive Officer of Iron Ore Company
of Canada and former Chief Executive Officer of Energy Resources
Australia Limited. He is a former Director of OZ Minerals Limited,
Zinifex Limited, St. Barbara Limited, Portman Limited, Northern
Orion Resources Inc. and Asia Pacific Resources Ltd.
(1)
Information provided is at the date of cessation as a Director of the Company.
INFORMATION ON COMPANY SECRETARY AND
DEPUTY COMPANY SECRETARY
Francesca Lee
General Counsel and Company Secretary
BComm, LLB (Hons), LLM, Grad. Dip. CSP, AGIA, 61
Ms Lee joined Newcrest as General Counsel and Company Secretary
in March 2014. She was General Counsel and Company Secretary
of OZ Minerals Limited from 2008 until 2014, and its antecedent
companies from 2003. Ms Lee has more than 30 years’ experience
working across various senior legal and commercial roles within the
mining industry including BHP Billiton, Rio Tinto Limited and Comalco
Limited, including as General Manager Internal Audit and Risk at
Rio Tinto Limited. She also spent several years as Vice President
Structured Finance with Citibank Limited.
Ms Lee was a member of the Australian Government Takeovers Panel
from 2009 until March 2015.
Claire Hannon
Deputy Company Secretary
BSc, LLB (Hons), Grad. Dip. App Fin, GAICD, 43
Ms Hannon joined Newcrest in January 2013 as Corporate Counsel
in the legal team. She was appointed as an additional Company
Secretary in August 2015. Prior to joining Newcrest, Ms Hannon
worked as a lawyer in the Melbourne office of Ashurst and the
London office of Clifford Chance, specialising in mergers and
acquisitions and corporate law.
40
DIRECTORS’ REPORT 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
Peter Hay
Sandeep Biswas
Gerard Bond
Philip Aiken AM
Roger Higgins
Winifred Kamit
Richard Knight (2)
Rick Lee AM
Xiaoling Liu
Vickki McFadden
John Spark
Number of
Ordinary
Shares
52,451
269,345
82,149
17,924
12,294
326
40,000
28,447
10,000
10,000
32,192
Number of
Rights Over
Ordinary
Nature of Interest
Shares (1)
Nature of Interest
Direct and Indirect
Direct and Indirect
Direct and Indirect
–
814,745
219,340
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct and Indirect
–
–
–
–
–
–
–
–
–
Direct
Direct
–
–
–
–
–
–
–
–
(1)
Represents Sandeep Biswas’ and Gerard Bond’s unvested performance rights granted pursuant to the Company’s 2014, 2015 and 2016 financial year Long Term
Incentive plans.
(2) Balance as at date on which he ceased to be a Director of Company.
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 were:
COMMITTEES OF THE BOARD
Director
Directors’ Meetings
Audit & Risk
Human Resources &
Remuneration
Safety & Sustainability
Nominations
Special Board
Committees(1)
Peter Hay
Sandeep Biswas
Gerard Bond
Philip Aiken AM
Roger Higgins
Winifred Kamit
Richard Knight
Rick Lee AM
Xiaoling Liu
Vickki McFadden
John Spark
A
9
9
9
8(2)
8(2)
8(2)
1
9
9
6
9
B
9
9
9
9
9
9
1
9
9
6
9
A
–
–
–
–
–
–
–
5
5
3
5
B
–
–
–
–
–
–
–
5
5
3
5
A
–
–
–
8
–
7
–
8
8
–
–
B
–
–
–
8
–
8
–
8
8
–
–
A
–
–
–
4
4
4
–
–
1
–
–
B
–
–
–
4
4
4
–
–
1
–
–
A
4
–
–
4
–
–
–
–
–
–
4
B
4
–
–
4
–
–
–
–
–
–
4
A
3
2
3
–
–
–
–
–
–
–
2
B
3
3
3
–
–
–
–
–
–
–
2
Column A – Indicates the number of meetings attended whilst a Director/Committee member.
Column B – Indicates the number of meetings held whilst a Director/Committee member.
(1)
These are out of session Committee meetings and include meetings of the Board Executive Committee and other Committees established from time to time to deal
with ad-hoc matters delegated to the relevant Committee by the Board. The membership of such special Committees may vary.
(2) Meeting missed was an out of session meeting held on short notice which the Director was unable to attend due to prior commitments.
Details of the functions and memberships of the Committees of the Board are presented in Newcrest’s Corporate Governance Statement.
This report is signed in accordance with a resolution of the Directors.
Peter Hay
Chairman
14 August 2017
Melbourne
Sandeep Biswas
Managing Director and Chief Executive Officer
41
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
To assist readers to better understand the financial performance of the underlying operating businesses of Newcrest, the financial information
in this Operating and Financial Review includes non-IFRS financial information. Explanations and reconciliations of non-IFRS information to
the financial statements are set out in section six. All financial data presented in this Operating and Financial Review is quoted in US$ unless
otherwise stated.
1. SUMMARY OF RESULTS FOR THE FULL YEAR ENDED 30 JUNE 2017(1)
Key points
• Statutory profit(2) of $308 million and Underlying profit(3) of $394 million
• All-In Sustaining Cost(3) increased by 3% to $787 per ounce
• EBITDA margin(3) improved by 3% to 40.5%
• All-In Sustaining Cost margin(3) of $476 per ounce
• Cash flow from operating activities of $1,467 million and free cash flow(3) of $739 million
• Gold production(4) of 2.381 million ounces, a decrease of 2%
• Copper production(4) of 83.9 thousand tonnes, an increase of 1%
• Net debt of $1.5 billion, reduced by $608 million (or 29%) since 30 June 2016
• Net debt to EBITDA(3) ratio improved to 1.1 times
• Gearing reduced to 16.6% at 30 June 2017, down from 22.8% at 30 June 2016
•
Interim dividend of US 7.5 cents per share and final dividend of US 7.5 cents per share (70% franked)
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
2
3
3
3
3
3
3
3
3
3
3
3
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
%
times
%
%
%
times
US$m
oz
t
US$/oz
US$/oz
US$/oz
US$/lb
AUD:USD
PGK:USD
AUD:USD
3,477
308
394
1,408
719
1,467
739
7,534
1,499
16.6
1.1
40.5
20.7
7.9
13.6
492
2,380,630
83,941
787
476
1,263
2.44
0.7541
0.3153
0.7692
3,295
332
323
1,292
594
1,241
814
7,120
2,107
22.8
1.6
39.2
18.0
6.2
11.3
53
2,438,994
83,070
762
404
1,166
2.21
0.7285
0.3358
0.7426
182
(24)
71
116
125
226
(75)
414
(608)
(6.2)
(0.5)
1.3
2.7
1.7
2.3
439
(58,364)
871
25
72
97
0.23
0.0256
(0.0205)
0.0266
6%
(7%)
22%
9%
21%
18%
(9%)
6%
(29%)
(27%)
(31%)
3%
15%
27%
20%
828%
(2%)
1%
3%
18%
8%
10%
4%
(6%)
4%
Highlights
Revenue
Statutory profit
Underlying profit
EBITDA
EBIT
Cash flow from operating activities
Free cash flow
Total equity
Net debt
Gearing
Net debt to EBITDA
EBITDA margin
EBIT margin
ROCE
Interest coverage ratio
Cash and cash equivalents
Group production – gold
– copper
All-In Sustaining Cost
All-In Sustaining margin
Realised gold price
Realised copper price
Average exchange rate
Average exchange rate
Closing exchange rate
42
Copper production of 83.9 thousand tonnes was 1% higher than the
prior period driven by increased ore tonnes from Cadia East Panel
Cave 2, notwithstanding the suspension of mining following the
seismic event.
Newcrest’s All-In Sustaining Cost of $787 per ounce in the current
period was $25 per ounce or 3% higher than the prior period,
reflecting the lower contribution from Cadia due to the seismic event,
the unfavourable impact of a stronger Australian dollar on costs and
higher sustaining capital spend. This was partially offset by a higher
average realised copper price and lower unit operating costs at Lihir
and Gosowong as a result of cost and efficiency improvements. The
current period All-In Sustaining Cost has been normalised (reduced)
by $28 per ounce for the production disruptions following the seismic
event at Cadia. The prior period was normalised (reduced) by $12 per
ounce for the impact of the FY16 geotechnical event at Gosowong
and redundancy costs at Telfer associated with the transition of open
pit mining to contractor mining.
Free cash flow of $739 million was $75 million lower than the prior
period reflecting the investment of $63 million to acquire a 14.5%
interest in SolGold Plc, higher capital expenditure at Lihir and a
$27 million cash out flow associated with the disposal of Hidden
Valley, partially offset by higher average realised gold and copper
prices, higher copper sales volumes, favourable working capital
movements and lower interest payments as a result of lower debt
levels. All operations were free cash flow positive with improved
free cash flow generation from Gosowong, Lihir and Cadia.
The free cash flow performance of the Group enabled a $608 million
reduction in net debt during the period, delivering an improvement
in Newcrest’s key target financial ratios. At 30 June 2017, Newcrest
had a net debt to EBITDA ratio of 1.1 times and a gearing ratio of
16.6%, which compares favourably with a net debt to EBITDA ratio
of 1.6 times and gearing ratio of 22.8% as at 30 June 2016.
Full year results
Newcrest’s operating and financial performance for the current
period reflects the Company’s continued commitment to
realising operational improvement across the business through
the Group-wide program known as Edge, with a focus on safety,
operating discipline, cash generation and profitable growth.
The results of the Edge program are most evident in the record
operational performance delivered by Lihir over the year, together with
operating cost reductions and productivity gains across the Group.
These operational improvements have partially offset the adverse
impacts of the current period production disruptions following the
seismic event impacting Cadia on 14 April 2017 and the unusually
high rainfall at Telfer during January and February 2017.
Following the seismic event which resulted in the temporary
suspension of ore production from Cadia East, stockpiles of low
grade ore from Cadia Hill were processed and the Ridgeway sub-level
cave was recommissioned in May 2017 to partially mitigate the
impact. As previously announced to the market, the remediation
work required to safely restart ore extraction from Panel Cave 2
has been completed, with ore production recommencing from
19 July 2017. Remediation work continues on Panel Cave 1, with
ore extraction expected to recommence in the first quarter of FY18.
Statutory profit of $308 million was $24 million lower than
the prior period. The current period Statutory profit includes
significant items (after tax and non-controlling interests) with a
net expense of $86 million. The significant items comprised a net
investment hedge loss of $62 million representing a prior period
foreign exchange loss reclassified from the Foreign Currency
Translation Reserve to the Income Statement, a $10 million loss
on disposal of Newcrest’s 50% interest in Hidden Valley and a
$14 million write-down of capitalised exploration at Bonikro, all
of which were reported in the half-year results.
Underlying profit in the current period of $394 million was
$71 million higher than the prior period primarily driven by the
higher average realised gold and copper prices and higher copper
sales volumes. This was partially offset by lower gold sales volumes,
increased exploration expense, higher income tax expense and
an unfavourable impact on costs from the strengthening of the
Australian dollar against the US dollar.
The average realised gold price in the current period of $1,263 per
ounce was 8% higher than the prior period, while the average realised
copper price of $2.44 per pound was 10% higher.
Gold production of 2.381 million ounces was 2% lower than the prior
period and within the market guidance range of 2.35–2.60 million
ounces. Gold production volume in the current period was impacted
by the suspension of mining activity at Cadia East following the
seismic event on 14 April 2017 and the effects of unusually
high rainfall at Telfer during January and February 2017. Gold
production was also adversely impacted by lower feed grades
at Telfer and Bonikro. Partially offsetting this was record mill
throughput and production at Lihir and increased mining rates and
mill throughput and gold grade at Gosowong.
43
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
1. SUMMARY OF RESULTS FOR THE FULL YEAR ENDED 30 JUNE 2017(1) (continued)
Capital structure
Newcrest’s net debt at 30 June 2017 was $1,499 million, comprising $1,991 million of corporate bonds less $492 million of cash and
cash equivalents.
From a liquidity perspective, Newcrest had $492 million of cash and $2,040 million(5) in committed undrawn bank facilities as at 30 June 2017.
Newcrest’s financial objectives are to meet all financial obligations, maintain a strong balance sheet to withstand cash flow volatility, be
able to pursue profitable growth opportunities, and be able to return excess cash generated to shareholders. Newcrest looks to maintain a
conservative level of balance sheet leverage.
From a financial policy perspective, Newcrest looks to:
• Target an investment grade credit rating throughout the cycle;
• Maintain a leverage ratio (Net Debt to EBITDA) of less than 2.0 times;
• Maintain a gearing ratio of below 25%; and
• Maintain cash and committed undrawn bank facilities of at least US$1.5 billion, with approximately one-third of that amount in the form
of cash.
At 30 June the Group’s position in relation to these metrics was:
Metric
Credit rating (S&P/Moody’s)
Leverage ratio (Net debt to EBITDA)
Gearing ratio
Cash and committed undrawn facilities
Policy ‘looks to’
Investment grade
Less than 2.0 times
Below 25%
At least $1.5bn,~1/3 in cash
2017
2016
BBB–/Baa3
1.1
16.6%
$2.53bn
($492m cash)
BBB–/Baa3
1.6
22.8%
$2.45bn
($53m cash)
In January 2017, having regard to the Company’s strong liquidity position and the cost of maintaining committed bank facilities, Newcrest
effected a $400 million reduction in its committed bilateral bank facilities, pro-rated across all banks providing the loan facilities to Newcrest.
In addition, Newcrest effected the early repayment of $25 million of private placement notes, originally due to mature in May 2020.
Dividend
Newcrest’s dividend policy continues to balance financial performance and capital commitments with a prudent leverage and gearing level
for the Company. Newcrest looks to pay ordinary dividends that are sustainable over time having regard to its financial policy, profitability,
balance sheet strength and reinvestment options in the business. Going forward, Newcrest is targeting a total dividend payout of at least
10–30% of free cash flow generated for that financial year, with the dividend being no less than US15 cents per share on a full year basis.
The Newcrest Board has determined that, having regard to the Company’s financial performance in the 2017 financial year and target
financial metrics at year end, a final 70% franked dividend of US 7.5 cents per share will be paid on 27 October 2017. The record date
for entitlement is 21 September 2017. The financial impact of the dividend amounting to $57.5 million has not been recognised in the
Consolidated Financial Statements for the year. The Dividend Reinvestment Plan remains in place.
Guidance(7), (8)
Subject to market and operating conditions, Newcrest provides the following guidance for FY18(7):
Production guidance for the 12 months ended 30 June 2018(7)
Cadia
Telfer
Lihir
Gosowong
Bonikro
Group production
– gold
– copper
– gold
– copper
– gold
– gold
– gold
– gold
– copper
koz
kt
koz
kt
koz
koz
koz
moz
kt
680 – 780
~70
440 – 500
~15
880 – 980
230 – 290
130 – 155
2.4 – 2.7
80 – 90
Cost guidance for the 12 months ended 30 June 2018(7), (8)
US$m
Cadia
Telfer
Lihir
Gosowong
Bonikro Wafi-Golpu
Other
Group
All-In Sustaining Cost *
Capital expenditure
– Production stripping *
– Sustaining capital *
– Major projects (non–sustaining)
Total Capital expenditure
Exploration expenditure
Depreciation and amortisation
(including production stripping)
255–295
580–620
800–885
220–240
125–140
–
90–100 2,100–2,250
–
75–85
85–105
160–190
40–50
55–65
10–20
105–135
75–90
90–115
50–65
215–270
–
25–35
–
25–35
~30
10–15
5–20
45–65
–
–
20–30
20–30
–
~15
–
~15
145–170
270–330
170–240
585–740
70–90
800–850
*
Production stripping and sustaining capital shown above are included in All-In Sustaining Cost.
44
Gold production is expected to be lower in the September 2017 Quarter than the June 2017 Quarter as a result of a higher level of planned
shutdown activity being undertaken in the September 2017 quarter. Gold production and free cash flow is expected to be higher in the second
half of the financial year as Cadia East ore production ramps up and there are fewer planned shutdown events.
Production guidance for Cadia is based on the information available as at the date of this release and may be updated as the ramp up of
Cadia East production progresses. The AISC ($m) for Cadia is stated on a non-normalised basis, however, it is expected AISC for the
September quarter will be normalised for the seismic event that impacted Cadia East in April 2017 (the Group’s FY17 AISC per ounce was
normalised by $28/oz). As previously disclosed there has been a significant shift upwards in wholesale electricity prices in Australia which
has led to an increase in Cadia’s operating costs in the order of $55-60 per ounce. Cadia’s costs are also impacted by a higher AUD:USD
assumption (0.80) than was experienced in FY17 (0.75).
Lihir’s gold production guidance is in-line with FY17 guidance, with a planned increase in throughput offset by the decrease in average gold
grade processed. The September 2017 quarter production will be adversely impacted by a planned major plant outage, and the year will
include two planned maintenance shutdowns on autoclave 4. Lihir’s AISC is anticipated to be higher in FY18 than FY17 primarily as a result of
a planned increase in production stripping.
Telfer’s AISC guidance is higher in FY18 due to an expected reduction in copper grade resulting in lower by-product credits, increased levels of
production stripping activity and a higher AUD:USD assumption.
Gosowong’s gold production is forecast to decrease from the FY17 result, primarily due to lower gold grade.
Bonikro’s gold production is expected to increase from the FY17 result, primarily due to higher gold grade, partially offset by lower throughput
as the amount of oxide ore in the feed decreases.
Gold hedging
Newcrest completed additional hedging of a portion of Telfer’s expected FY19 gold sales during the period, bringing the total volume and
prices hedged for the current period and future years as follows:
Financial Year Ending
30 June 2017
30 June 2018
30 June 2019
Total
At 30 June 2017, the unrealised mark-to-market gain on these hedges was $40 million.
Gold Ounces
Hedged
Average Price
A$/oz
300,694
294,697
135,044
730,435
1,730
1,765
1,767
1,751
45
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
1. SUMMARY OF RESULTS FOR THE FULL YEAR ENDED 30 JUNE 2017(1) (continued)
Review of Operations(6)
FOR THE 12 MONTHS ENDED 30 JUNE 2017
Cadia(4)
Telfer
Lihir
Gosowong
Bonikro
Hidden
Valley
Other
Group
Operating
Production
Gold
Copper
Silver
Sales
Gold
Copper
Silver
Financial
Revenue
EBITDA
EBIT
Net assets
Operating cash flow
Investing cash flow
Free cash flow*
AISC
AISC Margin
koz
kt
koz
koz
kt
koz
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
US$/oz
620
64
383
626
64
381
1,137
626
490
2,763
671
(169)
502
151
241
1,022
386
20
229
398
21
229
631
144
6
510
178
(108)
70
469
1,178
85
940
–
42
941
–
42
1,181
542
283
4,638
571
(218)
353
807
858
405
296
–
361
275
–
284
350
177
79
314
186
(44)
142
208
757
506
128
–
15
129
–
15
162
48
9
118
65
(27)
38
142
1,105
158
11
–
138
10
–
151
16
2
1
–
5
(1)
4
12
1,252
11
–
–
–
–
–
–
–
(131)
(149)
(809)
(209)
(161)
(370)
81
–
–
2,381
84
1,169
2,379
85
1,102
3,477
1,408
719
7,534
1,467
(728)
739
1,870
787
476
*
Free cash flow for ‘Other’ comprises net interest paid of $120 million, income tax paid of $34 million, other investing activities of $88 million (including payments
of $63 million to acquire a 14.5% interest in SolGold Plc and $27 million in relation to the disposal of Hidden Valley), corporate costs of $56 million, capital
expenditure of $37 million and exploration expenditure of $36 million partially offset by working capital movements of $1 million.
FOR THE 12 MONTHS ENDED 30 JUNE 2016
Cadia(4)
Telfer
Lihir
Gosowong
Bonikro
Hidden
Valley
Other
Group
Operating
Production
Gold
Copper
Silver
Sales
Gold
Copper
Silver
Financial
Revenue
EBITDA
EBIT
Net assets
Operating cash flow
Investing cash flow
Free cash flow*
AISC
AISC Margin
koz
kt
koz
koz
kt
koz
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
US$/oz
669
64
399
668
64
401
1,099
651
424
2,701
646
(164)
482
183
274
892
462
19
200
464
19
200
634
173
42
561
207
(81)
126
448
967
199
900
–
24
884
–
24
1,035
397
199
4,783
425
(118)
307
734
830
336
197
–
291
223
–
310
257
87
10
290
102
(54)
48
208
935
231
138
–
18
139
–
18
162
63
28
154
76
(32)
44
131
941
225
73
–
1,331
75
–
1,330
108
3
(9)
(16)
15
(5)
10
94
1,255
(89)
–
–
–
–
–
–
–
(82)
(100)
(1,353)
(230)
27
(203)
69
–
–
2,439
83
2,264
2,454
83
2,283
3,295
1,292
594
7,120
1,241
(427)
814
1,867
762
404
*
Free cash flow for ‘Other’ comprises net interest paid of $137 million, income tax paid of $28 million, corporate costs of $54 million, working capital movements of
$17 million, capital expenditure of $27 million and exploration expenditure of $28 million, partially offset by proceeds from sale of the remaining Evolution Mining
Limited shares of $88 million.
46
(1)
All figures in this Report relate to businesses of the Newcrest Mining Limited Group (‘Newcrest’ or ‘the Group’) for the 12 months ended 30 June 2017 (‘current period’)
compared with the 12 months ended 30 June 2016 (‘prior period’), except where otherwise stated. All references to ‘the Company’ are to Newcrest Mining Limited.
(2) Statutory profit/(loss) is profit after tax attributable to owners of the Company.
(3)
Newcrest’s results are reported under International Financial Reporting Standards (“IFRS”). This report also includes certain non-IFRS financial information,
including the following:
•
•
•
•
•
‘Underlying profit/(loss)’ is profit or loss after tax before significant items attributable to owners of the Company.
EBITDA is ‘Earnings before interest, tax, depreciation and amortisation, and significant items’. EBIT is ‘Earnings before interest, tax and significant items’.
‘EBITDA Margin’ is EBITDA expressed as a percentage of revenue. ‘EBIT Margin’ is EBIT expressed as a percentage of revenue.
ROCE is ‘Return on capital employed’ and is calculated as EBIT expressed as a percentage of average total capital employed (net debt and total equity).
Interest coverage ratio is calculated as EBITDA adjusted for facility fees and discount unwind on provisions, divided by net interest payable (interest expense
adjusted for facility fees, discount unwind on provisions and interest capitalised).
‘AISC’ is All-In Sustaining Cost and ‘AIC’ is All-In Cost as per World Gold Council Guidance Note on Non-GAAP Metrics released June 2013. AISC will vary from
period to period as a result of various factors including production performance, timing of sales and the level of sustaining capital and the relative contribution
of each asset. AISC Margin reflects the average realised gold price less the AISC per ounce sold.
Net debt to EBITDA is calculated as net debt divided by EBITDA.
‘Free cash flow’ is calculated as cash flow from operating activities less cash flow related to investing activities. Free Cash Flow for each operating site is
calculated as Free cash flow before interest and tax.
Underlying profit, EBIT, EBITDA, EBITDA Margin, EBIT Margin, Free cash flow, All-In Sustaining Cost, All-In Sustaining Cost Margin, All-In Cost, Sustaining
capital and Major projects (non-sustaining) capital, ROCE and Interest coverage ratio are non-IFRS financial measures which Newcrest employs in managing the
business. They are used by Management to assess the performance of the business and make decisions on the allocation of resources and have been included
in this report to provide greater understanding of the underlying financial performance of Newcrest’s operations. When reviewing business performance this
non-IFRS information should be used in addition to, and not as a replacement of, measures prepared in accordance with IFRS.
•
•
•
•
These measures have not been subject to audit or review by Newcrest’s external auditor. These measures do not have any standard definition under IFRS and may be
calculated differently by other companies. Refer to section six for a reconciliation of non-IFRS measures to the most appropriate IFRS measure.
For the 12 months ended 30 June 2017 production and sales volumes include 1,345 gold ounces and 157 tonnes of copper related to the pre-commissioning
and development of the Cadia East project. For the 12 months ended 30 June 2016, the comparable volumes were 1,800 gold ounces and 206 tonnes of
copper. Expenditure associated with this production and revenue from the sales are capitalised and not included in the operating profit calculations.
Comprises undrawn bilateral bank debt facilities of US$2,000 million and an additional undrawn US$40 million bank loan facility of a subsidiary.
All data relating to operations is shown at 100%, apart from Hidden Valley which is shown at Newcrest’s ownership percentage of 50% up to the economic disposal
date of 31 August 2016. Newcrest owns 75% of Gosowong through its holding in PT Nusa Halmahera Minerals, an incorporated joint venture. Bonikro includes mining
and exploration interests in Côte d’Ivoire which are held by the following entities: LGL Mines CI SA (of which Newcrest owns 89.89%) and Newcrest Hire CI SA (of which
Newcrest owns 89.89%).
These materials include forward looking statements. Forward looking statements can generally be identified by the use of words such as “may”, “will”, “expect”,
“intend”, “plan”, “estimate”, “anticipate”, “continue”, “outlook” and “guidance”, or other similar words and may include, without limitation, statements regarding
plans, strategies and objectives of management, anticipated production or construction commencement dates and expected costs or production outputs.
The Company continues to distinguish between outlook and guidance. Guidance statements relate to the current financial year. Outlook statements relate to years
subsequent to the current financial year.
Forward looking statements inherently involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance
and achievements to differ materially from statements in these materials. Relevant factors may include, but are not limited to, changes in commodity prices,
foreign exchange fluctuations and general economic conditions, increased costs and demand for production inputs, the speculative nature of exploration and project
development, including the risks of obtaining necessary licences and permits and diminishing quantities or grades of reserves, political and social risks, changes
to the regulatory framework within which the Company operates or may in the future operate, environmental conditions including extreme weather conditions,
recruitment and retention of personnel, industrial relations issues and litigation.
Forward looking statements are based on the Company’s good faith assumptions as to the financial, market, regulatory and other relevant environments that will exist and
affect the Company’s business and operations in the future. The Company does not give any assurance that the assumptions on which forward looking statements are
based will prove to be correct. There may be other factors that could cause actual results or events not to be as anticipated, and many events are beyond the reasonable
control of the Company. Readers are cautioned not to place undue reliance on forward looking statements. Forward looking statements in these materials speak only
at the date of issue. Except as required by applicable laws regulations, the Company does not undertake any obligation to publicly update or revise any of the forward
looking statements or to advise of any change in assumptions on which any such statement is based.
The guidance stated assumes weighted average copper price of $2.40 per pound and AUD:USD exchange rate of 0.80 for FY18.
(4)
(5)
(6)
(7)
(8)
47
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
2. DISCUSSION AND ANALYSIS OF OPERATIONS AND THE INCOME STATEMENT
2.1. Profit overview
Statutory profit was $308 million and Underlying profit was $394 million in the current period.
The Statutory profit in the current period includes significant items (after tax and non-controlling interests) with a net expense of $86 million.
The significant items comprised a net investment hedge loss of $62 million representing a prior period foreign exchange loss reclassified from
the Foreign Currency Translation Reserve to the Income Statement, a $10 million loss on disposal of Newcrest’s 50% interest in Hidden Valley
and a $14 million write-down of capitalised exploration at Bonikro. The net investment hedge loss and write-down of capitalised exploration
are both non-cash items.
Underlying profit was $71 million higher than the prior period primarily driven by higher average realised gold and copper prices. This was
partially offset by lower gold sales volumes, the unfavourable impact on costs from the strengthening of the Australian dollar against the
US dollar, increased exploration expense in the current period and higher income tax expense compared to the prior period.
US$m
Gold revenue
Copper revenue
Silver revenue
Total revenue
Operating costs
Depreciation and amortisation
Total cost of sales
Corporate administration expenses
Exploration
Other income/(expense)
Net finance costs
Income tax expense
Non-controlling interests
Underlying profit
Underlying profit movement US$ million
Revenue
$182 million
44
231
FOR THE 12 MONTHS ENDED 30 JUNE
2017
3,001
456
20
3,477
(1,938)
(671)
(2,609)
(84)
(53)
(12)
(132)
(181)
(12)
394
2016
2,857
403
35
3,295
(1,921)
(680)
(2,601)
(79)
(32)
11
(147)
(121)
(3)
323
Change
Change%
144
53
(15)
182
(17)
9
(8)
(5)
(21)
(23)
15
(60)
(9)
71
5%
13%
(43%)
6%
(1%)
1%
(0%)
(6%)
(66%)
(209%)
10%
(50%)
(300%)
22%
Operating Costs
($17) million
Depreciation
and Amortisation
$9 million
9
6
18
(87)
(15)
(23)
(9)
(21)
(13)
(60)
(9)
394
323
FY16
Gold
price
Copper
price
Gold
sales
volume
Copper
sales
volume
Silver
revenue
Operating
costs
FX on
operating
costs
Depre
-ciation
FX on
depreciation
Explor
-ation
Corporate
and other
Income
tax
expense
Non-
controlling
interests
FY17
600
500
400
300
200
100
0
48
2.2. Revenue
Total sales revenue for the current period of $3,477 million was $182 million or 6% higher than the prior period. Newcrest’s sales revenue
continues to be predominantly attributable to gold, being 86% of total sales revenue in the current period (87% in the prior period).
US$m
Total sales revenue for 12 months ended 30 June 2016
Changes in revenues from volume:
Gold
Copper
Silver
Total volume impact
Change in revenue from price:
Gold
Copper
Silver
Total price impact
Total sales revenue for 12 months ended 30 June 2017
(87)
9
(18)
231
44
3
3,295
(96)
278
3,477
Gold revenue of $3,001 million was 5% higher than the prior period as a result of an 8% increase in the average realised gold price
($1,263 per ounce in the current period compared to $1,166 per ounce in the prior period).
The gold price impact was partially offset by a 3% decrease in gold sales volumes resulting from the suspension of mining activities at
Cadia East in the fourth quarter following the seismic event on 14 April 2017, production disruptions at Telfer due to the unusually high rainfall
in January and February 2017, the disposal of Hidden Valley on 31 August 2016 and lower grade at Bonikro.
Copper revenue of $456 million was 13% higher than the prior period primarily as a result of a 10% increase in the average realised copper
price ($2.44 per pound in the current period compared to $2.21 per pound in the prior period) and a 2% increase in copper sales volumes.
The current period included 300,694 ounces of Telfer gold sales hedged at an average price of A$1,730 per ounce.
2.3. Cost of sales
US$m
Site production costs
Inventory movements
Royalties
Treatment and realisation
Operating costs
Depreciation and amortisation
Cost of sales
FOR THE 12 MONTHS ENDED 30 JUNE
2017
1,676
29
96
137
1,938
671
2,609
2016
1,667
38
85
131
1,921
680
2,601
Change
Change %
9
(9)
11
6
17
(9)
8
1%
(24%)
13%
5%
1%
(1%)
0%
Operating costs of $1,938 million were $17 million or 1% higher than the prior period.
This increase in operating costs includes an unfavourable foreign exchange impact of approximately $23 million as a result of the
strengthening of the Australian dollar against the US dollar, partially offset by the weaker Papua New Guinea Kina against the US dollar.
Drivers of an increase in production costs largely relate to activity levels increasing due to the ramp-up of the Cadia East mine (prior to the
seismic event), higher mining rates and mill throughput at Gosowong and Bonikro, and higher costs at Telfer (partially related to the unusually
high rainfall). However, the effect of these increases were offset by cost reductions from the Edge program in the form of lower input prices
and increased operational efficiency across the Group, as well as the disposal of Hidden Valley in the current period. Unit operating costs were
adversely impacted at Cadia following the seismic event on 14 April 2017 that resulted in the temporary suspension of mining activities at
Cadia East and substantially lower levels of production in the June 2017 quarter.
49
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
2. DISCUSSION AND ANALYSIS OF OPERATIONS AND THE INCOME STATEMENT (continued)
2.3. Cost of sales (continued)
Higher treatment and realisation costs were largely due to higher copper concentrate production at Telfer and the higher average realised
gold and copper prices increasing metal deduction payments. Comparatively higher royalties were due to a royalty refund received by
Cadia in the prior period.
The decrease in depreciation expense compared with the prior period primarily reflects the lower depreciation charges at Cadia due to
cessation of mining of Ridgeway Deeps in the prior period and lower production from Cadia East in the current period. This was partially offset
by increased depreciation at Lihir and Gosowong associated with the increase in gold production and the strengthening of the Australian dollar
against the US dollar increasing depreciation at Telfer and Cadia, where it is an Australian dollar denominated expense.
As the Company is a US dollar reporting entity, operating costs will vary in accordance with the movements in the operating currencies where
those costs are not denominated in US dollars. The table below shows indicative currency exposures in FY17 on operating costs by site:
Cadia
Telfer
Lihir
Gosowong
Bonikro
Group
USD
15%
15%
45%
40%
55%
30%
AUD
85%
85%
20%
5%
–
50%
PGK
–
–
30%
–
–
10%
IDR
–
–
–
55%
–
6%
CFA
–
–
–
–
45%
3%
Other
–
–
5%
–
1%
2.4. Other items
Corporate administration expenses of $84 million were 6% higher than the prior period. This included corporate costs of $56 million which
were adversely impacted by a stronger Australian dollar, depreciation expense of $18 million and equity-settled share-based costs of $10 million.
Exploration expenditure of $58 million was 32% higher than the prior period reflecting Newcrest’s growing portfolio of strategic partnerships,
farm-in arrangements and investments across Asia Pacific, West Africa and the Americas. Of this exploration expenditure $53 million was
expensed, resulting in a capitalisation rate of 9%.
Other expenses of $12 million were $23 million higher than the prior period, comprising:
US$m
Net foreign exchange gain/(loss)
Net fair value gain/(loss) on gold and copper derivatives and fair value movements on concentrate receivables
Other items
Other income/(expense)
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
2016
(4)
–
(8)
(12)
2
8
1
11
The net foreign exchange loss in the current period primarily relates to the restatement of US dollar denominated cash and concentrate
receivables in the Group’s Australian dollar functional currency operations (Cadia and Telfer) and Corporate entities. This was partially offset
by foreign exchange gains from cash flow hedges on US dollar borrowings transferred to the Income Statement.
The net fair value gain on gold and copper derivatives and fair value movements on concentrate receivables in the prior period primarily related
to the movement in spot prices and fair value arising from the quotational period adjustments on sales. Newcrest seeks to lock in the gold and
copper price for the quotational period for concentrate shipments at the time of sale using forward sales contracts to minimise this impact.
Other items in the current period primarily relate to losses on sale of property, plant and equipment.
50
2.5. Income tax
Income tax expense on Statutory profit in the current period was $164 million, resulting in an effective tax rate of 34%, which is higher than
the Australian company tax rate of 30%. The effective tax rate was higher than the Australian company tax rate primarily due to the book tax
effect associated with the net investment hedge loss and no income tax benefit recognised on both the loss on disposal of Hidden Valley and
the write-down of capitalised exploration at Bonikro.
Income tax expense on Underlying profit in the current period was $181 million, resulting in an effective tax rate of 31%. The effective tax rate
was higher than the Australian company tax rate as a result of higher levels of overseas exploration expenses not deductible for tax purposes.
2.6. Significant items
Significant items totalling a net expense of $86 million (after tax and non-controlling interests) were recognised for the current period comprising:
• a $10 million loss on disposal of Newcrest’s 50% interest in Hidden Valley;
• a prior period net investment hedge loss of $62 million which was reclassified from the Foreign Currency Translation Reserve to the
Income Statement in the current period. This represented a net foreign exchange loss on historic funding arrangements that were
designated as a hedge of the Group’s net investment in the Hidden Valley mine. This non-cash item moves the prior period loss from
the reserve to retained earnings, with no net impact on shareholders’ equity; and
• $14 million, non-cash write-down of non-current assets representing capitalised exploration at Bonikro. This was also a non-cash item.
US$m
Loss on business divestment
Net investment hedge loss
Write-down of non-current assets
Total
Attributable to:
Non-controlling interests
Owners of the parent
FOR THE 12 MONTHS ENDED 30 JUNE 2017
Gross
(10)
(79)
(15)
(104)
Tax
–
17
–
17
Net
(10)
(62)
(15)
(87)
(1)
(86)
In the prior period, significant items totalling a net benefit of $9 million (after tax and non-controlling interests) were recognised, comprising:
FOR THE 12 MONTHS ENDED 30 JUNE 2016
US$m
Class action settlement net expense
Gain on disposal of investment
Total
Attributable to:
Non-controlling interests
Owners of the parent
Gross
(12)
18
6
Tax
3
–
3
Net
(9)
18
9
–
9
51
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
3. DISCUSSION AND ANALYSIS OF CASH FLOW
Cash flow from operating activities of $1,467 million was $226 million (or 18%) higher than the prior period as a result of higher average
realised gold and copper prices and copper sales volumes. This was offset by cash flow related to investing activities which increased by
$301 million compared to the prior period.
The increase in investing activity cash flows largely relates to other investing activities, including payments totalling $63 million to acquire
a 14.5% interest in SolGold Plc and a cash outflow of $27 million associated with the disposal of Hidden Valley. The period-on-period
comparison is also impacted by proceeds totalling $88 million received from the sale of Newcrest’s remaining interest in Evolution Mining
Limited in the prior period. The increase in current period cash flows from investing activities also included a $98 million increase in capital
expenditure at Lihir across production stripping, sustaining capital and major project capital.
Free cash flow for the current period of $739 million was $75 million lower than the prior period. All operations were free cash flow positive
in the current period.
US$m
Cash flow from operating activities
Cash flow related to investing activities
Free cash flow
Cash flow related to financing activities
Net movement in cash
Cash at the beginning of the period
Cash at the end of the period
3.1 Cash flow from operating activities
US$m
Receipts from customers
Payments to suppliers and employees
Net interest paid
Income taxes paid
Dividends received
Net cash inflow from operating activities
FOR THE 12 MONTHS ENDED 30 JUNE
2017
1,467
(728)
739
(300)
439
53
492
2016
1,241
(427)
814
(959)
(145)
198
53
Change
Change %
226
(301)
(75)
659
584
(145)
439
18%
(70%)
(9%)
69%
403%
(73%)
828%
FOR THE 12 MONTHS ENDED 30 JUNE
2017
3,509
(1,888)
(120)
(34)
–
1,467
2016
Change
Change %
3,332
(1,927)
(137)
(28)
1
1,241
177
39
17
(6)
(1)
226
5%
2%
12%
(21%)
(100%)
18%
Cash inflow from operating activities of $1,467 million was $226 million higher than the prior period as a result of higher average realised gold
and copper prices and higher copper sales volumes, favourable working capital movements and lower interest paid reflecting lower debt levels.
This was partially offset by lower gold sales volumes and an increase in income taxes paid.
Working capital was lower at the end of the current period reflecting lower receivables related to the temporary suspension of mining activity
at Cadia East as well as efforts to actively manage working capital to partially offset the impact of the production disruptions. This favourable
working capital position is expected to partially reverse in the first half of FY18, consistent with the pattern of prior years.
52
3.2 Cash flow from investing activities
US$m
Production stripping
Telfer
Lihir
Bonikro
Total production stripping
Sustaining capital expenditure
Cadia
Telfer
Lihir
Gosowong
Bonikro
Hidden Valley
Corporate
Total sustaining capital
Major projects (non-sustaining)
Cadia
Telfer
Lihir
Bonikro
Wafi-Golpu
Corporate
Total major projects (non-sustaining) capital
Total capital expenditure
Exploration and evaluation expenditure
Interest capitalised to development projects
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment in Evolution
Cash outflow on sale of Hidden Valley
Payments for investment in SolGold Plc
Net cash outflow from investing activities
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
27
49
14
90
56
51
114
33
11
1
14
280
112
23
54
–
20
3
212
582
58
–
(2)
–
27
63
728
15
23
16
54
49
57
69
48
15
5
8
251
115
4
27
1
19
–
166
471
44
1
(1)
(88)
–
–
427
80%
113%
(13%)
67%
14%
(11%)
65%
(31%)
(27%)
(80%)
75%
12%
(3%)
475%
100%
(100%)
5%
28%
24%
32%
(100%)
(100%)
100%
12
26
(2)
36
7
(6)
45
(15)
(4)
(4)
6
29
(3)
19
27
(1)
1
3
46
111
14
(1)
(1)
88
27
63
301
70%
Cash outflow from investing activities of $728 million was $301 million higher than the prior period, with increased capital expenditure
primarily at Lihir and Telfer, a cash outflow of $27 million associated with the disposal of Hidden Valley and payments totalling $63 million
to acquire a 14.5% interest in SolGold Plc. The prior period included proceeds totalling $88 million received from the sale of Newcrest’s
remaining interest in Evolution Mining Limited.
53
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
3. DISCUSSION AND ANALYSIS OF CASH FLOW (continued)
3.2 Cash flow from investing activities (continued)
Capital expenditure of $582 million in the current period comprised:
•
•
•
Production stripping of $90 million, including waste stripping activity of Phase 9 and Phase 14 at Lihir, Main Dome Stage 6 and
West Dome Stage 2 at Telfer and Bonikro (Hiré pit).
Sustaining capital expenditure of $280 million, with higher expenditure at Lihir due to the focus on delivering asset reliability
and debottlenecking the processing plant.
Major project, or non-sustaining, capital expenditure of $212 million.
The major project capital expenditure primarily related to:
• Cadia East development ($45 million): During the current period, activity was focused on the final development of Panel Cave 2 with
the completion of the undercut level and cave propagation. This also included building the related infrastructure such as the fuel bay
and roadways. The expanded concentrate dewatering facility at Blayney was also completed and commissioned during the current
period. Total expenditure was $3 million lower than the prior period.
• Cadia Concentrator 1 to Concentrator 2 crushed feed project ($36 million): During the current period, work was completed on the
conveying and crushing systems between Concentrator 1 and Concentrator 2 to remove the need to truck Cadia East material to
Concentrator 2 and improve processing rates through finer product to the Concentrator 2 SAG mill.
• Cadia Concentrator 1 cleaner upgrade ($23 million): During the current period construction of the Concentrator 1 cleaner upgrade work
was completed with full load commissioning expected to be completed early in the first quarter of FY18. This upgrade work expands
metal recovery capacity to align with changes in the Cadia East ore.
• Lihir major projects ($53 million): Activity focused on increasing processing plant throughput, upgrading the mine site to drive a
substantial increase in total material movement and ongoing study, drilling and test work to optimise the seepage barrier design to
facilitate the mining of the Kapit ore-body and the float tails leach project.
• Telfer ($23 million): Development of the Western Flanks underground mine.
• Wafi-Golpu ($20 million): an update on the Stage One Feasibility Study and Stage Two Prefeasibility Study was released to the market
in February 2016. Activities identified under the feasibility study update forward work plan continued during the current period.
There was an increase in greenfield and brownfield exploration spend in the current period.
US$m
Expenditure by nature
Greenfield
Brownfield
Resource definition
Expenditure by region
Australia
Indonesia
Papua New Guinea
West Africa
Fiji
North America
Latin America
New Zealand
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
31
14
13
58
16
13
2
19
–
2
4
2
58
26
8
10
44
17
8
6
7
2
1
1
2
44
5
6
3
14
(1)
5
(4)
12
(2)
1
3
–
14
19%
75%
30%
32%
(6%)
63%
(67%)
171%
(100%)
100%
300%
–
32%
The growth pipeline increased with a number of new exploration projects in Australia, Papua New Guinea, West Africa and Argentina
commencing during the year.
Exploration on these projects commenced with target generation undertaken on all new projects including drilling at Pedernales (Argentina)
and Topacio (Nicaragua). Surface programs commenced at Tatau/Big Tabar Islands (Papua New Guinea), Mendooran (New South Wales), and
various projects in Cote d’Ivoire. This work has been successful in identifying new targets and new zones of mineralisation. An advanced target
has been defined at the Antenna Prospect within the Séguéla Project (Cote d’Ivoire) with four drill rigs operating during the last quarter of the
current period to determine the extent of the discovered mineralisation.
Exploration continued at all brownfield sites with drilling ongoing at Gosowong, Cadia and Telfer. At Gosowong exploration focused on incremental
resource growth around the existing operations and new discoveries within the region. At Telfer, the exploration was focused on resource growth
around the underground operation at Main Dome. Resource definition and target generation exploration was also undertaken at Cadia.
54
3.3 Cash flow from financing activities
US$m
Net proceeds / (repayments) of borrowings
Subsidiary bank loan
Bilateral bank debt
Private placement notes
Net repayment of borrowings
Payment for treasury shares
Dividends paid to members of the parent entity
Contingent consideration received
Dividend paid to non-controlling interests
Net cash outflow from financing activities
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
(20)
(25)
(125)
(170)
(19)
(105)
–
(6)
(300)
20
(950)
–
(930)
(6)
–
9
(32)
(959)
(40)
925
(125)
760
(13)
(105)
(9)
26
659
(200%)
97%
82%
(217%)
(100%)
81%
69%
Cash outflow from financing activities of $300 million reflects Newcrest’s continued focus of applying free cash flow to the repayment of debt
and the recommencement of dividend payments to shareholders.
Dividends of $6 million were paid to PT Antam (Persero) TBK (“PT Antam”) for their 25% non-controlling interest in PT Nusa Halmahera
Minerals (the entity that owns Gosowong).
Payment for treasury shares of $19 million represents shares purchased on market to satisfy obligations under employee incentive plans.
55
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
4. REVIEW OF OPERATIONS
4.1. Cadia
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Copper produced
Silver produced
Gold sales
Copper sales
Silver sales
Financial
Revenue
Cost of Sales (including depreciation)
Depreciation
EBITDA
EBIT
Operating cash flow
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
tonnes
ounces
ounces
tonnes
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
18,853
18,853
24,027
0.97
82.4
619,606
63,805
382,763
625,942
63,845
380,692
1,137
647
136
626
490
671
56
112
168
502
151
241
23,327
23,327
22,021
1.14
82.9
668,773
64,130
399,117
668,234
64,178
401,038
1,099
675
227
651
424
646
49
115
164
482
183
274
(4,474)
(4,474)
2,006
(0.17)
(0.5)
(49,167)
(325)
(16,354)
(42,292)
(333)
(20,346)
38
(28)
(91)
(25)
66
25
7
(3)
4
20
(32)
(33)
(19%)
(19%)
9%
(15%)
(1%)
(7%)
(1%)
(4%)
(6%)
(1%)
(5%)
3%
(4%)
(40%)
(4%)
16%
4%
14%
(3%)
2%
4%
(17%)
(12%)
Cadia’s operating and financial performance for the current period was impacted by the seismic event on 14 April 2017 which resulted in the
temporary suspension of mining activity at Cadia East. The resulting lower gold production was due to the ore sources in the June quarter
of the current period primarily being low grade Cadia Hill stockpile material and low grade ore from the recommissioned Ridgeway sub-level
cave from May 2017. Notwithstanding the seismic event, mill throughput was higher than the prior period, reflecting the improved operational
performance prior to the event with increased ore production from Panel Cave 2. The prior period ore production volumes included production
from Ridgeway Deeps which ceased in the prior period when it was put into care and maintenance from March 2016.
The higher EBIT in the current period was primarily due to lower depreciation charges and higher average realised gold and copper prices
(partially offsetting the lower gold and copper sales volumes). Lower depreciation charges were due to the cessation of mining from Ridgeway
Deeps in the prior period and lower production from Cadia East in the current period.
All-In Sustaining Cost per ounce was higher in the current period, reflecting the higher sustaining capital and lower gold sales due to the
production disruption following the seismic event notwithstanding the earnings normalisation applied to the cost of sales in the current period
reduced Cadia’s All-In Sustaining Costs by $109 per ounce. Prior to the seismic event, Adjusted Operating Costs per ounce in the current
period were lower than the prior period.
Free cash flow for the current period increased marginally as a result of higher realised gold and copper prices and favourable working capital
movements due to a reduction in concentrate debtors (an outcome of the temporary suspension of production from Cadia East), partially
offsetting lower sales volumes and the impact of a stronger Australian dollar against the US dollar.
56
4.2. Telfer
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Copper produced
Silver produced
Gold sales
Copper sales
Silver sales
Financial
Revenue
Cost of Sales (including depreciation)
Depreciation
EBITDA
EBIT
Operating cash flow
Production stripping
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
tonnes
ounces
ounces
tonnes
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
15,686
34,144
21,187
0.70
79.4
386,242
20,136
229,453
398,281
20,916
229,453
631
625
138
144
6
178
27
51
23
101
70
469
1,178
17,547
30,204
21,502
0.80
82.9
462,461
18,940
200,261
463,723
18,831
200,261
634
592
131
173
42
207
15
57
4
76
126
448
967
(1,861)
3,940
(315)
(0.10)
(3.5)
(76,219)
1,196
29,192
(65,442)
2,085
29,192
(3)
33
7
(29)
(36)
(29)
12
(6)
19
25
(56)
21
211
(11%)
13%
(1%)
(13%)
(4%)
(16%)
6%
15%
(14%)
11%
15%
(0%)
6%
5%
(17%)
(86%)
(14%)
80%
(11%)
475%
33%
(44%)
5%
22%
Lower gold production for the current period was driven by the lower feed grade to the mill, lower recoveries and marginally lower throughput.
The lower feed grade was due to the unusually high rainfall in January and February impeding access to the West Dome pits, with the primary
mill feed being lower grade stockpile material during that period. Although the stockpile gold grade and recovery rates were lower, the
stockpile copper grade was higher than ex-pit ore which resulted in higher copper production.
Revenue in the current period was marginally lower with the decline in gold sales almost fully offset by the increased average realised gold
price (inclusive of hedge settlements), increased average realised copper price and increased copper sales volumes.
The lower EBIT in the current period was driven by the increase in cost of sales which was primarily due to an increase in ore processing and
underground mining costs, partially offset by a decrease in open pit mining costs.
These factors contributing to lower gold production, lower gold sales volumes and higher costs were also the drivers behind the increase in
All-In Sustaining Cost per ounce.
Free cash flow was lower primarily due to the higher cost of sales and an increase in non-sustaining capital expenditure associated with the
development of the Western Flanks mine.
57
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
4. REVIEW OF OPERATIONS (continued)
4.3. Lihir
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Silver produced
Gold sales
Silver sales
Financial
Revenue
Cost of Sales (including depreciation)
Depreciation
EBITDA
EBIT
Operating cash flow
Production stripping
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
ounces
ounces
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
13,389
30,069
13,001
2.84
79.1
940,060
42,257
940,789
42,257
1,181
898
259
542
283
571
49
114
54
217
353
807
858
11,311
20,213
12,093
3.06
75.6
900,034
24,321
884,226
24,321
1,035
836
198
397
199
425
23
69
27
119
307
734
830
2,078
9,856
908
(0.22)
3.5
40,026
17,936
56,563
17,936
146
62
61
145
84
146
26
45
27
98
46
73
28
18%
49%
8%
(7%)
5%
4%
74%
6%
74%
14%
7%
31%
37%
42%
34%
113%
65%
100%
82%
15%
10%
3%
Lihir’s gold production in the current period was a record for the operation and higher than the prior period primarily due to an 8% increase in
mill throughput and a 5% increase in gold recovery, partially offsetting a 7% decrease in gold head grade.
The sustainable mill throughput rate target of 13mtpa by end of December 2016 was achieved in the current period, demonstrating the
availability, utilisation and rate improvements achieved through Edge initiatives. The 8% higher mill throughput was achieved with no increase
in cost of sales (exclusive of depreciation), resulting in lower cash operating costs per tonne relative to the prior period.
Revenue for the current period was 14% higher than the prior period, reflecting increased production and an 8% increase in the average
realised gold price. The higher EBIT was a reflection of the higher sales revenue, more than offsetting the increase in depreciation. Cost of
sales (excluding depreciation) were broadly unchanged in net terms.
The higher cost of sales in the current period was mainly due to higher depreciation expense largely as a result of the higher gold sales, coupled
with a stronger Australian Dollar against the US Dollar. These impacts were partially offset by cost and efficiency improvements identified and
implemented through the Edge program, together with lower energy prices and the weakening of the Papua New Guinea Kina against the US Dollar.
A higher All-In Sustaining Cost per ounce reflects the lower gold head grade and an increase in sustaining capital expenditure and production
stripping (waste stripping in Phase 14 commenced towards the end of the prior period).
The 15% increase in free cash flow was primarily due to the higher average realised gold price and higher gold sales volumes, partially offset
by the higher capital expenditure.
58
4.4. Gosowong(6)
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Silver produced
Gold sales
Silver sales
Financial
Revenue
Cost of Sales (including depreciation)
Depreciation
EBITDA
EBIT
Operating cash flow
Sustaining capital
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
ounces
ounces
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
564
664
565
17.03
96.5
295,876
361,266
275,008
283,787
350
271
98
177
79
186
33
142
208
757
416
484
479
13.19
96.5
197,463
290,530
222,637
309,563
257
247
77
87
10
102
48
48
208
935
148
180
86
3.84
–
98,413
70,736
52,371
(25,776)
93
24
21
90
69
84
(15)
94
–
(178)
36%
37%
18%
29%
–
50%
24%
24%
(8%)
36%
10%
27%
103%
690%
82%
(31%)
196%
–
(19%)
Higher gold production in the current period was primarily due to higher gold head grade and higher ore mined. Production in the prior period
was adversely impacted by the geotechnical event that occurred in February 2016 and subsequent suspension of mining activity at Kencana
and Toguraci.
Following the reduced production profile in the prior period the operation has implemented a number of initiatives to improve efficiency,
including an organisational restructure which has resulted in changes and reductions to the workforce. The operation also benefited from Edge
initiatives which have increased mining productivities, particularly ore mined at Kencana.
The higher EBIT was primarily driven by higher gold sales volumes and a higher average realised gold price, partially offset by increased
depreciation expense associated with the higher sales volumes.
Lower All-In Sustaining Cost per ounce was mainly driven by higher gold grade and lower sustaining capital expenditure.
Free cash flow of $142 million was higher driven by higher gold sales volumes, the higher average realised gold price and lower sustaining
capital expenditure.
59
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
4. REVIEW OF OPERATIONS (continued)
4.5. Bonikro(6)
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Silver produced
Gold sales
Silver sales
Financial
Revenue
Cost of Sales (including depreciation)
Depreciation
EBITDA
EBIT
Operating cash flow
Production stripping
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
ounces
ounces
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
2,035
19,383
2,732
1.62
90.7
128,327
14,602
128,851
14,560
162
153
39
48
9
65
14
11
–
25
38
142
1,105
1,519
12,923
2,510
1.82
93.9
137,696
18,298
139,489
17,631
162
134
35
63
28
76
16
15
1
32
44
131
941
516
6,460
222
(0.20)
(3.2)
(9,369)
(3,696)
(10,638)
(3,071)
–
19
4
(15)
(19)
(11)
(2)
(4)
(1)
(7)
(6)
11
164
34%
50%
9%
(11%)
(3%)
(7%)
(20%)
(8%)
(17%)
–
14%
11%
(24%)
(68%)
(14%)
(13%)
(27%)
(100%)
(22%)
(14%)
8%
17%
Lower gold production for the current period was driven by 11% lower gold grade and 3% lower gold recovery, partially offset by 9% higher
mill throughput reflecting increased availability following implementation of Edge improvements that reduced unplanned outages. Gold
recovery for the current period was lower than the prior period due to the transition from oxide ore to un-oxidised ore.
The lower EBIT was primarily due to lower sales volumes offsetting the benefit of the higher average realised gold price and higher cost of
sales reflecting higher mining and processing volumes and higher depreciation charges.
The All-In Sustaining Cost per ounce was higher due to the lower gold grade and increased operating costs driven by the increase in the waste
to ore ratio of the Hiré pits.
Free cash flow for the current period decreased due to lower sales volumes and higher operating costs.
The Strategic Review to assess options for maximising the value of Bonikro to Newcrest shareholders continues. The review is considering a
range of options, including investment in a further cut-back in the Bonikro pit and divestment of the operation. The strategic review is expected
to be finalised within the September 2017 quarter.
60
4.6. Hidden Valley(6)
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Silver produced
Gold sales
Silver sales
Financial
Revenue
Cost of Sales (including depreciation)
Depreciation
EBITDA
EBIT
Operating cash flow
Sustaining capital
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
ounces
ounces
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
67
527
324
1.28
83.9
10,520
138,471
9,701
151,068
16
15
1
2
1
5
1
4
12
1,252
1,531
4,477
1,728
1.51
86.5
72,566
1,331,310
75,221
1,329,959
(1,464)
(3,950)
(1,404)
(0.23)
(2.6)
(62,046)
(1,192,839)
(65,520)
(1,178,891)
108
117
12
3
(9)
15
5
10
94
1,255
(92)
(102)
(11)
(1)
10
(10)
(4)
(6)
(82)
(3)
(96%)
(88%)
(81%)
(15%)
(3%)
(86%)
(90%)
(87%)
(89%)
(85%)
(87%)
(92%)
(33%)
111%
(67%)
(80%)
(60%)
(87%)
(0%)
As announced to the market on 18 September 2016, Newcrest sold its 50% interest in the Hidden Valley mine to its joint venture partner,
Harmony Gold Mining Company Limited. The current period represents data to 31 August 2016.
61
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
5. DISCUSSION AND ANALYSIS OF THE BALANCE SHEET
5.1. Net assets and total equity
Newcrest had net assets and total equity of $7,534 million as at 30 June 2017.
US$m
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax asset
Property, plant and equipment
Other intangible assets
Deferred tax assets
Investment in associate
Other assets
Total assets
Liabilities
Trade and other payables
Current tax liability
Borrowings
Other financial liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Equity attributable to owners of the parent
Non-controlling interests
Total equity
AS AT 30 JUNE
2017
2016
Change
Change %
492
88
1,681
41
26
8,852
35
80
64
224
53
134
1,715
–
2
8,891
44
105
–
247
11,583
11,191
(455)
(58)
(1,991)
(4)
(454)
(1,087)
(4,049)
7,534
7,450
84
7,534
(369)
(13)
(2,160)
(38)
(543)
(948)
(4,071)
7,120
7,041
79
7,120
439
(46)
(34)
41
24
(39)
(9)
(25)
64
(23)
392
(86)
(45)
169
34
89
(139)
22
414
409
5
414
828%
(34%)
(2%)
1,200%
(0%)
(20%)
(24%)
(9%)
4%
(23%)
(346%)
8%
89%
16%
(15%)
1%
6%
6%
6%
6%
5.2. Net debt, gearing and leverage
Net debt (comprising total borrowings less cash and cash equivalents) of $1,499 million at 30 June 2017 was $608 million lower than the
prior period. All of Newcrest’s debt is US dollar denominated.
Components of the movement in net debt are outlined in the table below.
US$m
2,107
(25)
(125)
(20)
(439)
1
1,499
(608)
(29%)
Net debt at 30 June 2016
Net repayment of bilateral bank debt
Net repayment of private placement notes
Net repayment of subsidiary bank loan
Net increase in cash balances
Other items
Net debt at 30 June 2017
Movement $
Movement %
62
Having regard to the Company’s strong liquidity position in June 2017 Newcrest effected the early repayment of $25 million of private
placement notes originally due to mature in May 2020, in addition to repaying the $100 million of private placement notes that matured in
May 2017.
The gearing ratio (net debt as a proportion of net debt and total equity) as at 30 June 2017 was 16.6%. This is a reduction from 22.8% as at
30 June 2016, reflecting the application of free cash flow generated during the current period to the repayment of debt and the build-up of
cash and cash equivalents.
US$m
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Net debt and total equity
AS AT 30 JUNE
2017
1,991
(492)
1,499
7,534
9,033
2016
2,160
(53)
2,107
7,120
9,227
Gearing (net debt / net debt and total equity)
16.6%
22.8%
Change
Change %
(169)
(439)
(608)
414
(194)
(6.2)
(8%)
(828%)
(29%)
6%
(2%)
(27%)
Change
Change %
5.2.1. Net debt
US$m
Bilateral bank debt – unsecured
Corporate bonds – unsecured
Private placement notes – unsecured
Subsidiary bank loan – unsecured
Capitalised transaction costs on facilities
Less cash and cash equivalents
Net debt
US$m
Bilateral bank debt facilities
Corporate bonds
Subsidiary bank loan
US$m
Bilateral bank debt facilities
Corporate bonds
Private placement notes
Subsidiary bank loan
AS AT 30 JUNE
2017
–
2,000
–
–
(9)
(492)
1,499
2016
25
2,000
125
20
(10)
(53)
2,107
(25)
–
(125)
(20)
1
(439)
(608)
AS AT 30 JUNE 2017
Facility
utilised
–
2,000
–
2,000
Facility
unutilised
2,000
–
40
2,040
AS AT 30 JUNE 2016
Facility
Utilised
Facility
unutilised
25
2,000
125
20
2,170
2,375
–
–
30
2,405
(100%)
–
(100%)
(100%)
10%
(828%)
(29%)
Facility
limit
2,000
2,000
40
4,040
Facility
limit
2,400
2,000
125
50
4,575
63
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
6. NON-IFRS FINANCIAL INFORMATION
Newcrest results are reported under Australian Accounting Standards (‘AAS’). Compliance with AAS also results in compliance with International
Financial Reporting Standards (‘IFRS’). This report also includes certain non-IFRS financial information, including EBIT (earnings before interest,
tax and significant items), EBITDA (earnings before interest, tax, depreciation and amortisation and significant items), Underlying profit (profit
after tax before significant items attributable to owners of the Company), All-In Sustaining Cost and All-In Cost (both determined in accordance
with the World Gold Council Guidance Note on Non-GAAP Metrics released June 2013), free cash flow (cash flow from operating activities less
cash flow related to investing activities), Sustaining capital and Major projects (non-sustaining) capital, ROCE and interest coverage ratio.
These measures are used internally by Management to assess the performance of the business and make decisions on the allocation of
resources, and are included in this report to provide greater understanding of the underlying financial performance of the Group’s operations.
When reviewing business performance, this non-IFRS information should be used in addition to, and not as a replacement of, measures
prepared in accordance with IFRS. The non-IFRS information has not been subject to audit or review by Newcrest’s external auditor.
The non-IFRS measures do not have any standard definition under IFRS and may be calculated differently by other companies. The tables
below reconcile these non-IFRS measures to the most appropriate IFRS measure, noting that:
• Sustaining and Major project (non-sustaining) capital are reconciled to investing cash flow in section 3.2;
• Free cash flow is reconciled to the cash flow statement in section 3.
6.1. Reconciliation of Statutory profit to Underlying profit
Underlying profit, EBIT and EBITDA is reported by Newcrest to provide greater understanding of the underlying business performance of
its operations and the Group. These measures exclude significant items of income or expense which are, either individually or in aggregate,
material to Newcrest or to the relevant business segment and are either outside the ordinary course of business or are part of the ordinary
activities of the business but are unusual due to their size and nature. Examples include gains/losses and other costs incurred for acquisitions
and disposals of mining interests and asset impairment and write-down charges. Statutory profit and Underlying profit both represent profit
after tax amounts attributable to Newcrest shareholders.
Profit after tax attributable to Newcrest shareholders
US$m
Statutory profit
Loss on business divestment
Net investment hedge loss
Write-down of non-current assets
Total significant items
Underlying profit
Profit after tax attributable to Newcrest shareholders
US$m
Statutory profit
Gain on disposal of investment
Net costs of class action settlement
Total significant items
Underlying profit
FOR THE 12 MONTHS ENDED 30 JUNE 2017
Before Tax and
Non-controlling
interest
Non-controlling
interest
Tax
After tax and
Non-controlling
interest
483
10
79
15
104
587
(164)
–
(17)
–
(17)
(181)
(11)
–
–
(1)
(1)
(12)
308
10
62
14
86
394
FOR THE 12 MONTHS ENDED 30 JUNE 2016
Before Tax and
Non-controlling
interest
Non-controlling
interest
Tax
After tax and
Non-controlling
interest
453
(18)
12
(6)
447
(118)
–
(3)
(3)
(121)
(3)
–
–
–
(3)
332
(18)
9
(9)
323
64
6.2. Reconciliation of Underlying profit to EBITDA
US$m
Underlying profit
Non-controlling interests
Income tax expense
Net finance costs
EBIT
Depreciation and Amortisation
EBITDA
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
2016
394
12
181
132
719
689
323
3
121
147
594
698
1,408
1,292
6.3. Reconciliation of All-In Sustaining Cost and All-In Cost to cost of sales
“All-In Sustaining Cost” and “All-In Cost” are non-IFRS measures which Newcrest has adopted since the guidance was released by the
World Gold Council in June 2013.
Gold sales (koz)(9)
Cost of sales
Depreciation and amortisation
By-product revenue
Corporate costs
Sustaining exploration
Production stripping and underground mine development
Sustaining capital expenditure
Rehabilitation accretion and amortisation
All-In Sustaining Costs
Non-sustaining capital expenditure
Non-sustaining exploration
All-In Cost
Reference
6.3.1
6.3.2
6.3.3
6.3.4
6.3.5
6.3.6
6.3.6
FOR THE 12 MONTHS ENDED 30 JUNE
2017
2016
US$m
2,377
2,541
(671)
(476)
66
8
101
280
21
1,870
212
50
2,132
US$/oz
1,069
(282)
(200)
28
3
42
118
9
787
89
21
897
US$m
2,452
2,572
(680)
(438)
61
13
60
251
28
1,867
166
31
2,064
US$/oz
1,049
(277)
(179)
24
5
25
102
13
762
68
12
842
9.
For the 12 months ended 30 June 2017 production and sales volumes include 1,345 gold ounces and 157 tonnes of copper related to the development of the
Cadia East project. For the 12 months ended 30 June 2016, the comparable volumes were 1,800 gold ounces and 206 tonnes of copper. Expenditure associated
with this production and revenue from the sales are capitalised and not included in the operating profit calculations.
6.3.1 Cost of sales
US$m
Cost of sales as per the consolidated income statement
Less: Earnings normalisation adjustment(10)
Total Cost of Sales
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
2,609
(68)
2,541
2016
2,601
(29)
2,572
10.
The current period includes an earnings normalisation adjustment relating to the seismic event at Cadia which caused production interruptions in the final quarter
of the financial year ($28/oz). The prior period includes cost normalisation adjustments relating to the impact of Gosowong’s geotechnical event which caused
production interruptions in the second half of the previous financial year ($9/oz) and redundancy costs at Telfer associated with the transition of open pit
mining to a contractor ($3/oz).
65
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
6. NON-IFRS FINANCIAL INFORMATION (continued)
6.3. Reconciliation of All-In Sustaining Cost and All-In Cost to cost of sales (continued)
6.3.2 Depreciation and amortisation
US$m
Depreciation and amortisation (per 2.1 of the Operating and Financial Review)(11)
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
671
2016
680
11. This relates to the depreciation and amortisation element of cost of sales. Corporate asset depreciation is shown separately below in 6.3.4 Corporate costs.
6.3.3 By-product revenue
US$m
Copper sales revenue (per 2.1 of the Operating and Financial Review)
Silver sales revenue (per 2.1 of the Operating and Financial Review)
Total By–product revenue
6.3.4 Corporate costs
US$m
Corporate administration expenses (per 2.1 of the Operating and Financial Review)
Less: Corporate depreciation
Total Corporate costs
6.3.5 Production stripping and underground mine development
US$m
Underground mine development
Production stripping (per 3.2 of the Operating and Financial Review)
Total production stripping and underground mine development
6.3.6 Capital expenditure
US$m
Sustaining capital expenditure (per 3.2 of the Operating and Financial Review)
Non-sustaining capital expenditure (per 3.2 of the Operating and Financial Review)
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
456
20
476
2016
403
35
438
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
2016
84
(18)
66
79
(18)
61
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
2016
11
90
101
6
54
60
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
280
212
2016
251
166
66
6.4. Reconciliation of Return on Capital Employed (ROCE)
ROCE is “Return on Capital Employed” and is reported by Newcrest to provide greater understanding of the underlying business performance
of its operations and the Group. ROCE is calculated as EBIT before significant items expressed as a percentage of average total capital
employed (net debt and total equity).
US$m
EBIT
Total capital (net debt and total equity) – as at 30 June 2015
Total capital (net debt and total equity) – as at 30 June 2016
Total capital (net debt and total equity) – as at 30 June 2017
Average total capital employed
Return on Capital Employed
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
719
–
9,227
9,033
9,130
7.9%
2016
594
9,846
9,227
–
9,537
6.2%
6.5. Reconciliation of Interest Coverage Ratio
Interest Coverage Ratio is reported by Newcrest to provide greater understanding of the underlying business performance of its operations
and the Group. Interest Coverage Ratio is calculated as EBITDA adjusted for facility fees and discount unwind on provisions, divided by net
interest payable (i.e. interest expense adjusted for facility fees, discount unwind on provisions and interest capitalised).
US$m
EBITDA
Less facility fees and other costs
Less discount unwind on provisions
Adjusted EBITDA
Net interest expense
Less facility fees and other costs
Less discount unwind on provisions
Add interest capitalised
Net interest payable
Interest Coverage Ratio
FOR THE 12 MONTHS
ENDED 30 JUNE
2017
1,408
(23)
(8)
1,377
132
(23)
(8)
–
101
13.6
2016
1,292
(26)
(11)
1,255
147
(26)
(11)
1
111
11.3
67
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
7. RISKS
Newcrest’s business, operating and financial results and performance
are subject to various risks and uncertainties, many of which are
beyond Newcrest’s reasonable control. Set out below are matters
which Newcrest has assessed as having the potential to have a
material impact on the business, operating and/or financial results
and performance of the Group. These matters may arise individually,
simultaneously or in combination.
The matters identified below are not necessarily listed in order
of importance and are not intended as an exhaustive list of all of
the risks and uncertainties associated with Newcrest’s business.
Additional risks and uncertainties not presently known to
Management and the Board, or that Management and the Board
currently believe to be immaterial or manageable, may adversely
affect Newcrest’s business.
Market price of gold and copper
Fluctuations in metal prices can occur due to numerous factors
beyond Newcrest’s control, including macroeconomic and
geopolitical factors (such as financial and banking stability, global
and regional political events, changes in inflationary expectations,
interest rates, and global economic growth expectations),
speculative positions taken by investors or traders, actual or
expected gold purchases and/or sales by central banks, changes in
supply or demand for gold and copper, gold hedging and de-hedging
by gold producers, and drivers that impact operating costs in major
gold and copper producing regions.
Examples of the potential impact of changes in the metal prices on
Newcrest’s total revenue from operations in the 2018 financial year
include (but are not limited to):
•
•
a US$10 per ounce change in the average realised gold price is
estimated to have an impact of approximately US$20 million.
a US$0.05 per pound change in the average realised copper
price is estimated to have an impact of approximately
US$10 million.
Material changes in metal prices may change the economic viability
of mining operations, particularly higher cost mining operations,
which may result in decisions to alter production plans or the
suspension or closure of mining operations.
Lower metal prices may also reduce the market value of Newcrest’s
gold or copper inventory and furthermore may result in
Newcrest curtailing or suspending its exploration activities, with
the result that depleted Ore Reserves may not be replaced and/or
unmined Ore Reserves or Mineral Resources may not be mined.
In addition, historical and current metal price variability may
impact upon Newcrest’s assumptions regarding future metal prices
which, in turn, may affect Newcrest’s current and future operating
activities and financial results. Examples of the potential impacts
of changes to assumptions regarding future metal prices, alone or
in combination with other factors such as foreign exchange rates,
include (but are not limited to):
•
•
•
changes to proposed project developments or the acceleration,
deferral or abandonment of current or future project developments;
changes to Newcrest’s estimates of Mineral Resources and Ore
Reserves; and
changes in the estimation of the recoverable amount of
Newcrest’s assets when assessing potential accounting
impairment of those assets.
68
Foreign exchange rates
The majority of Newcrest’s revenue is realised in, or linked to, the
US dollar on the basis that metals such as gold and copper are traded
globally based on prices quoted in US dollars. Given the geographic
spread of Newcrest’s operations, Newcrest’s operating costs are
exposed to multiple currencies, including a portion of costs at each
operation being denominated in the local currency. The relative
movement of these currencies (particularly the Australian dollar)
against the US dollar will impact upon Newcrest’s costs and financial
results which are reported in US dollars. An example of the potential
impact of foreign exchange rate changes on Newcrest’s EBIT in the
2018 financial year is (but not limited to):
•
a A$0.01 change in the AUD:USD exchange rate is estimated to
have an impact on EBIT of approximately US$20 million.
As with assumptions regarding future metal prices, assumptions
regarding future foreign exchange rates, alone or in combination
with other factors, may impact upon continuing operations, project
development decisions, exploration investment decisions, Mineral
Resource and Ore Reserves estimates and the assessment of the
recoverable amount of Newcrest’s assets.
Increased costs and commodity inputs
Operating costs are subject to variations from one year to the
next due to a number of factors, some of which are specific to a
particular mine site, including changing ore grade, characteristics
and metallurgy, changes in the ratio of ore to waste as the mine
plan follows the sequence of extracting the ore body, surface
and underground haulage distances, underground geotechnical
conditions and decisions made in respect of the level of sustaining
capital invested to maintain operations.
In addition operating costs and capital expenditure are, to a significant
extent, driven by external economic conditions impacting on the cost
of commodity inputs consumed in extracting and processing ore
(including electricity, fuel, chemical reagents, explosives, tyres and
steel), and labour costs associated with those activities.
Newcrest’s inability to adjust its cost profile and meet projected
operating cost targets at its existing mines and new mining projects,
may impact upon operations, project development decisions,
exploration investment decisions, Mineral Resource and Ore
Reserves estimates, and the assessment of the recoverable
amount of Newcrest’s assets.
Operating risks and hazards
Newcrest’s mining operations are subject to operating risks
and hazards including (without limitation) unanticipated ground
conditions, industrial incidents, infrastructure and equipment
under-performance or failure, shortage of material supplies,
transportation and logistics issues in relation to the Group’s
workforce and equipment, environmental incidents, health
and safety related incidents, and interruptions and delays due to
community issues.
Some of Newcrest’s operations are in areas known to be seismically
active and are subject to the risks of earthquakes and related risks
of tidal surges and tsunamis, which are difficult to predict. Some of
Newcrest’s operations may also experience other specific operating
challenges relating to ground conditions and rock temperature.
Any increased frequency of severe weather events such as floods,
drought, and cyclones, which may be attributed to climate change,
may negatively affect these operations by restricting access to site
and causing damage to property. Newcrest has in place site-based
management plans for responding to these events.
A key operational risk for Newcrest is the availability of power and
water to support mining and mineral processing activities, particularly
at Newcrest’s remotely located assets. Even a temporary interruption
of power or water supply could adversely affect an operation.
Newcrest faces particular geotechnical, geothermal and
hydrological challenges, in particular due to the trend toward more
complex deposits, deeper and larger pits, and the use of deep, bulk
underground mining techniques. This leads to higher pit walls, more
complex underground environments and increased exposure to
geotechnical and hydrological impacts.
There are a number of risks and uncertainties associated with the
block cave mining methods being applied by Newcrest at its Cadia
operations. Risks include that a cave may not propagate as anticipated,
excessive air pockets may form during the cave propagation, the caving
spans needed for successful cave propagation give rise to a risk of
unplanned ground movement due to changes in stresses released in
the surrounding rock and excessive water ingress, disturbance and the
presence of fine materials may also give rise to unplanned release of
material of varying properties and/or water through drawbells.
In addition, the success of Newcrest at some of its operations,
including the Lihir operation, depends, in part, upon the
implementation of Newcrest’s engineering solutions to particular
hydrological and geothermal conditions. At Lihir, for example,
significant removal of both groundwater and sea water inflow and
geothermal control is required before and during mining.
A failure to safely resolve any unexpected problems relating to these
conditions at a commercially reasonable cost may adversely impact
upon continuing operations, project development decisions, exploration
investment decisions, Mineral Resource and Ore Reserves estimates
and the assessment of the recoverable amount of Newcrest’s assets.
Future operating and capital cost requirements
Newcrest’s business, operating and financial performance and
results may be impacted by the extent to which Newcrest’s revenues
are able to fund its operating and capital expenditure requirements.
To the extent that these are insufficient, Newcrest may need to
draw on available debt facilities or seek additional funds through
asset divestitures, equity raisings, debt issues, or additional debt
(or some combination of these), or may need to defer operating or
capital expenditure.
Consistent with market practice, Newcrest’s ability to draw upon
its committed facilities is subject to the satisfaction of conditions
which Newcrest must satisfy at the time of drawdown. Newcrest’s
ability to service current debt arrangements and to raise and service
any additional debt or to meet conditions applicable to current or
future debt arrangements, will be a function of a number of factors,
including (without limitation) macroeconomic conditions, future gold
and copper prices, Newcrest’s credit rating, operational cash flow
and production performance. If Newcrest is unable to obtain any
required additional funding on acceptable terms then its business,
operating and financial performance and results may be impacted.
Exploration, project evaluation and project development
Newcrest’s current and future business, operating and financial
performance and results are impacted by the discovery of new
mineral prospects and actual performance of developing and
operating mines, which may differ significantly from estimates
determined at the time the relevant project was approved for
development. Newcrest’s current or future development activities
may not result in expansion or replacement of current production, or
one or more new production sites or facilities may be less profitable
than anticipated or may not be profitable at all.
Newcrest’s ability to sustain or increase its current level of production
in the future is in part dependent on the success of its exploration
activities in replacing gold and copper reserves depleted by production,
the development of new projects and the expansion of existing
operations. In the last decade, the time from discovery to production
has increased significantly as a result of a variety of factors, including
increases in capital requirements, environmental considerations,
economic conditions and the complexity and depth of ore bodies.
In the absence of exploration success, or additions to Newcrest’s
mineral inventory to support future operations through development
activities, expansions or acquisitions, Newcrest will be unable to
replace Ore Reserves and Mineral Resources depleted by operations.
Exploration activities are speculative in nature and often require
substantial expenditure on exploration drilling and sampling as a
basis on which to establish the presence, extent and estimated grade
(metal content) of mineralised material.
Once mineralisation is discovered it may take several years to
determine whether adequate Ore Reserves and/or Mineral Resources
exist to support a development decision and to obtain necessary ore
body knowledge to assess the technical and economic viability of
mining projects. During that time the economic viability of the project
may change due to fluctuations in factors that affect both revenue
and costs, including metal prices, foreign exchange rates, the required
return on capital and future cost of development and mining operations.
Maintaining title
Newcrest’s production, development and exploration activities
are subject to obtaining and maintaining the necessary titles,
authorisations, permits and licences, and associated land access
arrangements with the local community and various layers of
Government, which authorise those activities under the relevant law
(Authorisations). There can be no guarantee that Newcrest will be
able to successfully obtain and maintain relevant Authorisations, or
obtain and maintain relevant Authorisations on terms acceptable
to Newcrest, to support its activities, or that renewal of existing
Authorisations will be granted in a timely manner or on terms
acceptable to Newcrest.
Authorisations held by or granted to Newcrest may also be subject
to challenge by third parties which, if successful, could impact on
Newcrest’s exploration, development and/or mining activities.
69
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
7. RISKS (continued)
Law and regulation
Newcrest’s current and future mining operations, development
projects and exploration activities are subject to various national
and local laws, policies and regulations governing the prospecting,
development and mining of mineral deposits, taxation and royalties,
import and export duties and restrictions, foreign exchange
controls, foreign investment approvals, employee and community
relations, health and safety, environmental management and
other matters, and the manner in which these laws are applied or
interpreted. Changes in these laws, policies and/or regulations
may have the potential to materially alter the value of a particular
operation and/or the Group as a whole. A failure to comply with legal
requirements may result in enforcement action being taken against
Newcrest with potentially material consequences, including financial
penalties, suspension of operations and forfeiture of assets.
In a number of jurisdictions where Newcrest has existing interests,
the legal framework is increasingly complex, subject to change and
becoming more onerous. Changes in laws may result in material
additional expenditure, taxes or costs or interruption to Newcrest’s
activities in order to comply with changing requirements. There
can also be disputes in relation to the application or interpretation
of laws, policies or regulations in the countries where Newcrest
operates which could have an adverse impact on Newcrest’s
operations, financial performance and/or value.
Political, economic, social and security risks
Newcrest has exploration, development and production activities
that are subject to political, economic, social, security and other risks
and uncertainties.
These risks and uncertainties are unpredictable, vary from
country to country and include but are not limited to law and
order issues (including varying government capacity to respond),
political instability, expropriation and/or nationalisation, changes
in government ownership levels in projects, fraud, bribery and
corruption, restrictions on repatriation of earnings or capital, land
ownership disputes and tenement access issues. These risks have
become more prevalent in recent years, and in particular there has
been an increasing social and political focus on:
•
the revenue derived by governments and other stakeholders
from mining activities, which has resulted in announced reviews
of the fiscal regimes applicable to mining in a number of the
jurisdictions in which Newcrest has interests (including Papua
New Guinea and Indonesia); and
• national control of and benefit from natural resources, with
proposed reforms regarding government or landowner
participation in mining activities, limits on foreign ownership of
mining or exploration interests and/or forced divestiture (with
or without adequate compensation), and broad reform agenda
in relation to mining legislation, environmental stewardship and
local business opportunities and employment.
70
Examples of reviews announced in jurisdictions in which Newcrest
has mining and/or exploration interests include (without limitation):
•
•
In Indonesia (where Newcrest’s 75% owned Gosowong
operations are located), in the context of the review of the
Gosowong Contract of Work, the Government may seek to
reduce the size of the tenement holding, impose requirements
for additional local equity participation, and make changes to
the fiscal regime that applies to the project.
In Papua New Guinea, the Government has undertaken a broad
review of mining laws and its taxation regime. In addition to the
risk of an increased tax cost to the Group’s operations, potential
reforms from these reviews may include changes to the level
and manner of local equity participation in projects and the
introduction of additional retrospective reporting and compliance
requirements which may increase operating costs. There is also
the risk of changes to foreign exchange controls and/or laws
or regulations pertaining to the holding of cash offshore and
remittance of profits and capital to the parent company.
There can be no certainty as to what changes, if any, will be made
to relevant laws in the jurisdictions where the Group has current
interests, or other jurisdictions where the Group may have interests
in the future, or the impact that relevant changes may have on
Newcrest’s ability to own and operate its mining and related interests
and to otherwise conduct its business in those jurisdictions.
Community relations
Newcrest’s relationship with the communities in which it operates is
an essential part of ensuring success of its existing operations and
the development of its projects. A failure to manage relationships
with the communities in which Newcrest operates may lead to
local dissatisfaction, which, in turn, may lead to interruptions to
Newcrest’s operations, development projects and exploration
activities. Particular challenges in community relations include
increasing expectations regarding the level of benefits that
communities receive and the level of transparency regarding the
payment of compensation and the provision of other benefits to
affected landowners and the wider community.
Typically, where Newcrest has exploration activities, development
projects or operations, it enters into agreements with local
landowners. These agreements include compensation and other
benefits and may be subject to periodic review. The negotiation
and/or review of community agreements, including compensation
and other benefits, involves complicated and sensitive issues,
associated expectations and often competing interests, which
Newcrest seeks to manage respectfully. The nature and subject
matter of these negotiations may result in community unrest which,
in some instances, results in interruptions to Newcrest’s activities.
For example, the community agreements in place with customary
landowners in relation to Newcrest’s Lihir operation in Papua New
Guinea are the subject of a regular review process. The duration of
the review process is a result of the important and complex issues
covered by the agreements and the competing interests of different
landowner groups. During the ongoing review process, and in the
context of the previous review (FY00-FY07), the Lihir operations
have experienced periodic disruptions as a result of community
unrest regarding the progress of the review negotiations and
intra-community issues. Although community issues are generally
resolved within a short period, there can be no assurance that further
disputes with the customary landowners will not arise from time
to time which, if prolonged, could lead to disruptions to Newcrest’s
operations and development projects.
In addition, there is a level of community concern relating to the
perceived effect of mining activities on the environment and on the
communities located near such activities. Certain non-government-
organisations are vocal critics of the mining industry and its
practices, including in relation to the use of hazardous substances
in processing activities and the use of deep sea tailings placement.
Adverse publicity generated by non-government-organisations
or others relating to extractive industries generally, or Newcrest
specifically, could have an adverse impact on Newcrest’s reputation
or financial condition and may impact on Newcrest’s relationships
with the communities in which it operates. No assurance can be given
that incidents will not arise that generate community concerns
associated with Newcrest’s activities and potentially cause
disruptions until resolved.
Health
There are numerous occupational health risks associated with
mining and metallurgical processes. These include musculoskeletal
disorders, fatigue, mental health illnesses and exposure to noise,
diesel particulate matter, silica and acid mist. Unforeseen or past
workplace exposures may lead to long-term health issues and
potential compensation liabilities.
The global nature of Newcrest’s operations also means that our
employees may be affected by mosquito borne diseases such as
malaria, dengue fever or zika virus. Other potential health impacts
include tuberculosis, and pandemic influenza outbreaks such as
swine or avian flu.
Environment and Closure
Mining operations and development activities have inherent risks
and liabilities associated with potential harm to the environment
and the management of waste products. Newcrest’s activities are
therefore subject to extensive environmental law and regulation
in the various jurisdictions in which it operates. Compliance with
these laws require significant expenditure and non-compliance may
potentially result in fines or requests for improvement actions from
the regulator or could result in reputational harm. Newcrest monitors
its regulatory obligations on an ongoing basis, including its reporting
obligations under the Australian National Greenhouse and Energy
Reporting Scheme, in addition to pursuing energy efficiency.
Newcrest’s operations may create a risk of exposure to hazardous
materials. Newcrest uses hazardous material (for example, cyanide)
and generates waste products that must be disposed of. Appropriate
management of waste is a key consideration in Newcrest’s operations.
Mining operations can also impact flows and water quality in surface
and ground water bodies and remedial measures may be required to
prevent or minimise such impacts.
Newcrest is required to close its operations and rehabilitate the
lands that it disturbs during the exploration and operating phases
in accordance with applicable mining and environmental laws and
regulations. A closure plan and estimate of closure and rehabilitation
liabilities are prepared for each of Newcrest’s operations. These
estimates of closure and rehabilitation liabilities are based on current
knowledge and assumptions, however actual costs at the time of
closure and rehabilitation may vary materially. In addition, adverse or
deteriorating external economic conditions may bring forward mine
closure and associated closure and rehabilitation costs.
Resources and reserves
Mineral Resources and Ore Reserves estimates are necessarily
imprecise and involve subjective judgements regarding a number
of factors including (but not limited to) grade distribution and/or
mineralisation, the ability to economically extract and process
mineralisation, and future commodity prices, exchange rates
and operating costs. Such estimates relate to matters outside
Newcrest’s reasonable control and involve statistical analysis
which may subsequently prove to be unreliable or flawed.
Newcrest’s annual Mineral Resources and Ore Reserves statement
is based upon a number of factors, including (without limitation)
exploration drilling and production results, geological interpretations,
economic assumptions (such as future commodity prices and
exchange rates) and operating and other costs. These factors
may result in reductions in Newcrest’s Mineral Resources and Ore
Reserves estimates, which could adversely affect the life-of-mine
plans and may impact upon the value attributable to Newcrest’s
mineral inventory and/or the assessment of realisable value of one or
more of Newcrest’s assets and/or depreciation expense.
Reliance on contractors
Some aspects of Newcrest’s production, development and exploration
activities are conducted by contract mining operators. As a result,
Newcrest’s business, operating and financial performance and
results may be negatively impacted upon by the availability and
performance of these contractors and their financial strength.
The material risks associated with contract mining operators
at Newcrest’s sites includes the risk of the contractor or its
sub-contractors being involved in a safety or environmental
incident and the potential for interruption to Newcrest’s operations
due to a contractor becoming insolvent.
Marketing
Newcrest produces mineral concentrates which are exported by
ocean vessels to smelters, located predominantly in Asia, with
associated risks including (without limitation) fluctuating smelter
charges, marine transportation charges and inland freight charges.
Transportation of the concentrate is also subject to numerous
risks including (without limitation) delays in delivery of shipments,
terrorism, loss of or reduced access to export ports, weather
conditions and environmental liabilities in the event of an accident
or spill. Sales of concentrate may also be adversely impacted by
disruption at Newcrest’s operations or the operations of one or
more of the receiving smelters and consequent declarations of force
majeure at Newcrest’s or buyer’s operations. Additionally, the quality
of mineral concentrates, including the presence of impurities and
deleterious substances, is subject to restrictions on import which
vary across jurisdictions and may impact upon the saleability or price
realised for the mineral concentrate.
Human resources and industrial relations
Newcrest competes with mining and other companies to attract and
retain key employees and third party contractors with appropriate
technical skills and managerial experience necessary to continue
to operate its business. There can be no assurance that Newcrest
will be able to attract and retain skilled and experienced personnel
and, should Newcrest lose any of its key personnel or fail to attract
personnel, its business may be harmed and its operations and
financial condition could be adversely affected.
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KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
7. RISKS (continued)
Human resources and industrial relations (continued)
Newcrest may be impacted by industrial relations issues in
connection with its employees and the employees of Newcrest’s
contractors and suppliers. Any such activity could cause production
delays, increased labour costs and adversely impact Newcrest’s
ability to meet its production forecasts.
In a number of jurisdictions where Newcrest has mining and related
interests, there are also local requirements or expectations
regarding the extent to which local and national persons are directly
engaged in the mining and related activities which may result in
disruptions to Newcrest’s activities where relevant requirements
and/or expectations are not met. There can be no assurance that
disruptions will not occur in the future which may have an adverse
effect on Newcrest’s business. Similarly, there can be no assurance
that Newcrest will be able to attract and retain suitably qualified and
experienced local or national personnel, or that unskilled persons
trained by Newcrest will be retained, in the future.
Competition for projects to replace Ore Reserves
Significant gold deposits are becoming more difficult to find,
are deeper and often in remote and challenging jurisdictions.
The declining rate of discovery of new gold deposits has, in recent
years, increased the challenge of replacing the mining depletion of
existing resources and reserves throughout the global gold sector.
Newcrest faces intense competition for acquisition of attractive
exploration and mining properties to replace reserves depleted by
mining. As a result of this competition, exploration and acquisitions
may not result in Newcrest being able to maintain or increase its
Ore Reserves which could negatively impact its future business,
operating and financial performance and results.
Newcrest evaluates potential acquisition and development
opportunities for mineral deposits, exploration or development
properties and operating mines. Newcrest’s decision to acquire or
develop these properties is based on a variety of factors, including
historical operating results, estimates and assumptions regarding
the extent and quality of mineralisation, resources and reserves,
assessment of the potential for further discoveries or growth
in resources and reserves, development and capital costs, cash
and other operating costs, expected future commodity prices,
projected economic returns and evaluations of existing or potential
liabilities associated with the relevant assets and how these factors
may change in future. Other than historical operating results (if
applicable), these factors are uncertain and could have an impact
on revenue, cash and other operating results, as well as the process
used to estimate Mineral Resources and Ore Reserves.
Joint venture arrangements
Newcrest has joint venture interests, including its interests in the
Wafi-Golpu Project in Papua New Guinea, the Gosowong mine in
Indonesia and the Namosi project in Fiji. These operations are subject
to the risks normally associated with the conduct of joint ventures
which include (but are not limited to) disagreement with joint venture
partners on how to develop and operate the mines or projects
efficiently, inability of joint venture partners to meet their financial and
other joint venture commitments and particular risks associated with
entities where a sovereign state holds an interest, including the extent
to which the state intends to engage in project decision making and
the ability of the state to fund its share of project costs. The existence
or occurrence of one or more of these circumstances or events may
have a negative impact on Newcrest’s future business, operating and
financial performance and results, and/or value of the underlying asset.
New acquisitions
Newcrest’s ability to make successful acquisitions and any difficulties
or time delays in achieving successful integration of any such
acquisitions could have an adverse effect on its business, operating
results and financial condition. Business combinations and acquisitions
entail a number of risks including the effective integration of
acquisitions to realise synergies, unanticipated costs and liabilities and
issues impacting production. Newcrest may also be liable for the acts
or omissions of previous owners of the acquired business or otherwise
exposed to liabilities that were unforeseen or greater than anticipated.
These and other factors may result in reductions in the Mineral
Resources and Ore Reserves estimates for the acquired business,
and/or impact upon the value attributable to the acquired business.
Macro-economic conditions
Newcrest’s operating and financial performance is influenced by a
variety of macro-economic and business conditions including the
level of inflation, interest rates, exchange rates and government
fiscal, monetary and regulatory policies. Prolonged deterioration in
general economic conditions, change or deterioration in the rate of
economic growth including changes to interest rates or decrease
in consumer and business demand, could be expected to ultimately
have an impact on Newcrest’s business, results of operations or
financial condition and performance.
Information Technology
Newcrest’s operations are supported by information technology (IT)
systems, consisting of infrastructure, networks, applications, and
service providers. Newcrest could be subject to network and systems
interference or disruptions from a number of sources, including (without
limitation) security breaches, cyber-attacks and system defects. The
impact of IT systems interference or disruption could include production
downtime, operational delays, destruction or corruption of data and
disclosure of commercially sensitive information any of which could
have a material impact on Newcrest’s business, operations or financial
condition and performance. Disaster recovery plans are in place for
all of Newcrest’s major sites and critical IT systems.
72
Litigation
Litigation has the potential to negatively impact upon Newcrest’s
business, operating and financial performance and results. Regardless
of the ultimate outcome of litigation (which may be subject to appeal),
and whether involving regulatory action or civil claims, litigation may
have a material impact on Newcrest as a result of the costs associated
with litigation (some of which may not be recoverable) and the
management time associated with defending litigation.
The notes to Newcrest’s Financial Statements provide details
regarding certain current and potential litigation involving Newcrest.
Forward looking statements
Newcrest provides outlook and guidance on aspects of its business
including production, cost and capital expenditure which relate
to matters in the future (forward looking statements). Forward
looking statements inherently involve known and unknown risks,
uncertainties and other factors that may cause Newcrest’s actual
results, performance and achievements to differ materially from
those indicated in the forward looking statements.
Forward looking statements are based on Newcrest’s assumptions as
to the financial, market, regulatory and other relevant environments
that will exist and affect Newcrest’s business and operations in the
future. There can be no assurance that the assumptions on which
forward looking statements are based will prove to be correct.
There may be other factors that could cause actual results or events
not to be as anticipated, and many events are beyond the reasonable
control of Newcrest.
Uninsured risks
In addition to maintaining insurances required by law, Newcrest
maintains a range of insurance policies to assist in mitigating the
impact of events which could have a significant adverse effect on its
operations and profitability. Newcrest’s insurances do not cover all
potential risks associated with its business. Newcrest may elect not
to insure, or to self-insure against certain risks, where the premiums
associated with insuring against those risks are considered to be
excessive or for various other reasons, including an assessment
that the risks are remote. Further, Newcrest’s insurance policies
carry deductibles and limits which apply in the event of a claim which
may lead to Newcrest not recovering the full monetary impact of
an insured event, and are subject to policy terms and conditions
(including exclusions) which may impact on the extent to which
a relevant policy responds to the circumstances of a claim. The
occurrence of events for which Newcrest is not insured, or in respect
of which relevant insurances do not respond fully, may adversely
affect Newcrest’s financial condition and performance.
Liquidity and Indebtedness
In addition to cash flows from operating activities, Newcrest
has a range of debt facilities with external financiers – including
unsecured bilateral bank loan facilities and corporate unsecured
senior notes (or ‘bonds’). Newcrest has sought to structure these
debt facilities to have varying maturities so that its refinancing
obligations are staggered. Although Newcrest currently generates
sufficient funds to service its debt requirements, no assurance can
be given that Newcrest will be able to meet its financial covenants,
its debt repayment obligations, or be able to refinance the debt
prior to its expiry on acceptable terms to Newcrest. If Newcrest
is unable to meet its financial covenants or debt repayment
obligations when required or refinance its external debt on
acceptable terms, its financial condition and ability to continue
operating may be adversely affected.
Counterparty Risk
Newcrest is exposed to commercial and financial counterparty risk
which arises from the potential default of the counterparty
to the Group’s financial assets, commercial agreements
and insurance policies. The financial assets comprise of cash
and cash equivalents, trade and other receivables and derivative
financial instruments. Counterparty default may adversely affect
Newcrest’s financial condition and performance and may lead to
Newcrest not recovering the full monetary impact of a commercial
arrangement or an insured event.
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 BBB (S&P) equivalent.
Credit risk is further limited by ensuring diversification with maximum
investment limits based on credit ratings. All customers who wish to
trade on credit terms are subject to a credit risk analysis.
Newcrest is also exposed to counterparty risk arising from a potential
failure of an insurer on Newcrest’s panel in the event of a valid claim.
The Group limits its counterparty risks by diversification of insurers
across the Newcrest portfolio and insures with insurance companies
with a credit rating of at least A- equivalent.
73
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
REMUNERATION REPORT
14 August 2017
Dear Shareholder,
On behalf of the Board, we are pleased to provide Newcrest’s Remuneration Report for the year ended 30 June 2017, for which we seek
your support at our Annual General Meeting (AGM) in November 2017.
This report explains the links between Newcrest’s Executive remuneration framework and Newcrest’s strategy and performance.
YEAR IN REVIEW
Financial year 2017 delivered a number of very pleasing outcomes including a significant improvement in our safety performance,
strong cash flow generation and a number of operational achievements, particularly at Lihir and Cadia. Lihir achieved record annual mill
throughput and gold production and Cadia completed establishment of the Panel Cave 2 footprint. Notwithstanding the seismic event
that impacted Cadia and the Group in the fourth quarter of the financial year, Newcrest achieved Group production guidance for the
fourth year in a row. All operations contributed to the free cash flow generation of the Group, which was applied to both further reducing
net debt and strengthening the balance sheet, as well as increasing dividends to shareholders.
As foreshadowed in the 2016 Remuneration Report, Richard Knight retired from the Board, with effect from 16 August 2016 and Vickki
McFadden joined the Board as an independent Non-Executive Director (NED) with effect from 1 October 2016. During the financial
year we also announced a number of changes to the Executive team to consolidate the leadership of our operational assets under two
Executive General Managers and to increase the capacity of the other Executive General Managers to lead our medium-to-long term
growth prospects. Effective 1 January 2017, Craig Jetson was appointed to the role of Executive General Manager (EGM) Cadia and
Lihir, and Craig Jones moved into the new role of EGM Wafi-Golpu. Phil Stephenson assumed responsibility for Bonikro in the expanded
role of EGM Gosowong, Telfer and Bonikro, providing Michael Nossal with increased capacity to focus on the Company’s growth and
development activities in his ongoing role of Chief Development Officer. As previously announced, in September 2016 Jane Thomas,
EGM People, left the Company following her resignation and Melanie Allibon commenced in the role of EGM People on 30 January 2017.
REMUNERATION OUTCOMES AND CHANGES
Short term incentive (STI) outcomes for our Executives for the 2017 financial year ranged from 57% to 69% of their potential maximum.
As has been the case in previous years, the Board has made adjustments to the STI business outcomes for the effect of commodity
prices, foreign exchange rates and other significant items determined by the Board which are considered to be outside the control of
Management. In relation to the 2017 financial year such adjustments for non-controllable items included the Cadia seismic event. The
cash flow measure was also adjusted for the $63m investment in SolGold Plc. 29.3% of the 2013 Long Term Incentives (LTIs) vested
during the 2017 financial year.
Three of the nine Executives received an increase in total fixed remuneration (TFR) during the 2017 financial year. The Chief Financial Officer
received an increase in TFR as part of the annual salary review, following benchmarking of his remuneration against market practice for his role.
The EGM Wafi-Golpu and EGM Gosowong, Telfer and Bonikro received increases as a result of the changed scope of their roles associated with
the organisational restructure noted above. The EGM Wafi-Golpu also received performance rights and a decrease in the maximum STI and LTI
opportunities as a result of the changed scope of his role. The Non-Executive Directors did not receive any fee increases.
The Board remains committed to ensuring that Newcrest’s remuneration frameworks are aligned to the Company’s strategy and
performance and that they attract, reward and retain high calibre people and drive strong individual and Group performance in the
interests of both the Company and its shareholders. To this end, the key enhancement that was implemented during the 2017 financial
year was the introduction of relative total shareholder return (Relative TSR) measured against the S&P TSX Global Gold Index as a
performance condition for one-third of the LTI grant.
Following extensive benchmarking and advice from the Board’s independent Remuneration advisors, the face value of the CEO’s annual
LTI grants will increase from 150% to 180% of total fixed remuneration (TFR). This increase will be effective from the grant planned for
November 2017, subject to shareholder approval at this year’s Annual General Meeting. The change is intended to recognise the highly
competitive global market for executive talent, particularly amongst the global gold mining companies with which Newcrest competes.
The change also recognises Sandeep’s contribution to significantly improving the Company’s performance since he was appointed as
Managing Director and Chief Executive Officer in 2014, and is designed to encourage him to remain with Newcrest over the long term.
Notably, this will be Sandeep’s first change in remuneration, and any value realised by him from the increased LTI opportunity will be
entirely dependent upon achievement of our challenging LTI performance conditions. His TFR and short term incentive opportunity
remain unchanged.
A review of all Executives’ TFR is expected to occur in September 2017 in line with reviews of employees across the rest of the organisation.
We continue to welcome shareholder feedback and thank you for your continued support.
Peter Hay
Chairman, Board of Directors
Rick Lee AM
Chairman, Human Resources and Remuneration Committee
74
This Report details the remuneration arrangements in place for the key management personnel (KMP), being those executives who have
authority for planning, directing and controlling the activities of the Company. KMP comprises all NEDs and Executives. In this Report,
Executives refers to members of the Executive Committee (including the Managing Director and Chief Executive Officer (CEO) and Finance
Director and Chief Financial Officer (CFO) of Newcrest, who are also Directors of the Company).
This Report has been audited under section 308(3C) of the Corporations Act 2001.
Contents
We have structured the Report into the following sections:
Section 1
Remuneration Snapshot
Section 2
Key Management Personnel
Section 3
Remuneration Governance
Section 4
Our Executive Remuneration Framework
Section 5
Remuneration Outcomes
Section 6
Executive Service Agreements and Termination Arrangements
Section 7
Non-Executive Directors’ Remuneration
Section 8
Shareholdings
Section 9
Statutory Tables
1. REMUNERATION SNAPSHOT
1.1. Key remuneration outcomes for the 2017 financial year
75
77
77
78
86
90
90
91
92
Executive Remuneration
The Chief Financial Officer received an increase in TFR as part of the annual salary review, following
benchmarking of his remuneration against market practice for his role. The increase of 6.2% was his first
increase since 2012 and was effective 1 October 2016.
The EGM Wafi-Golpu and EGM Gosowong, Telfer and Bonikro received increases as a result of the changed
scope of their roles associated with the organisational restructure that took effect 1 January 2017, as follows:
• EGM Wafi-Golpu (0.6% increase to A$775,000); and
• EGM Gosowong, Telfer and Bonikro (19.2% increase to A$775,000).
The level of the increase for the EGM Gosowong, Telfer and Bonikro was set to reflect the increase in
responsibility to include Bonikro and his increased experience in the role as EGM. A comparison of the
proposed package against market data was also taken into account. The change in TFR for the EGM Wafi-Golpu
was accompanied by a reduction in his maximum LTI and STI opportunities to 80% and 120% respectively and
the grant of sign on rights as detailed in section 4.6.
The average STI outcome for Executives was 63.1% of the maximum opportunity based on the assessment of
business and personal measures.
29.3% of the 2013 LTI Plan vested during the 2017 financial year, reflecting, in part, the lagging effect of
some of the LTI metrics during the earlier part of the three year performance period to 30 June 2016.
The 2014 LTI Plan (under which grants of LTIs were made in the 2015 financial year) is expected to vest on
or around 7 November 2017 and it is anticipated that the vesting levels will be in the range of 60 to 70%.
STI Outcomes
LTI Outcomes
NED Remuneration
NEDs received no fee increases during the 2017 financial year.
75
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
REMUNERATION REPORT
1. REMUNERATION SNAPSHOT (continued)
1.2. Actual Remuneration Table
The table below details the cash and value of other benefits actually received by the current Executives in the 2017 financial year in their
capacity as KMP. This is a voluntary disclosure to provide shareholders with increased clarity and transparency. It includes non-IFRS financial
information and some of the figures in this table have not been prepared in accordance with Australian Accounting Standards. See section 9.1
for the statutory remuneration table that has been prepared in accordance with Australian Accounting Standards.
Non-Statutory Current Executive Remuneration
Short Term
Incentive
Paid(2)
TFR(1)
Other Cash
Benefits(3)
Other
Benefits(4)
LTI Rights
Vested(5)
Unrestricted
Shares and
other Rights
Total
Executive
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
2017 financial year
Sandeep Biswas(6)
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish(7)
Francesca Lee
Michael Nossal(8)
Philip Stephenson
Jane Thomas
1,734
725
210
349
583
528
528
735
537
103
1,096
370
–
–
251
–
201
348
169
191
27
–
–
8
–
35
–
56
40
–
41
10
2
1
9
27
7
8
49
1
817
554
–
–
279
–
–
–
–
–
942
–
–
–
–
71
–
941
–
–
4,657
1,659
212
358
1,122
661
736
2,088
795
295
Notes to Non-Statutory Current Executive Remuneration
(1)
TFR (Total Fixed Remuneration) comprises base salary and superannuation contributions. For new or former Executives, TFR has been pro-rated for time served as
an Executive during the financial year.
(2) Represents amounts paid under the STI Plan during the year in a period in which the person was an Executive, relating to performance for the 2016 financial year.
(3) Comprises cash payments made in accordance with Executive Service Agreements and either relocation costs or travel costs paid in lieu of relocation entitlements.
(4) Represents non-monetary benefits such as parking, insurance and applicable fringe benefits tax paid on benefits.
(5)
Represents Rights that have vested under the 2013 LTI Plan during the 2017 financial year. The value of the Rights has been determined based on the share price at
the close of business on the vesting date.
In October 2016, 57,630 ordinary Newcrest shares were released by Pacific Custodians Pty Ltd as trustee for the Newcrest Employee Share Trust to Sandeep Biswas
in accordance with the 2015 STI Plan Rules. The value of the shares has been determined based on the share price at the close of business on the release date.
In September 2016, Ian Kemish received a tranche of 4,383 fully paid ordinary shares on vesting of sign-on rights granted to him (based on the 5 day volume
weighted average price (VWAP) immediately prior to his commencement date). Such shares were granted to him as compensation for amounts forgone in accepting
a role with Newcrest. The value of the shares has been determined based on the share price at the close of business on the exercise date.
In September 2016, Michael Nossal received a tranche of 58,365 fully paid ordinary shares on vesting of sign-on rights granted to him (based on the 5 day VWAP
immediately prior to his commencement date of 6 July 2015). In September 2016, he also received a cash payment of A$75,000 (US$ 56,100). Such shares
and cash were given to him as compensation for amounts forgone in accepting a role with Newcrest. The value of the shares has been determined based on the
share price at the close of business on the exercise date.
(6)
(7)
(8)
TFR and Other Benefits have been translated from Australian dollars to US dollars using an average exchange rate of 0.7541. Short Term
Incentive Paid, Other Cash Benefits, LTI Rights Vested, Unrestricted Shares and Other Rights have been translated at the rate applicable on the
date of the event.
1.3. Key changes to the Executive remuneration framework during the 2017 financial year
Changes in STI Measures
For the FY17 STI Plan, completion of Critical Control Management Verifications was added as a
component of the Safety measure. This reinforces the importance of the second pillar in Newcrest’s Safety
Transformation Plan to ensure critical controls are in place for every high risk task.
Changes in LTI Measures
and Vesting Schedules
For the 2016 LTI Plan, the Strategic Performance measure was replaced by Relative Total Shareholder
Return (TSR). The vesting schedules for the Comparative Costs and Return of Capital Employed (ROCE)
were also adjusted. Refer to section 4.5.2 for further details.
1.4. What changes are planned for the 2018 financial year?
The Company’s remuneration framework is continually monitored to ensure it remains effective, competitive and aligned to strategy.
At the 2017 Annual General Meeting, shareholders will be asked to approve an LTI grant to the CEO with a face value of 180% of his TFR
(i.e. $3.1m). This is an increase from previous grants, which have been based on a face value of 150% of TFR (i.e. $2.6m). The Board approved
this increase after considering benchmark data provided by independent Remuneration advisors, to encourage him to remain in the role and to
recognise his success in improving the Company’s performance since he became CEO in 2014. Since appointment, the CEO’s remuneration has
otherwise remained unchanged, and any value realised by him from the increased LTI opportunity will be entirely dependent upon achievement
of LTI performance conditions. His TFR and STI opportunity remain unchanged.
No other material changes are currently planned for the Executive remuneration framework during the 2018 financial year.
1.5. Currency
The currency used in this Report is US dollars which represents Newcrest’s reporting (presentation) currency.
Executive remuneration, which is paid in Australian dollars, is translated into US dollars for reporting purposes. The Total Fixed Remuneration
for Executives in Australian dollars is shown in section 5.1 to enable comparisons to be made in future years without the impact of changes in
exchange rates. The NED fees in Australian dollars are shown in section 7.3.
76
2. KEY MANAGEMENT PERSONNEL (KMP)
The following table details the Company’s KMP during the 2017 financial year.
Name
Role
Term
Executive Directors
Sandeep Biswas
Gerard Bond
Other Executives
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Former Executives
Jane Thomas
Non-Executive Directors
Peter Hay
Philip Aiken am
Roger Higgins
Lady Winifred Kamit
Rick Lee am
Xiaoling Liu
Vickki McFadden
John Spark
Managing Director and Chief Executive Officer (CEO)
Finance Director and Chief Financial Officer (CFO)
Full year
Full year
Executive General Manager (EGM) People
EGM Cadia and Lihir
EGM Wafi-Golpu
EGM Cadia and MMJV
EGM Public Affairs and Social Performance
EGM General Counsel and Company Secretary
Chief Development Officer (CDO)
EGM Gosowong, Telfer and Bonikro
EGM Gosowong and Telfer
From 30 January 2017
From 1 January 2017
From 1 January 2017
1 July 2016 – 31 December 2016
Full year
Full year
Full year
From 1 January 2017
1 July 2016 – 31 December 2016
EGM People
Ceased 9 September 2016
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Full year
Full year
Full year
Full year
Full year
Full year
From 1 October 2016
Full year
Former Non-Executive Directors
Richard Knight
Non-Executive Director
Ceased 16 August 2016
3. REMUNERATION GOVERNANCE
3.1. Role of the Board and Human Resources and Remuneration Committee (HRR Committee)
The Board takes an active role in the governance and oversight of Newcrest’s remuneration policies and is responsible for ensuring that the
Company’s remuneration strategy aligns with Newcrest’s short and long term business objectives.
The HRR Committee reviews, formulates and makes recommendations to the Board in relation to matters within its Charter, including
the remuneration arrangements of the CEO, Executives and the NEDs, and oversees the major components of the Board’s approved
remuneration strategy.
The Charter for the HRR Committee is available on the Company’s website: www.newcrest.com.au/about-us/corporate-governance. Current
members of the HRR Committee are Rick Lee (Chairman), Philip Aiken, Xiaoling Liu and Winifred Kamit, however all Directors are invited to
attend HRR Committee meetings.
3.2. External Remuneration Consultants
During the 2017 financial year, the HRR Committee obtained advice from KPMG as part of the review of the Company’s remuneration
arrangements, including:
• benchmarking data for CEO, Executive and NED remuneration; and
•
information and insights with respect to market practices and trends in remuneration within ASX listed and global gold companies.
In addition to the above, KPMG provided remuneration recommendations in relation to the CEO’s remuneration package to the HRR
Committee as defined by the Corporations Act 2001. KPMG was paid $14,102 (excluding GST) in relation to these recommendations.
KPMG provided a formal declaration confirming that its recommendations were made free from undue influence by the member of the key
management personnel to whom the recommendations relate to and, in view of this declaration and the protocols and processes governing
the engagement of KPMG and receipt of its recommendations, the Board is satisfied that each of the recommendations were free of undue
influence by such persons. KPMG was paid $1,091,841 (excluding GST) for other services provided during the 2017 financial year. These
services relate to a range of advisory and tax matters.
The engagement of KPMG was initiated by the HRR Committee, based on agreed protocols governing the engagement and processes set out
in the Company’s External Remuneration Consultants Policy.
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KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
REMUNERATION REPORT
4. OUR EXECUTIVE REMUNERATION FRAMEWORK
4.1. Remuneration Strategy
Our remuneration strategy is to provide market-competitive remuneration, having regard to the size and complexity of the Company, the scope
of each role, and the impact the Executive can have on Company performance.
The key elements of the remuneration strategy are to:
• attract and retain talented, high performing Executives (including by providing sign-on grants where appropriate to attract key talent);
• provide appropriate levels of “at risk” performance pay to encourage, recognise and reward high performance;
•
•
• ensure that there is an appropriate balance of risk and reward sharing between Executives and the Company.
incorporate business performance measures that align performance incentives with the long term interests of shareholders;
incorporate performance measures that reinforce our culture and values; and
Executive remuneration packages are benchmarked against comparable roles in:
• ASX 11 – 40 companies;
• a customised peer group comprising largely industrial, materials, energy and utilities companies of comparable scale and international
•
complexity; and
the following global gold mining companies: Goldcorp Inc, Yamana Gold Inc, Freeport-McMoRan Copper & Gold, Polyus Gold
International Ltd, Agnico Eagle Mines Limited, AngloGold Ashanti Ltd, Barrick Gold Corporation, Gold Fields Ltd, Eldorado Gold Corp,
Kinross Gold Corporation, IAMGOLD Corp and Newmont Mining Corporation.
TFR is targeted at the 50th percentile for comparable roles and experience/skills, while the total remuneration package for each Executive
(inclusive of both fixed and variable remuneration) is targeted at up to the 75th percentile for comparable roles and experience/skills.
4.2. Executive Remuneration Framework
The diagram below outlines the remuneration components (other than any sign-on grants) for the 2017 financial year for all Executives.
Further details regarding each of the remuneration components are provided in sections 4.3 to 4.5.
REMUNERATION TYPE
FIXED REMUNERATION
VARIABLE / AT-RISK REMUNERATION
TOTAL FIXED
REMUNERATION (TFR)
SHORT TERM
INCENTIVE (STI)
LONG TERM
INCENTIVE (LTI)
Delivered in cash
Delivered in equity
COMPONENT
Delivery
Composition
Base salary plus
superannuation
50% of STI outcomes
paid in cash after the
financial year.
50% of STI outcomes
deferred as shares, with
one half restricted for
one year and the other
half for two years.
Link with strategic
objectives
Set to attract, retain,
motivate and reward
high quality executive
talent to deliver on the
Company’s strategy
Outcomes based on a combination of business
performance and personal measures.
Subject to clawback and overarching Board
discretion.
Designed to:
• align interests of shareholders and Executives
through an appropriate level of “at risk” pay;
reward for increasing shareholder value by
meeting or exceeding Company and individual
objectives; and
•
• support the financial and strategic direction of
the business through performance measures.
78
Rights with a 3 year
vesting period and one
year holding lock.
Outcomes based on ROCE,
comparative cost position
and relative TSR.
Subject to clawback
and overarching
Board discretion.
Designed to:
• align interests of
shareholders and
Executives through an
appropriate level of
“at risk” pay; and
• encourage Executives
to focus on the key
performance drivers
which underpin
the Company’s
strategy to deliver
long term growth in
shareholder value.
The diagram below illustrates how the different components of remuneration are delivered over a three year cycle.
Salary
STI
LTI
FY2017
Salary
Paid during the year
FY2018
FY2019
FY2020
FY2021
Performance Period
(12 months)
50%
Cash
25% Deferred Shares
25% Deferred Shares
(12 months)
(24 months)
Performance Period
Vesting Period post-grant (Performance Rights)
(3 years)
Restricted Shares
(12 months)
Newcrest’s mix of remuneration components, expressed as a percentage of “maximum” earning opportunity, for current Executives, for the
2017 financial year is illustrated in the following graphs. Although the components of TFR, STI and LTI are described separately, they should be
viewed as part of an integrated package. Sign-on grants described in section 4.6 are not reflected in the graphs.
100%
80%
60%
40%
20%
0%
33.3%
27.8%
26.7%
22.2%
22.2%
22.2%
22.2%
20.0%
22.2%
20.0%
27.8%
33.3%
CEO
CFO & CDO
Other
Executives(1)
LTI
STI (Def)
STI (Cash)
TFR
(1)
For the period from 1 July 2016 to 31 December 2016, the maximum LTI and STI opportunities for Craig Jones were 100% and 160% respectively (the same as the
CFO and CDO). From 1 January 2017, his maximum LTI and STI opportunities decreased to 80% and 120% respectively as a result of his change in role (the same as
other Executives).
The “at risk” components are subject to deliberately challenging performance conditions. The potential “maximum” earning opportunity shown
above is not expected to be achieved each year, but is designed to only be achieved in respect of exceptional performance.
For the 2017 financial year, the total remuneration opportunities for the majority of the Executives were within the 50th – 75th percentile
range of the benchmarked ASX comparator groups.
4.3. Total Fixed Remuneration (TFR)
Feature
Composition
Description
TFR comprises base salary, superannuation contributions in line with statutory obligations, and any salary
packaged amounts (for example, novated lease vehicles). TFR is paid in Australian dollars.
Relevant Considerations
TFR is determined on an individual basis, considering the scope of the role, the individual’s skills and
expertise, individual and group performance, market movements and competitiveness.
Review
TFR is reviewed annually. The CFO received an increase of 6.2% to A$975,000 with effect from 1 October
2016, following benchmarking that was undertaken and an expansion in his accountabilities. Other EGMs
received increases as a result of the changed scope of their roles associated with the organisational
restructure that took effect 1 January 2017, as follows:
• EGM Wafi-Golpu (0.6% increase to A$775,000)
• EGM Gosowong, Telfer and Bonikro (19.2% increase to A$775,000)
TFR for KMP will be next reviewed in September 2017 taking into account benchmarking.
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KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITYRemuneration Mix as a Percentage of Maximum FY2017 DIRECTORS’ REPORT
REMUNERATION REPORT
4. OUR EXECUTIVE REMUNERATION FRAMEWORK (continued)
4.4. Short Term Incentive
4.4.1. Key features of the STI Plan for the 2017 financial year
Feature
Participation
Performance Period
Performance Conditions
Description
All Executives and employees from Supervisor level and above are invited to participate in the STI Plan.
The assessment period is the financial year preceding the payment date of the STI (i.e. 1 July 2016 –
30 June 2017).
Performance conditions are a mix of personal and business measures. Robust threshold, target and
maximum targets are established for all measures to drive high levels of business and individual
performance. The annual budget generally forms the basis for the “target” performance set by the Board.
The diagram below illustrates the weighting of the performance conditions, using the CEO’s personal
conditions as an example.
Sustainable &
Safe Performance
25%
Operational
Performance
25%
Value &
Cash Generation
25%
Strategy/Growth
25%
Personal
measures
40%
Business
measures
60%
Safety
25%
Earnings
25%
Costs
25%
FCF
25%
For further details in relation to the personal and business measures, including their composition, and how
they are set and assessed, refer to section 4.4.2.
Calculation of STI Award
STI Amount ($) = ((40% x personal outcome) + (60% x business outcome)) x “At Target” STI% x TFR
Business and personal outcomes are scored out of 200%, with 50% for threshold performance, 100% for
target performance and 200% for maximum performance. Business or personal measures that fail to meet
the threshold target score 0%. If the overall average of the four personal measures is below 50%, the CEO
and/or Board has the discretion to not make an STI award to that participant. Accordingly, the minimum
value of the STI Award is nil.
Payment, Delivery and Deferral For Executives, the STI is delivered 50% in cash and 50% in deferred shares in October 2017, following
finalisation of the audited annual Company results and the approval of all personal outcomes. Of the
deferred component, half is to be released after 12 months (in October 2018) and the remainder after
two years (in October 2019). Deferred shares are forfeited by the Executive if they resign or are dismissed
before the shares are released from the restriction. The Executives are entitled to dividends and voting
rights attaching to their deferred shares.
Cessation of Employment
during Performance Period
Clawback
Except at the discretion of the Board:
•
•
if a participant resigns or is dismissed, the STI is forfeited and any deferred shares are forfeited; and
if a participant ceases employment for any other reason, the STI award will be reduced on a pro rata
basis, but will remain payable and any deferred shares will remain on foot for the balance of the
relevant restriction period and then be released.
In general, the Board has the discretion to reduce or forfeit an STI award, or to seek recovery from a
participant, if an event or circumstance has occurred which has resulted in an inappropriate benefit being
conferred on a participant (including fraud, dishonesty, gross misconduct or if the outcomes are the result
of material error or misstatement of the financial accounts). The discretion may be exercised for a period of
two years from the vesting or award date.
Overriding Board Discretion
The Board retains overriding discretion to adjust the final outcome. This is an important measure to ensure
any STI award is appropriate in the circumstances.
80
4.4.2. STI performance conditions in detail
Business measures for the 2017 financial year
Business Measure
Weighting Reason the Performance Measure Was Adopted
Safety
25%
Total Recordable Injury Frequency
Rate (TRIFR(1)) (8.3%)
Major Hazard Audit and Significant
Potential Incident (SPI)(2) Action
Close Out on Time (8.3%)
Critical Control Management
Verifications(3) (CCM) (8.3%)
Earnings
25%
Adjusted Net Profit/(Loss) After
Tax and Before Significant Items
Costs
AISC per ounce(4)
25%
Free Cash Flow
25%
FCF
The Company is committed to reinforcing a strong safety culture and improving safety
leadership. The combined measures maintain a focus on safety performance, as measured
by TRIFR, drives critical actions and ensures effective controls are in place to prevent future
potential fatalities and/or serious injuries.
The earnings target is a direct financial measurement of the Company’s performance,
providing a strong alignment to the interests of shareholders. The results are based on the
statutory profit of the Group adjusted for the effect of commodity prices, foreign exchange
rates and other significant items determined by the Board which are considered to be
outside the control of Management. It provides a strong reflection of production delivery,
operational efficiency and cost management.
This measure is a highly relevant short and long term measure which is consistent with the
Company’s strategy of focussing on sustainable cash generation and profitability. It is
the primary unit cost measure in the gold industry, and is visible and readily understood.
It is based on publicly disclosed and reconciled results and is therefore a reliable measure
for use by the Company, adjusted for the effect of commodity prices and foreign exchange
rates and other significant items determined by the Board which are considered to be
outside the control of Management.
FCF is a highly relevant short and long term measure. It reflects cost and capital management
and production efficiencies. FCF is necessary to fund growth opportunities, repay debt and
ultimately pay dividends to shareholders. It is based on publicly disclosed and reconciled
results and is adjusted for the effect of commodity prices and foreign exchange rates and
other significant items determined by the Board which are considered to be outside the
control of Management.
(1) TRIFR is the total number of recordable injuries per million hours worked. It is a lagging indicator of safety performance.
(2)
Major Hazard Audit action close out, and SPI close out, ensures a stronger focus on addressing hazards which may lead to serious potential incidents in the future,
including the potential for a fatality. Actions are measured by reference to completion against their due date.
Critical Control Management Verification completion ensures that all planned System Verifications (SVs) and Field Control Critical Checks (FCCCs) have been
completed. Critical Control Management is the second pillar of Newcrest’s Safety Transformation Plan and is focussed on verifying that effective controls are in
place and working for every high risk task.
(3)
(4) All-In Sustaining Cost (AISC) metrics as per World Gold Council Guidance Note on Non-GAAP metric released 27 June 2013.
Personal measures for the 2017 financial year
For the 2017 financial year, the key elements of the personal performance measures for Sandeep Biswas were set by the Board to align
with the Company’s strategic goals. The personal performance measures were selected to recognise the important role that the CEO plays
in personally advancing the Company’s strategic objectives of improving the safety and sustainability performance of the Company, its
operational performance, value and cash generation and progressing its growth initiatives.
The personal performance measures for other Executives for the 2017 financial year focussed on their areas of responsibility which, in the case
of the operational Executives, included safety, production, cost saving and operational efficiency. Non-financial targets are generally aligned to
core values, including safety and key strategic and growth objectives. If there is a fatality within the area of accountability of an Executive, the
Board may exercise discretion to adjust the assessment of the personal safety measure, including a zero award, where appropriate.
Further detail as to the personal measures for the CEO and CFO and outcomes with respect to such measures is set out in section 5.3.1.
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KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
REMUNERATION REPORT
4. OUR EXECUTIVE REMUNERATION FRAMEWORK (continued)
4.4. Short Term Incentive (continued)
4.4.3. STI opportunities for Executives
The target percentages awarded differ by level. For “at target” performance:
the CEO had the opportunity to receive 100% of TFR;
the CFO and CDO had the opportunity to receive 80% of TFR;
•
•
• Craig Jones had the opportunity to receive 80% of TFR for the period as EGM Cadia and MMJV and 60% of TFR for the period as
EGM Wafi-Golpu;
• Craig Jetson had the opportunity to receive 60% of TFR for the period as KMP; and
•
the other Executives had the opportunity to receive 60% of TFR.
Each Executive had the opportunity to receive double the “at target” percentage for “maximum” performance. Targets are set with a level of
“stretch” built in, and as such, maximum STI targets are designed to only be achieved in respect of exceptional performance.
4.5. Long Term Incentive
4.5.1. Key Features Of The 2016 LTI Plan (under which rights were issued during the 2017 financial year)
Feature
Equity type
Grant Date
LTI Value
Description
Allocations are in the form of rights to shares in the Company (Rights). Upon vesting, each Right is
automatically exercised at a nil exercise price and vests as one fully paid ordinary share. As the Rights
represent a participant’s ‘at risk’ long term incentive component of their remuneration package, the
Rights are granted at no cost to the participant.
The grant date was 15 November 2016 and Rights under the plan will vest, subject to the satisfaction of
the performance conditions, on 15 November 2019. The total number of Rights held by each Executive is
summarised in section 9.4.
For these purposes, the value of each Right is calculated based on the value of the underlying security, using
the five day VWAP of Newcrest’s share price immediately preceding the grant date.
Performance period
The assessment period is the three financial years commencing on 1 July 2016.
Performance Conditions
Rights issued under the 2016 LTI Plan are subject to the Performance Conditions shown below:
Comparative
cost position
33%
Relative total
shareholder
return
33%
ROCE
33%
The Performance Conditions have been set to align with the long-term goals and performance of Newcrest
and the generation of shareholder returns. Further details in regards to the Performance Conditions are
detailed in section 4.5.2.
Rights vest three years from the grant date subject to the Performance Conditions being met. Rights are
automatically exercised on vesting. On vesting of the Rights, the Board has the discretion, subject to the LTI
Plan Rules, to issue new shares, purchase existing shares on-market or pay a cash equivalent amount. The
practice in recent years has generally been to purchase shares on-market.
For Executives, shares received on the vesting and automatic exercise of Rights are subject to a 12 month holding
lock.
No dividends are paid on unvested Rights. Dividends, when applicable, will be paid for vested shares held
under the holding lock.
Vesting
Holding lock
Dividends
82
Feature
Clawback
Description
In general, the Board has the discretion to reduce or forfeit an LTI award for a participant if an event or
circumstance has occurred which has resulted in an inappropriate benefit being conferred on a participant
(including fraud, dishonesty, gross misconduct or if the outcomes are the result of material error or
misstatement of the financial accounts). The discretion may be exercised for a period of two years from the
vesting or grant date.
Cessation of employment
Except at the discretion of the Board:
•
•
if a participant gives a notice of resignation or is dismissed, unvested Rights will lapse on cessation
of employment; and
if a participant ceases employment for any other reason, pro-rata unvested Rights will remain on foot and
vest subject to the application of the performance conditions and any holding lock in the terms of grant.
For all leavers, any restricted shares will be released after expiration of the holding lock period (subject to
the Board exercising a discretion under the clawback policy).
The Board may exercise its discretion to allow all or some unvested Rights to vest if a change of control
event occurs.
There is no retesting. Rights that do not vest based on performance over the three year performance period
will lapse on the third anniversary of the grant date.
Change of control
Retesting
Overriding Board discretion
The Board retains overriding discretion to adjust the final outcome. This is an important measure to ensure
any LTI award is appropriate in the circumstances.
4.5.2. 2016 LTI performance conditions in detail
2016 LTI Performance Conditions
Component
Assessment
Reason the Performance Measure Was Adopted
This measure is closely aligned to Newcrest’s strategic
objective to be a low cost producer and aligned to our
relative value proposition for gold equity investors.
The AISC result is a sound basis for the Company to
use in assessing comparative cost as it is based on
publicly disclosed results.
Comparative Cost Position
The Company’s measure for
the Comparative Cost Position
performance condition is the AISC,
adopted by the Company in relation
to costs reporting.
The AISC incorporates costs related
to sustaining production.
Performance over the three year
performance period, is compared
against all other producers based on
data sourced from an independent
provider selected by the Board. Cost
performance for each of the three
years of the performance period is
averaged to determine the number
of Rights that may be exercised in
relation to this performance measure.
The vesting scale for this measure is as
follows:
• 0% vests if Comparative Costs are at or
above the 50th percentile;
• 40% vests if Comparative Costs are less
than the 50th percentile, but at or above
the 25th percentile;
• 100% vests if Comparative Costs are
below the 25th percentile.
Straight line vesting occurs between
these thresholds.
The Comparative Costs measure will be
assessed using peer data for the period
from 1 July 2016 until 30 June 2019.
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KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
REMUNERATION REPORT
4. OUR EXECUTIVE REMUNERATION FRAMEWORK (continued)
4.5. Long Term Incentive (continued)
Component
Assessment
Reason the Performance Measure Was Adopted
Return on Capital Employed (ROCE)
ROCE is an absolute measure, defined
as underlying earnings before interest
and tax (EBIT), divided by average
capital employed, being shareholders’
equity plus net debt.
For each of the three years of the
performance period ROCE is averaged
to determine the number of Rights
that may be exercised in relation to
this performance measure.
Average capital employed is calculated
as a simple average of opening
and closing balances. If material
equity transactions (for example,
significant equity issuances or asset
impairments) occur such that the
simple average is not representative
of actual performance, the average
capital employed for the year is
adjusted for the effect of these
transactions.
Average capital employed for the
purpose of this calculation excludes
approved capital invested in long-
dated projects until commercial
production is achieved, so as not to
discourage Management’s pursuit
of long-dated growth options.
Relative TSR
Total Shareholder Return (TSR)
is a measure of performance
over time that combines share
price appreciation and dividends
paid to show the total return
to the shareholder, expressed
as an annualized percentage.
Relative TSR is a measure of the
Company’s TSR performance
against that of other companies.
84
The vesting scale for this measure is
as follows:
• 0% vests if ROCE is less than 6%;
• 30% vests if ROCE is 6%;
• 100% vests if ROCE is 13% or more;
Straight line vesting occurs between
these thresholds.
ROCE aligns Management action and company
outcomes closely with long term shareholder value.
ROCE provides a balance to the other LTI metrics as
it serves as a counter to “buying” success.
ROCE is also based on publicly disclosed and
reconciled results and is therefore a sound basis for
the Company to use in assessing value.
Impairments are excluded from the capital base in
the year in which they occur, such that the return is
on a pre-impairment basis and LTI participants do
not benefit from the impairment. However, the post
impairment capital base is used in the calculation
of returns in subsequent years so as to not de-
incentivise current or new management.
Relative TSR will be measured by comparing
Newcrest’s AUD share price performance
against the S&P TSX Global Gold Index over
three years.
Relative TSR will be assessed by
averaging performance over the six month
period immediately prior to the start
(1 January 2016 – 30 June 2016) and the
end (1 January 2019 – 30 June 2019) of
the performance period.
The treatment of dividend and capital
adjustments will be in accordance with the
adjustments made by the data provider.
The vesting schedule for this measure is
detailed below.
• 0% vests if Relative TSR is below
the Index;
The Relative TSR measure provides alignment
between the outcomes of the Plan and the returns
experienced by shareholders, in order to specifically
encourage outperformance against other gold
mining companies.
The S&P TSX Global Gold Index is the most appropriate
comparison point for Newcrest to use for the Relative
TSR measure because:
• As a gold mining company, Newcrest’s share
price performance is significantly impacted by
fluctuations in the gold price. Accordingly, it is
appropriate to compare Newcrest’s performance
to that of other gold mining companies.
• There are few ASX-listed gold mining companies
which act as a directly relevant comparison to
Newcrest given the differences in scale, and it
is therefore considered that a comparison with
international peers is more appropriate.
• 50% vests if Relative TSR is equal to
• Rather than hand-pick a selection of peer gold
the Index;
• 100% vests if Relative TSR exceeds the
Index by 18 percentage points or more.
Straight line vesting occurs between
these thresholds.
mining companies from various stock exchanges
globally, the Board considers that Newcrest’s
performance should be compared to the S&P TSX
Global Gold Index as each of Newcrest’s major
peers are constituents in the S&P TSX Global
Gold Index.
4.5.3 LTI opportunities For Executives
The maximum opportunity for the 2016 LTI grant was as follows:
•
•
•
•
•
for the CEO, 150% of TFR;
for the CFO and CDO, 100% of TFR;
for Craig Jones, 100% of TFR in his capacity as EGM Cadia and MMJV for the period from 1 July to 31 December 2016, and 80% of TFR
in his capacity as EGM Wafi-Golpu for the period from 1 January 2017;
for Craig Jetson, 80% of TFR for the period as KMP; and
for other Executives, 80% of TFR.
Section 4.2 indicates the value of the grants expressed as a percentage of the total remuneration package.
4.5.4 Outlook for 2017 LTI Performance Conditions (2018 Financial Year)
The LTI Performance Conditions to be adopted for grants made during the 2018 financial year will remain unchanged to those detailed above
for the 2016 LTI Plan.
4.6. Sign-on grants
No sign-on grants were issued to new Executives during FY17. However, the following sign-on arrangements detailed in the 2016
Remuneration Report continued to apply, namely:
• On commencement, Michael Nossal received a total of 116,730 sign-on performance rights worth A$1,500,000 (US$1,092,750)
calculated using the five day VWAP immediately prior to his commencement date. 58,365 of these rights vested as Newcrest ordinary
shares in August 2016. He also received an additional cash payment of $75,000 (US$56,100) in September 2016. The remaining
58,365 rights are due to vest in July 2017 (or as soon as possible afterwards in accordance with the Securities Dealing Policy). The
rights were granted at no cost, have a nil exercise price and are not subject to any performance conditions other than a service condition.
• On commencement, Ian Kemish received a total of 18,993 sign-on performance rights worth A$390,000 (US$284,115) calculated
using the five day VWAP immediately prior to his commencement date of 16 May 2016. 4,383 of these sign-on rights vested as
Newcrest ordinary shares in August 2016. An additional cash payment of A$80,000 (US$61,640) was made in July 2017. 4,870 rights
are due to vest on 25 November 2017 and 9,740 rights are due to vest on 24 November 2018 (or as soon as possible afterwards in
accordance with the Securities Dealing Policy). The rights were granted at no cost, have a nil exercise price and are subject to adequate
performance and continuing employment (other than in limited circumstances).
In addition, Craig Jones was issued 15,845 sign-on performance rights worth A$300,000 (US$217,050), calculated using the five day VWAP
immediately prior to his appointment date of 1 January 2017 to the role of EGM Wafi-Golpu. The rights will vest on 30 June 2018 (or as soon
as possible afterwards in accordance with the Securities Dealing Policy) subject to the performance conditions being met. The rights were
granted in compensation for a reduction in his “at target” STI award from 80% to 60%, and a reduction in his maximum LTI award from 100%
to 80% effective from 1 January 2017. The rights were granted at no cost, have a nil exercise price and are subject to adequate performance
and continuing employment (other than in limited circumstances).
The above sign-on payments and grants of rights are detailed in the Remuneration Tables in section 9 of this report. The minimum value of
sign-on payments that have not yet been made or are unvested is nil if the performance / service conditions are not met.
85
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
REMUNERATION REPORT
5. REMUNERATION OUTCOMES
5.1. Total Fixed Remuneration (TFR) for the 2017 financial year
Set out below is the TFR for the current Executives as at 30 June 2017, shown in Australian dollars. This information is provided to enable
comparisons to be made in future years, without the impact of changes in exchange rates.
Name
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
TFR A$
2,300,000
975,000
660,000
925,000
775,000
700,000
700,494
975,000
775,000
5.2. Relationship between STI and LTI outcomes for the 2017 financial year and Newcrest’s Financial Performance
Newcrest’s key operational and financial outcomes for the 12 months ended 30 June 2017 are as follows:
• Statutory profit of $308 million and Underlying profit of $394 million
• All-In Sustaining Cost increased by 3% to $787 per ounce
• EBITDA margin improved by 3% to 40.5%
• All-In Sustaining Cost margin of $476 per ounce
• Free cash flow of $739 million
• Gold production of 2.381 million ounces, a decrease of 2%
• Copper production of 83.9 thousand tonnes, an increase of 1%
• Net debt of $1.5 billion, reduced by $608 million (or 29%) since 30 June 2016
• Net debt to EBITDA ratio improved to 1.1 times
• Gearing reduced to 16.6% at 30 June 2017, down from 22.8% at 30 June 2016
•
Interim dividend of 7.5 cents per share and final dividend of 7.5 cents per share (70% franked).
The following table provides a summary of the key financial results for Newcrest over the past five financial years.
Five Year Summary of Newcrest’s Financial Performance
Year Ended 30 June
Statutory profit/(loss)
Underlying profit(1)
Cash flows from operating activities
Free cashflow(2)
All–in sustaining cost(3)
EBITDA Margin
EBIT Margin
Gearing(4)
Net Debt to EBITDA(5)
ROCE
Share price at 30 June(6)
Earnings/(loss) per share(7)
Basic
Underlying
Dividends
Gold produced
Average realised gold price
Measure
US$ million
US$ million
US$ million
US$ million
US$/oz sold
%
%
%
times
%
A$
US$ cents/share
US$ cents/share
US$ cents/share
000’s ounces
US$/oz
2017
308
394
1,467
739
787
40.5
20.7
16.6
1.1
7.9
20.16
40.2
51.4
15.0
2,381
1,263
2016
332
323
1,241
814
762
39.2
18.0
22.8
1.6
6.2
23.00
43.3
42.1
7.5
2,439
1,166
2015
376
424
1,280
854
780
38.5
22.6
29.3
2.1
7.8
13.02
49.1
55.3
–
2,423
1,236
2014
(2,105)
393
965
136
897
37.5
20.3
33.8
2.7
6.2
10.52
(274.6)
51.3
–
2,396
1,292
2013
(5,319)
459
1,148
(1,484)
1,318
39.0
19.7
29.3
2.6
5.0
9.87
(694.5)
59.9
12.5
2,110
1,585
This table includes non-IFRS financial information. Refer to section 6 of the Operating and Financial Review for an explanation and reconciliation of non-IFRS terms.
(1) Underlying profit is profit after tax before significant items attributable to owners of the parent.
(2) Free cashflow is calculated as cash flow from operating activities less cash flow related to investing activities.
(3)
AISC metrics as per World Gold Council Guidance Note on Non-GAAP Metrics, released in June 2013. Newcrest’s AISC will vary from period to period as a result of
various factors including production performance, timing of sales, the level of sustaining capital and the relative contribution of each asset.
(4) Gearing ratio is calculated as net debt at the end of the reporting period divided by net debt plus equity.
(5) Net debt to EBITDA is calculated as net debt at the end of the reporting period divided by the rolling 12 month EBITDA.
(6) Opening share price on 1 July 2012 was A$22.61.
(7)
Basic EPS is calculated as net profit after tax and non-controlling interests (statutory profit) divided by the weighted average number of ordinary shares. Underlying
earnings per share is calculated as net profit after tax and non-controlling interests and before significant items (underlying profit) divided by the weighted average
number of ordinary shares.
86
The graphs below show Newcrest’s performance over the last five years for metrics used to determine the business component of STI awards,
before any adjustments for fatalities as a result of the exercise of Board discretion.
TRIFR
3.8
3.6
3.4
3.2
3.0
2.8
3.7
3.6
3.6
3.3
3.1
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
3
1
0
2
Major Hazard Audit and
SPI Action Close Out on Time1
Statutory Profit/(Loss) (US$m)
102
100
98
96
94
92
90
%
100% 100%
98%
97%
94%
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
3
1
0
2
1,000
0
(1,000)
(2,000)
(3,000)
(4,000)
(5,000)
(6,000)
308
)
5
0
1
2
(
,
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
Underlying Profit (US$m)
AISC (US$ per oz sold)
Free Cashflow (US$m)
500
400
300
200
100
0
459
424
394
393
323
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
3
1
0
2
1400
1200
1000
800
600
400
200
0
897
787
762
780
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
3
1
0
2
1000
500
0
(500)
(1000)
(1500)
(2000)
1
The measure for 2014 and 2013 was different to the current measure, as it comprised only Safety Action Register Close Out.
739 814 854
136
)
9
1
3
5
(
,
3
1
0
2
)
4
8
4
1
(
,
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
3
1
0
2
87
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY3323761,318 DIRECTORS’ REPORT
REMUNERATION REPORT
5. REMUNERATION OUTCOMES (continued)
5.3. STI Outcomes for 2017 financial year
5.3.1. Performance against STI Objectives
Element
Weight
Performance
Description
Threshold
Target
Maximum
Business Measures
Safety (1) – TRIFR
Safety (2) – Major Hazard
Audits & SPI action close out
on time
Safety (3) – Critical Controls
Management Verifications
Earnings – NPAT before
significant items (US$m)
60%
5%
5%
5%
15%
Cost – AISC/oz (US$)
15%
Cash flow: FCF (US$m)
15%
Total Business outcome
Personal Measures
(Sandeep Biswas – CEO)
Sustainable and Safe
Performance
Operational Performance
Value and cash generation
Strategy and Growth
Personal Measures
(Gerard Bond – CFO)
People
Capital management
and improvement in risk
management and assurance
Drive value from Marketing
and IT
Cash delivery
Personal Measures
(other Executives)
Individual measures based
on initiatives and key project
deliverables linked to company
strategy and performance
40%
10%
10%
10%
10%
40%
15%
45%
15%
25%
40%
• TRIFR of 3.29 was at the level
required to achieve the minimum
• 98% were completed on time
• 1,945 System Verifications
and 176,254 Field Control
Critical Checks were completed
during FY17
• Outcome of US$453m, inclusive
of adjustments(1), was slightly
below target
• Outcome of $765/oz, inclusive of
adjustments(1),(2) that improved the
outcome, was above target(2)
• Outcome of $849m, inclusive of
adjustments(1) that improved the
outcome, was well above target
The total business outcome was
125% of target
• Excellent close outs of Serious
Potential Incidents and Major
Hazard Audits, and embedding
widespread verification of
Critical Controls
Improvements in Organisational
Health, including diversity
•
• Demonstrated significantly
improved milling rates at Lihir
• Excellent cash generation and
delivery of efficiency initiatives
• Broad portfolio of growth/
exploration pathways progressed
•
Improvements in Organisational
Health, including diversity
• Successful implementation
and/or execution of major
risk management and capital
management frameworks
• Significant progress on IT
simplification and productivity
• Excellent cash generation and
delivery of efficiency initiatives
• Other Executives had a broad
range of objectives against
which performance varied
significantly (from threshold
to close to maximum)
Adjustments made to measures are in accordance with the detail provided in section 4.4.2. The adjustments are for the effect of commodity prices, foreign exchange
rates and other significant items determined by the Board which are considered to be outside the control of Management. In relation to the 2017 financial year the
adjustment for non-controllable items included events such as the Cadia seismic event. The cash flow measure was also adjusted for the $63m investment in SolGold Plc.
The reported AISC cost was normalised by US$28/oz for the Cadia seismic event. Refer to section 6.3 of the Operating and Financial Review for further detail.
(1)
(2)
88
A reconciliation of the Earnings measure outcome to statutory profit is detailed below:
Statutory profit
Add back: Significant items after tax(1)
Underlying profit
Adjust: Board agreed adjustments(2)
Earnings measure
2017
US$m
308
86
394
59
453
2016
US$m
332
(9)
323
(57)
266
(1) Refer to section 2.6 of the Operating and Financial Review for details of significant items.
(2)
Represents adjustments for the effect of commodity prices, foreign exchange rates and other significant items determined by the Board which are considered to be
outside the control of Management. In relation to the 2017 financial year the adjustment for non-controllable items includes events such as the Cadia seismic event.
5.3.2. STI Outcomes for all Executives for the 2017 financial Year
The table below summarises performance against Personal Measures and final STI outcomes for all Executives for the 2017 financial year.
Executive
Sandeep Biswas
Gerard Bond
Melanie Allibon(4)
Craig Jetson(5)
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Jane Thomas(6)
% of STI
Target
Awarded(1)
% of TFR
awarded as
STI(2)
Actual STI
Awarded(3)
US$’000
STI Amount
Deferred(3)
US$’000
% of Max STI
Opportunity
Awarded
% of Max STI
Opportunity
Forgone
137.8%
135.0%
121.0%
137.0%
115.0%
123.0%
119.0%
127.0%
121.0%
–
137.8%
108.0%
30.2%
40.8%
80.6%
73.8%
71.4%
101.6%
72.6%
–
2,390
794
150
284
469
390
377
747
390
–
1,195
397
75
142
235
195
189
374
195
–
68.9%
67.5%
60.5%
68.5%
57.5%
61.5%
59.5%
63.5%
60.5%
–
31.1%
32.5%
39.5%
31.5%
42.5%
38.5%
40.5%
36.5%
39.5%
–
(1) The assessment against personal measures for the Executives ranged from 100% to 157%.
(2)
Calculated using the Total Fixed Remuneration values detailed at section 4.3 and the percentages for Target Performance disclosed in the table in section 4.4.1.
However, for Craig Jones and Philip Stephenson, the amounts tabled above are the sum of two separate six month calculations. The Actual STI awarded to each of
them for the period 1 July 2016 to 31 December 2016 was calculated using their TFR at 31 December 2016 (A$770,494 and A$650,000 respectively). The STI
awarded to Craig Jones was calculated on the basis of an 80% opportunity “at target” for the period 1 July to 31 December 2016 and 60% “at target” for the period
1 January to 30 June 2017 as noted in section 4.2. The Actual STI awarded to each of them for the period 1 January 2017 to 30 June 2017 was calculated using
their TFR at 30 June 2017, as detailed in section 5.1.
(3) Amounts have been translated from Australian dollars to US dollars using an average exchange rate of 0.7541.
(4) Melanie Allibon’s STI entitlement has been pro-rated from her commencement date of 30 January 2017.
(5) Craig Jetson’s STI award only includes the amount related to the period when he was a KMP.
(6)
Jane Thomas was not eligible to receive an award under the STI Plan for the 2017 financial year due to her resignation.
5.4. Vesting Outcomes for 2013 LTI Plan
Following the completion of the performance period from 1 July 2013 to 30 June 2016, the 2013 LTI Plan vested on 15 November 2016 at
29.3% of maximum based on the assessment of performance against the applicable measures.
Element
Comparative Cost
ROCE
Reserves Growth
TOTAL VESTING
Weighting
Performance Achieved
Percentage Vesting
33.3%
33.3%
33.3%
19th percentile
6.54%
Less than the minimum
29.3%
0.0%
0.0%
29.3%
(70.7% lapsed)
5.5. Estimated Vesting of LTI Rights in the 2018 financial year (2014 LTI Plan)
The 2014 LTI Plan is expected to vest on or about 7 November 2017. The vesting outcome is not yet known but it is anticipated that it will
be in the range of 60 to 70%. Relevant considerations in finalising the vesting outcome will include confirmation of the Comparative Cost
outcomes, for which an assessment is yet to be made. The performance conditions which apply to the 2014 LTIs are Comparative Cost (33.3%),
ROCE (33.3%) and Strategic Performance (33.3%). The Strategic Performance condition comprises replacement of reserves and resources
(40%), organisational health (20%), diversity targets (20%) and growth (20%). Additional details on the performance standards attached to
each performance condition were disclosed in the 2015 Remuneration Report.
89
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY DIRECTORS’ REPORT
REMUNERATION REPORT
6. EXECUTIVE SERVICE AGREEMENTS AND TERMINATION ARRANGEMENTS
Remuneration and other terms of employment for the Executives are formalised in Executive Service Agreements (ESA). Each of the ESAs
provides for the payment of fixed and performance based at risk remuneration, employer superannuation contributions, other benefits such as,
death and disablement insurance cover via the Newcrest Superannuation Plan, and salary continuance cover. The ESAs do not have a fixed end date.
The remuneration for each Executive during the 2017 financial year is detailed in sections 1.2 and 9.1, and positions held are detailed in section 2.
Each ESA provides that the Executive may terminate their employment by giving the Company:
(a) in the case of Sandeep Biswas, Gerard Bond, Francesca Lee, Ian Kemish and Michael Nossal, three months’ notice; and
(b) in the case of Melanie Allibon, Craig Jetson, Craig Jones and Philip Stephenson, six months’ notice.
The difference in notice period for the Executives has arisen due to a general change in policy. Those Executives mentioned in paragraph (b)
above entered into ESAs following the change in policy.
The Company may terminate the Executive’s employment by giving 12 months’ notice and the Company may, at its discretion, elect to pay the
Executive an amount in lieu of notice for any portion of the 12 months not worked.
The Company may terminate an Executive’s employment without notice at any time for cause. No payment in lieu of notice, or any payment in
respect of STI or LTI is payable under the ESA in this circumstance.
On cessation of employment, STI or LTI awards vest in accordance with the relevant Plan Rules. Refer to sections 4.4 and 4.5 for further details.
7. NON-EXECUTIVE DIRECTORS’ REMUNERATION
7.1. Remuneration Policy
The Non-Executive Director (NED) fees and other terms are set by the Board. NEDs are paid by way of a fixed Director’s fee and Committee
fees commensurate with their respective time commitments and responsibilities. The level and structure of the fees is based upon the need
for the Company to attract and retain NEDs of suitable calibre, the demands of the role and prevailing market conditions.
In order to maintain impartiality and independence, NEDs do not receive any performance-related remuneration and are not entitled to
participate in the Company’s short and long term incentive schemes. NEDs are not provided with any retirement benefits, other than statutory
superannuation contributions.
7.2. Fee Pool
The maximum amount of fees (including superannuation contributions) that can be paid to NEDs is capped by a pool approved by shareholders.
At the Annual General Meeting held on 28 October 2010, shareholders approved the current fee pool of A$2,700,000 per annum
(US$2,036,070 using the average exchange rate of 0.7541 for the 2017 financial year).
7.3. Fee Structure
In reviewing the level of fees, the Board obtained independent market data from KPMG. Whilst NED fees have not increased since 2011, the
benchmarking of the fees to the ASX 11 - 40 comparator group showed that the current NED fees are competitively positioned, and as a result,
the Board decided that there would be no change to existing fee levels.
The table below outlines the main Board and Committee fees as at 30 June 2017.
Board Fees
Chairperson (2)
Members
Committee Fees
Audit & Risk Committee
Chairperson
Members
Safety & Sustainability Committee
Chairperson
Members
HRR Committee
Chairperson
Members
Per Annum
A$’000
Per Annum
US$’000(1)
600
200
50
25
40
20
40
20
452
151
38
19
30
15
30
15
(1) Board and Committee fees have been translated from Australian dollars to US dollars using an average exchange rate of 0.7541 for the 2017 financial year.
(2) The Chairperson of the Board does not receive any additional payments for his/her role as Chair or Member of any Committee.
Under the Company’s Constitution, NEDs may be reimbursed for reasonable travel, accommodation and other expenses incurred while
engaged on the business of the Company. NEDs may also be remunerated for additional services, for example, if they undertake specialist
or consulting work on behalf of the Company outside the scope of their normal Director’s duties. No fees for additional services were paid to
NEDs for the current or prior financial year.
90
8. SHAREHOLDINGS
8.1. Minimum Shareholding Policy
All KMP are required to hold shares in the Company. The Company introduced a Minimum Shareholding Requirement Policy applicable to all
KMP from 1 July 2015. The policy requires that:
the CEO own a minimum of 100% of TFR in shares, to be acquired within five years;
•
• all Executives own a minimum of 50% of TFR in shares, to be acquired within five years; and
• all NEDs own a minimum of one year’s total annual fees in shares, to be acquired within three years (or as agreed with the Chairman for
newly appointed NEDs),
from the later of appointment or 1 July 2015.
8.2. Executive Shareholdings
A summary of current shareholdings of Executives, including their closely related entities, as at 30 June 2017 are set out below.
Executive
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Former Executives
Jane Thomas
Opening
balance(1)
Granted as
remuneration(2)
Acquired on
exercise of
Rights(3)
Net other
movements(4)
Closing
balance(5)
Value as at
30 June 2017(6)
A$’000
Percentage
of TFR
%
200,752
40,808
5,000
12,998
7,110
–
–
–
–
70,418
23,778
–
–
16,124
4,383
12,948
80,733
10,844
51,793
35,126
–
–
17,678
–
–
–
–
(53,618)
(17,563)
–
–
–
(4,383)
–
(28,365)
–
269,345
82,149
5,000
12,998
40,912
–
12,948
52,368
10,844
5,430
1,656
101
262
825
–
261
1,056
219
–
–
–
–
–
–
236
170
15
28
106
–
37
108
28
–
(1)
(2)
Opening balance is as at 1 July 2016 for all except Craig Jetson and Melanie Allibon. The opening balance for Craig Jetson is 1 January 2017, when he commenced as
an EGM and became KMP. The opening balance for Melanie Allibon is 30 January 2017, when she commenced as an EGM and became KMP.
Remuneration granted in FY2017 includes shares allocated in respect of the deferral of 50% of an Executive’s STI award for the 2016 STI Plan. Vesting of deferred
shares remains subject to service. The amount included for Ian Kemish and Michael Nossal includes the vesting of sign-on rights as detailed in section 4.6.
(3) Shares acquired on exercise of rights represents the shares acquired on vesting of Rights under the 2013 LTI Plan.
(4) Net other movements represents the sale of shares by Executives.
(5) For current Executives, the closing balance is as at 30 June 2017. For former Executives, the closing balance is at the date of their departure.
(6) Based on closing share price on 30 June 2017 of A$20.16
8.3. Non-Executive Directors’ Shareholdings
A summary of current shareholdings of NEDs, including their closely related entities, as at 30 June 2017 are set out below.
Non-Executive Directors
Peter Hay
Philip Aiken
Roger Higgins
Winifred Kamit
Rick Lee
Xiaoling Liu
Vickki McFadden
John Spark
Former Non-Executive Directors
Richard Knight
Opening
balance(1)
Net other
Movements
Closing
balance(2)
Value as at
30 June 2017(3)
A$’000
Percentage of
ongoing
annual fees
%
52,000
17,769
12,294
326
28,447
10,000
–
32,105
451
155
–
–
–
–
10,000
87
52,451
17,924
12,294
326
28,447
10,000
10,000
32,192
40,000
–
40,000
1,057
361
248
7
573
202
202
649
176
139
113
3
216
82
90
259
(1)
Opening balance is as at 1 July 2016 for all except Vickki McFadden. The opening balance for Vickki McFadden is 1 October 2016, when she commenced as a
Non-Executive Director.
For current Non-Executive Directors, the closing balance is as at 30 June 2017. For former Non-Executive Directors, the closing balance is at the date of their departure.
(2)
(3) Based on closing share price on 30 June 2017 of A$20.16.
8.4. Securities Dealing Policy
The Company has a Securities Dealing Policy which prohibits the use by Directors, Executives and employees of hedging and derivatives such
as caps, collars, warrants or similar products in relation to Newcrest securities, including shares acquired under the Company’s equity incentive
schemes, whether or not they are vested. The Policy also prohibits entry into transactions in associated products that operate to limit the
economic risk of their security or interest holdings in the Company. Employees are not permitted to enter into margin loans in relation to
Newcrest securities at any time without prior approval from the Chairman or Company Secretary. It is available on the Company’s website at:
www.newcrest.com.au/about-us/corporate-governance.
91
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY Perfor-
mance
related
(J)
%
72.6
65.5
45.8
46.4
60.1
32.8
58.4
47.7
47.0
DIRECTORS’ REPORT
REMUNERATION REPORT
9. STATUTORY TABLES
9.1. Executive Remuneration
Executives
Salary
SHORT TERM
Short
Term
Incentive
Other
Cash
Benefits
LONG
TERM
POST-
EMPLOY-
MENT
SHARE-BASED PAYMENTS
Other
Benefits
Super-
annuation
LTI
Rights
STI
Deferral
Leave
Other
Total
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
2017
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Former Executives
Jane Thomas
Total
2016
Sandeep Biswas
Gerard Bond
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Jane Thomas
Total (1)
1,720
710
203
341
568
513
513
720
522
1,195
397
75
142
235
195
189
374
195
99
–
5,909
2,997
1,662
655
547
60
496
686
453
489
5,048
1,059
358
243
–
195
337
163
184
2,539
27
–
–
8
–
86
–
11
40
–
172
19
–
103
8
–
153
47
28
358
41
10
2
1
9
27
7
8
49
1
155
19
9
130
–
6
7
47
39
257
19
(12)
16
24
(16)
12
(9)
22
11
(41)
26
46
11
9
1
9
17
17
30
2,503
685
90
96
561
103
403
322
232
1,124
289
28
92
183
73
147
271
137
–
–
–
–
75
106
–
283
–
6,644
2,094
421
711
1,630
1,130
1,265
2,026
1,201
15
15
7
7
15
15
15
15
15
4
–
–
–
63
n/a
123
4,995
2,344
464
17,185
14
14
14
4
14
14
14
14
931
303
224
–
131
94
69
(37)
852
135
91
–
74
127
61
–
66
–
–
82
–
820
–
–
4,668
1,485
1,361
155
925
2,255
871
747
60.9
53.6
41.0
n/a
43.2
24.7
33.6
19.7
140
102
1,715
1,340
968
12,467
(1)
Total Executive remuneration for the 2016 financial year excludes Executives who ceased being an Executive in the 2016 financial year. Total remuneration for
these Executives in 2016 was US$234,000.
The table above details the statutory remuneration disclosures as calculated with reference to the Corporations Act 2001 and relevant
accounting standards. All Executives are compensated in Australian dollars. Remuneration has been presented in US dollars, consistent with
Newcrest’s presentation currency. All remuneration components have been translated from Australian dollars to US dollars using an average
rate of 0.7541 (2016: 0.7285).
Where applicable, remuneration is pro-rated for the time periods during the 2017 financial year that the Executive was a KMP. An explanation
of the relevant remuneration items included in the tables is provided in the associated footnotes. The figures provided in relation to share
based payments (columns G to I) are calculated in accordance with accounting standards and represent the amortised fair value of equity
instruments that have been granted to Executives. Note that, in many cases, this methodology has made it appear that LTI values have
increased between 2016 and 2017. In practice, for the CEO specifically, the face value of grants has remained the same in both November
2015 (2016 financial year) and November 2016 (2017 financial year), at 150% of TFR for both awards.
92
Notes to Executive Remuneration
(A)
Salaries comprise cash salary and available salary package options grossed up by related fringe benefits tax, where applicable, net of superannuation commitments,
paid during the financial year. For former and new Executives, this balance is pro-rated for time served as KMP.
Short Term Incentive refers to cash amounts earned under the STI Plan which are paid in the following financial year. For Executives who departed Newcrest during
the year, the STI treatment applies in accordance with the Plan Rules.
(B)
(C) Other cash benefits comprise:
-
-
For Ian Kemish and Michael Nossal, this includes the cash component awarded as “sign-on” incentives, as detailed in section 4.6. These entitlements are being
expensed over the period in which the performance and/or service conditions are fulfilled, ending on the date on which they become fully entitled to the award.
For all other Executives this relates to travel costs paid in lieu of relocation entitlements.
(D) Other benefits represents non-monetary benefits such as parking, insurance and applicable fringe benefits tax payable on benefits.
(E) Represents leave entitlements, measured on an accruals basis, and reflects the movement in the entitlements over the year.
(F) Represents company contributions to superannuation under the Superannuation Guarantee legislation (SGC).
(G)
Represents the fair value of Rights, comprising Rights over unissued shares, granted under the LTI Plan. This is calculated in accordance with Australian Accounting
Standard AASB 2 Share Based Payments.
The Rights granted in the 2017 financial year have been valued using the Monte-Carlo simulation model, taking into account the impact of the TSR condition.
The calculation of the share based payment expense is based on the apportioned expense associated with Rights granted.
The Rights granted in prior financial years have been valued using a Black-Scholes model. The calculation of the share based payment expense is based on the
apportioned expense associated with Rights granted, adjusted for the reassessment of estimated vesting outcomes of those Rights.
Represents the deferral of 50% of the STI award granted to the Executives which is deferred in the form of shares (refer to section 4.4). The deferred amount
is being expensed over the period in which the performance and/ or service conditions are fulfilled, ending on the date on which the Executive fully becomes
entitled to the award.
Represents Rights awarded to Executives as “sign-on” incentives in accordance with their Executive Service Agreements, as detailed in section 4.6. Their entitlements
are being expensed over the period in which the performance and/or service conditions are fulfilled, ending on the date on which they become fully entitled to the award.
Represents performance related remuneration as a percentage of total remuneration. Performance related remuneration comprises Short-Term Incentive, LTI
Rights and STI Deferral.
(H)
(I)
(J)
9.2. Executives – Changes in Rights Holdings during the 2017 financial year
Executives
Current
Sandeep Biswas
Gerard Bond
Melanie Allibon(7)
Craig Jetson(8)
Craig Jones
Ian Kemish(4)
Francesca Lee
Michael Nossal(4)
Philip Stephenson
Former
Jane Thomas(9)
Opening
balance(1)
Granted
under 2016
LTI Plan
Other
Grants(2)
Rights
Lapsed/
Forfeited(3)
Vested
and/or
Exercised(4)
Closing
balance(5)
Closing
balance non-
vested(6)
843,123
297,290
–
62,011
209,153
18,993
108,238
194,811
60,298
148,391
41,937
21,134
22,366
33,140
24,087
24,104
41,937
22,366
–
–
–
–
15,845
–
–
–
–
(124,976)
(84,761)
–
–
(42,657)
–
–
–
–
(51,793)
(35,126)
–
–
(17,678)
(4,383)
–
(58,365)
–
814,745
219,340
21,134
84,377
197,803
38,697
132,342
178,383
82,664
814,745
219,340
21,134
84,377
197,803
38,697
132,342
178,383
82,664
103,257
–
–
(103,257)
–
–
(1)
The opening balance for Executives who commenced during the 2017 financial year is assessed on their commencement date, and for other Executives, is assessed
on 1 July 2016.
(2) Rights granted to Craig Jones as a “sign-on” payment as detailed in section 4.6.
(3)
Rights which lapsed or were forfeited for Sandeep Biswas, Gerard Bond and Craig Jones were granted in the 2014 financial year. For Jane Thomas the Rights
forfeited were granted in the 2015 and 2016 financial years.
For Sandeep Biswas, Gerard Bond and Craig Jones, Rights that vested were granted in the 2014 financial year. For Michael Nossal and Ian Kemish rights that vested
were in relation to the sign-on incentives granted to each on their commencement, as detailed at section 4.6.
(4)
(5) The closing balance for former Executives is assessed on the date of their departure, and for current Executives, is assessed on 30 June 2017.
(6)
These Rights are ‘at risk’ and will lapse or be forfeited in the event that the minimum prescribed conditions are not met by the Company or individual Executives,
as applicable.
(7) Melanie Allibon commenced in the position on 30 January 2017 and received a pro-rata invitation to participate in the 2016 LTI Plan.
(8) For Craig Jetson, the opening balance and grant under the 2016 LTI Plan, represent Rights issued prior to his appointment date as an Executive.
(9)
Jane Thomas’ Rights lapsed on the cessation of her employment in September 2016.
93
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
DIRECTORS’ REPORT
REMUNERATION REPORT
9. STATUTORY TABLES (continued)
9.3. Executives – Total Value of Rights Granted and Exercised during the 2017 financial year
Executives
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Jane Thomas
Accounting
Fair Value
of Rights
Granted
Value of
Rights
Exercised
(A)
(B)
US$’000
US$’000
2,040
576
290
307
673
331
331
576
307
–
817
554
–
–
279
71
–
941
–
–
The following assumptions have been applied to this table:
(A)
(B)
The accounting value of the Rights granted under the LTI Plan reflects the fair value of a Right on the Grant Date, being US$13.75 multiplied by the number of
Rights granted during the year. The accounting value of a sign-on Right granted to Ian Kemish and Michael Nossal reflects the fair value of the Rights on the Grant
Date, being US$14.99 and US$9.75 respectively, multiplied by the number of Rights granted during the year. The accounting value of a sign-on Right granted to Craig
Jones reflects the fair value of the Rights on the Grant Date, being US$13.70, multiplied by the number of Rights granted during the year. This amount represents
the maximum value which will be expensed over the performance period. The minimum value is nil if the performance and/or service conditions are not met.
The value at the exercise date has been determined by the Company’s share price at the close of business on the exercise date multiplied by the number of Rights
exercised during the year ended 30 June 2017 (nil exercise price).
9.4. Executives – Source of Rights Holdings at 30 June 2017
FINANCIAL YEAR
PLAN
Allocation Date
VWAP for grant(1)
Future financial years in
which rights may vest
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson(2)
Craig Jones(3)
Ian Kemish(4)
Francesca Lee
Michael Nossal(5)
Philip Stephenson(6)
Jane Thomas(7)
BALANCE AT
30 JUNE 2017
FY2017
OTHER
FY2017
2016 LTI
FY2016
OTHER
31 Jan 17
15 Nov 16
16 May 16
A$18.93
A$23.25
FY2018
–
–
–
–
15,845
–
–
–
–
–
FY2020
148,391
41,937
21,134
22,366
33,140
24,087
24,104
41,937
22,366
–
A$20.54
FY2018 to
FY2019
–
–
–
–
14,610
–
–
–
–
814,745
219,340
21,134
84,377
197,803
38,697
132,342
178,383
82,664
–
FY2016
OTHER
6 Jul 15
A$12.85
FY2018
–
–
–
–
–
–
58,365
–
–
FY2016
2015 LTI
5 Nov 15
A$12.49
FY2019
276,285
73,555
–
41,643
61,703
–
44,878
78,081
41,643
44,206
FY2015
2014 LTI
7 Nov 14
A$8.84
FY2018
390,069
103,848
–
20,368
87,115
–
63,360
–
18,655
59,051
(1) Five day VWAP of Newcrest’s share price used to determine the number of Rights offered.
(2) Craig Jetson’s 2014, 2015 and 2016 Rights were issued whilst he was in his previous role as GM – Lihir Operations.
(3)
(4)
(5)
Craig Jones was entitled under his ESA to sign-on rights as detailed in section 4.6. The 15,845 rights granted were calculated based on a value of A$300,000
(US$217,050) divided by the VWAP of Newcrest’s share price over the 5 trading days immediately prior to his appointment date of 1 January 2017.
Ian Kemish was entitled under his ESA to sign-on rights as detailed in section 4.6. The 18,993 rights granted were calculated based on a value of A$390,000
(US$284,115) divided by the VWAP of Newcrest’s share price over the 5 trading days immediately prior to his commencement date of 16 May 2016. His first
tranche of 4,383 rights vested in September 2016, leaving a balance of 14,610 sign-on rights.
Michael Nossal was entitled under his ESA to sign-on rights as detailed in section 4.6. The 116,730 rights granted were calculated based on a value of A$1,500,000
(US$1,092,750) divided by the VWAP of Newcrest’s share price over the five 5 trading days immediately prior to his commencement date of 6 July 2015. His first
tranche of 58,365 rights vested during FY17, leaving a balance of 58,365 sign-on rights.
(6) Philip Stephenson’s FY2015 Rights were issued whilst he was in a previous role as GM – Health, Safety, Environment, Security and Risk.
(7)
Jane Thomas’ Rights lapsed on the cessation of her employment in September 2016.
94
9.5. Non-Executive Directors Remuneration
Non-Executive Directors
Peter Hay
Philip Aiken (4)
Roger Higgins
Winifred Kamit
Rick Lee
Xiaoling Liu
Vickki McFadden (4)
John Spark
Former Non-Executive Directors
Richard Knight (5)
Total
Total (1)
SHORT TERM
Board
Fees
US$’000
Committee
Fees
US$’000
POST-
EMPLOYMENT
Super-
annuation(2)
US$’000
Total(3)
US$’000
438
423
146
141
136
100
136
132
136
132
136
109
102
–
136
132
18
133
–
–
45
40
15
10
30
29
49
47
40
39
14
–
38
36
2
17
15
15
5
5
15
10
15
15
15
15
15
12
11
–
15
14
2
14
453
438
196
186
166
120
181
176
200
194
191
160
127
–
189
182
22
164
1,384
1,302
233
218
108
100
1,725
1,620
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
(1)
Total Non-Executive Director (NED) remuneration for the 2016 financial year excludes NED’s who ceased being a NED in the 2016 financial year. Total remuneration
for these NED’s in 2016 was US$73,000.
(2) Represents Company contributions to superannuation under the SGC and insurance payments.
(3)
Non-Executive Directors are compensated in Australian dollars. All remuneration components have been translated from Australian dollars to US dollars using an
average rate of 0.7541 (2016: 0.7285).
(4) Vickki McFadden was appointed as a Non-Executive Director on 1 October 2016.
(5) Richard Knight retired from the Board on 16 August 2016.
9.6. Other Transactions with KMP
There were no loans made to KMP or their related parties during the year. There were no other transactions between the Group and any KMP
or their related parties other than those within the normal employee, customer or supplier relationship on terms and conditions no more
favourable than arm’s length, all of which are trivial or domestic in nature.
95
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY AUDITOR’S INDEPENDENCE DECLARATION
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Newcrest Mining Limited
As lead auditor for the audit of Newcrest Mining Limited for the financial year ended 30 June 2017, I
declare to the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Newcrest Mining Limited and the entities it controlled during the
financial year.
Ernst & Young
Tim Wallace
Partner
Melbourne
14 August 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
96
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2017
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
98
99
100
101
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 103
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
143
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
1 Corporate Information
2 Basis of Preparation
3 Critical Accounting Judgements, Estimates
103
103
103
CAPITAL STRUCTURE AND
FINANCIAL RISK MANAGEMENT
19 Capital Management and Financial Objectives
20 Net Debt
and Assumptions
104
21 Financial Risk Management
PERFORMANCE
4 Segment Information
5
Income and Expenses
6 Significant Items
7
Income Tax Expense
8 Earnings per Share (EPS)
9 Dividends
10 Reconciliation of Net Profit after Income Tax
to Net Cash Flow from Operating Activities
RESOURCE ASSETS AND LIABILITIES
11 Property, Plant and Equipment
12 Impairment of Non-Financial Assets
13 Inventories
14 Trade and Other Receivables
15 Other Assets
16 Other Intangible Assets
17 Deferred Tax
18 Provisions
104
104
106
108
109
109
110
110
111
111
114
116
117
117
117
118
119
22 Issued Capital
23 Reserves
GROUP STRUCTURE
24 Controlled Entities
25 Parent Entity Information
26 Deed of Cross Guarantee
27 Interests in Joint Operations
28 Investment in Associate
29 Business Divestment
OTHER
30 Commitments
31 Events Subsequent to Reporting Date
32 Contingent Liabilities
33 Share Based Payments
34 Key Management Personnel
35 Auditors Remuneration
36 New Accounting Standards and Interpretations
121
121
122
123
129
130
131
131
132
133
135
136
137
138
138
138
138
139
141
141
142
97
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2017
Sales revenue
Cost of sales
Gross profit
Exploration expenses
Corporate administration expenses
Other income/(expenses)
Loss on business divestment
Net investment hedge loss
Write-down of non-current assets
Gain on disposal of investment
Class action settlement expense
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:
Non-controlling interests
Owners of the parent
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.
Note
5(a)
5(b)
11
5(c)
5(d)
6
6
6
6
6
5(e)
7(a)
8
8
2017
US$m
3,477
(2,609)
868
2016
US$m
3,295
(2,601)
694
(53)
(84)
(12)
(10)
(79)
(15)
–
–
615
2
(134)
483
(164)
319
11
308
319
40.2
40.0
(32)
(79)
11
–
–
–
18
(12)
600
1
(148)
453
(118)
335
3
332
335
43.3
43.0
98
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Profit after income tax
Other comprehensive income/(loss)
Items that may be reclassified subsequently to the Income Statement
Cash flow hedges
Cash flow hedge (gains)/losses transferred to the Income Statement
Cash flow hedge gains/(losses) deferred in equity
Income tax (expense)/benefit
Investments
Net gain on available-for-sale financial assets transferred
to the Income Statement upon disposal of investment
Foreign currency translation
Exchange gains/(losses) on translation of foreign operations,
net of hedges of foreign investments
Net investment hedge loss transferred to the Income Statement
on business divestment, net of tax
Realised exchange loss transferred to the Income Statement
upon disposal of investment/associate
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Non-controlling interests
Owners of the parent
The above Statement should be read in conjunction with the accompanying notes.
Note
21(a)
6
2017
US$m
319
2016
US$m
335
(23)
85
(19)
43
–
–
110
62
–
172
215
534
11
523
534
25
(57)
10
(22)
(25)
(25)
(101)
–
7
(94)
(141)
194
3
191
194
99
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
Note
20
14
13
21(f)
15
13
21(f)
11
16
17
28
15
20
18
21(f)
20
18
17
21(f)
22
23
2017
US$m
492
88
556
31
26
56
1,249
1,125
10
8,852
35
80
64
168
10,334
11,583
455
–
147
58
4
664
1,991
307
1,087
–
3,385
4,049
7,534
11,657
(4,154)
(53)
7,450
84
7,534
2016
US$m
53
134
545
–
2
69
803
1,170
–
8,891
44
105
–
178
10,388
11,191
369
120
147
13
21
670
2,040
396
948
17
3,401
4,071
7,120
11,666
(4,347)
(278)
7,041
79
7,120
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax asset
Other assets
Total current assets
Non-current assets
Inventories
Other financial assets
Property, plant and equipment
Other intangible assets
Deferred tax assets
Investment in associate
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax liability
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Equity attributable to owners of the parent
Non-controlling interests
Total equity
The above Statement should be read in conjunction with the accompanying notes.
100
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes paid
Dividends received
Net cash provided by operating activities
Cash flows from investing activities
Payments for plant and equipment
Mine under construction, development and feasibility expenditure
Production stripping expenditure
Exploration and evaluation expenditure
Information systems development
Interest capitalised to development projects
Proceeds from sale of investments
Proceeds from sale of property, plant and equipment
Payments for investments
Cash outflow on sale of subsidiary, net of cash held by the subsidiary
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings:
– Bilateral bank debt
– Bank loan
Repayment of borrowings:
– Bilateral bank debt
– Private placement notes
– Bank loan
Payment for treasury shares
Contingent consideration received
Dividends paid:
– Members of the parent entity
– Non-controlling interests
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The above Statement should be read in conjunction with the accompanying notes.
Note
10
6
28
29
20
2017
US$m
3,509
(1,888)
2
(122)
(34)
–
1,467
(286)
(193)
(90)
(58)
(13)
–
–
2
(63)
(27)
(728)
295
–
(320)
(125)
(20)
(19)
–
(105)
(6)
(300)
439
53
492
2016
US$m
3,332
(1,927)
1
(138)
(28)
1
1,241
(197)
(214)
(54)
(44)
(6)
(1)
88
1
–
–
(427)
2,160
20
(3,110)
–
–
(6)
9
–
(32)
(959)
(145)
198
53
101
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
ATTRIBUTABLE TO OWNERS OF THE PARENT
Issued
Capital
FX
Translation
Reserve
Hedge
Reserve
Equity
Settlements
Reserve
Fair
Value
Reserve
Accu-
mulated
Losses
2017
US$m
US$m
US$m
US$m
US$m
US$m
Balance at 1 July 2016
11,666
(340)
(16)
78
Profit for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Transactions with
owners in their
capacity as owners
Share-based payments
Shares purchased
Dividends paid
Shares issued – dividend
reinvestment plan
Balance at
30 June 2017
–
–
–
–
(19)
–
10
–
172
172
–
–
–
–
–
43
43
–
–
–
–
11,657
(168)
27
–
–
–
10
–
–
–
88
The above Statement should be read in conjunction with the accompanying notes.
–
–
–
–
–
–
–
–
–
Total
US$m
7,041
308
215
523
(4,347)
308
–
308
–
–
(115)
10
(19)
(115)
–
10
Non-
controlling
Interests
US$m
79
11
–
11
–
–
(6)
–
Total
US$m
7,120
319
215
534
10
(19)
(121)
10
(4,154)
7,450
84
7,534
ATTRIBUTABLE TO OWNERS OF THE PARENT
Issued
Capital
FX
Translation
Reserve
Hedge
Reserve
Equity
Settlements
Reserve
Fair
Value
Reserve
Accu-
mulated
Losses
Non-
controlling
Interests
Total
2016
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
Balance at 1 July 2015
11,673
(246)
Profit for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Transactions with
owners in their
capacity as owners
Share-based payments
Shares purchased
Dividends paid
Balance at
30 June 2016
–
–
–
–
(7)
–
–
(94)
(94)
–
–
–
6
–
(22)
(22)
–
–
–
70
–
–
–
8
–
–
(4,679)
6,849
108
332
332
–
(141)
332
191
–
–
–
8
(7)
–
3
–
3
–
–
(32)
25
–
(25)
(25)
–
–
–
–
11,666
(340)
(16)
78
(4,347)
7,041
79
7,120
Total
US$m
6,957
335
(141)
194
8
(7)
(32)
The above Statement should be read in conjunction with the accompanying notes.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
INTRODUCTION
This section provides information about the overall basis of
preparation that is considered to be useful in understanding these
financial statements.
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’) and the Port
Moresby Stock Exchange (‘POMSoX’). The registered office of
Newcrest Mining Limited is Level 8, 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 2017 was authorised for issue in accordance with a
resolution of the Directors on 14 August 2017.
2. BASIS OF PREPARATION
(a) Overview
This 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 (AASB).
The financial report also complies with International Financial
Reporting Standards (IFRS) including interpretations as issued by
the International Accounting Standards Board (IASB).
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 has been presented in United States (US) dollars
and all values are rounded to the nearest US$1,000,000 (US$m)
unless otherwise stated.
The accounting policies have been consistently applied by all entities
included in the Group and are consistent with those applied in the
prior year.
(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 significant controlled
entities (subsidiaries) is presented in Note 24.
Control is achieved when the Group is exposed, or has the rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee.
The Group re-assesses whether or not it controls an investee if facts
and circumstances indicate that there are changes to one or more
of the three elements of control. Specifically, the Group controls an
investee if, and only if, the Group has all of the following:
• Power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee);
• Exposure, or rights, to variable returns from its involvement
with the investee; and
• The ability to use its power over the investee to affect its returns.
Non-controlling interests in the results and equity of the entities
that are controlled by the Group are shown separately in the Income
Statement, Statement of Comprehensive Income, Statement of
Financial Position and Statement of Changes in Equity respectively.
(c) Foreign Currency
Presentation and Functional Currency
The presentation currency of the Group is US 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. All non-Australian operating entities
have a functional currency of US dollars, while the parent entity
and the Group’s Australian entities have a functional currency of
Australian dollars.
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 statements
are taken to the Income Statement with the exception of differences
on certain US dollar denominated borrowings (held by entities
with a functional currency of Australian dollars) where the foreign
currency components are designated as either cash flow hedges of
future US dollar denominated sales or hedges of a net investment
in a foreign operation. These are recognised in other comprehensive
income and accumulated in a reserve until the forecast sales used to
repay the debt occur (for cash flow hedges) or the foreign operation
is disposed (for net investment hedges), at which time they are
recognised in the Income Statement.
103
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
2. BASIS OF PREPARATION (continued)
(c) Foreign Currency (continued)
Translation
The assets and liabilities of subsidiaries with a functional currency
other than US dollars (being the presentation currency of the group)
are translated into US dollars at the exchange rate at the reporting
date and the income statement is translated at the average
exchange rate for the period. On consolidation, exchange differences
arising from the translation of these subsidiaries, translation
of net investments in foreign operations and of the borrowings
designated as hedges of the net investment are recognised in
other comprehensive income and accumulated in the foreign
currency translation reserve. On disposal of a foreign operation,
the component of other comprehensive income relating to that
particular foreign operation is recognised in the Income Statement.
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. 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 potentially have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
found within the following notes:
• Note 11 – Exploration, evaluation and deferred feasibility
expenditure
• Note 11 – Production stripping
• Note 11 – Units of production method of depreciation/
amortisation
• Note 11– Ore reserves and mineral resources
• Note 12 – Fair value of CGU’s
• Note 13 – Net realisable value of ore stockpiles
• Note 17 – Recovery of deferred tax assets
• Note 18 – Mine rehabilitation provision
• Note 33 – Share-based payments
PERFORMANCE
This section highlights the key indicators on how the Group
performed in the current year.
4. 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 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, Australia
• Telfer, Australia
• Lihir, Papua New Guinea
• Gosowong, Indonesia (1)
• Bonikro, Cote d’Ivoire (2)
• Hidden Valley JV (50% interest), Papua New Guinea (3)
• Exploration and Other (4)
(1)
(2)
(3)
(4)
Newcrest owns 75% of Gosowong through its holding in PT Nusa Halmahera
Minerals.
Bonikro includes mining and near-mine exploration interests in Côte d’Ivoire,
which are held by LGL Mines CI SA and Newcrest Hire CI SA (of which
Newcrest owns 89.89% respectively).
Newcrest divested its 50% interest in Hidden Valley during the year.
Refer Note 29.
Exploration and Other mainly comprises projects in the exploration,
evaluation and feasibility phase and includes Wafi-Golpu JV (50% interest)
and Morobe Exploration JV (50% interest) in PNG, Namosi JV (70.75%
interest) in Fiji and O’Callaghans in Australia and Newcrest’s global
greenfields exploration portfolio.
(a) Segment Results, Segment Assets and Segment
Liabilities
The measurement of segment results is in line with the basis of
information presented to the Group’s Executive Committee 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 revenue.
EBITDA is earnings before interest, tax, depreciation, amortisation
and significant items. EBIT is earnings before interest, tax and
significant items. The reconciliation of EBIT to profit before tax is
shown in Note 4(b).
Capital Expenditure comprises payments for property, plant
and equipment, production stripping expenditure, mines under
construction, development and feasibility expenditure and
information systems development.
Segment assets exclude intercompany receivables. Segment
liabilities exclude intercompany payables.
104
Cadia
Telfer
Lihir Gosowong
Bonikro
Hidden
Valley(2)
Total
Operat-
ions
Explor-
ation
& Other(3)
Corpo-
rate(4)
Total
Group
2017
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
External sales revenue
EBITDA
Depreciation and
amortisation
EBIT (Segment result) (1)
Capital expenditure
Segment assets
Segment liabilities
Net assets
1,137
626
(136)
490
168
3,450
687
2,763
631
144
(138)
6
101
743
233
510
1,181
542
(259)
283
217
5,685
1,047
4,638
350
177
(98)
79
33
467
153
314
162
48
(39)
9
25
169
51
118
16
2
(1)
1
1
–
–
–
3,477
1,539
(671)
868
545
10,514
2,171
8,343
–
(53)
–
(53)
23
553
10
543
–
(78)
(18)
(96)
3,477
1,408
(689)
719
14
582
516
1,868
11,583
4,049
(1,352)
7,534
(1) Refer to Note 4(b) for the reconciliation of segment result to profit before tax.
(2) The segment result for Hidden Valley is for the period to the date of divestment. Refer Note 29.
(3)
(4)
Includes net assets attributable to Wafi-Golpu JV of US$419 million and Namosi JV of US$97 million.
Includes investment in associates and eliminations.
Cadia
Telfer
Lihir Gosowong
Bonikro
Hidden
Valley
Total
Operat-
ions
Explor-
ation
& Other(2)
Corpo-
rate(3)
Total
Group
2016
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
External sales revenue
EBITDA
Depreciation and
amortisation
EBIT (Segment result) (1)
Capital expenditure
Segment assets
Segment liabilities
Net assets
1,099
651
(227)
424
164
3,388
687
2,701
634
173
(131)
42
76
756
195
561
1,035
397
(198)
199
119
5,713
930
4,783
257
87
(77)
10
48
449
159
290
162
63
(35)
28
32
200
46
154
108
3
(12)
(9)
5
30
46
3,295
1,374
(680)
694
444
10,536
2,063
(16)
8,473
–
(32)
–
(32)
19
532
7
525
–
(50)
(18)
(68)
3,295
1,292
(698)
594
8
471
123
2,001
11,191
4,071
(1,878)
7,120
(1) Refer to Note 4(b) for the reconciliation of segment result to profit before tax.
(2)
(3)
Includes net assets attributable to Wafi-Golpu JV of US$398 million and Namosi JV of US$96 million.
Includes eliminations.
(b) Reconciliation of EBIT (Segment Result) to Profit Before Tax
Segment Result
Finance costs:
Finance income
Finance costs
Significant items:
Loss on business divestment
Net investment hedge loss
Write down of non-current assets
Gain on disposal of investment
Class action settlement expense
Profit before tax
Note
4(a)
6
6
6
6
6
2017
US$m
719
2
(134)
(132)
(10)
(79)
(15)
–
–
(104)
483
2016
US$m
594
1
(148)
(147)
–
–
–
18
(12)
6
453
105
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
4. SEGMENT INFORMATION (continued)
(c) Geographical Information
Sales Revenue from External Customers (1)
Bullion (2)
Australia
China (including Hong Kong)
United Kingdom
Canada
Concentrate (3)
Japan
Korea
Philippines
Singapore
India
Other
Total sales revenue
Non-Current Assets (4)
Australia
Indonesia
Papua New Guinea
Cote d’Ivoire
Other
Total non-current assets
2017
US$m
2016
US$m
1,539
274
55
115
755
172
220
163
70
114
1,284
216
277
103
756
177
135
122
29
196
3,477
3,295
4,021
277
5,754
106
96
3,855
371
5,823
140
94
10,254
10,283
(1)
(2)
(3)
(4)
Revenue is attributable to geographic location, based on the location of customers.
Bullion sales to one customer amounted to US$606 million (2016: US$592 million) arising from sales by Cadia, Telfer, Lihir, Gosowong, Bonikro and Hidden Valley.
Concentrate sales to one customer amounted to US$647 million (2016: US$560 million) arising from concentrate sales by Cadia and Telfer.
Non-Current Assets for this disclosure excludes deferred tax assets.
5. INCOME AND EXPENSES
(a) Sales Revenue
Gold
Copper
Silver
Total sales revenue
Total revenue
(b) Cost of Sales
Site production costs
Royalties
Concentrate treatment and realisation
Inventory movements
Depreciation
Total cost of sales
(c) Corporate Administration Expenses
Corporate costs
Corporate depreciation
Share-based payments
Total corporate administration expenses
(d) Other Income/(Expenses)
Net foreign exchange gain/(loss)
Net fair value gain/(loss) on gold and copper derivatives and fair value movements on concentrate receivables
Other
Total other income/(expenses)
106
2017
US$m
3,001
456
20
3,477
3,477
1,676
96
137
29
1,938
671
2,609
56
18
10
84
(4)
–
(8)
(12)
2016
US$m
2,857
403
35
3,295
3,295
1,667
85
131
38
1,921
680
2,601
53
18
8
79
2
8
1
11
(e) Finance Costs
Interest on loans
Facility fees and other costs
Less: Capitalised borrowing costs
Discount unwind on provisions
Total finance costs
(f) Depreciation and Amortisation
Property, plant and equipment
Intangible assets
Less: Capitalised to inventory on hand or assets under construction
Total depreciation and amortisation expense
Included in:
Cost of sales depreciation
Corporate depreciation
Total depreciation and amortisation expense
(g) Employee Benefits Expense
Defined contribution plan expense
Share-based payments
Redundancy expense
Salaries, wages and other employment benefits
Total employee benefits expense
2017
US$m
2016
US$m
103
23
–
126
8
134
667
23
690
(1)
689
671
18
689
28
10
11
384
433
112
26
(1)
137
11
148
727
21
748
(50)
698
680
18
698
31
8
10
372
421
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 known or can be
reasonably estimated, and collectability is probable. The point at which risk and title passes for concentrate sales is generally 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.
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 four months. Revenue on provisionally priced sales is recognised based
on the estimated fair value of the total consideration receivable. Subsequent changes in fair value are recognised in the Income Statement
each period until final settlement and presented as part of ‘Other Income/Expense’.
107
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
6. SIGNIFICANT ITEMS
Significant items represent items of income or expense which are, either individually or in aggregate, material to Newcrest or to the relevant
business segment and are either outside the ordinary course of business or are part of the ordinary activities of the business but unusual due
to their size and nature.
Items by Nature
2017
Loss on business divestment (1)
Net investment hedge loss (2)
Write-down of non-current assets (3)
Total significant items
Attributable to:
Non-controlling interest (3)
Owners of the parent
2016
Settlement of class action proceedings (4)
Net associated expenses and insurance recoveries
Class action settlement expense
Gain on disposal of investment (5)
Total significant items
Attributable to:
Non-controlling interest
Owners of the parent
Gross
US$m
Tax
US$m
Net
US$m
(10)
(79)
(15)
(104)
(26)
14
(12)
18
6
–
17
–
17
8
(5)
3
–
3
(10)
(62)
(15)
(87)
(1)
(86)
(87)
(18)
9
(9)
18
9
–
9
9
Year Ended 30 June 2017
(1)
(2)
Year Ended 30 June 2016
(4)
(3)
(5)
During the year, the Group divested its 50% interest in the Hidden Valley Mine. Refer Note 29.
Represents the net foreign exchange loss on historic funding arrangements that were designated as a hedge of the Group’s net investment in the Hidden Valley
mine. Following its divestment, this loss was reclassified from the Foreign Currency Translation Reserve to the Income Statement.
Following a review of exploration activities as at 31 December 2016, the Group has recognised a write-down in respect of exploration assets in Bonikro. Of the
US$15 million, US$1 million is attributable to non-controlling interests.
On 22 February 2016, the Group announced that it had reached an agreement to settle the class action proceedings commenced by Earglow Pty Ltd on 21 July 2014
in the Federal Court of Australia (Court) on its own behalf and on behalf of a group of shareholders who acquired an interest in Newcrest securities between
13 August 2012 and 6 June 2013. On 3 May 2016 the Court approved the settlement. The Group paid A$36 million (US$26 million) in full and final settlement of
the proceeding including litigation costs and the applicant’s legal fees.
In September 2015, the Group disposed of its remaining holding in Evolution Mining Limited. Proceeds from the disposal were US$88 million.
108
7. INCOME TAX EXPENSE
(a) Reconciliation of Prima Facie Income Tax Expense
to Income Tax Expense per the Income Statement
Accounting profit before tax
Income tax expense calculated at 30% (2016: 30%)
De-recognition of deferred tax liabilities
Other
Adjustments on Significant items:
Loss on business divestment
Net investment hedge loss
Write-down of non-current assets
Gain on disposal of investment
Income tax expense per the Income Statement
(b) Income Tax Expense Comprises:
Current income tax
Current income tax expense
Over provision in respect of prior years
Deferred tax (1)
Relating to origination and reversal of temporary differences
Under provision in respect of prior years
Income tax expense per the Income Statement
(1) Refer to Note 17(a) for movements in deferred taxes.
8. EARNINGS PER SHARE (EPS)
EPS (cents per share)
Basic EPS
Diluted EPS
Earnings used in calculating EPS
Earnings used in the calculation of basic and diluted EPS:
Profit after income tax attributable to owners of the parent
Weighted average number of shares
Share data used in the calculation of basic and diluted EPS:
Weighted average number of ordinary shares used in calculating basic EPS
Effect of dilutive securities: share rights
Adjusted weighted average number of ordinary shares used in calculating diluted EPS
2017
US$m
2016
US$m
483
145
–
5
5
3
7
4
–
14
164
97
(4)
93
66
5
71
164
453
136
(8)
(5)
(13)
–
–
–
(5)
(5)
118
113
(94)
19
15
84
99
118
2017
US¢
40.2
40.0
2017
US$m
2016
US¢
43.3
43.0
2016
US$m
308
332
2017
No. of shares
2016
No. of shares
766,654,433
3,887,892
766,510,971
4,774,479
770,542,325
771,285,450
Rights granted to employees as described in Note 33 have been included in the determination of diluted earnings per share to the extent
they are dilutive.
109
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
9. DIVIDENDS
(a) Dividends declared and paid
The following dividends were paid during the year:
Final ordinary dividend for the 2016 financial year:
7.5 cents per share (unfranked), paid 18 October 2016
Interim ordinary dividend for the 2017 financial year:
7.5 cents per share (unfranked), paid 28 April 2017
2017
US$m
57.5
57.5
115.0
2016
US$m
–
–
–
Participation in the dividend reinvestment plan reduced the cash amount paid to US$105 million.
(b) Dividend proposed and not recognised as a liability
Subsequent to year-end, the Directors have determined to pay a final dividend for the year ended 30 June 2017 of US 7.5 cents per share,
which will be 70% franked. The dividend will be paid on 27 October 2017. The total amount of the dividend is US$57.5 million.
(c) Dividend franking account balance
Franking credits at 30% as at 30 June 2017 available for the subsequent financial year is US$18 million (2016: US$7 million).
10. RECONCILIATION OF NET PROFIT AFTER INCOME TAX TO NET CASH FLOW FROM OPERATING ACTIVITIES
2017
US$m
319
2016
US$m
335
689
10
62
10
8
15
–
4
53
33
40
1
3
23
81
(104)
220
–
1,467
698
–
–
8
11
–
(18)
5
32
53
39
15
52
(86)
(5)
10
95
(3)
1,241
Profit after income tax
Non-cash items:
Depreciation and amortisation
Loss on business divestment
Net investment hedge loss (net of tax)
Share-based payments
Discount unwind on provisions
Write-down of non-current assets
Gain on disposal of investment
Other non-cash items
Items presented as investing or financing activities:
Exploration expenditure written off
Changes in assets and liabilities:
(Increase)/Decrease in:
Trade and other receivables
Inventories
Other financial assets
Current and deferred tax assets
Other assets
(Decrease)/Increase in:
Trade and other payables
Provisions
Current and deferred tax liabilities
Other financial liabilities
Net cash from operating activities
110
RESOURCE ASSETS AND LIABILITIES
This section provides information that is relevant in understanding the composition and management of the Group’s resource assets and liabilities.
11. PROPERTY, PLANT & EQUIPMENT
Exploration &
Evaluation
Expenditure
Deferred
Feasibility
Expenditure
Mines
Under
Construction
Production
Stripping
Mine
Development(1)
Plant and
Equipment
US$m
US$m
US$m
US$m
US$m
US$m
Total
US$m
At 30 June 2017
Cost
Accumulated depreciation
and impairment
Year ended 30 June 2017
Carrying amount at
1 July 2016
Expenditure during
the year
Expenditure written-off
Depreciation
Disposal of assets
Write-down of assets
(Note 6)
Business divestment
(Note 29)
Foreign currency
translation
Reclassifications/
transfers
Carrying amount at
30 June 2017
442
(80)
362
294
–
294
393
278
58
(53)
–
(4)
(15)
(6)
1
(12)
362
26
–
–
–
–
–
1
(11)
294
83
–
83
102
115
–
–
–
–
–
4
(138)
83
459
(308)
151
7,741
7,473
16,492
(3,734)
4,007
(3,518)
3,955
(7,640)
8,852
148
4,099
3,871
8,891
90
–
(88)
–
–
–
1
–
1
–
(229)
–
–
–
71
65
286
–
(350)
(4)
–
–
56
96
576
(53)
(667)
(8)
(15)
(6)
134
–
151
4,007
3,955
8,852
(1)
Includes Mineral Rights with a carrying value of US$1,266m.
Exploration &
Evaluation
Expenditure
Deferred
Feasibility
Expenditure
Mines
Under
Construction
Production
Stripping
Mine
Development(1)
Plant and
Equipment
US$m
US$m
US$m
US$m
US$m
US$m
Total
US$m
At 30 June 2016
Cost
Accumulated depreciation
and impairment
Year ended 30 June 2016
Carrying amount at
1 July 2015
Expenditure during
the year
Expenditure written-off
Depreciation
Disposal of assets
Foreign currency
translation
Reclassifications/
transfers
Carrying amount at
30 June 2016
731
(338)
393
278
–
278
400
262
44
(32)
–
–
(1)
(18)
25
–
–
–
(2)
(7)
393
278
102
–
102
41
156
–
–
–
2
(97)
102
410
(262)
148
8,283
7,769
17,573
(4,184)
4,099
(3,898)
3,871
(8,682)
8,891
192
4,265
4,067
9,227
54
–
(96)
–
(2)
–
90
–
(283)
–
(76)
103
196
–
(348)
(6)
(57)
19
565
(32)
(727)
(6)
(136)
–
148
4,099
3,871
8,891
(1)
Includes Mineral Rights with a carrying value of US$1,299m.
111
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
11. PROPERTY, PLANT & EQUIPMENT (continued)
Exploration, Evaluation and Deferred 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)
(b)
Costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively by sale; or
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 exploration and evaluation costs incurred, together with an
appropriate portion of directly related overhead expenditure.
The carrying value of capitalised exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that
the carrying value may exceed its recoverable amount.
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 are capitalised as incurred.
At the commencement of construction, all past exploration, evaluation and deferred feasibility expenditure in respect of an area of interest
that has been capitalised is transferred to mines under construction.
ACCOUNTING JUDGEMENT, ESTIMATES AND ASSUMPTIONS – EXPLORATION, EVALUATION AND DEFERRED FEASIBILITY EXPENDITURE
Judgement is required to determine whether future economic benefits are likely, from either exploitation or sale, or whether activities have
not reached a stage that permits a reasonable assessment of the existence of reserves. In addition to these judgements, the Group has
to make certain estimates and assumptions. The determination of a JORC resource is itself an estimation process that involves varying
degrees of uncertainty depending on how the resources are classified (i.e. measured, indicated or inferred). The estimates directly impact
when the Group capitalises exploration and evaluation expenditure. The capitalisation 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.
The recoverable amount of capitalised expenditure relating to undeveloped mining projects (projects for which the decision to mine has not yet
been approved at the required authorisation level within the Group) can be particularly sensitive to variations in key estimates and assumptions.
If a variation in key estimates or assumptions has a negative impact on recoverable amount it could result in a requirement for impairment.
Mines Under Construction
This expenditure includes net direct costs of construction, borrowing costs capitalised during construction and an appropriate allocation of
attributable overheads. Expenditure is net of proceeds from the sale of ore extracted during the construction phase to the extent that this ore
extracted is considered integral to the development of the mine.
After production commences, all aggregated costs of construction are transferred to mine development or plant and equipment as appropriate.
Production Stripping Expenditure
Stripping (waste removal) costs are incurred both during the development phase and production phase of operations. Stripping costs incurred
during the development phase are capitalised as part of mine development costs. Stripping costs incurred during the production phase are
generally considered to create two benefits:
•
•
the production of ore inventory in the period – accounted for as a part of the cost of producing those ore inventories; or
improved access to the ore to be mined in the future – recognised as ‘production stripping asset’, if the following criteria are met:
Ɨ Future economic benefits (being improved access to the ore body) associated with the stripping activity are probable;
Ɨ The component of the ore body for which access has been improved can be accurately identified; and
Ɨ The costs associated with the stripping activity associated with that component can be reliably measured.
The amount of stripping 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 for each component of the mine. Stripping costs incurred in the period are deferred to the extent that the actual
current period waste to contained gold ounce ratio exceeds the life of component expected waste to contained gold ounce ratio (‘life of
component’) ratio.
112
A component is defined as a specific volume of the ore body that is made more accessible by the stripping activity and is determined based
on mine plans. An identified component of the ore body is typically a subset of the total ore body of the mine. Each mine may have several
components, which are identified based on the mine plan.
The production stripping asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping
activity that improves access to the ore within an identified component, plus an allocation of directly attributable overhead costs.
The production stripping asset is depreciated over the expected useful life of the identified component of the ore body that is made more
accessible by the activity, on a units of production basis. Economically recoverable reserves are used to determine the expected useful life of
the identified component of the ore body.
ACCOUNTING JUDGEMENT – PRODUCTION STRIPPING
The life of component ratio is a function of the mine 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 component ratio even if
they do not affect the mine design. Changes to production stripping resulting from a change in life of component ratios are accounted
for prospectively.
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 arrangement acquisition and are recognised at fair value at date of acquisition. Mineral rights are attributable
to specific areas of interest and are amortised when commercial production commences on a units of production basis over the estimated
economically recoverable reserves of the mine to which the rights relate.
Plant and Equipment and Mine Development
Cost
Plant and equipment and mine development is carried at cost less accumulated depreciation and any accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction cost, and any costs directly attributable to bringing the asset into
operation, the initial estimate of the rehabilitation obligation, and for qualifying assets (where relevant), borrowing costs. The purchase price
or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.
Construction cost for mine development includes expenditure in respect of exploration, evaluation and feasibility, previously accumulated and
carried forward in relation to areas of interest in which development or construction is underway.
Depreciation and Amortisation
Items of plant and equipment and mine development are depreciated over their estimated useful lives.
The Group uses the units of production basis when depreciating mine specific assets which results in a depreciation charge proportional to the
depletion of the anticipated remaining life of mine production. Each item’s economic life has due regard to both its physical life limitations and
to present assessments of economically recoverable reserves of the mine property at which it is located.
For the remainder of assets, the straight line method is used, resulting in estimated useful lives between 3 – 20 years, the duration of which
reflects the specific nature of the asset.
Estimates of remaining useful lives, residual values and depreciation methods are reviewed annually for all major items of plant and equipment
and mine development. Any changes are accounted for prospectively.
When an asset is surplus to requirements or no longer has an economic value, the carrying amount of the asset is reviewed and is written down
to its recoverable amount or derecognised.
ACCOUNTING ESTIMATE AND ASSUMPTIONS – UNITS OF PRODUCTION METHOD OF DEPRECIATION/AMORTISATION
The group uses the units 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.
ACCOUNTING ESTIMATES AND ASSUMPTIONS – ORE RESERVES AND MINERAL RESOURCES
The Group estimates its ore reserves and mineral resources annually at 31 December each year, and reports in the following February, based
on information compiled by Competent Persons as defined in accordance with the Australasian code for reporting Exploration Results,
Mineral Resources and Ore Resources (JORC code 2012). 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 (including exploration and evaluation
assets), the provision for rehabilitation obligations, the recognition of deferred tax assets, as well as the amount of depreciation charged to
the Income Statement.
113
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
12. IMPAIRMENT OF NON-FINANCIAL ASSETS
a) Impairment testing
Impairment tests are performed when there is an indication of impairment. Newcrest conducts a review of the key drivers of the recoverable
amount of cash generating units (‘CGUs’) annually, which is used as a source of information to determine whether there is an indication of
impairment or reversal of previously recognised impairments. Other factors, such as changes in assumptions in future commodity prices,
exchange rates, production rates and input costs, are also monitored to assess for indications of impairment or reversal of previously recognised
impairments. Where an indicator of impairment or impairment reversal exists, a detailed estimate of the recoverable amount is determined.
CGUs represent a grouping of assets 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. Generally, this results in the Group evaluating its CGUs as individual mining operations,
which is consistent with the Group’s representation of operating segments.
After consideration of the potential indicators which could impact the recoverable amount of the CGUs at 30 June 2017, the Group concluded:
• Telfer’s underperformance against plan in the current year and an updated life of mine plan, including an increase in near term stripping
expenditure, represented an indicator of potential impairment, while Newcrest’s updated assumption for the long term AUD:USD
exchange rate represented an indicator of potential impairment reversal. An updated assessment of the recoverable amount of Telfer
has determined that no further impairment or an impairment reversal is required as at 30 June 2017.
• There are no indicators of impairment or impairment reversal for the remainder of Newcrest’s CGUs as at 30 June 2017.
b) Basis of impairment and impairment reversal calculations
An impairment loss is recognised when a CGU’s carrying amount exceeds its recoverable amount. The recoverable amount of each CGU has
been estimated on the basis of fair value less costs of disposal (‘Fair Value’). The costs of disposal have been estimated by management based
on prevailing market conditions.
For CGUs that have previously recognised an impairment loss, an impairment reversal is recognised for non-current assets (other than goodwill)
when the Fair Value indicates that the previously recognised impairment has been reversed. Such a reversal is limited to the lesser of the
amount that would not cause the carrying amount to exceed its recoverable amount or the value that would have been determined (net of
depreciation) had no impairment loss been recognised.
Fair Value is estimated based on discounted cash flows using market-based commodity price and exchange rate assumptions, estimated
quantities of recoverable minerals, production levels, operating costs and capital requirements, based on the CGU’s latest life of mine plans.
In certain cases, where multiple investment options exist, Fair Value may be determined from a combination of two or more scenarios that are
weighted to provide a single Fair Value that is determined to be the most indicative. When plans and scenarios used to estimate Fair Value do not
fully utilise the existing mineral resource for a CGU, and options exist for the future extraction and processing of all or part of those resources, an
estimate of the value of unmined resources, in addition to an estimate of value of exploration potential, is included in the estimation of Fair Value.
The Fair Value estimates are considered to be level 3 fair value measurements (as defined by accounting standards, refer Note 21(g)) as they
are derived from valuation techniques that include inputs that are not based on observable market data. The Group considers the inputs and
the valuation approach to be consistent with the approach taken by market participants.
Estimates of quantities of recoverable minerals, production levels, operating costs and capital requirements are sourced from the Group’s
planning and budgeting process, including life of mine (‘LOM’) plans, latest short-term forecasts and CGU specific studies.
c) Key judgements, estimates and assumptions
ACCOUNTING ESTIMATES AND ASSUMPTIONS – FAIR VALUE OF CGU’S
Significant judgements, estimates and assumptions are required in determining estimates of Fair Value. This is particularly so in the
assessment of long life assets. It should be noted that the CGU Fair Values are subject to variability in key assumptions including, but not
limited to, gold and copper prices, exchange rates, discount rates, production profiles and operating and capital costs. A change in one or
more of the assumptions used to estimate Fair Value could result in a change in a CGU’s Fair Value.
The table below summarises the key assumptions used in the carrying value assessments as at 30 June 2017, and for comparison also
provides the equivalent assumptions used in 2016:
Assumptions
2018
2019
2020
Long term
(2021+)
2017
2018
2019
Long term
(2020+)
2017
2016
Gold
(US$ per ounce)
Copper
(US$ per pound)
AUD:USD
exchange rate
USD:PGK
exchange rate
Discount rate (%)
114
$1,250
$1,250
$1,250
$1,250
$1,200
$1,225
$1,250
$1,250
$2.50
$2.60
$2.70
$3.00
$2.10
$2.30
$2.70
$3.00
$0.75
$0.75
$0.75
$0.75
$0.73
$0.75
$0.77
$0.80
$3.10
$3.10
$3.10
$3.10
$3.00
$3.00
$3.00
$3.00
USD Assets 5.25 to 5.75%
AUD Assets 5.0%
USD Assets 5.25 to 5.75%
AUD Assets 5.0%
Commodity prices and exchange rates estimation approach
Commodity price and foreign exchange rates are estimated with reference to external market forecasts and reviewed at least annually.
The rates applied have regard to observable market data including spot and forward values, and to market analysis including equity analyst
estimates.
Metal prices
Newcrest has maintained the long term US dollar gold and copper price estimates applied in 2016. Short term gold and copper prices have
been slightly adjusted from 2016, reflecting spot prices during the 2017 financial year and Newcrest’s analysis of observable market
forecasts for future periods.
AUD:USD exchange rate
Newcrest has revised its AUD:USD exchange rate estimates to $0.75 for all future periods. This reflects the AUD trading at or around this level
for most of the last two years and Newcrest’s analysis of observable market forecasts for future periods. Telfer and Cadia both have a material
portion of operating and capital costs denominated in AUD, resulting in this change having a positive impact on the fair value of both CGUs.
USD:PGK exchange rate
Newcrest has slightly increased its USD:PGK exchange rate estimates for all periods reflecting the sustained weakening of the PNG Kina
against the US dollar.
Discount rate
In determining the Fair Value of CGUs, the future cash flows were discounted using rates based on the Group’s estimated real after tax
weighted average cost of capital for each functional currency used in the Group, with an additional premium applied having regard to the
geographic location of, and specific risks associated with the CGU.
CGU
Cadia, Telfer
Lihir, Gosowong
Bonikro
Functional
Currency
AUD
USD
USD
2017
5.00%
5.25%
5.75%
2016
5.00%
5.25%
5.75%
Production activity and operating and capital costs
LOM production activity and operating and capital cost assumptions are based on the Group’s latest forecasts and longer term LOM plans.
These projections can include expected operating performance improvements reflecting the Group’s objectives to maximise free cash flow,
optimise and reduce operational activity, apply technology, improve capital and labour productivity.
d) Sensitivity Analysis
Since 2013, impairments have been recognised for Lihir (in 2013 and 2014), Telfer (in 2013 and 2014), Hidden Valley (in 2013, 2014 and
2015) and Bonikro (in 2013, 2014 and 2015) and an impairment reversal recognised for Telfer in 2015. Newcrest disposed of its interest in
the Hidden Valley asset in the current period.
Following the review of the CGU’s recoverable amounts as at 30 June 2017, and in recognising no requirement for asset impairments or
impairment reversals, the Group has determined that the carrying amount as at 30 June 2017 of the Lihir and Bonikro CGUs approximate
their respective Fair Values.
In relation to Telfer, having regard to the various valuation scenarios, the Group has determined that the carrying amount as at 30 June 2017
approximates Telfer’s Fair Value. The Telfer LOM plan was updated in the fourth quarter of financial year 2017 which indicated an increase in
near term expenditure associated with increased production stripping and increased grade variability. This in turn negatively impacted the Fair
Value, while the revised AUD:USD exchange rate assumption positively impacted the Fair Value. Telfer is a relatively large, complex, low-grade,
mid-to-high cost operation with high sensitivity to AUD gold prices, reserve and resource model conversion and operating cost assumptions.
In determining the Fair Value of Telfer, a number of valuation scenarios were used, representing multiple investment options and valuation
approaches, which were assessed to provide the indicative modelled Fair Value. In determining these valuation scenarios:
• Where the LOM plan excludes a material portion of total resources, value was attributed to unmined resources not considered in the
LOM plan models;
• Exploration value was included, representing estimates of total mineral endowment with a per unit valuation of expected resource
growth applied; and
• A risk adjusted value of the potential for a future block cave at Telfer was included in the valuation.
115
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
12. IMPAIRMENT OF NON-FINANCIAL ASSETS (continued)
d) Sensitivity Analysis (continued)
In total, approximately 25% of Telfer’s Fair Value is attributable to this unmined resource, exploration value and risked value of a potential
Telfer block cave.
Any variation in the key assumptions used to determine the Fair Value of CGUs would result in a change of the estimated Fair Value. If the
variation in assumption had a negative impact on Fair Value, it could indicate a requirement for impairment of non-current assets. If the variation
in assumption had a positive impact on Fair Value, it could indicate a requirement for an impairment reversal of CGU’s (where applicable).
It is estimated that the following reasonably possible changes in the key assumptions would have the following approximate impact (increase
or decrease) on the Fair Value of each of these CGUs in its functional currency as at 30 June 2017:
$ million in functional currency
US$100 per ounce change in gold price
0.25% increase/decrease in discount rate
$0.05 increase/decrease in AUD:USD rate
$0.10 increase/decrease in USD:PGK rate
5% increase/decrease in operating costs from that assumed
Lihir
US$
1,100
135
270
140
370
Telfer
Bonikro
A$
170
5
120
n/a
110
US$
40
minor
minor
n/a
10
It must be noted that each of the sensitivities above assumes that the specific assumption moves in isolation, whilst all other assumptions are
held constant. In reality, a change in one of the aforementioned assumptions may accompany a change in another assumption which may have
an offsetting impact (for example, a decline in the US dollar gold price accompanied with a decline in the Australian dollar compared to the
US dollar). Action is also usually taken by management to respond to adverse changes in economic assumptions that may mitigate the impact
of any such change.
13. INVENTORIES
Current
Ore stockpiles
Gold in circuit
Bullion and concentrate
Materials and supplies
Total current inventories (1)
Non-Current
Ore stockpiles
Total non-current inventories (1)
2017
US$m
2016
US$m
144
27
83
302
556
1,125
1,125
140
27
80
298
545
1,170
1,170
(1)
Total inventories include inventories held at net realisable value at Telfer and Bonikro of US$79 million (2016: US$95 million for Telfer, Bonikro and Hidden Valley).
Ore stockpiles, gold in circuit, bullion and concentrate are physically measured or estimated and valued at the lower of cost and net realisable
value. Cost represents the weighted average cost and includes direct costs and an appropriate portion of fixed and variable production
overhead expenditure, including depreciation and amortisation, incurred in converting materials into finished goods. Net realisable value is the
estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Ore stockpiles which are not scheduled to be processed in the twelve months after the reporting date are classified as non-current inventory.
The Group believes the processing of these stockpiles will have a future economic benefit to the Group and accordingly values these stockpiles
at the lower of cost and net realisable value.
Materials and supplies are valued at the lower of cost and net realisable value. Any allowance for obsolescence is determined by reference to
stock items identified.
ACCOUNTING JUDGEMENT AND ESTIMATE – NET REALISABLE VALUE
The computation of net realisable value for ore stockpiles involves significant judgements and estimates in relation to timing and cost of
processing, commodity prices, foreign exchange rates, recoveries and the timing of sale of the bullion and concentrate produced. A change
in any of these assumptions will alter the estimated net realisable value and may therefore impact the carrying value of ore stockpiles.
116
14. TRADE AND OTHER RECEIVABLES
Current
Bullion awaiting settlement
Metal in concentrate receivables
GST receivable
Other receivables
Total current receivables
2017
US$m
2016
US$m
15
43
22
8
88
3
95
28
8
134
Bullion awaiting settlement, GST and other receivables are initially measured at fair value then subsequently at amortised cost, less an
allowance for doubtful debts. Bullion awaiting settlement is generally expected to settle within seven days. GST and other receivables are
expected to settle within one to two months.
Metal in concentrate receivables are initially and subsequently measured at fair value and are generally expected to settle within one to four
months. Fair value movements are recognised in the Income Statement and presented as part of “Other Income/Expense”.
15. OTHER ASSETS
Current
Prepayments and other
Total current other assets
Non-Current
Prepayments and other
Non–current tax assets (1)
Total non–current other assets
(1)
Includes US$96 million (2016: US$85 million) paid in respect to PT NHM’s prior year tax assessments. Refer Note 32(a).
16. OTHER INTANGIBLE ASSETS
Information Systems Development
Cost
Accumulated amortisation and impairment
2017
US$m
2016
US$m
56
56
49
119
168
2017
US$m
186
(151)
35
69
69
46
132
178
2016
US$m
169
(125)
44
Costs incurred in developing information technology systems and acquiring software are capitalised as intangible assets. Amortisation is
calculated on a straight line basis over the useful life, ranging from three to seven years.
117
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
17. DEFERRED TAX
(a) Movement in Deferred Taxes
2017
Deferred tax assets
Carry forward revenue losses recognised:
– Australian entities
Deferred tax liabilities
Temporary differences:
– Fixed assets (1)
– Provisions
– Other
Net deferred taxes
2016
Deferred tax assets
Carry forward revenue losses recognised:
– Australian entities
Deferred tax liabilities
Temporary differences:
– Fixed assets (1)
– Provisions
– Other
Net deferred taxes
Opening
Balance
at 1 July
US$m
(Charged) /
credited
to income
(Charged) /
credited
to equity
Translation
Closing
Balance
at 30 June
US$m
US$m
US$m
US$m
105
105
(1,125)
52
125
(948)
(843)
140
140
(1,002)
54
51
(897)
(757)
(28)
(28)
(82)
(4)
15
(71)
(99)
(30)
(30)
(133)
(1)
35
(99)
(129)
–
–
–
–
(59)
(59)
(59)
–
–
–
–
41
41
41
3
3
(15)
1
5
(9)
(6)
(5)
(5)
10
(1)
(2)
7
2
80
80
(1,222)
49
86
(1,087)
(1,007)
105
105
(1,125)
52
125
(948)
(843)
(1)
Comprises property, plant and equipment and other intangible assets.
(b) Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of:
• capital losses with a tax effect of US$246 million (2016: US$93 million)
•
revenue losses and temporary differences with a tax effect of US$181 million (2016: US$411 million)
because it is not probable that the Group will have sufficient future assessable income and/or capital gains available against which the
deferred tax asset could be utilised. This is partly due to restrictions that limit the extent to which the losses can be applied to future taxable
income in future periods.
118
(c) Tax Consolidation
The Company and its wholly-owned Australian subsidiaries are part of a tax consolidated group. Newcrest Mining Limited is the head entity of
the tax consolidated group. The tax losses attributable to the Australian entities are available for offsetting against future profits of the tax
consolidated group. These tax losses are subject to restrictions that limit the extent to which the losses can be applied against future taxable
income. Notwithstanding these restrictions, these losses do not have an expiry date.
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 tax assets are recognised for deductible temporary differences, carry-forward of unused tax credits and unused tax losses to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of
unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each 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 based on the expected manner of recovery of the carrying value of an asset or liability. 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.
ACCOUNTING JUDGEMENT, ESTIMATES AND ASSUMPTIONS – RECOVERY OF DEFERRED TAX ASSETS
Judgement is required to determine whether deferred tax assets are recognised in the statement of financial position. Deferred tax assets,
including those arising from un-utilised tax losses, require management to assess the likelihood that the Group will generate sufficient
taxable earnings in future periods in order to recognise and utilise those deferred tax assets. Judgement is also required in respect of the
expected manner of recovery of the value of an asset or liability (which will then impact the quantum of the deferred tax assets or deferred
tax liabilities recognised) and the application of existing tax laws in each jurisdiction.
Estimates of future taxable income are based on forecast cash flows from operations and existing tax laws in each jurisdiction. These
assessments require the use of estimates and assumptions such as exchange rates, commodity prices and operating performance over the
life of the assets. 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 and recover/utilise deferred tax assets in future periods.
18. PROVISIONS
Current
Employee benefits
Mine rehabilitation
Other
Total current provisions
Non-Current
Employee benefits
Mine rehabilitation
Other
Total non-current provisions
Note
2017
US$m
2016
US$m
(a)
(b)
(c)
(a)
(b)
(c)
108
10
29
147
41
262
4
307
107
5
35
147
43
348
5
396
Provisions (other than those relating to employee benefits) 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.
119
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
18. PROVISIONS (continued)
(a) Employee benefits
Liabilities for wages and salaries, annual leave and any other employee benefits are measured at the amounts expected to be paid when the
liabilities are settled.
Amounts expected to settle within twelve months are recognised in ‘Current Provisions’ (for annual leave and salary at risk) and ‘Trade and
Other Payables’ (for all other employee benefits) 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.
The liability for long service leave and other long term benefits is measured at the present value of the estimated future cash outflows
resulting from employees’ services provided up to the reporting date.
Long-term benefits not expected to be settled within twelve months are discounted using the rates attaching to high quality corporate bonds
at the reporting date, which most closely match the terms of maturity of the related liability.
b) Mine 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 rehabilitate locations where activities have occurred which have led to a future obligation to make good. The nature
of rehabilitation activities includes dismantling and removing structures, rehabilitating mine sites, dismantling operating facilities, closure of
tailings 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 mining location. When the liability
is initially recorded, the present value of the estimated cost is capitalised as part of 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. 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.
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 assets 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.
ACCOUNTING ESTIMATE – MINE REHABILITATION PROVISION
Significant estimates and assumptions are 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 changes
in technology, changes in regulations, price increases, changes in timing of cash flows which are based on life of mine plans 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.
Movements in Mine Rehabilitation provision
At 1 July 2016
Derecognised due to business divestment (Note 29)
Movements in economic assumptions and timing of cash flows
Change in cost estimates
Paid/utilised during the year
Unwinding of discount
Foreign currency translation
At 30 June 2017
Split between:
Current
Non-current
c) Other Provisions
Other provisions comprises restructure, onerous contracts, community obligations and other miscellaneous items.
US$m
353
(35)
(49)
(8)
(1)
8
4
272
10
262
272
120
CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT
This section outlines the Group’s capital and financial management policies and significant capital and financial risk management activities
that have been implemented during the year. This includes the Group’s exposure to various risks and how these could affect the Group’s
financial position and performance, as well as how the Group is managing those risks.
19. CAPITAL MANAGEMENT AND FINANCIAL OBJECTIVES
Newcrest’s capital structure consists of equity and net debt, which includes borrowings, cash and cash equivalents.
Newcrest’s financial objectives are to meet all financial obligations, maintain a strong balance sheet to withstand cash flow volatility, be
able to pursue profitable growth opportunities, and be able to return excess cash generated to shareholders. Newcrest looks to maintain a
conservative level of balance sheet leverage.
From a financial policy perspective, Newcrest looks to:
• Target an investment grade credit rating throughout the cycle;
• Maintain a leverage ratio (Net Debt to EBITDA) of less than 2.0 times;
• Maintain a gearing ratio of below 25%; and
• Maintain cash and committed undrawn bank facilities of at least US$1.5 billion, with approximately one-third of that amount in the
form of cash.
At 30 June the Group’s position in relation to these metrics were:
Metric
Credit rating (S&P/Moody’s)
Leverage ratio (Net debt to EBITDA)
Gearing ratio
Cash and committed undrawn facilities (US$)
Policy ‘looks to’
Investment grade
Less than 2.0 times
Below 25%
At least $1.5bn,
~ 1/3 in cash
2017
2016
BBB–/Baa3
1.1
16.6%
$2.53bn
($492m cash)
BBB–/Baa3
1.6
22.8%
$2.45bn
($53m cash)
Detail of the calculation of the capital management performance ratios is provided below:
Leverage Ratio
Net debt (Note 20)
EBITDA (Note 4)
Leverage ratio
2017
US$m
1,499
1,408
1.1 times
2016
US$m
2,107
1,292
1.6 times
Leverage Ratio is calculated as net debt at the end of the reporting period divided by the rolling 12 month EBITDA. Refer to Note 4, Segment
Information, for the definition of EBITDA.
Gearing Ratio
Net debt (Note 20)
Equity
Total capital (Net debt and equity)
Gearing ratio
Gearing ratio is calculated as net debt at the end of the reporting period divided by net debt plus equity.
2017
US$m
1,499
7,534
9,033
2016
US$m
2,107
7,120
9,227
16.6%
22.8%
121
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
20. NET DEBT
Newcrest borrows funds from financial institutions and debt investors in the form of committed revolving facilities, private placement notes
and corporate bonds. As at 30 June 2017, all of Newcrest’s borrowings were unsecured.
Borrowings are initially recognised at fair value and subsequently at amortised cost. Borrowings are net of transaction costs incurred. Borrowings
are classified as non-current liabilities where Newcrest has an unconditional right to defer settlement for at least 12 months from the year end.
Cash and cash equivalents comprise cash at bank, on hand and short-term deposits.
Net Debt
Private placement notes
Bank loan
Total current borrowings
Bilateral bank debt
Corporate bonds
Private placement notes
Less: capitalised transaction costs on facilities
Total non-current borrowings
Total borrowings
Cash and cash equivalents
Net debt
Note
(c)
(d)
(a)
(b)
(c)
2017
US$m
–
–
–
–
2,000
–
(9)
1,991
1,991
(492)
1,499
2016
US$m
100
20
120
25
2,000
25
(10)
2,040
2,160
(53)
2,107
(a) Bilateral bank debt
The Group has bilateral bank debt facilities of US$2,000 million (2016: US$2,400 million) with 12 banks. These are committed unsecured
revolving facilities, individually negotiated and documented with each bank but with similar terms and conditions.
The facilities are on normal terms and conditions and include certain financial covenants. Interest is based on LIBOR plus a margin, which varies
amongst the lenders. The maturity date profile of these facilities is shown in the table below:
Facility Maturity (financial year ending)
June 2019
June 2020
June 2021
2017
US$m
1,001
250
749
2,000
2016
US$m
1,200
300
900
2,400
(b) Corporate bonds
In each of November 2011 and October 2012, Newcrest issued US$1,000 million in US dollar corporate bonds (notes). The notes were issued
in accordance with Rule 144A and Regulation S of the Securities Act of the United States. The notes consist of:
Maturity
November 2021
October 2022
November 2041
Coupon Rate
4.45%
4.20%
5.75%
2017
US$m
750
750
500
2,000
2016
US$m
750
750
500
2,000
(c) Private placement notes
During the year ended 30 June 2005, the Group issued long term senior unsecured notes into the North American private placement market.
These notes were on normal terms and conditions and include certain financial covenants. During the year, the Group repaid the notes that
matured in May 2017 and prepaid the outstanding notes which were due to mature in May 2020.
Maturity
May 2017
May 2020
122
Coupon Rate
5.71%
5.92%
2017
US$m
–
–
–
2016
US$m
100
25
125
(d) Bank loan
PT Nusa Halmahera Minerals has a US$40 million (2016: US$50 million) loan facility with one bank. This is an unsecured revolving facility
on normal terms and conditions and includes certain financial covenants. Interest is based on LIBOR plus a margin. This facility matures in
January 2018. As at 30 June 2017 this facility was undrawn. (2016: US$20 million drawn).
(e) Financing facilities
The Group has access to the following unsecured financing facilities at the end of the financial year.
2017
Bilateral bank debt facilities
Corporate bonds
Bank loan
2016
Bilateral bank debt facilities
Corporate bonds
Private placement notes
Bank loan
Facility
Utilised(1)
Facility
Unutilised
US$m
US$m
–
2,000
–
2,000
25
2,000
125
20
2,170
2,000
–
40
2,040
2,375
–
–
30
2,405
Facility
Limit
US$m
2,000
2,000
40
4,040
2,400
2,000
125
50
4,575
(1) As at 30 June 2017, 100% of the facilities utilised were at fixed interest rates. (30 June 2016: 98% fixed rates and 2% floating rates).
21. FINANCIAL RISK MANAGEMENT
Newcrest is exposed to a number of financial risks, by virtue of the industry and geographies in which it operates and the nature of the financial
instruments it holds. The key risks that could adversely affect Newcrest’s financial assets, liabilities or future cash flows are:
a) Commodity and other price risks
b) Foreign currency risk
c) Liquidity risk
d) Interest rate risk
e) Credit risk
Further detail of each of these risks is provided below, including management’s strategies to manage each risk. These strategies are executed
subject to Board approved policies and procedures and administered by Group Treasury.
Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage certain market risks. The instruments used include forward sale contracts, diesel
and fuel 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.
For instruments in hedging transactions, the Group formally designates and documents the relationship between hedging instruments and hedged
items at the inception of the transaction, as well as its risk management objective and strategy for undertaking various hedge transactions.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in Other
Comprehensive Income (‘OCI’) and accumulated in the Hedge Reserve in equity. Any gain or loss relating to an ineffective portion is recognised
immediately in the Income Statement. Amounts accumulated in the Hedge Reserve 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, if it no longer qualifies for hedge
accounting or if the Group changes its risk management objective for the hedging relationship. At that point in time, any cumulative gain or loss
on the hedging instrument recognised via OCI remains deferred in the Hedge Reserve 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 the Hedge Reserve 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 arose 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 arose on the hedge prior to its redesignation are recognised in the Income Statement at the date of the redesignation.
123
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
21. FINANCIAL RISK MANAGEMENT (continued)
(a) Commodity and Other Price Risks
(i) Gold and copper price
All of Newcrest’s gold and copper production is sold into global markets. The market prices of gold and copper are the key drivers of Newcrest’s
capacity to generate cash flow. Newcrest is predominantly an unhedged producer and provides its shareholders with exposure to changes in
the market price of gold and copper.
Newcrest does undertake selected financial risk management activities to mitigate specific gold and copper price risks, as follows:
Provisionally priced concentrate sales and gold and copper forward sales contracts
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 or ‘QP’). The
QP exposure is typically between one and four months. Revenue of provisionally priced sales is recognised based on the estimated fair value of
the total consideration receivable. Subsequent changes in fair value are recognised in the Income Statement each period until final settlement
and presented as part of ‘Other Income/Expense’. Refer to Note 5(d).
As at 30 June 2017, 109,000 gold ounces and 15,000 copper tonnes were subject to QP adjustment (2016: 133,000 ounces gold and
29,000 tonnes copper).
In order to minimise the short term revenue volatility impact of QP adjustments, particularly across reporting periods, the Group takes out gold
and copper forward sales contracts at the time of concentrate shipments to lock in the price. These forward sales contracts are not designated
into hedge relationships with the fair value adjustments at reporting date recognised in the Income Statement as part of ‘Other Income/Expense’.
The following table details the gold and copper forward sale contracts outstanding as at the reporting date:
Gold and Copper forward sale contracts
Gold (ounces)
Maturing less than 6 months
Copper (tonnes)
Maturing less than 6 months
Quantity
(’000s)
104
14
2017
Weighted
Average Price
Fair Value
Quantity
2016
Weighted
Average Price
Fair Value
US$
US$m
(’000s)
US$
US$m
1,257
5,745
1
(3)
112
25
1,267
4,778
(6)
(2)
Partial hedging of Telfer future gold sales
During 2016 and in June 2017, Newcrest put in place hedges for a portion of the Telfer mine’s future gold production. Telfer is a large scale, low
grade mine and its profitability and cash flow are both particularly sensitive to the realised Australian dollar gold price. Having regard to the
favourable spot and forward prices at that time, hedging instruments in the form of Australian dollar gold bullion swaps were put in place to
secure margins on a portion of future production to June 2019, which will support the investment in future cutbacks and mine development.
The Telfer AUD gold bullion swaps have been designated as cash flow hedges with a hedge relationship of 1:1. Potential sources of hedge
ineffectiveness that may affect the hedging relationship during the term are variations to forecast production timing and volume assumptions
and credit risk.
As of 30 June 2017, the Group is holding AUD gold bullion swaps with the following maturity:
2017
2016
Quantity
(ounces)
Weighted
Average Price
Fair Value
Quantity
(ounces)
Weighted
Average Price
Gold forward contracts maturing:
(’000s)
Less than 12 months
Between 1–2 years
Between 2–3 years
Total
295
135
–
430
A$
1,765
1,767
–
1,766
US$m
(’000s)
30
10
–
40
301
295
70
666
A$
1,730
1,765
1,778
1,751
Fair Value
US$m
(13)
(13)
(4)
(30)
These swaps are measured at fair value and have been presented as part of ‘Other financial assets/liabilities’ with the effective portion of
fair value movements being recognised in OCI and accumulated in the ‘Cash flow hedge reserve’ in equity. There was no hedge ineffectiveness
recognised in the Income Statement during the year.
124
(ii) Fuel price
The Group’s input costs are exposed to price fluctuations, in particular to diesel and fuel prices. To mitigate this risk, the Group has entered into
short-term diesel/fuel swaps to fix certain diesel and heavy fuel oil costs in line with budget expectations.
These swaps have been designated as cash flow hedges with a hedge relationship of 1:1. Potential sources of hedge ineffectiveness that may
affect the hedging relationship during the term include differences in the pricing of the physical (hedged) item and hedging instrument, timing
of physical delivery misaligned with the hedging instrument and credit risk.
2017
Quantity
Weighted
Average Price
Fair Value
Quantity
2016
Weighted
Average Price
Fair Value
Maturing in less than 12 months
(’000s)
US$
US$m
(’000s)
US$
US$m
Diesel contracts
(barrels)
Heavy fuel oil contracts
(tonnes)
400
115
63
292
(1)
–
403
97
60
263
–
–
These swaps are measured at fair value and have been presented as part of ‘Other financial assets/liabilities’ with the effective portion of
fair value movements being recognised in OCI and accumulated in the ‘Cash flow hedge reserve’ in equity. There was no hedge ineffectiveness
recognised in the Income Statement during the year.
(iii) Financial Impacts of Hedges
The impact of hedged items designated in hedging relationships on the Income Statement and Other Comprehensive Income (‘OCI’), is as follows:
CASH FLOW HEDGES
LINE ITEM IN THE INCOME STATEMENT
Gold sales
Diesel
Heavy fuel oil
Borrowings
Total
Sales revenue
Cost of sales – Site production costs
Cost of sales – Site production costs
Other income/(expenses) – Net FX gains/(losses)
GAIN/(LOSS) RECLASSIFIED FROM
OCI TO INCOME STATEMENT
2017
US$m
2016
US$m
13
–
3
7
23
1
(12)
(14)
–
(25)
(iv) Sensitivity Analysis
The following table summarises the sensitivity of financial assets and financial liabilities held at the reporting date to movement in gold, with
all other variables held constant. The 15% movement for gold (2016: 15%) is based on reasonably possible changes, over a financial year,
using an observed range of actual historical rates for the preceding five year period.
POST-TAX GAIN/(LOSS)
Gold
Gold +15% (2016: +15%)
Gold –15% (2016: –15%)
IMPACT ON PROFIT (1)
HIGHER / (LOWER)
IMPACT ON EQUITY (2)
HIGHER / (LOWER)
2017
US$m
2016
US$m
2017
US$m
2016
US$m
–
–
–
–
(57)
57
(92)
92
(1) Represents the impact of the movement in commodity prices on the balance of the financial assets and financial liabilities at year end.
(2) For derivatives which are in an effective hedging relationship, all fair value movements are recognised in Other Comprehensive Income.
The sensitivity of the exposure of copper, diesel and heavy fuel oil on financial assets and financial liabilities at year end has been analysed and
determined to be not material to the Group.
125
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
21. FINANCIAL RISK MANAGEMENT (continued)
(b) Foreign Currency Risk
The Group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. The Group’s
revenue is primarily denominated in US dollars whereas a material proportion of costs (including capital expenditure) are collectively in
Australian dollars and PNG Kina. The Group’s Australian entities have AUD functional currencies, while all non-Australian operating entities
have USD functional currencies.
The Group’s Statement of Financial Position can also be affected materially by movements in the AUD:USD exchange rate. Measuring the
exposure to foreign exchange risk is achieved by regularly monitoring and performing sensitivity analysis on the Group’s financial position.
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
Related party payables
Borrowings
Derivatives
Gross Exposure
Net investment in US dollar functional currency entities (i)
Net Exposure (inclusive of net investment in foreign operations)
2017
US$m
2016
US$m
347
43
42
1
433
32
18
2,000
3
2,053
4
95
19
–
118
20
–
2,150
38
2,208
(1,620)
(2,090)
2,000
380
2,025
(65)
(i)
The Group seeks to mitigate the effect of its foreign currency exposure by borrowing in US dollars. The entity which undertakes the majority of the Group’s
borrowing activities has an AUD functional currency. Where considered appropriate the US dollar denominated debt is designated either as a:
•
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 recognised through Other Comprehensive Income and 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 2017, US dollar borrowings of US$2,000 million were designated as a net investment in
foreign operations (2016: US$2,025 million); or
Cash flow hedge of future US dollar denominated commodity sales.
Exchange gains or losses upon subsequent revaluation of US dollar denominated borrowings from the historical draw-down rate to the period-end spot
exchange rate are recognised in Other Comprehensive Income and deferred in equity in the Hedge Reserve and will be released to the Income Statement as
the anticipated hedged US dollar denominated commodity sales to which the deferred gains/(losses) are designated, occur.
•
Sensitivity analysis
The following table details the Group’s sensitivity arising in respect of translation of financial assets and financial liabilities to a
10% movement (2016: 10%) (i.e. increase and decrease) in the Australian dollar against the US dollar at the reporting date, with all other
variables held constant. The 10% sensitivity is based on reasonably possible changes, over a financial year, using the observed range of actual
historical rates for the preceding five-year period.
POST-TAX GAIN/(LOSS)
AUD/USD +10% (2016: +10%)
AUD/USD –10% (2016: –10%)
IMPACT ON PROFIT AFTER TAX
HIGHER/(LOWER)
IMPACT ON EQUITY
HIGHER/(LOWER)
2017
US$m
(27)
27
2016
US$m
6
(6)
2017
US$m
(140)
140
2016
US$m
(140)
140
Significant assumptions used in the foreign currency exposure sensitivity analysis above include:
• Reasonably possible movements in foreign exchange rates;
The reasonably possible movement of 10% (2016: 10%) was calculated by taking the AUD spot rate as at the reporting date, moving this
spot rate by 10% (2016:10%) and then re-converting the AUD into USD with the “new spot-rate”. This methodology reflects the translation
methodology undertaken by the Group.
• The translation of the net assets in subsidiaries with a functional currency other than AUD has not been included in the sensitivity
analysis as part of the equity movement.
126
(c) Liquidity Risk
Newcrest is exposed to liquidity risk primarily through its capital management policies and objectives, which utilise debt as a key element of
the Group’s capital structure. The specific risk exposures include the sufficiency of available unutilised facilities and the repayment maturity
profile of existing financial instruments.
Liquidity risk is managed centrally by Group Treasury to ensure sufficient liquid funds are available to meet the Group’s financial commitments
through the following management actions:
• Maintaining cash and committed undrawn bank facilities of at least US$1.5 billion, with approximately one-third of that amount in the
form of cash.
• Targeting to maintain an investment grade credit rating.
• Regular forecasting of all future cash flows relating to operational, investing and financing activities, including detailed sensitivity
analysis to test multiple scenarios.
• Management of repayment maturities to avoid excessive refinancing in any period.
• Maintain funding flexibility with committed available credit lines with a variety of counterparties.
• Managing credit risk related to financial assets.
The Group maintains a balance between continuity of funding and flexibility through the use of cash, loans and committed available credit lines.
Included in Note 20 is a list of undrawn facilities that the Group has at its disposal to manage liquidity risk.
The following table reflects all contractually fixed repayments and interest resulting from recognised financial liabilities at the reporting date,
including derivative financial instruments. For derivative financial instruments the market value is presented, whereas for the other obligations
the respective undiscounted cash flows for the respective upcoming financial years are presented.
2017
Payables
Borrowings
Derivatives
2016
Payables
Borrowings
Derivatives
Less than
6 months
Between
6–12 months
US$m
US$m
Between
1–2 years
US$m
Between
2–5 years
US$m
Greater than
5 years
US$m
455
31
3
489
369
34
15
418
–
47
1
48
–
171
6
177
–
94
–
94
–
96
13
109
–
1,014
–
1,014
–
335
4
339
–
1,826
–
1,826
–
2,653
–
2,653
Total
US$m
455
3,012
4
3,471
369
3,289
38
3,696
(d) Interest Rate Risk
The Group’s exposure to the risk of changes in market interest rates primarily relates to the Group’s debt obligations that have floating
interest rates. The Group’s interest rate exposure together with the effective interest rate for each class of financial assets and financial
liabilities at the reporting date is summarised as follows:
Consolidated
Financial Assets
Cash and cash equivalents
Financial Liabilities
Bilateral debt
Corporate bonds
Private placement
Bank loan
Floating
Interest
US$m
492
492
–
–
–
–
–
2017
Fixed
Interest
Effective
Interest Rate
US$m
–
–
–
2,000
–
–
2,000
%
1.2
–
4.7
–
–
Net exposure
492
(2,000)
Floating
Interest
US$m
53
53
25
–
–
20
45
8
2016
Fixed
Interest
Effective
Interest Rate
%
0.6
1.8
4.7
5.8
1.6
US$m
–
–
–
2,000
125
–
2,125
(2,125)
The other financial assets and financial liabilities of the Group not included in the above table are non-interest bearing and not subject to
interest rate risk.
The sensitivity of this exposure has been analysed and determined to be not material to the Group.
127
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
21. FINANCIAL RISK MANAGEMENT (continued)
(e) Credit Risk
The Group’s exposure to credit risk arises from the potential default of the counterparty to the Group’s financial assets, which comprise cash
and cash equivalents, trade and other receivables and derivative financial instruments.
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 BBB (S&P) equivalent. Credit risk is further limited by ensuring diversification with maximum
investment limits based on credit ratings. All customers who wish to trade on credit terms with providers of capital or financial counterparties
are subject to a credit risk analysis.
The Group obtains sufficient collateral (such as a letter of credit) 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 US$40 million (2016: US$33 million).
Receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. There were
no material impairments of receivables as at 30 June 2017 or 30 June 2016.
The majority of the Group’s receivables are due from concentrate customers in Japan, Korea and the Philippines. There have been no credit
defaults with these customers in recent history. Newcrest’s Treasury department evaluates credit risk on a continual basis. At the reporting
date there were no other significant concentrations of credit risk.
(f) Financial Assets and Financial Liabilities
The following tables disclose the carrying amounts of each class of financial assets and financial liabilities at year end.
2017
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets – current
Other financial assets – non-current
Financial Liabilities
Trade and other payables
Borrowings
Other financial liabilities – current
2016
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Borrowings
Other financial liabilities – current
Other financial liabilities – non-current
Amortised
cost
Fair Value
through profit
or loss
Fair Value
through OCI
US$m
US$m
US$m
492
45
–
–
537
455
1,991
–
2,446
–
43
1
–
44
–
–
3
3
–
–
30
10
40
–
–
1
1
Amortised
cost
Fair Value
through profit
or loss
Fair Value
through OCI
US$m
US$m
US$m
53
39
92
369
2,160
–
–
2,529
–
95
95
–
–
8
–
8
–
–
–
–
–
13
17
30
Total
US$m
492
88
31
10
621
455
1,991
4
2,450
Total
US$m
53
134
187
369
2,160
21
17
2,567
(g) Fair Value
Fair value measurements recognised in the Statement of Financial Position
For financial assets and liabilities carried at fair value, the Group uses the following to categorise the method used:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (as prices) or indirectly (derived from prices). Valuation inputs include forward curves, discount
curves and underlying spot and futures prices.
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
The Group’s financial assets and liabilities which are measured at fair value on a recurring basis, are categorised as Level 2 measurements.
128
Fair value of financial instruments carried at amortised cost
The carrying amounts of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their
fair value, except as detailed in the following table:
Financial Liabilities
Borrowings:
Fixed rate debt:
– Corporate Bonds
– Private placement
CARRYING AMOUNT
FAIR VALUE (1)
2017
US$m
2016
US$m
2017
US$m
2016
US$m
1,991
–
1,991
1,990
125
2,115
2,130
–
2,130
2,024
131
2,155
(1)
The fair value is a level 2 valuation. Fair values of the Group’s fixed rate borrowings are determined by using discounted cash flow models that use discount rates
that reflect the issuer’s borrowing rate as at the end of the reporting period.
22. ISSUED CAPITAL
(a) Movements in Issued Capital
Opening balance
Shares repurchased and held in treasury (1)
Shares issued – dividend reinvestment plan
Total issued capital
(b) Number of Issued Ordinary Shares
Comprises:
– Shares held by the public
– Treasury shares
Total issued capital
Movement in issued ordinary shares for the year
Opening number of shares
Shares issued under:
– Shares repurchased and held in treasury (1)
– Share plans (2)
– Dividend reinvestment plan
Closing number of shares
Movement in treasury shares for the year
Opening number of shares
– Purchases
– Issued pursuant to share plans
Closing number of shares
2017
US$m
11,666
(19)
10
11,657
2016
US$m
11,673
(7)
–
11,666
2017
No.
2016
No.
765,777,868
1,331,670
765,562,740
948,231
767,109,538
766,510,971
765,562,740
765,753,346
(1,100,000)
716,561
598,567
(613,375)
422,769
–
765,777,868
765,562,740
948,231
1,100,000
(716,561)
1,331,670
757,625
613,375
(422,769)
948,231
(1)
(2)
During the year, the Newcrest Employee Share Plan Trust (‘Trust’) purchased a total of 1,100,000 (2016: 613,375) ordinary fully paid Newcrest shares at an
average price of A$21.97 (US$16.73) per share (2016: average price of A$14.78 (US$10.50) per share). The shares were purchased on-market to be held by the
Trustee on behalf of the Trust to satisfy the future entitlements of the holders of performance rights (and any other rights to acquire shares) under Newcrest’s
current and future employee incentive schemes.
Represents rights exercised under the Company’s share-based payments plans and executive service agreements. Refer to Note 33 for share-based payments.
Issued ordinary share capital is classified as equity and is recognised at the fair value of the consideration received by the Group. Any
transaction costs arising on the issue of ordinary shares and the associated tax are recognised directly in equity as a reduction of the share
proceeds received.
Treasury Shares
The Group’s own equity instruments, which are purchased on-market for later use in employee share-based payment arrangements (treasury
shares), are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own
equity instruments.
129
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
23. RESERVES
Equity Settlements Reserve
Foreign Currency Translation Reserve
Hedge Reserve
Total Reserves
Note
(a)
(b)
(c)
2017
US$m
88
(168)
27
(53)
2016
US$m
78
(340)
(16)
(278)
(a) Equity Settlements Reserve
This reserve is used to recognise the fair value of rights and options issued to employees in relation to equity-settled share based payments.
(b) Foreign Currency Translation Reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of
subsidiaries which do not have a functional currency of USD. The reserve is also used to record exchange gains and losses on hedges of the net
investment in foreign operations. Refer Note 21(b).
(c) Hedge Reserve
The hedge reserve is used to record the effective portion of changes in the fair value of cash flow hedges (refer Note 21). The components of
the hedge reserve at year end were as follows:
Component
FX gains on US dollar denominated borrowings
Gold forward contracts – Telfer
Other cash flow hedges
Tax effect
Total Hedge Reserve
2017
US$m
2016
US$m
–
40
(1)
39
(12)
27
7
(30)
–
(23)
7
(16)
130
GROUP STRUCTURE
This section provides information relevant to understanding the structure of the Group.
24. CONTROLLED ENTITIES
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. The Group comprises the following significant entities:
Entity
Parent Entity
Newcrest Mining Limited
Subsidiaries
Cadia Holdings Pty Limited
Contango Agricultural Company Pty Ltd
Newcrest Exploration Holdings Pty Ltd
Newcrest Finance Pty Limited
Newcrest Holdings (Investments) Pty Limited
Newcrest International Pty Ltd
Newcrest New Zealand Exploration Pty Ltd
Newcrest Operations Limited
Newcrest West Africa Holdings Pty Ltd
Newgen Pty Ltd
Niugini Mining (Australia) Pty Ltd
Sulawesi Investments Pty Limited
Newcrest Insurance Pte Ltd
Newcrest Singapore Holdings Pte Limited
PT Nusa Halmahera Minerals
PT Nusantara Bintang Management
PT Puncakbaru Jayatama
Newcrest (Fiji) Pte Limited
Newcrest Exploration (Fiji) Pte Limited
Lihir Gold Limited
Newcrest PNG 1 Limited
Newcrest PNG 2 Limited
Newcrest PNG 3 Limited
Newcrest PNG Exploration Limited
Newcrest Resources Inc
Newroyal Resources Inc
LGL Exploration CI SA
LGL Mines CI SA
LGL Resources CI SA
Newcrest Dougbafla CI SA
Newcrest Hire CI SA
Notes
Country of
Incorporation
PERCENTAGE HOLDING
2017
%
2016
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Indonesia
Indonesia
Indonesia
Fiji
Fiji
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
USA
USA
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
(a)
(c)
(c)
(a)
(a)
(a)
(a) (b)
(a) (b)
(c)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(e)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
100
–
100
100
100
100
100
100
89.89
99.89
89.89
89.89
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
89.89
99.89
89.89
89.89
(a) These controlled entities are a party to a Deed of Cross Guarantee. Refer Note 26 for further information.
(b) Became a party to the Deed of Cross Guarantee in May 2016.
(c) Ceased being a party of the Deed of Cross Guarantee in May 2016.
(d) Audited by affiliates of the Parent entity auditors.
(e) The entity was sold during the year. Refer Note 29.
131
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25. 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
Other comprehensive income
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
Foreign currency translation reserve
Accumulated losses
Total equity
c) Commitments
Capital expenditure commitments
COMPANY
2017
US$m
2016
US$m
216
198
414
103
7,205
7,308
162
542
704
6,604
11,657
88
(31)
(5,110)
6,604
597
(204)
393
100
6,399
6,499
112
83
195
6,304
11,666
78
(229)
(5,211)
6,304
9
5
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 26. 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.
132
26. DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations Instrument 2016/785 dated 17 December 2016, the wholly-owned controlled entities detailed in Note 24
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 its eligible controlled entities enter into a Deed of Cross Guarantee (‘Deed’).
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.
In May 2016, the Company and its eligible controlled entities entered into a new Deed.
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 is set out below.
Income Statement
Operating sales revenue
Cost of sales
Gross profit
Exploration costs
Corporate administration costs
Other revenue
Other income/(expenses)
Loss on business divestment
Net investment hedge loss
Class action settlement expense
Impairment reversal
Profit before interest and income tax
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit after income tax
CONSOLIDATED
2017
US$m
1,767
(1,264)
503
(28)
(81)
7
(87)
(10)
(79)
–
24
249
4
(129)
124
(39)
85
2016
US$m
1,733
(1,257)
476
(18)
(76)
102
(63)
–
–
(12)
464
873
37
(139)
771
(98)
673
133
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
26. DEED OF CROSS GUARANTEE (continued)
CONSOLIDATED
2017
US$m
2016
US$m
353
54
149
31
42
629
170
1
5,478
3,879
21
91
9
64
9,713
19
106
163
–
39
327
225
3
5,640
3,775
23
105
10
–
9,781
10,342
10,108
542
–
70
31
4
647
1,992
159
310
–
2,461
3,108
7,234
608
100
67
12
21
808
2,040
195
236
17
2,488
3,296
6,812
11,657
(4,259)
(164)
7,234
11,666
(4,229)
(625)
6,812
Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Total current assets
Non-current assets
Other receivables
Inventories
Investment in subsidiaries
Property, plant and equipment
Other intangible assets
Deferred tax assets
Other assets
Investment in associates
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax liability
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Derivative financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
134
27. INTERESTS IN JOINT OPERATIONS
The Group has interests in the following significant unincorporated joint arrangements, which are accounted for as joint operations under
accounting standards.
Name
Country
Principal Activity
Note
Wafi-Golpu JV
Morobe Exploration JV
Hidden Valley JV
Papua New Guinea
Papua New Guinea
Papua New Guinea
Namosi JV
Fiji
Mineral exploration
Mineral exploration
Gold production and mineral
exploration
Mineral exploration
(a)
(a)
(b)
(c)
OWNERSHIP INTEREST
2017
50.0%
50.0%
–
70.75%
2016
50.0%
50.0%
50.0%
70.67%
Interest in Joint Operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations
for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint
operation, its share of assets, liabilities, revenue and expenses from those operations and revenue from the sale of its share of the output from
the joint operation or from the sale of the output by the joint operation.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the
standards applicable to the particular assets, liabilities, revenues and expenses.
(a) Morobe Mining Joint Ventures
The Wafi-Golpu JV and the Morobe Exploration JV are collectively referred to as the Morobe Mining Joint Ventures. These JVs are each owned
50% by the Group and 50% by subsidiaries of Harmony Gold Mining Company Limited. Pursuant to the JV agreements, key operational
decisions of the JVs require a unanimous vote and therefore the Group has joint control. For segment reporting, Wafi-Golpu and Morobe
Exploration are included within the ‘Exploration and Other’ segment.
Under the conditions of the Wafi-Golpu exploration tenements, the PNG Government (‘the State’) has reserved the right to take up an equity
interest of up to 30% in a mine developed from Wafi-Golpu. The right is exercisable by the State once at any time prior to the commencement
of mining. If the State exercises this right, the exercise price is a pro rata share of the accumulated historical exploration costs. Once the right
is exercised, the State is responsible for its proportionate share of ongoing exploration and project development costs. During February 2012,
the State indicated its intention to exercise its option. As at 30 June 2017, this option has not been exercised. In the event the option is
exercised in full, Newcrest’s interest in the Wafi-Golpu JV would be reduced to 35%.
(b) Hidden Valley Joint Venture
The Hidden Valley JV was part of the Morobe Mining Joint Ventures. The Group divested its interest in the Hidden Valley JV during the year.
Refer Note 29.
(c) Namosi Joint Venture
The Namosi JV was established between the Group and two other parties under the Namosi Joint Venture agreement in November 2007.
Pursuant to this JV agreement, key operational decisions of the JV require a unanimous vote and therefore the Group has joint control. For
segment reporting, the Namosi JV is included within the ‘Exploration and Other’ segment.
135
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28. INVESTMENT IN ASSOCIATE
Investment in SolGold Plc
Opening balance
Acquisition
Foreign currency translation
Closing balance
2017
US$m
2016
US$m
–
63
1
64
–
–
–
–
An associate is an entity that is neither a subsidiary nor joint arrangement, over which the Group has significant influence. Significant influence
is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
The Group’s investment in an associate is accounted for using the equity method.
The Group acquired an initial 10% interest in SolGold Plc (‘SolGold’) in October 2016 following the signing of a Share Subscription Agreement
(‘SSA’) with SolGold. The Group acquired further shares during the year. As at 30 June 2017, the Group held 219,772,271 shares, representing
a 14.5% interest.
SolGold is an Australian based, copper gold exploration and future development company with assets in Ecuador, the Solomon Islands and
Australia. SolGold is listed on the London Stock Exchange AIM, and subsequent to year end, also listed on the Toronto Stock Exchange.
Under the SSA, subject to holding more than 10% of the share capital of SolGold, Newcrest has a right (but not an obligation) to appoint a
Director to the Board of SolGold. Consequently, at the date of initial acquisition, it was determined that Newcrest had the ability to participate
in the financial and operating policy decisions of SolGold. It was therefore determined that Newcrest has significant influence under
accounting standards from the date of the initial acquisition.
In March 2017, Craig Jones, Executive General Manager – Wafi-Golpu, was appointed as a non-executive director of SolGold as Newcrest’s nominee.
136
29. BUSINESS DIVESTMENT
During the year, Newcrest sold Newcrest PNG 1 Ltd to a wholly owned subsidiary of Harmony Gold Mining Company Limited (‘Harmony’)
following the signing of a sale agreement on 18 September 2016. Newcrest PNG 1 Ltd was a wholly owned subsidiary of Newcrest that held
the 50% interest in the Hidden Valley Joint Venture including the Hidden Valley mine. In addition, Newcrest also sold its 50% interest in certain
exploration tenements proximate to the Hidden Valley mine to Harmony.
As part of the sale agreement Newcrest funded Newcrest PNG 1 Ltd with an amount of US$22.5m. This represented Newcrest’s one-off
contribution towards future Hidden Valley closure liability partially offset by the option value of the possible future cash flows of the asset.
(a) Loss on Business Divestment
The loss on the divestment of Hidden Valley was as follows:
Consideration received (1)
Less: Written down value of net assets sold
Loss on business divestment
US$m
Note
–
10
(10)
(b)
(1)
Total consideration comprised US$1 in respect of the sale of the Group’s 50% interest in the Hidden Valley mine and 1 PNG Kina in respect of the sale of Group’s
exploration tenements.
(b) Net Assets Disposed
The carrying value of the net assets disposed of was as follows:
Assets
Cash and cash equivalents (2)
Inventories
Exploration, evaluation and development
Other assets
Total Assets
Liabilities
Trade and other payables
Provisions – rehabilitation
Provisions – other
Total Liabilities
Net assets divested
(2)
Includes a cash contribution of US$22.5 million for the rehabilitation liability.
(c) Cash Outflow on Divestment
The cash outflow on sale of Hidden Valley, net of cash held by Hidden Valley was as follows:
Consideration received
Less: Cash and cash equivalents divested
Total
Book Value on
Divestment
US$m
27
21
6
2
56
8
35
3
46
10
US$m
–
(27)
(27)
137
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
OTHER
This section includes additional financial information and other disclosures that are required by the accounting standards and the
Corporations Act 2001.
30. COMMITMENTS
(a) Operating Lease Commitments
Future minimum rentals payable on non-cancellable operating leases due:
Within one year
Later than one year but not later than five years
Later than five years
Total
The Group leases assets for operations including plant and office premises. The leases have an average life
ranging from 1 to 10 years. There are no restrictions placed upon the lessee by entering into these leases.
(b) Capital Expenditure Commitments
Capital expenditure commitments
This represents contracted capital expenditure.
2017
US$m
2016
US$m
27
29
–
56
10
17
–
27
54
78
31. EVENTS SUBSEQUENT TO REPORTING DATE
Subsequent to year-end, the Directors have determined to pay a final dividend for the year ended 30 June 2017 of US 7.5 cents per share,
which will be 70% franked. The dividend will be paid on 27 October 2017. The total amount of the dividend is US$57.5 million. This dividend
has not been provided for in the 30 June 2017 financial statements.
There have been no other matters or events that have occurred subsequent to 30 June 2017 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.
32. CONTINGENT LIABILITIES
a) Income Tax Matters – Indonesia
During the current year the Indonesian Taxation Office (‘ITO’) completed a tax audit and issued an amended assessment to PT Nusa
Halmahera Minerals (‘PT NHM’) for the 30 June 2015 financial year. Subsequent to year end, the ITO also issued an amended assessment for
the 30 June 2016 financial year. In addition, during prior periods the ITO concluded audits of the 2010 to 2014 income years. The principal
issue raised in these amended assessments was the income tax rate applicable under the Gosowong Contract of Work (‘COW’). PT NHM is
75% owned by Newcrest.
The amended assessments issued by the ITO to PT NHM applied a higher tax rate to the income of PT NHM, in accordance with the ITO
interpretation. This resulted in additional tax assessments of US$10 million in relation to 30 June 2015 and US$1 million in relation to
30 June 2016 (on a 100% basis). In addition, PT NHM has previously received assessments in relation to this issue totalling US$85 million for
the 2010 to 2014 financial years (on a 100% basis).
PT NHM disagrees with the ITO interpretation but has paid the amounts assessed to mitigate future penalties. PT NHM has objected to these
assessments and is seeking recovery of the US$96 million paid.
PT NHM has also continued to apply its own interpretation of the income tax rate applicable under the COW to the 2017 financial year. If,
following audits, the ITO issues assessments maintaining its alternative interpretation of the applicable tax rate, the additional tax assessed
is estimated to be approximately US$7 million (on a 100% basis).
The Group considers that PT NHM has made adequate provision for its taxation liabilities and is taking appropriate steps to address
issues raised by the ITO. If PT NHM’s objection to prior period assessments is ultimately unsuccessful it will not recover the amounts paid
(US$96 million to date) and income tax expense would be adversely impacted by an equivalent amount.
b) Other Matters
In addition to the above matters, companies in the Group are recipients of, or defendants in, certain claims, proceedings and/or complaints
made, commenced or threatened. In the opinion of the Directors, all such matters are of such a kind, or involve such amounts, that they are not
anticipated to have a material effect on the financial position of the Group if disposed of unfavourably, or are at a stage which does not support
a reasonable evaluation of the likely outcome of the matter.
c) Bank Guarantees
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 US$76 million (30 June 2016: US$92 million).
138
33. 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). The Group operates a number of share-based
payment plans, including:
• Executive Performance Share Plan (‘LTI Plan’)
• Employee Share Acquisition Plan (‘ESAP’)
• Share Match Plan
• Short Term Incentive Plan (‘STI Plan’)
• Sign-On Share Plan
(a) 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, General Managers and
Managers participate in this plan.
The performance measures for the Performance Rights granted in the 2017 financial year comprised of three equally weighted measures, being:
• Comparative Cost Position;
• Return on Capital Employed (ROCE); and
• Relative Total Shareholder Return (‘TSR’)
These measures are consistent with the prior year except for TSR which replaced the Strategic Performance measure.
Each LTI measure was chosen by the Board as it is a key driver of group performance. Performance against each of these measures over the
three year vesting period accounts for 1/3rd 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 Performance Rights granted under the LTI plan is independently determined using an option pricing
model. The model inputs included:
Fair value
Share price at grant date
Expected life of right
Exercise price
Risk-free interest rate
Annualised volatility
Expected dividend yield
Model used
2017
2016
A$18.21
A$20.99
3 years
Nil
1.83%
45.0%
1.0%
Monte Carlo
A$11.89
A$11.89
3 years
Nil
1.95%
40.0%
0.0%
Black–Scholes
The fair value of the rights granted is adjusted to reflect market vesting conditions. Non-market conditions are included in the assumptions
about the number of rights that are expected to become exercisable and are updated at each reporting date. The impact of the revision to
original estimates is recognised in the Income Statement with a corresponding adjustment to equity.
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.
ACCOUNTING ESTIMATES AND ASSUMPTIONS - 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 above.
139
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
33. SHARE BASED PAYMENTS (continued)
(b) Movements in the Number of Rights issued under the LTI Plan
Detailed information of Performance Rights over unissued ordinary shares is set out below:
Grant date
2017
15 Nov 16
5 Nov 15
12 Dec 14
4 Dec 13
Total
2016
5 Nov 15
12 Dec 14
4 Dec 13
17 Sep 12
10 Nov 10
Total
Exercise date
15 Nov 19
5 Nov 18
7 Nov 17
16 Sep 16
5 Nov 18
7 Nov 17
16 Sep 16
17 Sep 15
10 Nov 13
Beginning
of year
–
1,402,187
1,543,279
1,307,868
4,253,334
–
1,762,682
1,371,575
452,054
4,432
MOVEMENT IN NUMBER OF RIGHTS DURING THE YEAR
Granted
Exercised
Forfeited
End of
year
835,916
–
–
–
835,916
1,449,853
–
–
–
–
–
–
–
(280,250)
(32,204)
(161,522)
(143,816)
(1,027,618)
803,712
1,240,665
1,399,463
–
(280,250)
(1,365,160)
3,443,840
–
–
–
(44,465)
(2,946)
(47,666)
(219,403)
(63,707)
(407,589)
(1,486)
1,402,187
1,543,279
1,307,868
–
–
3,590,743
1,449,853
(47,411)
(739,851)
4,253,334
All Performance Rights have a nil exercise price. The number of performance rights exercisable at year end is nil (2016: nil).
(c) ESAP, Share Match Plan and Sign-On Share Plan
Under the ESAP, eligible employees are granted shares in 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, and are not eligible for the LTI Plan, are able to participate
in the ESAP.
Under the Share Match Plan, eligible employees may contribute up to A$4,950 to acquire shares in the plan year. On the third anniversary of
the start of the plan year, the Company will match the number of acquired shares held by the employee at that time with matched shares.
To support Newcrest’s ability to attract and/or retain suitable executives and senior managers, it is sometimes necessary to offer sign-on
incentives. Such incentives are consistent with market practice in the industry. Rights awarded under the Sign-on Share Plan vest over periods
up to three years and are subject to continued employment and/or performance.
The number of shares and rights granted under these plans during the year was not material to the Group.
(d) STI Plan
This plan applies to certain employees including key management personnel. Under the STI Plan, for key management personnel, 50% of the
payment is provided in cash with the remaining 50% deferred into shares. The number of shares calculated is based on the Company’s volume
weighted average share price during the five trading days immediately preceding the allocation date of shares. Half the shares are released
after 12 months and the remainder after 2 years.
During the year, 169,478 shares were granted in respect to this plan (2016: 115,260 shares).
140
34. KEY MANAGEMENT PERSONNEL
(a) Remuneration of Key Management Personnel and Directors
Short-term
Long-term
Post-employment
Share-based payments expense
(b) Loans and other transactions with Key Management Personnel
There are no loans made to KMP, or their related entities, by the Group.
35. AUDITORS REMUNERATION
(a) Amounts received or due and receivable by Ernst & Young (Australia) for:
Audit or review of financial reports of the company and subsidiaries
Non-audit services:
Tax and advisory services
Accounting advice and other assurance-related services
Total non-audit services
Total
(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
2017
US$’000
2016
US$’000
10,850
26
231
7,803
18,910
9,992
140
219
4,043
14,394
2017
US$’000
2016
US$’000
1,155
1,375
224
223
447
110
199
309
1,602
1,684
164
17
160
63
141
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
36. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
(a) New accounting standards and interpretations issued but not yet effective and not yet adopted
The following standards, amendments to standards and interpretations have been identified as those which may impact the Group in the
period of initial application. They have been issued but are not yet effective and are available for early adoption at 30 June 2017, but have not
been applied in preparing this financial report.
Reference & Title
AASB 15 Revenue from contracts with customers
AASB 16 Leases
AASB Interpretation 23 – Uncertainty over Income Tax Treatments
Application
date for the
Group
1 July 2018
1 July 2019
1 July 2019
Impact on
Group
(i)
(ii)
(iii)
(i) AASB 15 Revenue from contracts with customers
AASB 15 was issued in December 2015 and establishes a five-step model to account for revenue arising from contracts with customers.
Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for
transferring goods or services to a customer. Under AASB 15 the revenue recognition model will change from one based on the transfer of risk
and reward of ownership to the transfer of control of ownership.
The new revenue standard will supersede all current revenue recognition requirements under AAS. Either a full retrospective application or a
modified retrospective application is required for annual periods beginning on or after 1 January 2018. The standard has an effective date for
the Group of 1 July 2018. The Group plans to adopt the new standard on the required effective date.
During 2017, the Group commenced its preliminary assessment of AASB 15 and some of the key issues it has identified, and its initial views
and perspectives, are set out below. These are based on the work completed to date and the Group’s current interpretation of AASB 15 and
may be subject to changes as more detailed analysis is completed and as interpretations evolve more generally. Furthermore, the Group is
considering and will continue to monitor any further development.
To date, the Group has identified the following areas that require consideration:
• The Group’s revenue is derived from bullion and concentrate sales:
Ɨ For the sale of bullion, we do not anticipate these sales to be materially affected by the new standard.
Ɨ For the sale of concentrate, the point of revenue recognition is dependent on the contract sales terms, which are generally undertaken
on Cost, Insurance and Freight (CIF) Incoterms. As the transfer of risks and rewards generally coincides with the transfer of control
at a point in time for the Incoterms as part of the Group’s concentrate sales arrangements, the timing and amount of revenue
recognised for the sale of concentrate is unlikely to be materially affected for the majority of sales.
• AASB 15 introduces the concept of performance obligations that are defined as a ‘distinct’ promised goods or services. For CIF Incoterms,
the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. Consequently,
the freight service on export concentrate contracts with CIF Incoterms represents a separate performance obligation as defined under
the new standard. This means that, where material, a portion of the revenue earned under these contracts, representing the obligation
to perform the freight service, will be deferred and recognised over time as this obligation is fulfilled, along with the associated costs.
Based upon the preliminary assessment performed, the impact of this change on the amount of revenue and profit recorded in a year is
not expected to be material.
(ii) AASB 16 Leases
AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more
than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use
the underlying leased asset and a lease liability representing its obligations to make lease payments.
The Group is in the process of assessing the impact of the new lease standard.
(iii) AASB Interpretation 23 – Uncertainty over income tax treatments
This interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of
AASB 112 Income Taxes. The Interpretation does not apply to taxes or levies outside the scope of AABS 112, nor does it specifically include
requirements relating to interest and penalties associated with uncertain tax treatments.
The Group has not yet determined the extent of the impact, if any.
Apart from the above, other accounting standards, amendments and interpretations that have been issued and will be applicable in future
periods have been considered, however their impact is not considered material to the Group.
(b) Early adoption of accounting standards
As disclosed in the 2016 annual financial report, the Group early adopted accounting standard AASB 9 Financial Instruments in the prior
financial year.
142
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 2017 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. 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 2017.
3. In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the
Closed Group identified in Note 26 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
Peter Hay
Chairman
14 August 2017
Melbourne
Sandeep Biswas
Managing Director and Chief Executive Officer
143
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
INDEPENDENT AUDITOR’S REPORT
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report to the Members of Newcrest Mining Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Newcrest Mining Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2017, the consolidated income statement, consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, notes to the financial statements, including a summary of significant accounting policies,
and the Directors' Declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2017 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
144
1. Assessment of the carrying value of assets
Why significant
How our audit addressed the key audit matter
As at 30 June 2017 the Group’s consolidated
statement of financial position includes plant and
equipment of $3,955 million, mine development
of $4,007 million, production stripping of $151
million, mines under construction of $83 million
and other intangible assets of $35 million. The
Group assesses the existence of indicators of
impairment and impairment reversal semi-
annually for each cash generating unit (“CGU”).
At 30 June 2017 the Group determined that
indicators of impairment existed for Telfer arising
from changes to mine plans and operating and
financial performance for the period. An
assessment of the recoverable amount was
performed for Telfer and no impairment was
determined or recorded.
The Group also considered if indicators of
impairment reversal existed for assets previously
impaired, other than goodwill. This analysis was
performed for Lihir. The analysis considered
changes in macro-economic factors, operating
and financial performance for the period, in
addition to updates to mine plans and related
studies that occurred through the mine planning
processes. No impairment reversals were
determined or recorded. Determination as to
whether or not an impairment charge or reversal
relating to an asset or CGU involves significant
judgement about the future results and plans for
each asset and CGU.
Further disclosure relating to the assessment of
impairment can be found at Note 12 Impairment
of Non-Financial Assets.
We evaluated the Group’s assessment of indicators of
impairment or impairment reversal. Where we or the
Group determined indicators existed we evaluated the
Group’s calculations of the recoverable amount of each
CGU.
With the support of our valuation specialists we assessed
the reasonableness of the board approved cash flow
projections and key macro-economic assumptions used
in the impairment models.
The Group has used internal and external experts to
provide geological, metallurgical, mine planning and
technological information to support key assumptions in
the impairment models.
We have examined the information provided by the
Group’s experts, including assessment of the competency
of experts and independence of the external experts, the
methodology applied, and we substantiated the
information provided to the inputs used in the
impairment models.
We also assessed the reasonableness of the cashflows
modelled against the past performance of the Group.
We assessed the key assumptions such as gold and
copper prices, discount rates, foreign exchange rates,
mine operating costs and capital expenditures and
performed sensitivity analysis around the key drivers of
the cash flow projections. Having determined the change
in assumptions (individually or collectively) that would be
required for the CGUs to record an impairment charge or
reversal, we considered the likelihood of such a
movement in those key assumptions arising.
We assessed the adequacy of the disclosures
included Note 12 Impairment of Non-Financial
Assets.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
145
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
INDEPENDENT AUDITOR’S REPORT
2. Taxation
Why significant
The Group operates in multiple taxation
jurisdictions. International income tax matters
involve significant judgement due to the
complexity of legislation and regulatory
requirements.
The Group’s Indonesian entities have been subject
to audits from the Indonesian Tax Office (ITO) in
relation to the applicable income tax rate. The
audits have covered multiple financial years.
The Group is disputing the assessment of the
applicable tax rate under the Contract of Works
(COW) and is seeking to recover the additional tax
paid totaling $96 million.
Disclosure in relation to tax matters can be found
at Note 32 Contingent Liabilities.
How our audit addressed the key audit matter
We tested the Group’s calculations for tax
provisions or tax receivables in each jurisdiction,
including deferred taxes.
We examined the tax assessments and relevant
correspondence received from the ITO. We
assessed the additional tax paid by the Group to
the ITO through examination of correspondence
with the ITO, tax returns and payment.
The Group has used independent tax and legal
experts to support the Group’s interpretation of the
COW and the tax position adopted by the Group.
With the involvement of our tax specialists we
assessed the tax position adopted by the Group,
including consideration of the independence and
competency of the independent tax and legal
experts and examination of relevant supporting
evidence.
We assessed the adequacy of the disclosures included
in Note 32 Contingent Liabilities.
3. Mine rehabilitation provisions
Why significant
How our audit addressed the key audit matter
The Group has rehabilitation obligations to restore
and rehabilitate land and environmental
disturbances created by mine operations, including
exploration and development activities. These
obligations are determined through regulatory and
legislative requirements across multiple
jurisdictions in addition to policies and processes
set by the Group.
At 30 June 2017 the Group has recorded $272
million as mine rehabilitation provisions. The
estimation of rehabilitation provisions is highly
complex and judgemental with respect to the
timing of the activities, the associated economic
assumptions and estimated cost of the future
activities.
Disclosure in relation to rehabilitation provisions
can be found in Note 18 Provisions.
We tested the Group’s calculations for mine rehabilitation
provision at each mine.
The Group has used independent experts to support the
estimation of the rehabilitation provisions.
With the support of our environmental specialists we
assessed the independence and competency of the
independent experts and tested the underlying data used
by the experts, and that the information provided by the
experts has been appropriately reflected in the
calculation of the rehabilitation provisions.
We assessed the reasonableness of economic
assumptions, such as the discount and inflation rates that
were applied in the calculations.
We assessed the adequacy of the disclosures included in
Note 18 Provisions.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
146
Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2017 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
147
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
INDEPENDENT AUDITOR’S REPORT
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
148
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the Directors' Report for the year ended 30
June 2017.
In our opinion, the Remuneration Report of Newcrest Mining Limited for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Tim Wallace
Partner
Melbourne
14 August 2017
Matthew A. Honey
Partner
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
149
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY
SHAREHOLDER INFORMATION
ISSUED CAPITAL (ON 11 SEPTEMBER 2017)
Title of Class
Ordinary
TWENTY LARGEST SHAREHOLDERS AS AT 11 SEPTEMBER 2017
Name
1 HSBC Custody Nominees (Australia) Limited
2 J P Morgan Nominees Australia Limited
3 Citicorp Nominees Pty Limited
4 National Nominees Limited
5 BNP Paribas Noms Pty Ltd
6 BNP Paribas Nominees Pty Ltd
7 Citicorp Nominees Pty Limited
8 National Nominees Limited
9 HSBC Custody Nominees (Australia) Limited
10 AMP Life Limited
11 Pacific Custodians Pty Limited
12 BNP Paribas Nominees Pty Ltd
13 BNP Paribas Nominees Pty Ltd
14 Pacific Custodians Pty Limited
15 Mr Stephen Segal
16 Merrill Lynch (Australia) Nominees Pty Limited
17 UBS Nominees Pty Ltd
18 HSBC Custody Nominees (Australia) Limited – A/C 2
19 HSBC Custody Nominees (Australia) Limited
20 Pacific Custodians Pty Limited
Total
SUBSTANTIAL SHAREHOLDERS(1) AS AT 11 SEPTEMBER 2017
Name
BlackRock Group
First Eagle Investment Management and its associated entities
Allan Gray Australia and its related bodies corporate
Commonwealth Bank of Australia and its related bodies corporate
(1) As notified to Newcrest under section 671B of the Corporations Act 2001.
DISTRIBUTION OF SHAREHOLDERS AS AT 11 SEPTEMBER 2017
Size of Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and Over
Total
Number of
Shareholders
Number of
Shares
60,412
767,109,538
Number of
Shares
% Issued
Capital
377,507,357
170,925,047
78,094,438
22,113,582
11,816,372
10,148,680
9,169,185
3,769,608
2,961,603
2,254,386
1,905,909
1,617,349
1,284,500
1,030,897
692,117
645,289
635,868
579,128
575,258
548,680
49.21
22.28
10.18
2.88
1.54
1.32
1.20
0.49
0.39
0.29
0.25
0.21
0.17
0.13
0.09
0.08
0.08
0.08
0.07
0.07
698,275,253
91.03
Number of
Shares
% Issued
Capital
103,449,291
13.49
55,471,061
51,713,142
40,213,974
7.24
6.74
5.24
Number of
Shareholders
Number of
Shares
% Issued
Capital
46,037
14,401,398
12,632
26,824,560
1,137
7,964,592
552
11,984,089
54
705,934,899
60,412
767,109,538
1.88
3.50
1.04
1.56
92.03
100.0
The number of shareholders holding less than a marketable parcel of ordinary shares was 3,563 (based on the closing market price on
11 September 2017).
150
VOTING RIGHTS
Each ordinary shareholder present at a general meeting (whether in person, by proxy or by representative) is entitled to one vote on a show of
hands or, on a poll, one vote for each fully paid ordinary 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 Board has determined a final dividend of US 7.5 cents per share for the year ended 30 June 2017. An interim dividend of US 7.5 cents per
share was paid on 28 April 2017.
The Dividend Reinvestment Plan (DRP) remains in place and will be offered to shareholders according to the terms of the DRP. A copy of the
DRP Rules is on the Company’s website at www.newcrest.com.au.
ON MARKET BUY-BACK
Newcrest has a current on-market buy-back program. There has been no activity under the program since April 2012.
AMERICAN DEPOSITARY RECEIPTS
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 Mellon. Contact details are set out in the Corporate Directory
Section of this Report, which is inside the back cover.
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 2017 financial year, the net movement for ADRs was negative 363,192 and at year-end a net 4,706,520 ADRs were outstanding.
INVESTORS
The Company’s website at www.newcrest.com.au/investors has a section where investors have access to market releases, reports,
presentations, dividend history, shareholder information, key dates and other information.
ONLINE SHARE REGISTRY INFORMATION
Visit the Company’s Share Registry, Link Market Services, at www.linkmarketservices.com.au to access a wide variety of your holding
information, make the following changes online or download forms.
You can:
confirm whether you have lodged your Tax File Number (TFN), Australian Business Number (ABN) or exemption;
• check your current holding and balances;
• update your electronic communication instructions;
• update your address and bank details;
•
• check transaction and dividend history;
• enter your email address;
• download a variety of instruction forms; and
• add or update DRP instructions.
You can access your holding via a secure login using your Securityholder Reference Number (SRN) or Holder Identification Number (HIN), which
you will find on your holding record. You will also need the postcode recorded on your holding record.
SHARE REGISTRY CONTACT INFORMATION
You can also contact the Company’s Share Registry by calling 1300 554 474 within Australia or +61 1300 554 474 from outside Australia.
More Share Registry contact details are set out in the Corporate Directory section of this Report, which is inside the back cover.
ANNUAL REPORT
You can access a full copy of the Annual Report online at www.newcrest.com.au. If you no longer wish to receive a hard copy of the Annual
Report, log into your shareholding or contact our Share Registry to update your communication instructions.
151
KEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORYMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENTSAFETY, SUSTAINABILITY & DIVERSITY FIVE YEAR SUMMARY
For the 12 months ended 30 June(1)
2017
2016
2015
2014
2013(2)
Gold Production (ounces)(3)(4)
Cadia(3)
Lihir
Telfer
Gosowong
Bonikro
Hidden Valley(4)
Total
Copper Production (tonnes)(3)
Silver Production (ounces)
619,606
940,060
386,242
295,876
128,327
10,520
668,773
900,034
462,461
197,463
137,696
72,566
667,418
688,714
520,309
331,555
119,970
94,601
592,832
721,264
536,342
344,747
94,994
105,845
446,879
649,340
525,500
312,711
90,350
85,004
2,380,630
2,438,994
2,422,568
2,396,023
2,109,784
83,941
83,070
96,816
86,118
80,366
1,168,812
2,263,837
2,181,419
2,324,210
1,931,816
All-In Sustaining Cost (US$ per ounce)
787
762
780
Cash Flow (US$m)
Cash flow from operations
Capital expenditure
Exploration expenditure
Free cashflow(5)
Profit and Loss (US$m)
Sales revenue
Depreciation and amortisation
Income tax expense/(benefit)
Net profit/(loss) after tax:
– Statutory profit/(loss)(6)
– Underlying profit(7)
Earnings per share and dividends (US cents per share)
Earnings per share (EPS):
– Basic EPS on statutory profit/(loss)
– Basic EPS on underlying profit
Dividends
Financial Position (US$m)
Total assets
Total liabilities
Total equity
Ratios
Net debt to EBITDA(8)
Gearing (percent)(9)
Return on Capital Employed (percent)(10)
Issued Capital (million shares) at year end
Gold Inventory (million ounces)(11)
Ore Reserves
Mineral Resources
1,467
582
58
739
3,477
689
164
308
394
40.2
51.4
15.0
11,583
4,049
7,534
1.1
16.6
7.9
767
65
130
1,241
471
44
814
3,295
698
118
332
323
43.3
42.1
7.5
11,191
4,071
7,120
1.6
22.8
6.2
767
69
140
1,280
471
38
854
3,604
574
335
376
424
49.1
55.3
Nil
11,803
4,846
6,957
2.1
29.3
7.8
767
75
140
897
965
773
57
136
3,707
638
(486)
(2,105)
393
(274.6)
51.3
Nil
12,799
5,539
7,260
2.7
33.8
6.2
767
78
150
1,318
1,148
2,449
156
(1,484)
3,859
742
(373)
(5,319)
459
(694.5)
59.9
12.5
15,836
6,559
9,277
2.6
29.3
5.0
767
87
161
Includes pre-commissioning production.
(1) All financial data presented in this report is quoted in US dollars unless otherwise stated.
(2) Financial information for 2013 has been restated to reflect the adoption of interpretation 20 - Stripping Costs in the Production Phase of a Surface Mine.
(3)
(4) Production from Hidden Valley for 2017 includes two months of production, up to the economic effective disposal date of 31 August 2016.
(5) Free cashflow is calculated as cash flow from operating activities less cash flow related to investing activities.
(6) Statutory Profit/(loss) is profit/(loss) after tax attributable to owners of the parent.
(7) Underlying Profit is profit after tax before significant items attributable to owners of the parent.
(8) Calculated as net debt divided by EBITDA of the preceding 12 months. Calculated as at 30 June.
(9) Calculated as net debt divided by net debt and total equity. Figure represents Gearing at 30 June.
(10) Calculated as EBIT to average total capital employed.
(11) Reserves and Resources are as at 31 December 2016 for 2017, 31 December 2015 for 2016, 31 December 2014 for 2015, 31 December 2013 for 2014
and 31 December 2012 for 2013.
152
CORPORATE DIRECTORY
INVESTOR INFORMATION
STOCK EXCHANGE LISTINGS
REGISTERED AND PRINCIPAL OFFICE
Newcrest Mining Limited
Level 8
600 St Kilda Road
Melbourne, Victoria 3004
Australia
T: +61 (0)3 9522 5333
F: +61 (0)3 9525 2996
E: investor.relations@newcrest.com.au
www.newcrest.com.au
COMPANY SECRETARIES
Francesca Lee and Claire Hannon
Newcrest Mining Limited
Level 8
600 St Kilda Road
Melbourne, Victoria 3004
Australia
T: +61 (0)3 9522 5333
F: +61 (0)3 9521 3564
E: francesca.lee@newcrest.com.au
claire.hannon@newcrest.com.au
INVESTOR RELATIONS
Chris Maitland
Head of Investor Relations
Newcrest Mining Limited
Level 8
600 St Kilda Road
Melbourne, Victoria 3004
Australia
T: +61 (0)3 9522 5717
E: chris.maitland@newcrest.com.au
AUSTRALIAN SECURITIES EXCHANGE
(Ticker NCM)
PORT MORESBY STOCK EXCHANGE
(Ticker NCM)
NEW YORK ADRS
(Ticker NCMGY)
SHARE REGISTRY
Link Market Services Limited
Tower 4
727 Collins Street
Melbourne, Victoria 3000
Australia
Locked Bag A14
Sydney South, New South Wales 1235
Australia
T: +61 1300 554 474
(toll free within Australia)
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
PNG REGISTRIES LIMITED
Level 2, AON Haus
MacGregor Street
Port Moresby, NCD
Papua New Guinea
PO Box 1265
Port Moresby, NCD
Papua New Guinea
T: +675 321 6377/ 78
F: +675 321 6379
E: ssimon@online.net.pg
AMERICAN DEPOSITARY
RECEIPTS (ADRS)
The Bank of New York Mellon
Shareholder Services
c/o Computershare Investor Services
PO Box 505000
Louisville, KY 40233-5000
T: +1-888-269-2377
(toll free within the US)
International Callers: +1 201-680-6825
E: shrrelations@cpushareownerservices.com
www.bnymellon.com/shareowner
OTHER OFFICES
PERTH OFFICE
Level 1, 1 Centro Ave
Subiaco WA 6008
Australia
T: +61 (0)8 9270 7070
PORT MORESBY OFFICE
Level 4
Port Tower Building
Hunter Street
Port Moresby, Papua New Guinea
T: + 675 321 7711
F: + 675 321 4705
COMPANY EVENTS
Annual General Meeting
14 November 2017 at 10.30am
The Pavilion
The Arts Centre Melbourne
100 St Kilda Road
Melbourne, Victoria 3004
Visit our website at www.newcrest.com.au to view our: key dates;
current share price; market releases; annual, quarterly and financial
reports; operations, project and exploration information; corporate,
shareholder, employment and sustainability information.
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153
SAFETY, SUSTAINABILITY & DIVERSITYKEY ACHIEVEMENTS FOR FY17CHAIRMAN’S REPORTMANAGING DIRECTOR’S REVIEWVALUE PROPOSITIONFORGING A STRONGER NEWCREST ASSET OVERVIEWTHE BOARD MINER OF CHOICEDIRECTORS’ REPORTFINANCIAL REPORTMINERAL RESOURCES & ORE RESERVESCORPORATE GOVERNANCE STATEMENT