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Coeur Mining2020
Annual
Report
We are well positioned to
deliver on our near-term
growth options of Havieron,
Red Chris and Wafi-Golpu.
Sandeep Biswas, Managing Director and Chief Executive Officer
OUR VISION
To be the Miner of ChoiceTM
for our people, shareholders,
host communities, partners
and suppliers.
LIHIR, PAPUA NEW GUINEA
1
OUR COMPANY
Asset Overview
Key Achievements for FY20
Chairman’s Report
Managing Director’s Review
Safety & Sustainability
People
Organic Growth Opportunities
Newcrest’s Value Proposition
The Board
Mineral Resources and Ore Reserves
Directors’ Report
Corporate Directory
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06
08
10
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14
16
18
20
24
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184
OUR MISSION
To safely deliver
superior returns to our
stakeholders from finding,
developing and operating
gold/copper mines.
NEWCREST 2020 ANNUAL REPORT 2
FORGING A STRONGER NEWCREST
Forging a Stronger Newcrest
The health and safety of
our people 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.
To achieve Newcrest’s full potential
for our stakeholders, our company
strategy focuses on five key pillars,
each with associated aspirations which
were set in February 2016.
Safety &
sustainability
People
Operating
performance
Technology
& innovation
Profitable
growth
Our aspirations
Zero fatalities and
industry-leading
TRIFR by end
of CY20
Our edge
First quartile
organisational health
by end of CY20
First quartile Group
AISC per ounce by
end of CY20
5 breakthrough
successes by end
of CY20
Exposure to five tier
one orebodies by
end of CY20
(operations,
development
projects, or equity
investments)
Being agile, bold and having an owner’s mindset
Newcrest’s three key
external stakeholders are:
3
Communities
Newcrest’s mining and exploration
activities have the potential to
significantly impact the communities
in which we operate.
A planned, transparent and constructive
approach to community engagement and
development is critical to maintaining
Newcrest’s social licence to operate and
ensures that our communities benefit from
Newcrest’s operations. We are conscious of
the need to balance community expectations
against a project’s ability to deliver returns
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 our 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, including road access
and maintenance, electricity and clean
water supply;
– income-generating activities, including
local business development, the supply
of goods and services and support for
local agricultural businesses; and
– improved community lifestyle, including
religious and sporting facilities and
sponsorship of both local and regional
events and activities.
Shareholders
To achieve our mission of safely
delivering superior returns to our
shareholders through the discovery
and development of gold/copper
orebodies and from our operating
gold/copper mines, we strive to:
– safely realise the full potential of our
– maintain capital discipline when
existing operating assets;
– apply our technical expertise to unlock
value in orebodies we currently own or
can acquire;
– leverage our exploration and technical
expertise to find, or gain access by
early-stage entry to, new gold/copper
orebodies;
deploying all growth and exploration
opportunities to ensure financial strength
throughout the capital cycle; and
– provide returns to shareholders through
share price performance and dividends
in line with our dividend policy.
Government
We believe Newcrest’s activities
positively contribute to the economy
of the jurisdictions in which we
operate through tax, royalties
and other socio-economic benefits
at the community level.
Newcrest recognises the importance to our
long-term success of developing meaningful
relationships with all levels of government.
We strive to proactively engage with
governments in the jurisdictions in which we
operate to understand their views about,
and expectations of, our activities. Our
engagement can cover a wider range of areas
including economic, environmental and social
responsibility. 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 sets
out 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 2020 ANNUAL REPORT 4
ASSET OVERVIEW
Asset Overview
ASSETS
FY20
production
Mining
method
Reserves and
resources1
Cadia
Orange, New South Wales
Telfer
Pilbara, Western Australia
Lihir
New Ireland Province, Papua New Guinea
843koz
Gold
96kt
Copper
393koz
Gold
16kt
Copper
776koz
Gold
Red Chris
British Columbia, Canada
39koz
Gold 2
25kt
Copper 2
Underground
Open pit
ADVANCED PROJECTS
Wafi-Golpu
Morobe Province, Papua New Guinea
POTENTIAL:
Golpu: Underground copper-gold mine; Wafi: Open pit gold-copper
mine; Nambonga: Underground gold-copper mine
Ore Reserve
5.5moz
Gold 3
2.5mt
Copper
Mineral Resource
13moz
Gold 4
4.4mt
Copper
1. Mineral Resources and Ore Reserves are as at 31 December 2019. See page 28 to 31 of this Annual Report.
2. Production outcomes represent Newcrest’s 70% ownership for the period from 15 August 2019 to 30 June 2020.
3. Golpu.
4.
Inclusive of Golpu, Wafi and Nambonga deposits.
Ore Reserve:
21moz gold & 4.3mt copper
Mineral Resource:
37moz gold & 8.2mt copper
Ownership:
100% Newcrest
Ore Reserve:
1.4moz gold & 0.18mt copper
Mineral Resource:
5.4moz gold & 0.54mt copper
Ownership:
100% Newcrest
Ore Reserve:
23moz gold
Mineral Resource:
49moz gold
Ownership:
100% Newcrest
Ownership:
70% Newcrest
30% Imperial Metals Limited
STATUS:
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
5
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NEWCREST 2020 ANNUAL REPORT
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ASSETS
ADVANCED PROJECTS
EXPLORATION
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EXPLORATION PROJECTS
AUSTRALIA
Havieron Project (FI)
Second Junction Reefs project (JV)
Encounter Alliance & JVs
Prodigy Gold NL (FI)
Isa North (100%)
Bulimba (100%)
Tenant East (100%)
Wilki Project Antipa (FI)
PAPUA NEW GUINEA
ECUADOR
Wamum (100%)
CANADA
Red Chris JV (70% JV)
GJ Project (100%)
NORTH AMERICA
Jarbidge (O)
Lundin Gold (EI)
Lundin Gold (JV)
SolGold (EI)
Cana Brava project (O & FI)
Porphyry targets (100%)
MEXICO
Azucar Minerals (EI)
CHILE
Altazor (O & FI)
Vicuna (O & FI)
Mioceno (O & FI)
Gorbea (O & FI)
KEY
FI = Farm-in
JV = Joint Venture
100% = 100% Newcrest tenement
EI = Equity investment in company
O = Option
6
KEY ACHIEVEMENTS FOR FY20
Key Achievements for FY20
Profit and Cash Flow
Statutory profit1 of $647 million
Underlying profit2,3 of $750 million
EBITDA margin2 of 46.8%,
EBIT2 margin of 30.4%
Cash flow from operating
activities of $1,471 million
Free cash flow before M&A
activity2 of
$670m
Balance Sheet
Leverage ratio2 of 0.3 times at
30 June 2020
Gearing5 of 6.8% at 30 June 2020
Cash and undrawn committed
facilities at 30 June 2020 of
approximately $3.5 billion
Extended and smoothed maturity
profile on Newcrest’s corporate
bonds following debt refinance
Successful equity raising
A$1.2bn
7
1
Y
F
394
84
719
6
1
Y
F
83
323
594
2,439
Total Dividends for FY20
US25cps
25.0
22.0
18.5
15.0
7.5
FY20
FY19
FY18
FY17
FY16
8
1
Y
F
459
78
774
2,381
2,346
Profit and Cash Flow
All-in Sustaining Cost2,7
($/ounce)
EBITDA2,4
($M)
Statutory Profit1
($M)
FY20
FY19
FY18
FY17
FY16
862
738
835
787
762
1,835
1,670
1,565
1,408
1,292
647
561
202
308
332
FY20
Underlying
profit 2,3
($m)
$750m
Copper
production
138kt
EBIT2,4
($m)
$1.2bn
Gold production
2.2moz
9
1
Y
F
561
106
924
2,488
7
Progress against our aspirations
FY20
SAFETY
Underlying
profit 2,3
($m)
$750m
Copper
production
138kt
EBIT2,4
($m)
Zero fatalities and industry leading TRIFR6 by end of 2020
– Over 5 years free of fatalities and a low TRIFR of 2.6 per million
hours worked
ORGANISATIONAL HEALTH
First Quartile Organisational Health by end of 2020
– Achieved first quartile organisational health score in the 2019 survey
OPERATIONAL PERFORMANCE
First Quartile AISC per ounce by end of 2020
– First quartile All-In Sustaining Cost (AISC)2,7 of $862 per ounce
– AISC margin of $668 per ounce
TECHNOLOGY & INNOVATION
5 breakthrough successes by end of 2020
Achieved 5 breakthroughs:
– High draw, deep caving, material increase in draw height and depth
– Selective refractory ore oxidation reduces oxygen requirement
at Lihir
– Coarse ore flotation, reducing grinding energy intensity and
improving recovery at Cadia
– Successful completion of undercutless caving trial at Telfer
– Successful trialling of a new generation of high temperature
electronic detonators at Lihir
GROWTH
$1.2bn
Exposure to 5 Tier One orebodies by end of 2020
– Tier One orebodies
– Cadia
– Lihir
– Red Chris (70% ownership with potential to be a Tier 1 orebody)
– Wafi-Golpu (50% ownership)
– Fruta del Norte (32% equity ownership and acquisition of
financing facilities8)
Gold production
2.2moz
1. Statutory profit is profit after tax attributable to the owners of the Company.
2. For this reference and other references to non-IFRS financial measures throughout
this annual report, refer to the information in the Operating and Financial Review
within the Directors’ Report regarding the inclusion and definitions of non-IFRS
financial measures.
3. Underlying profit is profit after tax before significant items attributable to the
owners of the Company. Refer to page 61 for further details.
4. EBITDA is ‘Earnings before interest, tax, depreciation and amortisation and
significant items’. EBIT is ‘Earnings before interest, tax and significant items’. EBITDA
and EBIT are used to measure segment performance and have been extracted from
Note 4 of the Financial Statements on page 121.
5. Gearing is calculated as net debt divided by net debt and total equity as at
30 June. Refer to page 60 for further details.
6. Total Recordable Injury Frequency Rate (per million hours worked).
7. AISC per ounce is determined in accordance with the updated World Gold Council
Guidance Note on Non-GAAP Metrics released in November 2018. Newcrest fully
adopted the updated Guidance Note from 1 July 2019, following the adoption
of the updated leasing standard (IFRS 16) in its financial statements.
8. Comprising the Gold Prepay Credit Agreement, the Stream Credit Facility
Agreement and the Offtake Agreement in respect of Lundin Gold Inc’s
Fruta del Norte mine.
9
1
Y
F
561
106
924
2,488
Cash Flow from Operating Activities
($M)
FY20
FY19
FY18
FY17
FY16
862
1,471
1,487
738
1,434
835
787
1,467
1,241
762
7
1
Y
F
394
84
719
8
1
Y
F
459
78
774
2,381
2,346
6
1
Y
F
83
323
594
2,439
NEWCREST 2020 ANNUAL REPORT
8
CHAIRMAN’S REPORT
Chairman’s Report
• Delivered against our profitable growth pillar.
• Announced our A$20 million Community Support Fund.
• Successfully completed a A$1.2 billion equity raising.
• Paying a total year dividend of US 25 cents per share.
The last financial year has
seen Newcrest continue to
deliver against its profitable
growth pillar.
In August 2019, Newcrest successfully
completed the acquisition of a 70% interest
in, and operatorship of, the Red Chris mine
in Canada and immediately commenced the
implementation of a safety and operational
transformation. In October 2019, the
Board approved the first stage of the
Cadia Expansion Project, which includes
the development of the PC2-3 block cave
and an increase in the nameplate capacity
of the process plant to 33mtpa. During the
period we also increased our investment in
Lundin Gold, the owner of the Tier 1 Fruta
del Norte mine, to 32% and acquired finance
facilities for the Fruta del Norte mine which
increase our direct exposure to the cash
flows it generates.
Newcrest’s safety transformation plan
continues to yield benefits with another
twelve-month period free of fatalities
or life-changing injuries and a continued
improvement in injury rates. The second
half of the financial year saw the COVID-19
global pandemic impact lives and economies.
Due to early and considered actions
implemented by Newcrest, we did not have
any COVID-19 related interruptions to our
operations in the financial year.
This would not have been possible without
the commitment of our people who safely
and efficiently adhered and adapted to our
precautionary measures, and the support
of our host communities and governments,
which aided in minimising any potential
disruptions to our business.
In April 2020, we announced our
A$20 million Community Support Fund
which is supporting our host communities
with the challenges associated with the
COVID-19 pandemic. Since launching
the Fund, a number of health, livelihood
and economic recovery initiatives have
been funded such as a partnership
with the University of Queensland to
support COVID-19 vaccine research, a
contribution to the cost of new lost-cost
ventilators and partnering with international
organisations to deliver medical supplies,
equipment, infrastructure and services in
Papua New Guinea.
The Board and I were pleased to see the
support from our shareholders in response
to the equity raising in the period. We
successfully completed a A$1 billion
placement for institutional investors and
raised A$200 million from our upsized Share
Placement Plan. These funds, together
with our free cash flow generation, ensure
that Newcrest remains in a strong financial
position and is well positioned to fund its
future growth options.
Taking into account our strong financial
position and considering our expected future
capital requirements and market conditions,
the Board has determined to pay a fully
franked final dividend of US 17.5 cents per
share, taking our total dividend for the year to
US 25 cents per share. This equates to total
dividends for the financial year representing
30% of the full year free cash flow before
NEWCREST 2020 ANNUAL REPORT
9
Newcrest acquired
70%
of the Red Chris mine
A$20m
COVID-19 Community Support
Fund announced
Total dividends for FY20
US25cps
M&A activity. This full year dividend is in line
with our dividend policy that states that the
total dividend payout is at least 10 to 30%
of annual free cash flow, with the total annual
dividend being no less than US15 cents per
share. This is the fifth consecutive year of
increasing dividend payments to shareholders.
In September 2020 we announced
the resignation of Xiaoling Liu and the
appointment of Sally-Anne Layman to
the Board. I would like to thank Xiaoling
for her strong contribution to the Board
and its Committees over the last 5 years,
bringing to bear her extensive global
mining experience. With her considerable
resources and corporate finance experience,
I expect Sally-Anne will make an excellent
contribution to the Board.
Newcrest holds a unique position in the
market, with its long reserve life, low cost
production, organic growth options, strong
exploration and technical capabilities and a
financially robust balance sheet. The Board
is confident about the Company’s prospects
under the leadership of a strong and
committed management team. We thank you
for your ongoing support.
Community
Support Fund
Supporting our communities during crisis
In April 2020, Newcrest established a
A$20 million Community Support Fund
to support host communities face the
challenges associated with the COVID-19
pandemic.
Papua New Guinea has been a priority, with
about half of the Fund allocated to support the
country’s preparations for and management
of the pandemic. Initiatives funded to date
include a collaboration with UNICEF to procure
personal protective equipment for frontline
healthcare workers and directly delivered the
refurbishment of all health care facilities in the
Lihir Group of Islands.
In Australia, the Fund has been focused on
the provision of support to the communities
surrounding our Cadia and Telfer operations,
and Melbourne headquarters. This has
included economic recovery assistance for
small businesses in the local government
areas of Blayney, Cabonne and Orange
and the establishment of isolation
accommodation for the Martu People,
in Western Australia.
We have also contributed A$1 million
towards the University of Queensland’s
COVID-19 vaccine research which
progressed to human trials in July 2020
and A$200,000 towards supporting
the development of a low-cost
Australian ventilator.
In Ecuador, our support through the Fund
has delivered health containment, response
and urgent humanitarian relief for the
communities which surround our interests in
the provinces of Zamora-Chinchipe and Loja.
To support the communities surrounding
the Red Chris operation in British Columbia,
initiatives have included the provision of
food, mental health promotion activities,
medical transport services, support for the
Tahltan Fish Camp, and an economic recovery
project for small businesses.
We will continually review the needs of our
communities in the COVID-19 environment
to ensure the benefit of the Fund is be
fully realised.
Peter Hay
Chairman
10
MANAGING DIRECTOR’S REVIEW
Managing Director’s Review
• Zero fatalities or life-changing injuries during the period.
• Newcrest produced 2.2 million ounces of gold.
• Refreshed our Diversity and Inclusion Strategy.
• We are in a strong financial position as we move into our next growth chapter.
During the period we
had no fatalities or
life-changing injuries.
On an underlying basis, we recorded a
total recordable injury frequency rate
of 2.01 per million hours worked, which
is a 13% improvement on the prior year.
Including Red Chris, our total recordable
injury frequency rate was 2.6 per million
hours worked which reflects that Red
Chris currently has a higher average injury
rate than our other Newcrest operations.
Our Safety Transformation Plan has
been in place for almost five years and
is continuing to yield benefits. We are
implementing our Safety Transformation
Plan at Red Chris following our
acquisition in August 2019 which is
starting to help deliver improvements in
Red Chris’ injury rates, as reported over
the course of the year.
We can never be complacent when it comes
to safety and our aim remains to eliminate
fatalities and life-changing injuries from
our business.
I am pleased to report that we did not have
any positive cases of COVID-19 across our
workforce in the financial year. Subsequent
to the end of the financial year, we had our
first positive case of COVID-19 detected
in an employee who was in isolation, having
returned to Lihir. The controls we had in
place were effective in detecting COVID-19
and ensuring that it was not spread to
others at Lihir and there was no interruption
to our business. Our track record and
implementation of effective preventative
actions has only been possible through
the support of our host communities and
governments in the jurisdictions in which we
operate and the adherence to safe practices
by our people. We will remain vigilant on this
front to ensure the risk of further infection
and interruption to our business and the wider
community is minimised while COVID-19
remains an enduring challenge for society.
For the financial year, Newcrest produced
2.2 million ounces of gold at an All-In
Sustaining Cost of $862 per ounce,
generating a statutory and underlying profit
of $647 million and $750 million respectively.
During the period Newcrest invested
~$1.3 billion to acquire a 70% interest in,
and operatorship of, the Red Chris mine in
Canada, as well as additional investments
in Lundin Gold to increase our interest
to 32% together with the acquisition of
finance facilities for the Fruta del Norte mine
which increase our direct exposure to the
cashflows generated by this Tier 1 asset.
To fund the acquisition of finance facilities
for the Fruta del Norte mine and future
organic growth options such as the declines
at both Havieron and Red Chris, Newcrest
undertook a successful equity raising for
A$1.2 billion in the period. We also took
the opportunity to refinance our existing
corporate bonds in the period, which allowed
us to lower the cost of our debt and smooth
and extend our debt maturity profile.
Cadia had another outstanding year,
producing 843koz of gold and achieving
record mined tonnes from Cadia East at a
volume equivalent to 31.8mtpa and a record
annualised mill throughput rate of 34.2mpta
in the June quarter. This strong operating
performance enabled Cadia to generate
record free cash flow of $991 million.
1. Excluding Gosowong from the date of divestment and excluding Red Chris in its first part year of Newcrest operation.
NEWCREST 2020 ANNUAL REPORT
11
Newcrest produced
2.2moz
of gold for the financial year
All-In Sustaining Cost
$862
per ounce
Underlying profit
$750m
As foreshadowed throughout the year, Lihir’s
performance in the period was impacted
by the presentation of difficult mining and
geothermal conditions and an increase to the
strip ratio as the mine transitions to the Kapit
orebody. This resulted in a higher proportion
of stockpile material being delivered to the
process plant which impacted head grades
and recovery. Lihir produced 776koz of gold
and delivered free cash flow of $233 million
in the period.
Telfer produced 393koz of gold and
generated $51 million of free cash flow,
which was a $43 million improvement on
the prior year.
In March 2020 we finalised the sale of our
75% interest in the Gosowong mine for total
consideration of $90 million.
During the period we announced that we
had earned a 40% interest in the Havieron
project, located 45km east of our Telfer
operation. The Havieron project is operated
by Newcrest under a farm-in agreement
with Greatland Gold Plc. Under the terms of
the farm-in Newcrest can earn up to a 70%
interest through expenditure of $65 million
and the completion of a series of exploration
and development milestones.
Drilling results to date continue to expand
and demonstrate the continuity of higher
grade mineralisation and have identified
mineralised breccias proximal to higher
grade mineralisation. Newcrest has recently
obtained the mining lease for the project
which is necessary to be able to commence a
decline, which will allow us to accelerate the
exploration and development timetable for
this exciting new orebody. We hope to start
work on the decline by the end of calendar
year 2020 or early 2021.
We currently have two drilling programs
underway at Red Chris. The first is in
the East Zone and is designed to obtain
geological, geotechnical and metallurgical
data to support future studies for
underground block cave mining. The second
is the Brownfields Exploration Program
which is focused on searching for higher
grade mineralisation within the Red Chris
porphyry corridor.
In the East Zone, infill resource drilling results
since acquisition have confirmed the presence
of multiple discrete higher grade ‘pods’ of
mineralisation. Drilling results returned to
date continue to confirm the potential of
finding additional discrete high grade ‘pods’
of mineralisation in the porphyry corridor.
Newcrest has a history of delivering value
through the application of technology and
innovation. Our current leading position
within the gold industry in block cave mining
is a direct outcome of this. As the world’s
remaining ore deposits become deeper and
lower grade, block cave mining with its high
productivity and low operating costs has
become the underground mining method
of choice when the orebody warrants it.
We are pleased to announce that we have
now delivered five breakthrough successes
against our Technology and Innovation
Pillar, with the successful trialling of a new
generation of high temperature electronic
detonators at Lihir and the completion of
our undercutless caving trial at Telfer.
Over the course of the financial year we
continued to integrate our sustainability
objectives and targets throughout the
business. During the financial year we
received formal endorsement from the
International Council on Mining and Metals
(ICMM) confirming that our Sustainability
Framework fully aligns to the ICMM
membership requirements.
We also progressed the implementation of
our sustainability-related Climate Change,
Water Stewardship, Biodiversity and Social
Performance policies.
The achievements made throughout the
year would not have been possible without
the commitment of our people. Our people
at Lihir, Telfer and Red Chris agreed to
extended rosters to support the operations
following the COVID-19 pandemic, whilst
people at Cadia and our corporate offices
have had to adapt to working from home
where possible in these unprecedented
circumstances.
During the year, the Board and Executive
Committee supported an initiative to refresh
our Diversity and Inclusion Strategy to
leverage our strengths, address our gaps and
develop a multi-year action plan to meet our
aspirations. Our continued focus under this
strategy is to increase the representation
of women across our business globally,
especially in management and leadership
positions, and improve the representation
of indigenous and local and national
employees globally.
We enter the new financial year in a strong
financial position as we move into our next
growth chapter. Thank you to our people,
shareholders, suppliers, customers and local
communities for your continued support.
Sandeep Biswas
Managing Director and
Chief Executive Officer
12
SAFETY & SUSTAINABILITY
Safety & Sustainability
OUR MISSION
To safely deliver superior returns to our
stakeholders from finding, developing
and operating gold/copper mines.
At Newcrest, safety and
sustainability is the foundation
for everything we do.
Our goal is unchanged from that which
has driven us forward over the last few
years. It is to create a work environment
where everyone can work safely and
healthily every day, both physically and
emotionally. We empower our people to
be safe, in an environment in which they
have the authority and responsibility
for their own safety and the safety of
others. We continue to strive to create
an environment where everyone can
make a difference and share their
concerns, insights and learnings with
others, no matter where our people are
or what they do.
Our Safety Transformation Plan, established
in 2015, continues to direct our efforts
and deliver results, and we will never
become complacent. An ongoing focus on
culture, controls and systems is required
to continue to improve our safety and
health performance.
– Our safety culture is centred around
NewSafe, which drives our understanding
of why people do the things they do, and
how we all can influence the right safety
outcomes.
– Our Critical Control Management
program puts in place the review, approval
and verification steps for high-risk
tasks. It helps our workforce identify
which events could cause fatalities or
life-changing injuries and verify that
preventative controls are in place.
– Process Safety is aimed at managing
chemical and energy hazards through the
proper design and operation of our plants.
It helps reduce the risk of the types of
events that can cause multiple fatalities.
Our overarching aim remains the elimination
of fatalities and life-changing injuries from
our business and in the 2020 financial year
we had no fatalities or life-changing injuries.
We are pleased to have been able to further
reduce our level of injuries in the period. On
a like-for-like basis, we ended the year with
a total recordable injury frequency rate
LIHIR, PAPUA NEW GUINEA
(TRIFR) of 2.01 per million hours worked,
which is a 13% improvement on the prior
year. We also experienced a significant
reduction in injuries at Red Chris since we
took over management, with our Group
TRIFR including Red Chris being 2.6. These
are industry-leading low levels of injury and
we remain focused on achieving further
reductions in injury rates.
We have also made progress in occupational
health and hygiene and contributed to
enhancing the health of our local communities.
Across Newcrest we have worked hard to
respond to the COVID-19 pandemic threat
and, in cooperation with the communities
within which we operate, we were successful
in keeping our sites COVID-19 free in the
financial year. This achievement was made
possible through the significant efforts
of our workforce and support from their
families (e.g. adapting to roster changes and
quarantine periods), local communities and
host governments which we recognise and
appreciate. The risk from COVID-19 remains
with us and we will continue to be vigilant with
our preventative controls.
We made significant progress in developing
and implementing exposure reduction
plans for key hygiene risks including silica,
diesel particulates and noise. We also
focused on better managing fatigue risks.
During the year, we introduced the three
pillars of our Health, Hygiene and Wellness
framework which includes Healthy Business,
Healthy Workers and Wellness Matters.
1. Excluding Gosowong from the date of divestment and excluding Red Chris in its first part year of Newcrest operation.
13
Under our Wellness Matters program, and in
response to the challenges COVID-19 may
have had on our employees, we were able
to introduce ‘Thinking Well’ which covers
mental health.
Our Sustainability Framework builds on
Newcrest’s transformation plan to clearly
articulate our vision and commitment to
sustainability, and how we will deliver on our
commitments through a series of supporting
objectives and targets.
During the 2020 financial year we were
pleased to have our membership of the
International Council on Mining and Metals
(ICMM) formally confirmed following a
comprehensive independent assessment.
During the year the World Gold Council also
launched a set of Responsible Gold Mining
Principles that Newcrest has committed to
as a member of the Council. The Newcrest
Sustainability Framework incorporates
the ICMM’s 10 Principles for Sustainable
Development and the World Gold Council’s
Responsible Gold Mining Principles
(which have a three year timeframe for
implementation). We also progressed
the implementation of our flagship
sustainability-related policies of Climate
Change, Water Stewardship, Biodiversity
and Social Performance policies. In our
Sustainability Report for FY20 (due to be
released in the second half of CY20), we
have reported on our performance against
our financial year 2020 public sustainability
commitments and for the 2021 financial
year have committed to deliver against
an updated and expanded suite of
sustainability metrics.
Sustainability target of a
30%
reduction in our greenhouse gas
emissions intensity by 2030
To reduce our carbon footprint, we have set
a target of a 30% reduction in greenhouse
gas emissions intensity by 2030, against a
2018 baseline, as measured by the metric
of kg CO2-e/per tonnes of ore treated.
This target is challenging and will require a
shift in our approach to both sourcing and
consuming energy. Close to 90% of our
GHG emissions are associated with power
generation, hence pursuing opportunities to
decarbonise our electricity supply will be key
to meeting our targets. We have commenced
the development of plans to identify work
programs to deliver those improvements
across our sites.
For business planning, including new
acquisitions and key capital expenditures,
we include carbon price scenarios ranging
between $25 and $50 a tonne of CO2-e in
our business case sensitivity analysis for
jurisdictions where there is no regulated
carbon price.
In 2019, we committed to progressively
disclose our performance against the
recommendations of the Taskforce on
Climate-Related Financial Disclosure (TCFD)
framework, considering both transition
risks and physical risks for Newcrest as we
transition to a lower-carbon economy. We
report on our progress against the TCFD
framework in our Sustainability Report.
We continue to work with industry in the
implementation of the TCFD framework
particularly through our ICMM membership.
The Global Industry Standard on Tailings
Management was released on 5 August
2020 following endorsement by all
three co-conveners of the Global Tailings
Review which included the United Nations
Environment Program (UNEP), the Principles
for Responsible Investment (PRI) and
the ICMM. Newcrest, as a member of the
ICMM, will continue to participate in the
implementation program of the Global
Tailings Standard.
Our sustainability reporting disclosures align
with the ICMM Sustainable Development
Framework and the conflict-free Gold
Standard. We support the World Gold Council
Responsible Gold Mining Principles and are
working towards our implementation of
these and will report our disclosures against
the Modern Slavery Act in Australia in 2021.
Our approach to sustainability also includes
community agreements, partnerships
and investment to foster socio-economic
advancement. Newcrest and its employees
are involved in targeted local community
programs, ranging from indigenous
employment and training, education, health
and awareness programs to agribusiness and
social housing initiatives. Our A$20 million
Community Support Fund, launched in April
2020, has collaboratively delivered targeted
support to our local communities to assist
them cope with the COVID-19 pandemic and
to help vaccine research efforts.
Our activities reflect Newcrest’s
commitment to work with industry,
governments, local communities and other
key stakeholders to explain our activities
and build long-term sustainable economic
opportunities and social capacity within the
communities in which we operate.
GRASS REHABILITATION,
TELFER, WESTERN AUSTRALIA
NEWCREST 2020 ANNUAL REPORT 14
People
PEOPLE
• Diversity and inclusion are essential parts of Newcrest’s vision.
• Across Newcrest we are committed to developing the
leadership and management skills of our people.
Diversity and inclusion are
essential parts of Newcrest’s
vision, values and company
culture. We aim to create
a diverse and inclusive
environment where everyone
feels safe, valued and
supported to bring their
whole unique self to work.
We established our Diversity and Inclusion
Strategy in 2018 and within two years have
made solid progress in establishing policies
and practices and raising awareness by
increasing their internal and external profile.
Our Diversity and Inclusion Strategy
remains focused on achieving measures that
look at both quantitative and qualitative
performance, as well as focusing on specific
metrics, that include:
Despite an initial increase in representation
levels of gender and local and national
diversity, progress and momentum slowed,
and we needed to understand the root
causes. During the financial year, the Board
and the Executive Committee supported
an initiative to refresh the strategy to
leverage our strengths, address our gaps,
and underpin this with a pragmatic multi-year
action plan to meet our aspiration.
To refresh the strategy, we collected
and analysed Newcrest’s internal and
external labour markets, sought insights
through stakeholder consultation at all
levels across the business, and reviewed
best practice strategies implemented by
comparable businesses.
– continuing to increase the representation
of women across our business globally,
with additional focus on increasing the
representation of females in leadership
roles; and
– improving the representation of
Aboriginal/Torres Strait Islander
employees in our Australian business and
the representation of indigenous, local
and national employees globally.
We know that having a diverse and inclusive
work environment goes beyond gender and
local representation. It is about having an
inclusive culture that values and respects
differences, as well as supporting one
another to achieve great things together.
Across Newcrest we are committed to
developing the leadership and management
skills of our people. During the reporting
period, our 25 most senior leaders whose
combined portfolio significantly impacts the
performance of the business, met regularly
as the Transformation Leadership Team (TLT).
NEWCREST 2020 ANNUAL REPORT
15
LIHIR, PAPUA NEW GUINEA
The TLT came together several
times throughout the year for
TransformationMatters which is purposed
to create connections and foster a
collaborative approach to leading Newcrest.
The TransformationMatters program has
also been run for leadership teams and
superintendents at Cadia, Lihir and Telfer.
Since its launch in 2018, our values-based
leadership program LeadingMatters has
been delivered to more than 400 leaders.
The program is focused on building leaders’
self-awareness and personal development
and business acumen to foster and grow
high-performing teams. The program’s goal
of developing middle to senior management
has now been achieved. The next phase of
leader development will flow from the new
initiative, Newcrest Leader Expectations,
being embedded across the organisation
which will provide leaders with the skills to
drive effective team behaviours.
Our ManagingMatters program continues
to support supervisors to acquire targeted
management skills, such as delegation, giving
and receiving feedback, and coaching others.
In FY20, 256 supervisor-level employees
attended the ManagingMatters program.
People
Partnering to solve the diversity challenge
In line with our refreshed Diversity and
Inclusion Strategy, which was launched
on 30 July 2020, Newcrest is committed
to increasing female representation in
Australia to 21% by FY23.
Creating a diverse and inclusive workplace
is everyone’s responsibility. Improving
the representation of women across our
business is just one way we are all working
to achieve this.
A highlight from this year’s strategic
activities include Newcrest’s new
partnership and recognition as an Endorsed
Employer with WORK180, as announced
as part of our International Women’s Day
celebrations.
WORK180 is a global platform which
provides women (and other minorities)
who are seeking a job, with a directory of
employers genuinely committed to driving
equality. Their purpose and commitment
is to empower every woman to choose
a workplace where they can thrive.
It is Newcrest’s view that becoming a
WORK180 Endorsed Employer signals
to potential employees that we take our
commitment to diversity and inclusion
seriously. The process for becoming a
WORK180 partner is stringent, with accepted
companies having to prove credentials in
areas around diversity and inclusion.
While job hunters are using WORK180
to source roles with companies who have
values aligned to their own, WORK180 is
also supplying valuable resources to their
partner companies.
Newcrest’s partnership with WORK180
provides us with additional guidance on
best-practice diversity and inclusion polices
and initiatives; branding opportunities; and
access to the WORK180 job board and
talent pool of high-quality female applicants.
WORK180 has a reach of in excess of five
million women per month in Australia alone.
16
ORGANIC GROWTH OPPORTUNITIES
Organic Growth Opportunities
DRILLING AT HAVIERON, PILBARA,
WESTERN AUSTRALIA
Havieron
High grade deposit located 45km east of Telfer
The Havieron tenement is located 45km
east of Telfer in the Paterson Province
of Western Australia. The Havieron
project is operated by Newcrest via a
farm-in agreement with Greatland Gold
Plc. Under the agreement, Newcrest can
earn up to a 70% interest through total
expenditure of US$65 million and the
completion of a series of exploration
and development milestones across
a four-stage farm-in, over a six year
period that commenced in May 2019.
Newcrest may acquire an additional
5% interest at the end of the farm-in
period at fair market value. The farm-in
agreement includes tolling principles
reflecting the intention of the parties
that, subject to a successful exploration
program and feasibility study, the
resulting joint venture ore will be
processed at Telfer.
Newcrest will continue drilling
activities in the 2021 financial year
to support the objective of delivering
an initial resource estimate in the
December 2020 quarter.
The higher grade ore extracted from
Havieron could materially improve Telfer’s
All-In Sustaining Cost per ounce and increase
its operational life.
Telfer is the largest processing facility in
the Paterson Province and has sufficient
capacity and capability to process other
discoveries in this region. Newcrest believes
that the Paterson Province presents
significant additional opportunities for
Telfer in the future.
On 1 April 2020, Newcrest announced
that it had earned a 40% interest in
the Havieron project under its farm-in
agreement and was progressing to
Stage 3.
Drilling results in the financial year
continue to expand and demonstrate,
the continuity of higher grade
mineralisation which extends over
450m and to vertical depths of 600m.
Drilling has also identified mineralised
breccias proximal to higher grade
mineralisation.
Studies are underway to investigate the
potential for the following1:
– potential to start an exploration
decline by the end of calendar year
2020 or early 2021;
– selective and bulk underground
mining options;
– potential to achieve commercial
production within two to three
years from the commencement
of the decline.
1. Subject to market and operating conditions and receipt of all necessary permits, consents and approvals.
NEWCREST 2020 ANNUAL REPORT
17
OPEN PIT AT RED CHRIS,
BRITISH COLUMBIA, CANADA
Pre-Feasibility Study expected
to be completed in the
September 2021 quarter.
Infill resource drilling confirms
the presence of discrete higher
grade ‘pods’ in the East Zone.
Red Chris
Potential long-life, low-cost block cave opportunity
On 15 August 2019, Newcrest successfully
completed the acquisition of a 70% interest
in, and operatorship of, the Red Chris mine in
British Columbia, Canada.
There are currently two drilling programs
underway at Red Chris. The first is the East
Zone Resource Definition Program which is
designed to obtain geological, geotechnical
and metallurgical data to support future
studies for underground block cave mining.
The second is the Brownfields Exploration
Program which is focused on searching
for higher grade mineralisation within the
Red Chris porphyry corridor.
In the East Zone, infill resource drilling results
since acquisition have confirmed the presence
of multiple discrete higher grade ‘pods’ of
mineralisation. Drilling results returned to
date continue to confirm the potential of
finding additional discrete high grade ‘pods’
of mineralisation in the porphyry corridor.
The Block Cave concept study was
completed during the financial year and was
based on historical drilling data received
from Imperial Metals. The Pre-Feasibility
Study is underway and will incorporate
recent drilling data. The Pre-Feasibility
Study is expected to be completed in the
September 2021 quarter.
Newcrest is preparing for its early works
program which includes the commencement
of exploration/geotechnical decline work,
expected to occur by the end of calendar
year 2020 or early 20211.
As announced in May 2020, Newcrest
completed the purchase of the GJ Project
located in the Golden Triangle of British
Colombia. The land holding is located
adjacent to Red Chris and covers the south
west extent of the Red Chris GJ-Donnelly
porphyry trend. An initial program
of 2,146 line kilometres of Airborne
Electro-Magnetic and Gravity surveys
has commenced, aimed at generating
drill targets.
1. Subject to market and operating conditions and receipt of all necessary permits, consents and approvals.
18
NEWCREST’S VALUE PROPOSITION
Newcrest’s Value Proposition
Delivering on commitments
Long reserve life
$3.5bn
• Newcrest strives to deliver on its commitments.
Free cash flow delivered over 6.5 years
In FY20, Newcrest successfully delivered on a
number of these, including:
52moz 1
of Gold Ore Reserves
With an estimated 52 million ounces of Gold
Ore Reserves, Newcrest’s Reserve Life was
approximately 24 years at 30 June 2020 2
Another year free of fatalities and life-changing
injuries and a further reduction in underlying
injury rates
Continued to grow and diversify the Company with
the addition of, 70% interest in, and operatorship
of, the Red Chris mine in British Columbia, Canada
Returned capital to shareholders, with a total
dividend of US25 cents per share, in accordance
with our dividend policy
Increased shareholder returns — Full Year
Dividends (CPS)
Established a A$20 million Community
Support Fund to support our host communities
with the COVID-19 pandemic
Continued development of two potentially
world-class exploration projects at Havieron
and Red Chris
FY20
FY19
FY18
FY17
FY16
25.0
22.0
18.5
15.0
7.5
See page 30 of this Annual Report. An updated Reserves and Resources statement will be issued in February 2021.
1.
2. Reserve life is indicative and calculated as proven and probable gold reserves (contained metal) as at 31 December 2019 divided by gold production for the
12 months ended 30 June 2020. The reserve life calculation does not take into account future production rates or gold recovery rates and therefore estimates
of reserve life do not necessarily equate to operating mine life.
19
Financially robust
Across May and June 2020, Newcrest
successfully raised A$1.2bn of equity
through a A$1.0bn placement to institutional
investors and a A$200m Share Purchase
Plan. The funds raised were used to fund the
acquisition of finance facilities for the Fruta
del Norte mine, with the remainder directed
to funding Newcrest’s organic growth options
such as the commencement of declines at
both Havieron and Red Chris.
On 13 May 2020, Newcrest issued
US$1.15bn of senior unsecured notes,
comprising 10-year bonds totalling
US$650m (maturing in 2030) and 30-year
bonds totalling US$500m (maturing in
2050). The proceeds from the new bonds
were used to repay all of the Company’s
notes due in 2021 and to repay all but
$380m of the notes due in 2022.
The combined transactions have ensured that
Newcrest’s balance sheet remains strong,
smooths and extends Newcrest’s weighted
average debt maturity profile to ~16 years
FY20 Results at a Glance 1,2
Gold produced3
Copper produced
Realised gold price
Realised copper price
Average exchange rate
Sales revenue
EBITDA
EBIT
Statutory profit
Underlying profit
Cash from operating activities
Net cash outflow from investing activities
Free cash flow
Return on capital employed (ROCE)
Leverage ratio
Gearing
Total dividends
(previously ~7 years) and secures long term
debt funding at coupons much lower than the
existing corporate bonds.
Newcrest’s net debt at 30 June 2020 was
$624m. This comprises $2,013m of capital
market debt, lease liabilities of $58m and
$4m relating to a loan acquired through
the acquisition of Red Chris, less $1,451m
of cash.
At 30 June 2020, Newcrest had $3,451m
of liquidity coverage, comprising $1,451m
of cash and $2,000m in committed undrawn
bilateral bank debt facilities with maturity
periods ranging from 2021 to 2023.
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.
Net Debt
$624m
Leverage
0.3 times
Gearing
6.8%
Liquidity Coverage
$3.45bn
ounces
tonnes
$ per ounce
$ per pound
AUD:USD
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
percent
times
percent
cents per share
12 months to
30 June 2020
12 months to
30 June 2019
2,171,118
2,487,739
137,623
105,867
1,530
2.57
0.6715
3,922
1,835
1,191
647
750
1,471
(2,092)
(621)
13.8
0.3
6.8
25.0
1,269
2.78
0.7156
3,742
1,670
924
561
561
1,487
(683)
804
11.2
0.2
4.9
22.0
% Change
(13%)
30%
21%
(8%)
(6%)
5%
10%
29%
15%
34%
(1%)
206%
(177%)
23%
50%
39%
14%
1. All financial data presented in the Annual Report is quoted in US dollars unless otherwise stated.
2. EBIT, EBITDA, Underlying profit, All-In Sustaining Cost (AISC), Free cash flow, ROCE, Gearing and Leverage Ratio 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 Director’s Report regarding non-IFRS measures.
Includes Newcrest’s attributable share of ounces from Fruta del Norte.
3.
NEWCREST 2020 ANNUAL REPORT 20
The Board
THE BOARD
Peter Hay
LLB, FAICD
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 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 and is a former member of the
Australian Takeovers Panel.
Other current Directorships/appointments
– Chairman of Australia Pacific Airports
Corporation (from July 2019)
– Chairman of Mutual Trust Pty Ltd
(from 2020)
– Member of AICD Corporate Governance
Committee (from 2012)
– Director of Cormack Foundation
(from 2005)
Former Listed Directorships
(last 3 years)
– Chairman of Vicinity Centres
(2015–2019)
Sandeep Biswas
BEng (Chem) (Hons), FAusIMM
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 (Vice Chairman since 2018,
Director from 2014)
– Director of the World Gold Council
(from 2017)
– Member of ICMM Council (from 2017)
Gerard Bond
BComm, Chartered Accountant,
Grad Dip App Fin and Invest, F Fin
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 (from 2017)
Philip Aiken AM
BEng (Chemical), Advanced Management
Program (HBS)
Independent Non-Executive Director
Mr Aiken was appointed to the Board
in April 2013. He is Chairman of the
Human Resources and Remuneration
Committee and a member of the Safety
and Sustainability Committee and the
Nominations Committee.
Skills, experience and expertise
Mr Aiken has extensive Australian and
international business experience, principally
in the engineering and resources sectors. He
was Group President Energy BHP Billiton,
President BHP Petroleum, Managing Director
BOC/CIG, Chief Executive of BTR Nylex and
Senior Advisor Macquarie Capital (Europe).
Current Listed Directorships
– Chairman of Balfour Beatty plc
(from 2015)
– Chairman of Aveva Group plc (from 2012)
Other current Directorships/appointments
– Director of Gammon China Limited
(Chairman during 2018, Director
from 2018)
– Business Ambassador, Business Events
Sydney (from 2016)
– Chairman of Australia Day Foundation
(from 2006)
21
Xiaoling Liu
BEng (Extractive Metallurgy),
PhD (Extractive Metallurgy), GAICD,
FAusIMM, FTSE
Independent Non-Executive Director
Dr Liu was appointed to the Board in
September 2015. As announced in
September 2020, Dr Liu has resigned
as a Non-Executive Director, effective
immediately after Newcrest’s Annual
General Meeting on 11 November 2020.
She was a member of the Human Resources
and Remuneration Committee and the Audit
and Risk Committee.
Skills, experience and expertise
Dr Liu has extensive executive experience
in leading global mining and processing
businesses. Her last executive role was as
President and Chief Executive Officer of
Rio Tinto Minerals based in Denver, where
she ran integrated mining, processing
and supply chain operations in the United
States, Europe and Asia. Prior to her
last executive role, Dr Liu held senior
management and operational roles at
Rio Tinto throughout her career including
President – Primary Metal Pacific, Managing
Director – Global Technical Services and
General Manager Bell Bay Smelter.
Current Listed Directorships
– Director of Incitec Pivot Limited
(from 2019)
– Director of South 32 Limited (from 2017)
Other current Directorships/ appointments
– Chancellor of Queensland University of
Technology (from 2020)
– Member of the Australian Academy of
Technological Sciences and Engineering
(from 2017)
Former Listed Directorships
(last 3 years)
– Director of Iluka Resources Limited
(2016–2019)
NEWCREST 2020 ANNUAL REPORT 22
THE BOARD
The Board continued
Roger Higgins
BE (Civil Engineering) (Hons), MSc (Hydraulics), PhD (Water
Resources), Stanford Executive Program, FIEAust, FAusIMM
Independent Non-Executive Director
Dr Higgins was appointed as Non-Executive Director to the Board
in October 2015. He is Chairman of the Safety and Sustainability
Committee and a member of the Human Resources and
Remuneration Committee.
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 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
– Director of Worley Limited (from 2019)
– Chairman of Minotaur Exploration Limited (Director from 2016,
Chairman from 2017)
Other Current Directorships/appointments
– Chair of the Advisory Board, PAX Republic (from 2019)
– Director of Ok Tedi Mining Limited (from 2014)
– Member of the Sustainable Minerals Institute Advisory Board,
University of Queensland (from 2016)
– Member of the Energy and Resources Advisory Board,
University of Adelaide (from 2019)
Former Listed Directorships (last 3 years)
– Director of Metminco Limited (2013–2019)
Vickki McFadden
BComm, LLB
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 is an experienced company
director and has broad experience in several
roles as member or chairman of audit and
risk committees. Ms McFadden has an
extensive background in finance and law.
She is a former investment banker with
considerable expertise 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 and a former
President of the Australian Takeovers Panel.
Current Listed Directorships
– Chairman of The GPT Group (from 2018)
– Director of Tabcorp Holdings Limited
(from 2017)
Other current Directorships/appointments
– Director of Allianz Australia Ltd
(from 2020)
– Director of The Myer Family Investments
Pty Ltd (from 2011)
23
Peter Tomsett
BEng (Mining) (Hons), MSc (Mineral
Production Management), GAICD
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, the Safety
and Sustainability Committee and the
Nominations 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)
Sally-Anne Layman
B Eng (Mining) (Hons), B Com, CPA, MAICD
Independent Non-Executive Director
Ms Layman was appointed as a
Non-Executive Director of the Board with
effect from 1 October 2020. She is a
member of the Audit and Risk Committee.
Skills, experience and expertise
Ms Layman has over 26 years of
international experience in resources and
corporate finance. She spent 14 years
with Macquarie Group in a range of senior
positions, including as Division Director
and Joint Head of the Perth office of the
Metals, Mining & Agriculture Division.
Prior to that, Ms Layman held various
positions with resource companies including
Mount Isa Mines, Great Central Mines
and Normandy Yandal.
Current Listed Directorships
– Director of Beach Energy Limited
(from 2019)
– Director of Pilbara Minerals Limited
(from 2018)
– Director of Imdex Limited (from 2017)
– Director of Perseus Mining Limited
(from 2017)
Other current Directorships/appointments
– Director of RL Advisory Pty Limited
(from 2017)
Former Listed Directorships
(last 3 years)
– Gascoyne Resources Limited
(2017–2019)
NEWCREST 2020 ANNUAL REPORT 24
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 2019 was released on 13 February 2020, and can be
found on Newcrest’s website at www.newcrest.com. 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 2020 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 2019, Newcrest has completed a
detailed review of all production sources. The review has taken
into account 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 2019, Group Mineral Resources are estimated
to contain 110 million ounces of gold, 19 million tonnes of copper,
94 million ounces of silver and 0.19 million tonnes of molybdenum.
This represents a decrease of approximately 3.5 million ounces of
gold (~3%) and 0.1 million tonnes of copper (~1%), with an increase
of 1.5 million ounces of silver (~2%) and 0.19 million tonnes of
molybdenum, compared to the estimate as at 31 December 2018.
The Group Mineral Resources as at 31 December 2019 include
changes at numerous deposits following updated notional
constraining shells and/or resource models. These include:
– Estimated mining depletion of approximately 3.1 million ounces
of gold, 0.1 million tonnes of copper and 1 million ounces of silver
– Decrease at Telfer, post mining depletion, of approximately
0.5 million ounces of gold and 0.02 million tonnes of copper
following updated resource models and reoptimised notional
constraining shells for the open pit and sterilisation underground
as the mine approaches the end of its operational life
– The addition of 0.19 million tonnes of molybdenum as a minor
by-product at Cadia East
As at 31 December 2019, Group Ore Reserves are estimated to
contain 52 million ounces of gold, 6.9 million tonnes of copper,
36 million ounces of silver and 0.12 million tonnes of molybdenum.
This represents a decrease of approximately 2.2 million ounces
of gold (~4%) and 0.1 million tonnes of copper (~1%), with an
increase in approximately 0.1 million ounces of silver (~1%) and
0.12 million tonnes of molybdenum, compared to the estimate
as at 31 December 2018.
The Group Ore Reserves as at 31 December 2019 include the
following changes:
– Estimated mining depletion of approximately 3 million ounces of
gold, 0.1 million tonnes of copper and 1 million ounces of silver,
offset by minor additions at operating sites
– The addition of 0.12 million tonnes of molybdenum as a minor
by-product at Cadia East
Updated mining, metallurgical and long term cost assumptions were
developed with reference to recent performance data. The revised
long term assumptions include changes in performance 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
Newcrest, WGJV & NJV
Mineral Resource Estimates
Gold – US$/oz
Copper – US$/lb
Silver – US$/oz
Molybdenum – US$/lb
Ore Reserve Estimates
Gold – US$/oz
Copper – US$/lb
Silver – US$/oz
Molybdenum – US$/lb
Long Term Exchange Rate AUD:USD
1,300
3.40
21.00
10.00
1,200
3.00
18.00
8.00
0.75
Gold, copper and silver metal price assumptions remain unchanged
from those used for December 2018 reporting. Molybdenum has been
added to the Cadia East Mineral Resource and Ore Reserve. Following
a review of exchange rate assumptions, the AUD:USD exchange
rate assumption remains unchanged at 0.75 and local currency
assumptions for the PNG Kina also remain unchanged. The Wafi Golpu
Joint Venture (WGJV) and the Namosi Joint Venture (NJV) long term
metal price and exchange rate assumptions are aligned to Newcrest’s
assumptions.
Where appropriate, Mineral Resources are also spatially constrained
with notional mining volumes based on metal prices of US$1,400/oz
for gold and US$4.00/lb for copper. This approach has been adopted
to eliminate mineralisation that does not have reasonable prospects
of eventual economic extraction from Mineral Resource estimates.
25
Competent Person Statement
1. The Annual Mineral Resources and Ore Reserves Statement
and Explanatory Notes have been compiled by Mr K. Gleeson.
Mr Gleeson is the Head of Mineral Resource Management,
a full-time employee of Newcrest Mining Limited and holds
options and shares in Newcrest Mining Limited. Mr Gleeson is
also entitled to participate in Newcrest’s executive equity long
term incentive plan, of which details are included in Newcrest’s
2020 Remuneration Report. He is a Fellow 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
material in this report in the form and context in which it appears.
2. The information in this Annual Report that relates to Mineral
Resources or Ore Reserves as at 31 December 2019 has been
extracted from the release titled “Annual Mineral Resources
and Ore Reserves Statement – 31 December 2019” dated
13 February 2020 (the original release). Newcrest confirms that
it is not aware of any new information or data that materially
affects the information included in the original release and, in
the case of Mineral Resources or Ore Reserves, that all material
assumptions and technical parameters underpinning the estimates
in the original release continue to apply and have not materially
changed. 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 2019
is based on and fairly represents information and supporting
documentation prepared by the Competent Persons named in the
Mineral Resources and Ore Reserves Tables extracted from the
original release.
Each of the Competent Persons named in the Mineral Resources and
Ore Reserves Tables extracted from the original release, 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 2020 Remuneration
Report. Mr Job is a full-time employee of Harmony Gold Mining
Company Limited, Newcrest’s joint venture partner in the WGJV.
All the Competent Persons named 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.
Red Chris Foreign Estimates
Estimates of Mineral Resources for the Red Chris deposit were
reported in accordance with NI 43-101 by Imperial Metals
Corporation (Imperial) and filed on SEDAR (www.sedar.com) on
30 September 2015. These estimates were re-stated by Imperial
in their September 2019 Mineral Resource and Mineral Reserve
statement (www.imperialmetals.com) but have not been updated
since 30 September 2015 and have not been depleted for
production to date.
The estimates of Mineral Resources for the Red Chris deposit are
qualifying foreign estimates under the ASX Listing Rules and are not
reported in accordance with the JORC Code. Competent persons
have not done sufficient work to classify the qualifying foreign
estimates as Mineral Resources in accordance with the JORC Code.
It is uncertain, that following evaluation and further exploration, the
foreign estimates will be able to be reported as Mineral Resources
in accordance with the JORC Code.
NEWCREST 2020 ANNUAL REPORT 26
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 Reserve 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 2019 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 the
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.
Changes Since 31 December 2019 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 2019” other than changes
due to normal mining depletion and other adjustments that occurred
during the six months ended 30 June 2020. 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 made to those assumptions
during the period to 30 June 2020. However, in preparing the Annual
Statement of Mineral Resources and Ore Reserves for the period
ended 31 December 2020, Newcrest proposes to review its long term
foreign exchange rate, metal prices and cost assumptions.
There are also specific ongoing studies to maximise the value
of operations at Lihir, Telfer, Red Chris and Cadia that may be
incorporated into the Mineral Resource and Ore Reserve assumptions
for the period ending 31 December 2020. Specifically:
1. at Telfer work continues to extend the underground mine life at the
sub level cave.
2. at Lihir several studies are ongoing, including the Lihir Mine
Optimisation study to quantify the blend of argillic ore from
stockpiles and open pit for optimal plant throughput and recovery.
3. at Red Chris ongoing studies aim to define the high value optimum
plan for evaluation of the qualifying foreign estimates reported
by Imperial in relation to Red Chris and reporting as Mineral
Resources and Ore Reserves in accordance with JORC Code 2012.
On 31 January 2020, Newcrest entered into an agreement to divest
its interest in Gosowong. Newcrest finalised the divestment of
Gosowong on 4 March 2020.
Mineral Resources and Ore Reserves continuedMINERAL RESOURCES AND ORE RESERVES 27
Cadia (NSW)
Mineralisation recognised to date in the Cadia Province is porphyry
related gold and copper, hosted in rocks of Ordovician age. Orebodies
are typically large tonnage, low-grade gold with strong copper
by-product and minor base metal associations. Minor molybdenum
and silver mineralisation is also present. Ore is sourced by bulk
mining methods from underground operations. Changes to Mineral
Resources and Ore Reserves at Cadia since 31 December 2019 have
only occurred at Cadia East as detailed below.
Cadia East Underground
Cadia East is a low-grade, porphyry 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 (PC2) commenced in October 2014.
During the year, Cadia progressed its growth opportunities including
its expansion plans. On 15 October 2019, Newcrest announced the
completion of the Stage 1 of the Cadia Expansion Feasibility Study
which comprised the development of the PC2-3 cave (within the overall
Ore Reserve) and increased nameplate capacity to 33mtpa. The second
stage, which is in Feasibility Study, is focused on a further increase
in processing capacity to 35mtpa and recovery rate improvement
projects and is expected to be completed by the end of CY20.
Changes to the Mineral Resource and Ore Reserve since
31 December 2019 were due to mining depletion and represent
decreases of 0.5 million ounces of gold and 0.06 million tonnes of copper.
Ridgeway
No change in Ore Reserves or Mineral Resources has been made since
31 December 2019.
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 methods.
Underground sub level cave 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 2019 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 2019,
the Mineral Resources and Ore Reserves were depleted by
0.2 million ounces of gold and 0.01 million tonnes of copper. Mining
of Ore Reserves in the Main Dome open pit was completed in the
fourth quarter of FY20. Further studies are currently evaluating
potential for additional Ore Reserves in Main Dome open pit.
Telfer Underground
The Telfer Underground comprises the sub level cave mine and
selective high-grade reef mining and Western Flanks reef and
stockwork mining. Since 31 December 2019, both the Mineral
Resources and Ore Reserves have been depleted by 0.05 million
ounces of gold and <0.01 million tonnes of copper. Underground Ore
Reserves for the sub level cave were completed. Further studies
are currently evaluating the potential for additional Ore Reserves
at the sub level cave and other underground areas to extend the
underground mine life.
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 2019 have occurred in both open pit and stockpiles
and have comprised the depletion of 0.6 million ounces of gold from
both Mineral Resource and Ore Reserve. Several studies are underway
in CY20, including the Lihir Mine Optimisation study to quantify the
blend of argillic ore from stockpiles and open pit for optimal plant
throughput and recovery.
Red Chris (Canada)
On 16 August 2019, Newcrest announced that it had acquired a 70%
joint venture interest in, and operatorship, of the Red Chris Mine and
surrounding tenements in British Columbia, Canada (refer market
release “Newcrest completes 70% acquisition of Red Chris”, dated
16 August 2019). Red Chris is a copper-gold porphyry with an operating
open-pit mine. Since completion of the transaction, Newcrest has
commenced a work program, which includes additional exploration and
resource definition drilling, resource optimisation for both open pit and
underground mining scenarios and prefeasibility level studies to define
the high value optimum plan for evaluation of the foreign estimates
reported by Imperial in relation to Red Chris and reporting as Mineral
Resources and Ore Reserves in accordance with JORC Code 2012. This
work is expected to be completed within three years and will be funded
using internal cash reserves that delivers a strategy of targeting smaller
open pit and larger underground resources.
WGJV Wafi-Golpu Project (PNG)
No change in Mineral Resources or Ore Reserves has been made since
31 December 2019 for Golpu. There has been no change to the Wafi
or Nambonga Mineral Resource since 31 December 2019.
NEWCREST 2020 ANNUAL REPORT 28
Mineral Resources as at 31 December 2019
Dec-19 Mineral Resources
Measured
Resource
Indicated
Resource
Inferred
Resource
Dec-19 Total Resource
Comparison to Dec-18
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
Luke Barbetti
Other
Total Cadia Province
Main Dome Open Pit
(incl. stockpiles)
West Dome Open Pit
Telfer Underground
Other
Total Telfer Province
Lihir
Gosowong(1)
Total Operational Provinces
Non-Operational Provinces
–
–
–
2,900
0.36
–
110
0.57
32
0.30
80
0.35
–
41
11
–
2,900
0.36
33
2,900
0.36
0.38
0.70
150
120
0.52
0.37
150
120
0.52
0.37
2.4
1.4
37
34
2.4
1.5
38
4.7
0.38
16
0.66
0.35
0.23
21
0.59
0.41
24
0.60
0.46
Ashok
Doorgapershad
–
–
–
–
–
–
32
0.44
1.7
2.9
11
4.4
120
0.66
0.02
0.66
120
0.66
Benjamin Likia
Denny Lesmana
83
–
1.9
530
–
2.7
2.3
10
67
0.41
1.4
1.1
2.3
8.2
44
4.9
680
3.1
1.6
1.3
2.3
10
2.5
2.3
0.20
5.4
49
1.0
93
150
0.63
50
4.9
690
3.3
1.6
1.3
2.3
10
3.1
2.7
0.20
6.4
50
1.1
96
WGJV – Golpu / Wafi &
Nambonga (50%)(2)
David Finn /
Greg Job
Namosi JV (72.49%)(3)
Vik Singh
–
–
Total Non-Operational Provinces
Total Gold Mineral Resources
–
400
0.84
110
0.77
510
0.83
13
500
0.83
13
–
1,300
0.11
120
0.08
1,400
0.11
5.0
1,400
0.11
18
110
4.9
18
110
Measured
Resource
Indicated
Resource
Inferred
Resource
Dec-19 Total Resource
Comparison to Dec-18
Total Resource
Competent Person
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Insitu
Copper
(million
tonnes)
Dry
Tonnes
(million)
Copper
Grade
(% Cu)
Insitu
Copper
(million
tonnes)
–
–
–
2,900
0.26
–
110
0.30
32
0.13
80
0.19
–
41
11
–
2,900
0.26
7.5
2,900
0.26
7.6
0.40
0.52
150
120
0.33
0.48
0.20
0.25
150
120
0.33
0.48
0.20
0.25
8.2
8.3
4.7
0.098
16
0.094
0.35
0.012
21
0.093
0.020
24
0.092
0.022
Ridgeway Underground
Luke Barbetti
Dec-19 Mineral Resources
Copper Mineral Resources
(inclusive of Copper Ore
Reserves)
Operational Provinces
Cadia East Underground
Other
Total Cadia Province
Main Dome Open Pit
(incl. stockpiles)
West Dome Open Pit
Telfer Underground
Other
O’Callaghans
Ashok
Doorgapershad
–
–
–
–
–
–
–
–
120
0.062
0.02
0.058
120
0.062
0.072
150
0.062
0.10
32
0.40
–
–
11
14
0.43
0.37
69
0.29
9.0
0.24
44
14
78
0.41
0.18
0.37
0.052
0.29
0.22
50
14
78
0.40
0.20
0.37
0.052
0.29
0.22
Total Telfer Province
Total Operational Provinces
Non-Operational Provinces
WGJV – Golpu / Wafi &
Nambonga (50%)(2)
David Finn /
Greg Job
Namosi JV (72.49%)(3)
Vik Singh
Total Non-Operational Provinces
Total Copper Mineral Resources
0.54
8.8
–
–
–
–
340
1.1
92
0.68
440
1.0
4.4
440
1.0
1,300
0.35
330
0.37
1,600
0.35
5.8
1,600
0.35
10
19
0.59
8.9
4.4
5.7
10
19
Mineral Resources and Ore Reserves continuedMINERAL RESOURCES AND ORE RESERVES 29
Dec-19 Mineral Resources
Silver Mineral Resources
(inclusive of Silver Ore
Reserves)
Operational Provinces
Measured
Resource
Indicated
Resource
Inferred
Resource
Dec-19 Total Resource
Comparison to Dec-18
Total Resource
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)
Cadia Valley Operations
Luke Barbetti
Gosowong(1)
Denny Lesmana
–
–
–
–
3,000
0.68
41
0.43
3,100
0.68
66
3,100
0.68
2.7
14
0.41
11
3.1
14
3.3
14
1.3
68
Total Operational Provinces
Non-Operational Provinces
WGJV – Golpu /
Wafi (50%)2)
David Finn /
Greg Job
Total Non-Operational Provinces
Total Silver Mineral Resources
–
–
400
1.7
87
1.7
480
1.7
27
480
1.6
27
94
67
1.5
69
24
24
93
Dec-19 Mineral Resources
Molybdenum Mineral Resources
(inclusive of Molybdenum Ore
Reserves)
Operational Provinces
Measured
Resource
Indicated
Resource
Inferred
Resource
Dec-19 Total Resource
Comparison to Dec-18
Total Resource
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Competent Person
Insitu
Moly-
bdenum
(million
tonnes)
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Insitu
Moly-
bdenum
(million
tonnes)
Cadia Valley Operations
Luke Barbetti
–
–
2,900
64
–
–
2,900
64
0.19
–
–
–
Total Operational Provinces
Total Molybdenum Mineral Resources
0.19
Dec-19 Mineral Resources
Tonnes
Grade
Contained Metal
Polymetallic Mineral Resources
(inclusive of Polymetallic Ore Reserves)
Competent Person
O’Callaghans
Measured
Indicated
Inferred
Total Polymetallic Mineral Resources
Measured
Indicated
Inferred
Ashok Doorgapershad
Ashok Doorgapershad
Comparison to Dec-18 Total Polymetallic Mineral Resources
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
0.53
0.19
0.49
0.26
0.11
0.24
0.24
0.023
0.26
0.36
0.18
0.017
0.0097
0.38
0.19
–
–
–
–
–
–
0.34
0.25
0.33
0.53
0.19
0.49
0.26
0.11
0.24
0.24
0.023
0.26
0.36
0.18
0.017
0.0097
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. On 31 January 2020 Newcrest announced that it had agreed to sell its interest in
PT Nusa Halmahera Minerals to PT Indotan Halmahera Bangkit (refer market release “Newcrest agrees to divest Gosowong for $90m” dated 31 January 2020).
Newcrest finalised the divestment of Gosowong on 4 March 2020.
(2) WGJV 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.
(3) Namosi refers to the Namosi unincorporated joint venture, in which Newcrest has a 72.49% interest. The figures shown represent 72.49% of the Mineral
Resource at December 2019 compared to 71.82% of the Mineral Resource at December 2018.
NEWCREST 2020 ANNUAL REPORT 30
Ore Reserves as at 31 December 2019
Dec-19 Ore Reserves
Proved Reserve
Probable Reserve
Dec-19 Total Reserve
Comparison to Dec-18
Total Reserve
Gold Ore Reserves
Competent Person
Operational Provinces
Cadia East Underground
Ridgeway Underground
Geoffrey Newcombe
Other
Total Cadia Province
Main Dome Open Pit
(incl. stockpiles)
West Dome Open Pit
Glenn
Patterson-Kane
Telfer Underground
Gito Patani
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)
–
–
–
–
–
–
1,400
0.45
1,400
80
–
0.54
–
80
–
0.45
0.54
–
1,400
80
–
0.47
0.54
–
20
1.4
–
21
21
1.4
–
22
4.7
0.38
2.2
0.57
7.0
0.44
0.099
9.3
0.52
0.15
–
–
47
1.5
0.77
2.3
47
1.5
0.77
1.2
2.3
0.11
63
4.9
0.75
1.5
1.9
0.30
–
–
83
–
David Grigg
Mark Kaesehagen
1.9
–
230
1.2
2.4
7.5
320
1.2
2.3
7.5
Pasqualino Manca
–
–
200
0.86
200
0.86
Total Telfer Province
Lihir
Gosowong (1)
Total Operational Provinces
Non-Operational Provinces
WGJV – Golpu (50%)(2)
Total Non-Operational Provinces
Total Gold Ore Reserves
1.4
23
0.30
46
5.5
5.5
52
330
1.4
2.3
8.1
200
0.86
2.0
24
0.37
49
5.5
5.5
54
Comparison to Dec-18
Total Reserve
Dec-19 Ore Reserves
Proved Reserve
Probable Reserve
Dec-19 Total Reserve
Copper Ore Reserves
Competent Person
Operational Provinces
Cadia East Underground
Ridgeway Underground
Geoffrey Newcombe
Other
Total Cadia Province
Main Dome Open Pit
(incl. stockpiles)
West Dome Open Pit
Glenn
Patterson-Kane
Telfer Underground
Gito Patani
O’Callaghans
Michael Sykes
Total Telfer Province
Total Operational Provinces
Non-Operational Provinces
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
0.29
1,400
80
–
0.28
–
80
–
0.29
0.28
–
4.0
1,400
0.23
–
4.3
80
–
0.30
0.28
–
4.1
0.23
–
4.3
4.7
0.098
2.2
0.084
7.0
0.094
0.0065
9.3
0.088
0.0082
–
–
–
–
–
–
47
1.5
44
0.080
0.33
0.29
47
1.5
44
0.080
0.037
0.33
0.005
0.29
63
4.9
44
0.076
0.048
0.29
0.014
0.29
0.13
0.18
4.4
2.5
2.5
6.9
0.13
0.20
4.5
2.5
2.5
7.0
WGJV – Golpu (50%)(2)
Pasqualino Manca
–
–
200
1.2
200
1.2
Total Non-Operational Provinces
Total Copper Ore Reserves
200
1.2
Mineral Resources and Ore Reserves continuedMINERAL RESOURCES AND ORE RESERVES 31
Dec-19 Ore Reserves
Proved Reserve
Probable Reserve
Dec-19 Total Reserve
Comparison to Dec-18
Total Reserve
Silver Ore Reserves
Competent Person
Operational Provinces
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)
Cadia Valley Operations
Geoffrey Newcombe
Gosowong (1)
Mark Kaesehagen
–
–
–
–
1,500
0.77
1,500
0.77
36
1,400
0.78
36
1.20
11.0
1.20
11.0
0.430
1.4
12
0.54
Total Operational Provinces
Total Silver Ore Reserves
36
36
36
36
Dec-19 Ore Reserves
Proved Reserve
Probable Reserve
Dec-19 Total Reserve
Molybdenum Ore Reserves
Competent Person
Operational Provinces
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Cadia Valley Operations
Geoffrey Newcombe
–
–
1,300
88
1,300
88
Total Operational Provinces
Total Molybdenum Ore Reserves
Insitu
Moly-
bdenum
(million
tonnes)
0.12
0.12
0.12
Comparison to Dec-18
Total Reserve
Dry
Tonnes
(million)
Moly-
bdenum
Grade
(ppm Mo)
Insitu
Moly-
bdenum
(million
tonnes)
–
–
–
Dec-19 Ore Reserves
Tonnes
Grade
Contained Metal
Polymetallic Ore Reserves
Competent Person
O’Callaghans
Proved
Probable
Total Polymetallic Ore Reserves
Proved
Probable
Michael Sykes
Michael Sykes
Comparison to Dec-18 Total Polymetallic Ore Reserves
Dry
Tonnes
(million)
Tungsten
Trioxide
Grade
(% WO3)
Zinc
Grade
(% Zn)
Lead
Grade
(% Pb)
–
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
Insitu
Tungsten
Trioxide
(million
tonnes)
–
0.16
0.16
–
0.16
0.16
Insitu Zinc
(million
tonnes)
Insitu Lead
(million
tonnes)
–
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. On 31 January 2020 Newcrest announced that it had agreed to sell its interest in PT Nusa Halmahera
Minerals to PT Indotan Halmahera Bangkit (refer market release “Newcrest agrees to divest Gosowong for $90m” dated 31 January 2020). Newcrest finalised
the divestment of Gosowong on 4 March 2020.
(2) WGJV 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.
NEWCREST 2020 ANNUAL REPORT 32
CORPORATE GOVERNANCE STATEMENT
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 www.newcrest.com. 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.
NEWCREST 2020 ANNUAL REPORT
33
Table of Contents
Directors’ Report
Operating and Financial Review
Remuneration Report
Financial Statements
Independent Auditor’s Report
34
38
80
111
174
34
DIRECTORS’ REPORT
Directors’ Report
The Directors present their report together with the consolidated financial statements 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 2020.
Directors
The Directors of the Company during the year ended 30 June 2020, 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.
Peter Hay
Non-Executive Director and Non-Executive Chairman
Sandeep Biswas Managing Director and Chief Executive Officer
Gerard Bond
Finance Director and Chief Financial Officer
Philip Aiken AM Non-Executive Director
Roger Higgins
Non-Executive Director
Xiaoling Liu
Non-Executive Director
Vickki McFadden Non-Executive Director
Peter Tomsett
Non-Executive Director
Principal Activities
The principal activities of the Group during the year were exploration,
mine development, mine operations and the sale of gold and gold/
copper concentrate. There were no significant changes in those
activities during the year.
Significant Changes in the State of Affairs
and Future Developments
Refer to the Operating and Financial Review for information on the
significant changes in the state of affairs of the Group and for likely
developments and future prospects of the Group.
Consolidated Result
The profit after tax attributable to Newcrest shareholders (‘Statutory
Profit’) for the year ended 30 June 2020 was US$647 million
(2019: US$561 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 2019 of
US 14.5 cents per share, amounting to US$111 million, was
paid on 26 September 2019. This dividend was fully franked.
– Interim dividend for the year ended 30 June 2020 of US 7.5 cents
per share, amounting to US$58 million, was paid on 27 March 2020.
This dividend was fully franked.
The Directors have determined to pay a final dividend for the year
ended 30 June 2020 of US 17.5 cents per share, which will be fully
franked. The dividend will be paid on 25 September 2020.
Subsequent Events
Subsequent to year end, the Directors have determined to pay a
final dividend for the year ended 30 June 2020 of US 17.5 cents
per share, which will be fully franked. The dividend will be paid
on 25 September 2020. The total amount of the dividend is
US$143 million. This dividend has not been provided for in the
30 June 2020 financial statements.
There have been no other matters or events that have occurred
subsequent to 30 June 2020 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. Refer to Note 35 for the number of Performance Rights over
unissued ordinary shares at year end.
35
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 37 to the financial statements. These services included:
– Assurance and agreed-upon-procedure services relating to
transaction accounting services, sustainability assurance services
and audited related assurance services.
– Non-audit services relating to sustainability services, tax and other
due diligence services.
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 approved by the Audit and Risk
Committee prior to engagement to ensure they did not impact on
the impartiality and objectivity of the auditor;
– assurance and agreed-upon-procedure services were provided by
the auditor based on their expertise, the service was either related
to the audit or it was impracticable for another provider to perform
the service; 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 on page 110.
Currency
All references to dollars in the Directors’ Report and the Financial Report
are references to US dollars ($ or US$) unless otherwise specified.
Rounding of Amounts
Newcrest Mining Limited is a company of the kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that Instrument, amounts in the
Directors’ Report and the Financial Report are rounded to the nearest
million dollars except where otherwise indicated.
Environmental Regulation and Performance
The Managing Director reports to the Board on all significant safety,
health and environmental incidents. The Board also has a Safety and
Sustainability Committee which has oversight of the safety, health
and environmental performance of the Group and meets at least four
times per year.
The operations of the Group are subject to environmental regulation
under the jurisdiction of the countries in which those operations are
conducted, including Australia, Papua New Guinea (‘PNG’), Canada,
Indonesia, USA, Chile, Ecuador 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. Incident numbers are based on
four levels of actual environmental consequence including: 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 based on
actual environmental consequence for the 2020 financial year and
2019 comparative year is shown in the following table.
Category
Level 2
Level 3
Level 4
2020 – Number of incidents
2019 – Number of incidents
6
11
0
0
0
0
Indemnification and Insurance of Directors
and Officers
Newcrest indemnifies each Director, Secretary and Executive
Officer of Newcrest and its subsidiaries against any liability related
to, or arising out of, the conduct of the business of Newcrest or its
subsidiaries or the discharge of the Director’s, Secretary’s or Executive
Officer’s duties. These indemnities are given to the extent that
Newcrest is permitted by law and its Constitution to do so. 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 2020 ANNUAL REPORT 36
Directors’ Report continued
Information on Directors
Details of the Directors’ qualifications, experience and special responsibilities are set out on pages 20 to 23. These details have been updated
since 14 August 2020.
Information on Company Secretary and Deputy Company Secretary
Francesca Lee
Chief Legal, Risk and Compliance Officer
BComm, LLB (Hons), LLM, Grad. Dip. CSP, AGIA, GAICD
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.
Claire Hannon
Deputy Company Secretary
BSc, LLB (Hons), Grad. Dip. App Fin, GAICD
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.
Ms Lee was a member of the Australian Government Takeovers Panel
from 2009 until March 2015, a Director of Cabrini Australia Limited
(from 2020) and a director of AMMA – Australian Resources & Energy
Group (from 2019).
Subsequent to year end, Ms Lee has resigned as Company Secretary
and Maria Sanz Perez was appointed as Company Secretary of
Newcrest, with effect from 31 July 2020.
Directors’ Interests
As at the date of this report, the interest of each Director in the shares and rights of Newcrest Mining Limited were:
Director
Peter Hay
Sandeep Biswas
Gerard Bond
Philip Aiken AM
Roger Higgins
Xiaoling Liu
Vickki McFadden
Peter Tomsett
Number of
Ordinary
Shares
56,318
524,482
155,541
18,411
13,675
14,172
11,272
21,172
Nature of
Interest
Direct and Indirect
Direct and Indirect
Direct and Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Number of
Rights Over
Ordinary
Shares (1)
–
527,150
129,220
–
–
–
–
–
Nature of
Interest
–
Direct
Direct
–
–
–
–
–
(1) Represents Sandeep Biswas’ and Gerard Bond’s unvested performance rights granted pursuant to the Company’s Long Term Incentive plans in the 2018, 2019
and 2020 financial years respectively.
Directors’ Report continuedDIRECTORS’ REPORT 37
Directors’ Meetings
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the Directors
of the Company during the financial year were:
Committees of the Board
Director
Directors’ Meetings
Audit & Risk
Human Resources &
Remuneration
Safety &
Sustainability
Nominations
Special Board
Committees (1)
Peter Hay
Sandeep Biswas
Gerard Bond
Philip Aiken AM
Roger Higgins
Xiaoling Liu
Vickki McFadden
Peter Tomsett
A
17
17
17
17
17
15(2)
17
17
B
17
17
17
17
17
17
17
17
A
–
–
–
–
–
6
6
6
B
–
–
–
–
–
6
6
6
A
–
–
–
7
7
6(2)
7
–
B
–
–
–
7
7
7
7
–
A
–
–
–
4
4
–
–
4
B
–
–
–
4
4
–
–
4
A
3
–
–
3
–
3
–
–
B
3
–
–
3
–
3
–
–
A
6
6
6
–
–
–
6
–
B
6
6
6
–
–
–
6
–
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) Meetings missed were out of session meetings 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.
Remuneration Report
The Remuneration Report is set out on pages 80 to 109 and forms part of this Directors’ Report.
This report is signed in accordance with a resolution of the Directors.
Peter Hay
Chairman
14 August 2020
Melbourne
Sandeep Biswas
Managing Director and Chief Executive Officer
NEWCREST 2020 ANNUAL REPORT
38
Directors’ Report continued
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.
Unless otherwise stated, all financial data presented in this Operating and Financial Review is quoted in US$ and the prior period represents the
12 months ended 30 June 2019.
Section 1 footnotes are located at the end of the section.
1. Summary of Results for the 12 Months Ended 30 June 20201
Key points
– Statutory profit2 of $647 million, 15% higher than the prior period
– Underlying profit3 of $750 million, 34% higher than the prior period
– All-In Sustaining Cost3 (“AISC”) of $862 per ounce, 17% higher than the prior period
– All-In Sustaining Cost margin3 of $668 per ounce, $137 per ounce higher than the prior period
– Cash flow from operating activities of $1,471 million, 1% lower than the prior period
– Acquired 70% ownership and operatorship of Red Chris on 15 August 2019
– Divested interest in Gosowong on 4 March 2020
– Acquired Fruta del Norte finance facilities on 30 April 2020
– Free cash flow3 of negative $621 million, though was positive $670 million before M&A activity
– Gold production of 2.2 million ounces, 13% lower than the prior period
– Copper production of 138 thousand tonnes, 30% higher than the prior period
– Net debt of $624 million, leverage ratio of 0.3 times and a gearing ratio of 6.8% as at 30 June 2020
– Full year dividends declared for FY20 of US25 cents per share (fully franked), including a final dividend determined of US17.5 cents per share
to be paid in September 2020
Directors’ Report continuedDIRECTORS’ REPORT 39
Group production – gold
11
– copper
Revenue
EBITDA
EBIT
Statutory profit
Underlying profit
Cash flow from operating activities
Free cash flow*
EBITDA margin
EBIT margin
All-In Sustaining Cost
All-In Sustaining margin
Realised gold price
Realised copper price
Average exchange rate
Average exchange rate
Closing exchange rate
Cash and cash equivalents
Net debt
Net debt to EBITDA
Gearing
ROCE
Interest coverage ratio
Total equity
3
3
2
3
3
3
3
3
3
3
3
3
For the 12 months ended 30 June
2020
2019
Change
Change %
oz
t
US$m
US$m
US$m
US$m
US$m
US$m
US$m
%
%
US$/oz
US$/oz
US$/oz
US$/lb
AUD:USD
PGK:USD
AUD:USD
US$m
US$m
times
%
%
times
US$m
2,171,118
137,623
3,922
1,835
1,191
647
750
1,471
(621)
46.8
30.4
862
668
1,530
2.57
0.6715
0.2927
0.6863
1,451
624
0.3
6.8
13.8
22.7
8,613
2,487,739
105,867
3,742
1,670
924
561
561
1,487
804
44.6
24.7
738
531
1,269
2.78
0.7156
0.2983
0.7013
1,600
395
0.2
4.9
11.2
24.2
7,631
(316,621)
31,756
180
165
267
86
189
(16)
(1,425)
2.2
5.7
124
137
261
(0.21)
(0.0441)
(0.0056)
(0.0150)
(149)
229
0.1
1.9
2.6
(1.5)
982
(13%)
30%
5%
10%
29%
15%
34%
(1%)
(177%)
5%
23%
17%
26%
21%
(8%)
(6%)
(2%)
(2%)
(9%)
58%
50%
39%
23%
(6%)
13%
* Free cash flow in the current period includes the payment for the acquisition of Red Chris (70% ownership) of $769 million9, the acquisition of Fruta del Norte
finance facilities of $460 million10, further investments in Lundin Gold of $79 million, net proceeds from divestment of Gosowong of $20 million8 and payment of
$3 million for an interest in Antipa Minerals Ltd.
Full year results
Newcrest’s focus on being a safe, low-cost and long-life major gold
producer was underpinned by another twelve-month period free of
fatalities or life-changing injuries. Early and considered actions by
Management in response to the COVID-19 pandemic were implemented
across all Newcrest sites and offices in the period. As a result of the
precautionary measures implemented Newcrest had no confirmed
cases of COVID-19 and managed to minimise the adverse impact of the
pandemic on its operating performance in the 2020 financial year. In
addition, a A$20 million Community Support Fund designed to assist
Newcrest’s local communities with the challenges associated with the
COVID-19 pandemic was established and announced on 7 April 2020,
from which disbursements have been made in the current period.
Concurrent with seeking to safely maximise output from existing
assets, Newcrest continued to optimise its existing portfolio
and pursue profitable growth opportunities during the current
period. On 15 August 2019, Newcrest completed the acquisition
of a 70% interest in, and operatorship of, the Red Chris mine and
surrounding tenements in British Columbia, Canada. A further
$79 million was invested to increase Newcrest’s shareholding in
Lundin Gold from 27.1% to 32%.
On 30 April 2020, Newcrest acquired the financing facilities in
respect of Lundin Gold’s Fruta del Norte mine, further increasing
Newcrest’s direct exposure to the cash flows generated by this
Tier 1 asset. Newcrest also finalised the sale of its 75% interest
in the Gosowong mine in Indonesia on 4 March 2020, for a total
consideration of $90 million8.
NEWCREST 2020 ANNUAL REPORT
40
Directors’ Report continued
1. Summary of Results for the 12 Months Ended 30 June 20201 continued
Full year results continued
On 15 October 2019 the Newcrest Board approved the first stage of
the Cadia Expansion Project to Execution phase, with this first stage
comprising commencement of the next cave development (PC2-3)
and an increase in nameplate capacity of the process plant to 33mtpa.
Newcrest also increased its interest to 40% of the Havieron project, a
high-grade orebody located approximately 45km east of Telfer which
has the potential to extend the operational life of Telfer.
To fund the acquisition of the Fruta del Norte financing facilities and
other future growth options, Newcrest successfully completed an
equity raising of A$1.2 billion in May and June 2020. In May 2020,
Newcrest issued US$1.15 billion of long-term debt at coupons much
lower than the existing corporate bonds which were largely repurchased
with the proceeds. The combination of this funding activity and strong
underlying free cash flow has allowed Newcrest to strengthen its
balance sheet and smooth and extend its debt maturity profile.
Newcrest’s lower production volumes compared to the prior period
reflects lower production from Lihir, the expected decline in feed
grade at Cadia, the divestment of Gosowong and the execution of
Telfer’s 1.4 train strategy (announced in August 2019).
Statutory profit was $647 million in the current period. The Statutory
profit includes significant items (after non-controlling interests) of
$103 million which represents the non-cash write-down of assets
relating to the divestment of Gosowong, transaction and integration
costs in relation to major M&A activity, and one-off finance costs
arising from the early repayment of existing corporate bonds.
Underlying profit of $750 million was $189 million higher than the
prior period driven by a higher realised gold price, higher copper
production at Cadia and Telfer, the favourable impact on operating
costs for the Australian operations from the weakening of the
Australian dollar against the US dollar and a lower depreciation
expense. These benefits were partially offset by lower gold sales
resulting from lower production, a lower realised copper price, higher
operating costs at Cadia and Lihir, increased income tax expense as a
result of the Company’s improved profitability and losses recognised
on investments in associates in the current period.
The average realised gold price in the current period of $1,530 per
ounce was 21% higher than the prior period and the average realised
copper price of $2.57 per pound was 8% lower than the prior period.
Gold production11 of 2.2 million ounces was 13% lower than the
prior period, reflecting lower gold head grade milled at Cadia and
Lihir, lower mill throughput at Telfer with the change to the 1.4 train
strategy, and the divestment of Gosowong. This decrease in gold
production was partially offset by the acquisition of Red Chris, record
high annual mining and mill throughput at Cadia, higher grade at Telfer
and the inclusion of 16,422 ounces of attributable gold production
from Newcrest’s 32% interest in the Fruta del Norte mine.
Copper production of 138 thousand tonnes was 30% higher than the
prior period, primarily driven by production from the newly acquired
Red Chris, and higher production from Cadia and Telfer.
Newcrest’s AISC of $862 per ounce in the current period was
17% higher than the prior period. The increase in AISC per ounce
reflects lower production and resulting sales, higher site operating
costs with the addition of Red Chris and increased maintenance costs
at Lihir and Cadia, higher sustaining capital expenditure associated
with the addition of Red Chris, and the impact of a lower realised
copper price. This was partially offset by the increase in copper sales
with the inclusion of Red Chris and higher copper sales at Cadia and
Telfer and the favourable impact of a weaker Australian dollar on
operating costs for Australian operations.
Notwithstanding a higher AISC per ounce, Newcrest’s AISC margin per
ounce increased by 26% from the prior period as a result of a higher
realised gold price.
Cashflow from operating activities of $1,471 million was broadly
unchanged from the prior period, as the benefit of higher gold prices,
increased copper sales volumes and the weaker Australian dollar in
the current period was more than offset by lower gold sales volumes,
the impact of a lower realised copper price, higher operating costs,
higher net working capital outflow and higher income tax payments.
Free cash flow of negative $621 million includes the payment for
the acquisition of Red Chris (70% ownership) of $769 million9,
payment for the acquisition of the Fruta del Norte finance facilities of
$460 million10, an additional investment in Lundin Gold of $79 million
(increasing Newcrest’s ownership to 32%), payment of $3 million for an
interest in Antipa Minerals and net proceeds of $20 million8 in relation
to the divestment of Gosowong.
Excluding the growth investments and divestment activity mentioned
above, Free cash flow before M&A activity3 was $670 million.
Adjusting the prior period to exclude M&A-related activity of the
same nature results in the current period Free cash flow before M&A
activity being $208 million or 24% lower than the prior period, due
to increased major capital project expenditure (primarily relating
to the development of PC2-3 at Cadia) and increased exploration
expenditure (with drilling at Havieron, exploration activity at Red Chris
and the acquisition of GJ Copper-Gold Property in British Columbia).
Capital structure
Across May and June 2020, Newcrest successfully raised A$1.2 billion
of equity through a A$1.0 billion placement to institutional investors
and a A$200 million Share Purchase Plan. The funds raised were used
to fund the US$460 million purchase of the Fruta del Norte finance
facilities, with the remainder directed to funding Newcrest’s organic
growth options such as the commencement of declines at both
Havieron and Red Chris.
On 13 May 2020, Newcrest issued US$1.15 billion of senior unsecured
notes, comprising 10-year bonds totalling US$650 million (maturing
in 2030) and 30-year bonds totalling US$500 million (maturing in
2050). The proceeds from the new bonds were used to repay all of the
Company’s notes due in 2021 and to repay all but $380 million of
the notes due in 2022.
Directors’ Report continuedDIRECTORS’ REPORT 41
The combined transactions have ensured that Newcrest’s balance sheet remains strong, smooths and extends Newcrest’s weighted average debt
maturity profile to ~16 years (previously ~7 years) and secures long term debt funding at coupons much lower than the existing corporate bonds.
Newcrest’s net debt at 30 June 2020 was $624 million. This comprises $2,013 million of capital market debt, lease liabilities of $58 million and
$4 million relating to a loan acquired through the acquisition of Red Chris, less $1,451 million of cash.
At 30 June 2020, Newcrest had $3,451 million of liquidity coverage, comprising $1,451 million of cash and $2,000 million in committed undrawn
bilateral bank debt facilities with maturity periods ranging from 2021 to 2023.
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’s financial policy metrics and its performance against them are as follows:
Metric
Policy ‘looks to’
Credit rating (S&P/Moody’s)
Investment grade
Leverage ratio (Net debt to EBITDA)
Less than 2.0 times
Gearing ratio
Below 25%
Cash and committed undrawn
bank facilities
At least $1.5bn, of which
~1/3 is in the form of cash
Telfer gold hedging
No new hedging in relation to Telfer was undertaken in the current period.
As at
30 June 2020
BBB/Baa2
0.3
6.8%
$3.45bn
($1.45bn cash)
As at
30 June 2019
BBB/Baa2
0.2
4.9%
$3.60bn
($1.6bn cash)
The total outstanding volume and prices of gold hedged for future years at Telfer and in total for Newcrest is:
Financial Year Ending
30 June 2021
30 June 2022
30 June 2023
Total
Gold Ounces
Hedged
Average Price
A$/oz
216,639
204,615
137,919
559,173
1,864
1,902
1,942
1,897
Telfer is a large scale; low grade mine and its profitability and cash flow are both very sensitive to the realised Australian dollar gold price.
The above hedges help support investment in future cutbacks and mine development.
The current period included 204,794 ounces of Telfer gold sales hedged at an average price of A$1,729 per ounce, representing a net revenue
loss of $82 million for the current period.
At 30 June 2020, based on gold forward curves, the unrealised mark-to-market loss on these hedges was $266 million.
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. Newcrest targets a total dividend payout of at least 10-30% of free cash flow
generated for that financial year, with the dividend being no less than US15 cents per share on a full year basis.
Having regard to the above mentioned considerations, the Newcrest Board has determined that a final fully franked dividend of US17.5 cents
per share will be paid on Friday, 25 September 2020. The record date for entitlement is Monday, 24 August 2020. The financial impact of the
final dividend amounting to $143 million has not been recognised in the Consolidated Financial Statements for the year. The Company’s Dividend
Reinvestment Plan remains in place.
Including the interim dividend of US7.5 cents per share, total dividends in respect of the 2020 financial year amount to US25 cents per share.
NEWCREST 2020 ANNUAL REPORT 42
Directors’ Report continued
1. Summary of Results for the 12 Months Ended 30 June 20201 continued
Guidance5,6,7
Subject to market and operating conditions, Newcrest provides the following guidance for FY21.
The production guidance numbers for FY21 assume no COVID-19 related interruptions. However, the AISC expenditure guidance for FY21
includes an estimate of additional costs associated with managing the business in a COVID-19 context (including on matters such as flights,
transport, rosters, leave, screening and testing, and disbursements from the Community Support Fund) in the order of $30-40 million. This
compares with the estimate of an additional ~$20 million of AISC spend to have been incurred on COVID-19 related matters in the current period.
Production guidance for the 12 months ending 30 June 20215,7
Cadia
Lihir
Telfer
Red Chris
Fruta del Norte(a)
Group production
– gold
– copper
– gold
– gold
– copper
– gold
– copper
– gold
– gold
– copper
koz
kt
koz
koz
kt
koz
kt
koz
koz
kt
680 – 760
95 – 105
720 – 820
360 – 420
10 – 20
45 – 55
25 – 30
95 – 110
1,950 – 2,150
135 – 155
Cost, capital, exploration and depreciation guidance for the 12 months ending 30 June 20215,6,7
US$m
Cadia
Lihir
Telfer
Red Chris
Norte(a)
Havieron
Other(b)
Group
Fruta del
All-In Sustaining Cost(c)
Capital expenditure
– Production
stripping(c)
– Sustaining capital(c)
– Major projects
(non-sustaining)
Total Capital
expenditure
50 – 130
940 – 990
510 – 570
80 – 115
81 – 85
130 – 140 1,800 – 1,950
–
90 – 100
135 – 150
80 – 90
–
50 – 55
35 – 55
65 – 75
–
25 – 30
170 – 200
310 – 350
380 – 420
130 – 180
–
30 – 40
35 – 45
5
580 – 690
470 – 520
345 – 420
50 – 55
130 – 170
35 – 45
25 – 35 1,060 –1,240
Exploration expenditure
Depreciation and amortisation (including depreciation of production stripping)
115 – 125
610 – 650
(a) The Fruta del Norte guidance represents Newcrest’s 32% interest in the annualised production and AISC for Fruta del Norte based on Lundin Gold’s market
release on 5 July 2020. This release estimated gold production for the second half of calendar year 2020 to be in the range of 150koz to 170koz at an AISC
of $770/oz to $850/oz.
(b) Other includes $5 million of major project expenditure (non-sustaining) in relation to Wafi-Golpu.
(c) Production stripping and sustaining capital shown above are included in AISC.
Directors’ Report continuedDIRECTORS’ REPORT 43
Review of Operations7
Operating
Production
Gold
Copper
Silver
Sales
Gold
Copper
Silver
Financial
Revenue
EBITDA4
EBIT4
Net assets
Operating cash flow4
Investing cash flow4
Free cash flow*
AISC
AISC Margin
koz
kt
koz
koz
kt
koz
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
US$/oz
Cadia
Lihir
Telfer Gosowong8
Red Chris9
Fruta del
Norte11
Other
Group
For the 12 months ended 30 June 2020
843
96
575
849
96
578
1,802
1,301
1,138
2,638
1,286
(295)
991
136
160
1,370
776
–
30
761
–
30
1,196
465
170
4,242
468
(235)
233
918
1,206
324
393
16
164
391
16
164
579
103
19
(24)
116
(65)
51
501
1,281
249
103
–
106
104
–
112
160
44
11
–
30
(19)
11
132
1,264
225(12)
39
25
110
37
24
76
185
63
16
836
57
(75)
(18)
63
1,703
(173)
16
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(141)
(163)
921
(486)
(1,403)
(1,889)
98
–
–
2,171
138
983
2,143
137
958
3,922
1,835
1,191
8,613
1,471
(2,092)
(621)
1,848
862
668
* Free cash flow for ‘Other’ includes other investing activities of $1,291 million (comprising the acquisition of a 70% interest in Red Chris of $769 million9,
the acquisition of Fruta del Norte finance facilities of $460 million10, further investments in Lundin Gold of $79 million, net proceeds from the divestment
of Gosowong of $20 million8 and $3 million investment in Antipa Minerals Ltd), income tax paid of $282 million, net interest paid of $96 million, exploration
expenditure of $84 million, corporate costs of $83 million, other capital expenditure of $30 million, and working capital movements of $24 million.
Cadia
Lihir
Telfer
Gosowong
Red Chris
Fruta del
Norte
Other
Group
For the 12 months ended 30 June 2019
Operating
Production
Gold
Copper
Silver
Sales
Gold
Copper
Silver
Financial
Revenue
EBITDA
EBIT
Net assets
Operating cash flow
Investing cash flow
Free cash flow*
AISC
AISC Margin
koz
kt
koz
koz
kt
koz
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
US$/oz
913
91
554
914
91
554
1,630
1,134
946
2,503
1,141
(176)
965
121
132
1,137
933
–
32
965
–
32
1,229
516
180
4,308
483
(182)
301
855
887
382
452
15
212
451
15
212
627
108
(28)
(9)
126
(118)
8
565
1,253
16
190
–
207
199
–
211
256
63
(4)
246
56
(27)
29
219
1,099
170
–
–
–
–
–
–
–
–
(151)
(170)
583
(319)
(180)
(499)
105
–
–
2,488
106
1,005
2,529
106
1,008
3,742
1,670
924
7,631
1,487
(683)
804
1,865
738
531
*
Free cash flow for ‘Other’ comprises net interest paid of $86 million, income tax paid of $165 million, other investing activities of $74 million (including
further investments in Lundin Gold and Sol Gold and net proceeds of $20 million following the divestment of Sèguèla), corporate costs of $88 million, capital
expenditure of $44 million, exploration expenditure of $58 million and net of favourable working capital movements of $16 million.
NEWCREST 2020 ANNUAL REPORT 44
Directors’ Report continued
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 2020 (‘current
period’) compared with the 12 months ended 30 June 2019 (‘prior period’), except where otherwise stated. All references to ‘the Company’ are to Newcrest
Mining Limited.
2. Statutory profit is profit after tax attributable to owners of the Company.
3. Newcrest’s results are reported under International Financial Reporting Standards (“IFRS”). This report also includes certain non-IFRS financial information,
including the following:
•
•
•
•
•
•
•
•
•
•
‘Underlying profit’ 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 updated World Gold Council Guidance Note on Non-GAAP Metrics released November 2018.
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, tax and intercompany transactions.
‘Free Cash Flow before M&A activity’ is ‘Free Cash Flow’ excluding acquisitions, investments in associates and divestments.
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. During the current period Newcrest adopted AASB 16 Leases and elected to apply the modified retrospective method of adoption. Under this method,
comparative figures are not required to be restated and continue to be presented under the previous standard, AASB 117. Refer to Notes 2(b) and 22 of the
consolidated financial statements for further details.
5. 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, particularly in the current economic environment with the significant volatility,
uncertainty and disruption caused by the COVID-19 pandemic. 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.
6. The guidance stated assumes weighted average copper price of $2.70 per pound, AUD:USD exchange rate of 0.68 and CAD:USD exchange rate of 0.74 for FY21.
7. All data relating to operations is shown at 100%, with the exception of Red Chris which is shown at 70% and Fruta del Norte which is shown at 32%. Prior to
divestment, Newcrest owned 75% of Gosowong through its holding in PT Nusa Halmahera Minerals, an incorporated joint venture.
8. Newcrest finalised the sale of its 75% interest in Gosowong on 4 March 2020 (‘divestment date’). Production and financial outcomes for the current period
represent Newcrest’s period of ownership to the divestment date. In the current period, net proceeds of $20 million were received with a further $30 million
payable in 18 months post transaction completion.
9. The payment of $769 million represents the cash consideration paid for the 70% interest in the Red Chris mine. The consideration of $769 million is shown net
of debt and working capital adjustments acquired on completion. Refer to Note 32(b) of the consolidated financial statements for further details.
10. The payment of $460 million represents the cash consideration paid for the acquisition of the Gold prepay agreement, the Stream Credit facility and the Offtake
agreement in respect of Lundin Gold Inc’s Fruta del Norte mine.
11. Group gold production in the current period includes 16,422 ounces from the Fruta del Norte mine (owned and operated by Lundin Gold) of which Newcrest has
a 32% interest. Due to the negligible impact of Fruta del Norte’s AISC on Newcrest’s FY20 AISC, it has been excluded from Newcrest’s calculation. Newcrest
accounts for its 32% interest using the equity accounting method. Refer to Note 31(b) of the consolidated financial statements for further details.
12. AISC margin determined using the March 2020 YTD realised gold price of $1,489 per ounce.
Directors’ Report continuedDIRECTORS’ REPORT
45
2. Discussion and Analysis of Operations and the Income Statement
2.1. Profit overview
Statutory profit was $647 million in the current period, $86 million (or 15%) higher than the prior period. The Statutory profit includes significant
items (after non-controlling interests) of $103 million which represents the write-down of assets relating to the divestment of Gosowong,
transaction and integration costs in relation to major M&A activity, and one-off finance costs arising from the early repayment of existing
corporate bonds.
Underlying profit of $750 million was $189 million (or 34%) higher than the prior period primarily driven by a higher realised gold price, higher
copper production at Cadia and Telfer, the favourable impact on operating costs for the Australian operations from the weakening of the
Australian dollar against the US dollar and a lower depreciation expense. These benefits were partially offset by lower gold sales driven by lower
production, lower realised copper price, higher operating costs at Cadia and Lihir, increased income tax expense as a result of the Company’s
improved profitability and losses recognised on investments in associates in the current period.
US$m
Gold revenue
Copper revenue
Silver revenue
Less: treatment and refining deductions
Total revenue
Operating costs4
Depreciation and amortisation4
Total cost of sales4
Corporate administration expenses
Exploration expense
Share of associates losses
Other income
Net finance costs4
Income tax expense
Non-controlling interests
Underlying profit
Movement in Underlying Profit ($m)
For the 12 months ended 30 June
2020
3,278
778
16
(150)
3,922
(1,946)
(622)
(2,568)
(117)
(64)
(37)
55
(102)
(338)
(1)
750
2019
3,208
651
15
(132)
3,742
(1,921)
(727)
(2,648)
(120)
(70)
(18)
38
(94)
(272)
3
561
Change
Change %
70
127
1
(18)
180
(25)
105
80
3
6
(19)
17
(8)
(66)
(4)
189
2%
20%
7%
(14%)
5%
(1%)
14%
3%
3%
9%
(106%)
45%
(9%)
(24%)
(133%)
34%
Revenue
$180m
Operating Costs
($25)m
Depreciation &
Amortisation
$105m
560
(64)
561
191
1
78
(18)
(103)
(490)
88
17
7
(8)
(66)
(4)
750
FY19
GOLD
PRICE
COPPER
PRICE
GOLD
SALES
VOLUME
COPPER
SALES
VOLUME
SILVER
REVENUE
REVENUE
DED-
UCTIONS
OPERATING
COSTS
FX ON
OPERATING
COSTS
DEPREC-
IATION
FX ON
DEPREC-
IATION
CORPORATE
AND
OTHER*
NET
FINANCE
COSTS
INCOME
TAX
EXPENSE
NON-
CONTROLLING
INTERESTS
FY20
* Corporate and other includes Corporate administration expenses, Exploration expense, Share of losses of associates and Other income (refer to Section 2.4 for detail).
NEWCREST 2020 ANNUAL REPORT
46
Directors’ Report continued
2. Discussion and Analysis of Operations and the Income Statement continued
2.2. Revenue
Total sales revenue for the current period of $3,922 million included deductions for treatment and refining costs of $150 million. Excluding the
deductions, total gross sales revenue increased by $198 million (or 5%) compared to the prior period. Newcrest’s sales revenue continues to be
predominantly attributable to gold, being 83% of total net sales revenue in the current period (85% in the prior period).
US$m
Total gross revenue for 12 months ended 30 June 2019
Changes in revenues from volume:
Gold
Copper
Silver
Total volume impact
Change in revenue from price:
Gold
Copper
Silver
Total price impact
Total gross revenue for 12 months ended 30 June 2020
Less: treatment and refining deductions
Total net revenue for 12 months ended 30 June 2020
(490)
191
(1)
560
(64)
2
3,874
(300)
498
4,072
(150)
3,922
Gold revenue in the current period of $3,238 million included deductions for gold treatment and refining costs of $40 million. Excluding these
deductions, total gold revenue increased by 2% compared to the prior period, driven by a 21% increase in the realised gold price ($1,530 per
ounce in the current period compared to $1,269 per ounce in the prior period) and additional ounces following the acquisition of Red Chris.
This was partially offset by lower levels of production from Lihir, Cadia and Telfer and the divestment of Gosowong in the current period.
Copper revenue in the current period of $670 million included deductions for copper treatment and refining costs of $108 million. Excluding
these deductions, total copper revenue increased by 20% compared to the prior period, driven by the additional copper production following the
acquisition of Red Chris and higher levels of copper production at Cadia and Telfer. This was partially offset by an 8% reduction in the realised
copper price ($2.57 per pound in the current period compared to $2.78 per pound in the prior period).
Silver revenue in the current period of $14 million included deductions for silver treatment and refining costs of $2 million.
2.3. Cost of sales
US$m
Site production costs4
Royalties
Treatment and realisation
Inventory movements
Operating costs
Depreciation and amortisation4
Cost of sales4
For the 12 months ended 30 June
2020
1,779
119
48
–
1,946
622
2,568
2019
1,739
113
37
32
1,921
727
2,648
Change
Change %
40
6
11
(32)
25
(105)
(80)
2%
5%
30%
(100%)
1%
(14%)
(3%)
Cost of sales of $2,568 million was $80 million (or 3%) lower than the prior period. Site production costs of $1,779 million were $40 million
higher than the prior period, primarily relating to the addition of Red Chris operating costs and increased maintenance costs at Lihir and Cadia.
This increase in costs was offset by the favourable impact on operating costs from the weaker Australian dollar against the US dollar, lower
mining and ore treatment activity at Telfer and the divestment of Gosowong in the current period.
The increase in royalties, treatment and refining costs for bullion, and realisation costs including freight for bullion and concentrate primarily
reflect higher gold revenues driven by the higher realised gold price and the addition of Red Chris costs.
Inventory movements in the current period reflect relatively constant levels at 30 June, compared to a drawdown of inventory in the prior period.
Gosowong was divested in the current period which contributed to the lower period end inventory levels, though COVID-19 necessitated an
increase in certain inventory items at Lihir and Telfer amounting to approximately $20 million.
Directors’ Report continuedDIRECTORS’ REPORT 47
Depreciation expense was lower in the current period compared to the prior period reflecting lower production volumes together with the benefit
of a weaker Australian dollar against the US dollar.
As the Company is a US dollar reporting entity, cost of sales will vary in accordance with the movements in the operating currencies where those
costs are not denominated in US dollars.
The table below shows indicative currency exposures on operating costs by site for the current period:
Cadia
Telfer
Lihir
Gosowong
Red Chris
Group*
USD
15%
10%
25%
10%
10%
20%
AUD
85%
90%
35%
5%
–
55%
PGK
–
–
40%
–
–
15%
IDR
–
–
–
85%
–
5%
CAD
–
–
–
–
90%
5%
* The Group number also includes the impact of currency exposures on corporate administration expenses and exploration expenditure.
2.4. Corporate, Exploration and Other items
US$m
Corporate administration expenses
Exploration expense
Share of associates losses
Other income
Corporate, Exploration and Other items
For the 12 months ended 30 June
2020
(117)
(64)
(37)
55
(163)
2019
(120)
(70)
(18)
38
(170)
Corporate administration expenses of $117 million in the current period comprised corporate costs of $83 million, depreciation of $22 million
and equity-settled share-based payments of $12 million. Corporate administration expenses are $3 million (or 3%) lower than the prior period
primarily due to a weaker Australian dollar reducing AUD denominated costs.
Exploration expenditure of $64 million was expensed in the current period, $6 million (or 9%) lower than the prior period. This decrease was
primarily driven by the higher level of capitalisation of exploration expenditure in the current period, particularly relating to Havieron.
Share of losses of associates of $37 million represents Newcrest’s share of losses incurred by its equity accounted associates, comprising
Lundin Gold, Sol Gold, Azucar Minerals and Antipa Minerals.
Other income of $55 million comprised:
US$m
Net fair value gain on gold derivatives
Net fair value gain on copper derivatives
Net foreign exchange gain/(loss)
Net fair value movement on Fruta del Norte finance facilities
Other items
Other income
For the 12 months ended 30 June
2020
2019
49
15
(6)
1
(4)
55
12
2
29
–
(5)
38
In the current period, Newcrest ceased its program of hedging the copper and gold price movement impacts during the quotational period.
Measurement of fair value of Newcrest’s outstanding concentrate debtors is recognised as a net fair value gain in other income. With this change
in approach, Newcrest will be exposed to changes in commodity prices during the quotational period for the sale of concentrate.
The net foreign exchange loss 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.
NEWCREST 2020 ANNUAL REPORT 48
Directors’ Report continued
2. Discussion and Analysis of Operations and the Income Statement continued
2.5. Net finance costs4
Net finance costs of $102 million were $8 million (or 9%) higher than the prior period with lower interest rates received on cash holdings over
the current period and a marginal increase in interest expense associated with a temporary drawdown on the bilateral bank loan facilities in the
current period.
US$m
Interest received
Interest on Fruta del Norte facilities
Finance income
Interest on loans
Interest on leases
Facility fees and other costs
Discount unwind provisions
Finance costs
Net finance costs
For the 12 months ended 30 June
2020
2019
15
4
19
(97)
(2)
(15)
(7)
(121)
(102)
26
–
26
(94)
–
(17)
(9)
(120)
(94)
2.6. Income tax
Income tax on Statutory profit was $350 million, resulting in an effective tax rate of 36% which is higher than the Australian company tax rate of
30% primarily due to the $44 million write-down of Gosowong assets following the classification as ‘held for sale’ as at 31 December 2019 and
the non-deductible share of losses in associates.
Income tax on Underlying profit was $338 million. The resulting effective tax rate of 31% is higher than the Australian company tax rate of
30% primarily as a result of the non-deductible share of losses in associates.
2.7. Significant items
Significant items totalling a net expense of $103 million (after non-controlling interest) were recognised in the current period, comprising:
– Write-down of tax assets and property, plant and equipment relating to the divestment of Gosowong;
– One-off finance costs arising from the early repayment of Newcrest’s $750m of corporate bonds which were due in November 2021 and
$370 million of corporate bonds which were due in late October 2022; and
– Transaction and integration costs in relation to major M&A activity (being the acquisition of Fruta del Norte financing facilities, the divestment
of Gosowong and certain integration costs associated with Red Chris).
There were no significant items reported in the prior period.
US$m
Items by nature
Write-down of property, plant and equipment at Gosowong
Write-down of Gosowong tax assets
Major transaction & integration costs
Debt extinguishment and other finance costs
Total
Attributable to:
Non-controlling interest
Owners of the parent
Total
For the 12 months ended 30 June 2020
Pre-Tax
Tax
After-Tax
20
–
15
69
104
–
37
(4)
(21)
12
20
37
11
48
116
13
103
116
Directors’ Report continuedDIRECTORS’ REPORT 49
3. Discussion and Analysis of Cash Flow
Free cash flow of negative $621 million includes payments for the following:
– acquisition of the interest in Red Chris for $769 million9,
– acquisition of the Fruta del Norte finance facilities for $460 million10,
– an additional investment in Lundin Gold increasing Newcrest’s ownership to 32%, for $79 million,
– acquisition of an interest in Antipa Minerals for $3 million, and
– net proceeds of $20 million8 in relation to the divestment of Gosowong.
Excluding growth investments and the divestment activity mentioned above, ‘Free cash flow before M&A activity’ was $670 million, which is
$208 million or 24% lower than the prior period. With cash flow from operating activities broadly unchanged year on year, the decrease in ‘Free cash
flow before M&A activity’ is primarily driven by increased investment in major capital projects and a higher level of total exploration expenditure.
For the 12 months ended 30 June
US$m
Cash flow from operating activities4
Production stripping and sustaining capital expenditure
Major capital expenditure
Total capital expenditure
Reclassification of capital leases4
Exploration and evaluation expenditure
Receipts from Fruta del Norte finance facilities10
Proceeds from sale of property, plant and equipment
Free cash flow (before M&A activity)3
Acquisition payment for a 70% interest of Red Chris9
Acquisition of Fruta del Norte finance facilities10
Payment for investment in Lundin Gold
Payment for investment in SolGold
Proceeds from sale of Gosowong, net of cash divested8
Proceeds from sale of Sèguèla
Payments for other investments
Free cash flow
2020
1,471
(422)
(273)
(695)
4
(113)
1
2
670
(769)
(460)
(79)
–
20
–
(3)
(621)
2019
1,487
(378)
(153)
(531)
–
(78)
–
–
878
–
–
(10)
(18)
–
20
(66)
Change
Change %
(16)
(44)
(120)
(164)
4
(35)
1
2
(208)
(769)
(460)
(69)
18
20
(20)
63
(1%)
(12%)
(78%)
(31%)
(45%)
(24%)
(690%)
100%
(100%)
95%
(177%)
804
(1,425)
NEWCREST 2020 ANNUAL REPORT
50
Directors’ Report continued
3. Discussion and Analysis of Cash Flow continued
3.1. Cash at the end of the period
US$m
Cash flow from operating activities4
Cash flow related to investing activities4
Free cash flow
Cash flow related to financing activities4
Net movement in cash
Cash at the beginning of the period
Effects of exchange rate changes on cash held
Cash at the end of the period
3.2. Cash flow from operating activities
US$m
EBITDA4
Add: Exploration expenditure written-off
Add: Other non-cash items or non-operating items
Sub-total
Working capital movements*
Receivables
Inventories
Payables and provisions
Other assets and liabilities
Net working capital movements
Net interest paid
Income taxes paid
Net cash inflow from operating activities4
*
Includes adjustments for non-cash items.
For the 12 months ended 30 June
2019
1,487
(683)
804
(157)
647
953
–
1,600
Change
Change %
(16)
(1,409)
(1,425)
620
(805)
647
9
(149)
(1%)
(206%)
(177%)
395%
(124%)
68%
(9%)
For the 12 months ended 30 June
2019
1,670
70
1
1,741
(51)
(5)
36
17
(3)
(86)
(165)
1,487
Change
Change %
165
(6)
(5)
154
(45)
(6)
27
(19)
(43)
(10)
(117)
(16)
10%
(9%)
(500%)
9%
(88%)
(120%)
75%
(112%)
(1,433%)
(12%)
(71%)
(1%)
2020
1,471
(2,092)
(621)
463
(158)
1,600
9
1,451
2020
1,835
64
(4)
1,895
(96)
(11)
63
(2)
(46)
(96)
(282)
1,471
Cash inflow from operating activities of $1,471 million was $16 million (or 1%) lower than the prior period. Lower gold sales volumes from
Lihir, Telfer and Cadia, higher income tax payments, a lower realised copper price, the divestment of Gosowong and timing of working capital
movements all combined to more than offset a higher realised gold price, higher copper production and associated sales, the inclusion of Red
Chris and the benefit of a weaker Australian dollar against the US dollar.
Directors’ Report continuedDIRECTORS’ REPORT 51
For the 12 months ended 30 June
2020
2019
Change
Change %
32
94
21
147
94
24
85
13
42
17
275
203
–
56
1
10
3
273
695
(4)
769
460
79
–
(20)
–
3
1,291
(1)
113
(2)
2,092
67
63
–
130
95
39
76
22
–
16
248
81
2
42
–
28
–
153
531
–
–
–
10
18
–
(20)
66
74
–
78
–
(35)
31
21
17
(1)
(15)
9
(9)
42
1
27
122
(2)
14
1
(18)
3
120
164
(4)
769
460
69
(18)
(20)
20
(63)
1,217
(1)
35
(2)
(52%)
49%
13%
(1%)
(38%)
12%
(41%)
6%
11%
151%
(100%)
33%
(64%)
78%
31%
690%
(100%)
100%
(95%)
1,645%
45%
683
1,409
206%
3.3. Cash flow from investing activities
US$m
Production stripping
Telfer
Lihir
Red Chris
Total production stripping
Sustaining capital expenditure
Cadia
Telfer
Lihir
Gosowong
Red Chris
Corporate
Total sustaining capital
Major projects (non-sustaining)
Cadia
Telfer
Lihir
Red Chris
Wafi-Golpu
Havieron
Total major projects (non-sustaining) capital
Total capital expenditure
Reclassification of capital leases4
M&A activity
Acquisition payment for a 70% interest of Red Chris9
Acquisition of Fruta del Norte finance facilities10
Payment for investments in Lundin Gold
Payment for investment in SolGold
Proceeds from sale of Gosowong, net of cash divested8
Proceeds from sale of Sèguèla
Payments for other investments
Total M&A activity
Receipts from Fruta del Norte finance facilities10
Exploration and evaluation expenditure
Proceeds from sale of property, plant and equipment
Net cash outflow from investing activities4
NEWCREST 2020 ANNUAL REPORT 52
Directors’ Report continued
3. Discussion and Analysis of Cash Flow continued
3.3. Cash flow from investing activities continued
Cash outflow from investing activities of $2,092 million was $1,409 million higher than the prior period reflecting the following payments:
– $769 million9 for the acquisition of Red Chris,
– $460 million10 for the acquisition of Fruta del Norte finance facilities,
– $79 million investment in Lundin Gold, increasing Newcrest’s ownership to 32%,
– higher major project capital expenditure with the Cadia Expansion Project (Stage 1) commencing during the current period,
– additional production stripping and sustaining capital associated with the inclusion of Red Chris, and
– increased exploration activity, with drilling at Havieron and Red Chris and the acquisition of GJ Copper-Gold Property in British Columbia.
Capital expenditure of $695 million in the current period comprised:
– Production stripping of $147 million, which was 13% higher than the prior period primarily driven by an increase in production stripping
activity at Lihir (Phase 15) and the addition of spend at Red Chris, partially offset by a decrease in pre-stripping activities at Telfer (West
Dome Stage 2 and 3 completed in the prior period).
– Sustaining capital expenditure of $275 million, which was $27 million higher than the prior period due to the addition of spend at Red Chris
(which is expected to be higher initially as Newcrest works to improve the site’s future operational performance), partially offset by lower
spend at Telfer and the divestment of Gosowong in the current period.
– Major project, or non-sustaining capital expenditure of $273 million, primarily related to:
• Cadia – increased spend was primarily associated with the Cadia Expansion Project (Stage 1), with work commencing on PC2-3
development in the current period, and the Cadia Molybdenum Plant;
• Lihir – major projects in the period included the seepage barrier feasibility study, pit cooling and throughput related projects; and
• Wafi-Golpu – with the lower capital expenditure in the current period reflecting a reduced work program following permitting delays.
Expenditure in the current period includes general maintenance of the site, community programs, environmental monitoring and
redundancy costs.
Exploration activity of $113 million was $35 million (or 45%) higher than the prior period, comprising the following:
US$m
Expenditure by nature
Greenfield
Brownfield
Resource definition
Expenditure by region
Australia
Indonesia
Papua New Guinea
West Africa
North America
Latin America
For the 12 months ended 30 June
2020
2019
Change
Change %
84
6
23
113
59
4
1
–
31
17
113
50
6
22
78
27
7
5
6
13
20
78
34
–
1
35
32
(3)
(4)
(6)
18
(3)
35
68%
0%
5%
45%
119%
(43%)
(80%)
(100%)
138%
(15%)
45%
Directors’ Report continuedDIRECTORS’ REPORT
53
In the current period, Newcrest continued its search for new discoveries with greenfield exploration activity undertaken in Australia, Canada, USA,
Ecuador and Chile. Activity was focused in and around fertile gold/copper districts including the Paterson Province (Western Australia), Golden
Triangle of British Columbia (Canada), Tanami (Northern Territory/Western Australia), Jarbidge (Nevada), Northern Andes (Ecuador) and the
Central Andes (Chile).
The higher level of Greenfield expenditure was predominantly due to additional drilling at the Havieron Project in Western Australia. Exploration
expenditure was also higher in the North America region compared to the prior period with Newcrest commencing drilling at Red Chris during
August 2019 and the acquisition of the GJ Copper-gold property in British Columbia in the current period.
3.4. Cash flow from financing activities
US$m
Net proceeds from equity raising
Net proceeds from corporate bonds
Repayment of other loans
Repayment of lease principal4
Payment for treasury shares
Dividends paid to members of the parent entity
Dividend paid to non-controlling interests
Other financing costs
Net cash inflow/(outflow) from financing activities4
For the 12 months ended 30 June
2020
771
14
(29)
(27)
(25)
(154)
(23)
(64)
463
2019
–
–
–
–
(26)
(131)
–
–
(157)
Change
Change %
771
14
(29)
(27)
1
(23)
(23)
(64)
620
4%
(18%)
395%
Cash inflow from financing activities of $463 million, was a net increase in cash inflow of $620 million from the prior period.
Financing activities of $463 million for the current period comprised:
– Net proceeds from equity raising reflects proceeds from the A$1.0 billion placement to institutional investors in May 2020, and the
A$200m share purchase plan (SPP) completed in June 2020, less costs;
– Net proceeds from corporate bonds of $14 million reflects the net impact of $1.15 billion of new long-term bond issuances and the
repurchase of existing near-term bond maturities net of fees incurred, undertaken to maintain a strong balance sheet, securing long-term
debt at coupons lower than the existing bonds and to smooth and extend the debt maturity profile;
– Repayment of $29 million of other loans assumed from Red Chris;
– Payment for treasury shares of $25 million represents shares purchased on market to satisfy obligations under employee share-based
payment plans;
– Dividends paid to Newcrest shareholders of $154 million;
– Dividends paid to non-controlling interests of $23 million were paid to PT Aneka Tambang Tbk for their 25 percent non-controlling interest
in PT Nusa Halmahera Minerals (the entity that owned Gosowong); and
– Other financing costs of $64 million reflects the early repayment costs of repurchasing existing corporate bonds.
NEWCREST 2020 ANNUAL REPORT 54
Directors’ Report continued
4. Review of Operations
4.1. Cadia
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Copper produced
Silver produced
Gold sales
Copper sales
Silver sales
Financial
Revenue
Cost of Sales4 (including depreciation)
Depreciation4
EBITDA4
EBIT4
Operating cash flow4
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
For the 12 months ended 30 June
2020
2019
Change
Change %
tonnes ‘000
tonnes ‘000
tonnes ‘000
grams/tonne
%
ounces
tonnes
ounces
ounces
tonnes
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
30,178
30,178
29,347
1.14
78.6
843,338
96,042
574,594
848,959
96,437
577,650
1,802
664
163
1,301
1,138
1,286
94
203
297
991
136
160
28,779
28,779
29,302
1.24
78.4
912,777
90,841
553,764
914,017
91,010
553,707
1,630
684
188
1,134
946
1,141
95
81
176
965
121
132
1,399
1,399
45
(0.10)
0.2
(69,439)
5,201
20,830
(65,058)
5,427
23,943
172
(20)
(25)
167
192
145
(1)
122
121
26
15
28
5%
5%
0%
(8%)
0%
(8%)
6%
4%
(7%)
6%
4%
11%
(3%)
(13%)
15%
20%
13%
(1%)
151%
69%
3%
12%
21%
Gold production of 843,338 ounces was 8% lower than the prior period reflecting an 8% decrease in gold grade milled. The decrease in grade is in
line with expected grades for the current period.
The mine produced in excess of 30 million tonnes of ore, achieving a record high annual mined tonnes from Cadia East and a 5% improvement on
the prior period. This increase in mined ore was principally the result of an increase in the conveying rate. In the final three months of the current
period, the mine achieved a record for mined tonnes at a volume equivalent to 31.8 million tonnes per annum.
In the current period total material milled was 29.3 million tonnes, consistent with the prior period. As previously reported at the half year, lower
tonnes were milled in the first half of the current period principally due to extended downtime of the Concentrator 1 SAG mill following the
identification (through routine inspections) of a preventative maintenance opportunity. In the final three months of the current period, a record
annualised mill throughput rate of 34.2 million tonnes per annum was achieved, with no planned maintenance activities undertaken during this period.
EBIT of $1,138 million was 20% higher than the prior period. This represented the cumulative benefit of an 11% increase in revenue and a
3% reduction in cost of sales (including depreciation). The increase in revenue was driven by a 21% higher realised gold price and higher volume
of copper sales which together more than offset the lower volume of gold sales and the impact of a lower realised copper price.
Cost of sales (including depreciation) was lower due to a lower depreciation charge associated with lower production in the current period as well
as a weaker Australian dollar positively impacting Australian dollar denominated operating costs (including depreciation). This was partially offset
by an increase in Australian dollar denominated costs primarily associated with unplanned maintenance activity.
AISC of $160 per ounce was $28 per ounce higher than the prior period. This reflected the cumulative impact of the 12% increase in the absolute
AISC spend and a 7% decrease in gold sales in the current period. The increase in the absolute AISC spend was primarily due to a decrease in
by-product credits (due to the lower copper price more than offsetting the higher copper volumes), higher Australian dollar denominated costs
primarily associated with unplanned maintenance and an increase in royalty payments associated with the higher revenue generation. These
increases in AISC spend were only partially offset by the favourable impact of a weaker Australian dollar.
Free cash flow of $991 million was 3% higher than the prior period. This reflects the 15% higher earnings (EBITDA) partially offset by a
69% increase in capital expenditure. The key drivers of increased capital expenditure in the current period are Stage 1 of the Cadia Expansion
Project (primarily PC2-3 development) and the Cadia Molybdenum Plant.
Directors’ Report continuedDIRECTORS’ REPORT 55
4.2. Lihir
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Silver produced
Gold sales
Silver sales
Financial
Revenue
Cost of Sales4 (including depreciation)
Depreciation4
EBITDA4
EBIT4
Operating cash flow4
Production stripping
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
For the 12 months ended 30 June
2020
2019
Change
Change %
tonnes ‘000
tonnes ‘000
tonnes ‘000
grams/tonne
%
ounces
ounces
ounces
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
12,030
30,085
13,798
2.38
73.6
775,978
29,520
760,724
29,520
1,196
1,026
295
465
170
468
94
85
56
235
233
918
1,206
14,775
31,057
13,350
2.86
76.0
932,784
32,017
964,553
32,017
1,229
1,049
336
516
180
483
63
76
42
181
301
855
887
(2,745)
(972)
448
(0.48)
(2.4)
(156,806)
(2,497)
(203,829)
(2,497)
(33)
(23)
(41)
(51)
(10)
(15)
31
9
14
54
(68)
63
319
(19%)
(3%)
3%
(17%)
(3%)
(17%)
(8%)
(21%)
(8%)
(3%)
(2%)
(12%)
(10%)
(6%)
(3%)
49%
12%
33%
30%
(23%)
7%
36%
Gold production of 775,978 ounces was 17% lower than the prior period, driven by a decrease in gold grade milled and lower gold recovery.
Total ore mined was lower in the current period due to the completion of mining in Phase 9 in early 2019 and ex-pit ore now being primarily
sourced from Phase 14 in the current period. The strip ratio also increased as the mine transitions towards the Kapit pit. Total material mined
was in line with the prior period due to increased waste movement in Phase 15 which will enable access to Phase 15 ore in FY21.
Gold head grade was 17% lower than the prior period. The lower volume of ex-pit ore required a higher ratio of lower grade stockpiled ore
(relative to mined ore) being delivered to the process plant, lowering overall processed grade for the year.
Gold recovery was 3% lower primarily due to a higher proportion of stockpile ore feed and reduced autoclave throughput as the higher levels
of clay in the stockpile feed created materials handling issues and increased viscosity which affects oxygen transfer in the autoclaves. The lower
autoclave throughput in turn required an increase in ore flotation, reducing overall recovery rates in the current period.
Clay levels associated with Argillic ores and stockpile material is higher than previously anticipated as mining progresses to the Kapit orebody.
Processing performance of the higher ratio of stockpile ore during the current period triggered a reassessment of feed blend impact on future
plant throughput and recovery. A pit optimisation study is currently underway to look at options to further improve the ore presentation to the
processing plant. The pit optimisation study is also reviewing opportunities to improve grade presentation to the mill by bringing forward grade
along with optimising the integration of the seepage barrier project to the mine schedule.
The higher strip ratios will continue into FY21 and FY22 and the processing plant feed is expected to continue to have high levels of stockpile
material and Argillic ores.
The seepage barrier feasibility study is forecast to be completed by the end of FY21 (subject to COVID-19 constraints). The extended timing for
the completion of the study is due to delays to the ground investigation trials as a result of COVID-19 related travel restrictions. The feasibility
study has identified an opportunity to access Kapit ore earlier through the realignment of the seepage barrier. This realignment could also create
an opportunity to access additional gold resources towards the end of the mine life which would have been sterilised with the original alignment of
the seepage barrier. This is likely to result in an increase in capital costs which are yet to be finalised as part of the study.
NEWCREST 2020 ANNUAL REPORT 56
Directors’ Report continued
4. Review of Operations continued
4.2. Lihir continued
Additionally, improvement programs are underway to address the impact of clays on the materials handling system and the ability of the
autoclaves to better handle ore with higher clay levels. The materials handling improvements include optimising the feed blend to the crushers,
along with modifications to transfer chutes to reduce blockages. The autoclave improvements are focussing on slurry densities, oxygen
management and projects that improve front and back end temperatures of the autoclaves.
EBIT of $170 million was $10 million (or 6%) lower than the prior period due to lower sales volumes and higher operating costs. This was partially
offset by a higher realised gold price and lower depreciation. Depreciation in the current period was $41 million (or 12%) lower primarily due to a
decrease in ore mined resulting in lower depreciation of production stripping assets and the lower sales volumes. Higher cost of sales (excluding
depreciation) was primarily driven by increased maintenance costs (reflecting the transition to a bi-annual shut-down strategy and higher costs in
relation to the mobile fleet).
AISC of $1,206 per ounce, was $319 per ounce higher (or 36%) than the prior period, primarily reflecting lower gold sales, higher operating costs
and increased sustaining capital in the current period.
Free cash flow of $233 million for the current period was $68 million (or 23%) lower than the prior period, driven by lower production and
associated sales volumes and increased operating and capital expenditure. This was partially offset by a higher realised gold price and favourable
movements in working capital. The key drivers of increased capital expenditure in the current period were the higher levels of waste movement in
Phase 15, the seepage barrier feasibility study, pit cooling and throughput-related projects.
4.3. Telfer
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Copper produced
Silver produced
Gold sales
Copper sales
Silver sales
Financial
Revenue
Cost of Sales4 (including depreciation)
Depreciation4
EBITDA4
EBIT4
Operating cash flow4
Production stripping
Sustaining capital
Non-sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
For the 12 months ended 30 June
2020
2019
Change
Change %
17,481
55,107
16,209
0.90
81.3
393,164
16,278
163,500
391,339
16,283
163,500
579
560
84
103
19
116
32
24
–
56
51
501
1,281
21,923
59,581
22,734
0.72
83.4
451,991
15,025
211,869
450,791
15,047
211,869
627
655
136
108
(28)
126
67
39
2
108
8
565
1,253
(4,442)
(4,474)
(6,525)
0.18
(2.1)
(58,827)
1,253
(48,369)
(59,452)
1,236
(48,369)
(48)
(95)
(52)
(5)
47
(10)
(35)
(15)
(2)
(52)
43
(64)
28
(20%)
(8%)
(29%)
25%
(3%)
(13%)
8%
(23%)
(13%)
8%
(23%)
(8%)
(15%)
(38%)
(5%)
168%
(8%)
(52%)
(38%)
(100%)
(48%)
538%
(11%)
2%
tonnes ‘000
tonnes ‘000
tonnes ‘000
grams/tonne
%
ounces
tonnes
ounces
ounces
tonnes
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
Directors’ Report continuedDIRECTORS’ REPORT 57
Gold production of 393,164 ounces was 13% lower than the prior period, due to lower milled tonnes and lower recovery, partially offset by higher
head grade. Mill throughput was 29% lower due to the deliberate change in mill operating strategy (announced in August 2019) to a reduced rate
utilising ~1.4 of the two trains’ capacity and targeting higher feed grade to improve margin.
Total material mined was lower than the prior period due to equipment availability and utilisation adversely impacting productivity in the open
pit. Reductions in underground mining activity also reflected a reduced footprint from the Sub Level Cave and Western Flanks as they near
completion of the currently approved mine plans.
Notwithstanding lower revenue resulting from lower gold production and sales volumes and a lower realised copper price, EBIT was higher due to a
higher realised gold price, lower site costs reflecting the lower mining and ore treatment activity and a weaker Australian dollar, lower depreciation
and higher copper sales volumes. A portion of Telfer’s gold sales were subject to hedges which adversely impacted its revenue by $82 million.
AISC of $1,281 per ounce was marginally higher than the prior period due to lower gold sales, a lower realised copper price and an increase in
unit operating costs, partially offset by lower sustaining capital expenditure, the benefit of a weaker Australian dollar, lower production stripping
activity and higher copper sales.
Free cash flow of $51 million was $43 million higher than the prior period due to a higher realised gold price, lower site costs reflecting the lower
mining and ore treatment activity and a weaker Australian dollar, lower capital expenditure and higher copper sales. This was partially offset by
lower gold sales volumes and a lower realised copper price.
4.4. Gosowong7,8
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Silver produced
Gold sales
Silver sales
Financial
Revenue
Cost of Sales (including depreciation)
Depreciation
EBITDA
EBIT
Operating cash flow
Sustaining capital
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
For the 12 months ended 30 June
2020
2019
Change
Change %
469
533
478
7.10
94.7
103,282
105,874
104,449
111,788
160
148
33
44
11
30
13
11
132
1,264
690
808
708
8.77
95.0
190,186
206,857
199,285
210,587
256
260
67
63
(4)
56
22
29
219
1,099
(221)
(275)
(230)
(1.67)
(0.3)
(86,904)
(100,983)
(94,836)
(98,799)
(96)
(112)
(34)
(19)
15
(26)
(9)
(18)
(87)
165
(32%)
(34%)
(32%)
(19%)
(0%)
(46%)
(49%)
(48%)
(47%)
(38%)
(43%)
(51%)
(30%)
(375%)
(46%)
(41%)
(62%)
(40%)
15%
tonnes ‘000
tonnes ‘000
tonnes ‘000
grams/tonne
%
ounces
ounces
ounces
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
On 31 January 2020, Newcrest announced that it had agreed to sell its interest in Gosowong to PT Indotan Halmahera Bangkit, for
consideration comprising:
– $5 million cash deposit paid on execution of the sale agreement
– $55 million payable on transaction completion
– $30 million deferred cash payable 18 months after transaction completion
The economic effective date for the Gosowong divestment was 31 December 2019.
The above results include production and financial performance up until the transaction completion date of 4 March 2020.
NEWCREST 2020 ANNUAL REPORT 58
Directors’ Report continued
4. Review of Operations continued
4.5. Red Chris7,9
Measure
Operating
Total ore mined
Total material mined
Total material milled
Gold head grade
Gold recovery
Gold produced
Copper produced
Silver produced
Gold sales
Copper sales
Silver sales
Financial
Revenue
Cost of Sales4 (including depreciation)
Depreciation4
EBITDA4
EBIT4
Operating cash flow4
Production stripping
Sustaining capital
Non-Sustaining capital
Total capital expenditure
Free cash flow
All-In Sustaining Cost
All-In Sustaining Cost
For the 12 months ended 30 June
2020
2019
Change
Change %
tonnes ‘000
tonnes ‘000
tonnes ‘000
grams/tonne
%
ounces
tonnes
ounces
ounces
tonnes
ounces
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$/oz
7,052
19,332
5,847
0.39
51.8
38,933
25,302
109,943
37,271
24,432
75,727
185
169
47
63
16
57
21
42
1
64
(18)
63
1,703
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
On 15 August 2019 Newcrest acquired a 70% interest in and operatorship of the Red Chris mine and surrounding tenements in British
Columbia, Canada.
Following acquisition, the Newcrest Safety Transformation Plan was implemented with improvements in TRIFR delivered over the current period,
drilling activity commenced together with investment in capital projects and a number of operational improvement initiatives to improve the
site’s future operational performance.
The production and financial outcomes above represent Newcrest’s 70% ownership for the period from 15 August 2019 to 30 June 2020.
Free cash flow for the current period includes the impact of net working capital acquired on completion of the acquisition.
Directors’ Report continuedDIRECTORS’ REPORT 59
As at 30 June
2020
2019
Change
Change %
1,451
305
1,573
546
1
8,809
17
24
65
386
65
1,600
135
1,573
103
32
7,816
–
33
60
333
152
(149)
170
–
443
(31)
993
17
(9)
5
53
(87)
13,242
11,837
1,405
(520)
(23)
(2,017)
(274)
(623)
(58)
(1,114)
(4,629)
8,613
8,613
–
8,613
(444)
(176)
(1,995)
(123)
(524)
–
(944)
(4,206)
7,631
7,567
64
7,631
(76)
153
(22)
(151)
(99)
(58)
(170)
(423)
982
1,046
(64)
982
(9%)
126%
0%
430%
(97%)
13%
(27%)
8%
16%
(57%)
12%
(17%)
87%
(1%)
(123%)
(19%)
(18%)
(10%)
13%
14%
(100%)
13%
5. Discussion and Analysis of the Balance Sheet
5.1. Net assets and total equity
Newcrest had net assets and total equity of $8,613 million as at 30 June 2020.
US$m
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax asset
Property, plant and equipment
Goodwill
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
Lease liabilities4
Deferred tax liabilities
Total liabilities
Net assets
Equity
Equity attributable to owners of the parent
Non-controlling interests
Total equity
During the current period Newcrest successfully completed an equity raising which consisted of:
– a A$1 billion placement to institutional investors in May 2020 (approximately 39.1 million new shares); and
– A$200 million share purchase plan in June 2020 (approximately 7.8 million new shares)
The issue price of new shares under both the placement and share purchase plan was A$25.60 per new share.
In addition, on 13 May 2020, Newcrest issued US$1.15 billion of senior unsecured notes, comprising 10-year bonds totalling US$650 million
(maturing in 2030) and 30-year bonds totalling US$500 million (maturing in 2050). The proceeds from the new bonds were used to repay all of
the Company’s notes due in 2021 and to repay all but $380 million of the notes due in 2022.
NEWCREST 2020 ANNUAL REPORT
60
Directors’ Report continued
5. Discussion and Analysis of the Balance Sheet continued
5.2. Financial metrics
5.2.1. Net debt and gearing
Net debt (comprising total borrowings less cash and cash equivalents) of $624 million at 30 June 2020 was $229 million (or 58%) higher than
the prior period. All of Newcrest’s debt is US dollar denominated.
The gearing ratio (net debt as a proportion of net debt and total equity) as at 30 June 2020 was 6.8%. This is an increase from 4.9% as at
30 June 2019, reflecting the negative free cash flow during the current period due to investments such as the acquisition of Red Chris, the
additional interest in Lundin Gold, progression of the Cadia Expansion Project and Cadia Molybdenum Plant, and higher levels of exploration
expenditure at Red Chris and Havieron.
Components of the movement in net debt and gearing are outlined in the table below.
US$m
Corporate bonds – unsecured
Other loans13
Capitalised transaction costs on facilities
Total borrowings
Lease liabilities4
Total debt
Less cash and cash equivalents
Net debt
Total equity
Net debt and total equity
Gearing (net debt/net debt and total equity)
2020
2,030
4
(17)
2,017
58
2,075
(1,451)
624
8,613
9,237
6.8%
2019
2,000
–
(5)
1,995
–
1,995
(1,600)
395
7,631
8,026
4.9%
Change
Change %
30
4
(12)
22
58
80
149
229
982
1,211
1.9
2%
(240%)
1%
4%
9%
58%
13%
15%
39%
13 Represents interest-bearing liabilities acquired as part of the Red Chris acquisition.
5.2.2. Leverage Ratio and Interest Coverage Ratio
Newcrest’s net debt to EBITDA (leverage ratio) remains comfortably within the target of being less than 2 times EBITDA on a trailing 12 month
basis. As at 30 June 2020 it had increased to 0.3 times (compared to 0.2 times at 30 June 2019) due to higher net debt as a result of the negative
free cash flow associated with growth investments in the current period.
US$m
Net debt
EBITDA (trailing 12 months)
Net debt to EBITDA (times)
2020
624
1,835
0.3
As at 30 June
2019
395
1,670
0.2
Change
Change %
229
165
0.1
58%
10%
50%
Newcrest’s interest coverage ratio decreased marginally to 22.7 times as at 30 June 2020 as a result of lower interest rates on cash holdings
decreasing interest income in the current period, notwithstanding the increase in EBITDA.
US$m
EBITDA
Less facility fees and other costs
Less discount unwind on provisions
Adjusted EBITDA
Net interest expense
Less facility fees and other costs
Less discount unwind on provisions
Net interest payable
Interest Coverage Ratio (times)
For the 12 months ended 30 June
2020
1,835
(15)
(7)
1,813
102
(15)
(7)
80
22.7
2019
1,670
(17)
(9)
1,644
94
(17)
(9)
68
24.2
Interest Coverage Ratio (times) 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).
Directors’ Report continuedDIRECTORS’ REPORT 61
Facility
utilised
Available
liquidity
Facility
limit
n/a
–
–
n/a
–
–
1,451
2,000
3,451
1,600
2,000
3,600
n/a
2,000
2,000
n/a
2,000
2,000
5.2.3. Liquidity coverage
Newcrest had $3,451 million of cash and committed undrawn bank facilities as at 30 June 2020.
US$m
As at 30 June 2020
Cash and cash equivalents
Bilateral bank debt facilities
Coverage
As at 30 June 2019
Cash and cash equivalents
Bilateral bank debt facilities
Coverage
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
updated World Gold Council Guidance Note on Non-GAAP Metrics released November 2018), Free cash flow (cash flow from operating activities less
cash flow related to investing activities), Free cash flow before M&A activity, Sustaining capital and Major projects (non-sustaining) capital.
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 3.3;
– 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 unusual due to their size and nature. Examples include gains/losses and other costs incurred for acquisitions and disposals
of mining interests and asset impairment and write-down charges. Statutory profit and Underlying profit both represent profit after tax amounts
attributable to Newcrest shareholders.
Profit after tax attributable to Newcrest shareholders
US$m
Statutory profit
Write-down of Gosowong tax assets
Write-down of property, plant and equipment at Gosowong
Major transaction and integration costs
Debt extinguishment and other finance costs
Underlying profit
In the prior period, Statutory profit was equal to Underlying profit.
For the 12 months ended 30 June 2020
Before Tax and
Non-controlling
interest
997
–
20
15
69
1,101
Non-
controlling
interest
After tax and
Non-controlling
interest
–
(8)
(5)
–
–
(13)
647
29
15
11
48
750
Tax
(350)
37
–
(4)
(21)
(338)
NEWCREST 2020 ANNUAL REPORT 62
Directors’ Report continued
6. Non-IFRS Financial Information continued
6.2. Reconciliation of Underlying profit to EBIT and EBITDA
US$m
Underlying profit
Non-controlling interests
Income tax expense
Net finance costs
EBIT
Depreciation and amortisation
EBITDA
For the 12 months ended 30 June
2020
2019
750
1
338
102
1,191
644
1,835
561
(3)
272
94
924
746
1,670
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.
The World Gold Council released an updated guidance note in November 2018, which Newcrest fully applied in the current period following the
adoption of the new leasing standard in the financial statements from 1 July 2019.
Gold sales (koz)
Cost of sales
Depreciation and amortisation
By-product revenue
Gold concentrate treatment and refining deductions
Corporate costs
Sustaining exploration
Sustaining leases4
Production stripping and underground mine development
Sustaining capital expenditure
Rehabilitation accretion and amortisation
All-In Sustaining Costs
Growth and development expenditure
Non-sustaining capital expenditure14
Non-sustaining exploration
Non-sustaining leases4
All-In Cost
Reference
6.3.1
6.3.2
6.3.3
6.3.4
6.3.7
6.3.5
6.3.6
6.3.4
6.3.6
6.3.7
For the 12 months ended 30 June
2020
2019
US$m
2,143
2,568
(622)
(684)
40
80
13
27
140
270
16
1,848
15
272
100
2
2,237
US$/oz
1,199
(291)
(319)
19
37
6
13
65
126
7
862
8
127
46
1
1,044
US$m
2,529
2,648
(727)
(569)
35
90
14
–
115
248
11
1,865
11
153
64
–
2,093
US$/oz
1,047
(288)
(225)
14
36
5
–
46
98
5
738
4
60
26
–
828
14 Represents spend on major projects that are designed to increase the net present value of the mine and are not related to current production. Significant projects
in the current period include PC2-3 development at Cadia, Cadia Molybdenum Plant and the seepage barrier feasibility study, pit cooling and throughput related
projects at Lihir.
6.3.1. Cost of sales4
US$m
Cost of sales as per Note 5(b) of the consolidated financial statements
For the 12 months ended 30 June
2020
2,568
2019
2,648
Directors’ Report continuedDIRECTORS’ REPORT 63
For the 12 months ended 30 June
2020
622
2019
727
For the 12 months ended 30 June
2020
778
(108)
670
16
(2)
14
684
2019
651
(96)
555
15
(1)
14
569
For the 12 months ended 30 June
2020
2019
117
(22)
(15)
80
120
(19)
(11)
90
For the 12 months ended 30 June
2020
2019
(7)
147
140
(15)
130
115
For the 12 months ended 30 June
2020
2019
143
386
15
544
275
273
(4)
544
(2)
542
230
153
18
401
248
153
–
401
–
401
6.3.2. Depreciation and amortisation
US$m
Depreciation and amortisation per Note 5(b) of the consolidated financial statements
6.3.3. By-product revenue
US$m
Copper concentrate sales revenue
Copper concentrate treatment and refining deductions
Total copper sales revenue per Note 5(a) of the consolidated financial statements
Silver sales revenue
Silver concentrate treatment and refining deductions
Total silver sales revenue per Note 5(a) of the consolidated financial statements
Total By-product revenue
6.3.4. Corporate costs
US$m
Corporate administration expenses per Note 5(c) of the consolidated financial statements
Less: Corporate depreciation
Less: Growth and development expenditure
Total Corporate costs
6.3.5. Production stripping and underground mine development
US$m
Underground mine development
Production stripping per the consolidated financial statements
Total production stripping and underground mine development
6.3.6. Capital expenditure
US$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 3.3 of the Operating and Financial Review
Non-sustaining capital expenditure per 3.3 of the Operating and Financial Review
Capitalised Leases per 3.3 of the Operating and Financial Review
Total capital expenditure
Sustaining capital expenditure related to integration (reclassified to Growth and development)
Total capital expenditure per 6.3 of the Operating and Financial Review
NEWCREST 2020 ANNUAL REPORT 64
Directors’ Report continued
6. Non-IFRS Financial Information continued
6.3. Reconciliation of All-In Sustaining Cost and All-In Cost to cost of sales continued
6.3.7. Exploration expenditure
US$m
Exploration and evaluation expenditure per consolidated financial statements
Sustaining exploration (per 6.3 of the Operating and Financial Review)
Non-sustaining exploration (per 6.3 of the Operating and Financial Review)
Total exploration expenditure
For the 12 months ended 30 June
2020
2019
113
13
100
113
78
14
64
78
6.4. Reconciliation of Return on Capital Employed (ROCE)
ROCE is “Return on Capital Employed” and is reported by Newcrest to provide greater understanding of the underlying business performance of
its operations and the Group. ROCE is calculated as EBIT before significant items expressed as a percentage of average total capital employed
(net debt and total equity).
US$m
EBIT
Total capital (net debt and total equity) – as at 30 June 2018
Total capital (net debt and total equity) – as at 30 June 2019
Total capital (net debt and total equity) – as at 30 June 2020
Average total capital employed
Return on Capital Employed
7. Risks
For the 12 months ended 30 June
2020
1,191
–
8,026
9,237
8,632
2019
924
8,502
8,026
–
8,264
13.8%
11.2%
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 One orebodies and two to four Tier 2 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.
Newcrest has a Risk Management Framework and process in place to identify those risks that may have a material impact on the Group. Material
Risks are documented and monitored with the implementation of preventative and mitigating processes and controls. Mitigating processes and
controls are designed to minimise the adverse impact on Newcrest should a risk or uncertainty materialise. Implemented processes and controls
may not eliminate the risk or the potential impact entirely. Further, Newcrest’s business, operating and/or financial results and performance may
be materially impacted should any such actions and controls fail or be disrupted.
Further information on Newcrest’s approach to risk management is set out in Newcrest’s Corporate Governance Statement.
Directors’ Report continuedDIRECTORS’ REPORT 65
Fluctuations in external
economic drivers
External economic drivers (including macroeconomic, metal prices, exchange rates and costs)
Market price of gold and copper
External Risks
Newcrest’s revenue is principally derived from the sale of gold and copper based on prevailing market prices. Fluctuations
in gold 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 including monetary policy
easing, inflation and changes in inflationary expectations, interest rates including negative interest rate environments,
global economic growth expectations, and actual or expected gold purchases and/or sales by central banks), speculative
positions taken by investors or traders, changes in demand for gold (including gold used in fabrication such as for design,
jewellery and other industrial uses, and changes due to product substitution), changes in supply for gold from production,
divestment and scrap, as well as gold hedging and de-hedging by gold producers. Fluctuations in copper prices can occur
due to numerous factors beyond Newcrest’s control, including the worldwide balance of copper demand and supply,
rates of global economic growth, the rate of development of new mines, trends in industrial production and conditions
in the electricity, housing and automotive industries, all of which correlate with demand for copper, economic growth
and political conditions in China, which has become the largest consumer of refined copper in the world, and other major
developing economies, speculative investment positions in copper and copper futures, the availability and cost of
substitute materials, currency exchange rate fluctuations, and availability and cost of appropriate smelting and refining
arrangements and recovery rate through the smelting and refining processes.
Newcrest is predominantly an unhedged producer, although Newcrest has hedges over a portion of Telfer’s future
planned gold production for FY21 to FY23. Telfer is a large scale, low grade mine and its profitability and cash flow
are both very sensitive to the realised Australian dollar gold price.
Lower gold and/or copper prices may adversely affect Newcrest’s financial condition and performance.
Foreign exchange rate fluctuations
Given the geographic spread of Newcrest’s operations, earnings and cash flows are exposed to multiple currencies,
including a portion of spend at each operation being denominated in the local currency. The relative movement of
these currencies (particularly the Australian dollar) against the US dollar may have a significant impact on Newcrest’s
financial results and cash flows, which are reported in US dollars.
The presentation currency of the Group is the US dollar. Newcrest’s parent entity and all Australian entities use the
Australian dollar as their functional currency, and Red Chris uses the Canadian dollar as its functional currency. All other
entities, including Lihir, use the US dollar as their functional currency. Newcrest does not hedge its foreign exchange
revenue or operating expenses to the US dollar although it may hedge certain major capital expenditures to the
functional currency of the project or operation and it maintains its debt in US dollar-denominated loans.
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 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 but not limited to,
electricity, water, 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. Where it considers appropriate, Newcrest does enter into short term, medium term or evergreen contracts at
fixed prices or fixed prices subject to price rise and fall mechanisms.
NEWCREST 2020 ANNUAL REPORT 66
Directors’ Report continued
7. Risks continued
Fluctuations in external
economic drivers
continued
Political events,
Government actions,
changes in law and
regulation and inability
to maintain title
Examples of impacts
External Risks continued
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 manage the impact of adverse movements 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.
Holding all other factors constant, examples of estimated potential financial impacts in the 2020 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
+/-$20m
+/-$14m
-/+$17m
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, civil unrest, rebellion and civil
society opposition, expropriation and/or nationalisation, changes in government ownership levels in projects, fraud,
bribery and corruption, restrictions on repatriation of cash, earnings or capital, land ownership disputes and tenement
access issues, disputes with local communities, renegotiation or nullification of existing concessions, licences, permits
and contracts, the occurrence of health infections and diseases and the imposition of international sanctions or border
closures, each of which could have a significant impact on Newcrest.
There is also a risk that governments could review laws, legislative decisions (such as the grant of tenements), contractual
arrangements or amend government policy, without notice or industry consultation. If, in one or more of Newcrest’s countries
of operations, we were not able to obtain or maintain necessary permits, authorisations or agreements to implement planned
projects or continue our operations under conditions or contracts or within timeframes that make such plans and operations
economic, or if legal, ownership, fiscal (including royalties and duties), banking and exchange controls (including controls
pertaining to the holding of cash and remittance of profits and capital to the parent company), employment, environmental
and social laws and regimes were to change, our operating results and financial condition could be materially impacted.
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 policy 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 a broad reform agenda in relation to mining legislation,
environmental stewardship and local business opportunities and employment.
– Environmental, Social and Governance (ESG) credentials for the mining industry in general and particularly for issues
relevant to civil society that could create unrest, suspension of mining operations or materially damage reputation.
Directors’ Report continuedDIRECTORS’ REPORT 67
In Papua New Guinea (PNG), there is a political focus on future policy directions, including in relation to the extractives
sector. Potential policy changes could include changes to the existing Mining Act, the level and manner of local equity
participation in projects, taxation regimes, changes to banking and foreign exchange controls, and/or changes in controls
pertaining to the holding of cash and remittance of profits and capital to the parent company.
On 24 April 2020 the PNG Government announced that the Special Mining Lease for the Porgera mining operation
would not be renewed. The PNG Government has stated that the decision relates to alleged issues specifically related
to environmental damages claims and resettlement at the Porgera mine and has no bearing on any other operations,
including Lihir, or advanced exploration projects, including Wafi-Golpu. The PNG Prime Minister stated that Wafi-Golpu
remained one of the Government’s priority projects for development. More recently, the PNG Government has taken
preliminary steps to introduce a production sharing regime for the mining sector by publishing a proposed new organic
law in the National Gazette on 16 July 2020. The proposed organic law requires the approval of a two thirds majority of
Parliament and, if passed in its current form, purports to transfer ownership of minerals from the PNG State to State
owned entities who would then be responsible for negotiating mineral production sharing arrangements. As drafted,
the proposed organic law will not apply to Lihir, but could potentially apply to Wafi-Golpu if a mining lease or mining
development contract is not in place before the effective date for the proposed organic law, which the PNG Prime
Minister has indicated is intended to be 2025.
More recently, the PNG Government has taken preliminary steps to introduce a production sharing regime for the
mining sector by publishing a proposed new organic law in the National Gazette on 16 July 2020. The proposed organic
law requires the approval of a two thirds majority of Parliament and, if passed in its current form, purports to transfer
ownership of minerals from the PNG State to State owned entities who would then be responsible for negotiating mineral
production sharing arrangements. As drafted, the proposed organic law will not apply to Lihir, but could potentially apply
to Wafi-Golpu if a mining lease or mining development contract is not in place before the effective date for the proposed
organic law, which the PNG Prime Minister has indicated is intended to be 2025.
There is also the potential for legal challenges to the Wafi-Golpu permitting process as it progresses towards completion,
including by provincial governments, landowner groups and civil society organisations. For example, permitting
negotiations for Wafi-Golpu were suspended in May 2019 due to a court stay order in a judicial review application brought
by the Governor of Morobe Province against the State of PNG in relation to a Memorandum of Understanding (MOU)
between the State of PNG and the Wafi-Golpu Joint Venture (WGJV) signed in December 2018. These proceedings (and
stay order) were dismissed by the National Court in February 2020 and the Governor appealed the matter to the Supreme
Court. On 16 May 2020 the PNG Prime Minister and the Governor announced that they had reached agreement on the
future permitting timeframe for the Wafi-Golpu project and that the Governor would withdraw the appeal. However, to date
the appeal has not been formally withdrawn. If the Governor’s appeal or other legal challenges to the permitting process
are pursued the Wafi-Golpu permitting process may be adversely impacted.
In Canada, the nature and extent of First Nations rights and title remains the subject of active debate, claims and litigation,
particularly in British Columbia where the Red Chris mine is located. First Nations in British Columbia have made claims in
respect of aboriginal rights and title to substantial portions of land and water in the province. Some of these claims are made
outside of Treaty and other processes. The effect of such claims on any particular area of land will not be determinable until
the exact nature of historical use, occupancy and rights to such property have been clarified by a decision of the Canadian
courts or definition in a treaty. First Nations in British Columbia are seeking settlements with respect to these claims, including
compensation from governments, and the effect of these claims cannot be estimated at this time. The federal and provincial
governments in Canada have been seeking to negotiate settlements with aboriginal groups throughout British Columbia in
order to resolve many of these claims. Although none of these claims have impacted the Red Chris mine, the issues surrounding
aboriginal title and rights are not likely to be resolved in the near future.
In Ecuador, a relatively new large-scale mining jurisdiction, policies and regulations are evolving amid a broader debate on the
benefits and impacts of mining. Potential future legal challenges around community consent and seeking to restrict mining
activities in Ecuador present a risk to the mining industry. There is a risk that Government positions on these matters may
change adversely for the mining industry following the Presidential and parliamentary elections scheduled for 2021.
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.
NEWCREST 2020 ANNUAL REPORT 68
Directors’ Report continued
7. Risks continued
Political events,
Government actions,
changes in law and
regulation and inability
to maintain title
continued
Changes in law and regulation and inability to maintain title
External Risks continued
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 landowners and local communities and various layers of
Government, which authorise those activities under the relevant law (Authorisations). In addition, Newcrest is subject
to law and regulation as a listed entity in Australia and Papua New Guinea.
Changes in law, policies or regulations, or to the manner in which they are interpreted or applied to Newcrest may have the
potential to materially impact the value of a particular operation, development project, exploration assets 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 a number of jurisdictions where Newcrest has existing interests, the legal framework is becoming increasingly complex,
onerous and subject to change. Changes in laws, policies or regulation, or to the manner in which they are interpreted
or applied, 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,
development projects, exploration assets, 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, or that Newcrest will be in a
position to comply with all conditions that are imposed. 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.
Although Newcrest believes it has taken reasonable measures to acquire the rights needed to undertake its operations,
develop its projects and undertake other activities as currently conducted, some risk exists that some titles and access
rights may be defective. No assurance can be given that such claims are not subject to unregistered, undetected or
other claims or interests which could be materially adverse to Newcrest or its operations. While Newcrest has used
its best efforts to ensure title to all its properties and secured access to surface rights, these titles or rights may be
disputed, which could result in costly litigation or disruption of operations. Surface access issues have the potential
to result in the delay of planned exploration programs, development projects and/or changes in the nature or scale of
existing operations and these delays may be significant. Newcrest expects that it will be able to resolve these issues
if and as they arise, however, there can be no assurance that this will be the case and future acquisitions, relocation
benefits and legal and related costs may be material, which may impact Newcrest’s ability to effectively operate in
relevant geographic areas.
Changes to taxation and royalty laws
Newcrest has operations and conducts business in multiple jurisdictions, and it is subject to the taxation and royalty
laws and regulations of each such jurisdiction. These laws and regulations are complicated and subject to change.
Newcrest may also be subject to review, audit and assessment in the ordinary course of its operations. Changes in
taxation and/or royalty laws and regulations or the results of audits and assessments could result in higher taxes and/
or royalties being payable, require payment of taxes and/or royalties due from previous years or result in significant
penalties on any assessed and unpaid taxes and/or royalties, which could adversely affect Newcrest’s profitability.
Taxes may also adversely affect Newcrest’s ability to effectively repatriate earnings and otherwise deploy its assets.
Climate Change
Newcrest has exposure to a range of climate change risks related to the transition to a lower-carbon economy including
political, policy and legal developments; technology; reputation; and increased capital costs, cost of inputs and raw
materials, access to external funding and insurances.
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.
In 2019, the Board approved Newcrest’s climate change policy and the progressive implementation of the Taskforce on
Climate-Related Financial Disclosure (TCFD) framework for reporting on climate related aspects in its Sustainability
Report. Newcrest continues to take steps to manage its risks and build resilience to climate change, as well as to
position itself for new opportunities.
Directors’ Report continuedDIRECTORS’ REPORT 69
Capital and Liquidity
In order to manage risks associated with policy and legal developments and to inform its investments, Newcrest has
adopted a protocol for applying shadow carbon prices of US$25/tonne and US$50/tonne CO2-e in the period to
2030 for jurisdictions where there are no regulated carbon prices. Using the two carbon prices will enable a range of
sensitivities to be considered for future investments. Newcrest has also set a 2030 target to reduce its operational
greenhouse gas emissions intensity by 30% against the 2018 baseline.
Newcrest’s operating sites are vulnerable to potential physical climate impacts. As part of its risk management
framework, Newcrest considers potential risks that may be caused by changes in climate, mainly at an operating site
level. For example, extreme weather events have the potential to damage infrastructure, disrupt operations and delay
production and delivery of products to market. Newcrest is working with experts to better understand physical threats
from climate change at its current and planned operating sites and to put in place adaptation plans to ensure that these
risk factors are considered in the design criteria for site operations and infrastructure. Newcrest is also undertaking
regional climate modelling to support risk assessments by sites related to the physical impacts of climate change.
There are no assurances that Newcrest will be able to reduce its costs or to identify such technologies that will suit its
purposes. In addition, the use of renewable power generation and low emission technologies may impact Newcrest’s
competitive position, its operating and financial results, and its financial condition.
Financial Risks
Newcrest has designed its capital structure to seek to have sufficient liquidity available to meet the Group’s financial
commitments. Newcrest has a range of debt facilities with external financiers including unsecured committed
bilateral bank debt facilities and corporate unsecured senior notes (or ‘bonds’) and has structured these facilities to
have varying maturities so that its refinancing obligations are staggered. Newcrest anticipates expenditures over
the next several years in connection with the development of new projects, maintenance and expansion of existing
projects, activities to facilitate mining of orebodies, along with sustaining capital expenditure across operations, and,
potentially, the acquisition of new projects. Newcrest may be unable to generate sufficient operating earnings or raise
additional capital to meet ongoing operating or capital expenditure requirements.
Newcrest may from time to time draw down under its available debt facilities or seek additional external funding
such as through asset divestitures, further equity or debt issues or additional bank debt, or it may need to defer
expenditure. Newcrest’s ability to service its current funding arrangements and to raise and service any additional
funding or to meet conditions applicable to current or future funding arrangements is a function of a number of factors,
including (without limitation), macroeconomic conditions, funding market conditions, future gold and copper prices,
Newcrest’s credit rating, Newcrest’s operational and financial performance, and cash flow and debt position at the
time. Newcrest’s ability to access external funding on an efficient basis may be constrained by a dislocation in these
markets at the time of planned issuance.
If Newcrest is unable to meet its financial obligations or is unable to obtain additional financing on acceptable terms,
its business, operating and financial condition and results may be adversely affected.
Counterparty credit risk Newcrest is exposed to counterparties defaulting on their payment 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 on funds held for investment is reduced through maximum investment limits being applied to banks and
financial institutions based on their credit ratings. Where possible, Newcrest 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.
Due to banking and foreign exchange regulations in some of the countries in which Newcrest operates, funds may be held
in countries or with banks or financial institutions with lower credit ratings. Newcrest only enters into derivative financial
instruments with banks or financial institutions with credit ratings of at least BBB (S&P) equivalent.
All concentrate customers who wish to trade on credit terms are subject to credit risk analysis. Bullion is largely sold on
a spot price basis to minimise credit exposure. Gold bullion customers are usually our lending banks and are currently
rated by S&P at A+ or better.
Newcrest is 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 insurer counterparty risk by diversification of insurers across the Newcrest
portfolio and insures with insurance companies with a credit rating of at least A- (S&P) equivalent where possible.
Newcrest is also exposed to counterparty default and credit risk through two of its recent strategic transactions. In
April 2020, Newcrest acquired for $460 million the gold prepay and stream facilities and an offtake agreement in
respect of Lundin Gold Inc.’s Fruta del Norte mine (the Facilities), details of which are located on Newcrest’s website.
In January 2020, Newcrest announced the divestment of its interest in Gosowong to PT Indotan Halmahera Bangkit
(Indotan), for total consideration of $90 million, of which $30 million becomes payable in 18 months from the date of
completion (being 4 March 2020). There can be no certainty that Lundin Gold Inc. will be able to service the Facilities,
nor that Indotan will make payment for the remaining consideration for Gosowong.
NEWCREST 2020 ANNUAL REPORT 70
Directors’ Report continued
7. Risks continued
Uninsured Risk
Financial Risks continued
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 insurance policies carry deductibles and
limits which will lead to Newcrest not recovering the full monetary impact of an insured event. 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. The occurrence of events for
which Newcrest is not insured may adversely affect its cash flows and overall profitability.
Asset impairments,
write-downs and
restructure costs
In accordance with Newcrest’s accounting policies and processes, the carrying amounts of all non-financial assets
are reviewed yearly and half-yearly to determine whether there is an indicator of impairment. Where an indicator of
impairment exists, a formal estimate of the recoverable amount is made. Impairment is recognised when the carrying
amount exceeds the recoverable amount. The recoverable amount of each cash generating unit (CGU) is estimated
using its fair value less costs of disposal.
Failure to discover
new ore reserves or
to enhance and realise
new ore reserves
Significant judgments and assumptions are required in making estimates of fair value. This is particularly relevant in
the assessment of long-life assets. The CGU valuations are subject to variability in key assumptions including, but not
limited to, long-term gold prices, currency exchange rates, discount rates, production profiles and operating and capital
costs. An adverse change in one of more of the assumptions used to estimate fair value could result in a reduction in a
CGU’s fair value. Life of mine (“LOM”) production and operating and capital cost assumptions are based on Newcrest’s
latest budget, quarterly forecast and/or longer-term LOM plans. The projections include expected cost improvements,
reflecting Newcrest’s objectives to maximise free cash flow, optimise and reduce activity, apply technology, improve
capital and labour productivity and remove high cost gold ounces from the production profile.
No assurance can be given as to the absence of significant impairment charges in future periods, including as a result
of further operational reviews, a change in any of the underlying valuation assumptions, or a deterioration in market or
operating conditions. If future impairment losses are incurred, Newcrest’s earnings and fiscal position in the period in
which it records the loss could be materially adversely impacted.
Exploration, project evaluation and project development
Strategic Risks
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 risks associated with sustaining
or increasing production through acquisition is increased by the level of competition over these development
opportunities. Additionally, 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, social and environmental considerations,
cultural heritage requirements, economic conditions, remote locations, and the complexity and depth of ore bodies.
Mine development and expansion projects require significant expenditures during the development phase before
production is possible. Projects are subject to the completion of successful concept, pre-feasibility and feasibility
studies, social and environmental assessments, issuance of necessary governmental permits and availability of
adequate financing.
Directors’ Report continuedDIRECTORS’ REPORT 71
Expansion projects may rely on the operating history at the existing operation to estimate production and operating
costs but there cannot be certainty that results will be the same for the expansion. Particularly for development
projects, estimates of proven and probable Ore Reserves and cash operating costs are, to a large extent, based upon
the interpretation of geologic data obtained from drill holes and other sampling techniques, and feasibility studies
that derive estimates of production and cash operating costs based upon anticipated tonnage and grades of ore to
be mined and processed, the configuration of the ore body, expected recovery rates of gold from the ore, estimated
operating costs, and other modifying factors. As a result, it is possible that actual capital and operating costs and
economic returns will differ significantly from those currently estimated for a project prior to production.
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 and project evaluation
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.
Even if significant mineralisation is discovered it may take additional time and further financial investment to
determine whether 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, regulatory requirements, tax regimes and future
cost of development and mining operations.
Competition to replace reserves
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 Newcrest 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 the mineralisation, future commodity prices, exchange rates, operating costs, transport costs, capital
expenditures, royalties and other costs. Such estimates relate to matters outside Newcrest’s reasonable control and
involve geological interpretation and statistical analysis which may subsequently prove to be unreliable or flawed.
NEWCREST 2020 ANNUAL REPORT 72
Directors’ Report continued
7. Risks continued
Failure to discover
new ore reserves or
to enhance and realise
new ore reserves
continued
Strategic Risks continued
Newcrest’s annual Mineral Resources and Ore Reserves statement (most recently issued on 13 February 2020) is
based upon a number of factors, including, without limitation, actual resource exploration drilling and production results,
geological interpretations, historical production performance, mining dilution and ore loss, metallurgical recovery,
economic assumptions (such as future commodity prices and exchange rates) and operating and other costs. Variability in
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. Mineral Resources and
Ore Reserves restatements could negatively affect Newcrest’s operating and financial results, as well as its prospects.
No assurance can be given that the Mineral Resources or Ore Reserves referred to in this document will be recovered
at the quality or yield presented or that downgrades of reserves and resources will not occur, and there is no assurance
that inferred Mineral Resource estimates, or even Measured and Indicated Mineral Resource estimates, are capable of
being directly reclassified as Ore Reserves under the JORC Code. The inclusion of Mineral Resource estimates should
not be regarded as a representation that these amounts can be converted to Ore Reserves or economically exploited,
and investors are cautioned not to place reliance on Mineral Resource estimates, particularly Inferred Mineral
Resource estimates.
The estimates of Mineral Resources for the Red Chris deposit are qualifying foreign estimates under the ASX Listing
Rules reported in accordance with the National Instrument 43-101 by Imperial Metals Corporation. The estimates
are not reported in accordance with the JORC Code. Competent persons have not done sufficient work to classify
the qualifying foreign estimates as Mineral Resources in accordance with the JORC Code. It is uncertain, that
following evaluation and further exploration, the foreign estimates will be able to be reported as Mineral Resources
in accordance with the JORC Code or that the quantity of Mineral Resources estimated in accordance with the JORC
Code will be equal or greater than the foreign estimates.
Joint venture risk
Joint venture arrangements
Inability to make
or to integrate new
acquisitions
Newcrest has joint venture interests, including its interests in Wafi-Golpu in Papua New Guinea, the Red Chris mine
in Canada, the Havieron Project in Western Australia 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 integration of acquisitions to
realise synergies, unanticipated costs and liabilities, inability to realise targeted upsides, unanticipated issues that
impact operations and inability to realise any anticipated synergies or other expected benefits. 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.
Directors’ Report continuedDIRECTORS’ REPORT 73
Operational failures
or catastrophes and
natural hazards
Operational Risks
Newcrest’s mining operations are subject to operating risks and hazards including (without limitation) geotechnical,
geothermal and hydrogeological challenges, unanticipated ground conditions, failure of tailings facilities, industrial
incidents, infrastructure and equipment under-performance or failure, shortage of material supplies or other
supply chain failures, transportation and logistics issues in relation to Newcrest’s workforce and equipment,
underperformance of key suppliers or contractors, natural events and environmental incidents, climate change
factors, health and safety related incidents, and interruptions and delays due to community and/or security issues. The
occurrence of any of these risks or hazards could impact the operating performance of Newcrest’s operations including
through increased costs, and decreased production, and result in a material adverse impact on Newcrest’s production,
cash flows or financial condition.
An increase in worldwide or regional demand for critical resources such as drilling equipment, processing equipment,
key consumables and skilled labour may cause unanticipated cost increases and delays in delivery times, thereby
impacting Newcrest’s operating costs, capital expenditures and production schedules.
A key operational risk for Newcrest is the availability and price of fuel, power and water to support mining and mineral
processing activities. Large amounts of power and large volumes of water are used in the extraction and processing
of minerals and metals. Apart from Cadia, our properties are located in remote, undeveloped areas and the availability of
infrastructure and key inputs, such as water and power, at a reasonable cost, cannot be assured. Power and water are
integral requirements for exploration, development and production facilities on mineral properties. Even a temporary
interruption of power or water supply could materially affect an operation. There is no guarantee that we will secure
power, water and access rights to land going forward or on reasonable terms.
The state of New South Wales remains impacted by a severe drought. Cadia has implemented significant water saving
efficiency measures and continues to pursue further water saving initiatives in the plant and optimisation of onsite
bores and other water sources. Recent rainfall in the region and the purchase of water licences on the water trading
market has resulted in improved levels of water being captured in on site storage facilities. Newcrest’s latest internal
modelling indicates that Cadia should have enough water to avoid any water-related production interruption for at
least the next two years. However, beyond that period and if rainfall around Cadia remains at historic lows and the
drought persists, production at Cadia may be impacted.
The storage of tailings and other by-products from mining at Newcrest’s operations poses a risk to the safety of
employees and surrounding communities and environment if the integrity of those structures is affected. Tailings
storage facilities are progressively constructed throughout the life of an operation and remain in place after mine
closure. Should there be a failure in the integrity of a tailings facility, there is a risk that tailings material may release
from the facility and cause material harm to people and the environment. Such an occurrence could severely damage
Newcrest’s reputation and standing. It may also subject Newcrest to material regulatory action, penalties and claims,
and may lead to the suspension or disruption of Newcrest’s operations and projects.
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.
Newcrest faces particular geotechnical, geothermal and hydrogeological 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,
geothermal and hydrogeological 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 gaps may form during the cave propagation, unplanned ground movement may occur due to changes in stresses
released in the surrounding rock, or mining induced seismicity is larger or more frequent than anticipated. 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.
NEWCREST 2020 ANNUAL REPORT 74
Directors’ Report continued
7. Risks continued
Operational failures
or catastrophes
and natural hazards
continued
Information technology
and cyber risk
Operational Risks continued
The success of Newcrest at some of its operations depends, in part, upon the implementation of Newcrest’s engineering
solutions to particular geotechnical, hydrogeological 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 result in damage to infrastructure or equipment and/or injury to personnel and 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.
No assurances can be given that unanticipated adverse geotechnical, geothermal and hydrogeological conditions will
not occur in the future or that such events will be detected in advance. Geotechnical failures could result in limited or
restricted access to mine sites, suspension of operations, injury or death of employees or third parties, government
investigations, increased monitoring costs, remediation costs, loss of ore and other impacts, which could cause one or
more of Newcrest’s projects or operations to be less profitable than currently anticipated and could result in a material
adverse effect on Newcrest’s operating results and financial position.
Newcrest’s operations are supported by and dependent on 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 personnel private or commercially sensitive
information and data breaches, and although disaster recovery plans are in place for all of Newcrest’s major sites and
critical IT systems, any such disruptions could have a material impact on Newcrest’s business, operations or financial
condition and performance.
Failure to attract and
retain key employees
and effectively manage
industrial relations
issues
Newcrest seeks to attract and retain employees and third-party contractors with the appropriate skills and 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. There can be no assurance that Newcrest will
be able to attract and retain suitably qualified and experienced local or national personnel, or that persons trained by
Newcrest will be retained in the future. 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.
Unions are present and have a legal right to represent eligible employees at Cadia and Telfer. There are ongoing
proceedings involving Red Chris regarding Union certification of the Red Chris site. If the certification is granted, it
would require us to negotiate a collective bargaining agreement with the United Steelworkers Union in respect of
eligible Red Chris mine employees.
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, which could occur at any of Newcrest’s sites in any locations
could cause production delays, increased labour costs, adversely impact Newcrest’s ability to meet its production
forecasts and have a material impact on Newcrest’s business operations or financial condition and performance.
In a number of jurisdictions where Newcrest has mining and related interests, there are also local requirements,
contractual obligations and expectations regarding the extent to which local and national persons and businesses are
directly engaged in the mining and related activities which may result in disruptions to Newcrest’s activities where
relevant requirements, obligations 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 engage competent and suitably experienced local businesses or attract and retain suitably
qualified and experienced local or national personnel, or that persons trained by Newcrest will be retained in the future.
Reliance on contractors 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.
Directors’ Report continuedDIRECTORS’ REPORT 75
Risks associated with
gold dore and mineral
concentrates
Corporate culture and
business conduct
Legal proceedings,
investigations and
disputes
Newcrest produces gold dore which is currently delivered to a gold refinery in Australia with associated risks including
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 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 its 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 fluctuating smelter charges, marine transportation
charges and inland freight charges. Transportation of the concentrate is also subject to numerous risks including 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
Newcrest’s reputation and licence to operate is dependent upon ongoing 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 and ethically,
in a socially-responsible manner. Mandatory training and communications in relation to key policies including, but
not limited to, the Code of Conduct, Anti-Bribery and Corruption Policy, continuous disclosure and insider trading
prohibitions is provided to personnel in high risk roles to promote an understanding of Newcrest’s legal obligations
and acceptable business conduct. The Legal Governance Compliance team has been established to implement a group
wide framework and compliance programs to ensure that adequate controls and procedures are in place to mitigate
against potential risks in relation to key risk areas, including Anti-Bribery and Corruption, Fraud, Conflicts of Interest,
Privacy and Sanctions. However, there is a risk that Newcrest employees or contractors will fail to adhere to group
policies, standards, and procedures that provide guidance on ethical and responsible business conduct and drive legal
compliance, which could have a material adverse impact on financial performance, financial condition and prospects,
as well as Newcrest’s reputation. Reputational loss may lead to increased challenges in developing and maintaining
community and landowner relations, decreased investor confidence and negative impacts on Newcrest’s ability
to operate and advance its projects, which also may adversely impact Newcrest’s financial performance, financial
condition and prospects.
Legal proceedings, investigations and disputes (including tax audits and disputes) could have a material adverse effect
on Newcrest’s financial condition and its financial and operating results. Newcrest engages in activities that can result in
substantial injury or damage, which may expose it to legal proceedings, investigations and disputes in the ordinary course
of its business regarding personal injury and wrongful death claims, labour and landowner disputes, as well as commercial
disputes with customers, suppliers and service providers. Also, the tax authorities in the jurisdictions in which Newcrest
operates could dispute tax positions held by it based on changes in law, jurisprudence, policy or interpretation. Newcrest
may also be found liable for the wrongful acts or omissions of its contractors or service providers.
Legal proceedings, investigations and disputes (including tax audits and disputes) have the potential to negatively
impact upon Newcrest’s business, operating and financial performance and results. Regardless of the ultimate
outcome of such proceedings, investigations and disputes, and whether involving regulatory action or civil or criminal
claims, there may be a material adverse impact on Newcrest as a result of the associated costs (some of which may not
be recoverable) and management time.
The notes to Newcrest’s Financial Statements provide details regarding certain current and potential litigation involving
Newcrest. These assessments and estimates made by Newcrest of claims and legal proceedings are based on the
information available to management at the time and involve significant management judgment. Adverse outcomes in
such legal proceedings in excess of the amounts that Newcrest has provided for, or changes in management’s evaluations
or predictions about the proceedings, could have a material adverse effect on its financial condition and operating results.
NEWCREST 2020 ANNUAL REPORT 76
Directors’ Report continued
7. Risks continued
Anti-bribery and
anti-corruption laws
Governance and Compliance Risk continued
Newcrest may be subject to potential fraud, bribery, corruption and money laundering risks associated with the business
in jurisdictions where it operates. Australian, Canadian, Papua New Guinean, United States and other anti-fraud,
anti-bribery, anti-corruption and anti-money laundering laws, conventions, regulations, and enforcement procedures,
and corresponding compliance obligations, have become more stringent in recent years. Failure to comply with applicable
legal and regulatory requirements and to maintain appropriate management and internal control frameworks to address
such compliance risks often carry substantial penalties and impose obligations and controls to prevent bribery by others
on Newcrest’s behalf. There can be no assurances that Newcrest’s internal controls will always protect it from reckless or
other inappropriate acts committed by its intermediaries, associates, directors, officers, employees or agents. Violations
of these laws, or allegations of such violations, could expose it to potential fines, penalties and other civil and/or criminal
litigation and have a material adverse effect on its business, financial position and performance and reputation.
COVID-19
Newcrest’s business and operations, and that of its suppliers and customers, may be adversely affected by the novel
coronavirus (2019-nCoV, or “COVID-19”) pandemic or other similar pandemics.
Health, Safety and Sustainability
The outbreak of communicable diseases and other adverse public health developments, could adversely affect Newcrest’s
business operations and/or the businesses of its customers and suppliers which consequently could have a material adverse
effect on Newcrest’s business, financial condition and results of operations, particularly if such outbreaks and developments
are inadequately controlled.
COVID-19 has spread globally and has become a global pandemic (declared 11 March 2020), causing significant disruption
across a number of geographies, industries and markets, including global supply chain disruptions and shortages.
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic
on Newcrest’s business (or on the operations of other businesses on which it relies), and there is no guarantee that
Newcrest’s efforts to address the adverse impacts of COVID-19 will be effective. The impact to date has included periods
of significant volatility in financial, commodities and other markets. This volatility, if it continues, could have an adverse
impact on Newcrest’s people, communities, suppliers or otherwise on its business, financial condition and results of
operations. Actions by Australian and foreign governments to address the pandemic, including travel bans and business
closures, may also have a significant adverse effect on the markets in which Newcrest conducts business.
Our operations have been impacted as a result of the pandemic. For instance, in March 2020, we announced a temporary
suspension to flying personnel to Lihir as a precaution due to heightened concerns surrounding COVID-19. Any further
or prolonged disruptions relating to COVID-19 or any other adverse public health developments could materially and
adversely affect our supply chains and/or labour force (and that of our suppliers). The extent to which COVID-19 will
impact Newcrest’s business and its financial results will depend on future developments, which are highly uncertain and
cannot be predicted. Such developments may include the geographic spread of the virus, the severity of the disease, the
duration of the pandemic, the actions that may be taken by various governmental authorities in response to the pandemic,
the impact on contracts and agreements to which Newcrest is a party, the impact on the markets in which Newcrest
operates and the global economy generally. For example, Newcrest is required to observe COVID-related government
controls and to date these have included travel restrictions across national borders and sometimes within countries.
We are actively considering various scenarios up to and including voluntary or mandated full or partial suspension of
operations in response to external factors. Our Business Continuity Planning also considers how to return to normal
operations as restrictions ease, or are planned to ease, in some jurisdictions.
On March 22, 2020, Lundin Gold Inc (Lundin Gold), in which we own an equity interest, announced that it had
temporarily suspended operations at its Fruta del Norte mine in Ecuador amid growing concerns regarding the spread
of COVID-19. On 5 July 2020 Lundin Gold announced that it had recommenced operations. An extended period of
suspension, depending on the length, could have an adverse impact on Newcrest’s investment in Lundin Gold and the
return on Newcrest’s investment in the Fruta del Norte financing facilities.
Subsequent to the financial year, Newcrest announced on 10 August 2020 that it is managing a COVID-19 case in
its isolation and treatment facility at Lihir Island. The individual, a PNG national, flew into Lihir from Port Moresby on
30 July and as per our protocol was isolated along with the other arrivals in a designated isolation camp while testing
was conducted and the 14 day isolation period completed. All people who travelled with the individual to Lihir do not
have any symptoms and remain within our isolation camp. They have been subject to testing and have tested negative.
Further testing of those people will be undertaken during the 14 day isolation period.
No assurance can be given as to the potential impact that COVID-19 may have on Newcrest’s business, results of operations,
cash flows or financial condition. To the extent the COVID-19 pandemic adversely affects Newcrest’s business and financial
results, it may also have the effect of heightening many of the other risks described in this presentation and may have an
adverse material impact on Newcrest’s operating and financial results, financial condition and liquidity position.
Directors’ Report continuedDIRECTORS’ REPORT 77
Health and safety
Environment
and closure
There are numerous occupational health and safety risks associated with mining and metallurgical processes such
as travel to and from operations, the operation of heavy and complex machinery in challenging geographic locations
and exposure to hazardous substances. These hazards may cause personal injury and/or loss of life to Newcrest’s
personnel, suppliers, customers or other third parties, damage to property and contamination of the environment,
which may result in the suspension of operations and the imposition of civil or criminal penalties, including fines,
expenses for remediation and claims brought by governmental entities or third parties.
Newcrest has in place a full Health, Safety and Environment management system with associated standards, tools
and governance processes to ensure hazards are identified, effectively managed and that controls are effective.
Newcrest’s Safety Transformation Plan has been designed to manage the fatality risks in the business by improving
safety culture, increasing the effectiveness of critical controls and improving process safety by designing, building
and maintaining Newcrest’s operations to a higher standard.
Health and hygiene reviews are conducted with a view to identifying the risks to people. These include, but are not
limited to, 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 employees may be affected by mosquito borne diseases
such as malaria, dengue fever or zika virus. Other potential health impacts include tuberculosis, and viral outbreaks
causing respiratory disease such as the COVID-19 pandemic. The occurrence of these health impacts and the potential
need for us to compensate those affected may result in disruptions to our operations and may adversely affect our
financial condition.
Mining and processing operations and development activities have inherent risks and liabilities associated with
potential harm to the environment and 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 and has systems in place to track and report
against these requirements and commitments. This extends to voluntary commitments such as the Cyanide Code, the
International Council for Mining and Metals 10 Principles for Sustainable Development and the World Gold Council
Responsible Gold Mining Principles (which were released in 2019 with a three-year timeframe for implementation).
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 and as proposed at Wafi-Golpu, 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 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. There is still a risk that such hazardous materials and waste products may
cause harm to the environment, which may subject Newcrest to regulatory action and financial penalties and may lead
to disruptions of its operations and projects and cause it reputational harm.
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. Impacts to biodiversity and air quality can also occur from
these activities and requires active management and planning to minimise their adverse effects. The management of
run-off water and the potential impacts of acid mine drainage is an important part of developing and operating mines,
so as to mitigate the risk of entrained contaminants and sediment being disbursed into the receiving environment
including rivers and ground water reservoirs. This is particularly relevant in areas where high rainfall and high levels of
groundwater are present, such as is the case in the Morobe Province of Papua New Guinea where Wafi-Golpu is located.
NEWCREST 2020 ANNUAL REPORT 78
Directors’ Report continued
7. Risks continued
Environment
and closure continued
Failure to maintain
community relations
Health, Safety and Sustainability continued
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 an estimate
of closure and rehabilitation liabilities is 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.
The occurrence of an environmental incident has the potential to cause significant adverse reactions in the local
community, which may impact Newcrest’s reputation, result in additional costs, lead to disruptions of Newcrest’s
operations and projects or lead to regulatory action, which may include financial penalties.
In addition, environmental laws and regulations are continually changing. A number of governments or governmental
bodies have introduced or are contemplating regulatory change in response to the potential impacts of climate change,
including mandatory renewable energy targets or potential carbon trading or carbon price regimes. If Newcrest’s
environmental compliance obligations were to change as a result of changes in the laws and regulations, or if
unanticipated environmental conditions were to arise at any of Newcrest’s projects or developments, its expenses and
provisions may increase, and its production may decrease, to reflect these changes. If material, Newcrest’s operating
and financial results and financial condition could be negatively impacted.
During the COVID-19 pandemic it may be necessary for some of our operations to be placed into temporary care
and maintenance if workforce safety and/or potential supply constraints are not appropriately managed. Ongoing
contingency planning by each site for a variety of COVID-19 scenarios includes potential care and maintenance. In
March 2020 the PNG government required each operational mine in PNG to provide care and maintenance plans based
on potential COVID-19 business continuity risks.
Newcrest’s relationship with the communities in proximity to its operations and on whose land it operates is an
essential part of ensuring success of its existing operations, exploration and the construction and 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, co-management
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
exploration programs, 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 prior reviews, Lihir has experienced intermittent 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 will not arise with the customary landowners
and other communities 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 public concern relating to the perceived impact of mining activities on the environment
and on the communities located near, and impacted by, 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 proximity to its
operations. No assurance can be given that incidents will not arise that generate community grievances associated with
Newcrest’s activities and potentially cause operational disruptions or delays to project development until resolved.
Directors’ Report continuedDIRECTORS’ REPORT 79
Indigenous peoples
Newcrest’s projects may be subject to risks related to Indigenous peoples.
Human Rights
Various international and national, state and provincial laws, codes, resolutions, conventions, guidelines, treaties,
and other principles and considerations relate to the rights of Indigenous peoples, including the requirement to
secure the Free, Prior and Informed Consent of these communities for Newcrest’s activities. Newcrest has projects
located in areas presently or previously inhabited by or used by Indigenous peoples. Some of these jurisdictions
impose obligations on government with respect to the statutory rights of Indigenous people and/or impose non-statutory
obligations that derive from these rights. Some mandate consultation with Indigenous people regarding actions which
may affect Indigenous peoples, including actions to approve or grant mining rights or permits.
The obligations of government and private parties under the various international and national requirements, principles and
considerations pertaining to Indigenous people continue to evolve and be defined. This is the case in British Columbia, where
Red Chris is located, Western Australia, where Telfer is located, and in Papua New Guinea, where Lihir and Wafi-Golpu are
located. In some countries, governments have, for example, introduced, or are contemplating, regulatory change to ensure
the spirit and intent of the United Nations Declaration on the Rights of Indigenous Peoples is enshrined in legislation.
Newcrest’s current and future operations are subject to a risk that one or more groups of Indigenous people may
oppose continued operation, further development, or new development of its projects or operations. Such opposition
may be directed through legal or administrative proceedings or protests, roadblocks or other forms of public
expression against its activities and may be influenced by perceptions of the mining industry generally driven by recent
newsworthy events. Opposition by Indigenous people to Newcrest’s activities may require modification of, or preclude
operation or development of, its projects or may require the entering into of additional agreements with Indigenous
people, beyond those to which Newcrest has previously entered into, which may result in additional costs. Claims and
protests of Indigenous peoples may disrupt or delay activities, including permitting, at Newcrest’s operations.
There is emerging legislation in multiple jurisdictions which is intensifying investor, shareholder and public scrutiny
concerning human rights issues that include forced labour, child labour and other slavery-like practices; displacement
of local communities, discrimination by race, age, gender, sexuality and other protected attributes, and underpayment
for labour or services provided. Failure to identify and respond to human rights issues can lead to costly and disruptive
legal action, investor divestment, negative publicity, reputational damage and significant financial loss.
Respect for human rights is considered a fundamental business responsibility under the UN Guiding Principles on
Business and Human Rights (UNGPs) and is a reflected commitment in Newcrest’s Human Rights Policy. In addition
to the UNGPs, the recent 2018 Australian Modern Slavery Act has introduced a new statutory reporting requirement
on the risk of modern slavery in the operations and supply chain of a reporting entity (and its owned and controlled
entities). Under the Act, companies such as Newcrest must possess a clear policy on human rights management
supported by best practices for responsible global conduct. This includes a focus on due diligence and the requirement
to assess real and potential human rights issues, act on findings, track responses, and communicate how issues are
being managed.
Human rights groups are increasingly scrutinising the extractive industry, particularly where the industry operates in
more complex socioeconomic and socio-political jurisdictions. The extractive industry in these regions is particularly
prone to complaints and/or legal disputes in connection with human rights risks associated with large scale land
acquisition and resettlement of people; adverse environmental impacts; livelihoods and health; the use of migrant
labour, child labour and forced labour; the use of private security firms; indigenous peoples; and risks arising from
operations in areas that are conflict affected areas and/or that host artisanal mining activities.
NEWCREST 2020 ANNUAL REPORT 80
Directors’ Report continued
REMUNERATION REPORT
14 August 2020
Dear Shareholder,
On behalf of the Board of Newcrest, we are pleased to provide our Remuneration Report for the year ended 30 June 2020, for which we
seek your support at our Annual General Meeting (AGM) in November 2020.
This report explains the links between Newcrest’s Executive remuneration framework and Newcrest’s strategy and performance.
Year in review
During the 2020 financial year, Newcrest had a strong focus on pursuing growth opportunities with over US$1.3 billion invested in the
acquisition of Red Chris and increasing our exposure to Fruta del Norte, in addition to the continued growth and optimisation of the
existing portfolio. We also further strengthened our balance sheet to ensure we are well positioned to deliver our near-term growth
options. Key achievements during the 2020 financial year (FY20) included:
– completed the acquisition of a 70% interest in the Red Chris mine in British Columbia, Canada
– divested our interest in Gosowong in Indonesia
– increased our level of direct ownership in Lundin Gold and further increased direct exposure to the cash flows of Lundin’s key asset
through the acquisition of the gold prepay and stream facilities and an offtake agreement in respect of the Fruta del Norte mine
– undertook an institutional placement and share purchase plan, together raising A$1.2 billion, to fund the acquisition of the Fruta del
Norte facilities and future growth opportunities
– issued senior unsecured notes for a combined aggregate principal amount of US$1.15 billion, the proceeds of which were used to
repurchase existing near-term corporate bonds. This enabled us to reduce our borrowing cost as well as smooth and extend our debt
maturity profile
– reached the Stage 2 farm-in milestone and acquired a 40% interest in the Havieron project in the Paterson Province in
Western Australia
– released promising drilling results with respect to the Havieron Project and Red Chris
– progressed several additional early stage exploration arrangements in Australia, Canada, Chile, Ecuador and the USA
– approved the first stage of the Cadia Expansion Project to Execution phase, with this first stage comprising commencement of the
next cave development (PC2-3).
From an operating perspective, Newcrest’s gold production was 13% lower than the prior year with lower production reflecting lower
gold head grade milled at Cadia and Lihir, lower mill throughput at Telfer with the change to the 1.4 train strategy, and the divestment
of Gosowong. Copper production was 30% higher than the prior year, reflecting the new contribution of Red Chris as well as additional
copper production from Cadia. The Group All-In Sustaining Cost (AISC) per ounce was 17% higher than the prior year mostly due to the
lower gold sales volumes, introduction of the higher cost Red Chris ounces and the effects of a lower realised copper price. However, the
AISC margin increased by US$137 per ounce with the higher realised gold prices experienced during the year. Newcrest generated strong
cash flow again this year with free cash flow (before M&A activities) of US$670 million. Newcrest’s operating and financial performance,
together with the outlook for gold prices and investment requirements relative to the balance sheet strength, enabled an increase in
dividends to shareholders for the fifth consecutive year.
We continue our focus on safety, with another twelve-month period free of fatalities or life-changing injuries. So far all of Newcrest’s
mines have continued to operate throughout the COVID-19 pandemic. Newcrest updated its guidance following the completion of the
sale of its interest in Gosowong, but did not subsequently change its guidance as a result of the COVID-19 pandemic. Newcrest moved
early to implement a range of COVID-19 control measures across all operations and projects to minimise the risk of infection to its
workforce, their family members and surrounding communities. These measures included modified rosters at some operations, remote
working where possible, social distancing, special leave arrangements for those impacted by the virus, and screening and health checks
for those travelling to Newcrest sites or projects. Newcrest also established a A$20 million Community Support Fund which has assisted
host communities with the challenges associated with the COVID-19 pandemic.
Newcrest ‘s interim dividend of US7.5 cents, combined with the final dividend of US17.5 cents (to be paid on 25 September 2020),
reflects a 14% increase on the prior year dividends.
Directors’ Report continuedDIRECTORS’ REPORT 81
FY20 Short Term Incentive (STI) outcomes for Executive KMP ranged from 32.5% to 44.1% of the maximum possible award. 92.2% of the
2016 Long Term Incentives (LTIs) vested during the 2020 financial year, representing performance for the three years to 30 June 2019.
During the 2020 financial year, COVID-19 did not result in an impact on workforce numbers and the FY20 incentive programs continued
to operate as normal throughout the organisation. The Executive remuneration outcomes were considered appropriate for FY20 given the
performance of the business relative to expectations and the performance of Management.
On 16 August 2019, following an Operating Model review, the Company announced changes to the planned structure and composition
of its Executive Committee to simplify and align responsibilities under clear points of accountability and increase the effectiveness and
efficiency of the business. Craig Jones was appointed Chief Operating Officer (PNG) and Phil Stephenson was appointed Chief Operating
Officer (Australia, Indonesia & the Americas). Craig Jetson decided to pursue opportunities outside Newcrest. The scope of the Chief
Development Officer role was reduced and Michael Nossal decided not to continue in the role in the longer term.
Lisa Ali commenced in the role of Chief People and Sustainability Officer on 28 February 2020, replacing Ian Kemish who retired on
31 March 2020. Seil Song was promoted to the role of Chief Development Officer effective 15 March 2020, and Suresh Vadnagra
commenced in the new role of Chief Technical and Projects Officer on 18 May 2020.
Since the end of the financial year, Maria Sanz Perez commenced in the role of Chief Legal Risk and Compliance Officer on 1 July 2020,
succeeding Francesca Lee who retired on 31 July 2020.
Remuneration framework
We have made no material changes to the Executive Remuneration framework in the 2020 financial year. The Board remains committed
to ensuring that Newcrest’s remuneration framework is aligned to the Company’s strategy and performance and that it is effective in
attracting, rewarding and retaining high calibre people and driving strong individual and Group performance in the interests of both the
Company and its shareholders and in accordance with the Company’s values and risk profile.
To this end, the structure of, and the performance conditions for, both the STI and LTI Plans have been reviewed. Minor changes were
made to the structure and performance conditions for the STI for the 2020 financial year and the 2021 financial year. As foreshadowed
in the 2019 Remuneration Report, effective from the grant of STIs for the 2020 financial year, on cessation of employment, other than
for dismissal for cause, all restricted shares granted as part of the STI remain on foot until the release from restriction date, including on
resignation. This change recognises that STI has been earned, whilst also providing ongoing shareholder alignment post-resignation.
The performance conditions and weightings attributed to the personal measures for the STI for the 2020 financial year reflect the five
pillars that underpin the Company’s strategy to the end of calendar year 2020. For the 2021 financial year there have been further minor
changes to the measures and weightings for safety, sustainability and costs. In August 2019, all Newcrest Share Plans for Executives and
non-Executives were consolidated under the Equity Incentive Plan Rules.
As part of the Operating Model review, Chief Operating Officers, Philip Stephenson and Craig Jones, received increases in Total Fixed
Remuneration (TFR) of 8.3% on appointment to their new roles in September 2019. Following benchmarking undertaken by the Board’s
independent remuneration adviser against the ASX 11 – 40 companies at that time (primary reference), an ASX Custom Peer Group
and major Global Gold comparators, as described at section 4.1 of this Report, no other Executives received increases in TFR. Incentive
opportunities were also reviewed and, to ensure appropriately competitive total remuneration opportunities, LTI awards were increased
from 100% to 120% for the CFO (as approved at the 2019 AGM), and from 80% to 100% for the Chief Operating Officers.
We continue to welcome shareholder feedback and thank you for your continued support.
Philip Aiken AM
Chairman, Human Resources and Remuneration Committee
NEWCREST 2020 ANNUAL REPORT 82
Directors’ Report continued
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 during the 2020 financial year.
During the year the Human Resources and Remuneration Committee and the Board re-examined the classification of KMP for the 2020 financial
year. After due consideration, taking into account the changes to the composition of the Executive Committee announced on 16 August 2019 and
the expanded scope of some Executive roles, it was determined that the KMP for the 2020 financial year comprised all members of the Executive
Committee and the Non-Executive Directors (NEDs).
This Report has been audited under section 308(3C) of the Corporations Act 2001.
Contents
Section 1
Key Management Personnel
Section 2
Remuneration Snapshot
Section 3
Remuneration Governance
Section 4
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
83
84
86
86
97
101
102
103
105
Directors’ Report continuedDIRECTORS’ REPORT 83
1. Key Management Personnel (KMP)
The following table sets out the Company’s KMP during the 2020 financial year. Each of the KMP was KMP for all of the 2020 financial year,
unless stated otherwise.
Name
Executive Directors
Sandeep Biswas
Gerard Bond
Other Executives
Lisa Ali
Craig Jones
Francesca Lee
Seil Song
Philip Stephenson
Suresh Vadnagra
Former Executives
Craig Jetson
Ian Kemish
Michael Nossal
Non-Executive Directors
Peter Hay
Philip Aiken AM
Roger Higgins
Xiaoling Liu
Vickki McFadden
Peter Tomsett
Role
Managing Director and Chief Executive Officer (CEO)
Finance Director and Chief Financial Officer (CFO)
Chief People & Sustainability Officer (CPSO)
Chief Operating Officer (COO) – Papua New Guinea
EGM – Wafi-Golpu
Chief Legal, Risk & Compliance Officer (CLRCO)
EGM – Company Secretary & General Counsel
Chief Development Officer (CDO) (1)
Chief Operating Officer (COO) – Australia & Americas
Chief Operating Officer (COO) – Australia, Indonesia & Americas
EGM – Gosowong, Telfer & HSES
Chief Technical & Projects Officer (CTPO)
EGM – Cadia and Lihir
Chief People & Sustainability Officer (CPSO)
EGM – People & External Affairs
Chief Development Officer (CDO)
28 Feb 20 – 30 Jun 20
1 Sep 19 – 30 Jun 20
1 Jul 19 – 31 Aug 19
1 Sep 19 – 30 Jun 20
1 Jul 19 – 31 Aug 19
15 Mar 20 – 30 Jun 20
6 Mar 20 – 30 Jun 20
1 Sep 19 – 5 Mar 20
1 Jul 19 – 31 Aug 19
18 May 20 – 30 Jun 20
1 Jul 19 – 31 Aug 19
1 Sep 19 – 31 Mar 20
1 Jul 19 – 31 Aug 19
1 Jul 19 – 31 Mar 20
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
(1) Prior to becoming KMP, Seil Song held the role of General Manager – Business Development since the beginning of the 2020 financial year.
(2) Craig Jetson ceased being KMP on 31 August 2019 and formally ceased employment with Newcrest on 1 January 2020 following a period of transition.
Subsequent to 30 June 2020, Maria Sanz Perez commenced in the role of Chief Legal Risk and Compliance Officer on 1 July 2020, succeeding
Francesca Lee who retired on 31 July 2020.
NEWCREST 2020 ANNUAL REPORT 84
Directors’ Report continued
2. Remuneration Snapshot
2.1. Key remuneration outcomes for the 2020 financial year
Executive Remuneration
STI Outcomes
LTI Outcomes
NED Remuneration
Both Chief Operating Officers
received an increase in TFR
of 8.3% on appointment to
their new roles, effective
1 September 2019.
There was no change to TFR
of CEO or CFO or any other
Executive as part of the 2019
annual salary review process.
The average STI outcome for
the 2020 financial year for
Executives was 40.8% of the
maximum opportunity, based
on the assessment of business
and personal measures.
During the 2020 financial year,
92.2% of the Rights granted under
the 2016 LTI Plan vested reflecting
the Company’s performance over
the three year performance period
to 30 June 2019.
Board and Committee fees were
not changed during the 2020
financial year.
The 2017 LTI Plan (under which grants
of LTI rights were made in the 2018
financial year) is expected to vest on
or around 21 November 2020 and it
is anticipated that the vesting levels
will be in the range of 60% to 70%.
During the 2020 financial year, new Equity Incentive Plan Rules were adopted. The intention in adopting the new rules was to improve consistency
across plans. They apply to all share plans from the 2020 financial year onwards.
2.2. Actual Remuneration
The table below details the cash and value of other benefits actually received by the Executives in the 2020 financial year in their capacity as KMP.
This is a voluntary disclosure to provide shareholders with increased clarity and transparency in relation to Executive remuneration. It includes
the value of LTI Rights and STI Shares that vested during their period as KMP 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 2020 financial year
Executive
Sandeep Biswas
Gerard Bond
Lisa Ali
Craig Jones
Francesca Lee
Seil Song
Philip Stephenson
Suresh Vadnagra
Former Executives
Craig Jetson
Ian Kemish
Michael Nossal
TFR(1)
US$’000
STI Paid
as cash(2)
US$’000
Termin-
ation(3)
US$’000
Other
Benefits(4)
US$’000
LTI Rights
Vested(5)
US$’000
Restricted STI
Shares Vested(6)
US$’000
Total
US$’000
1,612
672
171
563
487
148
564
68
525
402
532
1,072
347
–
185
177
–
192
–
235
189
343
–
–
–
–
–
–
–
–
–
–
335
48
6
158
2
4
2
70
–
–
31
5
2,902
820
–
648
471
–
437
–
–
471
820
1,678
554
–
316
272
–
298
–
369
278
529
7,312
2,399
329
1,714
1,411
150
1,561
68
1,129
1,371
2,564
Directors’ Report continuedDIRECTORS’ REPORT 85
Notes to Non-Statutory Executive Remuneration
(1) TFR (Total Fixed Remuneration) comprises base salary, superannuation contributions and payment of unused annual leave entitlements for former executives.
For new or former Executives, TFR has been pro-rated for time served as KMP during the financial year.
(2) Represents amounts paid under the STI Plan relating to performance for the 2019 financial year. The cash component for the 2019 financial year was paid in
October 2019.
(3) Represents termination payments paid during the year.
(4) Comprises cash payments for travel costs, relocation assistance, non-monetary benefits such as parking, insurance and applicable fringe benefits tax paid on
benefits. Includes US$99,000 (A$150,000) in relocation support paid to Lisa Ali in January and March 2020. A further A$150,000 in relocation support will be
paid on completion of Lisa Ali’s probation period on 28 August 2020 and is not included above.
(5) Represents Rights that have vested under the 2016 LTI Plan on 15 November 2019. The Shares issued on vesting remain subject to a one year holding lock
(i.e. they are included in this column, but are not available for trading until 15 November 2020). The value of the Rights has been determined based on the share
price at the close of business on the vesting date of A$31.22 (US$21.21).
(6) On 25 October 2019, ordinary Newcrest shares were released by Pacific Custodians Pty Ltd as trustee for the Newcrest Employee Share Trust to:
– Sandeep Biswas (36,533), Gerard Bond (12,137), Craig Jetson (7,518), Craig Jones (7,175), Ian Kemish (5,954), Francesca Lee (5,765), Michael Nossal (11,418)
and Philip Stephenson (5,958) in accordance with the STI Plan for the 2017 financial year which required deferral of part of the STI award for these Executives.
Sandeep Biswas (39,094), Gerard Bond (12,816), Craig Jetson (9,119), Craig Jones (7,042), Ian Kemish (6,577), Francesca Lee (6,473), Michael Nossal (12,415)
and Philip Stephenson (7,473) in accordance with the STI Plan for the 2018 financial year which required deferral of part of the STI award for these Executives.
–
The value of the Shares released under the STI Plan for the 2017 financial year and the STI Plan for the 2018 financial year has been determined based on the
share price at the close of business on the vesting date of A$32.43 (US$22.19).
TFR, Other Cash Benefits and Other Benefits have been translated from Australian dollars to US dollars using an average exchange rate of
0.6715. STI Paid as cash, LTI Rights Vested and Restricted STI Shares Vested have been translated at the rate applicable on the date of the event.
LTI Rights Vested and Restricted STI Shares Vested amounts reflect the share price on the date of vesting. For Restricted STI Shares, the vesting
date is the date the trading restriction is lifted.
2.3. Changes planned for the 2021 financial year
Executive Total Fixed
Remuneration
STI
A review of Executives’ TFR
against market data is currently
underway.
Minor changes have been made
to the STI Business measures
and their relative weighting
for the 2021 financial year.
These changes have been
made to increase the focus on
sustainability, in particular, actions
being taken in relation to emission
of greenhouse gases (GHG) and
water management.
LTI
NED Remuneration
No material changes are proposed
at this stage.
A review of NED fees is scheduled
for September 2020.
2.4. Currency
Unless otherwise indicated, 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$0.6715.
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.
NEWCREST 2020 ANNUAL REPORT
86
Directors’ Report continued
3. Remuneration Governance
Board
Takes an active role in the governance and oversight of Newcrest’s remuneration policies and has overall responsibility
for ensuring that the Company’s remuneration strategy aligns with Newcrest’s short and long term business objectives
and risk profile. The Board approves the remuneration arrangements for the CEO, upon recommendation from the
Human Resources and Remuneration (HRR) Committee.
HRR Committee
Established by the Board to review, formulate and make recommendations to the Board in relation to matters within
its Charter, including the remuneration arrangements of the CEO, Executives and the NEDs, and oversee 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 Phillip Aiken AM (Chairman), Vickki McFadden, Xiaoling Liu and
Roger Higgins, who are each independent NEDs. All Directors are invited to attend HRR Committee meetings.
External Remuneration
Consultants
Engaged by the HRR Committee to provide advice on remuneration related issues.
During the 2020 financial year, KPMG provided advice, 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 Company’s External Remuneration Consultants Policy sets out protocols governing the engagement of external
remuneration consultants.
4. Executive Remuneration Framework
4.1. Remuneration Strategy and Guiding Principles
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 guiding principles of our remuneration strategy are as set out below.
Strategy and Purpose
Values and culture
Shareholders
Performance
Market
Drive execution of key
objectives, which align with
the Company’s strategy
and will deliver long term
growth in shareholder
value. This includes our
commitment to safety
and sustainability.
Incorporate framework and
processes that reinforce
our values and culture.
Align interests of
Executives with those
of shareholders.
Provide appropriate levels
of “at risk” performance
pay to encourage,
recognise and reward
high performance.
Attract and retain
talented, high performing
Executives by reference
to comparable roles.
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: Yamana Gold Inc, Freeport-McMoran Copper & Gold, Agnico Eagle Mines Limited, AngloGold
Ashanti Ltd, Barrick Gold Corporation, Gold Fields Ltd, Kinross Gold Corporation, Newmont Corporation, Kirkland Lake Gold Limited, Evolution
Mining Limited and Northern Star Resources Limited.
Both the peer group and the global gold mining group were considered by the Board during FY20 and adjusted slightly.
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.
Directors’ Report continuedDIRECTORS’ REPORT 87
4.2. Components of the Executive Remuneration Framework
The table below outlines the remuneration components for the 2020 financial year for all Executives. Further details regarding each of the
remuneration components are provided in sections 4.3 to 4.5.
Remuneration Type
Fixed Remuneration
Variable/At-Risk Remuneration
Total Fixed Remuneration
(TFR)
Short Term Incentive
(STI)
Long Term Incentive
(LTI)
Delivered in cash
Delivered in equity
Component
Delivery
Composition
Base salary plus
superannuation
contributions in line with
statutory obligations,
and any salary packaged
amounts.
Link with strategic
objectives
Set to attract, retain,
motivate and reward
high quality executive
talent to deliver on the
Company’s strategy.
50% of STI award
paid in cash after the
financial year.
50% of STI award as
shares, with one half
restricted for one year
and the other half for
two years.
Outcomes based on a combination of business
performance and personal measures.
Subject to clawback and overarching Board discretion.
Designed to:
– align interests of shareholders and Executives
through an appropriate level of “at risk” pay and
by delivering 50% in restricted equity;
– motivate and 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.
Rights with a three year
vesting period and shares
allocated on vesting subject
to a one year holding lock.
Outcomes based on ROCE,
comparative cost position
and relative TSR.
Subject to clawback and
overarching Board discretion.
Designed to:
– align interests of
shareholders and
Executives through
an appropriate level
of “at risk” pay and by
delivering 100% in
equity; 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 Executive remuneration provided in respect of the 2020 financial year are
delivered over a four year period.
Salary
Paid throughout year
50% cash
25% restricted shares
25% restricted shares
STI
Performance Period
(12 months)
Restriction
Restriction
Paid Oct 2020
Released Oct 2021
Released Oct 2022
Awarded as Rights
LTI
Performance Period
(3 years)
Vests as shares
Unlocked
Holding lock
Nov 2019
Nov 2022
Nov 2023
FY20
FY21
FY22
FY23
FY24
NEWCREST 2020 ANNUAL REPORT
88
Directors’ Report continued
4. Executive Remuneration Framework continued
4.2. Components of the Executive Remuneration Framework continued
Newcrest’s mix of remuneration components, expressed as a percentage of “maximum” earning opportunity, for current Executives for the 2020
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.
Remuneration Mix as a Percentage of Maximum FY20 (%)
37.5
31.6
31.25
26.7
20.8
20.8
20.8
21.1
21.1
26.3
18.75
18.75
31.25
20.0
20.0
33.3
100
80
60
40
20
0
LTI
STI (Deferred)
STI (Cash)
TFR
CEO
CFO
COO, CDO & CTPO
CPSO & CLRCO
The “at risk” components are subject to deliberately challenging financial and non-financial 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. There is no STI awarded unless a threshold level of performance is achieved.
For the 2020 financial year, the total remuneration opportunities for the majority of the Executives were within the 50th – 75th percentile range
of the benchmarked ASX comparator groups.
4.3. Total Fixed Remuneration (TFR)
Feature
Composition
Description
TFR comprises base salary, superannuation contributions in line with statutory obligations, and any salary packaged
amounts (for example, novated lease vehicles). TFR is paid in Australian dollars.
Relevant Considerations
TFR is determined on an individual basis, considering the scope of the role, the individual’s skills and expertise,
individual and group performance, market movements and competitiveness.
Review
TFR is reviewed annually. The Chief Operating Officers received an increase in TFR of 8.3% due to the changes in
their roles, effective 1 September 2019. No other Executive received an increase in TFR as part of the 2019 annual
salary review process.
A review of Executives’ TFR against market data is currently underway.
Directors’ Report continuedDIRECTORS’ REPORT 89
4.4. Short Term Incentive
4.4.1. Key features of the STI Plan for the 2020 financial year
Feature
Participation
Opportunity
Description
All Executives are eligible to participate in the STI Plan.
For “at target” performance, the CEO has the opportunity to receive 100% of TFR; the CFO has 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 performance period is the financial year preceding the payment date of the STI. For the 2020 financial year,
the performance period was 1 July 2019 to 30 June 2020.
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.
Further details in relation to the personal STI measures and the outcomes are described in section 5.3.1 and the
business measures, are described in section 4.4.2.
The diagram below illustrates the indicative weighting of the performance conditions, using the CEO’s FY20
personal conditions as an example.
Safety & Sustainability
20%
People
15%
Operating
Performance
30%
Technology & Innovation 10%
Profitable Growth
25%
40%
Personal
measures
60%
Business
measures
Safety
25%
Earnings
25%
Costs
25%
Free Cash Flow
25%
Calculation of STI Award
to Executives
STI Amount ($) = ((40% x personal outcome) + (60% x business outcome)) x “At Target” STI% x TFR
Business and personal measures 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 five personal measures is below 50%, the CEO (in the case of an award
to the other Executives) or the Board (in the case of an award to the CEO) has the discretion not to make an STI
award to that participant. Accordingly, the minimum value of the STI Award is nil.
NEWCREST 2020 ANNUAL REPORT 90
Directors’ Report continued
4. Executive Remuneration Framework continued
4.4. Short Term Incentive continued
4.4.1. Key features of the STI Plan for the 2020 financial year continued
Feature
Description
Payment, Delivery
and Deferral
For Executives, the STI for the 2020 financial year is delivered 50% in cash and 50% in restricted shares in
October 2020, following finalisation of the audited annual Company results and the approval of all personal
outcomes. Of the restricted component, half of the restricted shares is to be released after 12 months after the
allocation date (in October 2021) and the remainder after two years after the allocation date (in October 2022).
As announced in the 2019 Remuneration Report, restricted shares remain on foot if the Executive resigns before
the shares are released from the restriction, unless the Board determines otherwise. During the restriction period, the
Executives are entitled to dividends and voting rights attaching to their restricted shares.
For allocation purposes, the value of each STI restricted share will be calculated using the five trading day volume
weighted average price (VWAP) of Newcrest’s share price immediately preceding the date of payment of the cash
portion of the STI Award, unless such price is assessed as not being fairly representative of the market price, in
which case an alternative and representative VWAP will be agreed by the HRRC.
Cessation of Employment Except at the discretion of the Board:
– if a participant resigns or is dismissed for cause during the Performance Period, the participant may not be
eligible to receive an STI award for that financial year;
– 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;
– if a participant is dismissed for cause while the restricted shares are subject to restrictions, the restricted shares
will be forfeited;
– if the participant resigns while the restricted shares are subject to restrictions, the participant will be entitled to
retain their restricted shares and the shares will remain on foot for the balance of the restriction period and then
be released. The Board will have the discretion to increase the STI restriction period for some or all of the STI
restricted shares on foot, from one year to two years;
– if the participant ceases employment for any other reason while the restricted shares are subject to restrictions,
the participant will be entitled to retain their restricted shares and the shares will remain on foot for the balance
of the restriction period and then be released.
In general, the Board has the discretion to reduce or forfeit an STI award, or to seek recovery from a participant, if an
event or circumstance has occurred which has resulted in an inappropriate benefit being conferred on a participant
(including in the case of fraud, dishonesty, gross misconduct by the Executive 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.
Clawback
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.
Directors’ Report continuedDIRECTORS’ REPORT 91
4.4.2. STI performance conditions for the 2020 financial year in detail
Business measures for the 2020 financial year
Business Measure
Weighting
Reason the Performance Measure Was Adopted
25%
The Company is committed to reinforcing a strong safety culture and improving safety
leadership. As such, the measures and targets are reviewed annually to meet the
aspirations of the Safety Transformation Plan. The combined measures maintain a
focus on safety performance, as measured by TRIFR, drive critical actions and ensure
effective controls are in place to help prevent fatalities and/or serious injuries.
Safety
TRIFR(1) (5%)
Significant Potential Incident (SPI)(2)
Action Verification and Investigation
Quality Improvement (5%)
Critical Control Management (CCM)(3)
Action Close Out on time (5%)
Occupational Exposure Level (OEL)(4)
Reduction Plans (5%)
Process Safety Improvements (5%)(5)
Earnings
25%
Adjusted Net Profit/(Loss) After Tax and
Before Significant Items
Costs
AISC per ounce(6)
Free Cash Flow
(FCF)
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 Verification and Investigation Quality Improvement focuses on ensuring that actions arising as an outcome of an SPI investigation have been
implemented, including an independent review of the quality (thoroughness and completeness) of each SPI investigation. This ensures a strong focus on
identifying and addressing hazards which may lead to serious potential incidents in the future, including the potential for a fatality.
(3) CCM action close out focuses on the timely completion of all actions identified following a Systems Verification (SV) or Field Critical Control Check (FCCC). CCM
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) OEL Reduction Plans focus firstly on the development of site Exposure Control Plans within the agreed timeframes, and subsequently, on the implementation of
the Control Plans for the top three exposure risks identified for each site.
(5) Process Safety Improvement focuses on the completion rate of all actions detailed in each site’s Process Safety Improvement Plan and targets wider system
risks, such as operating plant designs, and chemical and energy hazards.
(6) All-In Sustaining Cost metrics as per World Gold Council Guidance Note on Non-GAAP metrics. Refer to section 6 of the Operating and Financial Review.
NEWCREST 2020 ANNUAL REPORT 92
Directors’ Report continued
4. Executive Remuneration Framework continued
4.4. Short Term Incentive continued
4.4.2. STI performance conditions for the 2020 financial year in detail continued
Personal measures for the 2020 financial year
For the 2020 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 and taking into account the Company’s key material risks. 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 2020 financial year focussed on their areas of responsibility which, in the case
of the operational Executives, included safety, people, production, operational efficiency, material risk management, technology and innovation,
sustainability and Red Chris optimisation. 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, CFO and other Executives, and outcomes with respect to such measures is set out in
section 5.3.1.
4.4.3. STI Plan for the 2019 financial year
The terms that applied to the 2019 financial year STI award, which was delivered in October 2019 in respect of the performance period from
1 July 2018 to 30 June 2019, were described in detail in the 2019 Remuneration Report.
4.4.4. STI Plan for the 2021 financial year
Minor changes have been made to the STI Business measures and their relative weighting for the 2021 financial year. These changes have
been made to increase the focus on sustainability, in particular, actions being taken in relation to emission of GHG and water management. To
accommodate these changes, the weighting for Costs has been reduced to 20%. The Board considered a modest reduction in the weighting of
Costs to be appropriate for FY21 due to (1) the 33.3% weighting already in place for Comparative Costs in the Long-Term Incentive Plan; and
(2) a preference to not over-emphasise cost reduction in a relatively high-gold price environment. In addition, the weighting for Safety has been
reduced to 20%. The Board considered a modest reduction in the weighting of Safety to be appropriate for FY21 due to the inclusion of the
sustainability metrics and a total 30% weighting attributed to non-financial metrics.
FY20
SAFETY
EARNINGS
COSTS
25%
25%
25%
FY21
SAFETY
20%
SUSTAINABILITY 10%
EARNINGS
COSTS
25%
20%
25%
FREE CASH FLOW
FREE CASH FLOW
25%
Directors’ Report continuedDIRECTORS’ REPORT 93
4.5. Long Term Incentive
4.5.1. Key features of the 2019 LTI Plan (under which Rights were issued during the 2020 financial year)
Feature
Equity type
Maximum LTI
Opportunity
Grant Date
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 the Executive receives one fully paid ordinary share for each Right. 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. Rights are automatically exercised and do not have an expiry date.
The maximum LTI opportunity is 180% of TFR for the CEO, 120% of TFR for the CFO (increased from 100% under the
2018 LTI Plan), 100% of TFR for the COOs, CDO and CTPO (increased from 80% for the COOs under the 2018 LTI Plan),
and 80% of TFR for the other Executives. Section 4.2 indicates the value of the grants expressed as a percentage of the
total remuneration package.
The grant date was 19 November 2019 and Rights under the plan will vest, subject to the satisfaction of the
performance conditions, on 19 November 2022. The total number of Rights issued to, and held by, each Executive is
summarised in section 9.4.
LTI Grant Value
For allocation purposes, the value of each Right was calculated based on the face value of the underlying security, using
the five day VWAP of Newcrest’s share price immediately preceding the grant date (A$30.8409).
Performance period
The performance period is the three financial years commencing on 1 July 2019.
Performance Conditions Rights issued under the 2019 LTI Plan are subject to the Performance Conditions shown below:
Comparative
cost position
33%
Relative total
shareholder
return
33%
ROCE
33%
Vesting
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 Equity Incentive 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 the vesting obligations by allocating
shares purchased on-market.
Holding lock
For Executives, shares received on the vesting and automatic exercise of Rights are subject to a 12 month holding lock.
Dividends
Clawback
No dividends are paid on unvested Rights. Shares allocated on the vesting and automatic exercise of Rights and subject
to the holding lock have the right to receive dividends (when applicable).
In general, the Board has the discretion to reduce, forfeit or lapse 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 in the case of fraud, dishonesty, gross misconduct by the Executive 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.
NEWCREST 2020 ANNUAL REPORT 94
Directors’ Report continued
4. Executive Remuneration Framework continued
4.5. Long Term Incentive continued
4.5.1. Key features of the 2019 LTI Plan (under which Rights were issued during the 2020 financial year) continued
Feature
Description
Cessation of
employment
Except at the discretion of the Board:
– if a participant gives a notice of resignation or is dismissed for cause, 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 satisfaction of the applicable 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).
Change of control
The Board may exercise its discretion to allow all or some unvested Rights to vest if a change of control event occurs.
Where there is an actual change in control of the Company then, unless the Board determines otherwise, unvested Rights
will immediately vest or cease to be subject to restrictions on a pro rata basis having regard to the portion of the vesting
period that has elapsed.
Retesting
There is no retesting. Rights that do not vest based on performance over the three year performance period will lapse.
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. 2019 LTI performance conditions in detail
2019 LTI Performance Conditions
Component
Assessment
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 vesting scale for this measure is
as follows:
– 0% vests if Comparative Costs are at
or above the 50th percentile;
The AISC per ounce incorporates costs related
to sustaining production.
– 40% vests if Comparative Costs are less
than the 50th percentile;
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.
– 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 2019 until 30 June 2022.
Reason the Performance Measure
Was Adopted
This measure is closely aligned to Newcrest’s
strategic objective to be a low cost producer
and aligned to our relative value proposition
for gold equity investors.
The AISC per ounce result is a sound basis for
the Company to use in assessing comparative
cost as it is based on publicly disclosed results.
Directors’ Report continuedDIRECTORS’ REPORT 95
Component
Assessment
Reason the Performance Measure
Was Adopted
Return on Capital Employed (ROCE)
ROCE is an absolute measure, defined as
underlying earnings before interest and tax
(EBIT), divided by average capital employed,
being shareholders’ equity plus net debt.
For each of the three years of the performance
period ROCE is averaged to determine the
number of Rights that may be exercised in
relation to this performance measure.
Average capital employed is calculated as
a simple average of opening and closing
balances. If material equity transactions (for
example, significant equity issuances or asset
impairments) occur such that the simple average
is not representative of actual performance,
the average capital employed for the year is
adjusted for the effect of these transactions.
Average capital employed for the purpose
of this calculation excludes approved
capital invested in long-dated projects until
commercial production is achieved, so as
not to discourage Management’s pursuit
of long-dated growth options.
Relative TSR
Total Shareholder Return (TSR) is a measure
of performance over time that combines share
price appreciation and dividends paid to show
the total return to the shareholder, expressed
as an annualised percentage. Relative TSR is a
measure of the Company’s TSR performance
against that of other gold companies.
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.
These targets, including the threshold of
6%, have been in place since the 2016 LTI
award and are designed to exceed Newcrest’s
Weighted Average Cost of Capital whilst
also incentivising returns that are higher
than comparable industries in the prevailing
economic conditions.
ROCE aligns Management action and company
outcomes closely with long term shareholder
value. ROCE provides a balance to the other
LTI metrics as it serves as a counter to
“buying” success.
ROCE is also based on publicly disclosed and
reconciled results and is therefore a sound
basis for the Company to use in assessing value.
Impairments are excluded from the capital
base in the year in which they occur, such
that the return is on a pre-impairment basis
and LTI participants do not benefit from the
impairment. However, the post impairment
capital base is used in the calculation of
returns in subsequent years so as to not
de-incentivise current or new management.
Relative TSR will be measured by comparing
Newcrest’s AUD share price performance
against the S&P TSX Global Gold Index over
three years.
Rather than rely on spot price, the
performance calculations will reference the six
month period immediately prior to the start
(1 January 2019 – 30 June 2019) and the end
(1 January 2022 – 30 June 2022) 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.
NEWCREST 2020 ANNUAL REPORT 96
Directors’ Report continued
4. Executive Remuneration Framework continued
4.5. Long Term Incentive continued
4.5.3. Outlook for 2020 LTI Plan Performance Conditions (2021 financial year)
LTI Performance Conditions for the 2020 LTI Plan will be structurally identical to those which apply to the 2019 LTI Plan.
4.5.4. LTI Plans for past financial years
The terms that apply to the 2016, 2017, and 2018 LTI Plans, which vested or will vest in the 2020, 2021 and 2022 financial years respectively,
are described in detail in the 2017, 2018 and 2019 Remuneration Reports.
4.6. Sign-on arrangements
The following Sign-On arrangements for Executives were granted during the 2020 financial year. The arrangements for Suresh Vadnagra were
granted to compensate for forgone entitlements. The arrangements for Lisa Ali were granted to provide relocation support.
In both cases, performance conditions are imposed to ensure that the Executive does not become entitled to the sign-on benefits in the event of
underperformance. The CEO will assess performance against the relevant conditions, given that the Executives are direct reports to the CEO.
Recipient
Grant/Payment Date
Award
Vesting Periods
Suresh Vadnagra
29 May 2020
7,000 sign-on rights (face
value of A$200,000)
automatically exercised at
a nil exercise price to the
Executive. The Executive
receives one fully paid
ordinary share for each
right that is exercised.
Any sign-on rights that do
not vest at the end of the
vesting period will lapse.
3,500 sign-on rights due
to vest on 18 May 2021
and 3,500 sign-on
rights due to vest on
18 May 2022 (or as soon
as possible afterwards
in accordance with
Newcrest’s Securities
Dealing Policy).
In or around August 2020
In or around June 2021
Lisa Ali
January and March 2020
Around 6 months
after commencement
of employment
(i.e. 28 August 2020)
A$265,000 cash
(US$178,000)
A$110,000 cash
(US$74,000)
A$150,000 cash
(US$99,000)
A$150,000 cash
(US$99,000)
N/A
N/A
N/A
N/A
Vesting/Payment
Conditions
Adequate performance
and continuing
employment (other than
in limited circumstances).
Satisfactory completion
of probation period.
Repayable in the event
of resignation within
24 months of relocation.
Directors’ Report continuedDIRECTORS’ REPORT 97
5. Remuneration Outcomes
5.1. Total Fixed Remuneration (TFR) for the 2020 financial year
Set out below is the TFR for the current Executives as at 30 June 2020, shown in Australian dollars. TFR comprises base salary and superannuation
contributions and any salary packaged amounts (for example, novated lease vehicles). This information is provided in Australian dollars to enable
comparisons to be made in future years, without the impact of changes in exchange rates. The increases in TFR for Craig Jones and Philip Stephenson
were associated with their appointments to the roles of COO – PNG, and COO – Australia, Indonesia and the Americas, respectively.
Name
Sandeep Biswas
Gerard Bond
Lisa Ali
Craig Jones
Francesca Lee
Seil Song
Philip Stephenson
Suresh Vadnagra
TFR A$
30 June 2020
TFR A$
30 June 2019
% Increase
2,400,000
1,000,000
750,000
850,000
725,000
750,000
850,000
850,000
2,400,000
1,000,000
–
785,000
725,000
–
785,000
–
5.2. Newcrest’s Financial Performance for the past five financial years
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
Underlying profit(1)
Cash flows from operating activities
Free cash flow(2)
Free cash flow (before M&A activity)(2)
EBITDA Margin
EBIT Margin
Net Debt to EBITDA(3)
ROCE
Gearing(4)
Share price at 30 June (5)
Earnings per share(6)
Basic
Underlying
Dividends(7)
Gold produced
All-in sustaining cost(8)
Average realised gold price
Measure
US$ million
US$ million
US$ million
US$ million
US$ million
%
%
Times
%
%
A$
US cents/share
US cents/share
US cents/share
000’s ounces
US$/oz sold
US$/oz
2020
647
750
1,471
(621)
670
46.8
30.4
0.3
13.8
6.8
31.53
83.4
96.7
25.0
2,171
862
1,530
2019
561
561
1,487
804
878
44.6
24.7
0.2
11.2
4.9
31.95
73.0
73.0
22.0
2,488
738
1,269
2018
202
459
1,434
601
828
43.9
21.7
0.7
8.8
12.2
21.80
26.3
59.8
18.5
2,346
835
1,308
2017
308
394
1,467
739
829
40.5
20.7
1.1
7.9
16.6
20.16
40.2
51.4
15.0
2,381
787
1,263
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. Free cash flow (before M&A activity) is calculated
as free cash flow excluding investing activities relating to M&A investments and business divestments.
(3) Net debt to EBITDA is calculated as net debt at the end of the reporting period divided by the rolling 12 month EBITDA.
(4) Gearing ratio is calculated as net debt at the end of the reporting period divided by net debt plus equity.
(5) Opening share price on 1 July 2015 was A$13.02.
(6) Basic EPS is calculated as net profit after tax and non-controlling interests (statutory profit) divided by the weighted average number of ordinary shares.
Underlying earnings per share is calculated as net profit after tax and non-controlling interests and before significant items (underlying profit) divided by the
weighted average number of ordinary shares.
(7) Represents dividends determined in respect of the financial year.
(8) AISC metrics as per World Gold Council Guidance Note on Non-GAAP Metrics. See section 4.4.2 for further detail. Newcrest’s AISC will vary from period to period
as a result of various factors including production performance, timing of sales, the level of sustaining capital and the relative contribution of each asset.
0.0%
0.0%
–
8.3%
0.0%
–
8.3%
–
2016
332
323
1,241
814
902
39.2
18.0
1.6
6.2
22.8
23.00
43.3
42.1
7.5
2,439
762
1,166
NEWCREST 2020 ANNUAL REPORT 98
Directors’ Report continued
5. Remuneration Outcomes continued
5.2. Newcrest’s Financial Performance for the past 5 financial years continued
The graphs below show Newcrest’s performance over the last five years for metrics used for multiple years to determine the business component
of STI awards, before any adjustments as a result of the exercise of Board discretion. The FY20 TRIFR of 2.6 per million hours worked is
marginally higher than the prior year as a result of the addition of Red Chris which currently has a higher average injury rate than other Newcrest
operations, though it improved over the year. Excluding Red Chris, TRIFR for FY20 was 2.0 per million hours worked, which is a 13% improvement
on the prior year. All safety metrics other than TRIFR were introduced as metrics for FY20 only. They have no historical data prior to 2020 and
therefore no charts for such metrics are included.
TRIFR
3.7
3.3
2.6
2.3
2.4
2020
2019
2018
2017
2016
Statutory Profit (US$m)
Underlying Profit (US$m)
647
561
332
308
202
750
561
459
394
323
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
800
700
600
500
400
300
200
100
0
2020
2019
2018
2017
2016
2020
2019
2018
2017
2016
1200
Free Cashflow before M&A Activity (US$m)
AISC (US$ per oz sold)
878 828 829
902
670
960
720
480
240
0
862
835
787
762
738
2020
2019
2018
2017
2016
2020
2019
2018
2017
2016
5.3. STI Outcomes for 2020 financial year
5.3.1. Performance against STI objectives
STI outcomes are determined based on business and personal performance. When assessing personal performance, as well as considering the
outcomes, consideration is given to whether the outcomes have been achieved in a manner that is consistent with the Company’s values and
standards and risk management processes.
Directors’ Report continuedDIRECTORS’ REPORT 99
Element
Weight
Performance(1)
threshold target
Description
maximum
Business Measures
Safety (1) – TRIFR
Safety (2) – SPI action
verification and investigation
quality improvement
Safety (3) – Critical Control
Management Action Close
Out on time
Safety (4) – OEL Reduction
Plans
Safety (5) – Process Safety
Improvements
Earnings – NPAT before
significant items (US$m)
Cost – AISC/oz (US$)
Cash flow: FCF (US$m)
Total Business outcome
Personal Measures
(Sandeep Biswas – CEO)
Safety and Sustainability
People
60%
3%
3%
3%
3%
3%
15%
15%
15%
40%
8%
6%
– TRIFR of 2.58 exceeded maximum target of 2.7 for FY20
– 100% completion achieved maximum target.
– 88% completion of CCM Actions close outs on time was below the
minimum target.
– Targets met or exceeded for the completion of Exposure Control Plans and
engineering controls developed and submitted for approval for the top 3
exposure risks at each site.
– 79% of Process Safety Action Plans items completed which was above the
minimum target.
– Outcome of $465m (below Minimum), inclusive of adjustments(1) (which
reduced the outcome as per the reconciliation on the next page).
– Outcome of $894/oz (below minimum), inclusive of adjustments(1) (which
reduced the outcome).
– Outcome of $414m, inclusive of adjustments(1) (which improved
the outcome).
– The total business outcome was 47%
– Process Safety audit targets met or exceeded.
– Risk Management enhancements and strong risk leadership through
COVID-19 response.
– Met or exceeded 11 out of 13 public Sustainability & Climate
Change targets.
– Met or exceeded targets to enhance key organisational capabilities.
– Exceeded Diversity & Inclusion target for women employed globally.
Missed targets for women and PNG nationals in leadership roles.
Operating Performance
12%
– Achieved maximum for Free Cash Flow(2) and exceeded target for Edge L4
Technology & Innovation
4%
10%
40%
10%
4%
12%
10%
4%
40%
Profitable Growth
Personal Measures
(Gerard Bond – CFO)
Safety and Sustainability
People
Operating Performance
Technology & Innovation
Profitable Growth
Personal Measures
(other Executives)
Individual measures based
on initiatives and key
project deliverables linked
to company strategy and
performance
cash delivery.
– Newcrest Operating Model detailed design and delivery phases
implemented.
– Progress exceeding targets for key breakthroughs, e.g. undercutless caving,
high temperature explosives and hydrofloat.
– Met targets for probability weighted NPV for innovation portfolio.
– Red Chris acquisition completed and integration well progressed.
– Divestment of Gosowong, and significant exploration and drilling results
at Red Chris and Havieron.
– Significant improvements in automated HSE reporting, dashboards and
digital solutions including mobility tools and data science.
– Biodiversity and Catchment water risk assessments well progressed.
Emissions Management Plans and Energy Strategy projects advanced.
– Exceeded diversity and career development targets.
– Achieved maximum for Free Cash Flow(2) and well above target for Edge L4
cash delivery in Group and Procurement.
– All internal audit actions completed and independent assessment of risk
maturity rating completed.
– Newcrest Operating Model detailed design and delivery
phases implemented.
– Significant activity including finalising Red Chris M&A, divestment of
Gosowong, A$1.2 billion equity raising and SPP, and acquisition of the Fruta
del Norte financing facilities. Successful refinancing of the corporate bonds,
lowering their cost and smoothing and extending their maturity profile.
– Outcomes against individual measures for the remaining Executives ranged
from 0% to 200%.
(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, transactions related to M&A activity and other items determined by the Board which are considered to be outside the control of
Management. COVID-19 led to additional costs (primarily related to labour, medical and accommodation), which reduced NPAT (-$14m), FCF (-$41m) and AISC
spend (-$17m), and had further productivity impacts. The Board determined that no adjustment would be made to reflect these additional COVID-19 related
costs. The unadjusted values for financial business metrics are NPAT ($750m), FCF (-$621m) and AISC ($862/oz).
(2) Unlike for the Business Score, Free Cash Flow is not adjusted for commodity prices and foreign exchange rates in Personal outcomes (but is adjusted for cash
outlays related to M&A, so as not to disincentivise management for M&A transactions). On this basis, Free Cash Flow exceeded target for both the CEO and CFO.
NEWCREST 2020 ANNUAL REPORT 100
Directors’ Report continued
5. Remuneration Outcomes continued
5.3. STI Outcomes for 2020 financial year continued
5.3.1. Performance against STI objectives continued
A reconciliation of the Earnings measure outcome to statutory profit is detailed below:
Statutory profit
Add back: Significant items after tax(1)
Underlying profit
Adjust: Board agreed adjustments(2)
Earnings measure
2020
US$m
647
103
750
(285)
465
2019
US$m
561
–
561
(107)
454
(1) Refer to section 2.7 of the Operating and Financial Review for details of significant items for 2020. There were no significant items in 2019.
(2) Represents adjustments for the effect of commodity prices, foreign exchange rates and other significant items determined by the Board which are considered
to be outside the control of Management.
A reconciliation of the Free Cash Flow measure outcome to the statutory cashflow is detailed below:
Cash flows from operating activities
Cash flows from investment activities
Free cash flow
Add back: M&A activity(1)
Free cash flow (before M&A activity)
Adjust: Board agreed adjustments(2)
Free Cash Flow measure
2020
US$m
1,471
(2,092)
(621)
1,291
670
(256)
414
2019
US$m
1,487
(683)
804
74
878
(126)
752
(1) Refer to section 3 of the Operating and Financial Review for details.
(2) Represents adjustments for the effect of commodity prices, foreign exchange rates and other significant items determined by the Board which are considered
to be outside the control of Management.
5.3.2. STI outcomes for all Executives for the 2020 financial year
The table below summarises achievement against the performance conditions and final STI outcomes for all Executives for the 2020 financial year.
Executive
Sandeep Biswas
Gerard Bond
Lisa Ali(4)
Craig Jones
Francesca Lee
Seil Song(5)
Philip Stephenson
Suresh Vadnagra(4)
Former Executives
Craig Jetson(6)
Ian Kemish(7)
Michael Nossal(7)
% of STI
Target
Awarded(1)
Total STI
Awarded(2)
US$’000
Proportion
of Total STI
Restricted (%)(3)
% of Max STI
Opportunity
Forgone
87.4
88.2
76.2
65.0
84.6
84.2
87.4
–
–
77.0
84.2
1,409
474
78
223
247
75
299
–
–
175
340
50
50
50
50
50
50
50
–
–
50
50
56.3
55.9
61.9
67.5
57.7
57.9
56.3
–
100.0
61.5
57.9
(1) The assessment against personal measures for the Executives (which represent 40% of the award) ranged from 46% to 75% of maximum.
(2) Amounts have been translated from Australian dollars to US dollars using an average exchange rate of US$0.6715.
(3) Proportion of the Total STI awarded which will comprise restricted shares.
(4) STI awards for new Executives are pro-rated in accordance with the proportion of the performance period completed following their commencement date.
Nil awards are made for new employees with less than three months service during the performance period.
(5) The STI award shown for Seil Song relates solely to the period he has served as Chief Development Officer and does not include the proportion of his STI award
attributable to his previous role as General Manager – Business Development.
(6) On cessation, Craig Jetson received no STI cash payment or grant of shares for the period of FY20 worked prior to cessation.
(7) The STIs for Ian Kemish and Michael Nossal were pro-rated for the period worked during FY20 prior to cessation.
Directors’ Report continuedDIRECTORS’ REPORT 101
5.4. Vesting Outcomes for 2016 LTI Plan
Following the completion of the performance period from 1 July 2016 to 30 June 2019, Rights granted under the 2016 LTI Plan vested on
15 November 2019 at 92.2% of maximum based on the assessment of performance against the applicable measures.
Element
Comparative Cost
ROCE
Relative Total Shareholder
Return (TSR)
TOTAL VESTING
Weighting
33.3%
33.3%
33.3%
Performance Achieved
25th percentile (3–yr avg)
10.7% (3–yr avg)(1)
NCM share price outperformed the S&P/TSX Global
Gold Total Return Index by 47.3 percentage points
over the period
Percentage of Total
LTI Award Vesting
33.3%
25.5%
33.3%
92.2%
(7.8% lapsed)
(1) The three-year ROCE average includes adjustments to FY17 and FY18 consistent with adjustments that applied for the purposes of the STI for the 2017
and 2018 financial years. This reflected adjustments for non-controllable items such as the 2017 Cadia seismic event. In addition, adjustments have been
made to allow for Development Projects that are not yet in commercial production. This amounted to an average reduction in the Capital Employed of $796m,
representing approximately 9% of the pre-adjusted Capital Employed.
5.5. Estimated Vesting of LTI Rights in the 2021 financial year (2017 LTI Plan)
Rights granted under the 2017 LTI Plan are expected to vest on or about 21 November 2020. The vesting outcome is not yet known, but it is
anticipated that it will be in the range of 60% to 70%. The performance conditions which apply to the 2017 LTI Rights are the same as for the
2016 LTI Plan detailed above, i.e.: Comparative Cost (33.3%), ROCE (33.3%) and Relative TSR (33.3%). Additional details on the performance
standards attached to each performance condition were disclosed in the 2018 Remuneration Report.
6. Executive Service Agreements and Termination Arrangements for KMP
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 remuneration, an opportunity to participate in incentive plans (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 2020 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, and Francesca Lee three months’ notice; and
(b) in the case of Lisa Ali, Craig Jones, Seil Song, Philip Stephenson, and Suresh Vadnagra, six months’ notice.
The difference in notice period for the Executives arose 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 is payable under
the ESA in this circumstance.
On cessation of employment, STI or LTI awards vest, lapse or are forfeited in accordance with the relevant plan rules. Refer to sections 4.4
and 4.5 for further details.
During the 2020 financial year, three members of KMP ceased employment with the Company. The treatment of the departing Executives’ LTI and
STI awards is set out in sections 9.1 and 9.2. Other than unpaid statutory entitlements, Michael Nossal received the equivalent of six months TFR
in lieu of notice. No termination benefits were provided to Ian Kemish or Craig Jetson.
From 1 April 2020, Ian Kemish has been engaged on an ongoing contract of services, for up to 60 days per annum at up to A$320,000
(US$215,000) per annum, to provide advice, support and advocacy (as required) on political, policy and regulatory issues impacting the resource
sector, primarily in the PNG national and Australian federal jurisdictions, but with flexibility to work in other international jurisdictions if required.
The contract may be terminated by either party on 3 months’ notice. As at 30 June 2020, US$45,000 had been paid under this contract.
On 6 April 2020, Newcrest entered into a consultancy agreement with Michael Nossal to provide ongoing assistance in relation to Newcrest’s
Energy Strategy. The agreement is on an ‘as required’ basis and does not have a fixed end date. Newcrest will pay Michael Nossal a fee of
A$5,300 (exclusive of GST) per day of assistance. As at 30 June 2020, US$43,000 had been paid under this agreement.
NEWCREST 2020 ANNUAL REPORT 102
Directors’ Report continued
7. Non-Executive Directors’ Remuneration
7.1. Remuneration Policy
The Non-Executive Director (NED) fees and other terms of appointment 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 aggregate fee pool of A$2,700,000 per annum
(US$1,813,000 using the average exchange rate of 0.6715 for the 2020 financial year).
7.3. Fee Structure
In reviewing the level of fees, the Board obtains independent market data from its remuneration adviser, KPMG, primarily (but not exclusively) in
relation to ASX listed companies with market capitalisations ranked between 11-40. No change was made to base Board fees during the 2020
financial year and a review of fees from 1 January 2021 is scheduled for later in 2020. The aggregate fees are currently 29% below the aggregate
fee pool approved by shareholders.
The table below outlines the main Board and Committee fees as at 30 June 2020.
Fees (per annum)(1)
Board(2)
Audit & Risk Committee
Safety & Sustainability Committee
HRR Committee
Chairman
Member
A$’000
US$’000
A$’000
US$’000
600
55
44
44
403
37
30
30
200
28
22
22
134
18
15
15
(1) Board and Committee fees have been translated from Australian dollars to US dollars using an average exchange rate of 0.6715 for the 2020 financial year.
(2) The Chairperson of the Board does not receive any additional payments for his role as Chairman or Member of any Committee.
Under the Company’s Constitution, NEDs may be reimbursed for reasonable travel, accommodation and other expenses incurred while engaged
on the business of the Company. NEDs may also be remunerated for additional services, for example, if they undertake specialist or consulting
work on behalf of the Company outside the scope of their normal Director’s duties. No fees for additional services were paid to NEDs for the
current or prior financial year.
Directors’ Report continuedDIRECTORS’ REPORT 103
8. Shareholdings
8.1. Minimum Shareholding Policy
The Company has a Minimum Shareholding Requirement Policy which requires that KMP hold at least the following value of Newcrest shares. The
intent of the policy is to align the interests of KMP with those of our shareholders. Progress is monitored on a regular basis. As at 30 June 2020,
each current KMP who has been KMP for at least the period set out below has met this requirement.
CEO
Executives
NEDs
Minimum requirement
100% of TFR in shares
50% of TFR in shares
One year’s total annual fees in shares
Deadline for achieving shareholding
(from the later of appointment or 1 July 2015)
5 years
5 years
3 years
8.2. Executive Shareholdings
A summary of current shareholdings of Executives, including their closely related parties, as at 30 June 2020 are set out below.
Executive
Sandeep Biswas
Gerard Bond
Lisa Ali
Craig Jones
Francesca Lee
Seil Song
Philip Stephenson
Suresh Vadnagra
Former Executives
Craig Jetson(7)
Ian Kemish
Michael Nossal
Granted as remuneration
Opening
balance(1)
STI
Plan (2)
LTI
Plan (3)
Net
other
movements(4)
Closing
balance(5)
Value based
on VWAP(6)
A$’000
Percentage
of TFR
%
643,252
195,046
–
60,235
79,365
–
74,720
–
79,685
19,228
165,191
44,038
14,278
–
7,618
7,254
–
7,880
–
9,636
7,780
14,098
136,816
38,665
–
30,555
22,223
–
20,621
–
10,310
22,208
38,665
(299,624)
(92,448)
–
(25,466)
(29,947)
–
–
–
(82,802)
(12,651)
(93,358)
524,482
155,541
–
72,942
78,895
–
103,221
–
16,829
36,565
124,596
15,839
4,697
–
2,203
2,383
–
3,117
–
508
1,104
3,763
660
470
0
259
329
0
367
0
53
147
376
(1) Opening balance is as at 1 July 2019 for all Executives except for Lisa Ali (where the opening balance is at 28 February 2020) and Suresh Vadnagra (where the
opening balance is at 18 May 2020).
(2) Remuneration granted in FY20 includes shares allocated on 25 October 2019 in respect of 50% of an Executive’s STI award for the STI Plan for the 2019
financial year. The number of shares granted was determined using the five day VWAP of A$35.8587, calculated over the period 7 to 11 October 2019, being
the five trading days prior to the date the cash STI payment was made (12 October 2019).
(3) Represents the shares acquired on vesting and automatic exercise of Rights under the 2016 LTI Plan.
(4) Net other movements represents the sale or purchase of shares, or the acquisition of shares through the Share Purchase Plan announced on 30 April 2020,
by Executives (other than for Craig Jetson which includes forfeited shares – see note (7)). In August 2019, the CEO and CFO each sold shares for the first time
in their tenure with Newcrest for a purpose other than sales to meet their taxation liabilities arising as a result of their receipt of shares under employment
incentive schemes. The shares sold comprised approximately 30% of their holdings at the time.
(5) The closing balance is as at 30 June 2020 for current Executives, and as at the date of cessation of employment for former Executives.
(6) Based on VWAP for the period 1 July 2019 to 30 June 2020 of A$30.20.
(7) On cessation, 10,310 Rights granted to Craig Jetson under the 2016 LTI Plan vested as shares, with the balance of 10,310 Rights forfeited. 9,636 restricted
shares granted as part of the FY19 STI Plan were forfeited.
NEWCREST 2020 ANNUAL REPORT 104
Directors’ Report continued
8. Shareholdings continued
8.3. Non-Executive Directors’ Shareholdings
A summary of current shareholdings of NEDs, including their closely related parties, as at 30 June 2020 is set out below.
Non-Executive Directors
Peter Hay
Philip Aiken AM
Roger Higgins
Xiaoling Liu
Vickki McFadden
Peter Tomsett
Opening
balance(1)
Net other
Movements(2)
Value based on
Closing
balance(3)
VWAP(4)
A$’000
Percentage of
ongoing annual
fees%
54,601
18,229
12,503
13,000
10,000
20,000
1,717
182
1,172
1,172
1,272
1,172
56,318
18,411
13,675
14,172
11,272
21,172
1,701
556
413
428
340
639
283
209
155
172
123
256
(1) Opening balance is as at 1 July 2019.
(2) Net other movements represents the sale or purchase of shares or the acquisition of shares through the dividend reinvestment plan or the Share Purchase Plan
announced on 30 April 2020 by Non-Executive Directors.
(3) For current Non-Executive Directors, the closing balance is as at 30 June 2020.
(4) Based on VWAP for the period 1 July 2019 to 30 June 2020 of A$30.20.
8.4. Securities Dealing Policy
The Company has a Securities Dealing Policy which prohibits the use by Directors, Executives and employees of hedging and derivatives such
as caps, collars, warrants or similar products in relation to Newcrest securities, including shares acquired under the Company’s equity incentive
schemes, whether or not they are vested. The Policy also prohibits entry into transactions in associated products that operate to limit the
economic risk of their security or interest holdings in the Company. Employees are not permitted to enter into margin loans in relation to Newcrest
securities at any time without prior approval from the Chairman or Company Secretary. The Policy is available on the Company’s website at
https://www.newcrest.com/about-newcrest/corporate-governance.
Directors’ Report continuedDIRECTORS’ REPORT 105
9. Statutory Tables
9.1. Executive Remuneration
Short Term
Termin-
ation
Benefits
Long
Term
Post-
Employ-
ment
Share-Based Payments
Short
Term
Incentive
(B)
US$’000
Other
Cash
Benefits
(C)
US$’000
Other
Benefits
(D)
US$’000
Termin-
ation
Payments
(E)
US$’000
Salary
(A)
US$’000
Leave
(F)
US$’000
Super-
annuation
(G)
US$’000
LTI
Rights
(H)
US$’000
STI
Restricted
Shares
(I)
US$’000
Other
(J)
US$’000
Total
US$’000
Perform-
ance
related
(K)
%
Executives
2020
Sandeep Biswas
Gerard Bond
Lisa Ali(2)
Craig Jones(2)
Francesca Lee(2)
Seil Song
Philip Stephenson
Suresh Vadnagra
Former Executives
Craig Jetson(1)
Ian Kemish(2)
Michael Nossal
1,597
657
171
549
473
144
549
67
317
367
493
704
237
39
111
124
38
150
–
–
87
170
19
–
225
–
–
–
29
190
–
11
–
Total
5,384
1,660
474
2019
Sandeep Biswas
Gerard Bond
Craig Jetson(1)
Michael Nossal
Philip Stephenson
Total
1,685
696
666
696
545
4,288
1,130
366
247
362
202
2,307
31
–
–
–
75
106
142
25
6
–
2
4
2
33
–
–
11
5
88
38
9
7
7
81
–
–
–
–
–
–
–
–
–
–
335
335
–
–
–
–
–
–
18
4
12
22
9
11
16
5
(2)
6
(24)
77
(9)
12
–
20
22
45
14
14
–
14
14
4
14
2
7
11
11
2,007
493
71
323
270
–
323
–
(675)
105
181
1,358
450
39
227
231
38
269
–
–
254
475
–
–
–
–
–
–
–
17
–
–
–
5,742
1,861
557
1,248
1,125
237
1,383
281
(353)
852
1,646
105
3,098
3,341
17 14,579
15
15
15
15
15
75
2,303
567
396
567
342
4,175
1,112
364
224
353
199
2,252
–
–
–
–
–
6,305
2,029
1,555
2,020
1,481
– 13,390
70.9
63.4
26.8
53.0
55.6
32.1
53.7
0.0
n/a
52.3
50.2
72.1
63.9
55.8
63.5
50.2
(1) On cessation of employment, nil shares were granted to Craig Jetson under the FY20 STI Plan and both tranches of restricted shares granted under the FY19 STI
Plan were forfeited.
(2) Appointed as KMP during the current year financial and therefore no prior year comparison is shown.
NEWCREST 2020 ANNUAL REPORT 106
Directors’ Report continued
9. Statutory Tables continued
9.1. Executive Remuneration continued
The table on page 105 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 0.6715 (2019: 0.7156).
An explanation of the relevant remuneration items included in the table is provided in the associated footnotes. The figures provided in relation to
share based payments (columns H to J) 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 during the financial year. Refer
to section 1 of this Report for further information as to the period for which each of the Executives was KMP during the 2020 financial year.
(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 travel costs paid and sign on arrangements to Lisa Ali and Suresh Vadnagra as outlined in section 4.6. The sign on arrangements are
being expensed over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the Executive becomes fully entitled
to the sign on arrangement.
(D) Other benefits represents non-monetary benefits such as parking, insurance and applicable fringe benefits tax payable on benefits.
(E) Represents payment equivalent to six months TFR in lieu of notice made to Michael Nossal on cessation of employment.
(F) Represents leave entitlements, measured on an accruals basis, and reflects the movement in the entitlements over the year. For former Executives, this includes
the reversal of long service leave expensed in prior years which did not vest upon cessation.
(G) Represents company contributions to superannuation under the Superannuation Guarantee legislation (SGC).
(H) 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.
(I) Represents the 50% of the STI award granted to the Executives which is in the form of restricted shares (refer to section 4.4). Effective from the grant of STIs for the
2020 financial year, on cessation of employment, other than for dismissal for cause, all restricted shares granted as part of the STI remain on foot until the release from
restriction date, including on resignation. Due to this change the restricted shares granted in respect to the 2020 financial year are expensed in the 2020 financial year.
For STI awards granted in prior years, the restricted 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.
(J) Sign-on Rights issued to Suresh Vadnagra as the equity component of his sign-on grant in accordance with his Executive Service Agreement, as detailed in section
4.6. His entitlement is being expensed over the period in which the performance and service conditions are fulfilled, ending on the date on which he becomes fully
entitled to the award.
(K) Represents performance related remuneration as a percentage of total remuneration. Performance related remuneration comprises cash Short Term Incentive,
LTI Rights and STI Restricted Shares.
Directors’ Report continuedDIRECTORS’ REPORT
107
9.2. Executives – Changes in Rights Held during the 2020 financial year
Executives
Sandeep Biswas
Gerard Bond
Lisa Ali(6)
Craig Jetson(7)
Craig Jones(8)
Ian Kemish(9)
Francesca Lee
Michael Nossal(9)
Seil Song(10)
Philip Stephenson
Suresh Vadnagra(11)
Opening
balance(1)
Granted
under 2019
LTI Plan
Other Grants
Rights
Lapsed/
Forfeited(2)
Vested
and/or
Exercised(3)
Closing
balance(4)(5)
535,467
132,248
–
91,350
90,183
77,209
76,267
132,248
23,061
79,409
–
140,074(12)
38,909(12)
17,662
–
27,561
19,455
18,806
32,424
13,358
27,561
–
–
–
–
–
–
–
–
–
–
–
7,000
(11,575)
(3,272)
–
(81,040)
(2,585)
(40,047)
(1,881)
(67,264)
–
(1,745)
–
(136,816)
(38,665)
–
(10,310)
(30,555)
(22,208)
(22,223)
(38,665)
–
(20,621)
–
527,150
129,220
17,662
–
84,604
34,409
70,969
58,743
36,419
84,604
7,000
(1) The opening balance is assessed on 1 July 2019.
(2) Represent Rights which lapsed or were forfeited under the 2016 LTI Plan (which were granted in the 2017 financial year). On cessation, 81,040 Rights held
by Craig Jetson under the 2016, 2017 and 2018 LTI Plans were forfeited.
(3) Represent Rights that vested under the 2016 LTI Plan (which were granted in the 2017 financial year).
(4) The closing balance is assessed on 30 June 2020.
(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.
(6) Lisa Ali’s Rights were pro-rated from her commencement date of 28 February 2020.
(7) On cessation, Craig Jetson forfeited 50% of Rights granted under the 2016 LTI Plan, forfeited all Rights granted under the 2017 and 2018 LTI Plans and did not
participate in the 2019 LTI Plan.
(8) The opening balance for Craig Jones represents Rights granted as EGM – Wafi-Golpu.
(9) A pro-rated number of Rights held by Ian Kemish and Michael Nossal in the 2017, 2018 and 2019 LTI Plans were forfeited based on their cessation date of
31 March 2020.
(10) The opening balance for Seil Song, and the Rights granted under the 2019 LTI, represent Rights granted as GM – Business Development. The shares allocated
on vesting of those Rights are not subject to holding lock. Consistent with the structure of LTI for employees below KMP level, 50% of the Rights granted in both
the 2018 and 2019 LTI Plans are not subject to Performance Conditions.
(11) Suresh Vadnagra was granted 7,000 sign-on rights shortly after commencement as detailed in section 4.6. This represents 100% of the equity component of his
sign-on grant. No rights vested or lapsed during FY20.
(12) Approval from Newcrest shareholders for the issuance of these Rights to Sandeep Biswas and Gerard Bond was obtained for the purpose of ASX Listing Rule
10.14 at the 2019 AGM.
NEWCREST 2020 ANNUAL REPORT 108
Directors’ Report continued
9. Statutory Tables continued
9.3. Executives – Total Value of Rights Granted and Exercised during the 2020 financial year
Executives
Sandeep Biswas
Gerard Bond
Lisa Ali
Craig Jetson
Craig Jones
Ian Kemish
Francesca Lee
Michael Nossal
Seil Song
Philip Stephenson
Suresh Vadnagra
Accounting
Fair Value of
Rights Granted
(A)
US$’000
Value of
Rights
Exercised
(B)
US$’000
2,562
712
323
–
504
356
344
593
–
504
129
2,902
820
–
–
648
471
471
820
–
437
–
The following assumptions have been applied to the table:
(A) The accounting value of the Rights granted under the 2019 LTI Plan reflects the fair value of a Right on the Grant Date, being US$18.29 multiplied by the number
of Rights granted during the year. The accounting value of a Sign-on Right granted to Suresh Vadnagra reflects the fair value of the Rights on the Grant Date, being
US$18.44, 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 2016 LTI Plan. 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 2020 (nil exercise price).
9.4. Executives – Source of Rights Held as at 30 June 2020
Financial Year
Plan
Grant Date
VWAP for grant(1)
Future financial years in which rights may vest
Sandeep Biswas
Gerard Bond
Lisa Ali(2)
Craig Jetson(3)
Craig Jones
Ian Kemish(4)
Francesca Lee
Michael Nossal(4)
Seil Song(5)
Philip Stephenson
Suresh Vadnagra(6)
FY18
FY19
FY20
2017 LTI
2018 LTI
2019 LTI
FY20
Other
21 Nov 17
21 Nov 18
19 Nov 19
29 May 20
A$23.48
A$20.49
A$30.84
A$28.57
Balance at
30 June 2020
FY21
176,283
41,516
–
–
26,400
18,754
23,862
32,652
5,493
26,400
–
FY22
210,793
48,795
–
–
30,643
13,276
28,301
22,127
17,568
30,643
–
FY23
140,074
38,909
17,662
–
27,561
2,379
18,806
3,964
13,358
27,561
–
–
–
–
–
–
–
–
–
–
–
7,000
527,150
129,220
17,662
–
84,604
34,409
70,969
58,743
36,419
84,604
7,000
(1) Five day VWAP of Newcrest’s share price prior to the Grant Date is used to determine the number of Rights offered under the 2017 LTI, 2018 LTI and 2019 LTI.
Five day VWAP of Newcrest’s share price for sign-on shares is for the period prior to commencement of employment of Suresh Vadnagra on 18 May 2020.
(2) Lisa Ali’s Rights were pro-rated from her commencement date of 28 February 2020.
(3) On cessation, Craig Jetson forfeited all Rights granted under the 2017 and 2018 LTI Plans and did not participate in the 2019 LTI Plan.
(4) Rights held by Ian Kemish and Michael Nossal in the 2017, 2018 and 2019 LTI Plans have been pro-rated to their cessation date.
(5) All Rights currently held by Seil Song were granted as GM – Business Development and the shares allocated on vesting are not subject to holding lock. 50% of the
Rights granted in both the 2018 and 2019 LTI Plans are not subject to Performance Conditions.
(6) 7,000 sign-on rights were granted to Suresh Vadnagra in part compensation for forgone equity awards with his previous employer. The number of sign-on rights
granted was calculated based on a value of A$200,000 (US$134,300 divided by the VWAP of Newcrest’s share price over the five trading days immediately prior
to commencement of employment on 18 May 2020).
Directors’ Report continuedDIRECTORS’ REPORT 109
9.5. Non-Executive Directors Remuneration
Non-Executive Directors
Peter Hay
Philip Aiken AM
Roger Higgins
Xiaoling Liu
Vickki McFadden
Peter Tomsett
Total
Total(1)
Board
Fees
US$’000
Short Term
Committee
Fees
US$’000
Post-
Employment
Other
Benefits(2)
US$’000
Super-
annuation(3)
US$’000
Total(4)
US$’000
389
415
131
137
120
128
127
128
120
128
120
107
1,007
1,043
–
–
44
47
44
37
33
35
52
55
33
30
206
204
–
7
–
–
–
–
–
–
–
–
–
–
–
7
14
15
4
6
14
15
7
15
14
15
14
12
67
78
403
437
179
190
178
180
167
178
186
198
167
149
1,280
1,332
FY
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
(1) Total Non-Executive Director (NED) remuneration for the 2019 financial year excludes NEDs who ceased being a NED in the 2019 financial year. Total
remuneration for these NEDs in 2019 was US$72,000.
(2) Comprise travels costs and applicable fringe benefits tax paid on such costs.
(3) Represents Company contributions to superannuation under the SGC and insurance payments.
(4) 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 0.6715 (2019: 0.7156).
9.6. Other Transactions with KMP
There were no loans made, guaranteed or secured, directly or indirectly, by the Company and any of its subsidiaries 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.
NEWCREST 2020 ANNUAL REPORT 110
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation Ernst & Young8 Exhibition Street Melbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auAuditor’s Independence Declaration to the Directors of Newcrest Mining Limited As lead auditor for the audit of the financial report of Newcrest Mining Limited for the financial year ended 30 June 2020, 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 14 August 2020 Financial Report
111
Contents
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
Segment Information
Income and Expenses
Significant Items
Income Tax Expense
Earnings per Share (EPS)
Dividends
10 Notes to the Consolidated Statement of
Cash Flows
Resource Assets and Liabilities
11 Property, Plant and Equipment
12 Impairment of Non-Financial Assets
13 Inventories
14 Trade and Other Receivables
15 Other Assets
16 Goodwill
17 Other Intangible Assets
18 Deferred Tax
19 Provisions
112
113
114
115
116
117
173
174
117
117
117
119
120
120
123
125
126
126
127
127
128
128
131
134
134
135
135
135
136
138
Capital Structure and Financial Risk Management
20 Capital Management and Financial Objectives
21 Net Debt
22 Leases
23 Other Financial Assets and Liabilities
24 Financial Risk Management
25 Issued Capital
26 Reserves
Group Structure
27 Controlled Entities
28 Parent Entity Information
29 Deed of Cross Guarantee
30 Interest in Joint Operations
31 Investment in Associates
32 Acquisition of Red Chris
33 Business Divestment
Other
34 Contingencies
35 Share-Based Payments
36 Key Management Personnel
37 Auditors’ Remuneration
38 New Accounting Standards and Interpretations
39 Commitments
40 Events Subsequent to Reporting Date
140
140
141
143
144
146
155
156
157
157
158
159
161
162
164
166
168
168
168
170
171
171
172
172
NEWCREST 2020 ANNUAL REPORT 112
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statement
For the Year Ended 30 June 2020
Revenue
Cost of sales
Gross profit
Exploration expenses
Corporate administration expenses
Other income/(expenses)
Share of profit/(loss) of associates
Write-down of property, plant and equipment
Major transaction and integration costs
Profit before interest and income tax
Finance income
Finance costs
Net 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)
31
6
6
5(e)
7(a)
8
8
2020
US$m
3,922
(2,568)
1,354
(64)
(117)
55
(37)
(20)
(15)
1,156
19
(190)
(171)
985
(350)
635
(12)
647
635
83.4
83.1
2019
US$m
3,742
(2,648)
1,094
(70)
(120)
38
(18)
–
–
924
26
(120)
(94)
830
(272)
558
(3)
561
558
73.0
72.8
Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2020
Profit after income tax
Other comprehensive income/(loss)
Items that may be reclassified subsequently to the Income Statement
Cash flow hedges
Cash flow hedge (gains)/losses transferred to the Income Statement
Cash flow hedge gains/(losses) deferred in equity
Income tax (expense)/benefit
Investments
Share of other comprehensive income/(loss) of associates
Foreign currency translation
Exchange gains/(losses) on translation of foreign operations,
net of hedges of foreign investments and tax
Items that will not be reclassified to the Income Statement
Investments
Fair value gain/(loss) of equity instruments held at fair value through
other comprehensive income (‘FVOCI’)
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Non-controlling interests
Owners of the parent
The above Statement should be read in conjunction with the accompanying notes.
Note
24(a)
31
113
2020
US$m
635
2019
US$m
558
99
(266)
50
(117)
10
10
(86)
(86)
(12)
(12)
(205)
430
(12)
442
430
(12)
(143)
47
(108)
3
3
(162)
(162)
24
24
(243)
315
(3)
318
315
NEWCREST 2020 ANNUAL REPORT
114
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
As at 30 June 2020
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax assets
Other assets
Total current assets
Non-current assets
Trade and other receivables
Inventories
Other financial assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Investment in associates
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Current tax liability
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Deferred tax liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Equity attributable to owners of the parent
Non-controlling interests
Total equity
The above Statement should be read in conjunction with the accompanying notes.
Note
14
13
23
15
14
13
23
11
16
17
18
31
15
21
22
19
23
21
22
19
18
23
25
26
2020
US$m
1,451
254
549
65
1
52
2,372
51
1,024
481
8,809
17
24
65
386
13
10,870
13,242
520
4
26
129
23
116
818
2,013
32
494
1,114
158
3,811
4,629
8,613
12,403
(3,170)
(620)
8,613
–
8,613
2019
US$m
1,600
135
576
4
32
35
2,382
–
997
99
7,816
–
33
60
333
117
9,455
11,837
444
–
–
133
176
59
812
1,995
–
391
944
64
3,394
4,206
7,631
11,641
(3,648)
(426)
7,567
64
7,631
Consolidated Statement of Cash Flows
For the Year Ended 30 June 2020
Cash flows from operating activities
Profit before income tax
Adjustments for:
Depreciation and amortisation
Write-down of property, plant and equipment
Net finance costs
Exploration expenditure written off
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
Net payment for acquisition of Red Chris
Payment for acquisition of Fruta del Norte finance facilities
Receipts from Fruta del Norte finance facilities
Proceeds from sale of property, plant and equipment
Payments for investments in associates
Cash inflow on sale of subsidiary, net of cash held by the subsidiary
Other investing activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings:
– Bilateral bank debt
– Corporate bonds
Repayment of borrowings:
– Bilateral bank debt
– Corporate bonds
– Repayment of other loans
Proceeds from equity issue, net of costs
Payment for treasury shares
Other financing activities
Repayment of lease principal
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
Effects of exchange rate changes on cash held
Cash and cash equivalents at the end of the year
The above Statement should be read in conjunction with the accompanying notes.
115
Note
2020
US$m
2019
US$m
5(f)
6
4(b)
11
10(a)
32
23(b)
31
33(c)
21
21
21
21
10(b)
25
985
644
20
171
64
11
(46)
1,849
17
(113)
(282)
1,471
(143)
(386)
(147)
(113)
(15)
(769)
(460)
1
2
(82)
20
–
(2,092)
600
1,134
(600)
(1,120)
(29)
771
(25)
(64)
(27)
(154)
(23)
463
(158)
1,600
9
1,451
830
746
–
94
70
1
(3)
1,738
24
(110)
(165)
1,487
(230)
(153)
(130)
(78)
(18)
–
–
–
20
(28)
–
(66)
(683)
–
–
–
–
–
–
(26)
–
–
(131)
–
(157)
647
953
–
1,600
NEWCREST 2020 ANNUAL REPORT
116
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2020
Attributable to Owners of the Parent
Issued
Capital
US$m
FX
Translation
Reserve
US$m
Hedge
Reserve
US$m
Equity
Settlements
Reserve
US$m
Other
Reserves
US$m
2020
Balance at 1 July 2019
11,641
Profit for the year
Other comprehensive
income/(loss) for the year
Total comprehensive
income for the year
Transactions with owners in
their capacity as owners
Shares issued – Equity
raising (net of costs)
Share-based payments
Shares purchased
Dividends
Shares issued – Dividend
reinvestment plan
Business divestment
(Note 33)
–
–
–
772
–
(25)
–
15
–
(489)
–
(75)
–
(86)
(117)
(86)
(117)
–
–
–
–
–
–
–
–
–
–
–
–
112
–
–
–
–
11
–
–
–
–
26
–
(2)
(2)
–
–
–
–
–
–
Accu-
mulated
Losses
US$m
(3,648)
647
Non-
controlling
Interests
US$m
64
(12)
Total
US$m
7,567
647
Total
US$m
7,631
635
–
(205)
–
(205)
647
442
(12)
430
–
–
–
(169)
–
–
772
11
(25)
(169)
15
–
–
–
–
(23)
772
11
(25)
(192)
–
15
(29)
–
(29)
8,613
Balance at 30 June 2020
12,403
(575)
(192)
123
24
(3,170)
8,613
Attributable to Owners of the Parent
Issued
Capital
US$m
FX
Translation
Reserve
US$m
Hedge
Reserve
US$m
Equity
Settlements
Reserve
US$m
Other
Reserves
US$m
2019
Balance at 1 July 2018
11,656
Profit for the year
Other comprehensive
income/(loss) for the year
Total comprehensive
income for the year
Transactions with owners in
their capacity as owners
Share-based payments
Shares purchased
Dividends
Shares issued – dividend
reinvestment plan
–
–
–
–
(26)
–
11
(327)
–
33
–
(162)
(108)
(162)
(108)
–
–
–
–
–
–
–
–
Balance at 30 June 2019
11,641
(489)
(75)
101
–
–
–
11
–
–
–
112
The above Statement should be read in conjunction with the accompanying notes.
Accu-
mulated
Losses
US$m
(4,067)
561
Total
US$m
7,395
561
–
(243)
561
318
–
–
(142)
11
(26)
(142)
–
11
Non-
controlling
Interests
US$m
67
(3)
–
(3)
–
–
–
–
Total
US$m
7,462
558
(243)
315
11
(26)
(142)
11
(1)
–
27
27
–
–
–
–
26
(3,648)
7,567
64
7,631
Notes to the Consolidated Financial Statements
For the Year Ended 30 June 2020
117
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 PNG National Stock
Exchange (‘PNGX’). 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 2020 was authorised for issue in accordance with a resolution
of the Directors on 14 August 2020.
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 in Note 2(b).
Discussion of the Group’s significant accounting policies are located
within the applicable notes to the financial statements.
(b) Adoption of New Accounting Standards Effective
this Financial Year
(i) AASB 16 Leases
AASB 16 Leases (AASB 16) superseded AASB 117 Leases
(AASB 117) and related Interpretations and applied to all the Group’s
contracts on 1 July 2019, unless those contracts are within scope
of other standards.
AASB 16 introduced 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, infrastructure, mining equipment and
contractor-provided equipment.
The Group adopted AASB 16 on 1 July 2019 and elected to apply the
modified retrospective method of adoption. This transition method
required the cumulative effect of initially applying AASB 16 being
recognised as an adjustment to the opening balance of retained
earnings from the date of initial application. The cumulative effect on
retained earnings was immaterial. In accordance with the modified
retrospective method, Newcrest has not restated comparative
information for the year ended 30 June 2019.
The Group used the practical expedient available under the standard
to ‘grandfather’ its assessment of contracts not previously identified
as leases under AASB 117, as well as practical expedients for
short-term leases, low value leases and leases expiring within
12 months of transition date. It also utilised the practical expedients
to apply a single discount rate to a portfolio of leases where relevant
and the use of hindsight in assessing a lease’s extension options.
The Group implemented the new lease standard on the transition
date and recognised its transition population in the accounts of
the Group. During the first half of the 2020 financial year, new
business procedures and framework were implemented to facilitate
identification of leases under the new standard, with additional leases
recognised on balance sheet as required.
In comparison to the outgoing lease standard, the new standard has
resulted in a change to the Income Statement with lease payments no
longer included as part of operating costs and lease interest and right of
use depreciation now included as part of finance costs and depreciation
expense respectively. The Statement of Financial Position was also
impacted, with an increase to both non-current assets (right-of-use
assets as a component of property, plant and equipment) and liabilities.
The Statement of Cash Flows was also impacted with the principal
component of lease payments now included as part of financing
activities rather than as part of operating activities.
Refer to Note 22 Leases for the Group’s new accounting policy under
AASB 16.
NEWCREST 2020 ANNUAL REPORT 118
2. Basis of Preparation continued
(b) Adoption of New Accounting Standards Effective this Financial Year continued
(i) AASB 16 Leases continued
The Group’s operating lease commitments at 30 June 2019 as reported in the Group’s most recent annual report (under AASB 117), formed the
basis for the lease liabilities recognised on date of initial application.
Reconciliation of AASB 117 Operating Lease Commitments
Operating lease commitments (AASB 117) reported at 30 June 2019
Leases expiring within 12 months and low value leases (practical expedients)
Effect of discounting (incremental borrowing rate*)
Leases liabilities as at 1 July 2019
* The weighted average incremental borrowing rate at date of initial application was 4.5%.
The effect of adoption of AASB 16 as at 1 July 2019 was as follows:
Assets
Property, plant and equipment (Right-of-use assets)
Liabilities
Current lease liabilities
Non-current lease liabilities
Impact on Retained Earnings using the modified retrospective method
1 Jul 2019
US$m
74
(15)
(6)
53
1 Jul 2019
US$m
53
23
30
–
(ii) AASB Interpretation 23 – Uncertainty over tax treatments
This interpretation addressed 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 AASB 112, nor does it specifically include requirements
relating to interest and penalties associated with uncertain tax treatments.
The Group has reviewed the interpretation and has determined that adoption did not have an impact. The interpretation has an effective date for
the Group of 1 July 2019.
(c) 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 27.
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.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 119
(d) 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. The parent entity and the Group’s Australian entities have a
functional currency of Australian dollars. Lihir and Gosowong have a functional currency of US dollars and Red Chris has a functional currency of
Canadian 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.
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 18 – Recovery of deferred tax assets
– Note 19 – Mine rehabilitation provision
– Note 22 – Leases
– Note 24 – Valuation of Fruta del Norte (‘FdN’) finance facilities
– Note 35 – Share-based payments
NEWCREST 2020 ANNUAL REPORT 120
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
– Red Chris JV (70% interest), Canada(1)
– Gosowong, Indonesia(2)
– Exploration and Projects(3)
(1) Newcrest acquired a 70% interest in the Red Chris JV on 15 August 2019. Refer to Note 32.
(2) Newcrest divested it’s 75% share of Gosowong through its holding in PT Nusa Halmahera Minerals on 4 March 2020. Refer to Note 33.
(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 (72.49% interest) in Fiji, Havieron (40% interest) and O’Callaghans in Australia and Newcrest’s global greenfields exploration portfolio.
(a) Segment Results, Segment Assets and Segment Liabilities
The measurement of segment results is in line with the basis of information presented to the Group’s Executive Committee for internal management
reporting purposes. The performance of each segment is measured based on their Revenues, Costs, EBITDA and EBIT (‘Segment Result’).
Segment Revenues represent gold, copper and silver revenue, less related treatment and refining deductions. All segment revenue is from third parties.
Following the adoption of AASB 16 Leases on 1 July 2019 the Group’s EBITDA for the year ended 30 June 2020 excludes lease expenditure
capitalised to the balance sheet. Consistent with the modified retrospective transition method, comparative figures have not been restated.
Refer to Note 2(b)(i) for further information on adoption of AASB 16.
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.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 121
Red Chris(2)
US$m
Gosowong(3)
US$m
Total
Operations
US$m
Exploration
& Projects(4)
US$m
Corporate
& Other(5)
US$m
Total Group
US$m
60
139
1
(15)
185
63
(47)
16
64
961
125
836
158
–
2
–
160
44
3,278
778
16
(150)
3,922
1,976
(33)
(622)
1,354
665
10,171
2,479
11
13
–
–
–
–
–
–
–
–
(64)
–
(64)
13
594
21
–
–
–
–
–
(77)
(22)
(99)
17
2,477
2,129
3,278
778
16
(150)
3,922
1,835
(644)
1,191
695
13,242
4,629
2020
Gold
Copper
Silver
Treatment and
refining deductions
Total revenue
EBITDA
Depreciation and
amortisation
EBIT (Segment
result)(1)
Capital expenditure
Segment assets
Segment liabilities
Net assets/
(liabilities)
Cadia
US$m
1,336
547
10
(91)
1,802
1,301
Telfer
US$m
528
92
3
(44)
579
103
Lihir
US$m
1,196
–
–
–
1,196
465
(163)
(84)
(295)
1,138
297
3,392
754
19
56
264
288
170
235
5,554
1,312
2,638
(24)
4,242
7,692
573
348
8,613
Notes:
(1) Refer to Note 4(b) for the reconciliation of segment result to profit before tax.
(2) In August 2019, the Group acquired a 70% interest in Red Chris. Refer to Note 32.
(3) In March 2020, Gosowong was divested. Refer to Note 33.
(4) Includes net assets attributable to Wafi-Golpu JV of US$477 million, Havieron of US$38 million and Namosi JV of US$25 million.
(5) Includes investment in associates, Fruta del Norte finance facilities and eliminations.
2019
Gold
Copper
Silver
Treatment and refining deductions
Total revenue
EBITDA
Depreciation and amortisation
EBIT (Segment result)(1)
Capital expenditure
Segment assets
Segment liabilities
Net assets/(liabilities)
Cadia
US$m
1,156
558
8
(92)
1,630
1,134
(188)
946
176
3,206
703
2,503
Telfer
US$m
571
93
3
(40)
627
108
(136)
(28)
108
245
254
(9)
Lihir
US$m
1,228
–
1
–
1,229
516
(336)
180
181
5,464
1,156
4,308
Gosowong(2)
US$m
Total
Operations
US$m
Exploration
& Projects(3)
US$m
Corporate
& Other(4)
US$m
253
–
3
–
256
63
(67)
(4)
22
356
110
246
3,208
651
15
(132)
3,742
1,821
(727)
1,094
487
9,271
2,223
7,048
–
–
–
–
–
(70)
–
(70)
28
538
14
524
–
–
–
–
–
(81)
(19)
(100)
16
2,028
1,969
59
Total
Group
US$m
3,208
651
15
(132)
3,742
1,670
(746)
924
531
11,837
4,206
7,631
Notes:
(1) Refer to Note 4(b) for the reconciliation of segment result to profit before tax.
(2) Net assets for Gosowong includes cash of US$110 million.
(3) Includes net assets attributable to Wafi-Golpu JV of US$467 million and Namosi JV of US$25 million.
(4) Includes investment in associates and eliminations.
NEWCREST 2020 ANNUAL REPORT 122
4. Segment Information continued
(b) Reconciliation of EBIT (Segment Result) to Profit Before Tax
Note
2020
US$m
2019
US$m
Segment Result
Finance income
Finance costs
Write-down of property, plant and equipment
Major transaction and integration costs
Net finance costs and significant items
Profit before tax
(c) Geographical Information
Total Revenue(1)
Bullion(2)
Australia
China
Concentrate(3)
Japan
Korea
Singapore
Switzerland
Philippines
United Kingdom
Other
Total revenue
Non-Current Assets(4)
Australia
Papua New Guinea
Canada
USA
Indonesia
Other
Total non-current assets
4(a)
5(e)
6
6
1,191
19
(190)
(20)
(15)
(206)
985
1,420
253
1,356
309
163
148
115
115
43
3,922
3,628
5,578
1,236
403
–
25
10,870
924
26
(120)
–
–
(94)
830
1,421
388
976
274
162
137
298
86
–
3,742
3,492
5,537
255
–
146
25
9,455
(1) Revenue is attributable to geographic location, based on the location of customers. This location may differ to the port of destination.
(2) Bullion sales to one customer amounted to US$439 million (2019: US$457 million).
(3) Concentrate sales to one customer amounted to US$783 million (2019: US$561 million) arising from concentrate sales by Cadia and Telfer.
(4) Non-Current Assets includes deferred tax assets of US$65 million (2019: US$60 million).
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. Income and Expenses
(a) Revenue
Gold – Bullion
Gold – Concentrate
Gold – Concentrate treatment and refining deductions
Total gold revenue
Copper – Concentrate
Copper – Concentrate treatment and refining deductions
Total copper revenue
Silver – Bullion
Silver – Concentrate
Silver – Concentrate treatment and refining deductions
Total silver revenue
Total revenue(1)
(b) Cost of Sales
Site production costs
Royalties
Realisation
Inventory movements
Depreciation and amortisation
Total cost of sales
(c) Corporate Administration Expenses
Corporate costs
Corporate depreciation
Share-based payments
Total corporate administration expenses
(d) Other Income/(Expenses)
Net fair value gain/(loss) on gold and copper derivatives and fair value movements on concentrate receivables
Net foreign exchange gain/(loss)
Net fair value movement on Fruta del Norte finance facilities
Other
Total other income/(expenses)
(e) Finance Costs
Interest on loans
Interest on leases
Facility fees and other costs
Discount unwind on provisions (Note 19b)
Debt extinguishment and related costs (Note 6)
Total finance costs
123
2020
US$m
2019
US$m
1,670
1,608
(40)
3,238
778
(108)
670
3
13
(2)
14
1,805
1,403
(35)
3,173
651
(96)
555
4
11
(1)
14
3,922
3,742
1,779
119
48
–
1,946
622
2,568
83
22
12
117
64
(6)
1
(4)
55
97
2
15
7
121
69
190
1,739
113
37
32
1,921
727
2,648
88
19
13
120
14
29
–
(5)
38
94
–
17
9
120
–
120
(1) Total revenue for the year ended 30 June 2020 comprises of revenue from contracts with customers of US$4,004 million (2019: US$3,745 million) and gold
hedge losses of US$82 million (2019: US$3 million).
NEWCREST 2020 ANNUAL REPORT 124
5. Income and Expenses continued
(f) Depreciation and Amortisation
Property, plant and equipment
Intangible assets
Adjustments to inventory on hand or assets under construction
Total depreciation and amortisation expense
Included in:
Cost of sales depreciation
Corporate depreciation
Total depreciation and amortisation expense
(g) Employee Benefits Expense
Salaries, wages and other employment benefits
Defined contribution plan expense
Share-based payments
Redundancy expense
Total employee benefits expense
2020
US$m
2019
US$m
627
24
651
(7)
644
622
22
644
400
30
12
2
444
717
26
743
3
746
727
19
746
364
27
13
–
404
(h) Significant Accounting Policies
Revenue recognition
Revenue from the sale of goods is recognised when the Group satisfies its performance obligations under its contract with the customer, by
transferring such goods to the customers control. Control is generally determined to be when risk and title to the goods passes to the customer.
Bullion revenue is recognised at a point in time upon transfer of control to the customer and is measured at the amount to which the Group
expects to be entitled which is based on the deal agreement.
Concentrate revenue is generally recognised upon receipt of the bill of lading when the goods are delivered for shipment under CIF Incoterms.
The freight service on export concentrate contracts with CIF Incoterms represents a separate performance obligation to the transfer of the
concentrate product itself and is separately disclosed where material.
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 and is net of deductions related to treatment and refining charges. Subsequent changes in fair value are
recognised in the Income Statement each period until final settlement and presented as part of ‘Other Income/Expenses’.
Interest income
Interest income on financial assets that are classified as fair value through profit and loss (‘FVTPL’) is accounted for on a contractual rate basis.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 125
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.
Year ended 30 June 2020
Write-down of property, plant and equipment(1)
Write-down of tax assets(1)
Major transaction and integration costs(2)
Debt extinguishment and related costs(3)
Total significant items
Attributable to:
Non-controlling interest(4)
Owners of the parent
Pre-Tax
US$m
Tax
US$m
After tax
US$m
20
–
15
69
104
–
37
(4)
(21)
12
20
37
11
48
116
13
103
116
(1) Represents a write-down of property, plant and equipment, and tax assets (collectively non-current assets) at Gosowong, following the classification of
Gosowong as held for sale as at 31 December 2019. Refer to Note 33 for further details.
(2) Represents transaction costs for the acquisition the Fruta del Norte finance facilities and business acquisition and integration costs in relation to Red Chris.
(3) Represents finance costs arising from the early repayment of US$750 million of Newcrest’s bonds which were due in November 2021 and the early repayment
of US$370 million of bonds which were due in October 2022.
(4) Relates to the write-down of non-current assets at Gosowong.
Year Ended 30 June 2019
There were no significant items for the year ended 30 June 2019.
NEWCREST 2020 ANNUAL REPORT 126
7. Income Tax Expense
(a) Reconciliation of Prima Facie Income Tax Expense to Income Tax Expense
per the Income Statement
Accounting profit before tax
Income tax expense calculated at 30% (2019: 30%)
Non-deductible exploration and business development expenditure
Net unrecognised deferred tax assets
Tax effect of losses from equity accounted investments
Other
Adjustments on Significant items:
Write-down of tax assets
Write-down of property, plant and equipment
Income tax expense per the Income Statement
(b) Income Tax Expense Comprises:
Current income tax
Current income tax expense
Adjustments to current income tax of prior periods
Deferred tax(1)
Relating to origination and reversal of temporary differences
Adjustments to deferred tax of prior periods
Income tax expense per the Income Statement
(1) Refer to Note 18(a) for movements in deferred taxes.
8. Earnings per Share (EPS)
EPS (cents per share)
Basic EPS
Diluted EPS
Earnings used in calculating EPS
Earnings used in the calculation of basic and diluted EPS:
Profit after income tax attributable to owners of the parent
Weighted average number of shares
Share data used in the calculation of basic and diluted EPS:
Weighted average number of ordinary shares used in calculating basic EPS
Effect of dilutive securities: share rights
Adjusted weighted average number of ordinary shares used in calculating diluted EPS
2020
US$m
2019
US$m
985
296
3
5
10
(7)
37
6
43
350
211
(19)
192
144
14
158
350
830
249
8
8
5
2
–
–
–
272
259
(6)
253
11
8
19
272
2020
US¢
83.4
83.1
2020
US$m
2019
US¢
73.0
72.8
2019
US$m
647
561
2020
No. of shares
2019
No. of shares
776,049,586 768,198,613
2,611,062
2,406,282
778,455,868 770,809,675
Rights granted to employees as described in Note 35 have been included in the determination of diluted earnings per share to the extent they are dilutive.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 127
9. Dividends
(a) Dividends declared and paid
The following ordinary dividends were paid during the year:
Final dividend:
Paid 26 September 2019 (fully franked)
Paid 5 October 2018 (fully franked)
Interim dividend:
Paid 27 March 2020 (fully franked)
Paid 22 March 2019 (fully franked)
2020
US¢ per share
2020
US$m
2019
US¢ per share
2019
US$m
14.5
–
7.5
–
22.0
111.0
–
58.0
–
169.0
–
11.0
–
7.5
18.5
–
84.5
–
57.5
142.0
Participation in the dividend reinvestment plan reduced the cash amount paid during 2020 to US$154 million (2019: US$131 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 2020 of US 17.5 cents per share, which
will be fully franked. The dividend will be paid on 25 September 2020. The total amount of the dividend is US$143 million.
(c) Dividend franking account balance
Franking credits at 30% as at 30 June 2020 available for subsequent financial years is US$295 million (2019: US$107 million).
10. Notes to the Consolidated Statement of Cash Flows
(a) Operating Cash Flows Arising from Changes in:
Trade and other receivables
Inventories
Trade and other payables
Provisions
Other assets and liabilities
Change in working capital
2020
US$m
2019
US$m
(96)
(11)
71
(8)
(2)
(46)
(51)
(5)
43
(7)
17
(3)
(b) Other Information
The repayment of other loans of US$29 million, comprises of repayment of US$42 million less cash contribution from the Red Chris joint venture
participant of US$13 million.
NEWCREST 2020 ANNUAL REPORT 128
RESOURCE ASSETS AND LIABILITIES
This section provides information that is relevant in understanding the composition and management of the Group’s resource assets and liabilities.
11. Property, Plant and Equipment
Exploration
& Evaluation
Expenditure
US$m
Deferred
Feasibility
Expenditure
US$m
Assets
Under
Construction
US$m
Production
Stripping
US$m
Right-Of-Use
Assets
US$m
Mine
Develop-
ment (1)
US$m
Plant and
Equipment
US$m
Total
US$m
At 30 June 2020
Cost
Accumulated depreciation and
impairment
Year ended 30 June 2020
Carrying amount at 1 July 2019
Adoption of AASB 16
Additions during the year
Expenditure written-off
Depreciation
Disposal of assets
Business acquisition (note 32)
Business divestment (note 33)
Write-down of assets (note 6)
Foreign currency translation
Reclassifications/transfers
Carrying amount at 30 June 2020
499
(80)
419
351
–
113
(64)
–
–
35
–
–
–
(16)
419
280
–
280
272
–
11
(2)
–
–
–
–
–
(1)
–
280
377
–
377
292
–
255
–
–
–
9
–
–
(4)
(175)
377
450
(178)
272
201
–
147
–
(74)
–
–
–
–
(2)
–
272
(1) Includes Mineral Rights at Lihir and Red Chris with a carrying value of US$1,557m.
82
7,561
7,413
16,662
(3,656)
3,905
(3,913)
3,500
(7,853)
8,809
(26)
56
–
53
24
–
(26)
–
7
–
–
(2)
–
56
3,394
–
217
–
(187)
–
460
(20)
(13)
(46)
100
3,905
3,306
–
147
–
(340)
(1)
344
(6)
(7)
(32)
89
3,500
7,816
53
914
(66)
(627)
(1)
855
(26)
(20)
(87)
(2)
8,809
Total
US$m
Exploration
& Evaluation
Expenditure
US$m
Deferred
Feasibility
Expenditure
US$m
Assets
Under
Construction
US$m
Production
Stripping
US$m
Mine
Develop-
ment (1)
US$m
Plant and
Equipment
US$m
At 30 June 2019
Cost
Accumulated depreciation and impairment
Year ended 30 June 2019
Carrying amount at 1 July 2018
Expenditure during the year
Expenditure written-off
Depreciation
Disposal of assets
Foreign currency translation
Reclassifications/transfers
Carrying amount at 30 June 2019
431
(80)
351
368
78
(70)
–
(12)
(1)
(12)
351
272
–
272
244
30
–
–
–
–
(2)
272
292
–
292
83
236
–
–
–
(7)
(20)
292
331
(130)
201
172
130
–
(99)
–
(2)
–
201
7,462
(4,068)
3,394
3,673
54
–
(258)
–
(94)
19
3,394
7,252
(3,946)
3,306
16,040
(8,224)
7,816
3,616
103
–
(360)
–
(68)
15
3,306
8,156
631
(70)
(717)
(12)
(172)
–
7,816
(1) Includes Mineral Rights at Lihir with a carrying value of US$1,200m.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 129
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
(b) Where activities in the area of interest have not yet reached a
stage which permits a reasonable assessment of the existence
or otherwise of economically recoverable reserves, and active
and significant operations in, or in relation to, the area of
interest are continuing.
Such expenditure consists of an accumulation of acquisition costs
and direct 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 or write-down.
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.
NEWCREST 2020 ANNUAL REPORT
130
11. Property, Plant and Equipment continued
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 Estimates and Assumptions – Units of
Production Method of Depreciation/ Amortisation
The Group uses the units of production basis when depreciating/
amortising mine-specific assets which results in a depreciation/
amortisation charge proportional to the depletion of the anticipated
remaining life of mine production. Each item’s economic life, which is
assessed annually, has due regard to both its physical life limitations
and to present assessments of economically recoverable reserves
of the mine property at which it is located. These calculations
require the use of estimates and assumptions. 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.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 131
12. Impairment of Non-Financial Assets
(b) Basis of Impairment and Impairment
(a) Impairment Testing
Impairment tests are performed when there is an indicator of
impairment or impairment reversal and performed at least annually
for cash generating units (‘CGUs’) with goodwill recognised as an asset.
Newcrest conducts a review of the key drivers of the recoverable
amount of CGUs annually, which is used as a source of information to
determine whether there is an indicator 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.
As a result of the Red Chris acquisition (refer Note 32) in the current
year, goodwill of US$17 million was recognised. The goodwill reflects
the requirement to record deferred tax balances for the difference
between the assigned values and the tax bases of assets acquired and
liabilities assumed in the business combination. A detailed estimate was
determined of the recoverable amount of Red Chris at 30 June 2020
and the Group concluded no impairment was required.
During the period the Group revised upwards its future gold price
estimates, resulting in an impairment reversal indicator for the Lihir
and Telfer CGUs. A detailed estimate of the recoverable amounts of
both CGUs was undertaken, however other compensating factors
(including a higher discount rate for Lihir and lower copper price
estimates for Telfer) resulted in the Group concluding no impairment
reversal was required as at 30 June 2020.
In relation to the impacts of the COVID-19 pandemic, Newcrest has
been able to continue operating at all CGUs during the second half of
the current year. Whilst there have been disruptions to the movements
of workers to some assets and additional costs have been incurred to
introduce appropriate protocols at all sites (with additional costs also
expected to be incurred in FY2021), the Group does not believe that
the COVID-19 impacts represent an indicator of impairment for any CGU.
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
life of mine (‘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 24(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.
NEWCREST 2020 ANNUAL REPORT 132
12. Impairment of Non-Financial Assets continued
(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 2020, and for comparison also provides
the equivalent assumptions used in 2019:
Assumptions
2021
2022
2023
2024
Long term
(2025+)
2020
2021
2022
Long term
(2023+)
2020
2019
Gold
(US$ per ounce)
Copper
(US$ per pound)
AUD:USD
exchange rate
CAD:USD
exchange rate
USD:PGK
exchange rate
$1,550
$1,500
$1,450
$1,400
$1,350
$1,250
$1,250
$1,250
$1,250
$2.35
$2.60
$2.70
$2.80
$3.00
$2.80
$2.90
$3.00
$3.00
$0.68
$0.70
$0.72
$0.72
$0.75
$0.72
$0.72
$0.72
$0.75
$0.74
$0.76
$0.77
$0.79
$0.79
n/a
n/a
n/a
n/a
K3.44
K3.44
K3.44
K3.44
K3.44
K3.20
K3.20
K3.20
K3.20
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 increased short-term and long-term US dollar gold price estimates and reduced short to medium-term US dollar copper prices
applied in 2020. These changes were to align with observable market data, taking into account spot prices during the 2020 financial year and
Newcrest’s analysis of observable market forecasts for future periods.
AUD:USD exchange rate
Newcrest has maintained its long-term AUD:USD exchange rate estimates. The AUD:USD exchange rate estimates for the 2021 to 2024
financial years have been reduced from 2019, reflecting spot prices during the 2020 financial year and Newcrest’s analysis of observable market
forecasts for future periods.
USD:PGK exchange rate
Newcrest has marginally increased its USD:PGK exchange rate estimates for all future periods, reflecting spot prices during the 2020 financial
year and Newcrest’s analysis of observable market forecasts for future periods.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 133
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 (‘WACC’) for each functional currency used in the Group, with an additional premium applied having regard to the
geographic location of, and specific risks associated with the CGU.
CGU
Cadia, Telfer
Lihir
Red Chris
Functional
Currency
AUD
USD
CAD
2020
4.50%
6.00%
4.50%
2019
4.75%
5.75%
n/a
The Group uses a capital asset pricing model to determine its estimated real after tax WACC. Due to changes in the current period to inputs and
assumptions used in the capital asset pricing models, the WACC for all functional currencies reduced. For Lihir, the overall discount was increased
by 0.25% as at 30 June 2020, due to an increase in the risk premium applied to its geographic location.
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 and improve capital and labour productivity.
(d) 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 2020, and in recognising no requirement for asset impairment or impairment reversal, the Group has determined that the Lihir carrying
amount as at 30 June 2020 is within a range that approximates its Fair Value.
Impairments have previously been recognised for the Telfer CGU in 2013, 2014 and 2018 and an impairment reversal was recognised for Telfer
in 2015. Following the review of Telfer’s recoverable amount as at 30 June 2020, and in recognising no requirement for asset impairment or
impairment reversal, the Group has determined that the Telfer carrying amount as at 30 June 2020 is within a range that approximates its Fair
Value. 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, capital cost and reserve and resource model conversion assumptions and changes in these
assumptions can have material impacts relative to Telfer’s 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).
Red Chris was acquired during the period at Fair Value. Any variation in the key assumptions used to determine the Fair Value of the Red Chris
CGU that had a negative impact on Fair Value could indicate a requirement for impairment of non-current assets.
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 2020:
$ million in functional currency
US$100 per ounce change in gold price
US$0.10 per pound change in copper price
0.25% increase/decrease in discount rate
$0.10 increase/decrease in USD:PGK rate
$0.05 increase/decrease in AUD:USD rate
$0.05 increase/decrease in CAD:USD rate
5% increase/decrease in operating costs from that assumed
Lihir
US$
970
n/a
130
110
245
n/a
330
Telfer
A$
100
5
minor
n/a
95
n/a
60
Red Chris
C$
50
70
5
n/a
n/a
140
80
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 2020 ANNUAL REPORT 134
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)
2020
US$m
2019
US$m
133
40
60
316
549
1,024
1,024
171
38
52
315
576
997
997
(1) Total inventories include inventories held at net realisable value of US$1 million (2019: US$36 million).
Ore stockpiles, gold in circuit, bullion and concentrate are physically measured or estimated and valued at the lower of cost and net realisable
value. Cost represents the weighted average cost and includes direct costs and an appropriate portion of fixed and variable production overhead
expenditure, including depreciation and amortisation, incurred in converting materials into finished goods. Net realisable value is the estimated
selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Ore stockpiles which are not scheduled to be processed in the twelve months after the reporting date are classified as non-current inventory. The
Group believes the processing of these stockpiles will have a future economic benefit to the Group and accordingly values these stockpiles at
the lower of cost and net realisable value.
Materials and supplies are valued at the lower of cost and net realisable value. Any allowance for obsolescence is determined by reference to
stock items identified.
Accounting Judgement and Estimate – Net Realisable Value of Ore Stockpiles
The computation of net realisable value for ore stockpiles involves significant judgements and estimates in relation to timing and cost of
processing, commodity prices, foreign exchange rates, recoveries and the timing of sale of the bullion and concentrate produced. A change in any
of these assumptions will alter the estimated net realisable value and may therefore impact the carrying value of ore stockpiles.
14. Trade and Other Receivables
Current
Metal in concentrate receivables
GST receivable
Other receivables
Total current receivables
Non-Current
Other receivables(1)
Total non-current receivables
2020
US$m
2019
US$m
194
30
30
254
51
51
92
29
14
135
–
–
(1) Represents deferred cash consideration on Gosowong divestment and right to reimbursement (receivable) from the Red Chris joint venture participant for its
share of Red Chris’ liabilities.
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/Expenses’.
GST and other receivables are initially measured at fair value then subsequently at amortised cost, less an allowance for doubtful debts. GST and
other current receivables are expected to settle within one to three months.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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) In 2019, this balance included US$50 million paid in respect to the PT NHM income tax rate dispute.
16. Goodwill
Opening balance
Business acquisition(1)
Closing balance
(1) Goodwill recognised as part of the acquisition of Red Chris. Refer to Note 32.
17. Other Intangible Assets
Information Systems Development
Cost
Accumulated amortisation and impairment
135
2020
US$m
2019
US$m
52
52
3
10
13
2020
US$m
–
17
17
2020
US$m
194
(170)
24
35
35
48
69
117
2019
US$m
–
–
–
2019
US$m
217
(184)
33
Costs incurred in developing information technology systems and acquiring software are capitalised as intangible assets. Amortisation is
calculated on a straight line basis over the useful life, ranging from three to seven years.
NEWCREST 2020 ANNUAL REPORT 136
18. Deferred Tax
(a) Movement in Deferred Taxes
2020
Deferred tax relates to the following:
– Revenue losses recognised
– Property, plant and equipment
– Provisions
– Other
Net deferred taxes
Reflected in the statement of
financial position as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred taxes
2019
Deferred tax relates to the following:
– Revenue losses recognised
– Property, plant and equipment
– Provisions
– Other
Net deferred taxes
Reflected in the statement
of financial position as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred taxes
Opening
Balance
at 1 July
US$m
Acquisitions
& divestments
US$m
(Charged)/
credited
to income
US$m
(Charged)/
credited
to equity
US$m
Translation
US$m
Closing
Balance
at 30 June
US$m
60
(1,141)
44
153
(884)
69
(1,138)
48
83
(938)
–
(14)
3
(21)
(32)
–
–
–
–
–
(3)
(83)
(5)
(70)
(161)
(6)
(21)
(3)
5
(25)
–
–
–
30
30
–
–
–
72
72
(1)
7
(1)
(7)
(2)
(3)
18
(1)
(7)
7
56
(1,231)
41
85
(1,049)
65
(1,114)
(1,049)
60
(1,141)
44
153
(884)
60
(944)
(884)
(b) Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of:
– capital losses with a tax effect of US$129 million (2019: US$161 million)
– revenue losses and temporary differences with a tax effect of US$197 million (2019: US$189 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.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 137
(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 is accounted for using the balance sheet liability method.
Temporary differences are differences between the tax base of an
asset or liability and its carrying amount in the statement of financial
position. The tax base of an asset or liability is the amount attributed
to that asset or liability for tax purposes.
Deferred tax liabilities are recognised for taxable temporary differences.
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.
Deferred tax assets and liabilities are not recognised if the temporary
differences giving rise to them:
– Arise from the initial recognition of an asset or liability in a
transaction that is not a business combination and that, at the time
of the transaction, affects neither the accounting profit nor taxable
profit or loss.
– Are associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal of the
temporary difference can be controlled and it is probable that
the temporary difference will not reverse in the foreseeable future.
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 un-utilised tax losses, require
management to assess the likelihood that the Group will generate
sufficient taxable earnings in future periods in order to recognise
and utilise those deferred tax assets. Judgement is also required in
respect of the expected manner of recovery of the value of an asset
or liability (which will then impact the quantum of the deferred tax
assets or deferred tax liabilities recognised) and the application of
existing tax laws in each jurisdiction.
Estimates of future taxable income are based on forecast cash flows
from operations and existing tax laws in each jurisdiction. These
assessments require the use of estimates and assumptions such
as exchange rates, commodity prices and operating performance
over the life of the assets. To the extent that cash flows and taxable
income differ significantly from estimates, the ability of the Group
to realise the net deferred tax assets reported at the reporting
date could be impacted.
Additionally, future changes in tax laws in the jurisdictions in which
the Group operates could limit the ability of the Group to obtain tax
deductions and recover/utilise deferred tax assets in future periods.
NEWCREST 2020 ANNUAL REPORT 138
19. Provisions
Current
Employee benefits
Mine rehabilitation
Other
Total current provisions
Non-Current
Employee benefits
Mine rehabilitation
Total non-current provisions
Note
2020
US$m
2019
US$m
(a)
(b)
(c)
(a)
(b)
108
6
15
129
12
482
494
105
9
19
133
39
352
391
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.
(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 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.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 139
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
Opening balance
Business acquisition (Note 32)
Business divestment (Note 33)
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
Closing balance
Split between:
Current
Non-current
2020
US$m
2019
US$m
361
73
(32)
10
83
(6)
7
(8)
488
6
482
488
329
–
–
14
25
(5)
9
(11)
361
9
352
361
(1) The change for 2020 primarily relates to an increase in estimated closure costs at Lihir, following an update to Lihir’s mine closure plan.
(c) Other Provisions
Other provisions comprise of community obligations and other miscellaneous items.
NEWCREST 2020 ANNUAL REPORT 140
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.
20. 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 is in the form of cash
Detail of the calculation of the capital management performance ratios is provided below:
Leverage Ratio
Net debt (Note 21)
EBITDA (Note 4)
Leverage ratio
2020
2019
BBB/Baa2
0.3
6.8%
$3.45bn
BBB/Baa2
0.2
4.9%
$3.60bn
($1,451m cash)
($1,600m cash)
2020
US$m
624
1,835
0.3 times
2019
US$m
395
1,670
0.2 times
Leverage Ratio is calculated as net debt at the end of the reporting period divided by the rolling 12 month EBITDA. Refer to Note 4, Segment
Information, for the definition of EBITDA.
Gearing Ratio
Net debt (Note 21)
Equity
Total capital (Net debt and equity)
Gearing ratio
Gearing ratio is calculated as net debt at the end of the reporting period divided by net debt plus equity.
2020
US$m
624
8,613
9,237
6.8%
2019
US$m
395
7,631
8,026
4.9%
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 141
21. Net Debt
Newcrest borrows funds from financial institutions and debt investors in the form of committed revolving facilities and corporate bonds.
As at 30 June 2020, all of Newcrest’s borrowings were unsecured.
Borrowings are initially recognised at fair value and subsequently at amortised cost. Borrowings are net of transaction costs incurred. Borrowings
are classified as non-current liabilities where Newcrest has an unconditional right to defer settlement for at least 12 months from the year end.
Cash and cash equivalents comprise cash at bank and short-term deposits.
Net Debt
Other loans
Total current borrowings
Corporate bonds
Less: capitalised transaction costs on facilities
Total non-current borrowings
Total Borrowings
Lease liabilities (current)
Lease liabilities (non-current)
Total lease liabilities
Total Debt
Cash and cash equivalents
Net debt
Note
(a)
(b)
2020
US$m
4
4
2,030
(17)
2,013
2,017
26
32
58
2,075
(1,451)
624
2019
US$m
–
–
2,000
(5)
1,995
1,995
–
–
–
1,995
(1,600)
395
(a) Other Loans
Other loans represent interest-bearing liabilities acquired as part of the Red Chris acquisition. Refer to Note 32. This facility matures in
November 2020 and has an interest rate of 3.6%.
(b) Corporate Bonds (‘Notes’)
In each of November 2011 and October 2012, Newcrest issued US$1,000 million in US dollar Notes. In May 2020, Newcrest issued a further
US$1,150 million in US dollar Notes. All of the Notes were issued in accordance with Rule 144A and Regulation S of the Securities Act of the
United States.
In May 2020 and June 2020, Newcrest repurchased all of the US$750 million of the November 2011 Notes due in November 2021 and
US$370 million of the US$750 million Notes due in October 2022.
The Notes consist of:
Maturity
November 2021
October 2022
May 2030
November 2041
May 2050
Coupon Rate
4.45%
4.20%
3.25%
5.75%
4.20%
2020
US$m
–
380
650
500
500
2019
US$m
750
750
–
500
–
2,030
2,000
(c) Bilateral Bank Debt
As at 30 June 2020, the Group had bilateral bank debt facilities of US$2,000 million (2019: US$2,000 million) with 13 banks (2019: 13 banks).
These are committed unsecured revolving facilities, individually negotiated and documented with each bank but with similar terms and conditions.
The facilities are on normal terms and conditions and include certain financial covenants. Interest is based on LIBOR plus a margin, which varies
amongst the lenders. As at 30 June 2020 and 30 June 2019 these facilities were undrawn.
NEWCREST 2020 ANNUAL REPORT 142
21. Net Debt continued
(c) Bilateral Bank Debt continued
The maturity date profile of these facilities is shown in the table below:
Facility Maturity (financial year ending)
June 2022
June 2024
(d) Financing Facilities
The Group has access to the following unsecured financing facilities at the end of the financial year.
2020
Corporate bonds
Bilateral bank debt facilities
Other loans(2)
2019
Corporate bonds
Bilateral bank debt facilities
2020
US$m
1,076
924
2,000
Facility
Utilised(1)
US$m
Facility
Unutilised
US$m
2,030
–
4
2,034
2,000
–
2,000
–
2,000
–
2,000
–
2,000
2,000
(1) As at 30 June 2020, the corporate bonds were at fixed interest rates and the other loans at variable interest rates. (2019: 100% fixed interest rates).
(2) Other loans represent interest-bearing liabilities acquired as part of the Red Chris acquisition.
(e) Movement in Debt
Movement in total debt during the year was as follows:
Debt
Opening balance
Adjustment: Lease liabilities recognised as a result of adopting AASB 16 Leases on 1 July 2019
Adjusted opening balance
Movements:
Drawdown of bilateral bank debt facilities
Repayment of bilateral bank debt facilities
Issuance of corporate bonds
Repurchase of corporate bonds
Business acquisition – Lease liabilities (Note 32)
Business acquisition – Other loans (Note 32)
Payment of lease principal
Repayment of other loans
Non-cash movements(1)
Net movement
Closing balance
2020
US$m
1,995
53
2,048
600
(600)
1,134
(1,120)
10
46
(27)
(42)
26
27
2,075
2019
US$m
1,076
924
2,000
Facility
Limit
US$m
2,030
2,000
4
4,034
2,000
2,000
4,000
2019
US$m
1,993
–
1,993
–
–
–
–
–
–
–
–
2
2
1,995
(1) Represents non-cash movements in lease liabilities (including additions, modifications and terminations), amortisation of transaction costs and foreign exchange
movements during the period.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 143
22. Leases
Set out below are the accounting policies of the Group upon adoption of AASB 16 Leases, which have been applied from the date of initial
application. Refer to Note 2(b)(i) for further information regarding the adoption of AASB 16.
The Group has lease contracts for various items of property, plant and equipment used within its operations and office premises. Leases for
property includes the Group’s office premises and have lease terms ranging from 1 to 10 years. Leases for operations include equipment hire
and contractor provided equipment. These assets have lease terms ranging between 1 to 5 years.
(a) Right-of-use Assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The
cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before
the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end
of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease
term. Right-of-use assets are presented in property, plant and equipment and are subject to impairment assessment.
Refer to Note 11 for the Group’s right-of-use assets as at 30 June 2020.
(b) Lease Liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease,
if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are
recognised as expense in the period on which the event or condition that triggers the payment occurs.
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease
if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the
interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the
underlying asset. Lease components are separately identified to non-lease components of contracts where applicable.
Below is a summary of the Group’s lease liabilities as at 30 June 2020.
Lease Liabilities
Opening balance
Adjustment: Lease liabilities recognised as a result of adopting AASB16 Leases on 1 July 2019
Adjusted opening balance
Movements:
Additions during the year
Lease modifications
Business acquisition (Note 32)
Interest accretion
Lease payments
Foreign currency translation
Net movement
Closing balance
2020
US$m
–
53
53
14
9
10
2
(29)
(1)
5
58
NEWCREST 2020 ANNUAL REPORT 144
22. Leases continued
(c) Short-term Leases and Leases of Low-value Assets
The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or
less from the commencement date and do not contain a purchase option). It also applies the low-value asset recognition exemption to leases that
are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line
basis over the lease term.
During the year, the Group incurred short-term lease expenses of US$33 million. The value of leases of low-value assets was not material.
Furthermore, the Group’s commitment for short-term leases not provided for in the financial statements as at 30 June 2020 was not material.
(d) Other
The Group is party to certain service contracts that contain contractor provided equipment leases. These leases include mix of payments
arrangements, including both fixed and productivity-based payments based on performance. During the year, the Group incurred US$14 million
of productivity-based lease payments that were not required to be included in the measurement of the lease liability. The Group’s commitment
for future cash outflows relating to such payments was not material.
Accounting Judgement and Estimate – Leases
Judgement is required when assessing whether a contract is or contains a lease. In exercising this judgement, the Group refers to the rights
conferred to it in the contract, such as whether it conveys the right to control, or the right to direct the use of an identified asset.
Judgement is also required in determining the lease term, in particular for service contracts that contain contractor provided equipment
leases. The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably
certain not to be exercised.
23. Other Financial Assets and Liabilities
Other Financial Assets/(Liabilities)
Gold and copper USD forward contracts(1)
FdN finance facilities
Total other financial assets – current
FdN finance facilities
Contingent consideration asset(2)
Other financial assets(3)
Total other financial assets – non-current
Gold and copper USD forward contracts(1)
Gold AUD forward contracts(4)
Fuel forward contracts(5)
Total other financial liabilities – current
Gold AUD forward contracts(4)
Total other financial liabilities – non-current
(1) Net fair value gain/loss of Nil (2019: US$12 million loss). Refer Note 24 (a)(i)
(2) Relates to the contingent consideration on the sale of Bonikro.
(3) Instrument is designated as FVOCI and is not in a hedging relationship.
(4) Net fair value loss of US$266 million (2019: US$106 million loss). Refer Note 24 (a)(i)
(5) Net fair value loss of US$8 million (2019: US$1 million loss). Refer Note 24 (a)(ii)
(b)
(b)
2020
US$m
2019
US$m
–
65
65
396
9
76
481
–
(108)
(8)
(116)
(158)
(158)
4
–
4
–
9
90
99
(16)
(42)
(1)
(59)
(64)
(64)
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 145
(a) Significant Accounting Policies
(i) Non-derivative financial assets
Initial recognition and measurement
The Group holds financial assets in the form of facilities agreements
and offtake arrangements. These assets have been classified as
FVTPL as the cash flows arising are subject to variability due to
commodity pricing and production volumes and do not meet the
criteria for amortised cost or FVOCI income classification.
Financial assets at FVTPL are initially recognised at fair value. The
initial fair value of acquired financial assets is their purchase price.
Directly attributable transaction costs are expensed as incurred in
the statement of profit or loss.
Subsequent measurement
Financial assets at FVTPL are measured at fair value as at each
reporting date through profit and loss. The Group’s policy on financial
assets at FVTPL is to separately present:
– Interest income calculated on a contractual rate basis; and
– All other changes in fair value.
(ii) Fair value measurement
The Group measures financial assets and financial liabilities at fair
value at each balance sheet date. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All financial assets and financial liabilities for which fair value is
measured or disclosed in the financial statements are categorised
within the fair value hierarchy described in Note 24(g).
(iii) 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.
NEWCREST 2020 ANNUAL REPORT 146
23. Other Financial Assets and Liabilities
continued
(b) Fruta del Norte Finance Facilities
In April 2020, Newcrest acquired the gold prepay and stream facilities
and an offtake agreement in respect of Lundin Gold Inc.’s (‘Lundin’)
Fruta del Norte (‘FdN’) mine in Ecuador for US$460 million.
The Group has determined that the agreements represent financial
assets, to be measured at fair value with changes in the fair value
being recorded in profit or loss. Further detail on the fair value
measurement process is provided in Note 24(g). Details of the
agreements are as follows:
Gold Prepay Credit Agreement (‘GPCA’)
The GPCA is a non-revolving credit facility with a face value of
US$150 million to be repaid in cash based on the value of 218,500 oz
of gold (as adjusted for the risk collar described below). Key terms of
the agreement are:
– Repayment through 19 quarterly cash payments equivalent to
11,500 oz of gold (with the volume adjusted for the risk collar) at
the price of gold starting from December 2020 and concluding in
June 2025.
– The risk collar is based on an average gold price for three months
leading to any quarterly payment. Should this average gold
price be >US$1,436 per ounce or < US$1,062 per ounce, the
amount of the next quarterly payment is reduced or increased,
respectively by 15%.
Stream Credit Facility Agreement (‘SCFA’)
The SCFA is a non-revolving credit facility with a face value of
US$150 million to be repaid in cash based on the FdN mine gold and
silver production. The amount of each monthly payment is the sum of
the following:
– 7.75% of refined gold processed in the prior month, multiplied by
the excess of the gold price over US$400 per ounce (subject to an
inflationary adjustment), until 350,000 ounces is reached; and
– 100% of refined silver processed in the prior month, multiplied by
the excess of the silver price over US$4 per ounce (subject to an
inflationary adjustment), until 6 million ounces is reached.
Lundin also has the option to repay (i) 50% of the remaining Stream
Credit Facility on June 30, 2024 for $150 million and/or (ii) the other
50% of the remaining Stream Credit Facility on June 30, 2026 for
$225 million.
Both the GPCA and SCFA have a stated interest rate of 7.5%.
Repayments in excess of the principal and stated interest rate amount
is classified as finance income.
Offtake Agreement
The offtake agreement allows Newcrest to acquire 50% of refined gold
production from FdN, up to a maximum of 2.5 million ounces at a price
determined based on delivery dates and a defined quotational period.
Purchases of gold under the Offtake agreement and the subsequent
sale are recognised in Other Income/Expense.
24. 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.
The fair valuation of the FdN finance facilities, which is accounted
for at fair value through profit or loss, is impacted by fluctuations in
gold prices.
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/Expenses’. Refer
to Note 5(d).
As at 30 June 2020, 233,000 gold ounces and 41,000 copper tonnes
were subject to QP adjustment (2019: 222,000 ounces gold and
32,000 tonnes copper).
In order to minimise the short-term revenue volatility impact of
QP adjustments, particularly across reporting periods, the Group
historically took out gold and copper forward contracts at the time of
concentrate shipments to lock in the price. These forward contracts
were not designated into hedge relationships with the fair value
adjustments at reporting date recognised in the Income Statement
as part of ‘Other Income/Expenses’. During the year, Newcrest ceased
entering into such forward contracts.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 147
The following table details the gold and copper forward contracts outstanding as at the reporting date.
Gold and Copper
USD forward contracts
Maturing less than 6 months:
Gold (ounces)
Copper (tonnes)
Total fair value
2020
Weighted
Average
Price
US$
Quantity
(‘000s)
–
–
–
–
Fair Value
US$m
Quantity
(‘000s)
2019
Weighted
Average
Price
US$
–
–
–
164
26
1,319
6,144
Fair Value
US$m
(16)
4
(12)
Partial hedging of Telfer future gold sales
Newcrest has put in place hedges for a portion of the Telfer mine’s future planned gold production. Telfer is a large scale, low grade mine and its
profitability and cash flow are both particularly sensitive to the realised Australian dollar gold price. Having regard to the favourable spot and
forward prices at the time, hedging instruments in the form of Australian dollar gold forward contracts were put in place in 2016 to 2018 to
secure margins on a portion of future planned production to June 2023, to support investment in cutbacks and mine development.
The Telfer AUD gold forward contracts have been designated as cash flow hedges with a hedge relationship of 1:1. Potential sources of hedge
ineffectiveness that may affect the hedging relationship during the term are variations to forecast production timing and volume assumptions
and credit risk.
As of 30 June 2020, the Group is holding AUD gold forward contracts with the following maturity:
Gold AUD forward contracts maturing:
Less than 12 months
Between 1–2 years
Between 2–3 years
Between 3–4 years
Total
2020
Weighted
Average
Price
A$
1,864
1,902
1,942
–
1,897
Quantity
(ounces)
(‘000s)
217
204
138
–
559
Fair Value
US$m
Quantity
(ounces)
(‘000s)
(108)
(97)
(61)
–
(266)
205
217
204
138
764
2019
Weighted
Average
Price
A$
1,729
1,864
1,902
1,942
1,852
Fair Value
US$m
(42)
(28)
(23)
(13)
(106)
These forward contracts are measured at fair value with the effective portion of fair value movements being recognised in OCI and accumulated
in the ‘Cash flow hedge reserve’ in equity. There was no hedge ineffectiveness recognised in the Income Statement during the year.
(ii) Fuel price
The Group’s input costs are exposed to price fluctuations, in particular to diesel and heavy fuel oil prices. To mitigate this risk, the Group has
entered into short-term fuel forward contracts to fix certain diesel and heavy fuel oil costs in line with budget expectations.
These forward contracts have been designated as cash flow hedges with a hedge relationship of 1:1. Potential sources of hedge ineffectiveness
that may affect the hedging relationship during the term include differences in the pricing of the physical (hedged) item and hedging instrument,
timing of physical delivery misaligned with the hedging instrument and credit risk.
Forward contracts maturing in:
Less than 12 months
Diesel (barrels)
Heavy fuel oil (tonnes)
Total fair value
2020
Weighted
Average
Price
US$
Quantity
(‘000s)
350
115
65
267
Fair Value
US$m
Quantity
(‘000s)
2019
Weighted
Average
Price
US$
(6)
(2)
(8)
531
135
79
365
Fair Value
US$m
–
(1)
(1)
These forward contracts are measured at fair value with the effective portion of fair value movements being recognised in OCI and accumulated
in the ‘Cash flow hedge reserve’ in equity. The hedge ineffectiveness recognised in the Income Statement during the year was immaterial.
NEWCREST 2020 ANNUAL REPORT 148
24. Financial Risk Management continued
(a) Commodity and Other Price Risks continued
(iii) Financial impacts of hedges
The impact of hedged items designated in hedging relationships on the Income Statement and OCI, is as follows:
Cash flow hedges
Telfer gold sales
Diesel
Heavy fuel oil
Total
Line item in the Income Statement
Sales revenue
Cost of sales – Site production costs
Cost of sales – Site production costs
Gain/(loss) reclassified
from OCI to
Income Statement
2020
US$m
(82)
(6)
(11)
(99)
2019
US$m
(3)
6
9
12
(iv) Sensitivity analysis
The following table summarises the sensitivity of financial assets and financial liabilities held at the reporting date to movement in the gold price
with all other variables held constant. The movements for gold and copper are based on reasonably possible changes, over a financial year, using
an observed range of actual historical rates for the preceding five year period.
Post-tax gain/(loss)
Gold
Gold +15% (2019: +10%)
Gold -15% (2019: -10%)
Copper
Copper +15% (2019: +15%)
Copper -15% (2019: -15%)
Impact on Profit(1)
Higher/(Lower)
Impact on Equity(2)
Higher/(Lower)
2020
US$m
2019
US$m
43
(43)
26
(26)
6
(6)
4
(4)
2020
US$m
(104)
104
–
–
2019
US$m
(77)
77
–
–
(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 gold prices on the FdN finance facilities has been disclosed as part of note 24(g).
The sensitivity of the exposure of 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,
PNG Kina and Canadian dollars. The Group has entities that have AUD, CAD and USD functional currencies.
The Group’s Statement of Financial Position can also be affected materially by movements in the AUD:USD and the CAD: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.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 149
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)
2020
US$m
1,213
222
47
–
1,482
28
–
2,038
8
2,074
(592)
1,142
550
2019
US$m
1,444
92
24
4
1,564
31
2
2,000
17
2,050
(486)
854
368
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 2020, US dollar borrowings (net of cash) of US$1,142 million were designated as a net investment in foreign operations
(2019: US$854 million).
Sensitivity analysis
The following table details the Group’s sensitivity arising in respect of translation of financial assets and financial liabilities to a 5% movement
(2019: 10%) in the Australian dollar against the US dollar at the reporting date, with all other variables held constant. The impact of the
movement in other currencies against the US dollar is immaterial. The percentage sensitivity is based on reasonably possible changes, over a
financial year, using the observed range of actual historical rates for the preceding five-year period.
Post-tax gain/(loss)
AUD/USD +5% (2019: +10%)
AUD/USD -5% (2019: -10%)
Impact on Profit After Tax
Higher/(Lower)
Impact on Equity
Higher/(Lower)
2020
US$m
(17)
17
2019
US$m
(26)
26
2020
US$m
(40)
40
2019
US$m
(60)
60
Significant assumptions used in the foreign currency exposure sensitivity analysis above include:
– Reasonably possible movements in foreign exchange rates;
The reasonably possible movement of 5% (2019: 10%) was calculated by taking the AUD spot rate as at the reporting date, moving this
spot rate by 5% (2019: 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.
NEWCREST 2020 ANNUAL REPORT
150
24. Financial Risk Management continued
(c) Liquidity Risk
Newcrest is exposed to liquidity risk primarily through its capital management policies and objectives, which utilise debt as an 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$1,500 million, with approximately one-third of that amount
in the form of cash.
– Targeting to maintain an investment grade credit rating.
– Forecasting of cash flows relating to operational, investing and financing activities, including sensitivity analysis to test multiple scenarios.
– Management of repayment maturities to avoid excessive refinancing in any period.
– Maintain funding flexibility with committed available credit lines with a variety of counterparties.
– Managing credit risk related to financial assets.
The Group maintains a balance between continuity of funding and flexibility through the use of cash, loans and committed available credit lines.
Included in Note 21 is a list of undrawn facilities that the Group has at its disposal to manage liquidity risk.
The following table reflects all contractually fixed repayments and interest resulting from recognised financial liabilities at the reporting date,
including derivative financial instruments and leases. For derivative financial instruments the market value is presented, whereas for the other
obligations the respective undiscounted cash flows for the respective upcoming financial years are presented.
2020
Payables
Borrowings
Derivatives
Lease liabilities
2019
Payables
Borrowings
Derivatives
Less than
6 months
US$m
Between
6-12 months
US$m
Between
1-2 years
US$m
Between
2-5 years
US$m
Greater than
5 years
US$m
520
30
60
15
625
444
31
33
508
–
43
56
14
113
–
47
20
67
–
87
97
13
197
–
94
28
122
–
600
61
15
676
–
1,650
39
1,689
–
2,755
–
6
2,761
–
1,003
–
1,003
Total
US$m
520
3,515
274
63
4,372
444
2,825
120
3,389
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 151
(d) Interest Rate Risk
The Group’s exposure to the risk of changes in market interest rates primarily relates to the Group’s cash and debt obligations that have floating
interest rates. The Group is also subject to interest rate risk with respect to the fair value of the FdN finance facilities, which are accounted for at
fair value through profit or loss (refer Note 24(g)). The Group’s interest rate exposure together with the effective interest rate for each class of
financial assets and financial liabilities at the reporting date is summarised as follows:
Consolidated
Financial Assets
Cash and cash equivalents
FdN finance facilities(1)
Financial Liabilities
Corporate bonds
Lease liabilities
Other loans
2020
2019
Floating
Interest
US$m
1,451
–
1,451
–
–
4
4
Fixed
Interest
US$m
Effective
Interest Rate
%
–
299
299
2,030
58
–
2,088
0.6
7.5
4.3
4.3
3.6
Floating
Interest
US$m
1,600
–
1,600
–
–
–
–
Fixed
Interest
US$m
Effective
Interest Rate
%
–
–
–
2,000
–
–
2,000
2.4
–
4.7
–
–
Net exposure
1,447
(1,789)
1,600
(2,000)
(1) The principal component of the GPCA and SCFA are subject to interest at the contractual rate.
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, the FdN finance facilities 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. Newcrest’s Treasury department evaluates counterparty credit risk on
investment funds and derivative exposures on a continual basis.
All customers who wish to trade on credit terms are subject to a credit risk analysis at least annually. The Group obtains sufficient collateral
(such as a letter of credit) from customers where determined appropriate, as a means of mitigating the risk of financial loss from defaults.
At the reporting date the value of collateral held was US$41 million (2019: US$43 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 2020 or 30 June 2019.
The majority of the Group’s receivables at the reporting date are due from concentrate customers in Japan. There have been no credit defaults with
these customers in recent history. At the reporting date there were no other significant concentrations of credit risk with concentrate customers.
The FdN finance facilities, which were acquired in April 2020 are due from Lundin, which operates the FdN gold mine in Ecuador. The Group
limited its credit risk on the facilities by acquiring a customary lender security covenant package, which includes a requirement for Lundin to
seek approvals from the senior lenders and Newcrest as subordinated lender under the Facilities for any material amendments to the mine plan,
financial model and operating budget of the FdN mine. Newcrest also ranks ahead of ordinary equity holders with regard to preference of cash
flows from the FdN mine.
NEWCREST 2020 ANNUAL REPORT 152
24. 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, classified between
amortised cost, fair value through profit or loss and fair value through other comprehensive income (‘OCI’).
2020
Financial Assets
Cash and cash equivalents
Trade and other receivables – current
Trade and other receivables – non-current
FdN finance facilities – current
FdN finance facilities – non-current
Other financial assets – non-current
Financial Liabilities
Trade and other payables
Borrowings – current
Borrowings – non-current
Lease liabilities – current
Lease liabilities – non-current
Other financial liabilities – current
Other financial liabilities – non-current
2019
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
Other financial liabilities – non-current
(1) The Trade and other receivables in this classification relates to concentrate receivables.
(2) Relates to Telfer AUD gold hedges, fuel hedges and other equity investments.
(3) Primarily relates to concentrate receivables and gold and copper forward contracts.
Amortised
cost
US$m
Fair Value
through
profit or loss(1)
US$m
Fair Value
through OCI(2)
US$m
1,451
60
51
–
–
–
1,562
520
4
2,012
26
32
–
–
2,594
–
194
–
65
396
9
664
–
–
–
–
–
–
–
–
–
–
–
–
–
76
76
–
–
–
–
–
116
158
274
Amortised
cost
US$m
Fair Value
through
profit or loss(3)
US$m
Fair Value
through OCI(2)
US$m
1,600
43
–
–
1,643
444
1,995
–
–
2,439
–
92
4
9
105
–
–
16
–
16
–
–
–
90
90
–
–
43
64
107
Total
US$m
1,451
254
51
65
396
85
2,302
520
4
2,012
26
32
116
158
2,868
Total
US$m
1,600
135
4
99
1,838
444
1,995
59
64
2,562
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 153
(g) Fair Value
(i) 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 fair value method used, as defined by
IFRS 13 Fair Value Measurement.
– 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 1 and Level 2
measurements with the exception of the following Level 3 measurements:
– FdN finance facilities of US$461 million (refer Note 23), and
– Contingent consideration asset of US$9 million (2019: US$9 million).
Fair value of FdN finance facilities
In April 2020, Newcrest acquired the GPCA, SCFA and Offtake Agreement in relation to Lundin Gold Inc’s Fruta del Norte mine (refer Note 23).
Each of these financial instruments are classified as Level 3 as their valuation includes significant unobservable inputs. The following table
summarises the fair value of these financial assets on an aggregated basis.
Movements in Fair Value
Acquisition value
Repayments during the period
Accrued interest
Fair value adjustments
Closing balance
Split between:
Current
Non-current
2020
US$m
460
(2)
2
1
461
65
396
461
NEWCREST 2020 ANNUAL REPORT 154
24. Financial Risk Management continued
(g) Fair Value continued
(i) Fair value measurements recognised in the Statement of Financial Position continued
Valuation measurement and key assumptions
The GPCA and SCFA are valued based on a discounted cash flow model, whilst the Offtake Agreement valuation is based on Monte Carlo
simulation to determine the margin achieved on sales associated with this agreement (which is then incorporated into a discounted cash flow
model). The valuation requires management to make certain assumptions about the model inputs, including gold prices, discount rates and
FdN production profiles. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s
estimate of fair value for these financial assets.
The following table summarises the quantitative information about the significant unobservable inputs used in Level 3 fair value measurements.
Financial Assets
Unobservable inputs
Inputs
Relationship of unobservable inputs to fair value
FdN finance facilities Gold price
The Group’s carrying
value assessment gold
price assumptions
(refer note12(c))
An increase or decrease in gold prices of 10% applied to the gold price
assumptions for the term of the agreements would change the fair
value of the asset by +US$49 million/-US$19 million
Discount rate
8.5%
An increase or decrease in the discount rate of 1% would change
the fair value of the asset by -US$19 million/+US$20 million
FdN production
profile
FdN mine plan
An increase or decrease in the production profile of 10% would change
the fair value of the asset by +US$18 million/-US$26 million
The sensitivity of the exposure of silver prices on the FdN finance facilities has been analysed and determined to be not material to the Group.
Accounting Estimates and Assumptions – Fair Value of FdN finance facilities
Significant judgements, estimates and assumptions are required in determining estimates of Fair Value for the FdN finance facilities.
The sensitivity of the exposure of silver prices on the FdN finance facilities has been analysed and determined to be not material to the Group.
It should be noted that the Fair Value is subject to variability in key assumptions including, but not limited to, gold prices, discount rates and
FdN production profiles. A change in one or more of the assumptions used could result in a material change in the estimated Fair Value
of the FdN finance facilities.
(ii) Fair value of financial instruments carried at amortised cost
The carrying amounts of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their fair
value, except as detailed in the following table:
Financial Liabilities
Borrowings:
Fixed rate debt – Corporate Bonds
Carrying amount
Fair value(1)
2020
US$m
2019
US$m
2020
US$m
2019
US$m
2,012
1,995
2,330
2,145
(1) The fair value is a level 2 valuation. Fair values of the Group’s fixed rate borrowings are determined by using discounted cash flow models that use discount rates
that reflect the issuer’s borrowing rate as at the end of the reporting period.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 155
2020
US$m
2019
US$m
11,641
784
(13)
1
772
15
(25)
11,656
–
–
–
–
11
(26)
12,403
11,641
2020
No.
2019
No.
813,819,599 766,613,683
1,861,708
2,252,295
816,071,894 768,475,391
766,613,683 766,608,812
46,874,992
(1,193,157)
802,570
721,511
–
(1,709,425)
981,719
732,577
813,819,599 766,613,683
1,861,708
1,193,157
(802,570)
1,134,002
1,709,425
(981,719)
2,252,295
1,861,708
25. Issued Capital
(a) Movements in Issued Capital
Opening balance
Shares issued – equity raising(1)
Share issue costs
Tax effect of issue costs
Equity raising net of issue costs
Shares issued – dividend reinvestment plan
Shares repurchased and held in treasury(2)
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 issued – equity raising(1)
– Shares repurchased and held in treasury(2)
– Share plans(3)
– 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
(1) In May and June 2020, Newcrest raised a total of A$1,200 million (US$784 million) from an equity raising comprising of an institutional placement of
A$1,000 million (US$646 million) and a share purchase plan of A$200 million (US$138 million). A total of 46,874,992 fully paid ordinary shares were issued
at a price of A$25.60 (US$16.73) per share.
(2) During the year, the Newcrest Employee Share Plan Trust (‘Trust’) purchased a total of 1,193,157 (2019: 1,709,425) fully paid ordinary Newcrest shares at an
average price of A$31.40 (US$22.22) per share (2019: average price of A$20.95 (US$14.87) per share). The shares were purchased on-market to be held by the
Trustee on behalf of the Trust to satisfy the future entitlements of the holders of performance rights (and any other rights to acquire shares) under Newcrest’s
current and future employee incentive schemes.
(3) Represents rights exercised under the Company’s share-based payments plans and executive service agreements. Refer to Note 35 for share-based payments.
Issued ordinary share capital is classified as equity and is recognised at the fair value of the consideration received by the Group. Any transaction
costs arising on the issue of ordinary shares and the associated tax are recognised directly in equity as a reduction of the share proceeds received.
Treasury Shares
The Group’s own equity instruments, which are purchased on-market for later use in employee share-based payment arrangements (treasury
shares), are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own
equity instruments.
NEWCREST 2020 ANNUAL REPORT 156
26. Reserves
Equity settlements reserve
Foreign currency translation reserve
Hedge reserve
Other reserves
Total reserves
Note
(a)
(b)
(c)
(d)
2020
US$m
123
(575)
(192)
24
(620)
2019
US$m
112
(489)
(75)
26
(426)
(a) Equity Settlements Reserve
This reserve is used to recognise the fair value of rights and options issued to employees in relation to equity-settled share-based payments.
(b) Foreign Currency Translation Reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of
subsidiaries which do not have a functional currency of USD. The reserve is also used to record exchange gains and losses on hedges of the net
investment in foreign operations. Refer Note 24(b).
(c) Hedge Reserve
The hedge reserve is used to record the effective portion of changes in the fair value of cash flow hedges (refer Note 24). The components of the
hedge reserve at year end were as follows:
Component
Gold forward contracts – Telfer
Fuel forward contracts
Tax effect
Total Hedge Reserve
24(a)
24(a)
2020
US$m
(266)
(8)
(274)
82
(192)
2019
US$m
(106)
(1)
(107)
32
(75)
(d) Other Reserves
Other Reserves are used to record Newcrest’s share of other comprehensive income/(loss) of associates (refer Note 31) and changes in the fair
value of equity instruments held at fair value.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 157
GROUP STRUCTURE
This section provides information relevant to understanding the structure of the Group.
27. 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
Notes
Country of Incorporation
Percentage Holding
2020
%
2019
%
Parent Entity
Newcrest Mining Limited
Subsidiaries
Cadia Holdings Pty Limited
Contango Agricultural Company Pty Ltd
Newcrest Finance Pty Limited
Newcrest International Pty Ltd
Newcrest Operations Limited
Newcrest West Africa Holdings Pty Ltd
Newgen Pty Ltd
Niugini Mining (Australia) Pty Ltd
Newcrest Insurance Pte Ltd
Newcrest Singapore Holdings Pte Limited
Orion Co-V Pte Ltd
Gryphus Pte Ltd
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
Newcrest Canada Services Inc
Newcrest Red Chris Mining Limited
Newcrest Chile SpA
Newcrest Ecuador SA
Newcrest Dougbafla CI SA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Singapore
Singapore
Indonesia
Indonesia
Indonesia
Fiji
Fiji
Papua New Guinea
Papua New Guinea
Papua New Guinea
Papua New Guinea
USA
USA
Canada
Canada
Canada
Canada
Chile
Ecuador
Côte d’Ivoire
100
100
100
100
100
100
100
100
100
–
100
100
–
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
89.89
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
100
100
89.89
(a)
(a)
(a)
(a)
(a)
(a)
(b)
(c)
(e)
(e)
(c)
(c)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
Notes:
(a) These controlled entities are a party to a Deed of Cross Guarantee. Refer Note 29 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.
(e) These entities were acquired during the year.
NEWCREST 2020 ANNUAL REPORT 158
28. 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
2020
%
478
(87)
391
85
6,991
7,076
170
489
659
6,417
12,403
123
(666)
(5,443)
6,417
2019
%
(113)
(298)
(411)
91
6,117
6,208
300
486
786
5,422
11,641
112
(579)
(5,752)
5,422
9
3
(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 29. 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 Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 159
29. 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 27 are relieved from the Corporations Act 2001 requirements for preparation, audit, and lodgement of financial reports,
and Directors’ Report.
It is a condition of the Class Order that the Company and each of 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
Revenue
Cost of sales
Gross profit
Exploration costs
Corporate administration costs
Dividend income from subsidiaries
Other income/(expenses)
Share of profit/(loss) of associate
Impairment reversal/(loss)
Profit before interest and income tax
Finance income
Finance costs
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after income tax
Consolidated
2020
US$m
2,381
(1,222)
1,159
(31)
(111)
55
67
(2)
48
1,185
12
(185)
1,012
(286)
726
2019
US$m
2,258
(1,335)
923
(31)
(117)
22
(57)
(4)
12
748
26
(116)
658
(192)
466
NEWCREST 2020 ANNUAL REPORT 160
29. Deed of Cross Guarantee continued
Consolidated
Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Total current assets
Non-current assets
Other receivables
Investment in subsidiaries
Property, plant and equipment
Other intangible assets
Deferred tax assets
Other financial assets
Other assets
Investment in associates
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Current tax liability
Lease liabilities
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Lease liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
2020
US$m
1,298
197
174
–
20
1,689
99
6,234
3,346
21
56
85
3
75
9,919
11,608
993
79
22
20
116
1,230
2,012
238
194
21
158
2,623
3,853
7,755
2019
US$m
1,477
106
157
4
26
1,770
52
4,521
3,206
26
60
99
5
78
8,047
9,817
509
74
165
–
61
809
1,995
244
86
–
63
2,388
3,197
6,620
12,403
(3,500)
(1,148)
7,755
11,641
(4,057)
(964)
6,620
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 161
30. 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)
2020
50.0%
72.49%
2019
50.0%
71.82%
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 Wafi Mining Limited, whose ultimate holding company is Harmony Gold Mining
Company Limited. Pursuant to the JV agreement, key operational decisions of the JV require a minimum 70% (effectively 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 (prior to the
commencement of mining) an equity interest of up to 30% of any mineral discovery within the Wafi-Golpu tenements. 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 exploration expenditure. 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 2020, 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 2020 is US$477 million (2019: US$467 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.
The carrying value of the Group’s interest in the Namosi JV as at 30 June 2020 is US$25 million (2019: US$25 million).
NEWCREST 2020 ANNUAL REPORT 162
31. Investment in Associates
Movements in investment in associates
Opening balance
Acquisition – Lundin Gold Inc
Acquisition – Antipa Minerals Ltd
Acquisition – SolGold plc
Total acquisitions
Share of profit/(loss)
Share of other comprehensive income/(loss)
Foreign currency translation
Closing balance
2020
US$m
2019
US$m
333
79
3
–
82
(37)
10
(2)
386
324
10
–
18
28
(18)
3
(4)
333
An associate is an entity that is neither a subsidiary nor joint arrangement, over which the Group has significant influence. Significant influence
is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The Group’s investment in associates is accounted for using the equity method.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on its
investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the
associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount
of the associate and its carrying value and recognises the amount in the Income Statement.
(a) Details of Associates
Associate
Country of Incorporation
Lundin Gold Inc
SolGold plc
Azucar Minerals Ltd
Antipa Minerals Ltd
Canada
United Kingdom
Canada
Australia
Interest
Carrying Amount
2020
%
32.0%
13.6%
19.9%
9.9%
2019
%
27.1%
15.2%
19.9%
–
2020
US$m
309
72
2
3
386
2019
US$m
252
78
3
–
333
Lundin Gold Inc commenced commercial production in the current year. The remaining associates are in the exploration and/or mine development
phase and do not currently generate revenue. Further details are as follows:
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 163
(b) Investment in Lundin Gold Inc
Lundin Gold Inc (‘Lundin’) is a Canadian based mine development and operating company, operating the Fruta del Norte (‘FdN’) gold mine 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$1 million),
following a share subscription agreement entered into on 24 February 2018. The Group’s current interest is 32.0%. The Group has appointed
two directors to the Board of Lundin.
During the year, Newcrest acquired the FdN finance facilities. This did not have an impact on the Group’s equity interest in Lundin. Refer to Note 23.
The following table discloses summarised financial information of the Group’s investment in Lundin Gold Inc.
Lundin Gold’s Statement of Financial Position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Proportion of Newcrest’s ownership
Carrying value calculated per ownership percentage
Fair value adjustment
Carrying amount
2020
US$m
176
1,231
(183)
(657)
567
32.0%
181
128
309
2019
US$m
273
1,071
(51)
(727)
566
27.1%
153
99
252
Lundin Gold commenced commercial production in February 2020 and had revenue during the year of US$50m (100% basis).
As at 30 June 2020, the Group held 73,504,145 shares (2019: 60,237,973) with a market value of US$685 million (2019: US$302 million)
based on the closing share price on the TSX.
(c) Investment in Other Associates
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. As at 30 June 2020, the Group held 281,216,471 shares
(2019: 281,216,471 shares) with a market value of US$73 million (2019: US$114 million) based on the closing share price on the LSE.
Azucar Minerals Ltd (‘Azucar’) is a mineral exploration company listed on the TSX. The associates’ assets include the El Cobre copper/gold
porphyry project near Veracruz, Mexico. As at 30 June 2020, the Group held 14,674,056 shares (2019: 14,674,056) with a market value of
US$2 million (2019: US$3 million) based on the closing share price on the TSX.
Antipa Minerals Ltd (‘Antipa’) is an Australia mineral exploration company listed on the ASX, with exploration assets in the Paterson Province of
Western Australia. As at 30 June 2020, the Group held 228,472,719 shares (2019: nil) with a market value of US$4 million based on the closing
share price on the ASX.
The Group has a right (but not an obligation) to appoint a Director to the Board of each of these associates.
NEWCREST 2020 ANNUAL REPORT 164
32. Acquisition of Red Chris
On 15 August 2019, the Group completed the acquisition of a 70% interest in Red Chris with TSX-listed Imperial Metals Corporation (‘Imperial’),
following the signing of an Asset Purchase Agreement (‘APA’) on 10 March 2019 and the Red Chris Joint Venture Agreement (‘Red Chris JVA’) on
15 August 2019.
The Red Chris mine is a copper-gold porphyry with an operating open-pit. The acquired property comprises 23,142 hectares of land with 77 mineral
tenures in British Columbia, Canada. The acquisition aligns with Newcrest’s stated strategic goal of building a global portfolio of Tier 1 orebodies.
The acquisition was structured via an unincorporated arrangement. The Group has operatorship of Red Chris pursuant to the Red Chris JVA. Under
the Red Chris JVA, the Group has rights to its share of the assets and obligations for its share of the liabilities of the arrangement rather than
a right to a net return. In addition, as the operator (manager) of Red Chris, the Group has a direct legal liability for the entire balance of certain
liabilities and a right to reimbursement by Imperial for its share of that liability.
This arrangement is not within the scope of AASB 11 Joint Arrangements. The Group has recognised its interest in assets and liabilities,
revenue from the sale of its share of the output by the unincorporated arrangement, and associated expenses in accordance with the applicable
accounting standard. All such amounts have been measured in accordance with the terms of the JVA, which is generally in proportion to the Group’s
70% interest in the arrangement with the exception of the liabilities for which the Group has a direct legal liability. These liabilities are recognised
at 100% along with a receivable due from Imperial for its 30% share of the liability.
These amounts have been recorded in the Group’s financial statements on the appropriate lines.
(a) Consideration
The final consideration paid was US$769 million as shown the in the table below:
Consideration paid in respect to:
Property, plant and equipment(1)
Less: Debt and working capital balances(2)
Cash consideration paid
15 Aug 2019
US$m
30 Jun 2020
US$m
804
(30)
774
804
(35)
769
(1) Inclusive of rehabilitation provision.
(2) The debt (assumed equipment loans and other interest-bearing liabilities) and working capital balances were subject to adjustment under the APA which was
finalised during the year.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 165
Provisional
Fair Value(1)
US$m
Adjustments
US$m
Final
Fair Value
US$m
1
28
813
10
852
(25)
(7)
(33)
(9)
(30)
(104)
748
20
768
49
2
42
–
93
(12)
(3)
(13)
(64)
3
(89)
4
(3)
1
50
30
855
10
945
(37)
(10)
(46)
(73)
(27)
(193)
752
17
769
(b) Fair Values
Details of the fair values at the date of acquisition are set out below:
Assets and Liabilities Acquired
Receivables
Inventories
Property, plant and equipment
Deferred tax assets
Total assets
Trade and other payables
Debt – Lease liabilities
Debt – Other interest-bearing liabilities
Provisions
Deferred tax liabilities
Total liabilities
Fair value of identifiable net assets
Goodwill on acquisition
Fair value of net assets
(1) Represents the provisionally determined values reported in the Group accounts for the half-year ended 31 December 2019.
The initial accounting for the acquisition of Red Chris had been provisionally determined at the end of the previous reporting period (half-year
ended 31 December 2019). The key adjustments from the provisional balances included:
– Finalisation of balances which were subject to a debt and working capital adjustment which was completed in the second half of the financial year;
– Increase in provisions relating to the mine rehabilitation and restoration provision;
– Recognition of 100% of certain liabilities and a right to reimbursement (receivable) from Imperial for its share of that liability.
The goodwill reflects the requirement to record deferred tax balances for the difference between the assigned values and the tax bases of assets
acquired and liabilities assumed in the business combination. Goodwill is not deductible for tax purposes.
(c) Other Information
Refer to Note 4 Segment Information for details of the segment result of Red Chris for the period 15 August 2019 to 30 June 2020.
Business acquisition and integration costs of US$5 million were incurred during the year. These have been expensed in the Income Statement
within ‘Transaction and integration costs’. Refer Note 6.
NEWCREST 2020 ANNUAL REPORT 166
33. Business Divestment
Divestment of Gosowong
On 31 January 2020, Newcrest signed an agreement to sell 100% of Newcrest Singapore Holdings Pte Ltd (‘NSH’) which owns a 75% interest
in PT Nusa Halmahera Minerals (‘PT NHM’), which operates the Gosowong mine (Gosowong) in Indonesia, and 100% of PT Puncakbaru Jayatama
(‘PT PJ’), which employs exploration personnel in Indonesia, to PT Indotan Halmahera Bangkit (‘Indotan’) for consideration comprising:
– US$ 5 million cash deposit paid on execution of the sale and purchase agreement
– US$ 55 million cash payable on transaction completion
– US$ 30 million deferred cash payable 18 months after completion
The sale of NSH followed a strategic review of the asset by Newcrest and to comply with the amended Gosowong Contract of Work which
required Newcrest to sell down to at least 49% of PT NHM by 30 June 2020.
As a result of the sale agreement, the assets and liabilities of Gosowong and PT PJ were classified as ‘held for sale’ with effect from
31 December 2019. The carrying value of Gosowong was compared to its fair value less costs to sell and this resulted in a write-down of
non-current assets of US$57 million after taking into account the sales proceeds less transaction costs. The write-down attributable to Newcrest
for its 75% interest in Gosowong is US$44 million.
The sale was completed on 4 March 2020 and Gosowong and PT PJ were deconsolidated from that date. The sale agreement had an economic
effective date of 31 December 2019 and as a result, the cash generated during the period 31 December 2019 to 4 March 2020 was to the
benefit of the acquirer. This amounted to US$10 million.
(a) Impact on Income Statement
The impact of the divestment on the Income Statement was as follows:
Consideration
Less: Transaction costs
Net proceeds
Written down value of net assets sold
Less: Written down value of net assets attributable to non-controlling interests
Written down value of net assets sold (75%)
Total gain/(loss) on business divestment
Note
33(b)
2020
US$m
90
(5)
85
114
(29)
85
–
Refer to Note 4 Segment Information for details of the segment result of Gosowong for the period 1 July 2019 to 4 March 2020.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Net Assets Disposed
The carrying value of the net assets disposed of is as follows:
Book Value on Divestment
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Current and non-current tax assets
Other assets
Total Assets(1)
Liabilities
Trade and other payables
Provisions
Total Liabilities
Net assets divested
Attributable to:
Non-controlling interest (25%)
Owners of the parent (75%)
(1) Total assets is inclusive of a US$57 million write-down to property, plant and equipment and tax assets as per Note 6. Of this amount, US$13 million is
attributable to non-controlling interest.
(c) Impact on Statement of Cash Flows
The cash inflow on divestment, net of cash held by the subsidiaries was as follows:
Cash consideration received
Less: Transaction costs paid
Less: Cash and cash equivalents divested
Total
167
2020
US$m
35
20
37
26
59
20
197
23
60
83
114
29
85
114
2020
US$m
60
(5)
(35)
20
NEWCREST 2020 ANNUAL REPORT 168
OTHER
This section includes additional financial information and other disclosures that are required by the accounting standards and the Corporations Act 2001.
34. Contingencies
(a) 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$144 million (30 June 2019: US$62 million).
(b) Other Matters
The 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.
35. 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 Deferral Plan (‘STI Deferral 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 General Managers (including Key Management Personnel), General
Managers and Managers participate in this plan.
The vesting conditions for the Performance Rights granted in the 2020 financial year for Executive General Manager comprised of a service
condition and three equally weighted performance 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 determines the grant made to participants. There is no ability
to re-test performance under the Plan after the performance period.
The vesting conditions for the General Managers comprise a service condition and 50% of the rights have performance measures as noted above.
The vesting conditions for Managers comprise service conditions only.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 169
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 – Executive General Managers
Fair Value – General Managers
Fair Value – Managers
Share price at grant date
Expected life of right
Exercise price
Risk-free interest rate
Annualised volatility
Expected dividend yield
2020
2019
A$26.85
A$28.62
A$30.38
A$31.30
3 years
Nil
0.73%
30.0%
1.0%
A$17.77
A$18.95
A$20.13
A$20.74
3 years
Nil
2.08%
30.0%
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.
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.
(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
2020
19 Nov 2019
21 Nov 2018
21 Nov 2017
15 Nov 2016
Total
2019
21 Nov 2018
21 Nov 2017
15 Nov 2016
5 Nov 2015
Total
Exercise date
19 Nov 2022
21 Nov 2021
15 Nov 2020
15 Nov 2019
21 Nov 2021
15 Nov 2020
15 Nov 2019
5 Nov 2018
Movement in Number of Rights During the Year
Granted
Exercised
Forfeited
745,324
–
–
–
745,324
–
–
–
(533,634)
(71,840)
(140,145)
(71,922)
(122,582)
(533,634)
(406,489)
2,205,609
End
of year
673,484
851,769
680,356
–
1,029,471
–
–
–
–
–
–
(611,163)
(37,557)
(65,602)
(43,458)
(501,033)
991,914
752,278
656,216
–
2,629,750
1,029,471
(611,163)
(647,650)
2,400,408
Beginning
of year
–
991,914
752,278
656,216
2,400,408
–
817,880
699,674
1,112,196
All Performance Rights have a nil exercise price. The number of performance rights exercisable at year end is nil (2019: nil).
NEWCREST 2020 ANNUAL REPORT 170
35. Share-Based Payments continued
(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$4,950 to acquire shares in the plan year. On the third anniversary of the
start of the plan year, the Company will match the number of acquired shares held by the employee at that time with matched shares.
To support Newcrest’s ability to attract and/or retain suitable executives and senior managers, it is sometimes necessary to offer sign-on
incentives. Such incentives are consistent with market practice in the industry. Rights awarded under the Sign-on Share Plan vest over periods
up to three years and are subject to continued employment and/or performance.
The number of shares and rights granted under these plans during the year was not material to the Group. The number of rights outstanding at
year end was 200,673 (2019: 210,654).
(d) STI Deferral Plan
This plan applies to certain employees including key management personnel. Under the STI Deferral Plan, for eligible employees, 50% of the
payment is provided in cash with the remaining 50% deferred into shares. The number of shares calculated is based on the Company’s volume
weighted average share price during the five trading days immediately preceding the date of payment of the cash portion. Half the shares are
released after 12 months and the remainder after two years.
During the year, 120,208 shares were granted in respect to this plan (2019: 225,640 shares).
36. Key Management Personnel
(a) Remuneration of Key Management Personnel and Directors
Short-term
Long-term
Post-employment
Termination benefit
Share-based payments expense
Total(1)
2020
US$’000
2019
US$’000
8,819
77
172
335
6,456
8,165
45
158
–
6,427
15,859
14,795
(1) In 2020, the Group re-examined the classification of Executives in Key Management Personnel (‘KMP’) which increased the number of Executives in KMP in 2020
to seven (2019: five). KMP also includes Non-Executive Directors for which the classification remained unchanged.
(b) Loans and Other Transactions with Key Management Personnel
There are no loans made to KMP, or their related entities, by the Group.
Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37. Auditors’ Remuneration
(a) Fees to Ernst & Young (Australia)
Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory
financial reports of any controlled entities
Fees for assurance services required by legislation to be provided by the auditor
Fees for other assurance and agreed-upon-procedures services:
– Transaction accounting services
– Sustainability assurance services
– Audit-related assurance services
Fees for other services:
– Sustainability services
– Tax and other due diligence services
Total
(b) Fees to Other Member Firms of Ernst & Young (Australia)
Fees for auditing the financial report of any controlled entities
Fees for other assurance and agreed-upon-procedures services
Total
Total fees to Ernst & Young
(c) Fees to Other Auditors
Audit or review of financial reports of subsidiaries
171
2020
US$’000
2019
US$’000
1,568
–
1,344
–
342
162
266
770
13
74
87
–
225
149
374
–
882
882
2,425
2,600
308
13
321
136
–
136
2,746
2,736
22
23
38. New Accounting Standards and Interpretations
The Group has considered accounting standards, amendments and interpretations that have been issued and will be applicable in future periods,
however their impact is not considered material to the Group.
NEWCREST 2020 ANNUAL REPORT 172
Notes to the Consolidated Financial Statements continued
For the Year Ended 30 June 2020
39. Commitments
Capital Expenditure Commitments
Capital expenditure commitments
This represents contracted capital expenditure.
2020
US$m
183
2019
US$m
109
40. Events Subsequent to Reporting Date
Subsequent to year end, the Directors have determined to pay a final dividend for the year ended 30 June 2020 of US 17.5 cents per share, which
will be fully franked. The dividend will be paid on 25 September 2020. The total amount of the dividend is US$143 million. This dividend has not
been provided for in the 30 June 2020 financial statements.
There have been no other matters or events that have occurred subsequent to 30 June 2020 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Directors’ Declaration
173
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 2020 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 2020.
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
14 August 2020
Melbourne
Sandeep Biswas
Managing Director and Chief Executive Officer
NEWCREST 2020 ANNUAL REPORT 174
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 2020, the 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
2020 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 (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, 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.
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175
1. Assessment of the carrying value of non-current assets
Why significant
How our audit addressed the key audit matter
At 30 June 2020 the Group’s consolidated
statement of financial position includes property,
plant and equipment of $8,809 million, goodwill
of $17 million and other intangible assets of $24
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), excluding
those containing goodwill, which are tested for
impairment at least annually.
At 30 June 2020, the Group determined that:
a.
Indicators of impairment or impairment
reversal were identified for Telfer and Lihir
as disclosed in Note 12.
b. The carrying value of the Lihir and Telfer
CGUs approximated their respective fair
values, requiring further sensitivity analysis
and for the reasons set out in Note 12 of the
financial report, the Group performed an
impairment test for these CGUs and the Red
Chris CGU. No impairment charge was
required following this test.
c. 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 of the
financial report.
We evaluated the Group’s assessment of indicators of
impairment or impairment reversal and the Group’s
calculations of the recoverable amount of each CGU
within their impairment testing.
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 supporting
the inputs used in the impairment models.
We also assessed the reasonableness of the forecast
cashflows against the past performance of the CGU’s.
We assessed 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 at Note 12.
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NEWCREST 2020 ANNUAL REPORT
176
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report continued
2. Mine rehabilitation provisions
Why significant
How our audit addressed the key audit matter
The Group has rehabilitation obligations to
restore and rehabilitate land and environmental
disturbances created by mine operations,
including exploration and development activities.
These obligations are determined through
regulatory and legislative requirements across
multiple jurisdictions in addition to policies and
processes set by the Group.
At 30 June 2020, the Group has recorded $488
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 at Note 19 of the
financial report.
We evaluated the Group’s determination of the mine
rehabilitation provision for 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 at Note 19.
3. Accounting for Red Chris acquisition
Why significant
How our audit addressed the key audit matter
On 15 August 2019, the Group completed the
acquisition of a 70% interest in, and operation of,
the Red Chris mine and surrounding tenements
in British Columbia, Canada. Total cash
consideration paid, after debt and working
capital adjustments, was $769 million.
Accounting for this transaction is complex,
requiring management to exercise judgement to
determine the fair value of acquired assets and
liabilities assumed, including contracts, the non
deductibility of the fair value uplift for tax
purposes and the associated goodwill.
Disclosure in relation to this acquisition can be
found at Note 32 of the financial report.
We read the purchase agreement to gain an
understanding of the key terms and conditions and to
assess if the appropriate accounting treatment was
applied.
With the involvement of our valuation specialists, we
assessed the:
reasonableness of the valuation assumptions
used by the internal and external experts in their
determination of the fair value of the acquired
assets and liabilities and the amount recognised
as goodwill.
competence, qualifications and objectivity of the
internal and external experts;
We assessed whether the fair values were
appropriately recorded in the financial
statements.
We assessed the adequacy of the disclosures
included at Note 32.
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4. Acquisition of the Fruta del Norte financing facilities
Why significant
How our audit addressed the key audit matter
On 30 April 2020, the Group completed the
acquisition of gold prepay and stream facilities
and an offtake agreement in respect of Lundin
Gold Inc.’s (‘Lundin’) Fruta del Norte mine for
$460 million.
With the involvement of our valuation specialists, we
evaluated the appropriateness of the valuation
methodology and assessed the reasonableness of the
key assumptions such as gold prices, silver prices and
discount rates used in the valuation model.
We assessed the life of mine production schedule
against external releases published by Lundin.
We assessed the adequacy of the disclosures
included at Note 23 and 24.
These financial assets have been recorded as
financial instruments and are classified as level 3
in the fair value hierarchy. These instruments are
required to be revalued at the end of each
reporting period with any change in value
recorded in Newcrest’s result for the period.
Their valuation is complex and requires
significant judgement by management as the
valuation assumptions are not directly
observable.
Disclosure in relation to this financial asset can
be found at Notes 23 and 24 of the financial
report.
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 2020 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
NEWCREST 2020 ANNUAL REPORT
178
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report continued
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
judgment 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.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
179
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation •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, actions taken to eliminate threats or safeguards applied. 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. Report on the Audit of 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 2020. In our opinion, the Remuneration Report of Newcrest Mining Limited for the year ended 30 June 2020, 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 Matthew Honey Partner Partner Melbourne 14 August 2020 NEWCREST 2020 ANNUAL REPORT 180
SHAREHOLDER INFORMATION
Shareholder Information
Issued Capital (On 1 September 2020)
Title of Class
Ordinary
Twenty Largest Shareholders as at 1 September 2020
Name
1
2
3
4
5
6
7
8
9
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
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