Newcrest Mining Annual Report 2020

Plain-text annual report

2020 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 04 06 08 10 12 14 16 18 20 24 34 184 OUR MISSION To safely deliver superior returns to our stakeholders from finding, developing and operating gold/copper mines. NEWCREST 2020 ANNUAL REPORT2 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 REPORT4 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 I S O M A N I A E N U G W E N A U P A P U P L O G I F A W I R H I L NEWCREST 2020 ANNUAL REPORT I A C R E M A H T R O N I S R H C D E R A D A N A C ASSETS ADVANCED PROJECTS EXPLORATION I O C X E M E L I H C R O D A U C E I A D A C R E F L E T A I L A R T S U A 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 REPORT14 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 REPORT20 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 REPORT22 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 REPORT24 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 REPORT26 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 RESERVES27 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 REPORT28 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 RESERVES29 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 REPORT30 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 RESERVES31 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 REPORT32 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 REPORT36 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’ REPORT37 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 $624 million, leverage ratio of 0.3 times and a gearing ratio of 6.8% as at 30 June 2020 – Full year dividends declared for FY20 of US25 cents per share (fully franked), including a final dividend determined of US17.5 cents per share to be paid in September 2020 Directors’ Report continuedDIRECTORS’ REPORT39 Group production – gold 11 – copper Revenue EBITDA EBIT Statutory profit Underlying profit Cash flow from operating activities Free cash flow* EBITDA margin EBIT margin All-In Sustaining Cost All-In Sustaining margin Realised gold price Realised copper price Average exchange rate Average exchange rate Closing exchange rate Cash and cash equivalents Net debt Net debt to EBITDA Gearing ROCE Interest coverage ratio Total equity 3 3 2 3 3 3 3 3 3 3 3 3 For the 12 months ended 30 June 2020 2019 Change Change % oz t US$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’ REPORT41 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 REPORT42 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 $5 million of major project expenditure (non-sustaining) in relation to Wafi-Golpu. (c) Production stripping and sustaining capital shown above are included in AISC. Directors’ Report continuedDIRECTORS’ REPORT43 Review of Operations7 Operating Production Gold Copper Silver Sales Gold Copper Silver Financial Revenue EBITDA4 EBIT4 Net assets Operating cash flow4 Investing cash flow4 Free cash flow* AISC AISC Margin koz kt koz koz kt koz US$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 REPORT44 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 $20 million. Directors’ Report continuedDIRECTORS’ REPORT47 Depreciation expense was lower in the current period compared to the prior period reflecting lower production volumes together with the benefit of a weaker Australian dollar against the US dollar. As the Company is a US dollar reporting entity, cost of sales will vary in accordance with the movements in the operating currencies where those costs are not denominated in US dollars. The table below shows indicative currency exposures on operating costs by site for the current period: Cadia Telfer Lihir Gosowong Red Chris Group* USD 15% 10% 25% 10% 10% 20% AUD 85% 90% 35% 5% – 55% PGK – – 40% – – 15% IDR – – – 85% – 5% CAD – – – – 90% 5% * The Group number also includes the impact of currency exposures on corporate administration expenses and exploration expenditure. 2.4. Corporate, Exploration and Other items US$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 REPORT48 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’ REPORT49 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 $16 million (or 1%) lower than the prior period. Lower gold sales volumes from Lihir, Telfer and Cadia, higher income tax payments, a lower realised copper price, the divestment of Gosowong and timing of working capital movements all combined to more than offset a higher realised gold price, higher copper production and associated sales, the inclusion of Red Chris and the benefit of a weaker Australian dollar against the US dollar. Directors’ Report continuedDIRECTORS’ REPORT51 For the 12 months ended 30 June 2020 2019 Change Change % 32 94 21 147 94 24 85 13 42 17 275 203 – 56 1 10 3 273 695 (4) 769 460 79 – (20) – 3 1,291 (1) 113 (2) 2,092 67 63 – 130 95 39 76 22 – 16 248 81 2 42 – 28 – 153 531 – – – 10 18 – (20) 66 74 – 78 – (35) 31 21 17 (1) (15) 9 (9) 42 1 27 122 (2) 14 1 (18) 3 120 164 (4) 769 460 69 (18) (20) 20 (63) 1,217 (1) 35 (2) (52%) 49% 13% (1%) (38%) 12% (41%) 6% 11% 151% (100%) 33% (64%) 78% 31% 690% (100%) 100% (95%) 1,645% 45% 683 1,409 206% 3.3. Cash flow from investing activities US$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 REPORT52 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 $64 million reflects the early repayment costs of repurchasing existing corporate bonds. NEWCREST 2020 ANNUAL REPORT54 Directors’ Report continued 4. Review of Operations 4.1. Cadia Measure Operating Total ore mined Total material mined Total material milled Gold head grade Gold recovery Gold produced Copper produced Silver produced Gold sales Copper sales Silver sales Financial Revenue Cost of Sales4 (including depreciation) Depreciation4 EBITDA4 EBIT4 Operating cash flow4 Sustaining capital Non-sustaining capital Total capital expenditure Free cash flow All-In Sustaining Cost All-In Sustaining Cost For the 12 months ended 30 June 2020 2019 Change Change % tonnes ‘000 tonnes ‘000 tonnes ‘000 grams/tonne % ounces tonnes ounces ounces tonnes ounces US$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 $991 million was 3% higher than the prior period. This reflects the 15% higher earnings (EBITDA) partially offset by a 69% increase in capital expenditure. The key drivers of increased capital expenditure in the current period are Stage 1 of the Cadia Expansion Project (primarily PC2-3 development) and the Cadia Molybdenum Plant. Directors’ Report continuedDIRECTORS’ REPORT55 4.2. Lihir Measure Operating Total ore mined Total material mined Total material milled Gold head grade Gold recovery Gold produced Silver produced Gold sales Silver sales Financial Revenue Cost of Sales4 (including depreciation) Depreciation4 EBITDA4 EBIT4 Operating cash flow4 Production stripping Sustaining capital Non-sustaining capital Total capital expenditure Free cash flow All-In Sustaining Cost All-In Sustaining Cost For the 12 months ended 30 June 2020 2019 Change Change % tonnes ‘000 tonnes ‘000 tonnes ‘000 grams/tonne % ounces ounces ounces ounces US$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 REPORT56 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’ REPORT57 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 – $30 million deferred cash payable 18 months after transaction completion The economic effective date for the Gosowong divestment was 31 December 2019. The above results include production and financial performance up until the transaction completion date of 4 March 2020. NEWCREST 2020 ANNUAL REPORT58 Directors’ Report continued 4. Review of Operations continued 4.5. Red Chris7,9 Measure Operating Total ore mined Total material mined Total material milled Gold head grade Gold recovery Gold produced Copper produced Silver produced Gold sales Copper sales Silver sales Financial Revenue Cost of Sales4 (including depreciation) Depreciation4 EBITDA4 EBIT4 Operating cash flow4 Production stripping Sustaining capital Non-Sustaining capital Total capital expenditure Free cash flow All-In Sustaining Cost All-In Sustaining Cost For the 12 months ended 30 June 2020 2019 Change Change % tonnes ‘000 tonnes ‘000 tonnes ‘000 grams/tonne % ounces tonnes ounces ounces tonnes ounces US$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’ REPORT59 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’ REPORT61 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$m Statutory profit Write-down of Gosowong tax assets Write-down of property, plant and equipment at Gosowong Major transaction and integration costs Debt extinguishment and other finance costs Underlying profit In the prior period, Statutory profit was equal to Underlying profit. For the 12 months ended 30 June 2020 Before Tax and Non-controlling interest 997 – 20 15 69 1,101 Non- controlling interest After tax and Non-controlling interest – (8) (5) – – (13) 647 29 15 11 48 750 Tax (350) 37 – (4) (21) (338) NEWCREST 2020 ANNUAL REPORT62 Directors’ Report continued 6. Non-IFRS Financial Information continued 6.2. Reconciliation of Underlying profit to EBIT and EBITDA US$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$m Cost of sales as per Note 5(b) of the consolidated financial statements For the 12 months ended 30 June 2020 2,568 2019 2,648 Directors’ Report continuedDIRECTORS’ REPORT63 For the 12 months ended 30 June 2020 622 2019 727 For the 12 months ended 30 June 2020 778 (108) 670 16 (2) 14 684 2019 651 (96) 555 15 (1) 14 569 For the 12 months ended 30 June 2020 2019 117 (22) (15) 80 120 (19) (11) 90 For the 12 months ended 30 June 2020 2019 (7) 147 140 (15) 130 115 For the 12 months ended 30 June 2020 2019 143 386 15 544 275 273 (4) 544 (2) 542 230 153 18 401 248 153 – 401 – 401 6.3.2. Depreciation and amortisation US$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 REPORT64 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’ REPORT65 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 REPORT66 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’ REPORT67 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 REPORT68 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’ REPORT69 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 REPORT70 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’ REPORT71 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 REPORT72 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’ REPORT73 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 REPORT74 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’ REPORT75 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 REPORT76 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’ REPORT77 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 REPORT78 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’ REPORT79 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 REPORT80 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’ REPORT81 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 REPORT82 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’ REPORT83 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 REPORT84 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’ REPORT85 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’ REPORT87 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’ REPORT89 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 REPORT90 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’ REPORT91 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 REPORT92 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’ REPORT93 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 REPORT94 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’ REPORT95 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 REPORT96 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$99,000) N/A N/A N/A N/A Vesting/Payment Conditions Adequate performance and continuing employment (other than in limited circumstances). Satisfactory completion of probation period. Repayable in the event of resignation within 24 months of relocation. Directors’ Report continuedDIRECTORS’ REPORT97 5. Remuneration Outcomes 5.1. Total Fixed Remuneration (TFR) for the 2020 financial year Set out below is the TFR for the current Executives as at 30 June 2020, shown in Australian dollars. TFR comprises base salary and superannuation contributions and any salary packaged amounts (for example, novated lease vehicles). This information is provided in Australian dollars to enable comparisons to be made in future years, without the impact of changes in exchange rates. The increases in TFR for Craig Jones and Philip Stephenson were associated with their appointments to the roles of COO – PNG, and COO – Australia, Indonesia and the Americas, respectively. Name Sandeep Biswas Gerard Bond Lisa Ali Craig Jones Francesca Lee Seil Song Philip Stephenson Suresh Vadnagra TFR A$ 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$13.02. (6) Basic EPS is calculated as net profit after tax and non-controlling interests (statutory profit) divided by the weighted average number of ordinary shares. Underlying earnings per share is calculated as net profit after tax and non-controlling interests and before significant items (underlying profit) divided by the weighted average number of ordinary shares. (7) Represents dividends determined in respect of the financial year. (8) AISC metrics as per World Gold Council Guidance Note on Non-GAAP Metrics. See section 4.4.2 for further detail. Newcrest’s AISC will vary from period to period as a result of various factors including production performance, timing of sales, the level of sustaining capital and the relative contribution of each asset. 0.0% 0.0% – 8.3% 0.0% – 8.3% – 2016 332 323 1,241 814 902 39.2 18.0 1.6 6.2 22.8 23.00 43.3 42.1 7.5 2,439 762 1,166 NEWCREST 2020 ANNUAL REPORT98 Directors’ Report continued 5. Remuneration Outcomes continued 5.2. Newcrest’s Financial Performance for the past 5 financial years continued The graphs below show Newcrest’s performance over the last five years for metrics used for multiple years to determine the business component of STI awards, before any adjustments as a result of the exercise of Board discretion. The FY20 TRIFR of 2.6 per million hours worked is marginally higher than the prior year as a result of the addition of Red Chris which currently has a higher average injury rate than other Newcrest operations, though it improved over the year. Excluding Red Chris, TRIFR for FY20 was 2.0 per million hours worked, which is a 13% improvement on the prior year. All safety metrics other than TRIFR were introduced as metrics for FY20 only. They have no historical data prior to 2020 and therefore no charts for such metrics are included. TRIFR 3.7 3.3 2.6 2.3 2.4 2020 2019 2018 2017 2016 Statutory Proﬁt (US$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’ REPORT99 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 ($862/oz). (2) Unlike for the Business Score, Free Cash Flow is not adjusted for commodity prices and foreign exchange rates in Personal outcomes (but is adjusted for cash outlays related to M&A, so as not to disincentivise management for M&A transactions). On this basis, Free Cash Flow exceeded target for both the CEO and CFO. NEWCREST 2020 ANNUAL REPORT100 Directors’ Report continued 5. Remuneration Outcomes continued 5.3. STI Outcomes for 2020 financial year continued 5.3.1. Performance against STI objectives continued A reconciliation of the Earnings measure outcome to statutory profit is detailed below: Statutory profit Add back: Significant items after tax(1) Underlying profit Adjust: Board agreed adjustments(2) Earnings measure 2020 US$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’ REPORT101 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 REPORT102 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$’000 600 55 44 44 403 37 30 30 200 28 22 22 134 18 15 15 (1) Board and Committee fees have been translated from Australian dollars to US dollars using an average exchange rate of 0.6715 for the 2020 financial year. (2) The Chairperson of the Board does not receive any additional payments for his role as Chairman or Member of any Committee. Under the Company’s Constitution, NEDs may be reimbursed for reasonable travel, accommodation and other expenses incurred while engaged on the business of the Company. NEDs may also be remunerated for additional services, for example, if they undertake specialist or consulting work on behalf of the Company outside the scope of their normal Director’s duties. No fees for additional services were paid to NEDs for the current or prior financial year. Directors’ Report continuedDIRECTORS’ REPORT103 8. Shareholdings 8.1. Minimum Shareholding Policy The Company has a Minimum Shareholding Requirement Policy which requires that KMP hold at least the following value of Newcrest shares. The intent of the policy is to align the interests of KMP with those of our shareholders. Progress is monitored on a regular basis. As at 30 June 2020, each current KMP who has been KMP for at least the period set out below has met this requirement. CEO Executives NEDs Minimum requirement 100% of TFR in shares 50% of TFR in shares One year’s total annual fees in shares Deadline for achieving shareholding (from the later of appointment or 1 July 2015) 5 years 5 years 3 years 8.2. Executive Shareholdings A summary of current shareholdings of Executives, including their closely related parties, as at 30 June 2020 are set out below. Executive Sandeep Biswas Gerard Bond Lisa Ali Craig Jones Francesca Lee Seil Song Philip Stephenson Suresh Vadnagra Former Executives Craig Jetson(7) Ian Kemish Michael Nossal Granted as remuneration Opening balance(1) STI Plan (2) LTI Plan (3) Net other movements(4) Closing balance(5) Value based on VWAP(6) A$’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$30.20. (7) On cessation, 10,310 Rights granted to Craig Jetson under the 2016 LTI Plan vested as shares, with the balance of 10,310 Rights forfeited. 9,636 restricted shares granted as part of the FY19 STI Plan were forfeited. NEWCREST 2020 ANNUAL REPORT104 Directors’ Report continued 8. Shareholdings continued 8.3. Non-Executive Directors’ Shareholdings A summary of current shareholdings of NEDs, including their closely related parties, as at 30 June 2020 is set out below. Non-Executive Directors Peter Hay Philip Aiken AM Roger Higgins Xiaoling Liu Vickki McFadden Peter Tomsett Opening balance(1) Net other Movements(2) Value based on Closing balance(3) VWAP(4) A$’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$30.20. 8.4. Securities Dealing Policy The Company has a Securities Dealing Policy which prohibits the use by Directors, Executives and employees of hedging and derivatives such as caps, collars, warrants or similar products in relation to Newcrest securities, including shares acquired under the Company’s equity incentive schemes, whether or not they are vested. The Policy also prohibits entry into transactions in associated products that operate to limit the economic risk of their security or interest holdings in the Company. Employees are not permitted to enter into margin loans in relation to Newcrest securities at any time without prior approval from the Chairman or Company Secretary. The Policy is available on the Company’s website at https://www.newcrest.com/about-newcrest/corporate-governance. Directors’ Report continuedDIRECTORS’ REPORT105 9. Statutory Tables 9.1. Executive Remuneration Short Term Termin- ation Benefits Long Term Post- Employ- ment Share-Based Payments Short Term Incentive (B) US$’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 REPORT106 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 REPORT108 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$134,300 divided by the VWAP of Newcrest’s share price over the five trading days immediately prior to commencement of employment on 18 May 2020). Directors’ Report continuedDIRECTORS’ REPORT109 9.5. Non-Executive Directors Remuneration Non-Executive Directors Peter Hay Philip Aiken AM Roger Higgins Xiaoling Liu Vickki McFadden Peter Tomsett Total Total(1) Board Fees US$’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 REPORT110 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 REPORT112 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 REPORT118 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 STATEMENTS119 (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 REPORT120 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 STATEMENTS121 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$25 million. (4) Includes investment in associates and eliminations. NEWCREST 2020 ANNUAL REPORT122 4. Segment Information continued (b) Reconciliation of EBIT (Segment Result) to Profit Before Tax Note 2020 US$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$60 million). Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS5. Income and Expenses (a) Revenue Gold – Bullion Gold – Concentrate Gold – Concentrate treatment and refining deductions Total gold revenue Copper – Concentrate Copper – Concentrate treatment and refining deductions Total copper revenue Silver – Bullion Silver – Concentrate Silver – Concentrate treatment and refining deductions Total silver revenue Total revenue(1) (b) Cost of Sales Site production costs Royalties Realisation Inventory movements Depreciation and amortisation Total cost of sales (c) Corporate Administration Expenses Corporate costs Corporate depreciation Share-based payments Total corporate administration expenses (d) Other Income/(Expenses) Net fair value gain/(loss) on gold and copper derivatives and fair value movements on concentrate receivables Net foreign exchange gain/(loss) Net fair value movement on Fruta del Norte finance facilities Other Total other income/(expenses) (e) Finance Costs Interest on loans Interest on leases Facility fees and other costs Discount unwind on provisions (Note 19b) Debt extinguishment and related costs (Note 6) Total finance costs 123 2020 US$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$3 million). NEWCREST 2020 ANNUAL REPORT124 5. Income and Expenses continued (f) Depreciation and Amortisation Property, plant and equipment Intangible assets Adjustments to inventory on hand or assets under construction Total depreciation and amortisation expense Included in: Cost of sales depreciation Corporate depreciation Total depreciation and amortisation expense (g) Employee Benefits Expense Salaries, wages and other employment benefits Defined contribution plan expense Share-based payments Redundancy expense Total employee benefits expense 2020 US$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 STATEMENTS125 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$370 million of bonds which were due in October 2022. (4) Relates to the write-down of non-current assets at Gosowong. Year Ended 30 June 2019 There were no significant items for the year ended 30 June 2019. NEWCREST 2020 ANNUAL REPORT126 7. Income Tax Expense (a) Reconciliation of Prima Facie Income Tax Expense to Income Tax Expense per the Income Statement Accounting profit before tax Income tax expense calculated at 30% (2019: 30%) Non-deductible exploration and business development expenditure Net unrecognised deferred tax assets Tax effect of losses from equity accounted investments Other Adjustments on Significant items: Write-down of tax assets Write-down of property, plant and equipment Income tax expense per the Income Statement (b) Income Tax Expense Comprises: Current income tax Current income tax expense Adjustments to current income tax of prior periods Deferred tax(1) Relating to origination and reversal of temporary differences Adjustments to deferred tax of prior periods Income tax expense per the Income Statement (1) Refer to Note 18(a) for movements in deferred taxes. 8. Earnings per Share (EPS) EPS (cents per share) Basic EPS Diluted EPS Earnings used in calculating EPS Earnings used in the calculation of basic and diluted EPS: Profit after income tax attributable to owners of the parent Weighted average number of shares Share data used in the calculation of basic and diluted EPS: Weighted average number of ordinary shares used in calculating basic EPS Effect of dilutive securities: share rights Adjusted weighted average number of ordinary shares used in calculating diluted EPS 2020 US$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$m 647 561 2020 No. of shares 2019 No. of shares 776,049,586 768,198,613 2,611,062 2,406,282 778,455,868 770,809,675 Rights granted to employees as described in Note 35 have been included in the determination of diluted earnings per share to the extent they are dilutive. Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS127 9. Dividends (a) Dividends declared and paid The following ordinary dividends were paid during the year: Final dividend: Paid 26 September 2019 (fully franked) Paid 5 October 2018 (fully franked) Interim dividend: Paid 27 March 2020 (fully franked) Paid 22 March 2019 (fully franked) 2020 US¢ per share 2020 US$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$13 million. NEWCREST 2020 ANNUAL REPORT128 RESOURCE ASSETS AND LIABILITIES This section provides information that is relevant in understanding the composition and management of the Group’s resource assets and liabilities. 11. Property, Plant and Equipment Exploration & Evaluation Expenditure US$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 STATEMENTS129 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 STATEMENTS131 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 REPORT132 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 STATEMENTS133 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 REPORT134 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 STATEMENTS15. 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$m 217 (184) 33 Costs incurred in developing information technology systems and acquiring software are capitalised as intangible assets. Amortisation is calculated on a straight line basis over the useful life, ranging from three to seven years. NEWCREST 2020 ANNUAL REPORT136 18. Deferred Tax (a) Movement in Deferred Taxes 2020 Deferred tax relates to the following: – Revenue losses recognised – Property, plant and equipment – Provisions – Other Net deferred taxes Reflected in the statement of financial position as follows: Deferred tax assets Deferred tax liabilities Net deferred taxes 2019 Deferred tax relates to the following: – Revenue losses recognised – Property, plant and equipment – Provisions – Other Net deferred taxes Reflected in the statement of financial position as follows: Deferred tax assets Deferred tax liabilities Net deferred taxes Opening Balance at 1 July US$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 STATEMENTS137 (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 REPORT138 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 STATEMENTS139 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 REPORT140 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$m 395 7,631 8,026 4.9% Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS141 21. Net Debt Newcrest borrows funds from financial institutions and debt investors in the form of committed revolving facilities and corporate bonds. As at 30 June 2020, all of Newcrest’s borrowings were unsecured. Borrowings are initially recognised at fair value and subsequently at amortised cost. Borrowings are net of transaction costs incurred. Borrowings are classified as non-current liabilities where Newcrest has an unconditional right to defer settlement for at least 12 months from the year end. Cash and cash equivalents comprise cash at bank and short-term deposits. Net Debt Other loans Total current borrowings Corporate bonds Less: capitalised transaction costs on facilities Total non-current borrowings Total Borrowings Lease liabilities (current) Lease liabilities (non-current) Total lease liabilities Total Debt Cash and cash equivalents Net debt Note (a) (b) 2020 US$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$2,000 million) with 13 banks (2019: 13 banks). These are committed unsecured revolving facilities, individually negotiated and documented with each bank but with similar terms and conditions. The facilities are on normal terms and conditions and include certain financial covenants. Interest is based on LIBOR plus a margin, which varies amongst the lenders. As at 30 June 2020 and 30 June 2019 these facilities were undrawn. NEWCREST 2020 ANNUAL REPORT142 21. Net Debt continued (c) Bilateral Bank Debt continued The maturity date profile of these facilities is shown in the table below: Facility Maturity (financial year ending) June 2022 June 2024 (d) Financing Facilities The Group has access to the following unsecured financing facilities at the end of the financial year. 2020 Corporate bonds Bilateral bank debt facilities Other loans(2) 2019 Corporate bonds Bilateral bank debt facilities 2020 US$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 STATEMENTS143 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 REPORT144 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 STATEMENTS145 (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 REPORT146 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 STATEMENTS147 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$m – (1) (1) These forward contracts are measured at fair value with the effective portion of fair value movements being recognised in OCI and accumulated in the ‘Cash flow hedge reserve’ in equity. The hedge ineffectiveness recognised in the Income Statement during the year was immaterial. NEWCREST 2020 ANNUAL REPORT148 24. Financial Risk Management continued (a) Commodity and Other Price Risks continued (iii) Financial impacts of hedges The impact of hedged items designated in hedging relationships on the Income Statement and OCI, is as follows: Cash flow hedges Telfer gold sales Diesel Heavy fuel oil Total Line item in the Income Statement Sales revenue Cost of sales – Site production costs Cost of sales – Site production costs Gain/(loss) reclassified from OCI to Income Statement 2020 US$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 STATEMENTS149 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$m 520 3,515 274 63 4,372 444 2,825 120 3,389 Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS151 (d) Interest Rate Risk The Group’s exposure to the risk of changes in market interest rates primarily relates to the Group’s cash and debt obligations that have floating interest rates. The Group is also subject to interest rate risk with respect to the fair value of the FdN finance facilities, which are accounted for at fair value through profit or loss (refer Note 24(g)). The Group’s interest rate exposure together with the effective interest rate for each class of financial assets and financial liabilities at the reporting date is summarised as follows: Consolidated Financial Assets Cash and cash equivalents FdN finance facilities(1) Financial Liabilities Corporate bonds Lease liabilities Other loans 2020 2019 Floating Interest US$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 REPORT152 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 STATEMENTS153 (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 REPORT154 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$m 2,012 1,995 2,330 2,145 (1) The fair value is a level 2 valuation. Fair values of the Group’s fixed rate borrowings are determined by using discounted cash flow models that use discount rates that reflect the issuer’s borrowing rate as at the end of the reporting period. Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS155 2020 US$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$14.87) per share). The shares were purchased on-market to be held by the Trustee on behalf of the Trust to satisfy the future entitlements of the holders of performance rights (and any other rights to acquire shares) under Newcrest’s current and future employee incentive schemes. (3) Represents rights exercised under the Company’s share-based payments plans and executive service agreements. Refer to Note 35 for share-based payments. Issued ordinary share capital is classified as equity and is recognised at the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary shares and the associated tax are recognised directly in equity as a reduction of the share proceeds received. Treasury Shares The Group’s own equity instruments, which are purchased on-market for later use in employee share-based payment arrangements (treasury shares), are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. NEWCREST 2020 ANNUAL REPORT156 26. Reserves Equity settlements reserve Foreign currency translation reserve Hedge reserve Other reserves Total reserves Note (a) (b) (c) (d) 2020 US$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 STATEMENTS157 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 REPORT158 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 STATEMENTS159 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$m 2,258 (1,335) 923 (31) (117) 22 (57) (4) 12 748 26 (116) 658 (192) 466 NEWCREST 2020 ANNUAL REPORT160 29. Deed of Cross Guarantee continued Consolidated Statement of Financial Position Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets Other assets Total current assets Non-current assets Other receivables Investment in subsidiaries Property, plant and equipment Other intangible assets Deferred tax assets Other financial assets Other assets Investment in associates Total non-current assets Total assets Current liabilities Trade and other payables Provisions Current tax liability Lease liabilities Other financial liabilities Total current liabilities Non-current liabilities Borrowings Provisions Deferred tax liabilities Lease liabilities Other financial liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Reserves Total equity 2020 US$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 STATEMENTS161 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$25 million). NEWCREST 2020 ANNUAL REPORT162 31. Investment in Associates Movements in investment in associates Opening balance Acquisition – Lundin Gold Inc Acquisition – Antipa Minerals Ltd Acquisition – SolGold plc Total acquisitions Share of profit/(loss) Share of other comprehensive income/(loss) Foreign currency translation Closing balance 2020 US$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 STATEMENTS163 (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 REPORT164 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$m 804 (30) 774 804 (35) 769 (1) Inclusive of rehabilitation provision. (2) The debt (assumed equipment loans and other interest-bearing liabilities) and working capital balances were subject to adjustment under the APA which was finalised during the year. Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS165 Provisional Fair Value(1) US$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$5 million were incurred during the year. These have been expensed in the Income Statement within ‘Transaction and integration costs’. Refer Note 6. NEWCREST 2020 ANNUAL REPORT166 33. Business Divestment Divestment of Gosowong On 31 January 2020, Newcrest signed an agreement to sell 100% of Newcrest Singapore Holdings Pte Ltd (‘NSH’) which owns a 75% interest in PT Nusa Halmahera Minerals (‘PT NHM’), which operates the Gosowong mine (Gosowong) in Indonesia, and 100% of PT Puncakbaru Jayatama (‘PT PJ’), which employs exploration personnel in Indonesia, to PT Indotan Halmahera Bangkit (‘Indotan’) for consideration comprising: – US$ 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 REPORT168 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 STATEMENTS169 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 REPORT170 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$’000 8,819 77 172 335 6,456 8,165 45 158 – 6,427 15,859 14,795 (1) In 2020, the Group re-examined the classification of Executives in Key Management Personnel (‘KMP’) which increased the number of Executives in KMP in 2020 to seven (2019: five). KMP also includes Non-Executive Directors for which the classification remained unchanged. (b) Loans and Other Transactions with Key Management Personnel There are no loans made to KMP, or their related entities, by the Group. Notes to the Consolidated Financial Statements continuedFor the Year Ended 30 June 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS37. Auditors’ Remuneration (a) Fees to Ernst & Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities Fees for assurance services required by legislation to be provided by the auditor Fees for other assurance and agreed-upon-procedures services: – Transaction accounting services – Sustainability assurance services – Audit-related assurance services Fees for other services: – Sustainability services – Tax and other due diligence services Total (b) Fees to Other Member Firms of Ernst & Young (Australia) Fees for auditing the financial report of any controlled entities Fees for other assurance and agreed-upon-procedures services Total Total fees to Ernst & Young (c) Fees to Other Auditors Audit or review of financial reports of subsidiaries 171 2020 US$’000 2019 US$’000 1,568 – 1,344 – 342 162 266 770 13 74 87 – 225 149 374 – 882 882 2,425 2,600 308 13 321 136 – 136 2,746 2,736 22 23 38. New Accounting Standards and Interpretations The Group has considered accounting standards, amendments and interpretations that have been issued and will be applicable in future periods, however their impact is not considered material to the Group. NEWCREST 2020 ANNUAL REPORT172 Notes to the Consolidated Financial Statements continued For the Year Ended 30 June 2020 39. Commitments Capital Expenditure Commitments Capital expenditure commitments This represents contracted capital expenditure. 2020 US$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 STATEMENTSDirectors’ 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 REPORT174 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 177 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 REPORT180 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 BNP PARIBAS NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD 10 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA 11 PACIFIC CUSTODIANS PTY LIMITED 12 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 13 AMP LIFE LIMITED 14 PACIFIC CUSTODIANS PTY LIMITED 15 NATIONAL NOMINEES LIMITED 16 MCCUSKER HOLDINGS PTY LTD 17 CS THIRD NOMINEES PTY LIMITED 18 BNP PARIBAS NOMINEES PTY LTD 19 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 20 NETWEALTH INVESTMENTS LIMITED Number of Shareholders Number of Shares 60,079 816,071,894 Number of Shares % Issued Capital 398,389,894 159,274,471 113,578,575 26,026,247 15,592,233 9,180,093 4,867,941 4,172,052 2,739,226 2,487,983 2,241,920 1,666,872 1,362,201 1,323,754 1,130,596 800,000 772,433 762,245 734,482 699,431 48.82 19.52 13.92 3.19 1.91 1.12 0.60 0.51 0.34 0.30 0.27 0.20 0.17 0.16 0.14 0.10 0.09 0.09 0.09 0.09 Total 747,802,649 91.63 Substantial Shareholders1 as at 1 September 2020 Name BlackRock Group Allan Gray Australia Pty Ltd and its related bodies corporate The Vanguard Group, Inc. Number of Shares 78,394,4662 80,753,6343 38,436,257 % Issued Capital 10.19 9.90 5.006 1. As notified to Newcrest under section 671B of the Corporations Act 2001. 2. This number includes 83 American Depositary Receipts that, according to BlackRock’s substantial holder notice of 1 April 2020, are non-voting. 3. This number includes 176,759 American Depositary Receipts that, according to Allan Gray’s substantial holder notice of 27 July 2020, are non-voting. 181 Distribution of Shareholders as at 1 September 2020 Size of Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and Over Total Number of Shareholders 45,767 12,470 1,227 562 53 60,079 Number of Shares 13,791,401 26,787,762 8,437,242 11,570,400 755,485,089 816,071,894 % Issued Capital 1.69 3.28 1.03 1.42 92.58 100.00 The number of shareholders holding less than a marketable parcel of ordinary shares was 2,861 (based on the closing market price on 1 September 2020). Unquoted Equity Securities as at 1 September 2020 The number of performance rights on issue under Newcrest’s Equity Incentive Plan was 2,395,480 and the number of holders of those performance rights was 813. Voting Rights Each ordinary shareholder present at a general meeting (whether in person, by proxy or by representative) is entitled to one vote on a show of hands or, on a poll, one vote for each fully paid ordinary share held. The Company encourages shareholders to express their views on the conduct of business by speaking at shareholder meetings or by writing to the Chairman of the Board of Directors. Dividends The Board has determined a final dividend of US 17.5 cents per share for the year ended 30 June 2020. An interim dividend of US 7.5 cents per share was paid on 27 March 2020. Mandatory Direct Credit of dividends applies to shareholders with a registered address in Australia or Papua New Guinea. Those shareholders are unable to receive their dividend by way of cheque. Shareholders should provide or update their bank account details online or via a relevant form (see below Online Share Registry Information). The Dividend Reinvestment Plan (DRP) remains in place and will be offered to shareholders according to the terms of the DRP. A copy of the DRP Rules is on the Company’s website at www.newcrest.com. On Market Buy-Back Newcrest currently has no on-market buy-back program. NEWCREST 2020 ANNUAL REPORT182 SHAREHOLDER INFORMATION Shareholder Information continued American Depositary Receipts Newcrest may also be traded in the form of American Depositary Receipts (ADRs). Each ADR represents one Newcrest ordinary share. The program is administered on behalf of the Company by The Bank of New York Mellon. Contact details are set out in the Corporate Directory Section of this Report, which is on page 184. ADR holders are not members of the Company but may instruct The Bank of New York Mellon as to the exercise of voting rights pertaining to the underlying shareholding. During the 2020 financial year, the net movement for ADRs was an increase of 902,602 and at year-end a net 5,972,421 ADRs were outstanding. Investors The Company’s website at www.newcrest.com/investors has a section where investors have access to market releases, reports, presentations, dividend history, shareholder information, key dates, the Interactive Analyst CentreTM and other information. Online Share Registry Information Visit the Company’s Share Registry, Link Market Services, at www.linkmarketservices.com.au to access a wide variety of your holding information, make the following changes online or download forms. You can: – check your current holding and balances; – update your electronic communication instructions; – update your address and bank details; – confirm whether you have lodged your Tax File Number (TFN), Australian Business Number (ABN) or exemption; – check transaction and dividend history; – enter your email address; – download a variety of instruction forms; and – add or update DRP instructions. You can access your holding via a secure login using your Securityholder Reference Number (SRN) or Holder Identification Number (HIN), which you will find on your holding record. You will also need the postcode recorded on your holding record. Share Registry contact information You can also contact the Company’s Share Registry by calling 1300 554 474 within Australia or +61 1300 554 474 from outside Australia. More Share Registry contact details are set out in the Corporate Directory section of this Report, which is on page 184. Annual Report You can access a full copy of the Annual Report online at www.newcrest.com. If you no longer wish to receive a hard copy of the Annual Report, log into your shareholding or contact our Share Registry to update your communication instructions. Five Year Summary For the 12 months ended 30 June(1) Gold Production (ounces) Cadia(2) Lihir Telfer Red Chris(3) Fruta del Norte(4) Gosowong(5) Bonikro(6) Hidden Valley(7) Total Copper Production (tonnes) Silver Production (ounces) All-In Sustaining Cost (US$ per ounce) Cash Flow (US$m) Cash flow from operations Capital expenditure Exploration expenditure Free cash flow(8) Profit and Loss (US$m) Sales revenue Depreciation and amortisation Income tax expense Net profit after tax: – Statutory profit(9) – Underlying profit(10) Earnings per share and dividends (US cents per share) Earnings per share (EPS): – Basic EPS on statutory profit – Basic EPS on underlying profit Dividends Financial Position (US$m) Total assets Total liabilities Total equity Ratios Net-debt-to-EBITDA (times)(11) Gearing (%)(12) Return on Capital Employed (%)(13) Issued Capital (million shares) at year end Gold Inventory (million ounces)(14) Ore Reserves Mineral Resources 183 2020 2019 2018 2017 2016 843,338 775,978 393,164 38,933 16,422 103,282 – – 2,171,118 137,623 983,431 862 912,777 932,784 451,991 – – 190,186 – – 2,487,739 105,867 1,004,507 738 599,717 955,156 425,536 – – 251,390 114,555 – 2,346,354 77,975 935,856 835 619,606 940,060 386,242 – – 295,876 128,327 10,520 2,380,630 83,941 1,168,812 787 668,773 900,034 462,461 – – 197,463 137,696 72,566 2,438,994 83,070 2,263,837 762 1,471 695 113 (621) 3,922 644 350 647 750 83.4 96.7 25.0 1,487 531 78 804 3,742 746 272 561 561 73.0 73.0 22.0 1,434 541 72 601 3,562 791 118 202 459 26.3 59.8 18.5 1,467 582 58 739 3,477 689 164 308 394 40.2 51.4 15.0 1,241 471 44 814 3,295 698 118 332 323 43.3 42.1 7.5 13,242 4,629 8,613 11,837 4,206 7,631 11,480 4,018 7,462 11,583 4,049 7,534 11,191 4,071 7,120 0.3 6.8 13.8 816 52 110 0.2 4.9 11.2 768 54 110 0.7 12.2 8.8 768 62 120 1.1 16.6 7.9 767 65 130 1.6 22.8 6.2 767 69 140 Includes pre-commissioning production (2016–2017). (1) All financial data presented in this summary is quoted in US dollars unless otherwise stated. (2) (3) Newcrest acquired 70% of Red Chris on 15 August 2019. Production outcomes are from the date of acquisition and represent Newcrest’s 70% share. (4) Represents Newcrest’s attributable share of 32%. (5) Production from Gosowong is shown up to the divestment date of 4 March 2020. (6) Production from Bonikro is shown up to the divestment date of 28 March 2018. (7) Production from Hidden Valley is shown up to the economic effective disposal date of 31 August 2016. (8) Free cash flow is calculated as cash flows from operating activities less cash flows relating to investing activities. (9) Statutory profit is profit after tax attributable to the owners of the Company. (10) Underlying profit is profit after tax before significant items attributable to the owners of the Company. (11) Calculated as net debt divided by EBITDA of the preceding 12 months. Calculated as at 30 June. (12) Calculated as net debt divided by net debt and total equity. Calculated as at 30 June. (13) Calculated as EBIT to average total capital employed. (14) Reserves and Resources are as at 31 December 2019 for 2020, 31 December 2018 for 2019, 31 December 2017 for 2018, 31 December 2016 for 2017 and 31 December 2015 for 2016. NEWCREST 2020 ANNUAL REPORTCompany Events Annual General Meeting (to be held virtually) 11 November 2020 at 10:30am (Melbourne time) Visit our website at www.newcrest.com to view our: key dates; current share price; market releases; annual, quarterly and financial reports; operations, project and exploration information; corporate, shareholder, employment and sustainability information. 184 Corporate Directory Investor Information Registered and Principal Office Newcrest Mining Limited Level 8 600 St Kilda Road Melbourne, Victoria 3004 Australia T: +61 (0)3 9522 5333 F: +61 (0)3 9525 2996 E: investor.relations@newcrest.com.au www.newcrest.com Company Secretaries Maria Sanz Perez and Claire Hannon Newcrest Mining Limited Level 8 600 St Kilda Road Melbourne, Victoria 3004 Australia T: +61 (0)3 9522 5333 F: +61 (0)3 9522 5500 E: ria.sanz@newcrest.com.au claire.hannon@newcrest.com.au Investor Relations Tom Dixon Head of Investor Relations and Media Newcrest Mining Limited Level 8 600 St Kilda Road Melbourne, Victoria 3004 Australia T: +61 (0)3 9522 5570 E: tom.dixon@newcrest.com.au Ryan Skaleskog Finance & Investor Relations Manager – Americas Newcrest Mining Limited Level 8 600 St Kilda Road Melbourne, Victoria 3004 Australia T: +1 866 396 0242 E: ryan.skaleskog@newcrest.com.au Stock Exchange Listings Australian Securities Exchange (Ticker NCM) PNGX Markets Limited (Ticker NCM) New York ADRs (Ticker NCMGY) Share Registry Link Market Services Limited Tower 4 727 Collins Street Docklands, Victoria 3008 Australia Locked Bag A14 Sydney South, New South Wales 1235 Australia T: +61 1300 554 474 (toll free within Australia) F: +61 (0)2 9287 0303 +61 (0)2 9287 0309* * For faxing of Proxy Forms only. E: registrars@linkmarketservices.com.au www.linkmarketservices.com.au PNG Registries Limited Level 4, Cuthbertson House Cuthbertson Street Port Moresby, NCD Papua New Guinea PO Box 1265 Port Moresby, NCD Papua New Guinea T: +675 321 6377/ 78 F: +675 321 6379 E: brenda@online.net.pg American Depositary Receipts (ADRs) BNY Mellon Shareowner Services PO Box 505000 Louisville, KY 40233-5000 USA T: + 1 888 BNY ADRS or +1888 269 2377 (toll free within the US) International Callers: +1 201 680 6825 E: shrrelations@cpushareownerservices.com www.mybnymdr.com newcrest.com

Continue reading text version or see original annual report in PDF format above