2018
ANNUAL REPORT
OUR VISION
To be the
Miner of
Choice.
To be the Miner of Choice for our people, shareholders,
host communities, partners and suppliers.
OUR MISSION
To safely deliver superior returns to our
stakeholders from finding, developing and
operating gold/copper mines.
1
“NEWCREST’S VISION IS TO BE
THE MINER OF CHOICE FOR
ALL OUR STAKEHOLDERS.
SANDEEP BISWAS
MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
FORGING A
STRONGER
NEWCREST
OUR
COMPANY
OUR
FIVE
PILLARS
Forging A Stronger Newcrest
Key Achievements for FY18
Asset Overview
Newcrest Value Proposition
2
4
6
7
Chairman's Report
Managing Director's Review
The Board
Mineral Resources
& Ore Reserves
Corporate Governance
Statement
Directors’ Report
Financial Report
8
8
10
26
34
36
94
Corporate Directory
153
Introduction
Safety & Sustainability
People
Operating Performance
Technology & Innovation
Profitable Growth
15
16
18
20
22
24
NEWCREST 2018 ANNUAL REPORT
2
FORGING A
STRONGER NEWCREST
The health and safety of our workforce is of primary
importance at 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 and enduring commitment to
the health and safety of our workforce best reflects
our values and underpins and sustains optimal
business performance.
OUR EDGE
Being agile, bold and having an owner’s mindset.
WE ACHIEVE SUPERIOR RESULTS THROUGH...
Safety
leadership
Process
control and
analytics
Management
operating
system
Asset
management
Safe mine
design
Exploration
and resource
capture
FORGING A STRONGER NEWCREST THREE KEY EXTERNAL STAKEHOLDERS ARE:
3
SHAREHOLDERS
COMMUNITIES
GOVERNMENT
To achieve our Mission of safely delivering
superior returns to our stakeholders from
finding, developing and operating gold/
copper mines, we strive to:
• Safely realise the full potential of our
existing assets
• Apply our technical expertise to unlock
value in orebodies we own or can acquire
• Leverage our exploration and
technical expertise to find, or gain
access by early-stage entry to new
gold/copper orebodies
• Maintain capital discipline when
deploying all growth and exploration
opportunities to ensure financial
strength throughout the capital cycle
• Provide shareholder value through
sustained dividend returns in-line with
our dividend policy
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
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 economy of the jurisdictions
where we operate including through tax,
royalties and other socio-economic 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. This can cover a wide range of areas
including economic, environmental, social
responsibility and technical best practices.
To strengthen community services and
support capacity building, Newcrest also
works through a range of partners, including
local governments.
Newcrest strives to act 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), which is 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
its 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 is
critical to any reform process and Newcrest
seeks to participate and contribute on
relevant issues to assist with informed
discussion and consideration.
NEWCREST 2018 ANNUAL REPORT FORGING A
STRONGER NEWCREST
4
KEY ACHIEVEMENTS FOR FY18
Delivering on operational and
financial commitments
RECORD THROUGHPUT ACHIEVED AT CADIA & LIHIR
• Lihir milled a record 14.3mt, producing a record
955koz of gold for the year
• Cadia achieved an annualised throughput rate > 30mtpa
for the month of June 2018
WITHIN TARGET FINANCIAL METRICS
• Leverage ratio target less than 2x
• Gearing target of less than 25%
•
• Strong cash & liquidity position
Investment grade rating
BALANCE SHEET
• Leverage ratio of 0.7x at 30 June 2018
• Gearing(6) of 12.2% at 30 June 2018
• Cash and undrawn committed debt facilities at
30 June 2018 of approximately $3.0 billion
DIVIDEND
Total dividend of 18.5 cents per share fully franked
OPERATING PERFORMANCE
• Gold production of 2.346 million ounces, copper
production of 78 thousand tonnes
• All-In Sustaining Cost (AISC) (1), (2) of $835 per ounce
• AISC (1),(2) margin of $473 per ounce
GROWTH
• Acquisition of 27.1% in Lundin Gold (gaining exposure
to the tier one Fruta del Norte orebody)
• Cadia Expansion Pre-Feasibility Study Findings released
with optimal plant size and mine development announced
• Updated Wafi-Golpu Feasibility Study released
• Entered into a further nine early stage entry arrangements
• Maiden resource delivered in the Seguela Project in
Côte d’Ivoire
PROFIT AND CASH FLOW
• Statutory profit(3) of $202 million
• Underlying profit(1), (4) of $459 million
• EBITDA margin(1), (5) of 43.9%; EBIT margin of 21.7%
• Cash flow from operating activities of $1,434 million
• Free cash flow(1) of $601 million
LOW COST POSITION
$835/oz
AISC (1), (2)
GENERATED FREE CASH FLOW (1) (FCF)
$601m
FCF in FY18
REDUCED NET DEBT
Reduced by
$459m
in FY18
ALL OPERATING SITES
free cash flow positive
FIVE CONSECUTIVE YEARS
of positive free cash flow
CLEAR DIVIDEND POLICY
putting shareholders first
(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.
(2) AISC and All-In Cost are both determined in accordance with the World Gold Council Guidance Note on Non-GAAP Metrics released June 2013
(3) Statutory profit is profit after tax attributable to owners of the Company.
(4) Underlying profit is profit after tax before significant items attributable to owners of the parent. Refer to page 60 for further details.
(5) EBITDA is ‘Earnings before interest, tax, depreciation, amortisation and significant items’. EBIT is ‘Earnings before interest, tax and significant items’. EBITDA and EBIT
are used to measure segment performance and have been extracted from Note 4 ’Segment Information’ on page 101.
(6) Gearing is calculated as net debt to net debt and total equity, as at 30 June. Refer to page 59 for further details.
5
$ MILLION
1,386
1,385
1,292
1,408
1,565
$ MILLION
748
811
594
719
774
$ MILLION
393
424
323
394
459
CASH FLOW FROM
OPERATING ACTIVITIES(1), (2)
FY14
FY15
FY16
FY17
FY18
FREE CASH FLOW(1), (2)
FY14
FY15
FY16
FY17
FY18
LEVERAGE RATIO(1), (2), (3)
FY14
FY15
FY16
FY17
FY18
$ MILLION
965
1,280
1,241
1,467
1,434
$ MILLION
136
854
814
739
601
TIMES
2.7
2.1
1.6
1.1
0.7
12 months to
30 June 2018
12 months to
30 June 2017
%
Change
(ounces)
(tonnes)
($ per ounce)
($ per pound)
(AUD:USD)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
(percent)
(times)
(percent)
(cents per share)
2,346,354
77,975
1,308
3.09
0.7754
3,562
1,565
774
202
459
1,434
833
601
8.8
0.7
12.2
18.5
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
(1%)
(7%)
4%
27%
3%
2%
11%
8%
(34%)
16%
(2%)
14%
(19%)
11%
(36%)
(27%)
23%
GROUP GOLD
PRODUCTION
THOUSAND
OUNCES
EBITDA(1), (2)
FY14
FY15
FY16
FY17
FY18
2,396
2,423
2,439
2,381
2,346
FY14
FY15
FY16
FY17
FY18
GROUP COPPER
PRODUCTION
THOUSAND
TONNES
FY14
FY15
FY16
FY17
FY18
ALL-IN
SUSTAINING COST(1)
FY14
FY15
FY16
FY17
FY18
86
97
83
84
78
$/OUNCE
897
780
762
787
835
EBIT(1), (2)
FY14
FY15
FY16
FY17
FY18
UNDERLYING PROFIT(1), (2)
FY14
FY15
FY16
FY17
FY18
FY18 RESULTS AT A GLANCE (1), (2)
Gold produced
Copper produced
Realised gold price
Realised copper price
Average exchange rate
Sales revenue
EBITDA
EBIT
Statutory profit
Underlying profit
Cash flow from operating activities
Net cash outflow from investing activities
Free cash flow
Return on capital employed (ROCE)
Leverage ratio(3)
Gearing
Total dividends
(1) All financial data presented in the Annual Report is quoted in US dollars unless otherwise stated.
(2) EBIT, EBITDA, Underlying profit, Free cash flow, ROCE 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.
(3) Leverage ratio (Net debt to EBITDA) is calculated as net debt divided by EBITDA of the preceding 12 months. Calculated as at 30 June.
NEWCREST 2018 ANNUAL REPORT FORGING A
STRONGER NEWCREST
6
3 Bonikro
ASSET OVERVIEW
ASSET
OVERVIEW
5 Gosowong
2 Telfer
1 Cadia
4 Lihir
6 Wafi-Golpu
7 Namosi
AUSTRALIA
1 CADIA
PAPUA NEW
GUINEA
4 LIHIR
ADVANCED
PROJECTS
6 WAFI-GOLPU
LOCATION: 25 kilometres from Orange,
New South Wales
FY18 PRODUCTION: 600koz of gold,
62kt of copper
LOCATION: Niolam Island, New Ireland
Province, 900 kilometres north-east
of Port Moresby
FY18 PRODUCTION: 955koz of gold
MINING METHOD: Underground
MINING METHOD: Open pit
RESERVES AND RESOURCES*^ :
Ore Reserve: 25moz gold & 4.3mt copper
Mineral Resource: 42moz gold &
8.7mt copper
OWNERSHIP: 100% Newcrest
RESERVES AND RESOURCES*:
Ore Reserve: 25moz gold
Mineral Resource: 52moz gold
OWNERSHIP: 100% Newcrest
2 TELFER
LOCATION: Pilbara, Western Australia
FY18 PRODUCTION: 426koz of gold, 16kt
of copper
MINING METHOD: Open pit and underground
RESERVES AND RESOURCES*:
Ore Reserve: 2.4moz gold & 0.21mt copper
Mineral Resource: 8.2moz gold &
0.66mt copper
OWNERSHIP: 100% Newcrest
AFRICA
3 BONIKRO
Located approximately 250 kilometres north
west of Abidjan in Côte d’Ivoire, Bonikro was
divested in the 2018 financial year.
INDONESIA
5 GOSOWONG
LOCATION: Halmahera Island, North Maluku
Province
FY18 PRODUCTION: 251koz of gold,
298koz of silver
MINING METHOD: Underground
RESERVES AND RESOURCES*:
Ore Reserve: 0.48moz gold &
0.62moz silver
Mineral Resource: 1.2moz gold &
1.7moz silver
OWNERSHIP: Gosowong is owned and
operated by PT Nusa Halmahera Minerals
(Newcrest 75%). The figures represent 100%
of the Mineral Resource and Ore Reserve.
LOCATION: Morobe Province, 65 kilometres
south-west of Lae, Papua New Guinea (PNG)
POTENTIAL: Golpu: Underground copper-
gold mine; Wafi: Open pit gold-copper mine;
Nambonga: Underground gold-copper mine
RESERVES AND RESOURCES*+:
Ore Reserve(1): 5.5moz gold & 2.4mt copper
Mineral Resource (2): 13moz gold &
4.4mt copper
(1) Golpu; (2) Inclusive of Golpu, Wafi and Nambonga deposits
STATUS: Updated feasibility study completed
– Awaiting special mining lease approval
OWNERSHIP: 50% Newcrest, 50% Harmony
Gold Mining Company Limited.
The figures represent Newcrest’s 50% share
of the Mineral Resource and Ore Reserve.
7 NAMOSI
LOCATION: Namosi Province, 30 kilometres
west of Suva, Fiji
POTENTIAL: Waisoi: Open pit copper-gold mine
RESERVES AND RESOURCES*:
Ore Reserve: 3.7moz gold & 3.6mt copper
Mineral Resource: 5.4moz gold &
5.4mt copper
STATUS: Waisoi – Prefeasibility study
OWNERSHIP: 71.42% Newcrest. The figures
represent Newcrest’s 71.42% interest in
Mineral Resource and Ore Reserve.
LEVERAGING OUR EXPLORATION EXPERIENCE
EXPLORATION
Our aspiration to grow our asset base is ideally achieved “through the drill bit” by our exploration team focussing on brownfield and greenfield
opportunities globally.
We are also pursuing alliances and joint venture arrangements with junior explorers and other mining companies who have access to prospective land. Our
experienced exploration teams will partner with these companies to maximise potential exploration results. Newcrest has experience mining and processing
a diverse range of orebodies, which gives confidence to our partners that Newcrest will be able to develop any viable deposits discovered.
In the 2018 financial year Newcrest entered into more than nine of these agreements of various forms with junior explorers and other mining companies.
* Mineral Resources and Ore Reserves are as at 31 December 2017. Mineral Resources and Ore Reserves will have been subject to mining depletion from this date.
^ Note Cadia Mineral Resources and Ore Reserves do not include adjustments for the Cadia East and Cadia Hill Mineral Resources and Ore Reserves, which were
updated in the Market release titled "Cadia Expansion Pre-Feasibility Study Findings" dated 22 August 2018 (the Cadia release). The updates decrease Cadia Gold
Ore Reserves by 2moz, decrease Gold Mineral Resources by 3moz, increase Copper Ore Reserves by 0.1mt and decrease Copper Mineral Resources by 0.3mt. The
Cadia release confirmed the removal of the entire Cadia Hill Ore Reserve containing approximately 1.5moz gold and 0.13mt copper and removal of the in situ Cadia Hill
Mineral Resource containing approximately 2.7moz gold and 0.23mt copper after the confirmed use for the Cadia Hill open pit for tailings storage.
+ Note Golpu Mineral Resources and Ore Reserves do not include adjustments made in market releases subsequent to 31 December 2017. For Golpu Ore Reserves
refer to market release titled “Updated Wafi-Golpu Feasibility Study” dated 19 March 2018 and “Supplementary Data on Updated Wafi-Golpu Feasibility Study” dated
12 April 2018. For Golpu Mineral Resources refer to market release “Wafi-Golpu –Update on Stage One Feasibility and Stage Two Prefeasibility Studies” dated
15 February 2016. The updates increase Golpu Copper Ore Reserves by 0.1mt.
FORGING A STRONGER NEWCREST 7
NEWCREST VALUE PROPOSITION
LONG RESERVE
LIFE
62moz
GOLD ORE RESERVES
With an estimated 62 million ounces
of gold Ore Reserves(1), Newcrest’s
Reserve Life was approximately
26 years at 30 June 2018 (2).
1500
1200
900
600
300
0
LOW COST
PRODUCTION
1,221
1,166
1,263
1,308
780
762
787
835
FY15
FY16
FY17
FY18
Four years of achieving an All-In
Sustaining Cost below $850/oz has
resulted in Newcrest consistently
realising an AISC margin of over $400/oz
in each of FY15, FY16, FY17 and FY18.
Realised gold price $/oz
AISC $/oz
GROWTH
OPTIONS
EXPLORATION
& TECHNICAL
CAPABILITY
Newcrest is focussed on maximising
the profitable cash generation potential
of its existing assets, projects and
exploration prospects.
In FY18, Newcrest released its expansion
plans for Cadia, achieved the target of
14mtpa sustainable milling throughput rate
at Lihir in March 2018, released an updated
Wafi-Golpu study, acquired a 27.1% interest
in Lundin Gold and entered a further nine
early-stage exploration arrangements.
Newcrest's capabilities to find, develop,
mine and process a diverse range of
orebodies, including lower grade, complex,
refractory, deep, narrow or those in poor
ground, have been enhanced by ongoing
innovation and problem solving of the
challenges in each of Newcrest’s mines. 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.
DELIVERING ON
COMMITMENTS
$3.4B
FREE CASH FLOW
DELIVERED OVER 4.5 YEARS
Newcrest is focussed on developing strong
relationships with all our stakeholders through
delivering on our commitments. In FY18,
Newcrest successfully delivered a number
of these, including:
• Fifth consecutive year of positive free cash flow
• 30mtpa milled throughput rate at Cadia by end
of June 2018
• Cadia Expansion Pre-feasibility Study Findings
released by end of August 2018
• Wafi-Golpu Updated Feasibility Study
released in April 2018
• Wafi-Golpu EIS submitted to the PNG
government end of June 2018
• $67m in total community payments and
expenditures on community services and
development projects
FINANCIALLY
ROBUST
Newcrest’s financial metrics have improved
significantly over the last four years, putting
Newcrest into a financially robust position.
This has enabled the Board to announce
dividends for the past 12 months totalling
US18.5 cents per share.
IMPROVED LEVERAGE RATIO
0.7x
IMPROVED
GEARING
INVESTMENT
GRADE
12.2%
BBB/Baa3
SUBSTANTIAL
LIQUIDITY
REDUCED
NET DEBT
$3.0bn
$1.0bn
LONG AVERAGE DEBT MATURITY
~9 years
Arrows represent direction since 30 June 2017
(1) See page 32 of this Annual Report. An updated Mineral Resources and Ore Reserves statement will be issued in February 2019. Details of updates subsequent to the
Mineral Resources and Ore Reserves Statement released on 15 February 2018 can be found on pages 28 and 29.
(2) Reserve life is indicative and calculated as proven and probable gold reserves (contained metal) as at 31 December 2017 divided by gold production for the 12 months
ended 30 June 2018. The reserve life calculation does not take into account gold recovery rates and therefore estimates of reserve life do not necessarily equate to
operating mine life.
NEWCREST 2018 ANNUAL REPORT 8
CHAIRMAN'S
REPORT
MANAGING
DIRECTOR'S
REVIEW
The free cash flow generated by the
business has meant we have improved
our net debt position by a further $459m
(31%) to $1.0 billion at 30 June 2018,
and our leverage and gearing ratios to that
date align to the ranges we targeted at the
commencement of the financial year.
Taking into account our improved balance
sheet, and considering expected capital
requirements and market conditions, the
Board has determined to pay a US 11 cents
per share final dividend, taking our total
dividend for the year to US 18.5 cents per
share. This meets Newcrest’s commitment
to targeting a total dividend payout of at
least 10 to 30% of annual free cash flow,
with the total annual dividend no less than
US 15 cents per share.
In July 2018 we announced the retirement
of Rick Lee and the appointment to the
Board of Peter Tomsett. I would like to thank
Rick for his contribution to the Board over
the last 11 years and commend his service
as Chairman of the Human Resources and
Remuneration Committee and as a member
of the Audit and Risk Committee. Peter
brings with him a very deep knowledge of
the gold industry and extensive operational
and mining experience as a mining engineer,
senior executive and non-executive director.
Newcrest’s admission to membership of
the International Council on Mining and
Metals last November is reflective of
our deep commitment to ensuring that
sustainability of both our business and of
the local communities where we operate
is central to the company’s development.
Our mutual success is dependent on working
collaboratively, over the long-term, with our
host communities and governments to see
the benefits of mining realised.
As one of the world’s lowest cost major gold
producers, with a solid portfolio of long-life
gold-copper assets and growth options,
dedicated and innovative work at Newcrest
is harnessing the company’s unique
capabilities and delivering strengthening
operational performance and growth
momentum. The Board is confident in the
positive outlook for the company —thank
you for your ongoing support.
PETER HAY
CHAIRMAN
I am very pleased to
present Newcrest’s
annual report for the
2018 financial year,
detailing our continued
efforts to build strongly
on our solid foundations
and recent progress.
Thanks to the excellent efforts of our
people, Newcrest is well-positioned
for the next stage of our business
transformation program.
Let me firstly underline that no
responsibility we have is more important
than that of ensuring everybody goes home
safe and healthy every day. Our relentless
focus on improving safety is fundamental to
Newcrest’s development and success. In the
last year we have had zero fatalities or life-
changing injuries and a 28 per cent reduction
in total recordable injury frequency rate. This
positive result reflects the strengths of our
safety focus and program, which continue to
be applied and renewed across the business.
Over the last 12 months our disciplined
approach to creating shareholder value
and driving operational performance and
cost improvement has generated solid
results across the Company. Group AISC
per ounce was $835 for the year, and all
sites generated positive free cash flow,
contributing to a statutory profit of $202m
and an underlying profit of $459m. This
was despite FY18 Group gold production
of 2.3moz being impacted by reduced
production at Cadia following the Northern
Tailings embankment slump in March 2018.
The recovery delivered following that
challenge has been outstanding.
Over the last four years we
have laid firm foundations
for future growth under our
transformation plans. The
benefits of our strategy are evident in
the positive results set out in this report.
In order to meet our business
objectives, while taking on the industry
challenges of the future, we are keenly
embracing the second stage of our
transformation agenda.
In February 2018 we announced our
updated "Forging a stronger Newcrest"
business strategy (see page 2). The
strategy is anchored to an evolved set
of five pillars, now reflecting that safety
and sustainability, people, operating
performance, technology and innovation,
and profitable growth, are fundamental to
the next stage of our transformation. We
have also articulated a 2020 aspirational
goal for each pillar, set according to
leading industry benchmarks.
I AM MOST PROUD OF OUR SAFETY
PERFORMANCE OVER THE YEAR.
There were no fatalities and a 28 per cent
decrease in our total recordable injury
frequency rate against the same period
last year. These results come after the
third year of commitment to our Safety
Transformation Plan across Newcrest,
focusing on empowering all our people to
take ownership of safety. We are building
a stronger safety culture through
NewSafe — our safety leadership
program; critical controls for every high
risk task; and robust process safety
management (see page 17).
OUR COMPANY 9
Notably 95% of the workforce has now
completed NewSafe leadership training
and we have logged 38,000 hours of
coaching, new digital and language options
have strengthened Critical Control
Management, and we increased resourcing
of Process Safety engineering safeguards.
This year’s safety results reinforce our
commitment to relentlessly pursuing the
elimination of fatalities and life-changing
injuries from our business.
REFLECTING THE IMPORTANCE OF
INTEGRATING SUSTAINABILITY
RIGHT ACROSS NEWCREST, WE HAVE
ELEVATED IT TO A PILLAR, ALONG
WITH SAFETY, IN OUR UPDATED
BUSINESS STRATEGY.
We are committed to transparently
engaging and supporting the communities
where we operate, minimising our impact,
and entrenching a strong reputation
internationally. Our successful admission to
the International Council on Mining and Metals
(ICMM) in November 2017 encompasses a
public commitment to ICMM’s 10 Principles
and position statements, which directly
address core sustainability development
challenges in the industry.
From the perspective of operating
performance, by promoting an ‘owner’s
mindset’ our Edge program has continued
to safely drive new operating efficiency
gains and cash, ensuring we achieve full
potential from each of our assets, and in turn
supporting our profitable growth agenda.
Despite a very challenging year at Cadia,
we delivered to the upper end of our revised
Group production guidance, a result just 2%
below our original guidance for FY18. We
produced this at a low All-In Sustaining Cost
of $835 per ounce, allowing us to generate
$601m in free cash flow.
I am very pleased that Lihir exceeded its
target sustainable milling rate of 14mtpa
allowing it to achieve its third consecutive
year of record gold production. This is a
testament to both Lihir’s people, and the
success of our programs applying Edge and
innovation to find further efficiency at our
operations, while bringing down AISC.
Cadia had a remarkable year, which was one
of adversity and stellar performance. Off the
back of the impacts from last year’s seismic
event, and then the impact of the Northern
Tailings embankment slump in March, Cadia’s
safe and rapid recovery to a final production
result of 600koz for FY18 exemplifies the
resilience and drive we have built into the
core of our business and our people.
Telfer recovered from the impacts of high
rainfall in the March 2018 quarter to achieve
annual records in FY18 for tonnes crushed
and tonnes milled. This is an encouraging
result as Newcrest continues to work on
improving Telfer’s profitability.
Gosowong has made a significant
contribution to our business, with free cash
flow in the 2018 financial year of $111m
before tax. We were pleased to complete
our negotiations with the Government of
Indonesia on Gosowong’s Contract of Work.
We have committed to divest our interest in
PT Nusa Halmahera Minerals down to 49%
ownership within two years. This was a good
outcome, while we retain our exploration
alliance with ANTAM and exposure to the
Indonesian archipelago.
In rationalising our asset portfolio, the
completion of our divestment of Bonikro
in March 2018 both contributed value for
Newcrest shareholders and provided a clear
future path for the mine to the benefit of its
employees, the community and all our Côte
d’Ivoire stakeholders. We continue to explore
further promising options in West Africa.
Our focus on technology and innovation
in our fourth pillar is directing our efforts
to identify and implement fresh thinking,
beyond our current unique capabilities, which
is helping us turn tough deposits into tier-one
assets. Our NextGen Caving technology, and
our developments in selective processing
and digital innovation, are just three
examples of the work that is allowing us to
improve our approach to optimising and
selecting our assets while overcoming the
challenges our industry faces.
WE MADE FURTHER PROGRESS IN
OUR GROWTH AGENDA THROUGH THE
SUBMISSION OF THE ENVIRONMENTAL
IMPACT STATEMENT FOR WAFI-GOLPU
TO THE PAPUA NEW GUINEA
GOVERNMENT IN JUNE 2018.
It followed the delivery to schedule of a
Feasibility Study Update in March 2018.
These two milestones are the culmination
of a significant collaborative and technical
effort with our joint venture partner,
Harmony Gold, and our PNG stakeholders
to bring the project and its many potential
benefits closer to fruition.
We are well on our way to achieving our
2020 profitable growth aspiration of having
exposure to five tier-one assets, with Cadia,
Lihir and Wafi-Golpu representing three
such assets. Our $251m investment in a
strategic partnership with Lundin Gold Inc.
in February 2018 gives us exposure to a
fourth tier one asset, Lundin’s Fruta del Norte
gold mine. It also means further access to
other highly prospective areas of Ecuador
and the broader Americas. Our interest in
Ecuador and the wider region was reflected
in our further investments into SolGold, and
smaller prospective farm-in exploration joint
ventures across the year (see page 24).
As our growth program matures, we
remain committed to delivering long-term
shareholder value. We achieve that through
low-cost production, long reserve life, strong
technical and exploration capabilities,
a strong balance sheet and by doing
what we say we will do. That is what sets
Newcrest apart.
OUR PEOPLE DRIVE NEWCREST’S
SUCCESS.
Reflecting that priority, we are strengthening
our culture and values, and building a diverse
and inclusive workplace. A significant focus
on investing in our workforce’s capabilities
and future continues, particularly through
the launch of our LeadingMatters and
ManagingMatters talent and leadership
development programs. The company-wide
efforts are reflected in a further year-on-
year improvement of two points in our
Organisational Health Index. We are striving
to meet full top-quartile performance through
making Newcrest a first-choice place to work.
The last year has provided both valuable
challenges and significant progress. I
extend my thanks to our people, and the
shareholders, suppliers, customers and host
communities, who work with us. Through
your commitment, Newcrest is well-
positioned for the future.
SANDEEP BISWAS
MANAGING DIRECTOR AND CHIEF
EXECUTIVE OFFICER
NEWCREST 2018 ANNUAL REPORT 10
THE BOARD
THE BOARD
1
2
3
4
5
6
1. PETER HAY
2. SANDEEP BISWAS
LLB, FAICD, 68
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
Former Listed Directorships
(last three years)
• Director of GUD Holdings
Limited (2009–2015)
• Director of Novion Limited
BEng (Chem) (Hons),
FAusIMM, 56
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.
Current Directorships/
appointments
• Vice Chairman of the
Minerals Council of Australia
• Director of the World Gold
Council
(2014–2015)
• Member of ICMM Council
OUR COMPANY 11
3. GERARD BOND
4. PHILIP AIKEN AM
5. RICK LEE AM
6. XIAOLING LIU
BComm, Graduate Diploma
Applied Finance and
Investment, Chartered
Accountant, F Fin, 50
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) (Hons), MA
(Econ) (Oxon), FAICD, 68
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.
Mr Lee is retiring from the
Board with effect immediately
following the AGM on
14 November 2018.
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)
BEng (Extractive
Metallurgy), PhD (Extractive
Metallurgy), GAICD,
FAusIMM, 62
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, the Audit and
Risk Committee and the
Nominations 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)
• Director of South 32 Limited
(from 2017)
Other Current Directorships/
appointments
• Director of Melbourne
Business School (from 2016)
• Member of the China
Matters Advisory Council
(from 2017)
BEng (Chemical), Advanced
Management Program
(HBS), 69
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. He is retiring as
Chairman of the Safety and
Sustainability Committee and
has been appointed as Chairman
of the Human Resources and
Remuneration Committee with
effect immediately following the
AGM on 14 November 2018.
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)
Current Directorships/
appointments
• Business Ambassador,
Business Events Sydney
(from 2016)
• Chairman of Australia Day
Foundation (from 2007)
• Chairman of Gammon China
Limited (from 2018)
• Chairman of Gammon
Construction Holdings
Limited (from 2018)
Former Listed Directorships
(last 3 years)
• Director of National Grid plc
(2008–2015)
NEWCREST 2018 ANNUAL REPORT 12
THE BOARD
7
8
9
THE BOARD
CONTINUED
7. ROGER HIGGINS
8. VICKKI MCFADDEN
9. PETER TOMSETT
BE (Civil Engineering)
(Hons), MSc (Hydraulics),
PhD (Water Resources), 67
Independent Non-Executive
Director
Dr Higgins was appointed to
the Board in October 2015. He
is a member of the Safety and
Sustainability Committee. He
has been appointed Chairman
of the Safety and Sustainability
Committee and a member of
the Human Resources and
Remuneration Committee with
effect immediately following the
AGM on 14 November 2018.
Skills, experience and
expertise
Dr Higgins brings extensive
experience leading mining
companies and operations, and
has 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
(Director from 2016,
Chairman from 2017)
• Director of Metminco
Limited (from 2013)
Other Current Directorships/
appointments
• Director of Ok Tedi Mining
Limited (from 2014)
BComm, LLB, 59
Independent Non-Executive
Director
Ms McFadden was appointed
as Non-Executive Director of
the Board in October 2016.
She is Chairman of the Audit and
Risk Committee and a member
of the Human Resources and
Remuneration Committee.
Skills, experience and
expertise
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.
Vickki has broad experience
in several roles as member or
chairman of audit committees.
Current Listed Directorships
• Director of Tabcorp Holdings
Limited (from 2017)
• Chairman of The GPT Group
(from 2018)
Other Current Directorships/
appointments
• 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 3 years)
• Chairman of Skilled Group
Limited (Director from
2005, Chairman from
2010–2015)
BEng (Hons I), MSc, GAICD, 60
Independent Non-Executive
Director
Mr Tomsett was appointed as a
Non-Executive Director of the
Board in September 2018. He is
a member of the Audit and Risk
Committee and the Safety and
Sustainability Committee.
Skills, experience and
expertise
Mr Tomsett has extensive
and deep gold mining and
international business
experience as both an executive
and non-executive director of a
broad range of mining companies
listed on the Australian, Toronto,
New York and London stock
exchanges. His last executive
role was as the President and
Chief Executive Officer of global
gold and copper company, Placer
Dome Inc, where he worked for
20 years in project, operational
and executive roles.
He has been the Chairman
and Managing Director of
Kidston Gold Mines Ltd and
the Non-Executive Chairman
of Equinox Minerals Ltd and
Silver Standard Resources
Inc. He has also held numerous
other Board positions in mining,
energy and construction
companies and associations
including as a Director of OZ
Minerals Ltd, Acacia Mining
plc, Talisman Energy Inc, North
American Energy Partners Inc,
Africo Resources Ltd, World
Gold Council, Minerals Council
of Australia, and International
Council for Mining and Metals.
Former Listed Directorships
(last 3 years)
• Director of OZ Minerals Ltd
(2017– 2018)
• Director of Acacia Mining plc
(2013– 2017)
• Chairman of Silver Standard
Resources Inc (Director
2006 – 2017, Chairman
2008 – 2017)
OUR COMPANY NEWCREST
2018 ANNUAL REPORT
13
14
OUR FIVE PILLARS
INTRODUCTION
15
“
SIGNIFICANT CHANGE ACROSS OUR
INDUSTRY IS INEVITABLE. WE NEED TO
CONTINUALLY TRANSFORM TO MEET
THE COMING CHALLENGES.
SANDEEP BISWAS
MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
OUR FIVE PILLARS
Newcrest’s ‘Forging a Stronger Newcrest’ plan, released
in February 2018, sets out the second phase of our
transformation journey.
The plan focuses on how Newcrest can build on what we have achieved
over the last three years – how we move forward and accelerate the
realisation of the company's full potential.
Over the past few years we have made genuine progress in improving
safety and addressing major hazards, in implementing Edge,
improving operational performance, and populating our growth
pipeline. We have made headway in aligning our people on priorities,
and in engaging with our shareholders.
We are now in a new phase where we are focused on further
improvements in safety, growing the business profitably, sustaining
and extending our performance improvements, improving our risk
management, reinvigorating Edge, and refreshing our long-term strategy.
To be successful for our people, shareholders, host communities,
partners and suppliers, our company strategy focuses on five key pillars.
These are the foundations which we believe are required to take
Newcrest from good to great.
PRIORITISE THE IMPORTANCE OF SAFETY AND
SUSTAINABILITY
Everybody going home safe and healthy every day is our priority.
We care for the communities we work with and the environment,
applying sustainable practices across all aspects of our business.
2020 aspiration (1): Zero fatalities and industry leading TRIFR
VALUE OUR PEOPLE
Our people are capable and engaged, empowered to deliver superior
returns. We have a focus on diversity and inclusion, and developing our
people at all levels.
2020 aspiration (1): First quartile Organisational Health
MAXIMISE OPERATING PERFORMANCE BY SAFELY
OPERATING OUR ASSETS TO THEIR FULL POTENTIAL
Optimising the returns we can achieve from our current operating
assets, we aim for low-cost, long-life operations. Integrated planning,
asset management and rigorous performance programs are utilised
to maximise production and minimise costs.
2020 aspiration (1): First quartile Group AISC per ounce
EMBRACE TECHNOLOGY AND INNOVATION
We are targeting audacious technical breakthroughs that will
optimise current mining while providing significant step changes
for future success.
2020 aspiration (1): Five breakthrough successes
FOCUS ON PROFITABLE GROWTH
Actively growing the value of our business through brownfield and
greenfield exploration, combined with a focus on early-entry merger
and acquisition prospects in known gold/copper regions.
2020 aspiration (1): Exposure to five tier one orebodies (operations,
development projects or equity investments)
(1) An aspiration should not be viewed as a forward looking statement or commitment. It is merely an ambition or objective that is strongly desired.
NEWCREST 2018 ANNUAL REPORT 16
SAFETY &
SUSTAINABILITY
OUR FIVE PILLARS
Safety &
Sustainability
At Newcrest we are committed to everybody going home
safe and healthy every day. Our focus is on maintaining
a safe and healthy workplace, through an emphasis on
safety leadership, maintaining a strong safety culture,
effective management of critical risks, a focus on health, hygiene
and wellbeing, and robust process safety management.
In 2017, Newcrest joined the International Council on Mining and
Metals (ICMM), an international organisation dedicated to a safe,
fair and sustainable mining and metals industry. ICMM serves as
a catalyst for change to enhance mining’s contribution to society.
Through our ICMM membership, we aspire to be industry leaders in
sustainable mining, with a commitment to conducting our activities
ethically and transparently.
We aim to integrate environmental management into all aspects
of our business, ensuring environmental risks are identified
and managed. Mining and processing is a major consumer of
energy, water and other resources and we work continually to
reduce energy consumption and emissions and to maximise the
responsible management of materials. Our aim is to minimise
both our impact on the environment in which we operate, along
with our lasting footprint.
Our approach to working with governments, communities and
lease area landholders in the areas where we operate is active,
inclusive and equitable. This is evident through our employment
of local people and local businesses and fair compensation for
landholders and affected communities.
Our agreements and partnerships aim to help sustainable
development focused on self-reliant socio-economic advancement
for the local communities we operate in. Our initiatives include a
wide range of sustainable development activities from providing
local infrastructure, housing, health and education services to
agri-business development and business development training.
Active partnerships with government and non-governmental
organisations are critical to the success of these initiatives, with
the added benefit of encouraging effective regulation and ongoing
government commitment.
Our policies, controls and practices are aligned with our corporate
values and we are committed to ensuring good governance and
compliance with all laws applying to our global business.
2020 ASPIRATION
ZERO FATALITIES AND
INDUSTRY-LEADING TRIFR
BY 2020
The health and safety of our workforce is a priority for Newcrest.
Our clear focus is on eliminating fatalities, life-changing injuries
and occupational illnesses, while striving to make continual
progress on reducing all injuries and health impacts.
OUR FIVE PILLARS NEWCREST
2018 ANNUAL REPORT
17
CASE STUDY
SAFETY TRANSFORMATION:
THE PLAN IS STILL THE PLAN
NewSafe Behaviour commitment session at Lihir
Newcrest’s commitment to our Safety Transformation Plan,
introduced by the company in 2015, has continued to drive
our safety performance improvements and support our safety
vision of everybody going home safe and healthy every day.
There is nothing that is more important.
Newcrest’s safety culture continues to strengthen with the
ongoing embedding of our NewSafe program. The program
brings together leadership, coaching and behaviours
components, which combine to build a culture where
opportunities for safety improvement are shared in an open
and positive way. Teams are supported to decide on and own
their personal safety behaviours and everyone is empowered
– and encouraged – to stop any task that could potentially be
unsafe. Since the introduction of NewSafe, around 95% of
Newcrest’s employees have completed the original NewSafe
leadership course, and more than 38,000 hours of NewSafe
coaching has taken place across the business. This year we
commenced the next stage of NewSafe, providing a refresher
on the material covered in the original training, as well as
incorporating feedback from the first few years of NewSafe.
The rollout of our formal Critical Control Management (CCM)
program continued over the year, with the availability of
a mobile app and multi-language options. The three-level
CCM process includes reviewing individual critical controls
in detail to ensure the systems are properly designed and
implemented (SVs); monitoring high-risk tasks and major
hazards to verify critical controls are implemented (FCCCs);
and using checklists before and during each high-risk task to
verify the correct critical controls are in place and effective
(OCCCs), with the ultimate aim of verifying that the most
important life-saving controls are known, in place and working.
Since their introduction in May 2016, more than 400,000
FCCCs have been completed across Newcrest.
The final pillar of the plan, robust Process Safety
management, aims to systematically and comprehensively
manage the integrity and containment of high-energy and
toxic processes based on a technical engineering-focused
approach. Further resources have been dedicated to process
safety during the year to manage our increased activity in this
area – for example, re-HAZOPs of the Power and Utilities area
at Lihir has involved the review and updating of more than
800 piping and instrumentation diagrams so far.
18
PEOPLE
OUR FIVE PILLARS
People
2020 ASPIRATION
FIRST QUARTILE
ORGANISATIONAL HEALTH
BY 2020
Newcrest maintains a focus on an inclusive and high-
performance culture, supported by training and development
opportunities, to ensure employees seek us out, and stay with us,
for a rewarding future.
Newcrest’s people are capable, engaged and empowered
to deliver superior returns. We strive to have diversity
and inclusion within all our teams, with a focus on
developing our people at all levels.
Every year we measure our organisational health in an annual
survey. A record 83 per cent of employees and contractors
completed the survey this year, with results showing we continued
to maintain positive momentum on organisational health for the
fifth year in a row.
Still, we have more to do and we have identified some significant
areas for continued improvement. For example, it is becoming
more important than ever to create meaningful career
opportunities, recognise and reward achievements and ensure
an open and trusting environment.
Late last year we introduced two tailor-made leadership and
management development streams to help Newcrest’s leaders
deliver on our 2020 aspirations. Designed as a six-month learning
journey, LeadingMatters is built on the premise that who you are
determines how you lead and focuses on developing values-based
leaders. ManagingMatters is a competency-based program
targeted at supervisors and superintendents to help them in
daily managerial tasks such as delegation, decision making, time
management, and giving and receiving feedback. More than 400
people have completed the programs since their introduction,
with the rollout set to continue in the coming year.
During the year we made progress on diversity and inclusion. In
October 2017 we released changes to our Australian Parental
Leave Policy, including 18 weeks of paid leave and flexible
payment options. In May we released our first Indigenous
Relations Policy and an associated practice guide applying to our
Australian operations. Senior leaders have supported our efforts
through participation in events such as International Women’s Day
and National Reconciliation Week.
For more details on our Diversity targets, see our Corporate
Governance Statement referred to on page 34 of this report.
OUR FIVE PILLARS 19
CASE STUDY
DIVERSITY AND INCLUSION
KEY TO OUR SUCCESS
Newcrest Parental Leave Award
At Newcrest, we know our different backgrounds 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.
We encourage our differences and tap into our collective
knowledge, leveraging the diverse thinking, skills, experiences
and working styles of our employees, contractors and
communities. We celebrate and recognise diversity in race,
gender, ethnicity, disability, age, nationality, religion, and other
important differences.
Through the People pillar of our transformation plan, we
seek ways to create a diverse and inclusive environment,
providing opportunities for flexibility to meet both the
needs of our business and people at different stages of their
lives and careers.
Our industry-leading Australian Parental Leave Program was
recognised for its contribution to diversity and inclusion in the
mining sector, winning best company diversity program at the
2018 Victorian Women in Resources Awards.
To mark Australia’s National Reconciliation Week, we launched
our first Newcrest Indigenous Relations Policy, providing a
clear statement of our commitment to indigenous peoples in
the communities in which we operate.
Around the world, our sites marked International Women’s
Day with team information sessions, a company-wide trivia
quiz, donations to women’s charities, and our International
Women’s Day Awards, celebrating the successes of female
employees and acknowledging our male champions of change.
NEWCREST 2018 ANNUAL REPORT 20
OPERATING PERFORMANCE
OUR FIVE PILLARS
Operating
Performance
Newcrest is and how we deliver value to shareholders.
Operating performance will always be central to what
As a component of our next stage of transformation we
have developed an integrated framework for achieving
world-class performance which brings together our Management
Operating System (MOS), asset management, process control and
analytics, and material risk management focus areas.
MOS is the framework through which we manage the implementation
of our strategy. It defines the people, processes, systems and tools
required to safely and efficiently define and execute all of our plans –
from life of province plans through to shift plans.
Our asset management program of work ensures the right
operational, technical and maintenance work is performed at the
right time, using the right plant and equipment, tools, parts and
skilled workforce.
Process control and analytics enable sustainable improvement
and reduce variability within our operations. They also allow us
to support the ongoing digitalisation of our business. Around
80% of our digital transformation focuses on enhancing our
operating performance.
Our material risk management process integrates risk thinking and
risk management into our end-to-end business process. It seeks to
manage and mitigate those risks with the highest potential impact
on our business, by seeking to maintain effective controls and
remediate control deficiencies.
Bringing all the components together, integrated planning ensures
our full value chain is linked and that transition points are managed
across our operations.
Empowering every employee to adopt an owner’s mindset,
Newcrest’s Edge performance improvement process allows us
to implement value adding solutions to identified opportunities.
Purpose built for Newcrest, Edge is designed to entrench a culture
of innovation, high performance and continuous improvement.
Edge aims to unlock value by identifying opportunities for deliberate
improvement actions and innovation, and safely delivering the same
or higher production outcomes and lowering costs.
2020 ASPIRATION
FIRST QUARTILE GROUP
AISC PER OUNCE BY 2020
Levers such as smart asset management, process control
and analytics, material risk management, integrated planning
and our Edge performance program are maximised to deliver
value to shareholders.
OUR FIVE PILLARS NEWCREST
2018 ANNUAL REPORT
21
CASE STUDY
CROWDSOURCING PLATFORM
DRIVES VALUE FROM GAME-
CHANGING SOLUTIONS
CREATED BY GLOBAL
INNOVATORS
Sherief Khorshid and Shuang Yu of Three
Springs Technology, winners of Hydrosaver, the
first challenge on The Newcrest Crowd, pictured
with Newcrest’s Friska Wirya and Liem Nguyen.
The Newcrest Crowd – our own crowdsourcing platform –
allows us to uncover multiple solutions from external resources
with the skills, experience and intellect to ‘hack’ multi-million-
dollar business problems in mere weeks, not years. This
translates into increased value for Newcrest.
Through the platform we can harness innovative thinkers
anywhere in the world, find solutions more cost-efficiently,
while freeing up our people to do their day job. The platform
enables us to tap into vast international networks of
innovators who are highly skilled, knowledgeable and
experienced, enabling crowdsourcing to be an effective and
efficient approach to problem solving.
Our first crowdsourced solution delivered from the platform
has now moved into production. Entitled ‘Hydrosaver’, the
winning algorithm predicts tailings underflow density at
Cadia. There were over 250 participants from 12 countries
who submitted 750 predictive algorithms to the challenge.
The winning solution will enable greater water reuse and
recycling at Cadia.
Two further trial challenges, ‘Get 2 the Core’, aiming to morph
unused core photography into a digital asset capable of
optimising exploration activities, and ‘Burn your bridges',
aiming to reduce the impact and occurrences of rock bridges,
were also conducted before the official public launch of the
Newcrest Crowd in August 2018.
We are identifying a pipeline of challenges in the business,
covering the areas of digital innovation, engineering, safety
and sustainability, for future crowdsourcing.
The Newcrest Crowd enables time and cost savings by
providing an exceptional opportunity for innovators to work
with, and inside, Newcrest.
22
TECHNOLOGY &
INNOVATION
OUR FIVE PILLARS
Technology
& Innovation
2020 ASPIRATION
FIVE BREAKTHROUGH
SUCCESSES BY 2020
Newcrest is using technology and innovation as a competitive
advantage to unlock the full potential of our assets and turn
tough deposits into tier one assets.
At Newcrest we are pursuing audacious breakthroughs
in technology and innovation. Our focus is to turn tough
deposits into tier one assets. Take NextGen Caving as an
example. We now have the uncommon capabilities required
to bulk cave mine low grade deposits at depths beyond 1.5 kilometres.
This is increasingly important as the top 200 metres of the Earth’s
crust is well developed and unexploited inventories are generally lower
grade and deeper than 1 kilometre.
Selective Processing is another example, where we are looking at
smarter ways to process lower grade ores. Historically, the gold industry
has operated under a processing model where around 20% of rock
processed contains 90% of the metal yet the industry pays for it all to
be processed. With ever decreasing grades and increasing costs across
the industry, Newcrest is focused on finding a suite of better ways to
maximise financial returns rather than maximise mill throughput.
At Newcrest we consider ourselves fortunate that we are small enough
to have a degree of agility that allows us to move quickly, with the
financial strength to back our technology and innovation aspirations.
OUR FIVE PILLARS 23
CASE STUDY
INNOVATION A GAME
CHANGER FOR LIHIR
Newcrest’s partial oxidation strategy at Lihir – now in its
fourth year of application – highlights the magnitude of
business-changing improvements that innovation and
technology provide.
This change in Lihir’s operating strategy was a consequence
of detailed work by geologists and metallurgists at Newcrest.
They identified that their applied mineralogy knowledge
of Lihir’s diverse ore types, could substantially change the
accepted high cost, full oxidation operating approach.
As the majority of gold is liberated from the dominant gold
bearing form of pyrite – microcrystalline pyrite – more rapidly
than from other forms of pyrite contained in Lihir ore, it led
to the realisation that the gold bearing pyrites at Lihir did not
need to be fully oxidised.
This insight unconstrained the refractory pyrite processing
system, enabled the full utilisation of the installed grinding
power, redefined large quantities of readily available
stockpile ores as more favourable, and led to a fundamental
change in how Newcrest runs Lihir.
Plant throughput has steadily increased from 10.1Mt in FY14
to 14.3Mt in FY18. The partial oxidation innovation enabled
this increase in mill throughput.
The work on the operating strategy at Lihir continues to
evolve – through our applied technology and innovation
approach – as we keep enquiring and learning more about
other ways to further maximise value from processing Lihir’s
various ore types.
A major component of the success was the initial query
of current practice assumptions. Our technology and
innovation approach takes that mindset and applies it to
other projects across the business.
NEWCREST 2018 ANNUAL REPORT 24
PROFITABLE GROWTH
OUR FIVE PILLARS
Profitable
Growth
secure world-class growth opportunities, supporting our
aspiration of exposure to five tier one orebodies by 2020.
At Newcrest we are using our unique capabilities to
We currently have two tier one operations in our long-life
Cadia and Lihir assets. Through optimising our business, and
ensuring we safely operate these assets to their full potential,
we are achieving organic growth in these assets.
We consider Wafi-Golpu, our project in Papua New Guinea (PNG),
to be another tier one development. Wafi-Golpu is a sister mine to
Cadia, in that it is our next generation of building on our world-class
block caving capability. From our first block cave at Ridgeway, to
our groundbreaking caves at Cadia, Wafi-Golpu takes 10 years of
Newcrest's block caving experience into the first major underground
mine to be developed in the Morobe Province in PNG.
During the year we formed a strategic partnership with Lundin
Gold which included a $251 million investment in Lundin Gold
Inc, and entering into a binding exploration Joint Venture Heads
of Agreement. This is an important step for us in our pursuit of
profitable growth in that it provides us with access to Lundin Gold's
Fruta del Norte gold mine in Ecuador and we believe that it will open
up further opportunities for us in the Americas.
Other transactions completed during the year – such as an
investment to maintain a 14.5% stake in SolGold, a copper gold
exploration company based in Australia with exploration ground in
Ecuador; a 19.9% placement in Azucar Minerals (formerly Almadex
Minerals) to gain exposure to the El Cobre prospect in Mexico; a
farm-in agreement with Mirasol Resources to explore a prospect in
Chile; and a number of early stage farm-in agreements in Australia
– also leverage our capabilities to try and secure future growth
options in the medium to long term.
Our exploration program continues with a mix of brownfield and
greenfield exploration activities across West Africa, Australia,
Papua New Guinea, Indonesia, United States of America, Ecuador,
Argentina and Chile.
We aim to have a ‘well stocked’ portfolio and balanced exploration
pipeline to provide future long-term growth optionality.
2020 ASPIRATION
EXPOSURE TO FIVE TIER
ONE OREBODIES BY 2020
Through organic growth and new mining opportunities we are
aiming for exposure to five tier one ore bodies – whether they
be operations, development projects or equity investments.
OUR FIVE PILLARS NEWCREST
2018 ANNUAL REPORT
25
CASE STUDY
OPENING UP NEW
GROWTH OPPORTUNITIES
IN THE AMERICAS
In February 2018 Newcrest announced a new strategic
partnership with Lundin Gold Inc, a Canadian mining company.
Lundin Gold Inc is currently building the Fruta del Norte gold
mine in Ecuador which is expected to have first production
by the end of 2019. This is a step forward for us as we build
towards our 2020 aspiration of exposure to five tier one
orebodies. The Fruta del Norte epithermal gold deposit
has similarities to our Gosowong operations and contains
potential for additional discoveries.
The transaction included Newcrest acquiring a 27.1%
interest in Lundin Gold Inc, for US$251 million at CAD$5.50
per share. Newcrest also entered into a binding Exploration
Heads of Agreement with Lundin Gold to earn up to 50%
direct interest in eight exploration concessions in Ecuador
by spending up to $20 million over five years.
When formed, Newcrest will manage the exploration
activities and the exploration joint venture company.
Entering into the joint venture with Lundin Gold also
provides Newcrest with a strategic arrangement that builds
on our existing investments in Ecuador, including SolGold.
The arrangement is an important step forward in our pursuit
of profitable growth and opens up further opportunities for
us in the Americas.
MINERAL RESOURCES
AND ORE RESERVES
26
MINERAL RESOURCES AND
ORE RESERVES
MINERAL RESOURCES AND ORE RESERVES
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 2017 was released on 15 February 2018, 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 2018 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 2017, 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 2017, Group Mineral Resources are estimated to
contain 120 million ounces of gold, 19 million tonnes of copper and
94 million ounces of silver. This represents a decrease of approximately
7 million ounces of gold (~6%), 0.1 million tonnes of copper (~2%)
and 1 million ounces of silver (~1%), compared with the estimate as
at 31 December 2016. The Group Mineral Resources estimates as at
31 December 2017 are set out in the Mineral Resource tables. Mineral
Resources are reported inclusive of Ore Reserves.
The Group Mineral Resources as at 31 December 2017 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 1 million ounces of silver.
• Decrease at Lihir, post mining depletion, of approximately
3 million ounces of gold from Inferred Mineral Resources
following re-interpretation based on alteration signatures
to define mineralogical domains, updated resource model
and re-optimisation of the notional spatial constraining shell.
The alteration domain model is based on in situ mineralogical
variation predominantly determined by multi-element
geochemistry (re-analysis acquired progressively since 2012)
and hyperspectral scanning of drill core (obtained progressively
since 2012). The alteration based domains improve the quality of
the subsequent resource estimation and better define the limits
of potentially economic mineralisation.
• Decrease at Telfer, post mining depletion, of approximately
0.8 million ounces of gold and 0.07 million tonnes of copper
following updated resource models and re-optimised notional
constraining shells for the open pit and reductions underground
of in situ and cave stocks in consideration of the maturity of the
Sub Level Cave operation.
• Removal, post mining depletion, of the Bonikro Mineral Resource
by 1 million ounces of gold following Newcrest agreeing to divest
its 89.89% interest (refer to market release “Newcrest agrees to
divest Bonikro for $81m” dated 13 December 2017).
• Addition of the maiden Mineral Resource for the Antenna
Deposit within the Séguéla Project Côte d’Ivoire of approximately
0.4 million ounces of gold (refer to market release “Newcrest
Quarterly Exploration Report for the three months ended
31 December 2017” dated 30 January 2018 for further detail).
As at 31 December 2017, Group Ore Reserves are estimated to
contain 62 million ounces of gold, 10 million tonnes of copper
and 37 million ounces of silver. This represents a decrease of
approximately 3 million ounces of gold (~5%), 0.1 million tonnes
of copper (~1%) and 0.7 million ounces of silver (~2%) compared
with the estimate as at 31 December 2016. The Group Ore
Reserves estimates as at 31 December 2017 are set out in the
Ore Reserve tables.
The Group Ore Reserves as at 31 December 2017 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 Bonikro Ore Reserve by
0.3 million ounces of gold following Newcrest agreeing to divest
its 89.89% interest (refer to market release “Newcrest agrees to
divest Bonikro for $81m” dated 13 December 2017).
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 remain unchanged
from those used for December 2016 reporting. There has been
no change to the AUD:USD exchange rate assumption since
December 2016 reporting but local currency assumptions
for Côte d’Ivoire Franc and PNG Kina have been updated (the
Indonesia Rupiah remains unchanged). Moreby Mining Joint Venture
(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
and AUD:USD 0.85 exchange rate.
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.
MINERAL RESOURCES AND
ORE RESERVES
27
The Annual Statement of Mineral Resources and Ore Reserves,
31 December 2017, 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,
specifically Wafi and Nambonga Mineral Resources.
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.
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 is entitled to participate in Newcrest’s executive
equity long term incentive plan, details of which are included
in Newcrest’s 2018 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 2017 has been
extracted from the release titled “Annual Mineral Resources
and Ore Reserves Statement – 31 December 2017” dated
15 February 2018 (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 2017:
a. for each of Gosowong Mineral Resources, Telfer Mineral
Resources, Cadia Mineral Resources and Golpu Mineral
Resources, is based on and fairly represents information
and supporting documentation prepared by the following
Competent Persons: Denny Lesmana – Gosowong Mineral
Resources, Peter Morgan – Telfer Mineral Resources,
Vik Singh – Cadia Mineral Resources, David Finn – Golpu
Mineral Resources; and
b. for all other Mineral Resources and 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 these 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 2018
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.
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 2017 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.
NEWCREST 2018 ANNUAL REPORT MINERAL RESOURCES
AND ORE RESERVES
28
MINERAL RESOURCES AND
ORE RESERVES
CHANGES SINCE 31 DECEMBER 2017 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 2017 other than changes
due to normal mining depletion and other adjustments that occurred
during the six months ended 30 June 2018. 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 material changes were
made to those factors or assumptions during the period to
30 June 2018, note however Golpu changed AUD:USD exchange
rate to 0.75 for March 2018 Ore Reserve update financial
evaluation (refer market release "Updated Wafi-Golpu Feasibility
Study" dated 19 March 2018). In preparing the Annual Statement
of Mineral Resources and Ore Reserves for the period ended
31 December 2018, 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 Namosi project that
may be incorporated into the Mineral Resource and Ore Reserve
assumptions for the period ending 31 December 2018. Cadia
Expansion Feasibility Study following on from the Pre-Feasibility
Study for the Cadia Expansion is expected to be completed by
December 2019. On 9 August 2018 Newcrest announced a likely
carrying reduction at Telfer, where the latest life of mine plan
indicates lower levels of ore mined and higher levels of waste from
West Dome, lower gold recoveries, higher estimated closure costs
and higher operating costs than previously forecast. An infill drilling
campaign to more tightly define Telfer’s open pit Mineral Resources
and Ore Reserves is underway. In addition Newcrest’s 75%-owned
Indonesian subsidiary, PT Nusa Halmahera Minerals (PT NHM), has
entered into an amendment agreement with the Government of
Indonesia to amend the Gosowong Contract of Work (CoW), and as
a result Newcrest must divest at least another 26% from its current
shareholding percentage of 75%.
At this stage, the impact that the assumption changes or outcomes
of the ongoing studies and amended Gosowong Contract of Work
(CoW) will have on Newcrest’s Mineral Resources and Ore Reserves
estimates for the period ending 31 December 2018, 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-copper deposits with
silver byproduct. Molybdenum and minor base metals are also
present. Ore is sourced by bulk mining methods from underground
operations. Changes to Mineral Resources and Ore Reserves at Cadia
since 31 December 2017 have only occurred at Cadia East and
Cadia Hill detailed below.
On 9 March 2018 an embankment slump of the Northern Tailings
Facility (NTF) occurred at Cadia, which resulted in the temporary
suspension of all mining and processing activities. Mining
recommenced progressively from 27 March 2018 and processing
recommenced at a limited rate from 29 March 2018 due to
limitations on the capacity able to be utilised of the Southern Tailings
Facility (STF). On 23 April 2018 Newcrest announced that it had
received approval from the New South Wales Department of Planning
and Environment to use the first 200m of the old Cadia Hill open pit
as a tailings storage facility. Deposition into the pit commenced in
early May and, following a short ramp up period, Cadia returned to full
production rates approximately two months after the embankment
slump of the NTF on 9 March.
Newcrest will look to define and commence the optimal repair
solution for the NTF while also applying for permission to use the
remaining 300m of the Cadia Hill open pit for tailings storage in two
distinct stages. The next application submitted in the first quarter
of FY19 was a proposal to use the next 140m of the Cadia Hill open
pit, which is expected to provide an additional 18 months of tailings
capacity. The final application to use up to 160m of the open pit is
likely to be submitted during the 2019 calendar year.
Newcrest plans to undertake buttressing around the Southern
Tailings Facility in preparation for the next tailings lift of the
Southern Tailings Facility and to further strengthen the wall.
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 Panel Cave 1 (PC1)
commenced in January 2013. Commercial production from Panel Cave
2 commenced in October 2014.
The Cadia Expansion Pre-Feasibility Study Findings was announced
on 22 August 2018. This study supported an update to the Cadia East
Ore Reserve. Changes to the Ore Reserve since 31 December 2017
included depletion due to mining and updated Ore Reserve based on the
Pre-Feasibility Study include operational learnings, removal of marginal
mineralisation from the latter stage caves and inclusion of PC3 for
an overall decrease of 0.3 million ounces of gold and an increase of
0.2 million tonnes of copper. Changes to the Mineral Resource since
31 December 2017 were due to mining depletion for decrease of
0.4 million ounces of gold and 0.03 million tonnes of copper.
MINERAL RESOURCES AND
ORE RESERVES
29
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. On 23 June 2018 Newcrest’s 75%-owned Indonesian
subsidiary, PT Nusa Halmahera Minerals (PT NHM), has entered
into an amendment agreement with the Government of Indonesia
to amend the Gosowong Contract of Work (CoW). Under this
agreement Indonesian parties must own at least 51% of PT NHM
within two years of signing the amendment agreement. As a result,
Newcrest must divest at least another 26% interest from its current
shareholding percentage of 75%.
Changes to Mineral Resources and Ore Reserves at Gosowong since
31 December 2017 have only occurred at the two producing mines
detailed below.
Kencana Underground
Since 31 December 2017, the Mineral Resource has changed through
mining depletion offset by incremental additions from infill and
near mine exploration for overall decrease of 0.03 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 0.03 million ounces of gold.
Toguraci Underground
Since 31 December 2017, the Mineral Resource has changed through
mining depletion and infill and near mine exploration drill programs
for overall decrease of 0.02 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 0.02 million ounces of gold.
MMJV WAFI-GOLPU PROJECT (PNG)
On the 19 March 2018 Newcrest released an updated Wafi-Golpu
Feasibility Study. This study incorporates the findings from
the earlier Pre-Feasibility and Feasibility Studies announced in
February 2016, interpretation of the additional orebody data
derived from further drilling and geotechnical studies, together with
further work undertaken on mine design, hydrology, tailings and port
and power options. The updated Study draws on extensive data
collection undertaken since 2016, providing a deeper understanding
of the project’s geotechnical, oceanographic, environmental and
social parameters.
The updated Wafi-Golpu Feasibility Study is the basis of updated
Ore Reserve for Golpu. Since December 2017 the Golpu Ore Reserve
increased by 0.05 million ounces of gold and 0.06 million tonnes of
copper. The Golpu Mineral Resource remains unchanged.
Cadia Hill and Stockpiles
On 23 April 2018 Newcrest announced that it had received
approval from the New South Wales Department of Planning and
Environment to use the first 200m of the old Cadia Hill open pit as
a tailings storage facility. Further study into the use of the Cadia Hill
open pit for tailings storage has confirmed that this will preclude
any portion of the existing Ore Reserve or Mineral Resource from
future extraction. Since 31 December 2017 as announced in
market release of 22 August 2018 (refer "Cadia Expansion Pre-
Feasibility Study Findings") this has resulted in the removal of the
entire Cadia Hill Ore Reserve containing approximately 1.5Moz gold
and 0.13Mt of copper and removal of the in situ Cadia Hill Mineral
Resource containing approximately 2.7Moz gold and 0.23Mt of
copper. Surface stockpiles from Cadia Hill containing approximately
0.3Moz gold and 0.04Mt of copper remain in Mineral Resource.
Ridgeway
No change in Reserves or Resources has been made since
31 December 2017.
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. Underground
selective and bulk long hole open stope mining methods are used for
excavation of the high-grade reefs and Western Flanks respectively,
while stockwork ore and waste are mined using sub level cave bulk
mining method. Underground sub level cave bulk mining ore and
Western Flanks bulk open stope ore is hoisted to the surface via a
shaft. Changes to Mineral Resources and Ore Reserves at Telfer since
31 December 2017 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 2017,
the Mineral Resource has been depleted by 0.19 million ounces
of gold and 0.01 million tonnes of copper and the Ore Reserve
has been depleted by 0.18 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 2017, both the Mineral
Resource and Ore Reserve have 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 2017 have occurred in both open pit and stockpiles and
have comprised the depletion of 0.5 million ounces of gold from both
Mineral Resource and Ore Reserve.
NEWCREST 2018 ANNUAL REPORT 30
MINERAL RESOURCES AND
ORE RESERVES
2017 MINERAL RESOURCES AS AT 31 DECEMBER 2017
Dec–17
Mineral Resources
Measured
Resource
Indicated
Resource
Inferred
Resource
Dec–17
Total Resource
Comparison to Dec–16
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)
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)
Seguela
Total Operational Provinces
Glenn
Patterson-Kane
Rob Taube
Drissa Sankare
Paul Kitto
Non-Operational Provinces
Paul Dunham /
MMJV – Golpu / Wafi &
Nambonga (50%) (3)
Greg Job
Namosi JV (71.42%) (4) Vik Singh
Total Non-Operational Provinces
Total Gold Mineral Resources
Stephen Guy
James Biggam
0.23
1.2
3,000
–
–
140
0.47
110
120
13
0.39
–
–
–
–
–
–
26
190
49
0.44
0.37
0.57
0.38
0.84
0.63
1.6
2.9
–
41
39
–
3,000
0.38
0.40
150
300
0.62
11
12
4.4
0.56
0.62
1.5
1.1
40
200
61
4.9
0.37
0.52
0.43
0.68
0.62
1.6
1.3
35
3,000
150
310
64
190
100
4.9
2.4
4.1
42
0.87
4.0
3.1
0.20
8.2
0.38
0.51
0.43
0.72
0.61
1.3
1.3
36
2.4
4.2
43
1.5
3.6
4.1
0.20
9.5
82
2.1
560
2.3
67
2.3
710
2.3
52
800
2.2
56
–
–
–
–
–
–
–
–
2.9
11
0.81
–
–
–
–
–
5.8
8.8
–
2.3
3.7
–
5.8
10
–
2.3
1.2
–
0.43
100
3.7
29
–
12
1.3
–
1.4
1.2
–
110
–
400
0.86
99
0.74
500
0.83
13
500
0.83
13
–
1,300
0.11
220
0.10
1,600
0.11
5.4
1,500
0.11
19
120
5.4
19
130
Dec–17
Mineral Resources
Measured
Resource
Indicated
Resource
Inferred
Resource
Dec–17
Total Resource
Comparison to Dec–16
Total Resource
Copper Mineral Resources
(inclusive of Copper Ore
Reserves)
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)
Stephen Guy
0.23
–
140
0.31
–
0.13
3,000
110
120
0.26
0.30
0.17
–
41
39
–
0.40
0.25
3,000
150
300
0.26
0.33
0.16
Insitu
Copper
(million
tonnes)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Insitu
Copper
(million
tonnes)
3,000
150
310
0.26
0.33
0.16
7.7
0.48
0.48
8.7
7.8
0.48
0.49
8.7
Operational Provinces
Cadia East Underground
Ridgeway Underground
Other
Total Cadia Province
Main Dome Open Pit
West Dome Open Pit
Telfer Underground
Other
O'Callaghans
James Biggam
Total Telfer Province
Total Operational Provinces
Non-Operational Provinces
MMJV – Golpu / Wafi &
Nambonga (50%) (3)
Paul Dunham /
Greg Job
Namosi JV (71.42%) (4)
Vik Singh
Total Non-Operational Provinces
Total Copper Mineral Resources
7.0
–
–
–
–
–
–
0.10
–
–
–
26
190
49
–
0.070
0.058
0.37
–
0.62
11
12
14
0.068
0.062
0.50
0.37
33
200
61
14
0.077
0.058
0.40
0.37
0.026
0.12
0.24
0.052
59
190
100
14
0.076
0.065
0.30
0.37
0.045
0.12
0.31
0.052
–
69
0.29
9.0
0.24
78
0.29
0.22
0.66
9.3
78
0.29
0.22
0.75
9.5
–
340
1.1
88
0.71
430
1.0
4.4
430
1.0
4.4
–
1,300
0.34
220
0.41
1,600
0.35
5.4
1,500
0.35
10
19
5.4
10
19
MINERAL RESOURCES AND ORE RESERVES MINERAL RESOURCES AND
ORE RESERVES
31
Dec–17
Mineral Resources
Measured
Resource
Indicated
Resource
Inferred
Resource
Dec–17
Total Resource
Comparison to Dec–16
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 Stephen Guy
Gosowong (1)
Total Operational Provinces
Rob Taube
Non-Operational Provinces
MMJV – Golpu /
Wafi (50%) (3)
Total Non-Operational Provinces
Paul Dunham /
Greg Job
Total Silver Mineral Resources
Dec–17
Mineral Resources
0.23
–
0.83
–
3,100
2.9
0.69
15
41
0.81
0.43
12
3,100
3.7
0.68
14
3,100
3.7
0.68
19
68
1.7
70
–
–
400
1.6
79
1.3
480
1.6
24
480
1.6
24
94
69
2.3
71
24
24
95
Polymetallic Mineral Resources
(inclusive of Polymetallic Ore Reserves)
Competent
Person
O'Callaghans
Measured
Indicated
Inferred
Total Polymetallic Mineral Resources
James Biggam
Measured
Indicated
Inferred
Comparison to Dec–16 Total Polymetallic Mineral Resources
James Biggam
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)
–
69
9.0
78
–
69
9.0
78
–
0.34
0.25
0.33
–
0.34
0.25
0.33
–
0.53
0.19
0.49
–
0.53
0.19
0.49
–
0.26
0.11
0.24
–
0.26
0.11
0.24
–
–
–
0.24
0.36
0.18
0.023
0.017
0.0097
0.26
0.38
0.19
–
–
–
0.24
0.36
0.18
0.023
0.017
0.0097
0.26
0.38
0.19
NOTE: Data are reported to two significant figures to reflect appropriate precision in the estimate and this may cause some apparent discrepancies in totals
(1) 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.
(2) 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. Note Bonikro divestment was completed on 28 March 2018.
(3) 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.
(4) Namosi refers to the Namosi unincorporated joint venture, in which Newcrest has a 71.42% interest. The figures shown represent 71.42% of the Mineral Resource at
December 2017 compared to 70.75% of the Mineral Resource at December 2016.
NEWCREST 2018 ANNUAL REPORT 32
2017 ORE RESERVES AS AT 31 DECEMBER 2017
Proved
Dec–17
Reserve
Ore Reserves
Probable Reserve
Dec–17
Total Reserve
Comparison to Dec–16
Total Reserve
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)
Gold Ore Reserves
Competent Person
Operational Provinces
Cadia East Underground
Ridgeway Underground
Other
Total Cadia Province
Main Dome Open Pit
West Dome Open Pit
Telfer Underground
Total Telfer Province
Geoffrey
Newcombe
Brett Ascott
Lihir
Gosowong (1)
Bonikro (2)
Total Operational Provinces
Steven Butt
Jimmy Suroto
Emmanuel Kwarfo
Non-Operational Provinces
MMJV – Golpu (50%) (3)
Namosi JV (71.42%) (4)
Pasqualino Manca
Geoffrey
Newcombe
Total Non-Operational Provinces
Total Gold Ore Reserves
Dec–17
Ore Reserves
Copper Ore Reserves
Competent Person
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 (71.42%) (4)
Geoffrey
Newcombe
Brett Ascott
Pasqualino Manca
Geoffrey
Newcombe
–
–
–
–
19
0.29
13
0.39
–
–
–
–
82
2.1
–
–
–
–
–
–
–
–
–
–
–
–
19
0.14
7.0
0.10
–
–
–
–
–
–
–
–
–
–
1,400
0.48
1,400
80
67
7.8
65
8.0
260
1.9
–
0.54
0.59
0.85
0.76
1.7
2.4
8.0
–
80
86
21
65
8.0
340
1.9
–
0.48
0.54
0.53
22
1.4
1.5
25
0.56
0.76
0.38
1.6
1.7
0.43
1,500
80
90
30
78
19
0.48
0.54
0.52
23
1.4
1.5
25
0.61
0.67
0.58
1.7
1.4
0.83
2.3
8.0
–
2.4
25
0.48
–
53
360
1.9
11
2.3
9.7
1.2
190
0.91
190
0.91
5.5
190
0.91
950
0.12
950
0.12
3.7
940
0.12
9.2
62
Proved
Reserve
Probable Reserve
Dec–17
Total Reserve
Comparison to Dec–16
Total Reserve
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)
1,400
0.28
1,400
80
67
7.8
65
8.0
44
0.28
0.15
0.080
0.074
0.28
0.29
80
86
15
65
8.0
44
4.0
1,500
0.28
0.28
0.14
4.0
0.23
0.13
4.4
0.097
0.023
0.060
0.047
0.24
0.045
0.29
80
90
24
78
19
44
0.28
0.28
0.15
0.23
0.13
4.3
0.090
0.013
0.074
0.048
0.28
0.023
0.29
0.13
0.21
4.5
190
1.3
190
1.3
2.4
190
1.3
950
0.37
950
0.37
3.6
940
0.37
3.1
26
0.58
0.43
56
5.5
3.7
9.2
65
0.13
0.24
4.6
2.4
3.5
5.9
11
Total Non-Operational Provinces
Total Copper Ore Reserves
5.9
10
MINERAL RESOURCES AND ORE RESERVESMINERAL RESOURCES AND ORE RESERVES
MINERAL RESOURCES AND
ORE RESERVES
33
Dec–17
Ore Reserves
Silver Ore Reserves
Competent Person
Proved
Reserve
Probable Reserve
Dec–17
Total Reserve
Comparison to Dec–16
Total Reserve
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)
Geoffrey
Newcombe
Jimmy Suroto
–
–
–
–
1,500
0.75
1,500
0.75
36
1,500
0.74
1.9
10
1.9
10
0.62
1.9
16
37
37
37
1.0
38
38
Operational Provinces
Cadia Valley Operations
Gosowong (1)
Total Operational Provinces
Total Silver Ore Reserves
Dec–17
Ore Reserves
Polymetallic Ore Reserves
Competent Person
O'Callaghans
Proved
Probable
Total Polymetallic Ore Reserves
Brett Ascott
Proved
Probable
Comparison to Dec–16 Total Polymetallic Ore Reserves
Brett Ascott
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
–
44
44
–
0.36
0.36
–
0.36
0.36
–
0.65
0.65
–
0.65
0.65
–
0.32
0.32
–
0.32
0.32
–
0.16
0.16
–
0.16
0.16
–
0.29
0.29
–
0.29
0.29
–
0.14
0.14
–
0.14
0.14
NOTE: Data are reported to two significant figures to reflect appropriate precision in the estimate and this may cause some apparent discrepancies in totals
(1) 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.
(2) 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. Note Bonikro divestment was completed on 28 March 2018.
(3) 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.
(4) Namosi refers to the Namosi unincorporated joint venture, in which Newcrest has a 71.42% interest. The figures shown represent 71.42% of the Ore Reserve at
December 2017 compared to 70.75% of the Ore Reserve at December 2016.
NEWCREST 2018 ANNUAL REPORT 34
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.
CORPORATE GOVERNANCE STATEMENTCORPORATE GOVERNANCE STATEMENT 35
TABLE OF CONTENTS
DIRECTORS' REPORT
OPERATING AND FINANCIAL REVIEW
REMUNERATION REPORT
FINANCIAL REPORT
INDEPENDENT AUDITOR'S REPORT
36
40
72
94
144
NEWCREST 2018 ANNUAL REPORT 36
DIRECTORS' REPORT
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 2018.
DIRECTORS
The Directors of the Company during the year ended 30 June 2018, 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
Sandeep Biswas
Gerard Bond
Philip Aiken AM
Roger Higgins
Rick Lee AM
Xiaoling Liu
Vickki McFadden
Winifred Kamit
John Spark
Non-Executive Director and Non-Executive Chairman
Managing Director and Chief Executive Officer
Finance Director and Chief Financial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (resigned on 14 November 2017)
Non-Executive Director (resigned on 14 November 2017)
Subsequent to year-end, the following changes to the composition of the Board of Directors have been announced:
•
•
the appointment of Peter Tomsett as an independent Non-Executive Director, effective 1 September 2018; and
the resignation of Rick Lee as an independent Non-Executive Director, immediately after the next Newcrest Annual General Meeting
on 14 November 2018.
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 2018 was US$202 million (2017:
profit of US$308 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 dividend for the year ended 30 June 2017 of US 7.5 cents
•
per share, amounting to US$57.5 million, was paid on
27 October 2017. This dividend was 70% franked.
Interim dividend for the year ended 30 June 2018 of
US 7.5 cents per share, amounting to US$57.5 million, was
paid on 2 May 2018. This dividend was fully franked.
The Directors have determined to pay a final dividend for the year
ended 30 June 2018 of US 11 cents per share, which will be fully
franked. The dividend will be paid on 5 October 2018.
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 2018 of US 11 cents per share,
which will be fully franked. The dividend will be paid on 5 October 2018.
The total amount of the dividend is US$84 million. This dividend has not
been provided for in the 30 June 2018 financial statements.
There have been no other matters or events that have occurred
subsequent to 30 June 2018 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.
DIRECTORS' REPORT DIRECTORS' REPORT
37
NON-AUDIT SERVICES
During the year, Ernst & Young (external auditor to the Company), has
provided other services in addition to the statutory audit, as disclosed
in Note 36 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. At the Cadia mine on 9 March 2018, a limited
breakthrough of tailings material occurred through the Northern
Tailings Storage Facility embankment that was fully contained
within the Southern Tailings Storage Facility. Although there was
some business interruption from this event (refer to Section 1 of the
Operating and Financial Review), due to its full containment there was
no recorded environmental consequence from this incident.
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’), Côte d’Ivoire and Fiji. 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 are required to also manage their 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 an internal reporting system covering all sites.
Environmental incidents are reported and assessed according to
their environmental consequence and environmental authorities are
notified where required and remedial action is undertaken.
Levels of environmental incidents are categorised based on
factors such as spill volume, incident location (onsite or offsite)
and environmental consequence. Historical reporting included five
environmental incident categories related to spill classifications while
the number of incidents for 2018 is based on four levels of actual
environmental consequence. Levels of environmental consequence
include: 1 (Minor), 2 (Major), 3 (Critical), and 4 (Catastrophic). Level
1 Minor incidents are tracked and managed at a site level and are
not reported in aggregate for the Group. The number of incidents
reported by level during the 2018 financial year based on actual
environmental consequence is shown in the following table.
Category
Level 2
Level 3
Level 4
2018 – Number of incidents
2017 – Number of incidents (1)
10
7
1
0
0
0
(1) Comparative figures have been restated to align with the new internal reporting
system based on environmental consequence. Based on historical spill
classification categories reported in the 2017 annual report, there were 18
Category II incidents and nil Category III, IV or V incidents.
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. No
payment has been made to indemnify any Director, Secretary and
Executive Officer of the Company and its subsidiaries during or since
the end of the financial year.
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.
NEWCREST 2018 ANNUAL REPORT 38
DIRECTORS' REPORT
INFORMATION ON COMPANY SECRETARY AND
DEPUTY COMPANY SECRETARY
Francesca Lee
General Counsel and Company Secretary
BComm, LLB (Hons), LLM, Grad. Dip. CSP, AGIA, 62
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, 44
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.
REMUNERATION REPORT
The Remuneration Report is set out on pages 72 to 92 and forms part
of this Directors' Report.
INFORMATION ON DIRECTORS
Details of the Directors’ qualifications, experience and special
responsibilities are set out on pages 10 to 12. These details have been
updated since 22 August 2018.
INFORMATION ON FORMER DIRECTORS (1)
Lady Winifred Kamit
Independent Non-Executive Director
BA, LLB, 65
Lady Kamit was appointed to the Board in February 2011 and
resigned effective 14 November 2017. She was 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
John Spark
Independent Non-Executive Director
BComm, FCA, MAICD, 69
Mr Spark was appointed to the Board in September 2007 and
resigned effective 14 November 2017. He was Chairman of the Audit
and Risk Committee and a member of the Nominations Committee.
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)
(1)
Information provided is at the date of cessation as a Director of the Company.
DIRECTORS' REPORT DIRECTORS' REPORT
39
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
Rick Lee AM
Xiaoling Liu
Roger Higgins
Vickki McFadden
Winifred Kamit (2)
John Spark (2)
Number of
Ordinary Shares
53,947
554,660
168,959
18,087
28,447
13,000
12,353
10,000
1,636
32,236
Nature of Interest
Direct and Indirect
Direct and Indirect
Direct and Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Direct and Indirect
Number of
Rights Over
Ordinary
Shares (1)
–
600,959
157,008
–
–
–
–
–
–
–
Nature of
Interest
–
Direct
Direct
–
–
–
–
–
–
–
(1) Represents Sandeep Biswas’ and Gerard Bond’s unvested performance rights granted pursuant to the Company’s 2015, 2016 and 2017 financial year Long Term
Incentive plans.
(2) Balance as at date on which he/she ceased to be a Director of the 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:
Director
Peter Hay
Sandeep Biswas
Gerard Bond
Philip Aiken AM
Roger Higgins
Rick Lee AM
Xiaoling Liu
Vickki McFadden
Winifred Kamit
John Spark
Directors’
Meetings
Audit & Risk
Human
Resources &
Remuneration
Safety &
Sustainability
Nominations
Special Board
Committees (1)
Committees of the Board
A
11
11
11
10(2)
11
10(2)
11
11
5
4(2)
B
11
11
11
11
11
11
11
11
5
5
A
–
–
–
–
–
4(2)
6
6
–
2
B
–
–
–
–
–
6
6
6
–
2
A
–
–
–
8
–
8
8
4
3(2)
–
B
–
–
–
8
–
8
8
4
4
–
A
3
–
–
4
4
–
–
–
1
–
B
3
–
–
4
4
–
–
–
1
–
A
5
–
–
5
–
–
–
–
–
1
B
5
–
–
5
–
–
–
–
–
1
A
2
2
2
–
1
–
2
1
–
1
B
2
2
2
–
1
–
2
1
–
1
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 a 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
22 August 2018
Melbourne
Sandeep Biswas
Managing Director and Chief Executive Officer
NEWCREST 2018 ANNUAL REPORT
40
OPERATING AND FINANCIAL REVIEW
To assist readers to better understand the financial performance of the underlying operating assets 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 6. All financial data presented in this Operating and Financial Review is quoted in US$ unless otherwise stated.
Section 1 footnotes are located at the end of the section.
1. SUMMARY OF RESULTS FOR THE FULL YEAR ENDED 30 JUNE 20181
Key points
• Statutory profit2 of $202 million and Underlying profit3 of $459 million
• All-In Sustaining Cost3 of $835 per ounce
• EBITDA margin3 of 43.9%
• All-In Sustaining Cost margin3 of $473 per ounce
• Cash flow from operating activities of $1,434 million
• Free cash flow3 of $601 million
• Gold production of 2.346 million ounces
• Copper production of 78.0 thousand tonnes
• Net debt of $1.0 billion and a gearing ratio of 12.2% as at 30 June 2018
• Net debt to EBITDA3 of 0.7 times
•
Interim dividend paid of US 7.5 cents per share (fully franked) and final dividend determined of US 11.0 cents per share (fully franked)
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
For the 12 months ended 30 June
2018
2017
Change
Change %
2
3
3
3
3
3
3
3
3
3
3
3
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
times
%
%
%
times
$m
oz
t
$/oz
$/oz
$/oz
$/lb
AUD:USD
PGK:USD
AUD:USD
3,562
202
459
1,565
774
1,434
601
7,462
1,040
12.2
0.7
43.9
21.7
8.8
17.9
953
2,346,354
77,975
835
473
1,308
3.09
0.7754
0.3105
0.7391
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
85
(106)
65
157
55
(33)
(138)
(72)
(459)
(4.4)
(0.4)
3.4
1.0
0.9
4.3
461
(34,276)
(5,966)
48
(3)
45
0.65
0.0213
(0.0048)
(0.0301)
2%
(34%)
16%
11%
8%
(2%)
(19%)
(1%)
(31%)
(27%)
(36%)
8%
5%
11%
32%
94%
(1%)
(7%)
6%
(1%)
4%
27%
3%
(2%)
(4%)
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT
OPERATING AND
FINANCIAL REVIEW
41
Full year results
During the current period, Newcrest’s operating performance was
strengthened by record annual operational results at Lihir (gold
production and mill throughput) and Telfer (mill throughput).
These operational achievements partially offset the adverse impacts
in the current period of:
•
•
the large seismic event on 14 April 2017 which resulted in the
temporary suspension of mining operations at Cadia, with mining
Panel Cave 2 (“PC2”) and Panel Cave 1 (“PC1”) recommencing in
July 2017 and September 2017 respectively and subsequent
progressive ramp-up in the first half of the current period; and
the embankment slump at the Northern Tailings Storage Facility
(“NTF”) at Cadia on 9 March 2018 which reduced milling rates for
approximately two months of the current period.
Despite the challenges outlined above, Cadia finished the financial
year strongly with its mine production and mill throughput annualised
rate exceeding 30mtpa in June 2018.
Concurrent with seeking to safely maximise output from existing
assets, Newcrest continued to focus on expanding its pipeline of
profitable growth opportunities through both early stage entry
arrangements and acquisition of equity investments. The largest
investment in the current period was the $251 million acquisition of
27.1% interest in Lundin Gold Inc, which provides Newcrest exposure
to the Fruta del Norte gold project in Ecuador. During the current
period, Newcrest divested Bonikro for $72 million cash and a net
smelter royalty on future ore mined at the Bonikro lease with a fair
value of $9 million.
Statutory profit of $202 million was $106 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
$257 million. The primary significant items were an asset impairment
at Telfer ($188 million) and a write-down of property, plant and
equipment at Namosi ($72 million).
Underlying profit of $459 million was $65 million higher than the
prior period, driven by higher realised gold and copper prices. This
was partially offset by lower gold and copper sales volumes, primarily
related to the effects of the Cadia seismic event and Cadia NTF event,
and higher depreciation expense compared to the prior period. The
result includes the receipt of insurance proceeds of $155 million,
before tax, relating to the Cadia seismic event.
The average realised gold price in the current period of $1,308 per
ounce was 4% higher than the prior period and the average realised
copper price of $3.09 per pound was 27% higher than the prior period.
Gold production of 2.35 million ounces in the current period was
negatively impacted by the temporary suspension of mining and
milling activities following the seismic and NTF events at Cadia,
together with lower head grades at Lihir and Gosowong. This was
largely offset by an increase in mill throughput volumes at Lihir,
Telfer and Gosowong.
Copper production of 78.0 thousand tonnes was 7% lower than the
prior period primarily driven by lower average head grade at Telfer
and the effects of the seismic and NTF events which impacted
operations at Cadia.
Newcrest’s All-In Sustaining Cost of $835 per ounce was $48 per
ounce higher than the prior period reflecting lower grade at some
sites, higher production stripping costs at Lihir and Telfer, higher
energy costs, the impacts of a stronger average Australian dollar
and lower volume contribution from Cadia due to the effects of both
the seismic and NTF events. The benefit of higher copper prices was
partially offset by lower copper sales volumes. The current period All-
In Sustaining Cost includes a net favourable normalisation of $11 per
ounce which is related to the effects of the Cadia seismic event.
Free cash flow of $601 million was $138 million lower than the
prior period driven by net working capital movements, lower gold
and copper sales volumes, an increase in investing activities and an
increase in income tax payments. These decreases were partially
offset by higher gold and copper prices, and $155 million in insurance
receipts related to the Cadia seismic event.
All operations were free cash flow positive before tax.
During the current period, Newcrest’s net debt reduced by $459m to
$1,040 million, including an increase in cash and cash equivalents to
$953 million. Newcrest’s gearing ratio improved to 12.2% and the net
debt to EBITDA ratio improved to 0.7 times in the current period.
Capital structure
Newcrest’s net debt at 30 June 2018 was $1,040 million, comprising
$1,993 million of corporate bonds less $953 million of cash and
cash equivalents.
From a liquidity perspective, Newcrest had $953 million of cash
and $2,020 million4 in committed undrawn bank facilities as at
30 June 2018, which results in total liquidity of $2,973 million.
Newcrest signed agreements in early August 2018 that extended
the average maturity of $2,000 million of the committed undrawn
bank facilities by approximately two years.
Newcrest’s financial objectives are to meet all financial obligations,
maintain a strong balance sheet to withstand cash flow volatility, be
able to invest capital in value-creating opportunities, and be able to
return excess cash generated to shareholders. Newcrest looks to
maintain a conservative level of balance sheet leverage.
NEWCREST 2018 ANNUAL REPORT 42
1. SUMMARY OF RESULTS FOR THE FULL YEAR ENDED 30 JUNE 20181 (continued)
Newcrest’s financial policy metrics, and its performance against them, are as follows:
Metric
Policy ‘looks to’
Credit rating (S&P/Moody’s)
Leverage ratio (Net debt to EBITDA)
Gearing ratio
Cash and committed undrawn bank facilities
Investment grade
Less than 2.0 times
Below 25%
At least $1.5bn, of which ~1/3 is in the form of cash
2018
2017
BBB–/Baa3
0.7
12.2%
$2.97bn
($953m cash)
BBB–/Baa3
1.1
16.6%
$2.53bn
($492m cash)
Dividend
Newcrest’s dividend policy seeks 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 metrics, 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 US 15 cents per share on a full year basis.
The Newcrest Board has determined that, having regard to the Company’s financial performance in the 2018 financial year and target
financial policy metrics at year end, a final fully franked dividend of US 11.0 cents per share will be paid on 5 October 2018. The record date
for entitlement is 29 August 2018. The financial impact of the dividend amounting to $84 million has not been recognised in the Consolidated
Financial Statements for the year. The Dividend Reinvestment Plan remains in place.
Guidance6,7
Subject to market and operating conditions, Newcrest provides the following guidance for FY19:
Production guidance for the 12 months ended 30 June 20196
Cadia
Telfer
Lihir
Gosowong
Group production
– gold
– copper
– gold
– copper
– gold
– gold
– gold
– copper
koz
kt
koz
kt
koz
koz
moz
kt
800 – 880
~90
400 – 460
~13
950 – 1,050
200 – 240
2.35 – 2.60
100 – 110
Cost, capital, exploration and depreciation guidance for the 12 months ended 30 June 20196,7
$m
All-In Sustaining Cost (a),(b)
Capital expenditure
Cadia
Telfer
Lihir
Gosowong Wafi-Golpu
Other
Group
85 – 155
530 – 575
880 – 935
230 – 250
–
95 – 110
1,870 – 1,970
– Production stripping (a)
– Sustaining capital (a),(b)
– Major projects (non-sustaining)(b)
Total Capital expenditure
85 – 95
–
95 – 110
70 – 80
100 – 120
55 – 65
170 – 200 105 – 120 235 – 270
60 – 70
40 – 45
~5
–
30 – 40
–
30 – 40
–
–
40 – 45
40 – 45
–
10 – 15
–
10 – 15
Exploration expenditure(c)
Depreciation and amortisation (including depreciation of production stripping)
145 – 165
245 – 290
200 – 235
590 – 690
90 – 100
750 – 800
(a) Production stripping and sustaining capital shown above are included in All-In Sustaining Cost
(b) Sustaining capital and All-In Sustaining Cost do not include costs associated with repair of the NTF, and Major projects (non-sustaining) does not include execution
capital associated with development of the Molybdenum plant at Cadia
(c) Exploration is not included in Total Capital
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT
OPERATING AND
FINANCIAL REVIEW
43
Gold production is expected to be lower in the September 2018 Quarter than the June 2018 Quarter as a result of a higher level of planned
shutdown activity being undertaken in the September 2018 Quarter. Gold production and free cash flow are expected to be higher in the second
half of the financial year as there are fewer planned shutdown events and the FY18 Australian tax balancing payment occurs in December 2018.
Cadia’s gold and copper production guidance are above FY18 production, with FY18 having been impacted by the April 2017 seismic event and
the NTF event. Cadia’s AISC ($m) is expected to be broadly in line with FY18 with higher copper production offset by higher mining and milling
activity and lower assumed copper price.
Lihir’s gold production guidance is at or above FY18 production, with a planned increase in mill throughput in accordance with achieving a
sustainable annualised target rate of 15mtpa by 30 June 2019. Lihir’s AISC ($m) is expected to increase from FY18 due to increased activity
to achieve the higher production.
Telfer’s gold production guidance is in line with FY18 results and AISC ($m) guidance is at or above the FY18 result with a planned increase
in production stripping.
Gosowong’s gold production guidance is below FY18 production, due to an expected decrease in average head grade. Gosowong’s AISC ($m)
is expected to be broadly in line with FY18.
FY19 total capital expenditure is expected to increase, primarily due to an increase in non-sustaining capital at Cadia (related to initial work
on the next block cave and infrastructure upgrade), an increase in spend on Wafi-Golpu and higher production stripping at Telfer.
AISC guidance assumes a weighted average copper price of $2.70 per pound and an AUD:USD exchange rate of 0.75 for FY19.
Telfer gold hedging
Newcrest completed additional hedging of a portion of Telfer’s expected FY19–23 gold sales during the current period, bringing the total
outstanding volume and prices hedged for future years at Telfer and in total for Newcrest to:
Financial Year Ending
30 June 2019
30 June 2020
30 June 2021
30 June 2022
30 June 2023
Total
Gold Ounces
Hedged
Average Price
A$/oz
231,224
204,794
216,639
204,615
137,919
995,191
1,739
1,729
1,864
1,902
1,942
1,826
The current period included 294,697 ounces of Telfer gold sales hedged at an average price of A$1,765 per ounce, representing a net revenue
benefit of $22 million.
At 30 June 2018, the unrealised mark-to-market gain on these hedges was $23 million.
NEWCREST 2018 ANNUAL REPORT 44
1. SUMMARY OF RESULTS FOR THE FULL YEAR ENDED 30 JUNE 20181 (continued)
Review of Operations5
For the 12 months ended 30 June 2018
Cadia8,9,10
Lihir
Telfer11 Gosowong
Bonikro5
Hidden
Valley
Other
Group9
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
$m
$m
$m
$m
$m
$m
$m
$m
$/oz
$/oz
600
62
359
586
61
357
955
–
57
930
–
57
1,182
1,207
816
655
538
261
2,630
4,554
801
(110)
691
100
171
1,137
557
(246)
311
869
934
374
426
16
207
422
16
207
686
140
(60)
37
135
(108)
27
533
1,262
46
251
–
298
265
–
370
351
148
58
256
146
(35)
111
234
882
426
115
–
14
104
–
13
136
69
20
–
52
(15)
37
83
801
507
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(146)
(160)
(15)
(257)
(319)
(576)
107
–
–
2,346
78
936
2,308
77
1,004
3,562
1,565
774
7,462
1,434
(833)
601
1,926
835
473
*
Free cash flow for ‘Other’ comprises net interest paid of $103 million, income tax paid of $69 million, other investing activities of $227 million (including payments of
$251 million to acquire a 27.1% interest in Lundin Gold, $15 million to acquire a 19.9% interest in Azucar Minerals (formerly known as Almadex Minerals), further
investment in SolGold Plc totalling $9 million and net proceeds of $48 million following the divestment of Bonikro), corporate costs of $77 million, capital expenditure
of $40 million, exploration expenditure of $49 million and working capital movements of $11 million.
For the 12 months ended 30 June 2017
Cadia8,9
Lihir
Telfer11 Gosowong
Bonikro
Hidden
Valley5
Other
Group9
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
$m
$m
$m
$m
$m
$m
$m
$m
$/oz
$/oz
620
64
383
626
64
381
1,137
626
490
2,763
671
(169)
502
151
241
1,022
940
–
42
941
–
42
1,181
542
283
4,638
571
(218)
353
807
858
405
386
20
229
398
21
229
631
144
6
426
178
(108)
70
469
1,178
85
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)
(725)
(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.
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT
OPERATING AND
FINANCIAL REVIEW
45
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 2018 (‘current period’)
compared with the 12 months ended 30 June 2017 (‘prior period’), except where otherwise stated. All references to ‘the Company’ are to Newcrest Mining Limited.
‘Statutory profit’ is profit after tax attributable to owners of the Company.
2.
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’ 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 for the preceding 12 months.
‘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 6 for a reconciliation of non-IFRS measures to the most appropriate IFRS measure.
4. Comprises undrawn bilateral bank debt facilities of $2,000 million and an additional undrawn $20 million bank loan facility of a subsidiary.
5. 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 effective
disposal date of 31 August 2016. Newcrest owns 75% of Gosowong through its holding in PT Nusa Halmahera Minerals, an incorporated joint venture. For Bonikro the
figures shown represent 100% up to the divestment date of 28 March 2018. Bonikro includes mining and near-mine exploration interests in Côte d’Ivoire held by LGL
Mines CI SA and Newcrest Hire CI SA (of which Newcrest owned 89.89% respectively up to the divestment date).
6. Disclaimer: 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 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 or 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.
7. The guidance stated assumes weighted average copper price of $2.70 per pound and AUD:USD exchange rate of 0.75 for FY19.
8.
In the prior period, Cadia includes development production from the Cadia East project of 1,345 gold ounces and 157 tonnes of copper. Expenditure associated with
this production and revenue from the sales are capitalised and not included in the operating profit calculations. There was no further capitalisation of production
following the completion of development activities at Cadia East in the prior period.
In the current period, Cadia’s and the Group’s AISC include a $42 and $11 per ounce normalisation (i.e. reduction) respectively, related to the Cadia seismic event.
In the prior period, Cadia’s and the Group’s AISC include a $110 and $28 per ounce normalisation (i.e. reduction) respectively, related to the Cadia seismic event.
9.
10. Cadia’s EBITDA, EBIT and free cash flow include $155 million (before tax) of insurance proceeds related to the seismic event.
11. The net assets for Telfer for the prior period have been restated to exclude a deferred tax asset of $84 million to align with the current year presentation. This asset
is now presented in Other as it will be primarily realised by other members of the Australian tax consolidated group.
NEWCREST 2018 ANNUAL REPORT
46
650
585
520
455
390
325
260
195
130
65
0
2. DISCUSSION AND ANALYSIS OF OPERATIONS AND THE INCOME STATEMENT
2.1. Profit overview
Statutory profit was $202 million and Underlying profit was $459 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 $257 million,
comprising asset impairments at Telfer ($188 million) and the investment in Azucar Minerals ($6 million), a write-down of non-current assets at
Namosi ($72 million), a $6m write-down of tax assets at Gosowong following an adverse verdict in respect of a FY13 tax rate dispute and a net
gain of $15 million relating to the exit from the Bonikro asset (comprising a $14 million write-down of non-current assets and a net investment
hedge gain of $29 million representing a prior period foreign exchange gain which has been reclassified from the Foreign Currency Translation
Reserve to the Income Statement on divestment of Bonikro).
Underlying profit of $459 million was $65 million higher than the prior period driven by higher realised gold and copper prices. This was partially
offset by lower gold and copper sales volumes, primarily related to the effects of the Cadia seismic event and Cadia NTF event, and higher
depreciation expense compared to the prior period. The result includes the receipt of insurance proceeds of $155 million, before tax, relating
to the Cadia seismic event.
$m
Gold revenue
Copper revenue
Silver revenue
Total revenue
Operating costs
Depreciation and amortisation
Total cost of sales
Corporate administration expenses
Exploration
Other income/(expense)
Share of associates losses
Net finance costs
Income tax expense
Non-controlling interests
Underlying profit
Movement in Underlying Profit ($m)
For the 12 months ended 30 June
2018
3,019
526
17
3,562
(1,972)
(777)
(2,749)
(104)
(60)
130
(5)
(114)
(191)
(10)
459
2017
3,001
456
20
3,477
(1,938)
(671)
(2,609)
(84)
(53)
(12)
–
(132)
(181)
(12)
394
Change
Change%
18
70
(3)
85
(34)
(106)
(140)
(20)
(7)
142
(5)
18
(10)
2
65
1%
15%
(15%)
2%
(2%)
(16%)
(5%)
(24%)
(13%)
1,183%
(100%)
14%
(6%)
17%
16%
Revenue
$85 million
109
Operating Costs
($34) million
Depreciation
and Amortisation
($106) million
106
394
(88)
(39)
(3)
(11)
(23)
135
2
(10)
459
(95)
(11)
(7)
FY17
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
FY18
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT OPERATING AND
FINANCIAL REVIEW
47
2.2. Revenue
Total sales revenue for the current period of $3,562 million was $85 million or 2% higher than the prior period. Newcrest’s sales revenue
continues to be predominantly attributable to gold, being 85% of total sales revenue in the current period (86% in the prior period).
$m
Total sales revenue for 12 months ended 30 June 2017
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 2018
(88)
(39)
(2)
106
109
(1)
3,477
(129)
214
3,562
Gold revenue of $3,019 million was 1% higher than the prior period. The 4% increase in the average realised gold price ($1,308 per ounce in the
current period compared to $1,263 per ounce in the prior period) was partially offset by lower gold sales volumes.
Copper revenue of $526 million was 15% higher than the prior period primarily driven by a 27% increase in the average realised copper price.
The price benefit was partially offset by a 9% decrease in copper sales volumes driven by lower average head grade at Telfer and lower mill
throughput at Cadia attributable to the effects of the seismic event and NTF event.
2.3. Cost of sales
$m
Site production costs
Royalties
Treatment and realisation
Inventory movements
Operating costs
Depreciation and amortisation
Cost of sales
For the 12 months ended 30 June
2018
1,719
104
134
15
1,972
777
2,749
2017
1,676
96
137
29
1,938
671
2,609
Change
Change %
43
8
(3)
(14)
34
106
140
3%
8%
(2%)
(48%)
2%
16%
5%
Cost of sales of $2,749 million was $140 million higher than the prior period primarily as a result of a 16% increase in depreciation and an
increase in site production costs.
The increase in depreciation expense compared with the prior period was primarily due to increases at Telfer ($62 million), Cadia ($25 million)
and Lihir ($18 million).
Site production costs were 3% higher in the current period which represents the costs associated with higher volumes of material mined and
milled at Lihir, Telfer and Gosowong, including record annual mill throughput at Lihir and Telfer.
As the Company is a US dollar reporting entity, cost of sales will vary in accordance with the movements in the operating currencies where
those costs are not denominated in US dollars. In FY18, operating costs and depreciation were adversely impacted by movements in operating
currencies against the US dollar by $23m and $11m respectively, primarily related to the stronger average Australian dollar against the US dollar.
The table below shows indicative currency exposures in FY18 on cost of sales by site (excluding Bonikro which was divested in the current
period), and a Group figure (including all site cost of sales, corporate administration expenses and exploration expenditure):
Cadia
Telfer
Lihir
Gosowong
Group
USD
15%
15%
50%
50%
30%
AUD
85%
85%
25%
5%
55%
PGK
–
–
25%
–
10%
IDR
–
–
–
45%
5%
NEWCREST 2018 ANNUAL REPORT
48
2. DISCUSSION AND ANALYSIS OF OPERATIONS AND THE INCOME STATEMENT (continued)
2.4. Exploration, Corporate and Other items
Exploration expenditure of $60 million was expensed in the current period, $7 million higher than the prior period. The increase in exploration
expenditure is in line with Newcrest’s focus on growing the portfolio of strategic partnerships, farm-in arrangements and investments across Asia
Pacific, West Africa and the Americas.
Corporate administration expenses of $104 million were 24% higher than the prior period. This includes corporate costs of $77 million,
depreciation expense of $14 million and equity-settled share-based payments of $13 million. The largest driver of the corporate cost increase
related to Newcrest’s growth and innovation activities.
Other income of $130 million comprised:
$m
Net foreign exchange gain/(loss)
Insurance recoveries
Other items
Other income/(expense)
For the 12 months
ended 30 June
2018
2017
15
121
(6)
130
(4)
–
(8)
(12)
The net foreign exchange gain in the current period primarily relates to the restatement of US dollar denominated cash and foreign denominated
financial assets and liabilities held by the Group’s Australian subsidiaries. Other items include net fair value gains and losses on gold and copper
derivatives and fair value movements on concentrate receivables.
During the year, Newcrest settled and received its insurance claim in relation to the 14 April 2017 seismic event at Cadia for $155 million.
Proceeds attributed to material damage of $34 million have been included in site production costs as an offset to the costs incurred to rectify
damage to the Cadia Panel Cave. The remaining proceeds of $121 million attributed to business interruption loss are presented in other income.
2.5. Net finance costs
Net finance costs of $114 million were $18 million or 14% lower than the prior period due to a lower average debt balance and the accumulation
of cash in the current period.
2.6. Income tax
Income tax on Statutory profit in the current period was $118 million, resulting in an effective tax rate of 36% 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 income tax benefits not
recognised in relation to the write-down of non-current assets at Namosi and Bonikro, non-deductible exploration expenses and a write-down of
a tax asset at Gosowong. These were partially offset by adjustments to prior period income tax expenses and the book tax effect associated with
the net investment hedge gain following the divestment of Bonikro.
Income tax on Underlying profit was $191 million resulting in an effective tax rate of 29%, which is lower than the Australian company tax rate
of 30%. The effective tax rate was lower than the Australian company tax rate primarily due to adjustments to prior period income tax expenses
partially offset by non-deductible exploration expenses.
2.7. Significant items
Significant items totalling a net expense of $257 million (after tax and non-controlling interest) were recognised in the current period, comprising:
• asset impairments, being losses of $194 million comprising:
‒ $188 million at Telfer, where the latest life of mine plan indicates lower levels of ore mined and higher levels of waste from West Dome,
lower gold recoveries, higher estimated closure costs and higher operating costs than previously forecast with the addition of a
reduction in the value attributed to a potential future block cave; and
‒ $6 million with respect to the investment in Azucar Minerals;
• write-down of property, plant and equipment at:
‒ Namosi totalling $72 million, where an assessment of potential project configurations prompted a reassessment of the
appropriateness to continue to carry forward previous study costs; and
‒ Bonikro totalling $14 million as a result of the divestment announcement in December 2017. This is also a non-cash item;
• a net investment hedge gain of $29 million reclassified from the Foreign Exchange Translation Reserve to the Income Statement,
representing a net foreign exchange gain on historical funding arrangements that were designated as a hedge of the Group’s net
investment in the Bonikro mine. This non-cash item reclassifies the gain from reserves to retained earnings, with no net impact on
shareholders’ equity; and
• a $6 million write-down of a tax asset at Gosowong following an adverse verdict in the Indonesian Tax Court with respect to a
FY13 tax rate dispute.
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT OPERATING AND
FINANCIAL REVIEW
49
$m
Telfer
Gosowong
Bonikro
Namosi
For the 12 months ended 30 June 2018
Items by nature
Impairment losses
Write-down of property, plant and
equipment
Net investment hedge gain
Total before income tax
Tax
Total after income tax
Attributable to:
Non-controlling interest
Owners of the parent
(269)
–
–
(269)
81
(188)
–
(188)
–
–
–
–
(8)
(8)
(2)
(6)
–
(15)
29
14
–
14
(1)
15
–
(72)
–
(72)
–
(72)
–
(72)
Azucar
Minerals
(6)
–
–
(6)
–
(6)
–
(6)
Total
(275)
(87)
29
(333)
73
(260)
(3)
(257)
In the prior period, significant items totalling a net expense of $86 million (after tax and non-controlling interests) were recognised, comprising:
• a $10 million loss on disposal of Newcrest’s 50% interest in Hidden Valley;
• a net investment hedge loss of $62 million which was reclassified from the Foreign Currency Translation Reserve to the Income
Statement. This represented a net foreign exchange loss on historical 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 historical loss from the reserve to retained earnings,
with no net impact on shareholders’ equity; and
• $14 million, non-cash write-down of property, plant and equipment representing capitalised exploration at Bonikro. This was also a
non-cash item.
$m
Items by nature
Write-down of property, plant and equipment
Loss on business divestment
Net investment hedge loss
Total before income tax
Tax
Total after income tax
Attributable to:
Non-controlling interest
Owners of the parent
For the 12 months ended 30 June 2017
Bonikro
Hidden
Valley
(15)
–
–
(15)
–
(15)
(1)
(14)
–
(10)
(79)
(89)
17
(72)
–
(72)
Total
(15)
(10)
(79)
(104)
17
(87)
(1)
(86)
NEWCREST 2018 ANNUAL REPORT 50
3. DISCUSSION AND ANALYSIS OF CASH FLOW
Free cash flow for the current period of $601 million was $138 million lower than the prior period.
Cash flow from operating activities of $1,434 million are $33 million (or 2%) lower than the prior period primarily related to working capital
movements, lower gold and copper sales volumes and higher income tax payments. These decreases were partially offset by the benefit of higher
realised gold and copper prices, and $155 million in insurance receipts related to the Cadia seismic event.
Cash outflow relating to investing activities of $833 million was $105 million (or 14%) higher than the prior period, largely driven by investments
to acquire interests in associates, partially offset by the proceeds from the divestment of Bonikro and a reduction in capital expenditure.
Cash outflow relating to financing activities was substantially lower in the current period as all bank debt facilities and private placement notes were
repaid in the prior period, with the effect that free cash flow was primarily applied to an increase in cash and cash equivalents and dividend payments.
All operations were free cash flow positive before tax in the current period.
$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
$m
EBITDA
Add: Exploration expenditure written-off
Add: Other non-cash items or non-operating items
Sub-total
Working capital movements12
Receivables
Inventories
Payables and provisions
Other assets and liabilities
Net working capital movements
Net interest paid
Income taxes paid
Net cash inflow from operating activities
12. Includes adjustments for non-cash items.
For the 12 months ended 30 June
2017
1,467
(728)
739
(300)
439
53
492
Change
Change %
(33)
(105)
(138)
160
22
439
461
(2%)
(14%)
(19%)
53%
5%
828%
94%
For the 12 months ended 30 June
2017
1,408
53
18
1,479
33
19
69
21
142
(120)
(34)
1,467
Change
Change %
157
7
(10)
154
(50)
(15)
(80)
(24)
(169)
17
(35)
(33)
11%
13%
(56%)
10%
(152%)
(79%)
(116%)
(114%)
(119%)
14%
(103%)
(2%)
2018
1,434
(833)
601
(140)
461
492
953
2018
1,565
60
8
1,633
(17)
4
(11)
(3)
(27)
(103)
(69)
1,434
Cash flow from operating activities of $1,434 million are $33 million (or 2%) lower than the prior period primarily related to working capital,
lower gold and copper sales volumes primarily related to the seismic and NTF events at Cadia and lower copper grade at Telfer, and higher income
tax payments. These decreases were largely offset by the benefit of higher realised gold and copper prices and the receipt of insurance proceeds
of $155 million.
In the current period there was a net working capital outflow of $27 million. The prior period inflow reflected active management of working
capital to partly offset the impact of production disruptions in that period.
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT 3.2. Cash flow from investing activities
$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
Wafi-Golpu
Corporate
Total major projects (non-sustaining) capital
Total capital expenditure
Exploration and evaluation expenditure
Proceeds from sale of property, plant and equipment
Proceeds from sale of Bonikro, net of cash divested
Payments for investment in Lundin Gold
Payments for investment in Azucar Minerals
Payments for investment in SolGold
Cash outflow on sale of Hidden Valley
Net cash outflow from investing activities
OPERATING AND
FINANCIAL REVIEW
51
For the 12 months ended 30 June
2018
2017
Change
Change %
43
95
12
150
58
46
102
25
4
–
15
250
59
9
48
23
2
141
541
72
(7)
(48)
251
15
9
–
833
27
49
14
90
56
51
114
33
11
1
14
280
112
23
54
20
3
212
582
58
(2)
–
–
–
63
27
728
16
46
(2)
60
2
(5)
(12)
(8)
(7)
(1)
1
(30)
(53)
(14)
(6)
3
(1)
(71)
(41)
14
(5)
(48)
251
15
(54)
(27)
105
59%
94%
(14%)
67%
4%
(10%)
(11%)
(24%)
(64%)
(100%)
7%
(11%)
(47%)
(61%)
(11%)
15%
(33%)
(33%)
(7%)
24%
(250%)
(100%)
(86%)
(100%)
14%
Cash outflow relating to investing activities was $105 million higher than the prior period, largely driven by investments to acquire interests in
associates consistent with Newcrest’s continued focus on expanding its pipeline of profitable growth opportunities through both exploration
and early stage entry. Equity investments during the current period included a 27.1% in Toronto Stock Exchange (“TSX”) and Nasdaq (Stockholm)
listed Lundin Gold Inc for $251 million, a 19.9% interest in TSX listed Azucar Minerals Ltd (formerly Almadex Minerals) for $15 million and
a further investment of $9 million in TSX and London Stock Exchange listed SolGold Plc. This was partially offset by proceeds of $48 million
(net of cash transferred on divestment) from the disposal of Bonikro, and lower capital expenditure.
Capital expenditure of $541 million in the current period comprised:
• Production stripping of $150 million, including higher levels of waste stripping activity at Lihir (primarily Phase 14) and Telfer (Main Dome
Stage 6 and West Dome Stages 2 and 3).
• Sustaining capital expenditure of $250 million, which was $30 million lower than the prior period due to completion of projects at Lihir
and Gosowong during the prior period, lower levels of mine development at Gosowong and lower spend at Bonikro.
• Major project, or non-sustaining, capital expenditure of $141 million was $71 million lower than the prior period. The expenditure in the
current period primarily related to:
– Cadia: comprising expansion studies, installation of the hydrofloat circuit to improve recoveries, and execution of the project to
increase the electricity transmission line capacity to the mine site. This was $53 million lower than the prior period due to the
completion of the Cadia East Panel Cave 2 development and the Cadia Concentrator 1 to Concentrator 2 crushed feed project.
– Lihir: activity focused on increasing processing plant throughput; float tails leach project (Stage 2) which was completed in the current
period; upgrading the mine capacity to enable increased total material movement; and ongoing study, drilling and other work to
facilitate the mining of the Kapit ore body.
– Wafi-Golpu: comprising capitalised expenditures associated with the Wafi-Golpu Joint Venture parties completing and releasing an
updated Feasibility Study for the project and lodging amended supporting documentation for the special mining lease application with
the Mineral Resources Authority of Papua New Guinea. In addition, work necessary for the Environmental Impact Statement (‘EIS’) for
the project was conducted, with the EIS submitted to the Conservation and Environmental Protection Authority for Papua New Guinea
in June 2018.
NEWCREST 2018 ANNUAL REPORT 52
3. DISCUSSION AND ANALYSIS OF CASH FLOW (continued)
3.2. Cash flow from investing activities (continued)
The increase in exploration activity in the current period represented a continued focus on greenfield exploration and resource definition drilling
at Telfer and Gosowong.
$m
Expenditure by nature
Greenfield
Brownfield
Resource definition
Expenditure by region
Australia
Indonesia
Papua New Guinea
West Africa
North America
Latin America
New Zealand
For the 12 months ended 30 June
2018
2017
Change
Change %
44
14
14
72
15
15
6
18
4
14
–
72
31
14
13
58
16
13
2
19
2
4
2
58
13
–
1
14
(1)
2
4
(1)
2
10
(2)
14
42%
–
8%
24%
(6%)
15%
200%
(5%)
100%
250%
(100%)
24%
The greenfield growth pipeline was enhanced with new exploration projects entered into in Australia, Côte d’Ivoire, Ecuador, Chile and the USA,
and a number of wholly-owned exploration tenements granted in Australia, Ecuador and Côte d’Ivoire. This has delivered substantial exploration
ground in proven fertile gold/copper districts including Tanami (Northern Territory/Western Australia), Mt Isa region (Queensland), Jarbidge
(Nevada), Northern Andes (Ecuador) and the Southern Andes (Chile/Argentina).
Target generation commenced on all new projects and drilling commenced or continued at Séguéla (Côte d’Ivoire), Vallecito (Argentina), Tatau and
Big Tabar Islands (Papua New Guinea), Mendooran (New South Wales), Cloncurry (Queensland) and Jarbidge (Nevada). A maiden Mineral Resource
was declared at the Antenna Prospect within the Séguéla Project and other prospects within the Séguéla Project are being assessed for further
potential mineralisation.
Exploration continued at all brownfield sites, with drilling ongoing at Gosowong, Telfer and Cadia. At Gosowong, exploration focused on delivering
incremental Resource growth around the existing operation. At Telfer, exploration focused on various targets for Resource growth including
Main Dome, West Dome, M-Reefs and geological testing of the block cave concept. Target generation testing was undertaken at Cadia, including
drilling at Rowan Brae.
3.3. Cash flow from financing activities
$m
Net proceeds / (repayments) of borrowings
Bilateral bank debt
Private placement notes
Subsidiary bank loan
Net repayment of borrowings
Payment for treasury shares
Dividends paid to members of the parent entity
Dividend paid to non-controlling interests
Net cash outflow from financing activities
For the 12 months ended 30 June
2018
2017
Change
Change %
–
–
–
–
(11)
(105)
(24)
(140)
(25)
(125)
(20)
(170)
(19)
(105)
(6)
(300)
25
125
20
170
8
–
(18)
160
100%
100%
100%
100%
42%
–
(300%)
53%
Cash outflow from financing activities of $140 million primarily relates to $105 million in dividend payments to shareholders.
Payment for treasury shares of $11 million represents shares purchased on market to satisfy obligations under employee incentive plans.
Dividends of $24 million were paid to PT Aneka Tambang Tbk. for their 25% non-controlling interest in PT Nusa Halmahera Minerals (the entity
that owns Gosowong).
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT
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
Other income
EBITDA
EBIT
Operating cash flow
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
OPERATING AND
FINANCIAL REVIEW
53
For the 12 months ended 30 June
2018
2017
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
tonnes
ounces
ounces
tonnes
ounces
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$/oz
22,102
22,102
21,145
1.12
78.7
599,717
61,764
359,378
585,686
60,927
357,263
1,182
648
161
121
816
655
801
58
59
117
691
100
171
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
3,249
3,249
(2,882)
0.15
(3.7)
(19,889)
(2,041)
(23,385)
(40,256)
(2,918)
(23,429)
45
1
25
–
190
165
130
2
(53)
(51)
189
(51)
(70)
17%
17%
(12%)
15%
(4%)
(3%)
(3%)
(6%)
(6%)
(5%)
(6%)
4%
0%
18%
100%
30%
34%
19%
4%
(47%)
(30%)
38%
(34%)
(29%)
Cadia’s operating and financial performance for the current period was adversely impacted by:
•
•
the large seismic event on 14 April 2017 which resulted in the temporary suspension of mining operations, with mining of PC2 and PC1
recommencing in July 2017 and September 2017 respectively and subsequent progressive ramp-up in the first half of the current period; and
the embankment slump at the Northern Tailings Storage Facility (“NTF”) at Cadia on 9 March 2018 which reduced milling rates for
approximately two months of the current period.
These events contributed to gold and copper production being 3% lower than the prior period. Lower material milled and lower recovery rates
in the current period were partially offset by higher gold head grades primarily driven by a higher proportion of ore feed from PC2 and the prior
period having a higher level of low-grade stockpiles feed following the seismic event. Recovery was adversely impacted by the higher proportion
of ore from that part of PC2 where the mineralogy of ore feed currently presents unfavourably for recovery purposes (subject to further work to
be undertaken, analysis of the PC2 ore body using hydrofracturing drill core indicates that recoveries from PC2 can be expected to improve over
time as the height of the draw increases).
EBIT of $655 million was 34% higher in the current period primarily driven by higher realised gold and copper prices. This increase was partially
offset by an increase in depreciation which was a result of the increased utilisation of Cadia East reserves, the acceleration of depreciation on the
Ridgeway assets (which are in care and maintenance) and the impact of a higher average Australian dollar exchange rate in the period. $34 million
of the $155 million of insurance proceeds which related to material damage caused by the seismic event were allocated to site production costs,
offsetting the costs that were largely incurred in this period, with the remainder of the proceeds ($121 million) recorded in other income for Cadia.
All-In Sustaining Cost per ounce was lower in the current period, with the reduction primarily attributable to higher copper prices increasing the
value of the copper by-product credits. This copper credit benefit was partially offset by higher site unit costs due to the lower sales volumes in
the current period. In the current and prior periods, Cadia’s AISC includes a $42 and $110 per ounce normalisation (i.e. reduction) respectively,
related to the Cadia seismic event.
Free cash flow was $189 million higher in the current period, driven by higher gold and copper prices and lower capital expenditure relative to the prior
period. These benefits were partially offset by a net working capital outflow relative to the prior period (including the build of ore stockpiles) and lower
production due to the events described above. The insurance proceeds of $155 million relating to the seismic event are included in operating cash flow.
NEWCREST 2018 ANNUAL REPORT 54
4. REVIEW OF OPERATIONS (continued)
4.2. 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
2018
2017
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
ounces
ounces
ounces
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$/oz
11,273
33,234
14,274
2.67
78.1
955,156
56,770
930,394
56,770
1,207
946
277
538
261
557
95
102
48
245
311
869
934
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
(2,116)
3,165
1,273
(0.17)
(1.0)
15,096
14,513
(10,395)
14,513
26
48
18
(4)
(22)
(14)
46
(12)
(6)
28
(42)
62
76
(16%)
11%
10%
(6%)
(1%)
2%
34%
(1%)
34%
2%
5%
7%
(1%)
(8%)
(2%)
94%
(11%)
(11%)
13%
(12%)
8%
9%
Gold production was 2% higher in the current period, driven by a 10% increase in milled tonnes with an annual record of 14.3mt milled in the
current period. This increase in milled tonnes reflected an increase in both throughput rate (tonnes per operating hour) and utilisation. The benefit
of this increase in milling volume was partially offset by a reduction in head grade as a result of the sequenced transition between the open pit
cutbacks (Phase 9 transitioning into Phase 14) and the available stockpile reclaim grade.
EBIT was lower in the current period, which is the result of lower head grade and higher cost of sales, with the latter driven primarily by higher
depreciation, higher fuel costs (primarily driven by higher prices) and a change in methodology where mobile maintenance planned rebuild
components were expensed rather than capitalised. The increase in depreciation reflects higher ounces produced in the period and a review of
depreciation rates completed in the current period. The impact of these increases was partially offset by the benefit of higher realised gold prices.
All-In Sustaining Cost per ounce was higher than the prior period reflecting the above drivers of higher operating costs, higher production
stripping costs and lower sales volumes relative to the prior period. These impacts were partially offset by lower sustaining capital expenditure.
Free cash flow for the current period was 12% lower than the prior period primarily driven by higher operating and production stripping costs,
and lower net working capital inflows. These impacts were partially offset by the benefit of higher realised gold prices and lower sustaining and
non-sustaining capital expenditure compared to the prior period.
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT 4.3. 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
OPERATING AND
FINANCIAL REVIEW
55
For the 12 months ended 30 June
2018
2017
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
tonnes
ounces
ounces
tonnes
ounces
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$/oz
20,321
44,293
23,026
0.71
78.9
425,536
16,212
207,099
422,241
16,390
207,099
686
746
200
140
(60)
135
43
46
9
98
27
533
1,262
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
4,635
10,149
1,839
0.01
(0.5)
39,294
(3,924)
(22,354)
23,960
(4,526)
(22,354)
55
121
62
(4)
(66)
(43)
16
(5)
(14)
(3)
(43)
64
84
30%
30%
9%
1%
(1%)
10%
(19%)
(10%)
6%
(22%)
(10%)
9%
19%
45%
(3%)
(1,100%)
(24%)
59%
(10%)
(61%)
(3%)
(61%)
14%
7%
Gold production was 10% higher in current period compared to the prior period primarily driven by an increase in total ore mined enabling
higher mill throughput. Total material milled of 23mt was an annual record for Telfer. Total material mined increased as a result of the planned
ramp up in West Dome Stage 3 and Main Dome Stage 4 more than offsetting the wind down of Main Dome Stage 6, and increased waste
movement in West Dome Stage 2.
EBIT was lower in the current period due to higher depreciation charges, the cost of increased open pit mining activities and the higher stripping
ratio from West Dome Stage 2, and the impact of a higher average Australian dollar exchange rate in the period. The increase in depreciation
reflects a review of asset useful lives and depreciation rates in the current period, Reserve revisions as at 31 December 2016 and higher
production in the current period. These were partially offset by higher gold and copper prices. The Telfer gold hedges had a positive $22 million
impact on revenue in the period.
All-In Sustaining Cost was higher in the current period driven by the increase in mining activity (including higher production stripping activity),
substantially lower copper sales (primarily due to lower feed grade) and the impact of a higher average Australian dollar exchange rate in the
period. This was partially offset by higher copper prices and a reduction in sustaining capital expenditure.
Free cash flow was lower in the current period primarily due to increased mining expenditure and lower net working capital inflows, partially
offset by higher gold and copper prices and lower sustaining and non-sustaining capital expenditure.
NEWCREST 2018 ANNUAL REPORT 56
4. REVIEW OF OPERATIONS (continued)
4.4. Gosowong5
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
2018
2017
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
ounces
ounces
ounces
$m
$m
$m
$m
$m
$m
$m
$m
$m
$/oz
679
767
704
11.49
95.7
251,390
298,459
265,442
369,733
351
293
90
148
58
146
25
111
234
882
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
115
103
139
(5.54)
(0.8)
(44,486)
(62,807)
(9,566)
85,946
1
22
(8)
(29)
(21)
(40)
(8)
(31)
26
125
20%
16%
25%
(33%)
(1%)
(15%)
(17%)
(3%)
30%
0%
8%
(8%)
(16%)
(27%)
(22%)
(24%)
(22%)
13%
17%
Lower gold production in the current period was primarily due to lower head grade, partially offset by higher mined and milled tonnes. Gold
sales in the current period were higher than gold produced in the current period following the unwind of prior period shipment delays following
production issues at the third party owned refinery.
The lower EBIT in the current period was a result of higher milling and mining costs incurred to produce gold from lower grade ore. These impacts
were partially offset by lower depreciation, reflecting lower gold production.
All-In Sustaining Cost per ounce was higher in the current period primarily due to lower gold volumes produced and sold, together with higher site
costs associated with higher levels of ore mined and milled (but at lower grade), partially offset by lower sustaining capital expenditure.
Free cash flow was $31 million lower than the prior period which is primarily driven by lower EBITDA and lower net working capital inflows,
partially offset by lower sustaining capital expenditure.
As announced on 26 June 2018, Newcrest’s 75% owned Indonesian subsidiary, PT Nusa Halmahera Minerals (“PT NHM”), has entered into an
amendment agreement with the Government of Indonesia to amend the Gosowong Contract of Work (“CoW”). The most significant of these
amendments impact the CoW as follows:
• PT NHM shall pay prevailing tax rates contained in the Indonesian Income Tax Laws law from 1 July 2018.
•
Indonesian parties must own at least 51% of PT NHM within two years of signing the amendment agreement. As a result, Newcrest must
divest at least another 26% interest from its current shareholding percentage of 75%.
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT 4.5. Bonikro5
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
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
OPERATING AND
FINANCIAL REVIEW
57
For the 12 months ended 30 June
2018
2017
Change
Change %
tonnes '000
tonnes '000
tonnes '000
grams/tonne
%
ounces
ounces
ounces
ounces
1,555
7,686
1,789
2.29
87.0
114,555
14,149
104,057
12,719
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$/oz
136
116
49
69
20
52
12
4
16
37
83
801
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
(480)
(11,697)
(943)
0.67
(3.7)
(13,772)
(453)
(24,794)
(1,841)
(26)
(37)
10
21
11
(13)
(2)
(7)
(9)
(1)
(59)
(304)
(24%)
(60%)
(35%)
41%
(4%)
(11%)
(3%)
(19%)
(13%)
(16%)
(24%)
26%
44%
122%
(20%)
(14%)
(64%)
(36%)
(3%)
(42%)
(28%)
On 13 December 2017, Newcrest announced that it had agreed to sell its 89.89% interest in the Bonikro operation in Côte d’Ivoire to a
consortium consisting of F&M Gold Resources Ltd and Africa Finance Corporation, for consideration comprising:
• $72 million cash payable on completion of the transaction; and
• Net smelter royalty on future ore mined at the Bonikro lease, with a fair value of $9 million.
The economic effective date for the Bonikro divestment transaction was 1 October 2017.
The above results include performance up until the transaction completion date of 28 March 2018.
NEWCREST 2018 ANNUAL REPORT 58
5. DISCUSSION AND ANALYSIS OF THE BALANCE SHEET
5.1. Net assets and total equity
Newcrest had net assets and total equity of $7,462 million as at 30 June 2018.
$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 associates
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
2018
2017
Change
Change %
953
77
1,586
68
1
8,156
42
69
324
204
492
88
1,681
41
26
8,852
35
80
64
224
11,480
11,583
(415)
(99)
(1,993)
(5)
(499)
(1,007)
(4,018)
7,462
7,395
67
7,462
(455)
(58)
(1,991)
(4)
(454)
(1,087)
(4,049)
7,534
7,450
84
7,534
461
(11)
(95)
27
(25)
(696)
7
(11)
260
(20)
(103)
40
(41)
(2)
(1)
(45)
80
31
(72)
(55)
(17)
(72)
94%
(13%)
(6%)
66%
(96%)
(8%)
20%
(14%)
406%
(9%)
(1%)
9%
(71%)
0%
(25%)
(10%)
7%
1%
(1%)
(1%)
(20%)
(1%)
5.2. Net debt, gearing and leverage
5.2.1. Net debt
Net debt (comprising total borrowings less cash and cash equivalents) of $1,040 million at 30 June 2018 was $459 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.
Net debt at 30 June 2017
Net increase in cash balances
Other items
Net debt at 30 June 2018
Movement $
Movement %
$m
1,499
(461)
2
1,040
(459)
(31%)
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT $m
Corporate bonds – unsecured
Capitalised transaction costs on facilities
Less cash and cash equivalents
Net debt
$m
Corporate bonds
Bilateral bank debt facilities
Subsidiary bank loan
$m
Corporate bonds
Bilateral bank debt facilities
Subsidiary bank loan
OPERATING AND
FINANCIAL REVIEW
59
2018
2,000
(7)
(953)
1,040
As at 30 June
2017
2,000
(9)
(492)
1,499
Facility
utilised
2,000
–
–
2,000
Facility
utilised
2,000
–
–
2,000
Change
Change %
–
2
(461)
(459)
As at 30 June 2018
Facility
unutilised
–
2,000
20
2,020
As at 30 June 2017
Facility
unutilised
–
2,000
40
2,040
–
22%
(94%)
(31%)
Facility
limit
2,000
2,000
20
4,020
Facility
limit
2,000
2,000
40
4,040
5.2.2. Gearing
The gearing ratio (net debt as a proportion of net debt and total equity) as at 30 June 2018 was 12.2%. This is a reduction from 16.6% as at
30 June 2017, primarily reflecting the increase of cash and cash equivalents.
$m
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Net debt and total equity
2018
1,993
(953)
1,040
7,462
8,502
2017
1,991
(492)
1,499
7,534
9,033
Gearing (net debt / net debt and total equity)
12.2%
16.6%
Change
Change %
2
(461)
(459)
(72)
(531)
(4.4)
0%
(94%)
(31%)
(1%)
(6%)
(27%)
5.2.3. Net debt to EBITDA
Newcrest’s net debt to EBITDA (leverage ratio) as at 30 June 2018 decreased to 0.7 times (compared to 1.1 times at 30 June 2017) primarily
a result of the build-up of cash and cash equivalents in the current period.
$m
Net debt
EBITDA (trailing 12 months)
Net debt to EBITDA (times)
2018
1,040
1,565
0.7
As at 30 June
2017
1,499
1,408
1.1
Change
Change %
(459)
157
(0.4)
(31%)
11%
(36%)
NEWCREST 2018 ANNUAL REPORT 60
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
$m
Statutory profit
Asset impairment loss (Telfer)
Asset impairment loss (Azucar)
Write-down of property, plant and equipment (Namosi)
Write-down of property, plant and equipment (Bonikro)
Net investment hedge gain (Bonikro)
Write-down of tax asset (Gosowong)
Total significant items
Underlying profit
Profit after tax attributable to Newcrest shareholders
$m
Statutory profit
Write-down of property, plant and equipment (Bonikro)
Loss on business divestment (Hidden Valley)
Net investment hedge loss (Hidden Valley)
Total significant items
Underlying profit
6.2. Reconciliation of Underlying profit to EBIT and EBITDA
$m
Underlying profit
Non-controlling interests
Income tax expense
Net finance costs
EBIT
Depreciation and amortisation
EBITDA
For the 12 months ended 30 June 2018
Before Tax and
Non-controlling
interest
Non-controlling
interest
Tax
After tax and
Non-controlling
interest
327
269
6
72
15
(29)
–
333
660
(118)
(81)
–
–
–
–
8
(73)
(191)
(7)
–
–
–
(1)
–
(2)
(3)
(10)
202
188
6
72
14
(29)
6
257
459
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
15
10
79
104
587
(164)
–
–
(17)
(17)
(181)
(11)
(1)
–
–
(1)
(12)
308
14
10
62
86
394
For the 12 months
ended 30 June
2018
2017
459
10
191
114
774
791
394
12
181
132
719
689
1,565
1,408
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT OPERATING AND
FINANCIAL REVIEW
61
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)13
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
For the 12 months ended 30 June
2018
2017
Reference
$m
US$/oz
$m
US$/oz
6.3.1
6.3.2
6.3.3
6.3.4
6.3.7
6.3.5
6.3.6
6.3.6
6.3.7
2,308
2,724
(777)
(543)
90
10
150
250
22
1,926
141
62
2,129
1,180
(336)
(235)
39
5
65
108
9
835
61
27
923
2,377
2,541
(671)
(476)
66
8
101
280
21
1,870
212
50
2,132
1,069
(282)
(200)
28
3
42
118
9
787
89
21
897
13. 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.
6.3.1. Cost of sales
$m
Cost of sales as per the consolidated income statement
Less: Earnings normalisation adjustments14
Normalisation of earnings related to seismic event
Reversal of insurance proceeds related to prior adjusted periods
Total Cost of Sales
For the 12 months
ended 30 June
2018
2,749
(50)
25
2017
2,609
(68)
–
2,724
2,541
14. The current period and prior period include earnings normalisation adjustments relating to the seismic event at Cadia of $11/oz and $28/oz respectively.
6.3.2. Depreciation and amortisation
$m
Depreciation and amortisation (per Note 5(b) of the consolidated financial statements)15
For the 12 months
ended 30 June
2018
777
2017
671
15. 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
$m
Copper sales revenue (per Note 5(a) of the consolidated financial statements)
Silver sales revenue (per Note 5(a) of the consolidated financial statements)
Total By-product revenue
6.3.4. Corporate costs
$m
Corporate administration expenses (per Note 5(c) of the consolidated financial statements)
Less: Corporate depreciation
Total Corporate costs
For the 12 months
ended 30 June
2018
526
17
543
For the 12 months
ended 30 June
2018
104
(14)
90
2017
456
20
476
2017
84
(18)
66
NEWCREST 2018 ANNUAL REPORT
62
6. NON-IFRS FINANCIAL INFORMATION (continued)
6.3.5. Production stripping and underground mine development
$m
Advanced operating development
Production stripping per the consolidated financial statements
Total production stripping and underground mine development
6.3.6. Capital expenditure
$m
Payments for property, plant and equipment per consolidated financial statements
Assets under construction, development and feasibility expenditure per consolidated financial statements
Information systems development per consolidated financial statements
Total capital expenditure
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)
Total capital expenditure
6.3.7. Exploration expenditure
$m
Exploration and evaluation expenditure per consolidated financial statements
Sustaining exploration (per 6.3 of the Operating and Financial Review)
Non-sustaining exploration (per 6.3 of the Operating and Financial Review)
Total exploration expenditure
For the 12 months
ended 30 June
2018
–
150
150
2017
11
90
101
For the 12 months
ended 30 June
2018
2017
217
160
14
391
250
141
391
286
193
13
492
280
212
492
For the 12 months
ended 30 June
2018
2017
72
10
62
72
58
8
50
58
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).
$m
EBIT
Total capital (net debt and total equity) – as at 30 June 2016
Total capital (net debt and total equity) – as at 30 June 2017
Total capital (net debt and total equity) – as at 30 June 2018
Average total capital employed
Return on Capital Employed
For the 12 months
ended 30 June
2018
774
–
9,033
8,502
8,768
8.8%
2017
719
9,227
9,033
–
9,130
7.9%
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT OPERATING AND
FINANCIAL REVIEW
63
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).
$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
Net interest payable
Interest Coverage Ratio
For the 12 months
ended 30 June
2018
1,565
(20)
(8)
1,537
114
(20)
(8)
86
17.9
2017
1,408
(23)
(8)
1,377
132
(23)
(8)
101
13.6
7. RISKS
Newcrest’s mission is to safely deliver superior returns to our stakeholders from finding, developing and operating gold/copper mines. In pursuit
of this, Newcrest is focused on the following five pillars and fulfilling the associated aspirations by the end of calendar year 2020:
• Safety and Sustainability: Zero fatalities and industry leading Total Recordable Injury Frequency Rate
• People: First quartile Organisation Health
• Operating Performance: First quartile Group AISC per ounce
• Technology and Innovation: Five breakthrough successes
• Profitable Growth: Exposure to five tier 1 orebodies
Newcrest’s business, operating and financial results and performance are subject to various risks and uncertainties, some 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 and fulfilment of the aspirations 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 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.
External Risks
Fluctuations in external
economic drivers
External economic drivers (including macroeconomic, metal prices, exchange rates and costs)
Market price of gold and copper
Newcrest’s revenue is principally derived from the sale of gold and copper based on prevailing market
prices. 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 and policies, 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, as well as gold hedging and de-hedging
by gold producers.
Newcrest is predominantly an unhedged producer. Newcrest has hedged a portion of Telfer’s future gold
production for FY19 to FY23 to secure margins on a portion of future sales and support investment in future
cutbacks and mine development. Newcrest’s Telfer operation is a large scale, low grade mine and its profitability
and cash flow are both very sensitive to the realised Australian Dollar gold price.
Foreign exchange rates
Given the geographic spread of Newcrest's operations, Newcrest’s cost of sales and other 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. Approximately 30% of Newcrest’s
cost of sales, corporate administration expenses and exploration expenditures are denominated in US dollars,
aligned to Newcrest’s reporting currency, and 55% of Newcrest’s cost base is denominated in Australian dollars.
NEWCREST 2018 ANNUAL REPORT 64
7. RISKS (continued)
Increased costs, capital and commodity inputs
Operating costs are subject to variations 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 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 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 currently hedges a portion of its expected fuel requirements. Other input costs are
generally not hedged. However, where it considers appropriate, Newcrest enters into short term, medium
term or evergreen contracts at fixed prices or fixed prices subject to price rise and fall mechanisms.
Examples of impacts
Actual or forecasted lower metal prices, and/or adverse movements in exchange rates and/or adverse
movements in operating costs 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;
reduce the market value of Newcrest’s gold or copper inventory and Newcrest’s estimates of Mineral
Resources and Ore Reserves;
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;
• affect Newcrest’s future operating activities and financial results through changes to proposed project
•
•
developments; and
result in changes in the estimation of the recoverable amount of Newcrest’s assets when assessing
potential accounting impairment of those assets.
Newcrest looks to mitigate the impact of any adverse movement in these factors by seeking to be a relatively
low-cost gold producer, maintaining a strong balance sheet, and having sufficient liquid funds and committed
undrawn bank facilities available to meet the Group’s financial commitments.
Examples of estimated potential financial impacts in the 2019 Financial Year of metal prices and exchange
rates are approximately as follows:
Element
Realised gold price
Realised copper price
AUD:USD exchange rate
Change
+/–$10/oz
+/–$0.05/lb
+/–A$0.01
Impact on
Revenue
Revenue
EBIT
Estimated Impact
+/–$25m
+/–$10m
–/+$15m
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT Political events, Government
actions, changes in law and
regulation and inability to
maintain title
OPERATING AND
FINANCIAL REVIEW
65
Political events, actions by Governments and tax authorities
Newcrest has exploration, development and production activities that are subject to political, economic, social,
regulatory 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
• 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.
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 might be made to relevant law or policy in the jurisdictions
where the Group has current or potential future interests, or the impact that any such 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.
Changes in law and regulation and inability to maintain title
Newcrest's current and future mining operations, development projects and exploration activities are subject
to various laws, policies and regulations and 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).
Changes in law, policies or regulations, or to the manner in which they are applied to Newcrest may have the
potential to materially impact the value of a particular operation or the Group as a whole. Failure to comply
with legal requirements may result in Newcrest being subject to enforcement actions with potentially material
consequences, such as financial penalties, suspension of operations and forfeiture of assets.
In several jurisdictions where Newcrest has existing interests, the legal framework is increasingly complex,
onerous and subject to change. Changes in laws may result in material additional expenditure, taxes or costs,
restrictions on the movement of funds, or interruption to, or operation of, Newcrest's activities. Disputes
arising from the application or interpretation of applicable laws, policies or regulations in the countries where
Newcrest operates could also adversely impact Newcrest’s operations, financial performance and/or value.
There can be no guarantee that Newcrest will be able to successfully obtain and maintain the necessary
Authorisations, or obtain and maintain the necessary Authorisations on terms acceptable to Newcrest, 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 and/or processing activities.
NEWCREST 2018 ANNUAL REPORT 66
7. RISKS (continued)
Climate Change
Financial Risks
Capital and Liquidity
Newcrest has exposure to a range of climate risks related to the transition to a lower-carbon economy including
policy and legal developments; price; technology; market and reputation; and risks related to the physical
impacts of climate change.
Newcrest is assessing the Taskforce on Climate-Related Financial Disclosure (TCFD) guidelines. We are also
assessing approaches to apply climate scenarios and the impact of it on the future price of energy into its
medium and long term investment decisions and portfolio analysis. Whilst climate change creates risks and
uncertainties, Newcrest also expects to identify opportunities.
Gold and copper mining operations are energy intensive and in the short term Newcrest expects to continue
to rely heavily on fossil fuels. However, Newcrest is seeking opportunities to improve its energy efficiency to
reduce direct mining and processing costs and is assessing options to use renewable power generation and
low emission technologies to reduce its greenhouse gas emissions intensity.
Newcrest’s operating sites are vulnerable to physical climate impacts. As part of its risk management
framework, Newcrest has identified material risks that potentially relate to physical climate impacts, mainly
at an operating site level. For example, Telfer has considered pit flooding as a result of a major rainfall event and
Lihir has identified loss of water supply due to a natural event. Extreme weather events have the potential to
damage infrastructure, disrupt operations and delay delivery of products to market. Newcrest is working with
experts and research organisations to better understand physical threats from climate change at its current
and planned operating sites with the objective of building resilience into its infrastructure.
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 structured these debt facilities to have varying
maturities so that its refinancing obligations are staggered.
Although Newcrest currently forecasts to generate sufficient funds to service its debt requirements, no
assurance can be given that Newcrest will be able to do so in the future or meet its financial covenants, its debt
repayment obligations, or be able to refinance its debt prior to its expiry, any or all of which may adversely affect
its ability to continue to operate.
Newcrest may in the future draw on available undrawn bank debt facilities or seek additional funds through
means such as asset divestitures, equity raisings, or additional debt (or some combination of these). Newcrest’s
ability to draw on or raise additional funding, and its ability to service that funding, may be influenced by factors
including (without limitation) macroeconomic conditions such as gold and copper prices, sector appetite,
Newcrest’s forecast and actual performance, regulatory change, strength of the banking sector, and the status
of the financial or capital markets.
Counterparty default
and credit risk
Newcrest is exposed to counterparties defaulting on their contracts or obligations which may adversely affect
Newcrest’s financial condition and performance. Newcrest limits its counterparty credit risk in a variety of ways.
Bank credit risk is limited by ensuring diversification with maximum investment limits based on credit ratings.
Newcrest only holds funds for investment with banks or financial institutions with credit ratings of at least
A- (S&P) equivalent and in countries rated at least A- (S&P) equivalent. Newcrest only enters into derivative
financial instruments with banks or financial institutions with credit ratings of at least BBB (S&P) equivalent.
All customers who wish to trade on credit terms are subject to 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.
Newcrest 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- (S&P) equivalent.
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, such
as where insurance is not available, where the premium associated with insuring against the risk is considered
excessive, or if the risk is considered to have a low likelihood of eventuating. Newcrest's insurance policies carry
deductibles and limits which may lead to Newcrest not recovering the full monetary impact of an insured event.
Uninsured Risk
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT Strategic Risks
Failure to discover new ore
reserves or to enhance and
realise new ore reserves
OPERATING AND
FINANCIAL REVIEW
67
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 and
process plants, 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 and acquisition activities in replacing gold and copper reserves depleted
by production, the development of new projects and the expansion of existing operations. The challenge
of sustaining and replacing projects for production is increased by the level of competition over these
development opportunities. 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, remote locations, 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
surveys, 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.
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, fiscal and regulatory frameworks, 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.
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.
NEWCREST 2018 ANNUAL REPORT 68
7. RISKS (continued)
Joint venture risk
Inability to make or to
integrate new acquisitions
Operational Risks
Operational failures
or catastrophes and
natural hazards
Information Technology
and cyber risk
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 or derived from the acquired business.
Newcrest’s mining operations are subject to operating risks and hazards including (without limitation)
unanticipated ground conditions, failure of tailings facilities, 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, natural events and environmental incidents, health and safety related
incidents, and interruptions and delays due to community and/or security 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, seismic
activity and rock temperature.
A key operational risk for Newcrest is the availability and price of fuel, 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 materially 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 and elsewhere. Risks include that a cave may not propagate as
anticipated, excessive air pockets may form during the cave propagation, unplanned ground movement may
occur due to changes in stresses released in the surrounding rock. 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.
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, disclosure of commercially sensitive information and data
breaches 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.
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT OPERATING AND
FINANCIAL REVIEW
69
Failure to attract and
retain key employees
and effectively manage
industrial relations issues
Reliance on contractors
Marketing
Newcrest seeks to attract and retain employees and third party contractors with the appropriate technical skills
and managerial experience necessary to continue to operate its business. A loss of key personnel or a failure
to attract appropriately skilled and experienced personnel could affect its operations and financial condition.
While, there can be no assurance that Newcrest will be able to attract and retain skilled and experienced
personnel, Newcrest values its people and has policies, procedures and frameworks in place to mitigate this risk.
Newcrest focuses on diversity and inclusion in the workplace, and developing its people at all levels.
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.
Some aspects of Newcrest's production, development and exploration activities are conducted by contractors.
As a result, Newcrest's business, operating and financial performance and results may be negatively impacted
by the availability and performance of these contractors and their financial strength. The material risks
associated with contractors 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.
Newcrest produces gold dore which is currently delivered to gold refineries in Australia and Indonesia with
associated risks including (without limitation) penalties from producing dore outside of the contractual
specifications, theft and fluctuating transportation charges. Transportation of the dore is also subject to
numerous risks including (without limitation) delays in delivery of shipments, terrorism and weather conditions.
Sales of gold dore may also be adversely impacted by delays and disruption at Newcrest’s operations or
the operations of one or more of the receiving refineries and consequent declarations of force majeure at
Newcrest’s or buyer’s operations.
In addition to gold dore, 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.
Governance and Compliance Risk
Failure to adequately
manage people and
corporate culture
Newcrest’s reputation and licence to operate is dependent upon on-going responsible, lawful and ethical
business conduct. Failure to do so can result in serious consequences, ranging from public allegations of
misbehaviour and reputational damage through to fines, regulatory intervention or investigation, temporary
or permanent loss of licences, litigation and/or loss of business. Newcrest’s management, standards, policies,
controls and training instil and reinforce a culture across the organisation whereby employees are encouraged
to act lawfully, ethically, and in a socially-responsible manner. However, there is a risk that Newcrest employees
will fail to adhere to Group standards, policies and procedures that provide guidance on acceptable business
conduct and drive regulatory compliance.
NEWCREST 2018 ANNUAL REPORT 70
7. RISKS (continued)
Health, Safety and Sustainability
Health and Safety
There are numerous occupational health and safety risks associated with mining and metallurgical processes.
Environment and Closure
Newcrest has in place a full HSE management system with associated standards, tools and governance
processes to ensure all hazards are identified, effectively managed and that controls are effective.
Newcrest’s Safety Transformation has been designed to manage the fatality risks in the business by improving
our safety culture, increasing the effectiveness of our critical controls and improving our process safety by
designing, building and maintaining our operations to a higher standard.
Health and hygiene reviews are conducted with a view to identifying the risks to our people. 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.
Mining and processing 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 requires 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 at some operations) and generates waste products that must be disposed of either
through offsite facilities or onsite permitted landfills and waste management areas. Mining and ore refining
processes at Newcrest sites also generate waste by-products such as tailings to be managed (by the use of
tailings storage facilities or, in the case of Lihir, deep sea tailing placement) and waste rock (to be managed in
waste rock dumps or in the case of Lihir, permitted barge dumping locations). Geochemical reactions within
long-term waste rock dumps or low grade ore storage stockpiles may also lead to the generation of acid and
metalliferous drainage that needs to be managed. 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.
OPERATING AND FINANCIAL REVIEWDIRECTORS' REPORT Failure to maintain
community relations
and community unrest
OPERATING AND
FINANCIAL REVIEW
71
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
landholders and the wider community.
Typically, where Newcrest has exploration activities, development projects or operations, it enters into
agreements with local landholders and the wider local community. 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 operational activities or delays to project implementation.
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 current and 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 operational
disruptions or delays to project development until resolved.
NEWCREST 2018 ANNUAL REPORT 72
REMUNERATION REPORT
22 August 2018
Dear Shareholder,
On behalf of the Board, we are pleased to provide Newcrest’s Remuneration Report for the year ended 30 June 2018, for which we
seek your support at our Annual General Meeting (AGM) in November 2018.
This report explains the links between Newcrest’s Executive remuneration framework and Newcrest’s strategy and performance.
YEAR IN REVIEW
During the current period, Newcrest’s operating performance was strengthened by record annual operational results at Lihir, both
gold production and mill throughput, and improved operational performance at Telfer. These operational achievements partially
offset the adverse impacts in the current period of the large seismic event on 14 April 2017 and the embankment slump at the
Northern Tailings Storage Facility (NTSF) on 9 March 2018 at Cadia. Despite these challenges, Cadia finished the financial year
strongly with its mine production and mill throughput annualised rate exceeding 30mtpa in June 2018.
As foreshadowed in the 2017 Notice of Annual General Meeting, Lady Winifred Kamit and John Spark retired from the Board, with
effect from 14 November 2017. The second half of calendar year 2018 will see further Board renewal with Peter Tomsett joining
the Board as an independent Non-Executive Director on 1 September 2018 and Rick Lee AM retiring with effect from the end of
the 2018 Annual General Meeting on 14 November 2018.
REMUNERATION OUTCOMES
Short term incentive (STI) outcomes for our Executives for the 2018 financial year ranged from 54.9% to 66.1% of the maximum
possible award. 65.6% of the 2014 Long Term Incentives (LTIs) vested during the 2018 financial year.
None of the Executives received an increase in total fixed remuneration (TFR) during the 2018 financial year. As foreshadowed in the
2017 Remuneration Report, and approved at the 2017 Annual General Meeting, the face value of the CEO’s annual LTI grant increased
from 150% to 180% of TFR following benchmarking undertaken and advice received from the Board’s independent remuneration
adviser in the 2017 financial year.
The Non-Executive Directors (NEDs) did not receive any fee increases during the 2018 financial year. However, following
benchmarking against a range of ASX companies, in particular those with market capitalisations ranked between 11–40, it was
determined that there should be an increase of 10% in Committee fees, with effect from the commencement of the 2019 financial
year (equating to an increase for each NED, other than the Chairman who does not receive Committee fees, in the range of 0.9% to
2.6%, based on the aggregate of Board and Committee fees received by the NED). The aggregate fees immediately following the
increases are 30.1% below the aggregate fee pool approved by shareholders. Base Board fees have not changed.
The Board remains committed to ensuring that Newcrest’s remuneration framework is aligned to the Company’s strategy and
performance and that it attracts, rewards and retains high calibre people and drives strong individual and Group performance in the
interests of both the Company and its shareholders. To this end, the structure of, and the performance conditions for, both the STI
and LTI Plans have been reviewed. While no changes were made to the structure and performance conditions in the 2018 financial
year, the performance conditions and weighting attributed to the conditions have been modified for the 2019 financial year grants
to reflect the five pillars that underpin the Company’s strategy to 2020. See section 4.4.1 for further details.
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
REMUNERATION REPORTDIRECTORS' REPORT
REMUNERATION REPORT
73
REMUNERATION REPORT
This Report details the remuneration arrangements in place for the key management personnel (KMP), being those people 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
Key Management Personnel
Section 2
Remuneration Snapshot
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. KEY MANAGEMENT PERSONNEL (KMP)
The following table details the Company’s KMP during the 2018 financial year.
Name
Role
73
74
75
75
83
87
87
88
89
Executive Directors
Sandeep Biswas
Gerard Bond
Other Executives
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Non-Executive Directors
Peter Hay
Philip Aiken AM
Roger Higgins
Rick Lee AM
Xiaoling Liu
Vickki McFadden
Lady Winifred Kamit
John Spark
Managing Director and Chief Executive Officer (CEO)
Finance Director and Chief Financial Officer (CFO)
Executive General Manager (EGM) People
EGM Cadia and Lihir
EGM Wafi-Golpu
EGM Public Affairs and Social Performance
EGM General Counsel and Company Secretary
Chief Development Officer (CDO)
EGM Gosowong, Telfer and Bonikro (1 July 2017 – 28 March 2018)
EGM Gosowong, Telfer and Health Safety Environment & Security (from 29 March 2018)
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
All Executives and Non-Executive Directors listed above held their position for all of the 2018 financial year, other than Lady Winifred Kamit and
John Spark who both ceased as Directors on 14 November 2017.
Subsequent to 30 June 2018, the following changes to KMP have been announced:
•
•
the appointment of Peter Tomsett as an independent Non-Executive Director, effective 1 September 2018; and
the resignation of Rick Lee AM as an independent Non-Executive Director, immediately after the next Newcrest AGM on 14 November 2018.
NEWCREST 2018 ANNUAL REPORT 74
2. REMUNERATION SNAPSHOT
2.1. Key remuneration outcomes for the 2018 financial year
Executive Remuneration
No Executives received an increase in TFR as part of the 2017 annual salary review.
STI Outcomes
LTI Outcomes
The average STI outcome for Executives was 61.4% of the maximum opportunity based on the assessment
of business and personal measures.
The face value of the CEO’s annual LTI grant increased from 150% to 180% of TFR, effective from the
2017 LTI grant.
NED Remuneration
65.6% of the 2014 LTI Plan vested during the 2018 financial year, reflecting the improved Company
performance over the three year performance period to 30 June 2017.
The 2015 LTI Plan (under which grants of LTI rights were made in the 2016 financial year) is expected to vest
on or around 5 November 2018 and it is anticipated that the vesting levels will be in the range of 55% to 65%.
NEDs received no fee increases during the 2018 financial year. However, following benchmarking, it was
determined that there should be an increase of 10% in Committee fees, with effect from the commencement
of the 2019 financial year (equating to an increase for each NED (other than the Chairman who does not receive
Committee fees) in the range of 0.9% to 2.6%, based on the aggregate of Board and Committee fees received
by the NED). Base Board fees have not changed.
2.2. Actual Remuneration Table
The table below details the cash and value of other benefits actually received by the Executives in the 2018 financial year in their capacity as
KMP. This is a voluntary disclosure to provide shareholders with increased clarity and transparency. It includes the value of LTI Rights and Other
Rights that vested during the year. See section 9.1 for the statutory remuneration table that has been prepared in accordance with statutory
obligations and Australian Accounting Standards.
Non-Statutory Executive Remuneration for the 2018 financial year
TFR(1)
STI Paid &
Vested(2)
Other
Cash
Benefits(3)
Other
Benefits(4)
LTI Rights
Unrestricted
Vested(5)
Shares(6)
Other
Rights(7)
Total
Executive
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
1,783
756
512
717
601
543
543
756
601
1,239
412
78
147
243
202
195
387
202
45
–
–
4
–
87
–
–
60
49
11
9
1
9
29
7
8
67
4,522
1,204
–
236
1,010
–
735
–
216
1,658
212
–
116
144
–
116
200
97
–
–
–
–
–
–
–
1,001
–
9,296
2,595
599
1,221
2,007
861
1,596
2,352
1,243
Notes to Non-Statutory Executive Remuneration
(1) TFR (Total Fixed Remuneration) comprises base salary and superannuation contributions.
(2) Represents amounts paid under the STI Plan during the year, relating to performance for the 2017 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 2014 LTI Plan during the 2018 financial year. The value of the Rights has been determined based on the share price at the
(6)
close of business on the vesting date of A$23.09 (US$17.67).
In November 2017, ordinary Newcrest shares were released by Pacific Custodians Pty Ltd as trustee for the Newcrest Employee Share Trust to:
•
•
Sandeep Biswas (57,630) in accordance with the 2015 STI Plan Rules which required deferral of part of the 2015 STI award to Sandeep Biswas.
Sandeep Biswas (35,209), Gerard Bond (11,889), Craig Jetson (6,499), Craig Jones (8,062), Francesca Lee (6,474), Mike Nossal (11,184) and Phil Stephenson
(5,422) in accordance with the 2016 STI Plan Rules which required deferral of part of the 2016 STI award for these Executives. On release, 16.97% of Craig
Jetson’s shares were sold to meet the Company’s tax withholding obligation for the time during the restriction period he spent working in PNG.
The value of the shares has been determined based on the share price at the close of business on the release date of A$23.40 (US$17.86).
(7) See section 4.6 for details of sign-on grants.
TFR and Other Benefits have been translated from Australian dollars to US dollars using an average exchange rate of 0.7754. STI Paid & Vested,
Other Cash Benefits, LTI Rights Vested, Unrestricted Shares and Other Rights have been translated at the rate applicable on the date of the event.
2.3. What changes are planned for the 2019 financial year?
Following benchmarking, the NEDs received a 10% increase in Committee fees with effect from the commencement of the 2019 financial year
(equating to an increase for each NED (other than the Chairman who does not receive Committee fees) in the range of 0.9% to 2.6%, based on the
aggregate of Board and Committee fees received by the NED). Base Board fees have not changed.
A review of Executives’ TFR against market data is currently underway.
No further material changes to the Company’s remuneration framework are proposed at this stage, but the Company continually monitors its
remuneration framework to ensure that it remains effective, competitive and aligned to strategy.
REMUNERATION REPORTDIRECTORS' REPORT
REMUNERATION REPORT
75
2.4. 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 at a rate of A$1.00:US$0.7754.
The TFR 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.
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 established by the Board 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 AM (Chairman), Philip Aiken AM, Vickki McFadden and Xiaoling Liu, who are each independent non-
executive directors. All Directors are invited to attend HRR Committee meetings.
On the resignation of Rick Lee immediately following the AGM on 14 November 2018, Philip Aiken AM will become Chairman of the HRR
Committee and Roger Higgins will become a member of the HRR Committee.
3.2. External Remuneration Consultants
During the 2018 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.
KPMG did not provide a remuneration recommendation as defined by the Corporations Act 2001.
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.
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 listed companies with market capitalisations ranked between 11 – 40;
• 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.
NEWCREST 2018 ANNUAL REPORT 76
4. OUR EXECUTIVE REMUNERATION FRAMEWORK (continued)
4.2. Executive Remuneration Framework
The diagram below outlines the remuneration components (other than any sign-on grants) for the 2018 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
Component
Delivery
Composition
Total Fixed
Remuneration (TFR)
Short Term Incentive (STI)
Long Term Incentive (LTI)
Delivered in cash
Delivered in equity
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.
Rights with a 3 year vesting period
and one year holding lock.
Outcomes based on ROCE,
comparative cost position and
relative TSR.
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.
Subject to clawback and overarching
Board discretion.
Designed to:
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.
• 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 provided in respect of the 2018 financial year are delivered over a
four year period.
FY18
FY19
FY20
FY21
FY22
Salary
Paid throughout year
Performance Period
(12 months)
Awarded as Rights
STI
LTI
50% cash
25% deferred shares
25% deferred shares
Deferral
Deferral
Paid Oct 2018
Vest Oct 2019
Vest Oct 2020
Performance Period
(3 years)
Vests as shares
Unlocked
Holding lock
Nov 2017
Nov 2020
Nov 2021
REMUNERATION REPORTDIRECTORS' REPORT REMUNERATION REPORT
77
Newcrest’s mix of remuneration components, expressed as a percentage of “maximum” earning opportunity, for current Executives for the 2018
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
37.5%
27.8%
26.7%
22.2%
20.0%
22.2%
20.0%
27.8%
33.3%
20.8%
20.8%
20.8%
CEO
CFO & CDO
Other
Executives(1)
LTI
STI (Deferred)
STI (Cash)
TFR
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 2018 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. No Executive received an increase in TFR as part of the 2017 annual review.
A review of Executives’ TFR against market data is currently underway.
4.4. Short Term Incentive
4.4.1. Key features of the STI Plan for the 2018 financial year
Feature
Participation
Opportunity
Description
All Executives and employees from Supervisor level and above are invited to participate in the STI Plan.
For “at target” performance, the CEO has the opportunity to receive 100% of TFR; the CFO and CDO have the
opportunity to receive 80% of TFR; and the other Executives have the opportunity to receive 60% of TFR.
Each Executive has the opportunity to receive double the “at target” percentage for exceptional performance
(‘maximum’ STI opportunity).
Performance Period
The assessment period is the financial year preceding the payment date of the STI (i.e. 1 July 2017 –
30 June 2018).
Remuneration Mix as a Percentage of Maximum FY2018NEWCREST 2018 ANNUAL REPORT 78
4. OUR EXECUTIVE REMUNERATION FRAMEWORK (continued)
4.4. Short Term Incentive (continued)
Feature
Description
Performance Conditions
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 specific
personal measures applicable to each KMP may change from year to year to reflect business priorities. The
relative weightings of these categories may also change from year to year to best reflect each Executive’s
priorities. The annual budget generally forms the basis for the “target” performance set by the Board.
The diagram below illustrates the indicative weighting of the performance conditions, using the CEO’s FY2018
personal conditions as an example.
People, Safety &
Sustainability
25%
Operating
Performance
25%
Value & Cash
Generation
25%
Profitable Growth
25%
Personal
measures
40%
Business
measures
60%
Safety
25%
Earnings
25%
Costs
25%
Free Cash Flow
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.
The Committee has determined that for the 2019 financial year, the CEO’s personal STI measures be weighted
as follows to reflect the five pillars that underpin the Company’s strategy to 2020:
• Safety and sustainability – 15%
• People – 15%
• Operating Performance – 35%
• Technology and Innovation – 10%
• Profitable Growth – 25%
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.
For Executives, the STI for the 2018 financial year is delivered 50% in cash and 50% in deferred shares in
October 2018, following finalisation of the audited annual Company results and the approval of all personal
outcomes. Of the deferred component, half of the deferred shares is to be released after 12 months (in
October 2019) and the remainder after two years (in October 2020). 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.
Except at the discretion of the Board:
•
if a participant resigns or is dismissed during the Performance Period, the participant may not be eligible
to receive an STI award for that financial year; and
if a participant ceases employment for any other reason during the Performance Period, the STI award will
be reduced on a pro rata basis, but will remain payable in the ordinary course.
Except at the discretion of the Board:
•
if a participant resigns or is dismissed while the deferred shares are subject to restrictions, the deferred
shares will be forfeited; and
if the participant ceases employment for any other reason while the deferred shares are subject to
restrictions, the participant will be entitled to retain their deferred shares and the shares will remain on
foot for the balance of the restriction period and then be released.
•
•
Calculation of STI Award
to Executives
Payment, Delivery
and Deferral
Cessation of Employment
Clawback
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 STI outcome. This is an important measure to ensure
any STI award is appropriate in the circumstances.
REMUNERATION REPORTDIRECTORS' REPORT REMUNERATION REPORT
79
4.4.2. STI performance conditions in detail
Business measures for the 2018 financial year
Business Measure
Safety
Total Recordable Injury Frequency
Rate (TRIFR(1)) (8.3%)
Significant Potential Incident (SPI)(2)
Action Close Out on Time (8.3%)
Critical Control Management
Verifications(3) (CCM) (8.3%)
Earnings
Adjusted Net Profit/(Loss) After Tax
and Before Significant Items
Costs
AISC per ounce(4)
Free Cash Flow
(FCF)
Weighting
Reason the Performance Measure Was Adopted
25%
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, drive critical actions and ensure effective controls are in
place to prevent future potential fatalities and/or serious injuries.
25%
25%
25%
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) SPI Action 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.
(3) 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.
(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 2018 financial year
For the 2018 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, people and sustainability performance of the Company, its operating
performance, value and cash generation, and profitable growth.
The personal performance measures for other Executives for the 2018 financial year focussed on their areas of responsibility which, in the case of
the operational Executives, included safety, people, 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.
NEWCREST 2018 ANNUAL REPORT 80
4. OUR EXECUTIVE REMUNERATION FRAMEWORK (continued)
4.5. Long Term Incentive
4.5.1. Key features of the 2017 LTI Plan (under which Rights were issued during the 2018 financial year)
Feature
Equity type
Maximum LTI Opportunity
Grant Date
LTI Grant 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 CEO opportunity is 180% of TFR, the opportunity for the CFO and CDO is 100% of TFR, and the
opportunity for the other Executives is 80% of TFR. Section 4.2 indicates the value of the grants expressed as a
percentage of the total remuneration package.
The grant date was 21 November 2017 and Rights under the plan will vest, subject to the satisfaction of
the performance conditions, on 21 November 2020. The total number of Rights held by each Executive is
summarised in section 9.4.
For allocation purposes, the value of each Right is calculated based on the value of the underlying security, using
the five day volume weighted average price (VWAP) of Newcrest’s share price immediately preceding the grant
date (A$23.48).
Performance period
The assessment period is the three financial years commencing on 1 July 2017.
Performance Conditions
Rights issued under the 2017 LTI Plan are subject to the Performance Conditions shown below:
Comparative
cost position
33%
Relative total
shareholder
return
33%
ROCE
33%
Vesting
Holding lock
Dividends
Clawback
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 relation 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 satisfy the vesting obligations by the issue of new shares, transfer of existing shares purchased
on-market or by paying a cash equivalent amount. The practice in recent years has generally been to satisfy by
shares purchased 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 in respect of shares held
under the holding lock.
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, a pro rata number of 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).
REMUNERATION REPORTDIRECTORS' REPORT REMUNERATION REPORT
81
Change of control
Retesting
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.
Overriding Board discretion
The Board retains overriding discretion to adjust the final LTI outcome. This is an important measure to ensure
any LTI award is appropriate in the circumstances.
4.5.2. 2017 LTI performance conditions in detail
2017 LTI Performance Conditions
Component
Assessment
Reason the Performance Measure Was Adopted
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 2017 until 30 June 2020.
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.
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 per ounce result is a sound basis for
the Company to use in assessing comparative
cost as it is based on publicly disclosed results.
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.
Comparative Cost Position
The Company’s measure for the Comparative
Cost Position performance condition is the
AISC per ounce, adopted by the Company in
relation to costs reporting.
The AISC per ounce incorporates costs
related to sustaining production.
Performance over the three year performance
period, is compared against other entities
based on data sourced from an independent
provider selected by the Board. The entities
that are included in the independent provider’s
database can change from year to year (such
as where additional companies begin to
report AISC, or where there are mergers and
demergers). 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.
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.
NEWCREST 2018 ANNUAL REPORT 82
4. OUR EXECUTIVE REMUNERATION FRAMEWORK (continued)
4.5. Long Term Incentive (continued)
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 gold companies.
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 2017 – 30 June 2017) and the
end (1 January 2020 – 30 June 2020) 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;
• 50% vests if Relative TSR is equal to
the Index;
• 100% vests if Relative TSR exceeds the
Index by 18 percentage points or more.
Straight line vesting occurs between these
thresholds.
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.
• Rather than hand-pick a selection of peer
gold 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. Outlook for 2018 LTI Performance Conditions (2019 financial year)
For grants made during the 2019 financial year, the LTI Performance Conditions will be structurally identical to those which apply to the
2017 LTI Plan.
4.6. Sign-on grants
No sign-on rights were issued during the 2018 financial year. However, the following sign-on arrangements detailed in the 2017 Remuneration
Report continued to apply.
Name
Grant Date
Original grant
Michael Nossal
27 April 2015
Ian Kemish
6 June 2016
116,730 rights
plus A$225,000
(US$174,000)
cash
18,993 rights
plus A$80,000
(US$62,000)
cash
Vested in
FY2018
58,365 rights
vested on 17
August 2017
A$80,000
(US$62,000)
cash in July 2017
Craig Jones
31 January 2017 15,845 rights
Nil
Yet to vest
Nil
9,740 rights due to vest on
24 November 2018 (or as soon as
possible afterwards in accordance
with the Securities Dealing Policy)
4,870 rights expected to vest on
28 August 2018 (or as soon as
possible afterwards in accordance
with the Securities Dealing Policy)
15,845 rights expected to vest
on 28 August 2018 (or as soon as
possible afterwards in accordance
with the Securities Dealing Policy)
Conditions to vesting
No performance
conditions except
continuing employment
(other than in limited
circumstances).
Subject to adequate
performance and
continuing employment
(other than in limited
circumstances).
Subject to meeting
performance
objectives, overall
adequate performance
and continuing
employment (other
than in limited
circumstances).
The above sign-on payments and grants of rights are detailed in section 9 of this report. The minimum value of sign-on payments that have not
yet been made or are unvested is nil, if the performance / service conditions are not met. All sign-on rights were granted at no cost and have a nil
exercise price.
REMUNERATION REPORTDIRECTORS' REPORT REMUNERATION REPORT
83
5. REMUNERATION OUTCOMES
5.1. Total Fixed Remuneration (TFR) for the 2018 financial year
Set out below is the TFR for the current Executives as at 30 June 2018, shown in Australian dollars. TFR comprises base salary and
superannuation contributions. This information is provided to enable comparisons to be made in future years, without the impact of changes
in exchange rates.
Name
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
TFR A$
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 2018 financial year and Newcrest’s Financial Performance
Newcrest’s key operational and financial outcomes for the 12 months ended 30 June 2018 are as follows:
• Statutory profit of $202 million and Underlying profit of $459 million
• All-In Sustaining Cost of $835 per ounce
• EBITDA margin of 43.9%
• All-In Sustaining Cost margin of $473 per ounce
• Cash flow from operating activities of $1,434 million
• Free cash flow of $601 million
• Gold production of 2.346 million ounces
• Copper production of 78.0 thousand tonnes
• Net debt of $1.0 billion and a gearing ratio of 12.2% as at 30 June 2018
• Net debt to EBITDA of 0.7 times
•
Interim dividend paid of US 7.5 cents per share (fully franked) and final dividend determined of US 11 cents per share (fully franked).
The following table provides a summary of the key financial results for Newcrest over the past five financial years.
Five Year Summary of Newcrest’s Financial Performance
Year Ended 30 June
Statutory profit/(loss)
Underlying profit(1)
Cash flows from operating activities
Free cash flow(2)
All-in sustaining cost(3)
EBITDA Margin
EBIT Margin
Gearing(4)
Net Debt to EBITDA(5)
ROCE
Share price at 30 June(6)
Earnings/(loss) per share(7)
Basic
Underlying
Dividends(8)
Gold produced
Average realised gold price
Measure
US$ 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
2018
202
459
1,434
601
835
43.9
21.7
12.2
0.7
8.8
21.80
26.3
59.8
18.5
2,346
1,308
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
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 cash flow 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 2013 was A$9.87.
(7) Basic EPS is calculated as net profit after tax and non-controlling interests (statutory profit) divided by the weighted average number of ordinary shares. Underlying
earnings per share is calculated as net profit after tax and non-controlling interests and before significant items (underlying profit) divided by the weighted average
number of ordinary shares.
(8) Represents dividends determined in respect of the financial year.
NEWCREST 2018 ANNUAL REPORT
84
5. REMUNERATION OUTCOMES (continued)
5.2. Relationship between STI and LTI outcomes for the 2018 financial year and Newcrest’s Financial Performance (continued)
The graphs below show Newcrest’s performance over the last five years for metrics used to determine the business component of STI awards,
before any adjustments as a result of the exercise of Board discretion.
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
300,000
250,000
200,000
150,000
100,000
50,000
0
US$m
1,000
800
600
400
200
0
100
100
2,028
98
97
3.7 3.6
3.1
94
1,945
%
100
98
96
94
92
90
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
8
1
0
2
7
1
0
2
US$m
500
0
(500)
(1,000)
(1,500)
(2,000)
(2,500)
US$m
308
332 376
202
459
394
424
393
323
(2,105)
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
US$ per oz sold
897
835
787
762 780
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
(1) The measure for 2014 was different to the current measure, as it comprised only Safety Action Close Out.
REMUNERATION REPORTTRIFRSPI Action Close Out on Time(1)3.32.43.73.63.11,9001,9201,9401,9601,9802,0002,0202,040Systems VerificationsFree Cashflow20182017201620152014ASIC73960181485413602004006008001,000Field Critical Control Checks20182017Statutory Profit/(Loss)176,254252,4773.73.63.10100200300400500Underlying ProfitDIRECTORS' REPORT
50
75
100
125
150
175
200
REMUNERATION REPORT
85
5.3. STI Outcomes for 2018 financial year
5.3.1. Performance against STI Objectives
Element
Weight Performance(1)
Description
threshold
target
maximum
Business Measures
60%
Safety (1) – TRIFR
Safety (2) – SPI action
close out on time
Safety (3) – Critical
Controls Management
Verifications
5%
5%
5%
Earnings – NPAT before
significant items (US$m)
Cost – AISC/oz (US$)
15%
15%
Cash flow: FCF (US$m)
15%
Total Business outcome
Personal Measures
(Sandeep Biswas – CEO)
People, Safety and
Sustainability
40%
10%
Operating Performance
10%
Value & Cash Generation
10%
Profitable Growth
10%
Personal Measures
(Gerard Bond – CFO)
People, Safety and
Sustainability
40%
6%
Operating Performance
12%
Value & Cash Generation
10%
12%
40%
Profitable Growth
Personal Measures
(other Executives)
Individual measures based
on initiatives and key
project deliverables linked
to company strategy and
performance
• TRIFR of 2.4 was lower than the level
required to achieve the maximum
• 99.7% were completed on time
• 2,028 System Verifications and 252,477
Field Critical Control Checks were
completed during the year
• Outcome of $282m, inclusive of
adjustments(1), was slightly below target
• Outcome of $897/oz, inclusive of
adjustments(1)(2), (which reduced the
outcome) was below the threshold
• Outcome of $646m, inclusive of
adjustments(1), (which improved the
outcome) was at maximum
• The total business outcome was 123%
• Significant improvement in TRIFR
• Excellent close out of SPI actions and
widespread embedding of verifications of
critical controls
Improvements in Organisational Health
•
• Delivery of improved milling rates at Lihir
and Cadia, notwithstanding interruption in
production at Cadia caused by the NTSF
embankment slump
• Exceeded stretch target for FCF and
delivery of efficiency initiatives
• Progress on major projects/studies and
technologies and growth in exploration and
project pipeline
• Support of CCM through development of
digital interfaces, reporting and mobility
solutions
Improvements in Organisational Health
•
• Delivery of quality communication systems
and facilities
• Development and delivery of digital
strategy and strategy to re-energise and
focus Edge
Improvement in investor relations
•
• Exceeded stretch target for FCF and
delivery of efficiency initiatives
• Optimisation of cost base and delivery of
central services
• Outcomes against individual measures
for the remaining Executives ranged from
below the minimum threshold to exceeding
the maximum
(1) Adjustments made to business 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 items determined by the Board which are considered to be outside the control of Management. In relation to the 2018 financial year the
adjustments for non-controllable items include events such as the reversal of insurance proceeds that relate to costs and business interruption in the 2017 financial
year. The cash flow measure was also adjusted for the acquisition and divestment activities.
(2) The reported AISC cost was normalised by US$11/oz for the Cadia Seismic event. Refer to section 6.3 of the Operating and Financial Review for further details.
NEWCREST 2018 ANNUAL REPORT
86
5. REMUNERATION OUTCOMES (continued)
5.3. STI Outcomes for 2018 financial year (continued)
A reconciliation of the Earnings measure outcome to statutory profit is detailed below:
Statutory profit
Add back: Significant items after tax(1)
Underlying profit
Adjust: Board agreed adjustments(2)
Earnings measure
2018
US$m
202
257
459
(177)
282
2017
US$m
308
86
394
59
453
(1) Refer to section 2.7 of the Operating and Financial Review for details of significant items.
(2) Represents adjustments for the effect of commodity prices, foreign exchange rates and other significant items determined by the Board which are considered to be
outside the control of Management. In relation to the 2018 financial year, the adjustment for non-controllable items includes events such as the reversal of insurance
proceeds that relate to costs and business interruption in the 2017 financial year.
5.3.2. STI Outcomes for all Executives for the 2018 financial year
The table below summarises performance against Personal Measures and final STI outcomes for all Executives for the 2018 financial year.
Executive
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
% of STI
Target
Awarded(1)
Actual STI
Awarded(2)
US$’000
STI Amount
Deferred(2)
US$’000
% of Max STI
Opportunity
Forgone
132.2
127.8
109.8
127.8
117.8
121.8
119.8
123.8
125.0
2,358
773
337
550
425
397
390
749
451
1,179
386
169
275
212
198
195
374
225
33.9
36.1
45.1
36.1
41.1
39.1
40.1
38.1
37.5
(1) The assessment against personal measures for the Executives ranged from 90% to 146%.
(2) Amounts have been translated from Australian dollars to US dollars using an average exchange rate of 0.7754.
5.4. Vesting Outcomes for 2014 LTI Plan
Following the completion of the performance period from 1 July 2014 to 30 June 2017, the 2014 LTI Plan vested on 7 November 2017 at
65.6% of maximum based on the assessment of performance against the applicable measures.
Element
Comparative Cost
ROCE
Strategic Performance
Reserves and Resources
Depletion Replacement
Diversity
Organisational Health
Growth
TOTAL VESTING
Weighting
33.3%
33.3%
33.3%
Performance Achieved
16th percentile
(3 year average)
7.85%(1)
(3 year average)
Less than the minimum
(3 year average)
Women in Level 2 to 4 roles – 17.9%
% increase in women accessing accelerated
development programs – 28.6%
% women selected for graduate program – 50%
67th percentile in 2017 survey
90% of maximum
Percentage of Total LTI
Award Vesting
30.7%
10.9%
24.0%
0.0%
6.7%
11.3%
6%
65.6%
(34.4% lapsed)
(1) The 3-year ROCE average includes adjustments to FY2017 consistent with adjustments that applied for FY2017 STI purposes. As disclosed in 2017, this reflected
adjustments for non-controllable items such as the 2017 Cadia seismic event.
5.5. Estimated Vesting of LTI Rights in the 2019 financial year (2015 LTI Plan)
The 2015 LTI Plan is expected to vest on or about 5 November 2018. The vesting outcome is not yet known but it is anticipated that it will be
in the range of 55% to 65%. The performance conditions which apply to the 2015 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 2016 Remuneration Report.
REMUNERATION REPORTDIRECTORS' REPORT
REMUNERATION REPORT
87
6. EXECUTIVE SERVICE AGREEMENTS AND TERMINATION ARRANGEMENTS
Remuneration and other terms of employment for the Executives are formalised in Executive Service Agreements (ESAs). 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 2018 financial year is detailed in sections 2.2 and 9.1, and positions held are detailed in section 1.
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$2,093,580
using the average exchange rate of 0.7754 for the 2018 financial year).
7.3. Fee Structure
In reviewing the level of fees, the Board obtained independent market data from its remuneration adviser, KPMG, in relation to ASX listed
companies with market capitalisations ranked between 11–40. No change was made to base Board fees. However, as the majority of Committee
fees had fallen below the median, a 10% increase in Committee fees was approved, with effect from the commencement of the 2019 financial
year (equating to an increase for each NED, other than the Chairman who does not receive Committee fees, in the range of 0.9% to 2.6%, based
on the aggregate of Board and Committee fees received by the NED). This was the first increase in NED fees since 1 January 2011. The aggregate
fees immediately following the increases are 30.1% below the aggregate fee pool approved by shareholders.
The table below outlines the main Board and Committee fees as at 30 June 2018, prior to the 10% increase in Committee fees taking effect.
Board Fees
Committee Fees
Chairperson(2)
Non-Executive Directors
Audit & Risk Committee
Chairperson
Members
Safety & Sustainability Committee
Chairperson
Members
HRR Committee
Chairperson
Members
Per Annum
A$’000
Per Annum
US$’000(1)
600
200
50
25
40
20
40
20
465
155
39
19
31
16
31
16
(1) Board and Committee fees have been translated from Australian dollars to US dollars using an average exchange rate of 0.7754 for the 2018 financial year.
(2) The Chairperson of the Board does not receive any additional payments for his role as Chair or Member of any Committee.
Under the Company’s Constitution, NEDs may be reimbursed for reasonable travel, accommodation and other expenses incurred while engaged
on the business of the Company. NEDs may also be remunerated for additional services, for example, if they undertake specialist or consulting
work on behalf of the Company outside the scope of their normal Director’s duties. No fees for additional services were paid to NEDs for the
current or prior financial year.
NEWCREST 2018 ANNUAL REPORT 88
8. SHAREHOLDINGS
8.1. Minimum Shareholding Policy
The Company’s Minimum Shareholding Requirement Policy requires that:
CEO
Executives
NEDs
Minimum requirement
100% of TFR in shares
50% of TFR in shares
One year’s total annual fees in shares
Deadline
(from the later of appointment or 1 July 2015)
5 years
5 years
3 years
8.2. Executive Shareholdings
A summary of current shareholdings of Executives, including their closely related parties, as at 30 June 2018 are set out below.
Executive
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Opening
balance(1)
Granted as
remuneration(2)
Acquired on
exercise of
Rights(3)
Net other
movements(4)
269,345
82,149
5,000
12,998
40,912
–
12,948
52,368
10,844
73,066
24,274
4,600
15,036
14,350
11,908
11,530
22,836
11,916
255,885
68,124
–
13,361
57,147
–
41,564
58,365
12,237
(43,636)
(5,588)
–
(4,483)
–
–
–
(28,365)
–
Closing
balance
554,660
168,959
9,600
36,912
112,409
11,908
66,042
105,204
34,997
Value as at
30 June 2018(5)
A$’000
12,092
3,683
209
805
2,451
260
1,440
2,293
763
Percentage of
TFR
%
526
378
32
87
316
37
206
235
98
(1) Opening balance is as at 1 July 2017 for all Executives.
(2) Remuneration granted in FY2018 includes shares allocated in respect of the deferral of 50% of an Executive’s STI award for the 2017 STI Plan. The number of shares
granted was determined by using the 5 day VWAP of A$21.6884, calculated over the period 5 to 11 October 2017, being the five trading days prior to the date the cash
STI payment was made (12 October 2017). Vesting of deferred shares remains subject to service.
(3) Shares acquired on exercise of rights represents the shares acquired on vesting and automatic exercise of Rights under the 2014 LTI Plan. The amount included for
Michael Nossal includes the vesting of sign-on rights as detailed in section 4.6.
(4) Net other movements represents the sale or purchase of shares by Executives.
(5) Based on closing share price as at 29 June 2018 of A$21.80.
8.3. Non-Executive Directors’ Shareholdings
A summary of current shareholdings of NEDs, including their closely related parties, as at 30 June 2018 are set out below.
Non-Executive Directors
Peter Hay
Philip Aiken
Roger Higgins
Rick Lee
Xiaoling Liu
Vickki McFadden
Former Non-Executive Directors
Winifred Kamit
John Spark
Opening
balance(1)
Net other
Movements
Closing
balance(2)
52,451
17,924
12,294
28,447
10,000
10,000
326
32,192
1,496
163
59
–
3000
–
1,310
44
53,947
18,087
12,353
28,447
13,000
10,000
1,636
32,236
Value as at
30 June 2018(3)
A$’000
1,176
394
269
620
283
218
N/A
N/A
Percentage
of ongoing
annual fees
%
196
151
122
234
116
86
N/A
N/A
(1) Opening balance is as at 1 July 2017.
(2) For current Non-Executive Directors, the closing balance is as at 30 June 2018. For former Non-Executive Directors, the closing balance is as at the date of their departure.
(3) Based on closing share price as at 29 June 2018 of A$21.80.
8.4. Securities Dealing Policy
The Company has a Securities Dealing Policy which prohibits the use by Directors, Executives and employees of hedging and derivatives
such as caps, collars, warrants or similar products in relation to Newcrest securities, including shares acquired under the Company’s equity
incentive schemes, whether or not they are vested. The Policy also prohibits entry into transactions in associated products that operate to limit
the economic risk of their security or interest holdings in the Company. Employees are not permitted to enter into margin loans in relation to
Newcrest securities at any time without prior approval from the Chairman or Company Secretary. It is available on the Company’s website at:
www.newcrest.com.au/about-us/corporate-governance.
REMUNERATION REPORTDIRECTORS' REPORT REMUNERATION REPORT
89
9. STATUTORY TABLES
9.1. Executive Remuneration
Short Term
Short
Term
Incentive
(B)
Other
Cash
Benefits
(C)
Salary
(A)
Long Term
Post-
Employment
Share-Based Payments
Other
Benefits
(D)
Super-
annuation
(F)
Leave
(E)
LTI
Rights
(G)
STI
Deferral
(H)
Other
(I)
Total
Perfor-
mance
related
(J)
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
%
1,768
740
496
702
585
527
528
740
1,179
386
169
275
212
198
195
374
45
–
–
4
–
25
–
–
49
11
9
1
9
29
7
8
585
225
6,671
3,213
60
134
67
190
1,720
710
203
341
568
513
513
720
1,195
397
75
142
235
195
189
374
27
–
–
8
–
86
–
11
41
10
2
1
9
27
7
8
522
195
5,810
2,997
40
172
49
154
20
6
11
(6)
7
9
14
25
7
93
19
(12)
16
24
(16)
12
(9)
22
11
67
16
16
16
16
16
16
16
16
16
144
15
15
7
7
15
15
15
15
15
119
2,146
555
202
252
415
222
325
571
1,191
379
92
202
225
150
190
360
–
–
–
–
155
80
–
–
6,414
2,093
995
1,446
1,624
1,256
1,275
2,094
70.4
63.1
46.5
50.4
52.5
45.4
55.7
62.3
325
196
–
1,481
50.4
5,013
2,985
235
18,678
2,503
685
90
96
561
103
403
322
1,124
289
28
92
183
73
147
271
–
–
–
–
75
106
–
283
6,644
2,094
421
711
1,630
1,130
1,265
2,026
72.6
65.5
45.8
46.4
60.1
32.8
58.4
47.7
232
137
–
1,201
47.0
4,995
2,344
464
17,122
Executives
2018
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip
Stephenson
Total
2017
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip
Stephenson
Total(1)
(1) Total Executive remuneration for the 2017 financial year excludes Executives who ceased being an Executive in the 2017 financial year.
Total remuneration for these Executives in 2017 was US$63,000.
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 0.7754 (2017: 0.7541).
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.
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.
(B) Short Term Incentive refers to cash amounts earned under the STI Plan which are paid in the following financial year.
(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 over unissued shares, granted under the LTI Plan. This is calculated in accordance with Australian Accounting Standard AASB 2 Share
Based Payments. The Rights have been valued using a combination of the Monte Carlo simulation and Black-Scholes models. Valuations are as at the Grant Date and, for
the portion of the awards that are not subject to market based hurdles such as TSR, are adjusted for the probability of hurdles being achieved. The amounts disclosed
have been determined by allocating the value of the Rights evenly over the period from grant date to vesting date and, as a result, the table includes Rights that were
granted in prior years.
(H) 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. As a result the table includes the accounting expense of deferrals from STI awarded in prior years.
(I) 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.
(J) Represents performance related remuneration as a percentage of total remuneration. Performance related remuneration comprises Short Term Incentive, LTI Rights
and STI Deferral.
NEWCREST 2018 ANNUAL REPORT
90
9. STATUTORY TABLES (continued)
9.2. Executives – Changes in Rights Holdings during the 2018 financial year
Executives
Current
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Opening
balance(1)
Granted
under 2017
LTI Plan
Rights
Lapsed/
Forfeited(2)
Vested
and/or
Exercised(3)
Closing
balance(4)
Closing
balance
non-vested(5)
814,745
219,340
21,134
84,377
197,803
38,697
132,342
178,383
82,664
176,283
41,516
22,483
31,510
26,400
23,845
23,862
41,516
26,400
(134,184)
(35,724)
–
(7,007)
(29,968)
–
(21,796)
–
(6,418)
(255,885)
(68,124)
–
(13,361)
(57,147)
–
(41,564)
(58,365)
(12,237)
600,959
157,008
43,617
95,519
137,088
62,542
92,844
161,534
90,409
600,959
157,008
43,617
95,519
137,088
62,542
92,844
161,534
90,409
(1) The opening balance is assessed on 1 July 2017.
(2) Rights which lapsed or were forfeited for Sandeep Biswas, Gerard Bond, Craig Jones, Craig Jetson, Phil Stephenson and Francesca Lee were granted in the 2015
financial year.
(3) Rights that vested for Sandeep Biswas, Gerard Bond, Craig Jones, Craig Jetson, Phil Stephenson, Francesca Lee and Michael Nossal were granted in the 2015 financial
year. For Michael Nossal 58,365 rights vested in relation to the sign-on incentives granted to him as detailed in section 4.6.
(4) The closing balance is assessed on 30 June 2018.
(5) 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.
9.3. Executives – Total Value of Rights Granted and Exercised during the 2018 financial year
Executives
Sandeep Biswas
Gerard Bond
Melanie Allibon
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Philip Stephenson
Accounting
Fair Value
of Rights
Granted
(A)
US$’000
2,692
634
343
481
403
364
364
634
403
Value of
Rights
Exercised
(B)
US$’000
4,522
1,204
–
236
1,010
–
735
1,001
216
The following assumptions have been applied to this table:
(A) The accounting value of the Rights granted under the 2017 LTI Plan reflects the fair value of a Right on the Grant Date, being US$15.27 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.
(B) The Rights which were exercised were granted in relation to the 2014 LTI Rights Plan and for Michael Nossal the sign-on rights were granted in the 2016 financial
year. 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 2018 (nil exercise price).
REMUNERATION REPORTDIRECTORS' REPORT REMUNERATION REPORT
91
9.4. Executives – Source of Rights Holdings at 30 June 2018
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
FY2017
FY2016
FY2016
FY2017
FY2018
Balance at
30 June 2018
Other
Other
31 Jan 17
16 May 16
A$18.93
A$20.54
FY2018
–
–
–
–
15,845
–
–
–
–
FY2018 to
FY2019
–
–
–
–
14,610
–
–
–
2015 LTI
5 Nov 15
A$12.49
FY2019
276,285
73,555
–
41,643
61,703
–
44,878
78,081
41,643
2016 LTI
2017 LTI
15 Nov 16
21 Nov 17
A$23.25
A$23.48
FY2020
148,391
41,937
21,134
22,366
33,140
24,087
24,104
41,937
22,366
FY2021
176,283
41,516
22,483
31,510
26,400
23,845
23,862
41,516
26,400
600,959
157,008
43,617
95,519
137,088
62,542
92,844
161,534
90,409
(1) Five day VWAP of Newcrest’s share price is used to determine the number of Rights offered.
(2) Craig Jetson’s 2015 and 2016 Rights were issued whilst he was in his previous role as GM – Lihir Operations.
(3) 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
(4)
(US$217,050) divided by the VWAP of Newcrest’s share price over the 5 trading days immediately prior to his appointment to his current role of EGM – Wafi-Golpu, on
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.
(5) 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$1,092,750) divided by the VWAP of Newcrest’s share price over the 5 trading days immediately prior to his commencement date of 6 July 2015. His first tranche
of 58,365 rights vested during FY17 and his second tranche of 58,365 rights vested in August 2017. All sign-on rights have now vested.
NEWCREST 2018 ANNUAL REPORT 92
9. STATUTORY TABLES (continued)
9.5. Non-Executive Directors Remuneration
Non-Executive Directors
Peter Hay
Philip Aiken AM
Roger Higgins
Rick Lee AM
Xiaoling Liu
Vickki McFadden
Former Non-Executive Directors
Lady Winifred Kamit (4)
John Spark (4)
Total
Total (1)
Short Term
Board
Fees
US$’000
Committee
Fees
US$’000
Post
Employment
Super-
annuation(2)
US$’000
Total(3)
US$’000
450
438
150
146
140
136
140
136
140
136
140
102
52
136
52
136
–
–
47
45
16
15
50
49
35
40
41
14
12
30
15
38
16
15
6
5
15
15
16
15
16
15
16
11
6
15
6
15
466
453
203
196
171
166
206
200
191
191
197
127
70
181
73
189
1,264
1,366
216
231
97
106
1,577
1,703
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
(1) Total Non-Executive Director (NED) remuneration for the 2018 financial year excludes NEDs who ceased being a NED in the 2018 financial year. Total remuneration for
these NEDs in 2017 was US$22,000.
(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 0.7754 (2017: 0.7541).
(4) Lady Winifred Kamit and John Spark retired from the Board on 14 November 2017.
9.6. Other Transactions with KMP
There were no loans, guaranteed or secured, directly or indirectly, by the Company and any of its subsidiaries made to KMP or their related
parties during the year. There were no other transactions between the Company or any of its subsidiaries and any KMP or their related parties
during the year.
REMUNERATION REPORTDIRECTORS' REPORT AUDITOR'S INDEPENDENCE
DECLARATION
93
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 2018, 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
Trent van Veen
Partner
22 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
NEWCREST 2018 ANNUAL REPORT
94
FINANCIAL REPORT
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2018
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Introduction
1
2
3
Corporate Information
Basis of Preparation
Critical Accounting Judgements, Estimates and
Assumptions
Performance
4
5
6
7
8
9
10
Segment Information
Income and Expenses
Significant Items
Income Tax Expense
Earnings per Share (EPS)
Dividends
Note to the Consolidated Statement of Cash Flows
Resource Assets and Liabilities
11
12
13
14
15
16
17
18
Property, Plant and Equipment
Impairment of Non-Financial Assets
Inventories
Trade and Other Receivables
Other Assets
Other Intangible Assets
Deferred Tax
Provisions
95
96
97
98
99
100
143
144
100
100
100
101
101
101
104
106
107
107
108
108
109
109
111
114
114
115
115
115
116
Capital Structure and Financial Risk Management
19
20
21
22
23
24
Capital Management and Financial Objectives
Net Debt
Other Financial Assets and Liabilities
Financial Risk Management
Issued Capital
Reserves
Group Structure
25
26
27
28
29
30
Controlled Entities
Parent Entity Information
Deed of Cross Guarantee
Interest in Joint Operations
Investment in Associates
Business Divestment
Other
31
32
33
34
35
36
37
Commitments
Events Subsequent to Reporting Date
Contingencies
Share-Based Payments
Key Management Personnel
Auditors’ Remuneration
New Accounting Standards and Interpretations
118
118
119
120
121
127
128
129
129
130
131
133
134
135
137
137
137
137
138
140
140
141
RUNNING HEAD CONSOLIDATED
FINANCIAL STATEMENTS
95
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2018
Sales revenue
Cost of sales
Gross profit
Exploration expenses
Corporate administration expenses
Other income/(expenses)
Share of profit/(loss) of associates
Impairment loss on property, plant and equipment
Impairment loss on investment in associate
Write-down of property, plant and equipment
Loss on business divestment
Net investment hedge gain/(loss)
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)
29
6,12
6
6
6
6
5(e)
7(a)
8
8
2018
US$m
3,562
(2,749)
813
(60)
(104)
130
(5)
(269)
(6)
(87)
–
29
441
8
(122)
327
(118)
209
7
202
209
26.3
26.2
2017
US$m
3,477
(2,609)
868
(53)
(84)
(12)
–
–
–
(15)
(10)
(79)
615
2
(134)
483
(164)
319
11
308
319
40.2
40.0
NEWCREST 2018 ANNUAL REPORT
96
CONSOLIDATED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Profit after income tax
Other comprehensive income/(loss)
Items that may be reclassified subsequently to the Income Statement
Cash flow hedges
Cash flow hedge (gains)/losses transferred to the Income Statement
Cash flow hedge gains/(losses) deferred in equity
Income tax expense
Investments
Share of other comprehensive income/(loss) of associates
Foreign currency translation
Exchange gains/(losses) on translation of foreign operations, net of hedges of
foreign investments
Net investment hedge (gain)/loss transferred to the Income Statement on
business divestment, net of tax
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Non-controlling interests
Owners of the parent
The above Statement should be read in conjunction with the accompanying notes.
Note
22(a)
29
6
2018
US$m
209
2017
US$m
319
(35)
44
(3)
6
(1)
(1)
(130)
(29)
(159)
(154)
55
7
48
55
(23)
85
(19)
43
–
–
110
62
172
215
534
11
523
534
FINANCIAL REPORT
CONSOLIDATED
FINANCIAL STATEMENTS
97
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Note
2018
US$m
2017
US$m
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax asset
Other assets
Total current assets
Non-current assets
Inventories
Other financial assets
Property, plant and equipment
Other intangible assets
Deferred tax assets
Investment in associates
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Current tax liability
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Equity attributable to owners of the parent
Non-controlling interests
Total equity
The above Statement should be read in conjunction with the accompanying notes.
20
14
13
21
15
13
21
11
16
17
29
15
18
21
20
18
17
21
23
24
953
77
554
33
1
54
492
88
556
31
26
56
1,672
1,249
1,032
35
8,156
42
69
324
150
9,808
11,480
415
137
99
–
651
1,993
362
1,007
5
3,367
4,018
7,462
11,656
(4,067)
(194)
7,395
67
7,462
1,125
10
8,852
35
80
64
168
10,334
11,583
455
147
58
4
664
1,991
307
1,087
–
3,385
4,049
7,534
11,657
(4,154)
(53)
7,450
84
7,534
NEWCREST 2018 ANNUAL REPORT 98
CONSOLIDATED
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Note
2018
US$m
2017
US$m
Cash flows from operating activities
Profit before income tax
Adjustments for:
Depreciation and amortisation
Significant items
Net finance costs
Exploration expenditure written off
Share of loss of associate
Other non-cash items or non-operating items
Change in working capital
Operating cash flows before interest and taxes
Interest received
Interest paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Payments for plant and equipment
Assets under construction, development and feasibility expenditure
Production stripping expenditure
Exploration and evaluation expenditure
Information systems development
Proceeds from sale of property, plant and equipment
Payments for investments in associates
Cash inflow/(outflow) on sale of subsidiary, net of cash held by the subsidiary
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings:
• Bilateral bank debt
Repayment of borrowings:
• Bilateral bank debt
• Private placement notes
• Bank loan
Payment for treasury shares
Dividends paid:
• Members of the parent entity
• Non-controlling interests
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The above Statement should be read in conjunction with the accompanying notes.
327
791
333
114
60
5
3
(27)
1,606
7
(110)
(69)
1,434
(217)
(160)
(150)
(72)
(14)
7
(275)
48
(833)
–
–
–
–
(11)
(105)
(24)
(140)
461
492
953
483
689
104
132
53
–
18
142
1,621
2
(122)
(34)
1,467
(286)
(193)
(90)
(58)
(13)
2
(63)
(27)
(728)
295
(320)
(125)
(20)
(19)
(105)
(6)
(300)
439
53
492
5(f)
6
5(e)
10
29
30
20(e)
20(e)
20(e)
20(e)
23
20
FINANCIAL REPORT
CONSOLIDATED
FINANCIAL STATEMENTS
99
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
2018
Issued
Capital
US$m
Balance at 1 July 2017
11,657
Attributable to Owners of the Parent
FX
Translation
Reserve
Hedge
Reserve
Equity
Settlements
Reserve
Other
Reserves
Accu-
mulated
Losses
US$m
US$m
US$m
US$m
Total
US$m
7,450
202
(4,154)
202
–
(154)
202
48
–
–
(115)
13
(11)
(115)
–
10
Non-
controlling
Interests
US$m
84
7
–
7
–
–
(24)
–
Total
US$m
7,534
209
(154)
55
13
(11)
(139)
10
27
88
–
6
6
–
–
–
–
–
–
–
13
–
–
–
–
–
(1)
(1)
–
–
–
–
US$m
(168)
–
(159)
(159)
–
–
–
–
US$m
(340)
–
172
172
–
–
–
–
–
–
–
–
(11)
–
10
–
–
–
–
(19)
–
10
Profit for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Transactions with
owners in their capacity
as owners
Share-based payments
Shares purchased
Dividends
Shares issued – dividend
reinvestment plan
Balance at
30 June 2018
Profit for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Transactions with
owners in their capacity
as owners
Share-based payments
Shares purchased
Dividends
Shares issued – dividend
reinvestment plan
Balance at
30 June 2017
The above Statement should be read in conjunction with the accompanying notes.
11,656
(327)
33
101
(1)
(4,067)
7,395
67
7,462
2017
Issued
Capital
US$m
Balance at 1 July 2016
11,666
Attributable to Owners of the Parent
FX
Translation
Reserve
Hedge
Reserve
Equity
Settlements
Reserve
Other
Reserves
Accu-
mulated
Losses
US$m
US$m
US$m
US$m
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
(16)
–
43
43
–
–
–
–
78
–
–
–
10
–
–
–
88
–
–
–
–
–
–
–
–
–
The above Statement should be read in conjunction with the accompanying notes.
11,657
(168)
27
(4,154)
7,450
84
7,534
NEWCREST 2018 ANNUAL REPORT 100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018 was authorised for issue in accordance with a resolution
of the Directors on 22 August 2018.
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 metal concentrate receivables, other financial assets and
other financial liabilities 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, except as noted below.
• The Group has changed the presentation of cash flows from
operating activities in the Statement of Cash Flows from the
direct method to the indirect method. The Group believes
the indirect method of presentation provides more relevant
information to users. Comparatives information included
in the Statement of Cash Flows, previously reported using
the direct method, have been reclassified to align to the new
presentation format.
• The Group has adopted the amendment to AASB 107 Statement
of Cash Flows. This amendment requires entities to provide
disclosure of changes in their liabilities arising from financing
activities, including both changes arising from cash flows and non-
cash changes. The Group has provided this disclosure in Note 20(e).
Discussion of the Group’s significant accounting policies are located
within the applicable notes to the financial statements.
(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 25.
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 borrowings (net of cash) 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.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
101
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
US dollar borrowings (net of cash) 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 29 – Investment in associates
• Note 33 – Contingencies
• Note 34 – 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, Côte d’Ivoire (2)
• Exploration and Projects (3)
(1) Newcrest owns 75% of Gosowong through its holding in PT Nusa
Halmahera Minerals.
(2) Bonikro includes mining and near-mine exploration interests in Côte d’Ivoire,
held by LGL Mines CI SA and Newcrest Hire CI SA (of which Newcrest owned
89.89% respectively up to the divestment date). Newcrest divested its
89.89% interest in Bonikro on 28 March 2018. Refer Note 30.
(3) Exploration and Projects mainly comprises projects in the exploration,
evaluation and feasibility phase and includes Wafi-Golpu JV (50% interest)
in PNG, Namosi JV (71.42% interest) in Fiji, 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, assets under
construction, development and feasibility expenditure and information
systems development.
Segment assets exclude intercompany receivables. Segment liabilities
exclude intercompany payables.
NEWCREST 2018 ANNUAL REPORT 102
4. SEGMENT INFORMATION (continued)
(a) Segment Results, Segment Assets and Segment Liabilities (continued)
2018
Cadia(3)
Telfer(4)
Lihir
Gosowong
Bonikro(5)
Total
Operations
Exploration
& Projects(6)
Corporate
& Other(7)
External sales revenue
EBITDA
Depreciation and
amortisation
EBIT (Segment result) (1)
Capital expenditure
Segment assets(2)
Segment liabilities
Net assets
US$m
1,182
816
(161)
655
117
3,315
685
2,630
US$m
686
140
(200)
(60)
98
307
270
37
US$m
1,207
538
(277)
261
245
5,655
1,101
4,554
US$m
US$m
351
148
(90)
58
25
370
114
256
136
69
(49)
20
16
–
–
–
US$m
3,562
1,711
(777)
934
501
9,647
2,170
7,477
US$m
US$m
–
(60)
–
(60)
25
524
9
515
–
(86)
(14)
(100)
15
1,309
1,839
(530)
Total
Group
US$m
3,562
1,565
(791)
774
541
11,480
4,018
7,462
Notes:
(1) Refer to Note 4(b) for the reconciliation of segment result to profit before tax.
(2) Segment assets are net of impairments and write-downs as disclosed in Note 6.
(3) Cadia’s EBITDA and EBIT includes US$34 million of insurance proceeds attributed to material damage and US$121 million of insurance proceeds attributed to business
interruption loss (total of US$155 million) in relation to the 14 April 2017 seismic event. Refer Note 5(b) and 5(d).
(4) The deferred tax asset attributable to Telfer is presented in the Corporate and Other segment as this asset is expected to be primarily realised by other members of the
Australian tax consolidated group. Comparative figures have been restated.
(5) The segment result for Bonikro is for the period to the date of divestment. Refer Note 30.
(6)
(7)
Includes net assets attributable to Wafi-Golpu JV of US$441 million and Namosi JV of US$25 million.
Includes investment in associates and eliminations.
2017
Cadia
Telfer(2)
Lihir Gosowong
Bonikro
Hidden
Valley(3)
Total
Operations
Exploration
& Projects(4)
Corporate
& Other(5)
Total
Group
US$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
631
144
1,181
542
(136)
(138)
(259)
490
168
3,450
687
2,763
6
101
659
233
426
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
10,430
2,171
8,259
–
(53)
–
(53)
23
553
10
543
–
(78)
(18)
(96)
14
3,477
1,408
(689)
719
582
600
1,868
11,583
4,049
(1,268)
7,534
Notes:
(1) Refer to Note 4(b) for the reconciliation of segment result to profit before tax.
(2) The segment assets for Telfer have been restated to exclude the deferred tax asset of US$84 million to align with the current year presentation. This asset is now
presented in the Corporate and Other segment as it will be primarily realised by other members of the Australian tax consolidated group.
(3) The segment result for Hidden Valley is for the period to the date of divestment. Refer Note 30.
(4)
Includes net assets attributable to Wafi-Golpu JV of US$419 million and Namosi JV of US$97 million.
Includes investment in associates and eliminations.
(5)
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT (b) Reconciliation of EBIT (Segment Result) to Profit Before Tax
Segment Result
Finance costs:
Finance income
Finance costs
Significant items:
Impairment loss on property, plant and equipment
Impairment loss on investment in associate
Write-down of property, plant and equipment
Loss on business divestment
Net investment hedge gain/(loss)
Profit before tax
(c) Geographical Information
Sales Revenue from External Customers (1)
Bullion (2)
Australia
China (including Hong Kong)
Canada
United Kingdom
Concentrate (3)
Japan
Singapore
Switzerland
India
United Kingdom
Korea
Philippines
Other
Total sales revenue
Non-Current Assets (4)
Australia
Papua New Guinea
Indonesia
Canada
Côte d’Ivoire
Other
Total non-current assets
NOTES TO THE
FINANCIAL STATEMENTS
103
Note
2018
US$m
2017
US$m
4(a)
774
719
6
6
6
6
6
8
(122)
(114)
(269)
(6)
(87)
–
29
(333)
327
1,615
314
38
–
926
211
192
79
77
61
49
–
2
(134)
(132)
–
–
(15)
(10)
(79)
(104)
483
1,539
274
115
55
755
163
47
70
28
172
220
39
3,562
3,477
3,605
5,688
224
257
9
25
9,808
4,101
5,754
277
–
106
96
10,334
(1) Revenue is attributable to geographic location, based on the location of customers.
(2) Bullion sales to one customer amounted to US$576 million (2017: US$606 million) arising from sales by all operating segments.
(3) Concentrate sales to one customer amounted to US$454 million (2017: US$647 million) arising from concentrate sales by Cadia and Telfer.
(4) Non-Current Assets includes deferred tax assets of US$69 million (2017: US$80 million).
NEWCREST 2018 ANNUAL REPORT
104
5. INCOME AND EXPENSES
(a) Sales Revenue
Gold
Copper
Silver
Total sales revenue
Total revenue
(b) Cost of Sales
Site production costs (1)
Royalties
Concentrate treatment and realisation
Inventory movements
Depreciation and amortisation
Total cost of sales
(c) Corporate Administration Expenses
Corporate costs
Corporate depreciation
Share-based payments
Total corporate administration expenses
(d) Other Income/(Expenses)
Insurance recoveries (1)
Net foreign exchange gain/(loss)
Net fair value gain/(loss) on gold and copper derivatives and fair value movements on concentrate receivables
Other
Total other income/(expenses)
(e) Finance Costs
Interest on loans
Facility fees and other costs
Discount unwind on provisions (Note 18b)
Total finance costs
2018
US$m
2017
US$m
3,019
526
17
3,562
3,562
1,719
104
134
15
1,972
777
2,749
77
14
13
104
121
15
(5)
(1)
130
94
20
114
8
122
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)
103
23
126
8
134
(1) During the year, Newcrest settled and received its insurance claim in relation to the 14 April 2017 seismic event at Cadia for US$155 million. Proceeds attributed to
material damage of US$34 million has been included in site production costs as an offset to the costs incurred to rectify damage to the Cadia Panel Cave. The remaining
proceeds of US$121 million attributed to business interruption loss is presented in Other Income.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT (f) Depreciation and Amortisation
Property, plant and equipment
Intangible assets
Less: Capitalised to inventory on hand or assets under construction
Total depreciation and amortisation expense
Included in:
Cost of sales depreciation
Corporate depreciation
Total depreciation and amortisation expense
(g) Employee Benefits Expense
Defined contribution plan expense
Share-based payments
Redundancy expense
Salaries, wages and other employment benefits
Total employee benefits expense
NOTES TO THE
FINANCIAL STATEMENTS
105
2018
US$m
2017
US$m
776
19
795
(4)
791
777
14
791
28
13
3
379
423
667
23
690
(1)
689
671
18
689
28
10
11
384
433
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’.
NEWCREST 2018 ANNUAL REPORT 106
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 Segment
2018
Impairment loss on property, plant and equipment
Impairment loss on investment in associate
Write-down of property, plant and equipment
Net investment hedge gain/(loss)
Total before income tax
Tax
Total after income tax
Attributable to:
Non-controlling interest
Owners of the parent
Telfer(1)
Gosowong(2)
Bonikro(3)(4)
Other(5)(6)
US$m
US$m
US$m
US$m
(269)
–
–
–
(269)
81
(188)
–
(188)
(188)
–
–
–
–
–
(8)
(8)
(2)
(6)
(8)
–
–
(15)
29
14
–
14
(1)
15
14
–
(6)
(72)
–
(78)
–
(78)
–
(78)
(78)
Total
US$m
(269)
(6)
(87)
29
(333)
73
(260)
(3)
(257)
(260)
Year Ended 30 June 2018
(1) The Group has recognised an impairment loss in relation to Telfer. Refer to Note 12.
(2) Represents a write-down of a non-current tax asset at Gosowong, following an unfavourable tax court verdict with respect to a 2013 tax rate dispute. Refer Note 33.
The amount attributable to non-controlling interests is US$2 million.
(3) Represents a write-down in property, plant and equipment at Bonikro, following the reclassification of Bonikro as ‘held for sale’ and prior to the subsequent divestment
of the Group’s 89.89% interest in Bonikro. Of the US$15 million, US$1 million is attributable to non-controlling interests. Refer to Note 30.
(4) Represents the net foreign exchange gain of US$29 million on historical funding arrangements that were designated as a hedge of the Group’s net investment in the
Bonikro mine. Following its divestment, this gain was reclassified from the Foreign Currency Translation Reserve to the Income Statement.
(5) The US$6 million represents an impairment of the Group’s investment in Azucar Minerals Ltd. Refer to Note 29.
(6) The Group has recognised a US$72 million write-down in respect of property, plant and equipment in relation to the Namosi JV as a result of a reassessment of the
appropriateness to continue to carry forward previous study (deferred feasibility) costs. Refer to Note 28.
Items by Segment
2017
Write-down of property, plant and equipment
Loss on business divestment
Net investment hedge gain/(loss)
Total before income tax
Tax
Total after income tax
Attributable to:
Non-controlling interest
Owners of the parent
Bonikro(1)
Hidden
Valley(2)(3)
US$m
US$m
(15)
–
–
(15)
–
(15)
(1)
(14)
(15)
–
(10)
(79)
(89)
17
(72)
–
(72)
(72)
Total
US$m
(15)
(10)
(79)
(104)
17
(87)
(1)
(86)
(87)
Year Ended 30 June 2017
(1) Following a review of exploration activities as at 31 December 2016, the Group recognised a write-down in respect of exploration assets in Bonikro. Of the
US$15 million, US$1 million is attributable to non-controlling interests.
(2) During the prior year, the Group divested its 50% interest in the Hidden Valley Mine. Refer Note 30.
(3) Represents the net foreign exchange loss on historical funding arrangements that were designated as a hedge of the Group’s net investment in the Hidden Valley
mine. Following its divestment, this loss was reclassified from the Foreign Currency Translation Reserve to the Income Statement.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT 7. INCOME TAX EXPENSE
(a) Reconciliation of Prima Facie Income Tax Expense
to Income Tax Expense per the Income Statement
Accounting profit before tax
Income tax expense calculated at 30% (2017: 30%)
Adjustments on Significant items:
Impairment loss on investment in associate
Write-down of property, plant and equipment
Loss on business divestment
Net investment hedge (gain)/loss
Write-down of tax asset
Other
Income tax expense per the Income Statement
(b) Income Tax Expense Comprises:
Current income tax
Current income tax expense
Adjustments to current income tax of prior periods
Deferred tax (1)
Relating to origination and reversal of temporary differences
Adjustments to deferred tax of prior periods
Income tax expense per the Income Statement
(1) Refer to Note 17(a) for movements in deferred taxes.
8. EARNINGS PER SHARE (EPS)
EPS (cents per share)
Basic EPS
Diluted EPS
Earnings used in calculating EPS
Earnings used in the calculation of basic and diluted EPS:
Profit after income tax attributable to owners of the parent
Weighted average number of shares
Share data used in the calculation of basic and diluted EPS:
Weighted average number of ordinary shares used in calculating basic EPS
Effect of dilutive securities: share rights
Adjusted weighted average number of ordinary shares used in calculating diluted EPS
NOTES TO THE
FINANCIAL STATEMENTS
107
2018
US$m
2017
US$m
327
98
2
26
–
(9)
8
27
(7)
118
166
2
168
(42)
(8)
(50)
118
2018
US¢
26.3
26.2
2018
US$m
483
145
–
4
3
7
–
14
5
164
97
(4)
93
66
5
71
164
2017
US¢
40.2
40.0
2017
US$m
202
308
2018
No. of shares
2017
No. of shares
767,412,240 766,654,433
3,887,892
2,921,887
770,334,127 770,542,325
Rights granted to employees as described in Note 34 have been included in the determination of diluted earnings per share to the extent
they are dilutive.
NEWCREST 2018 ANNUAL REPORT 108
9. DIVIDENDS
(a) Dividends declared and paid
The following dividends were paid during the year:
Final ordinary dividend for the 2017 financial year:
7.5 cents per share (70% franked), paid 27 October 2017
Interim ordinary dividend for the 2018 financial year:
7.5 cents per share (fully franked), paid 2 May 2018
2018
US$m
2017
US$m
57.5
57.5
57.5
115.0
57.5
115.0
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 2018 of US 11 cents per share,
which will be fully franked. The dividend will be paid on 5 October 2018. The total amount of the dividend is US$84 million.
(c) Dividend franking account balance
Franking credits at 30% as at 30 June 2018 available for the subsequent financial year is US$9 million (2017: US$18 million).
10. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
Operating cash flows arising from changes in:
Trade and other receivables
Inventories
Trade and other payables
Provisions
Other assets and liabilities
Change in working capital
2018
US$m
2017
US$m
(17)
4
(2)
(9)
(3)
(27)
33
19
89
(20)
21
142
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
109
RESOURCE ASSETS AND LIABILITIES
This section provides information that is relevant in understanding the composition and management of the Group’s resource assets and liabilities.
11. PROPERTY, PLANT AND EQUIPMENT
Exploration
& Evaluation
Expenditure
Deferred
Feasibility
Expenditure
Assets
Under
Construction
Production
Stripping
Mine
Development (1)
Plant and
Equipment
US$m
US$m
US$m
US$m
US$m
US$m
Total
US$m
At 30 June 2018
Cost
Accumulated depreciation
and impairment
Year ended 30 June 2018
Carrying amount at
1 July 2017
Expenditure during the year
Expenditure written-off
Depreciation
Disposal of assets
Write-down of assets (Note 6)
Impairment loss (Note 6)
Business divestment (Note 30)
Foreign currency translation
Reclassifications/transfers
Carrying amount at
30 June 2018
448
(80)
368
362
72
(60)
–
–
–
–
–
(1)
(5)
368
(1)
Includes Mineral Rights with a carrying value of US$1,233m.
244
–
244
294
28
–
–
–
(72)
–
–
(1)
(5)
244
83
–
83
83
83
–
–
–
–
–
–
(5)
(78)
83
556
7,576
7,354
16,261
(384)
172
(3,903)
3,673
(3,738)
3,616
(8,105)
8,156
151
150
–
(88)
–
(5)
(28)
(5)
(3)
–
172
4,007
123
–
(241)
–
(5)
(135)
(4)
(79)
7
3,955
207
–
(447)
(6)
(5)
(106)
(4)
(59)
81
8,852
663
(60)
(776)
(6)
(87)
(269)
(13)
(148)
–
3,673
3,616
8,156
Exploration
& Evaluation
Expenditure
Deferred
Feasibility
Expenditure
Assets
Under
Construction
Production
Stripping
Mine
Development (1)
Plant and
Equipment
US$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 30)
Foreign currency translation
Reclassifications/transfers
Carrying amount at
30 June 2017
442
(80)
362
393
58
(53)
–
(4)
(15)
(6)
1
(12)
362
(1)
Includes Mineral Rights with a carrying value of US$1,266m.
294
–
294
278
26
–
–
–
–
–
1
(11)
294
83
–
83
102
115
–
–
–
–
–
4
(138)
83
459
7,741
7,473
16,492
(308)
151
(3,734)
4,007
(3,518)
3,955
(7,640)
8,852
148
90
–
(88)
–
–
–
1
–
151
4,099
1
–
(229)
–
–
–
71
65
3,871
286
–
(350)
(4)
–
–
56
96
8,891
576
(53)
(667)
(8)
(15)
(6)
134
–
4,007
3,955
8,852
NEWCREST 2018 ANNUAL REPORT 110
11. PROPERTY, PLANT AND 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)
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.
(b)
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 assets 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 Joint Ore Reserves
Committee (‘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.
Assets 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:
‒ Future economic benefits (being improved access to the ore
body) associated with the stripping activity are probable;
‒ The component of the ore body for which access has been
improved can be accurately identified; and
‒ 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.
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.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
111
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. Any change in these estimates and assumptions
are accounted for prospectively.
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.
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 2018, the
Group concluded:
• At Telfer, the current period underperformance to plan and
updated life of mine plan (‘LOM’), which forecast a shorter mine
life, lower gold recoveries from processing and higher operating
costs, represented indicators of potential impairment. An updated
assessment of the recoverable amount of Telfer determined that
an impairment was required at 30 June 2018. Further details are
provided below in section (d) ‘Impacts’.
• At Gosowong, an increase in discount rate applied to the cash flows
used in determining the recoverable amount and amendments in
the Contract of Work (‘CoW’) with the Government of Indonesia,
which increased costs from 1 July 2018, represented indicators of
potential impairment. An updated assessment of the recoverable
amount of Gosowong has determined that no impairment is
required at 30 June 2018.
• At Lihir, an increase in discount rate applied to the cash flows
used in determining the recoverable amount represented an
indicator of potential impairment. An updated assessment of the
recoverable amount of Lihir has determined that no impairment
is required at 30 June 2018.
NEWCREST 2018 ANNUAL REPORT 112
12. IMPAIRMENT OF NON-FINANCIAL ASSETS (continued)
(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 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 LOM plans. In certain
cases, where multiple investment options and economic input ranges 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 22(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 LOM plans, latest short-term forecasts and CGU-specific studies.
(c) Key judgements, estimates and accounting
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 2018, and for comparison also provides
the equivalent assumptions used in 2017:
Assumptions
2019
2020
2021
Long term
(2022+)
2018
2019
2020
Long term
(2021+)
2018
2017
Gold
(US$ per ounce)
Copper
(US$ per pound)
AUD:USD
exchange rate
USD:PGK
exchange rate
Discount
rate (%)
$1,250
$1,250
$1,250
$1,250
$1,250
$1,250
$1,250
$1,250
$3.00
$3.00
$3.00
$3.00
$2.50
$2.60
$2.70
$3.00
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$3.10
$3.10
$3.10
$3.10
$3.10
$3.10
$3.10
$3.10
USD Assets 5.75%
AUD Assets 5.00%
USD Assets 5.25 to 5.75%
AUD Assets 5.00%
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 short term and long term US dollar gold and the long term US dollar copper price estimates applied in 2017.
Short term copper prices assumptions have increased from 2017 to align with the long term assumptions, reflecting spot prices during the 2018
financial year and Newcrest’s analysis of observable market forecasts for future periods.
AUD:USD exchange rate
Newcrest has maintained its AUD:USD exchange rate estimates for all future periods. This reflects the AUD trading at or around this level for
most of the last three years and Newcrest’s analysis of observable market forecasts for future periods.
USD:PGK exchange rate
Newcrest has maintained its USD:PGK exchange rate estimates for all future periods.
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.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT CGU
Cadia, Telfer
Lihir, Gosowong
Bonikro
NOTES TO THE
FINANCIAL STATEMENTS
113
Functional
Currency
AUD
USD
USD
2018
5.00%
5.75%
n/a
2017
5.00%
5.25%
5.75%
The Group uses a capital asset pricing model to estimate its estimated real after tax weighted average cost of capital. Due to changes in the
current period in inputs and assumptions used in the capital asset pricing model for USD functional currency assets, the discount rate applied to
Lihir and Gosowong was increased by 0.5% as at 30 June 2018, predominantly as a result of increases in US government bond rates.
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) Impacts
Following an updated assessment of the recoverable amount of Telfer as at 30 June 2018, the Group has determined the requirement for the
following impairment to ensure the carrying value does not exceed the Fair Value:
CGU
Telfer
Impairment (loss)
Pre-tax
US$m
(269)
Tax
Post-tax
US$m
81
US$m
(188)
The drivers of the impairment at Telfer are:
• Based on the latest LOM plan, which indicates lower levels of ore mined and higher levels of waste from West Dome, lower gold recoveries
from processing, higher estimated closure costs and higher operating costs than previously forecast; and
• A reduction in value attributable to unmined resources not included in the LOM plan models and the risked value of a potential block cave
at Telfer which is in study stage.
Telfer remains a complex, low-grade, mid-to-high cost operation with a relatively high annual gold production level. Telfer’s Fair Value has high
sensitivity to the AUD gold price, operating cost and reserve and resource model conversion assumptions and unfavourable changes in these
assumptions would further reduce the Fair Value. Telfer’s mine life and Fair Value are also sensitive to changes in its reported Mineral Resources
and Ore Reserves. The results of an infill drilling campaign at Telfer’s open pits in the first half of FY2019 will further inform the annual Mineral
Resource and Ore Reserve estimate process to be completed at 31 December 2018.
In total, approximately 29% of Telfer’s Fair Value (excluding future closure costs) is attributable to:
• Unmined resources not included in production in the LOM model;
• Exploration value, 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.
(e) Sensitivity Analysis
Impairments have previously been recognised for the Lihir CGU in 2013 and 2014. Following the review of Lihir’s recoverable amount as at
30 June 2018, and in recognising no requirement for asset impairment or impairment reversal, the Group has determined that the Lihir carrying
amount as at 30 June 2018 is within a range that approximates its Fair Value.
Any variation in the key assumptions used to determine the Fair Value of the Lihir and Telfer 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 CGUs (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 2018:
$ 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
$0.10 increase/decrease in USD:PGK rate
5% increase/decrease in operating costs from that assumed
Lihir
US$
1,040
130
250
120
350
Telfer
A$
180
minor
180
n/a
110
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.
NEWCREST 2018 ANNUAL REPORT 114
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)
2018
US$m
2017
US$m
153
49
72
280
554
144
27
83
302
556
1,032
1,032
1,125
1,125
(1) Total inventories include inventories held at net realisable value of US$51 million (2017: US$79 million).
Ore stockpiles, gold in circuit, bullion and concentrate are physically measured or estimated and valued at the lower of cost and net realisable
value. Cost represents the weighted average cost and includes direct costs and an appropriate portion of fixed and variable production overhead
expenditure, including depreciation and amortisation, incurred in converting materials into finished goods. Net realisable value is the estimated
selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Ore stockpiles which are not scheduled to be processed in the twelve months after the reporting date are classified as non-current inventory.
The Group believes the processing of these stockpiles will have a future economic benefit to the Group and accordingly values these stockpiles
at the lower of cost and net realisable value.
Materials and supplies are valued at the lower of cost and net realisable value. Any allowance for obsolescence is determined by reference to
stock items identified.
Accounting Judgement and Estimate – Net Realisable Value of Ore Stockpiles
The computation of net realisable value for ore stockpiles involves significant judgements and estimates in relation to timing and cost of
processing, commodity prices, foreign exchange rates, recoveries and the timing of sale of the bullion and concentrate produced. A change in
any of these assumptions will alter the estimated net realisable value and may therefore impact the carrying value of ore stockpiles.
14. TRADE AND OTHER RECEIVABLES
Current
Bullion awaiting settlement
Metal in concentrate receivables
GST receivable
Other receivables
Total current receivables
2018
US$m
2017
US$m
–
40
23
14
77
15
43
22
8
88
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”.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT 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$88 million (2017: US$96 million) paid in respect to PT NHM’s prior year tax assessments. Refer Note 33(a).
16. OTHER INTANGIBLE ASSETS
Information Systems Development
Cost
Accumulated amortisation and impairment
NOTES TO THE
FINANCIAL STATEMENTS
115
2018
US$m
2017
US$m
54
54
41
109
150
2018
US$m
206
(164)
42
56
56
49
119
168
2017
US$m
186
(151)
35
Costs incurred in developing information technology systems and acquiring software are capitalised as intangible assets. Amortisation is
calculated on a straight line basis over the useful life, ranging from three to seven years.
17. DEFERRED TAX
(a) Movement in Deferred Taxes
2018
Deferred tax assets
Carry forward revenue losses recognised:
– Australian entities
Deferred tax liabilities
Temporary differences:
–
– Provisions
– Other
Property, plant and equipment
Net deferred taxes
2017
Deferred tax assets
Carry forward revenue losses recognised:
– Australian entities
Deferred tax liabilities
Temporary differences:
– Property, plant and equipment
– Provisions
– Other
Net deferred taxes
Opening
Balance
at 1 July
US$m
(Charged) /
credited to
income
(Charged) /
credited to
equity
Translation
Closing
Balance
at 30 June
US$m
US$m
US$m
US$m
80
80
(1,222)
49
86
(1,087)
(1,007)
105
105
(1,125)
52
125
(948)
(843)
(8)
(8)
66
–
(16)
50
42
(28)
(28)
(82)
(4)
15
(71)
(99)
–
–
–
–
19
19
19
–
–
–
–
(59)
(59)
(59)
(3)
(3)
18
(1)
(6)
11
8
3
3
(15)
1
5
(9)
(6)
69
69
(1,138)
48
83
(1,007)
(938)
80
80
(1,222)
49
86
(1,087)
(1,007)
NEWCREST 2018 ANNUAL REPORT
116
17. DEFERRED TAX (continued)
(b) Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of:
• capital losses with a tax effect of US$189 million (2017:
•
US$246 million)
revenue losses and temporary differences with a tax effect
of US$180 million (2017: US$181 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.
(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 Judgements, 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 unutilised 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
2018
US$m
2017
US$m
(a)
(b)
(c)
(a)
(b)
(c)
108
9
20
137
39
320
3
362
108
10
29
147
41
262
4
307
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.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
117
(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 2017
Derecognised due to business divestment (Note 30)
Movements in economic assumptions and timing of cash flows
Change in cost estimates (1)
Paid/utilised during the year
Unwinding of discount
Foreign currency translation
At 30 June 2018
Split between:
Current
Non-current
(1) Change primarily relates to an increase in estimated closure costs at Telfer, following an update to Telfer’s mine closure plan.
(c) Other Provisions
Other provisions comprise of community obligations and other miscellaneous items.
US$m
272
(14)
9
63
(3)
8
(6)
329
9
320
329
NEWCREST 2018 ANNUAL REPORT 118
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
Detail of the calculation of the capital management performance ratios is provided below:
Leverage Ratio
Net debt (Note 20)
EBITDA (Note 4)
Leverage ratio
2018
2017
BBB–/Baa3
0.7
12.2%
$2.97bn
($953m cash)
BBB–/Baa3
1.1
16.6%
$2.53bn
($492m cash)
2018
US$m
1,040
1,565
0.7 times
2017
US$m
1,499
1,408
1.1 times
Leverage Ratio is calculated as net debt at the end of the reporting period divided by the rolling 12 month EBITDA. Refer to Note 4, Segment
Information, for the definition of EBITDA.
Gearing Ratio
Net debt (Note 20)
Equity
Total capital (Net debt and equity)
Gearing ratio
Gearing ratio is calculated as net debt at the end of the reporting period divided by net debt plus equity.
2018
US$m
1,040
7,462
8,502
2017
US$m
1,499
7,534
9,033
12.2%
16.6%
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
119
20. NET DEBT
Newcrest borrows funds from financial institutions and debt investors in the form of committed revolving facilities and corporate bonds.
As at 30 June 2018, all of Newcrest’s borrowings were unsecured.
Borrowings are initially recognised at fair value and subsequently at amortised cost. Borrowings are net of transaction costs incurred. Borrowings
are classified as non-current liabilities where Newcrest has an unconditional right to defer settlement for at least 12 months from the year end.
Cash and cash equivalents comprise cash at bank, on hand and short-term deposits.
Net Debt
Corporate bonds
Less: capitalised transaction costs on facilities
Total non-current borrowings
Total borrowings
Cash and cash equivalents
Net debt
Note
(a)
2018
US$m
2,000
(7)
1,993
1,993
(953)
1,040
2017
US$m
2,000
(9)
1,991
1,991
(492)
1,499
(a) Corporate bonds
In each of November 2011 and October 2012, Newcrest issued US$1,000 million in US dollar corporate bonds (notes). The notes were issued in
accordance with Rule 144A and Regulation S of the Securities Act of the United States. The notes consist of:
Maturity
November 2021
October 2022
November 2041
Coupon Rate
4.45%
4.20%
5.75%
2018
US$m
750
750
500
2017
US$m
750
750
500
2,000
2,000
(b) Bilateral bank debt
As at 30 June 2018, the Group had bilateral bank debt facilities of US$2,000 million (2017: US$2,000 million) with 12 banks. These are
committed unsecured revolving facilities, individually negotiated and documented with each bank but with similar terms and conditions.
The facilities are on normal terms and conditions and include certain financial covenants. Interest is based on LIBOR plus a margin, which varies
amongst the lenders. The maturity date profile of these facilities is shown in the table below:
Facility Maturity (financial year ending)
June 2019
June 2020
June 2021
2018
US$m
1,001
250
749
2,000
2017
US$m
1,001
250
749
2,000
Subsequent to year end, Newcrest signed agreements renegotiating the US$2,000 million facility that increased the number of lending banks to
13 and extended the maturity of the facilities to the financial years ending June 2022 (US$1,076 million) and June 2024 (US$924 million).
NEWCREST 2018 ANNUAL REPORT 120
20. NET DEBT (continued)
(c) Bank loan
PT Nusa Halmahera Minerals has a US$20 million (2017: US$40 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 on
31 March 2019. As at 30 June 2018 this facility is undrawn. (2017: undrawn).
(d) Financing facilities
The Group has access to the following unsecured financing facilities at the end of the financial year.
2018
Corporate bonds
Bilateral bank debt facilities
Bank loan
2017
Corporate bonds
Bilateral bank debt facilities
Bank loan
(1) As at 30 June 2018, 100% of the facilities utilised were at fixed interest rates. (30 June 2017: 100% fixed rates).
(e) Movement in borrowings
Movement in total borrowings during the year was as follows:
Borrowings
Opening balance
Cash drawdowns
Cash repayments
Non-cash movements
Closing balance
21. OTHER FINANCIAL ASSETS AND LIABILITIES
Other Financial Assets / (Liabilities)
Gold and copper USD forward contracts (1)
Gold AUD forward contracts (2)
Fuel forward contracts (3)
Total other financial assets – current
Gold AUD forward contracts (2)
Fuel forward contracts (3)
Contingent consideration asset (4)
Total other financial assets – non-current
Gold and copper USD forward contracts (1)
Fuel forward contracts (3)
Total other financial liabilities – current
Gold AUD forward contracts (2)
Total other financial liabilities – non-current
(1) Net fair value gain of US$6 million (2017: US$2 million loss). Refer Note 22 (a)(i)
(2) Net fair value gain of US$23 million (2017: US$40 million gain). Refer Note 22 (a)(i)
(3) Net fair value gain of US$25 million (2017: US$1 million loss). Refer Note 22 (a)(ii)
(4) Relates to the contingent consideration on the sale of Bonikro. Refer Note 30(a)
Facility
Utilised (1)
Facility
Unutilised
US$m
US$m
2,000
–
–
2,000
2,000
–
–
2,000
–
2,000
20
2,020
–
2,000
40
2,040
2018
US$m
1,991
–
–
2
1,993
Facility
Limit
US$m
2,000
2,000
20
4,020
2,000
2,000
40
4,040
2017
US$m
2,160
295
(465)
1
1,991
2018
US$m
2017
US$m
6
5
22
33
23
3
9
35
–
–
–
(5)
(5)
1
30
–
31
10
–
–
10
(3)
(1)
(4)
–
–
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
121
Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage certain market risks. 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 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.
22. 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.
(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 2018, 161,000 gold ounces and 21,000 copper tonnes were subject to QP adjustment (2017: 109,000 ounces gold and
15,000 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 contracts at the time of concentrate shipments to lock in the price. These forward 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’.
NEWCREST 2018 ANNUAL REPORT 122
22. FINANCIAL RISK MANAGEMENT (continued)
(a) Commodity and Other Price Risks (continued)
The following table details the gold and copper forward contracts outstanding as at the reporting date.
Gold and Copper USD forward contracts
Gold (ounces)
Maturing less than 6 months
Copper (tonnes)
Maturing less than 6 months
Quantity
(‘000s)
100
17
2018
Weighted
Average Price
Fair Value
US$
US$m
1,283
6,847
3
3
6
Quantity
(‘000s)
104
14
2017
Weighted
Average Price
Fair Value
US$
US$m
1,257
5,745
1
(3)
(2)
Partial hedging of Telfer future gold sales
Newcrest has put in place hedges for a portion of the Telfer mine’s future gold production. Telfer is a large scale, low grade mine and its
profitability and cash flow are both particularly sensitive to the realised Australian dollar gold price. Having regard to the favourable spot and
forward prices at that time, hedging instruments in the form of Australian dollar gold forward contracts were put in place to secure margins on
a portion of future production to June 2023, which will support the investment in future cutbacks and mine development.
The Telfer AUD gold forward contracts have been designated as cash flow hedges with a hedge relationship of 1:1. Potential sources of hedge
ineffectiveness that may affect the hedging relationship during the term are variations to forecast production timing and volume assumptions
and credit risk.
As of 30 June 2018, the Group is holding AUD gold forward contracts with the following maturity:
Gold AUD forward contracts maturing:
Less than 12 months
Between 1–2 years
Between 2–3 years
Between 3–4 years
Between 4–5 years
Total
Quantity
(ounces)
(‘000s)
231
205
217
204
138
995
2018
Weighted
Average Price
A$
1,739
1,729
1,864
1,902
1,942
1,826
Fair Value
US$m
5
(3)
10
7
4
23
Quantity
(ounces)
(‘000s)
295
135
–
–
–
430
2017
Weighted
Average Price
A$
1,765
1,767
–
–
–
1,766
Fair Value
US$m
30
10
–
–
–
40
These forward contracts are measured at fair value with the effective portion of fair value movements being recognised in OCI and accumulated
in the ‘Cash flow hedge reserve’ in equity. There was no hedge ineffectiveness recognised in the Income Statement during the year.
(ii) Fuel price
The Group’s input costs are exposed to price fluctuations, in particular to diesel and heavy fuel oil prices. To mitigate this risk, the Group has
entered into short-term fuel forward contracts to fix certain diesel and heavy fuel oil costs in line with budget expectations.
These forward contracts have been designated as cash flow hedges with a hedge relationship of 1:1. Potential sources of hedge ineffectiveness
that may affect the hedging relationship during the term include differences in the pricing of the physical (hedged) item and hedging instrument,
timing of physical delivery misaligned with the hedging instrument and credit risk.
Forward contracts maturing in:
Less than 12 months
Diesel (barrels)
Heavy fuel oil (tonnes)
Greater than 12 months
Diesel (barrels)
Total fair value
Quantity
(‘000s)
678
146
225
2018
Weighted
Average Price
Fair Value
US$
US$m
74
361
73
10
12
3
25
Quantity
(‘000s)
400
115
–
2017
Weighted
Average Price
Fair Value
US$
US$m
63
292
–
(1)
–
–
(1)
These forward contracts are measured at fair value with the effective portion of fair value movements being recognised in OCI and accumulated
in the ‘Cash flow hedge reserve’ in equity. There was no hedge ineffectiveness recognised in the Income Statement during the year.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT (iii) Financial Impacts of Hedges
The impact of hedged items designated in hedging relationships on the Income Statement and OCI, is as follows:
Cash flow hedges
Line item in the Income Statement
Telfer gold sales
Diesel
Heavy fuel oil
Borrowings
Total
Sales revenue
Cost of sales – Site production costs
Cost of sales – Site production costs
Other income/(expenses) – Net FX gain/(loss)
NOTES TO THE
FINANCIAL STATEMENTS
123
Gain/(loss) reclassified from
OCI to Income Statement
2018
US$m
2017
US$m
22
5
8
–
35
13
–
3
7
23
(iv) Sensitivity Analysis
The following table summarises the sensitivity of financial assets and financial liabilities held at the reporting date to movement in the gold price
with all other variables held constant. The 10% movement for gold (2017: 15%) is based on reasonably possible changes, over a financial year,
using an observed range of actual historical rates for the preceding five year period.
Post-tax gain/(loss)
Gold
Gold +10% (2017: +15%)
Gold -10% (2017: -15%)
Impact on Profit (1)
Higher / (Lower)
Impact on Equity (2)
Higher / (Lower)
2018
US$m
2017
US$m
2018
US$m
2017
US$m
5
(5)
–
–
(92)
92
(57)
57
(1) Represents the impact of the movement in commodity prices on the balance of the financial assets and financial liabilities at year end.
(2) For derivatives which are in an effective hedging relationship, all fair value movements are recognised in Other Comprehensive Income.
The sensitivity of the exposure of copper, diesel and heavy fuel oil prices on financial assets and financial liabilities at year end has been analysed
and determined to be not material to the Group.
(b) Foreign Currency Risk
The Group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. The Group’s revenue
is primarily denominated in US dollars whereas a material proportion of costs (including capital expenditure) are collectively in Australian
dollars and PNG Kina. The Group’s Australian entities have AUD functional currencies, while all non-Australian operating entities have USD
functional currencies.
The Group’s Statement of Financial Position can also be affected materially by movements in the AUD:USD exchange rate. Measuring the
exposure to foreign exchange risk is achieved by regularly monitoring and performing sensitivity analysis on the Group’s financial position.
The carrying amounts of the Group’s US dollar denominated financial assets and liabilities in entities which do not have a US dollar functional
currency at the reporting date are as follows:
US Dollar Denominated Balances
Financial Assets
Cash and cash equivalents
Trade and other receivables
Related party receivables
Derivatives
Financial Liabilities
Payables
Related party payables
Borrowings
Derivatives
Gross Exposure
Net investment in US dollar functional currency entities
Net Exposure (inclusive of net investment in foreign operations)
2018
US$m
761
40
4
31
836
27
28
2,000
–
2,055
2017
US$m
347
43
42
1
433
32
18
2,000
3
2,053
(1,219)
(1,620)
1,500
281
2,000
380
NEWCREST 2018 ANNUAL REPORT
124
22. FINANCIAL RISK MANAGEMENT (continued)
(b) Foreign Currency Risk (continued)
Net investment hedges
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 (net of cash)
is designated as a Net investment in foreign operations.
Exchange gains or losses upon subsequent revaluation of US dollar denominated borrowings and cash 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 2018, US dollar borrowings (net of cash) of US$1,500 million were designated as a net investment in foreign operations
(2017: US$2,000 million).
Sensitivity analysis
The following table details the Group’s sensitivity arising in respect of translation of financial assets and financial liabilities to a 10% movement
(2017: 10%) in the Australian dollar against the US dollar at the reporting date, with all other variables held constant. The percentage sensitivity is
based on reasonably possible changes, over a financial year, using the observed range of actual historical rates for the preceding five-year period.
Post-tax gain/(loss)
AUD/USD +10% (2017: +10%)
AUD/USD -10% (2017: -10%)
Impact on Profit
After Tax
Higher/(Lower)
2018
US$m
(18)
18
2017
US$m
(27)
27
Impact on Equity
Higher/(Lower)
2018
US$m
(103)
103
2017
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% (2017: 10%) was calculated by taking the AUD spot rate as at the reporting date, moving this
spot rate by 10% (2017:10%) 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.
(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:
• Targeting to maintain cash and committed undrawn bank facilities of at least US$1,500 million, with approximately one-third of that
amount in the form of cash.
• Targeting to maintain an investment grade credit rating.
• Forecasting of cash flows relating to operational, investing and financing activities, including sensitivity analysis to test multiple scenarios.
• Management of repayment maturities to avoid excessive refinancing in any period.
• Maintain funding flexibility with committed available credit lines with a variety of counterparties.
• Managing credit risk related to financial assets.
The Group maintains a balance between continuity of funding and flexibility through the use of cash, loans and committed available credit lines.
Included in Note 20 is a list of undrawn facilities that the Group has at its disposal to manage liquidity risk.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
125
The following table reflects all contractually fixed repayments and interest resulting from recognised financial liabilities at the reporting date,
including derivative financial instruments. For derivative financial instruments the market value is presented, whereas for the other obligations
the respective undiscounted cash flows for the respective upcoming financial years are presented.
2018
Payables
Borrowings
Derivatives
2017
Payables
Borrowings
Derivatives
Less than
6 months
Between
6–12 months
Between
1–2 years
Between
2–5 years
Greater than
5 years
US$m
US$m
US$m
US$m
US$m
411
31
–
442
455
31
3
489
–
47
–
47
–
47
1
48
–
94
5
99
–
94
–
94
–
1,715
–
1,715
–
1,014
–
1,014
–
1,032
–
1,032
–
1,826
–
1,826
Total
US$m
411
2,919
5
3,335
455
3,012
4
3,471
(d) Interest Rate Risk
The Group’s exposure to the risk of changes in market interest rates primarily relates to the Group’s cash and debt obligations that have floating
interest rates. The Group’s interest rate exposure together with the effective interest rate for each class of financial assets and financial
liabilities at the reporting date is summarised as follows:
Consolidated
Financial Assets
Cash and cash equivalents
Financial Liabilities
Corporate bonds
Floating
Interest
US$m
953
953
–
–
2018
Fixed
Interest
Effective
Interest Rate
US$m
–
–
2,000
2,000
%
2.3
4.7
Floating
Interest
US$m
492
492
–
–
2017
Fixed
Interest
Effective
Interest Rate
US$m
–
–
2,000
2,000
%
1.2
4.7
Net exposure
953
(2,000)
492
(2,000)
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.
(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 investment funds by dealing only with banks or financial institutions with credit ratings of at
least A- (S&P) equivalent and rated at least BBB (S&P) equivalent for derivative financial instruments. Credit risk is further limited by ensuring
diversification with maximum investment limits based on credit ratings.
All major buyers of copper concentrate 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 there was no collateral
held (2017: US$40 million).
Receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. There were no
material impairments of receivables as at 30 June 2018 or 30 June 2017.
The majority of the Group’s receivables are due from concentrate customers in Japan. There have been no credit defaults with these customers
in recent history. Newcrest’s Treasury department evaluates credit risk on a continual basis. At the reporting date there were no other significant
concentrations of credit risk.
NEWCREST 2018 ANNUAL REPORT 126
22. FINANCIAL RISK MANAGEMENT (continued)
(f) Financial Assets and Financial Liabilities
The following tables disclose the carrying amounts of each class of financial assets and financial liabilities at year end.
2018
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets – current
Other financial assets – non-current
Financial Liabilities
Trade and other payables
Borrowings
Other financial liabilities – non-current
2017
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets – current
Other financial assets – non-current
Financial Liabilities
Trade and other payables
Borrowings
Other financial liabilities – current
Amortised
cost
Fair Value
through profit
or loss
Fair Value
through OCI
US$m
US$m
US$m
953
37
–
–
990
415
1,993
–
2,408
–
40
6
9
55
–
–
–
–
–
–
27
26
53
–
–
5
5
Amortised
cost
Fair Value
through profit
or loss
Fair Value
through OCI
US$m
US$m
US$m
492
45
–
–
537
455
1,991
–
2,446
–
43
1
–
44
–
–
3
3
–
–
30
10
40
–
–
1
1
Total
US$m
953
77
33
35
1,098
415
1,993
5
2,413
Total
US$m
492
88
31
10
621
455
1,991
4
2,450
(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 with
the exception of the contingent consideration asset of US$9 million (refer Note 30(a)) which is categorised as Level 3 measurement.
Fair value of financial instruments carried at amortised cost
The carrying amounts of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their fair
value, except as detailed in the following table:
Financial Liabilities
Borrowings:
Fixed rate debt – Corporate Bonds
Carrying amount
Fair value (1)
2018
US$m
2017
US$m
2018
US$m
2017
US$m
1,993
1,991
2,072
2,130
(1) The fair value is a level 2 valuation. Fair values of the Group’s fixed rate borrowings are determined by using discounted cash flow models that use discount rates that
reflect the issuer’s borrowing rate as at the end of the reporting period.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT 23. ISSUED CAPITAL
(a) Movements in Issued Capital
Opening balance
Shares repurchased and held in treasury (1)
Shares issued – dividend reinvestment plan
Total issued capital
(b) Number of Issued Ordinary Shares
Comprises:
• Shares held by the public
• Treasury shares
Total issued capital
Movement in issued ordinary shares for the year
Opening number of shares
Shares issued under:
• Shares repurchased and held in treasury (1)
• Share plans (2)
• Dividend reinvestment plan
Closing number of shares
Movement in treasury shares for the year
Opening number of shares
• Purchases
• Issued pursuant to share plans
Closing number of shares
NOTES TO THE
FINANCIAL STATEMENTS
127
2018
US$m
11,657
(11)
10
11,656
2017
US$m
11,666
(19)
10
11,657
2018
No.
2017
No.
766,608,812 765,777,868
1,331,670
1,134,002
767,742,814 767,109,538
765,777,868 765,562,740
(600,000)
797,668
633,276
(1,100,000)
716,561
598,567
766,608,812 765,777,868
1,331,670
600,000
(797,668)
948,231
1,100,000
(716,561)
1,134,002
1,331,670
(1) During the year, the Newcrest Employee Share Plan Trust (‘Trust’) purchased a total of 600,000 (2017: 1,100,000) ordinary fully paid Newcrest shares at an average
price of A$21.63 (US$17.04) per share (2017: average price of A$21.97 (US$16.73) per share). The shares were purchased on-market to be held by the Trustee on
behalf of the Trust to satisfy the future entitlements of the holders of performance rights (and any other rights to acquire shares) under Newcrest’s current and future
employee incentive schemes.
(2) Represents rights exercised under the Company’s share-based payments plans and executive service agreements. Refer to Note 34 for share-based payments.
Issued ordinary share capital is classified as equity and is recognised at the fair value of the consideration received by the Group. Any transaction
costs arising on the issue of ordinary shares and the associated tax are recognised directly in equity as a reduction of the share proceeds received.
Treasury Shares
The Group's own equity instruments, which are purchased on-market for later use in employee share-based payment arrangements (treasury
shares), are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group's own
equity instruments.
NEWCREST 2018 ANNUAL REPORT
128
24. RESERVES
Equity Settlements Reserve
Foreign Currency Translation Reserve
Hedge Reserve
Other Reserves
Total Reserves
Note
(a)
(b)
(c)
(d)
2018
US$m
101
(327)
33
(1)
(194)
2017
US$m
88
(168)
27
–
(53)
(a) Equity Settlements Reserve
This reserve is used to recognise the fair value of rights and options issued to employees in relation to equity-settled share-based payments.
(b) Foreign Currency Translation Reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of
subsidiaries which do not have a functional currency of USD. The reserve is also used to record exchange gains and losses on hedges of the net
investment in foreign operations. Refer Note 22(b).
(c) Hedge Reserve
The hedge reserve is used to record the effective portion of changes in the fair value of cash flow hedges (refer Note 22). The components of the
hedge reserve at year end were as follows:
Component
Gold forward contracts – Telfer
Fuel forward contracts
Tax effect
Total Hedge Reserve
22(a)
22(a)
2018
US$m
23
25
48
(15)
33
2017
US$m
40
(1)
39
(12)
27
(d) Other Reserves
Other Reserves are used to record Newcrest’s share of other comprehensive income/(loss) of associates (refer Note 29).
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
129
GROUP STRUCTURE
This section provides information relevant to understanding the structure of the Group.
25. 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 Finance 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
Newcrest Hire Holdings Pte Ltd
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 2 Limited
Newcrest PNG 3 Limited
Newcrest PNG Exploration Limited
Newcrest Resources Inc
Newroyal Resources Inc
Newcrest Canada Inc
Newcrest Canada Holdings Inc
NewcrestEcuador SA
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
2018
%
2017
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Singapore
Indonesia
Indonesia
Indonesia
Fiji
Fiji
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
USA
USA
Canada
Canada
Ecuador
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
(a)
(a)
(a)
(c)
(a)
(a)
(a)
(c)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(d)
(d)
(b)
(c)
(b)
(b)
(c)
100
100
100
100
–
100
100
100
100
–
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
99.89
89.89
–
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
Notes:
(a) These controlled entities are a party to a Deed of Cross Guarantee. Refer Note 27 for further information.
(b) Audited by affiliates of the Parent entity auditors.
(c) These entities were sold during the year.
(d) These entities were incorporated during the year.
NEWCREST 2018 ANNUAL REPORT 130
26. 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/(loss) after income tax
Other comprehensive income/(loss)
Total comprehensive income/(loss) 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
2018
US$m
(272)
(250)
(522)
92
6,747
6,839
223
637
860
5,979
11,656
101
(281)
(5,497)
5,979
2017
US$m
216
198
414
103
7,205
7,308
162
542
704
6,604
11,657
88
(31)
(5,110)
6,604
5
9
(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 27. 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.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
131
27. DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 17 December 2016, the wholly-owned controlled
entities detailed in Note 25 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
Dividend income from subsidiaries
Other income/(expenses)
Share of profit/(loss) of associate
Loss on business divestment
Net investment hedge loss
Impairment loss on property, plant and equipment
Impairment reversal/(loss) – other
Profit before interest and income tax
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit after income tax
Consolidated
2018
US$m
1,868
(1,383)
2017
US$m
1,767
(1,264)
485
(40)
(102)
55
64
(2)
–
–
(269)
(91)
100
8
(117)
(9)
2
(7)
503
(28)
(81)
7
(87)
–
(10)
(79)
–
24
249
4
(129)
124
(39)
85
NEWCREST 2018 ANNUAL REPORT 132
27. DEED OF CROSS GUARANTEE (continued)
Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Total current assets
Non-current assets
Other receivables
Inventories
Investment in subsidiaries
Property, plant and equipment
Other intangible assets
Deferred tax assets
Other financial assets
Other assets
Investment in associates
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Current tax liability
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
Consolidated
2018
US$m
2017
US$m
803
57
165
33
42
1,100
36
3
5,120
3,372
31
69
35
4
67
8,737
9,837
509
73
99
–
681
1,993
228
186
5
2,412
3,093
6,744
353
54
149
31
42
629
170
1
5,478
3,879
21
91
–
9
64
9,713
10,342
542
70
31
4
647
1,992
159
310
–
2,461
3,108
7,234
11,656
(4,381)
(531)
6,744
11,657
(4,259)
(164)
7,234
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
133
28. INTEREST 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
Wafi-Golpu JV
Namosi JV
Country
Papua New Guinea
Fiji
Principal Activity
Mineral exploration
Mineral exploration
Ownership Interest
Note
(a)
(b)
2018
50.0%
71.42%
2017
50.0%
70.75%
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) Wafi-Golpu Joint Venture
The Wafi-Golpu JV is owned 50% by the Group and 50% by subsidiaries of Harmony Gold Mining Company Limited. Pursuant to the JV
agreement, key operational decisions of the JV require a unanimous vote and therefore the Group has joint control. For segment reporting,
Wafi-Golpu is included within the ‘Exploration and Projects’ 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 and project development
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 2018, 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%.
The carrying value of the Group’s interest in the Wafi-Golpu JV as at 30 June 2018 is US$441 million (2017: US$419 million).
(b) 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 Projects’ segment.
An assessment of potential project configurations prompted a reassessment of the appropriateness to continue to carry forward previous study
costs. As a result, the Group recognised a write-down in deferred feasibility expenditure of US$72 million. Refer Note 6.
The carrying value of the Group’s interest in the Namosi JV as at 30 June 2018, following the write-down is US$25 million (2017: US$97 million).
NEWCREST 2018 ANNUAL REPORT 134
29. INVESTMENT IN ASSOCIATES
Movements in investment in associates
Opening balance
Acquisition – Lundin Gold Inc
Acquisition – SolGold plc
Acquisition – Azucar Minerals Ltd
Total acquisitions
Share of profit/(loss)
Share of other comprehensive income/(loss)
Impairment loss – Azucar Minerals Ltd
Foreign currency translation
Closing balance
2018
US$m
2017
US$m
64
251
9
15
275
(5)
(1)
(6)
(3)
324
–
–
63
–
63
–
–
–
1
64
An associate is an entity that is neither a subsidiary nor joint arrangement, over which the Group has significant influence. Significant influence
is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
The Group’s investment in associates is accounted for using the equity method.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on its
investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the
associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of
the associate and its carrying value and recognises the amount in the Income Statement.
(a) Details of Associates
Associate
Lundin Gold Inc
SolGold plc
Azucar Minerals Ltd
Country of Incorporation
Canada
United Kingdom
Canada
Interest
Carrying Amount
2018
%
27.1%
14.5%
19.9%
2017
%
–
14.5%
–
2018
US$m
249
67
8
324
2017
US$m
–
64
–
64
Each of the Group’s associates are in the exploration and/or mine development phase and do not currently generate revenue. Further details
are as follows:
Lundin Gold Inc
Lundin Gold Inc (‘Lundin’) is a Canadian based mine development company, developing the Fruta del Norte gold project in Ecuador. Lundin is listed
on the Toronto Stock Exchange (‘TSX’) and the Nasdaq Stockholm.
On 26 March 2018, Newcrest acquired a 27.1% equity interest in Lundin for US$251 million (inclusive of transaction costs of US$1 million),
following a share subscription agreement entered into on 24 February 2018. In addition to holding 27.1% of the voting rights, in accordance
with the share subscription agreement, Newcrest has appointed two directors to the Board of Lundin and representation on the project advisory
committee of the Fruta del Norte gold project.
As at 30 June 2018, Lundin (on a 100% basis) has total assets of US$995 million, total liabilities of US$390 million and net assets of
US$605 million. Assets include cash of US$393 million, property, plant and equipment of US$285 million and mineral properties of
US$252 million. Liabilities include non-current borrowings of US$349 million.
As at 30 June 2018, the Group held 57,736,721 shares with a market value of US$200 million based on the closing share price on the TSX.
SolGold Plc
SolGold Plc (‘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 (‘LSE’) and the TSX.
The Group acquired an initial 10% interest in SolGold in October 2016 following the signing of a share subscription agreement with SolGold.
Under the agreement, 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, Newcrest appointed a director to the Board of SolGold.
As at 30 June 2018, the Group held 246,634,271 shares (2017: 219,772,271 shares) with a market value of US$74 million (2017:
US$111 million) based on the closing share price on the LSE.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
135
Azucar Minerals Ltd
Azucar Minerals Ltd (‘Azucar’) is a mineral exploration company listed on the TSX. Formerly Almadex Minerals Ltd, its assets include the El Cobre
copper/gold porphyry project near Veracruz, Mexico.
Newcrest acquired an initial 19.9% interest in Azucar in May 2018 for US$15 million following the signing of a subscription agreement with
Almadex Minerals Ltd. Under the agreement, subject to holding more than 10% of the share capital of Azucar, Newcrest has a right (but not an
obligation) to appoint a Director to the Board of Azucar. 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 Azucar. It was therefore determined that Newcrest has significant influence
under accounting standards from the date of the initial acquisition.
As at 30 June 2018, the Group held 14,391,568 shares with a market value of US$8 million based on the closing share price on the TSX.
Accounting Judgement and Estimate – Investment in Associates
Judgement is required in assessing whether there is objective evidence that the investment in each associate is impaired. At the reporting
date, the Group impaired its investment in Azucar Minerals Ltd.
30. BUSINESS DIVESTMENT
(a) Divestment of Bonikro in 2018
In December 2017, Newcrest signed an agreement to sell its 89.89% interest in the Bonikro operation, to a consortium consisting of F&M Gold
Resources Ltd and Africa Finance Corporation (‘the acquirer'). The divestment was completed on 28 March 2018, following the satisfaction of all
closing conditions precedent under the sale agreement. Consideration for the sale was US$81 million and comprised of:
• Cash of US$72 million cash; and
• Net smelter royalty on future ore mined at the Bonikro lease, with a fair value of US$9 million which has been recognised as a contingent
consideration asset (refer Note 21).
As a result of the sale agreement, Bonikro was classified as ‘held for sale’ and was disclosed as such in the 31 December 2017 half-year financial
statements. The carrying value of Bonikro was compared to its recoverable amount of US$80 million, which comprised consideration of
US$81 million less costs to dispose of US$1 million. This resulted in a write-down of US$15 million during the year.
The sale agreement had an economic effective date of 1 October 2017. The economic interest of Bonikro from 1 October 2017 to
28 March 2018 was to the benefit of the acquirer. The net cash generated by Bonikro during this period, which was to the benefit of the acquirer,
was US$23 million.
On sale completion, Newcrest released to the Income Statement from Other Comprehensive Income, a net foreign exchange gain of
US$29 million on historic funding arrangements that were designated as a hedge of the Group’s net investment in the Bonikro operations.
(b) Divestment of Hidden Valley in 2017
During the prior 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$22.5m. This represented Newcrest’s one-off
contribution towards future Hidden Valley closure liability partially offset by the option value of the possible future cash flows of the asset.
(c) Impact on Income Statement
The impact of the divestment of Bonikro in 2018 and of Hidden Valley in 2017 on the Income Statement is as follows:
Consideration received
Less: Transaction costs
Less: Written down value of net assets sold
Gain / (loss) on business divestment
Net investment hedge gain/ (loss) transferred to the
Income Statement on business divestment, net of tax
Write-down of property, plant and equipment
Total gain/(loss)
Note
30(d)
6
6
2018
US$m
2017
US$m
81
(1)
(80)
–
29
(15)
14
–
–
(10)
(10)
(62)
–
(72)
NEWCREST 2018 ANNUAL REPORT 136
30. BUSINESS DIVESTMENT (continued)
(d) Net Assets Disposed
The carrying value of the net assets of Bonikro in 2018 and of Hidden Valley in 2017 disposed of is as follows:
Book Value on Divestment
Assets
Cash and cash equivalents (1)
Receivables and prepayments
Inventories
Property, plant and equipment (2)
Total Assets
Liabilities
Trade and other payables
Provisions – rehabilitation
Provisions – other
Total Liabilities
Net assets divested
2018
US$m
2017
US$m
23
8
83
13
127
30
14
3
47
80
27
2
21
6
56
8
35
3
46
10
(1)
(2)
In 2018, the balance of US$23 million represents the net cash generated by Bonikro from 1 October 2017 to the 28 March 2018 which was divested in accordance
with the sale agreement. In 2017, the balance includes a cash contribution of US$22.5 million for the Hidden Valley rehabilitation liability.
In 2018, inclusive of a US$15 million write-down as per Note 6.
(e) Impact on Statement of Cash Flows
The cash inflow / (outflow) on divestment of Bonikro in 2018 and of Hidden Valley in 2017, net of cash held by the subsidiaries was as follows:
Cash consideration received
Less: Transaction costs paid
Less: Cash and cash equivalents divested
Total
2018
US$m
72
(1)
(23)
48
2017
US$m
–
–
(27)
(27)
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
137
OTHER
This section includes additional financial information and other disclosures that are required by the accounting standards and the
Corporations Act 2001.
31. COMMITMENTS
(a) Operating Lease Commitments
Future minimum rentals payable on non-cancellable operating leases due:
Within one year
Later than one year but not later than five years
Later than five years
Total
The Group leases assets for operations and office premises. The leases have an average life ranging
from 1 to 10 years. There are no restrictions placed upon the lessee by entering into these leases.
(b) Capital Expenditure Commitments
Capital expenditure commitments
This represents contracted capital expenditure.
2018
US$m
2017
US$m
30
41
13
84
27
29
–
56
63
54
32. EVENTS SUBSEQUENT TO REPORTING DATE
Subsequent to year-end, the Directors have determined to pay a final dividend for the year ended 30 June 2018 of US 11 cents per share, which
will be fully franked. The dividend will be paid on 5 October 2018. The total amount of the dividend is US$84 million. This dividend has not been
provided for in the 30 June 2018 financial statements.
There have been no other matters or events that have occurred subsequent to 30 June 2018 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.
33. CONTINGENCIES
(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 2016 financial year. In addition, during prior periods the ITO concluded audits of the 2010 to 2015 financial
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 assessment 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$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$95 million for the 2010 to 2015 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.
During the current year, PT NHM received an adverse ruling from the Indonesian Tax Court in relation to this dispute in relation to 30 June 2013
(tax in dispute US$8 million). PT NHM does not agree with the judgement and has appealed to the Indonesian Supreme Court. Given the Indonesian
Tax Court’s adverse ruling, PT NHM has written off US$8 million of tax receivable and recognised an income tax expense for the same amount.
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 US$88 million.
PT NHM has also continued to apply its own interpretation of the income tax rate applicable under the CoW to the 2017 and 2018 financial
years. 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$13 million (on a 100% basis).
It is noted that pursuant to the amendment to the CoW signed on 25 June 2018, PT NHM will be subject to the prevailing corporate tax rate,
which is the tax rate currently applied by PT NHM. On that basis, there should be no further dispute on the income tax rate applicable to PT NHM
for income tax years after 25 June 2018.
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.
(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$71 million (30 June 2017: US$76 million).
NEWCREST 2018 ANNUAL REPORT 138
34. 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
• Sign-On Share Plan
• Short Term Incentive Plan (‘STI 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 2018 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. 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
2018
2017
A$20.21
A$23.61
3 years
Nil
1.91%
35.0%
1.0%
A$18.21
A$20.99
3 years
Nil
1.83%
45.0%
1.0%
The rights have been valued using a combination of the Monte Carlo simulation and Black-Scholes models. 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.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
139
(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
2018
21 Nov 2017
15 Nov 2016
5 Nov 2015
12 Dec 2014
Total
2017
15 Nov 2016
5 Nov 2015
12 Dec 2014
4 Dec 2013
Total
Exercise date
Beginning of year
Granted
Exercised
Forfeited
End of year
Movement in Number of Rights During the Year
21 Nov 2020
15 Nov 2019
5 Nov 2018
7 Nov 2017
15 Nov 2019
5 Nov 2018
7 Nov 2017
16 Sep 2016
–
803,712
1,240,665
1,399,463
3,443,840
–
1,402,187
1,543,279
1,307,868
4,253,334
863,890
–
–
–
863,890
835,916
–
–
–
835,916
–
–
–
(790,812)
(46,010)
(104,038)
(128,469)
(608,651)
817,880
699,674
1,112,196
–
(790,812)
(887,168)
2,629,750
–
–
–
(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
All Performance Rights have a nil exercise price. The number of performance rights exercisable at year end is nil (2017: 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. The number of rights outstanding at
year end was 292,137 (2017: 444,052).
(d) STI Plan
This plan applies to certain employees including key management personnel. Under the STI Plan, for eligible employees, 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 198,180 shares were granted in respect to this plan (2017: 169,478 shares).
NEWCREST 2018 ANNUAL REPORT 140
35. 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.
36. 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:
Assurance-related services
Tax and advisory 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 financial reports of subsidiaries
2018
US$’000
11,688
93
241
8,233
20,255
2017
US$’000
10,850
26
231
7,803
18,910
2018
US$m
2017
US$m
1,227
1,155
417
359
776
223
224
447
2,003
1,602
184
164
23
17
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT NOTES TO THE
FINANCIAL STATEMENTS
141
37. 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 2018, 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 treatment
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 established 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 Group’s revenue from contracts with customers is derived from the sale of bullion and concentrate. The Group will adopt the new standard on
the required effective date of 1 July 2018.
As a result, the effect on the Group’s revenue recognition profile and policies will be as follows.
• The timing and measurement of sale of bullion is not affected.
• 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 of revenue recognised for the sale of
concentrate is not affected.
• AASB 15 introduced 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
on assessment performed against current year arrangements the impact is not material.
• Following the Group’s assessment of the requirements of AASB 15, it was determined that effective from 1 July 2018, treatment and refining
costs associated with the sale of concentrate will be presented as a reduction in revenue as this better reflects the amount the Group expects
to receive from the customer. This change in presentation will not result in an overall impact to profit after tax or equity of the Group.
The Group expects to use the modified retrospective approach of adoption. The cumulative effect on retained earnings recognised upon
adopting this standard on 1 July 2018 will not be material.
NEWCREST 2018 ANNUAL REPORT 142
37. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (continued)
(a) New accounting standards and interpretations issued but not yet effective and not yet adopted (continued)
(ii) AASB 16 Leases
AASB 16 introduces a single lessee accounting model, requiring the recognition of 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 party to contracts for leases of property, plant and equipment; including but not limited to: office premises, mining equipment and
contractor provided equipment. The Group is in the process of identifying which of its lease and other supply contracts will be within the scope
of the new standard.
Adoption of the new lease standard is expected to result in lower operating costs and higher finance and depreciation costs as the accounting profile
of the lease payments changes under the new model. The statement of financial position will also be impacted, with an increase to both non-current
assets (right-of-use assets) and liabilities (lease liabilities) expected. Cash flows from operating activities will increase as affected lease payments
will be now be classified as financing cash flows. Conversely, cash flows from financing activities will decrease for the same reason.
The Group is continuing to assess the impact of the new lease standard. The standard has an effective date for the Group of 1 July 2019.
The Group will adopt the new standard on the required effective date.
(iii) AASB Interpretation 23 – Uncertainty over income tax treatment
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 financial year
ended 30 June 2016.
NOTES TO THE FINANCIAL STATEMENTSFINANCIAL REPORT DIRECTORS'
DECLARATION
143
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 2018 and of its performance for the year ended on that date; and
(ii) Complying with Australian Accounting Standards and Corporations Regulations 2001.
(b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
(c) The financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International
Accounting Standards Board.
2.
3.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the
Corporations Act 2001 for the financial year ended 30 June 2018.
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 27 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
22 August 2018
Melbourne
Sandeep Biswas
Managing Director and Chief Executive Officer
NEWCREST 2018 ANNUAL REPORT
144
INDEPENDENT
AUDITOR'S REPORT
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 2018, 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
2018 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.
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145
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.
1. Assessment of the carrying value of non-current assets
Why significant
How our audit addressed the key audit matter
As at 30 June 2018 the Group’s consolidated
statement of financial position includes property,
plant and equipment of $8,156 million and other
intangible assets of $42 million. Group policy is to
assess for indicators of impairment and
impairment reversal annually or more frequently
if indicators of impairment exist, for each cash
generating unit (CGU).
At 30 June 2018 the Group determined that:
a) Indicators of impairment existed for the Telfer
CGU, arising from changes to the mine plan and
the operating and financial performance for the
year. An assessment of the recoverable
amount was performed for the Telfer CGU and
a post-tax impairment charge of $188 million
was recorded. The impairment was allocated to
property, plant and equipment assets.
b) Indicators of potential impairment existed for
the Gosowong and Lihir CGU’s. The Group
conducted a detailed review of recoverable
amounts of each CGU. No impairment charge
was required.
The Group also considered if previous impairment
of the Lihir CGU assets, other than goodwill,
should be reversed, concluding that an
impairment reversal was not required.
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 disclosures 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
determined that indicators existed, we evaluated the
Group’s calculations of the recoverable amount of each
CGU.
With the involvement of our valuation specialists, we
assessed the reasonableness of the board approved cash
flow projections, the value ascribed to unmined
resources, exploration potential and key macro-
economic assumptions used in the impairment models.
The Group 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 competence, qualifications and the
objectivity of the internal and external experts, the
methodology applied, and we have also 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 CGU’s to record an impairment charge or
reversal, we considered the likelihood of such a
movement in those key assumptions arising.
In addition, we assessed the adequacy of the disclosures
included in Note 12 Impairment of Non-Financial Assets.
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NEWCREST 2018 ANNUAL REPORT
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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 Work
(CoW) for the years (2010 to 2016) and is seeking
to recover the additional tax paid totaling $96
million of which $88 million is recorded as tax
receivable.
Disclosure in relation to tax matters can be found
at Note 33 Contingencies.
3. Mine rehabilitation provisions
Why significant
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 2018 the Group has recorded $329
million as mine rehabilitation provisions. The
estimation of mine 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 mine rehabilitation
provisions can be found in Note 18 Provisions.
How our audit addressed the key audit matter
We evaluated the Group’s 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 and tax
returns.
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 competence, qualifications and
objectivity of the independent tax and legal experts and
examination of relevant supporting evidence.
We assessed the adequacy of the disclosures included
in Note 33 Contingencies.
How our audit addressed the key audit matter
We evaluated the Group’s calculations for the mine
rehabilitation provision at each mine.
The Group has used internal and external experts to
support the estimation of the mine rehabilitation
provisions.
With the support of our environmental specialists we
assessed the competence, qualifications and objectivity of
the internal and external experts and assessed the
reasonableness of the assumptions in the closure plans
and cost estimates used by the Group’s internal and
external experts, and that the information provided by the
Group’s internal and external experts has been
appropriately reflected in the calculation of the mine
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.
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INDEPENDENT
AUDITOR'S REPORT
147
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 2018 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, with the exception of the Remuneration Report
and our related assurance opinion.
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
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NEWCREST 2018 ANNUAL REPORT
148
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
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FINANCIAL REPORT
INDEPENDENT
AUDITOR'S REPORT
149
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 2018.
In our opinion, the Remuneration Report of Newcrest Mining Limited for the year ended 30 June
2018, 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
Trent van Veen
Partner
Melbourne
22 August 2018
Matthew Honey
Partner
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
NEWCREST 2018 ANNUAL REPORT
150
SHAREHOLDER
INFORMATION
SHAREHOLDER INFORMATION
ISSUED CAPITAL (ON 4 SEPTEMBER 2018)
Title of Class
Ordinary
TWENTY LARGEST SHAREHOLDERS AS AT 4 SEPTEMBER 2018
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
1
2
3
4
5
6
7
8
9
10 NATIONAL NOMINEES LIMITED
11 AMP LIFE LIMITED
12 BNP PARIBAS NOMINEES PTY LTD
13 UBS NOMINEES PTY LTD
14 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
15 ECAPITAL NOMINEES PTY LIMITED
16 PACIFIC CUSTODIANS PTY LIMITED
17 NETWEALTH INVESTMENTS LIMITED
18 PACIFIC CUSTODIANS PTY LIMITED
19 NATIONAL NOMINEES LIMITED
20 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
Number of
Shareholders
Number
of Shares
57,969 767,742,814
Number
of Shares
% Issued
Capital
385,242,634
152,043,806
83,386,549
22,633,105
10,623,177
9,534,846
5,573,619
5,149,084
4,133,757
3,537,857
2,445,436
2,256,911
1,678,441
1,493,141
1,331,140
1,232,337
1,225,882
1,115,014
1,000,000
900,151
50.18
19.80
10.86
2.95
1.38
1.24
0.73
0.67
0.54
0.46
0.32
0.29
0.22
0.19
0.17
0.16
0.16
0.15
0.13
0.12
Total
696,536,887
90.73
SUBSTANTIAL SHAREHOLDERS1 AS AT 4 SEPTEMBER 2018
Name
BlackRock Group
Allan Gray Australia and its related bodies corporate
First Eagle Investment Management and its associated entities
Commonwealth Bank of Australia and its related bodies corporate
The Vanguard Group, Inc.
1 As notified to Newcrest under section 671B of the Corporations Act 2001.
DISTRIBUTION OF SHAREHOLDERS AS AT 4 SEPTEMBER 2018
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 Shares
% Issued
Capital
94,589,268
59,544,567
47,128,837
40,213,974
38,436,257
12.32
7.75
6.14
5.24
5.006
Number of
Shareholders
Number
of Shares
% Issued
Capital
44,023
12,202
1,119
566
13,820,781
26,058,517
7,946,605
12,362,466
59 707,554,445
1.80
3.39
1.04
1.61
92.16
57,969 767,742,814
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares was 4,293 (based on the closing market price on
4 September 2018).
FINANCIAL REPORT SHAREHOLDER
INFORMATION
151
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 11.0 cents per share for the year ended 30 June 2018. An interim dividend of US 7.5 cents per
share was paid on 2 May 2018.
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 2018 financial year, the net movement for ADRs was negative 42,260 and at year-end a net 4,664,260 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:
• check your current holding and balances;
• update your electronic communication instructions;
• update your address and bank details;
• confirm whether you have lodged your Tax File Number (TFN), Australian Business Number (ABN) or exemption;
• check transaction and dividend history;
• enter your email address;
• download a variety of instruction forms; 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.
NEWCREST 2018 ANNUAL REPORT 152
FIVE YEAR SUMMARY
For the 12 months ended 30 June(1)
2018
2017
2016
2015
2014
FIVE YEAR SUMMARY
Gold Production (ounces)(2)
Cadia(2)
Lihir
Telfer
Gosowong
Bonikro(3)
Hidden Valley(4)
Total
Copper Production (tonnes)(2)
Silver Production (ounces)
All-In Sustaining Cost (US$ per ounce)
Cash Flow (US$m)
Cash flow from operations
Capital expenditure
Exploration expenditure
Free cash flow(5)
Profit and Loss (US$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 (percent)
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
599,717
955,156
425,536
251,390
114,555
–
2,346,354
77,975
935,856
835
619,606
940,060
386,242
295,876
128,327
10,520
2,380,630
83,941
1,168,812
787
668,773
900,034
462,461
197,463
137,696
72,566
2,438,994
83,070
2,263,837
762
667,418
688,714
520,309
331,555
119,970
94,601
2,422,568
96,816
2,181,419
780
592,832
721,264
536,342
344,747
94,994
105,845
2,396,023
86,118
2,324,210
897
1,434
541
72
601
3,562
791
118
202
459
26.3
59.8
18.5
1,467
582
58
739
3,477
689
164
308
394
40.2
51.4
15.0
1,241
471
44
814
3,295
698
118
332
323
43.3
42.1
7.5
1,280
471
38
854
3,604
574
335
376
424
49.1
55.3
Nil
11,480
4,018
7,462
11,583
4,049
7,534
11,191
4,071
7,120
11,803
4,846
6,957
0.7
12.2
8.8
768
62
120
1.1
16.6
7.9
767
65
130
1.6
22.8
6.2
767
69
140
2.1
29.3
7.8
767
75
140
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
Includes pre-commissioning production (2014 to 2017).
(1) All financial data presented in this summary is quoted in US dollars unless otherwise stated.
(2)
(3) Production from Bonikro includes production up to the divestment date of 28 March 2018.
(4) Production from Hidden Valley includes production up to the economic effective disposal date of 31 August 2016.
(5) Free cash flow 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) Ore Reserves and Mineral Resources are as at 31 December 2017 for 2018, 31 December 2016 for 2017, 31 December 2015 for 2016, 31 December 2014 for 2015
and 31 December 2013 for 2014.
FINANCIAL REPORT
NEWCREST
2018 ANNUAL REPORT
CORPORATE DIRECTORY
153
CORPORATE DIRECTORY
STOCK EXCHANGE LISTINGS
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
Docklands, Victoria 3008
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
McGregor 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: brenda@online.net.pg
INVESTOR INFORMATION
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
Tamara Brown
Vice President Investor Relations and
Corporate Development (Americas)
Newcrest Mining Limited
First Canadian Place
100 King Street West – Suite 5600
Toronto, ON, M5X 1C9, Canada
T: + 1 647 255 3139
E: tamara.brown@newcrest.com.au
AMERICAN DEPOSITARY RECEIPTS
(ADRS)
BNY Mellon
Shareowner Services
PO Box 505000
Louisville, KY 40233-5000
USA
T: + 1 888 BNY ADRS or +1888 269 2377
(toll free within the US)
International Callers: +1 201 680 6825
E: shrrelations@bnymellon.com
www. mybnymdr.com
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, NCD
Papua New Guinea
T: + 675 321 7711
F: + 675 321 4705
COMPANY EVENTS
Annual General Meeting
14 November 2018 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.