Earnings Transcript for NCM.AX - Q2 Fiscal Year 2022

Operator: Thank you for standing by and welcome to the Newcrest Mining’s 2022 Half Year Results. All participants are in a listen only mode. There will be a presentation followed by a question-and-answer session [Operator Instructions]. I would now like to hand the conference over to Tom Dixon, Head of Investor Relations. Please go ahead.

Tom Dixon: Thanks very much, operator. Good morning, everyone, and welcome to Newcrest’s FY’22 Half Year Results Conference Call. I will just let you know, this call is being recorded today, Thursday, the 17th of February 2022. I will also just remind people that Newcrest is a U.S. dollar reporting entity, and all dollar references in the slides today are to U.S. dollars. Any references to the prior period is to the 6 months ending 31st of December 2020. I will now hand over to our Managing Director and CEO, Sandeep Biswas.

Sandeep Biswas: Thanks, Tom. It has been a very eventful first half for Newcrest. We have taken significant steps forward in our profitable growth agenda, and we have set up our operations for a stronger second half and a very bright future. This half, we had a big operational focus on major maintenance and productivity improvements with the planned replacement and upgrade of the Cadia SAG mill motor and the rebricking of Autoclave 4 at Lihir. The SAG mill is now operating at full capacity, and we expect production to significantly increase in the second half. In that context, our financial results were solid with the statutory and underlying profit of $298 million, in line with our expectations. We are all still witnessing the significant impact of the COVID-19 pandemic across the world. But pleasingly, our operations were able to continue producing throughout the half. And I want to personally thank our people for their hard work and dedication during this challenging time. COVID-19 still remains a risk for the business, and this continues to be very closely managed. We are also very pleased to announce the findings of the Red Chris Block Cave, Havieron Stage 1, Lihir Phase 14A and Cadia PC1-2 pre-feasibility studies during the period. And works have been advancing on each of these projects. The studies overwhelmingly demonstrate the depth and quality of our global organic growth portfolio and create an exciting pathway for one of our operating assets - for each one of our operating assets in the future. In November, we announced a deal to acquire Pretium Resources. As I mentioned at the time, Brucejack is an asset we have been watching and evaluating for many years now, and we are absolutely delighted that an ore body of its grade, quality and significant potential will become part of our already exceptional asset portfolio. We have also progressed plans to expand Cadia during the period, and our drilling results at Red Chris and Havieron continue to demonstrate fantastic potential. We continue to work diligently on our plans to extend the life of Telfer, and the West Dome cutback is well underway and progressing to plan. Today, we have announced a major increase across our mineral resources and ore reserves with a 10% increase in gold ore reserves to 54 million ounces compared to this time last year. This is an incredible movement and reinforces our unrivaled long reserve life advantage compared to our North American and Australian peers. This is a genuinely exciting time for Newcrest and a significant step forward in our Forging an Even Stronger Newcrest plan. At Newcrest, safety is core to how we run our business. We remain dedicated to the safety and well-being of our workforce to ensure that everyone goes home safe and healthy every day. However, it is been a challenging start to the year for Newcrest in relation to injury rates. These have increased during the period, mainly driven by a number of minor hand-related injuries. This trend is unacceptable, and our team is working around the clock to improve our safety performance going forward. Our NewSafe training program remains central to ensuring all new employees and contractors understand our safety culture and the values that have driven our safety transformation. Critical to our Forging an Even Stronger Newcrest plan is building a high-performing, inclusive and psychologically safe work environment. And we continue to roll out a range of initiatives across the organization during the period. And our Respect@Work program continues to progress with a dedicated project team now in place to eliminate behaviors associated with sexual assault and sexual harassment in the workplace. We want everyone to feel safe and empowered to speak up and to be included and to feel engaged. As part of that, we are focusing on psychological safety. And our goal is to establish the same strong track record for that as we have for physical safety across our workforce. Like safety, sustainability is core to how we run our business. This is constant work in progress as we look for ways to care for our environment, develop and maintain strong relationships with our communities and governments and make ethical and transparent strategic business decisions. I’m pleased with the progress we have made towards our sustainability commitments during the period. Along with many of our peers in the resources here, we have a goal of net zero carbon emissions by 2050. This is a fantastic goal, but we need to turn it into an action plan and to take concrete steps to deliver on our commitments. Our dedicated project team has been working to develop our Group Net Zero Carbon Emissions Roadmap, which will outline the detailed steps Newcrest will take to reduce our carbon emissions and to manage climate change risks and opportunities. We have a strong track record in identifying and employing innovative technologies, and we look forward to applying that skill set to support the transition to a low-carbon future. With Pretium due to join our portfolio, we look forward to leveraging their industry-leading sustainability initiatives as well. Brucejack has one of the lowest greenhouse gas emissions intensities of any operating gold mine in the world and will be a great fit into our sustainability agenda. It was also pleasing to see the Rye Park Wind Farm reach financial close during the period and commence construction. This renewables project will secure a significant portion of Cadia’s future projected energy requirements and is expected to achieve commercial operation in 2024. Our $20 million community fund has supported more than 65 initiatives since its inception, including health assistance, livelihood restoration and economic recovery in PNG, Australia, Canada, Ecuador and Fiji. It is been a tremendous support to many people in our communities, and we look forward to continuing this program into the future. Since we announced the findings of Cadia PC1-2, the Red Chris Block Cave, Havieron Stage 1 and Lihir Phase 14A pre-feasibility Studies, works have been advancing on each of these projects as they progress through the feasibility stage. Some project activities have experienced a few disruptions relating to COVID, but the teams are managing the impact on the overall schedule, and we remain committed to delivering each study on time. These studies represent the work of many highly skilled people across many years to position Newcrest with such a fabulous range of high-quality and capital-efficient growth options. As highlighted on this slide, each project is expected to deliver a real after-tax internal rate of return higher than 16%. At the spot gold and copper prices at the time of the release, the estimated economics improve even further to at least 22% on all four projects, noting that spot prices, as we speak, are even higher today. The studies are expected to create $3.6 billion net present value to Newcrest, increasing to over $5 billion at the higher metal prices you see on this slide. Works are advancing on all these projects, and we continue to evaluate and progress opportunities to extract the full potential of all of them. I’m also excited to highlight our cost profile going forward. I think this is something that really differentiates Newcrest. If you combine the results of these 4 studies with the expectations from our existing assets, our all-in sustaining cost per ounce is anticipated to half, falling to less than $500 per ounce in FY’30. If realized, this cost position is without comparison in our industry at this scale. The material growth in our copper production comes exclusively from Tier 1 jurisdictions and will assist our all-in sustaining cost position with the addition of byproduct credits from Cadia and Red Chris. And there is also further potential upside in our copper growth story with the development - or the potential development of Wafi-Golpu, which is not included in our base case. The development of Namosi - it can’t also be - it is excluded from our base case, but at current copper prices, this is difficult to rule this project out also. As we foreshadowed to the market, Cadia had a slower start to the year due to the replacement and upgrade of the SAG mill motor. This was the first time a gearless mill motor of its size and foundation anywhere in the world has been completely removed, replaced and upgraded. It was a tremendous achievement for our team to safely complete the project after nearly 5 years of planning and more than 150 people involved. It sets Cadia up for a fabulous second half with the mill now operating at full capacity. We also had some great news in December with regulatory approval received to increase the permitted processing capacity at Cadia to 35 million tonnes per annum. Increasing the capacity of the mill was part of the Cadia expansion project, which is on track for completion in the upcoming September quarter. Key activities are well progressed, including development of PC2-3, upgrading the material handling system, improvements to gold and copper recovery and other associated infrastructure. We also received approval to repair the slumped section of the Northern Tailings dam at Cadia. We plan to progress the remediation once our design work is fully complete. And finally, the Moly plant delivered the first concentrate production at Cadia early this year, and the team is working hard to ramp up the plant and improve the product specs. Moly will be an additional revenue stream for Cadia into the future, and we estimate it will provide a life-of-mine average of around $50 per ounce benefit to Cadia’s already low all-in sustaining cost. Lihir had a challenging start to the financial year. Planned and unplanned shutdown activity impacted mill throughput, and heavy rainfall limited access to higher-grade ore in the pit. Despite the heavy rainfall, we have seen mining rate increase in the first half compared to the prior period. This is in line with our plan to increase mining rates to 50 million tonnes per year to meet our base case production schedule. Mining rates will continue to increase in the second half, and additional pumping capacity installed into Phase 14 in January will limit the impact of weather events during the second half. Lihir is also expecting higher-grade ore from Phase 14 and increasingly high- and medium-grade ore from Phase 15. Together with the higher mining rates and lower maintenance schedule, this should increase gold production in the second half. We still expect Lihir to meet production guidance in FY’22, although gold production is likely to be at the lower end of the 700,000 to 800,000-ounce range. We remain on track to complete the Lihir Phase 14A feasibility study in the fourth quarter. And as this slide highlights, we have made some great progress in ground support, anchor drilling and installation. We have also commenced drainage works and procurement of additional mobile equipment, and our ground support trial results have been positive. Realizing Lihir’s potential to be one million ounce plus per annum producer is a fabulous opportunity for the company, and we continue to work to achieve this milestone. The potential of Red Chris for Newcrest continues to unfold. The pre-feas study announced last year reflects only Stage 1 of our growth aspirations, with an initial ore reserve of 8.1 million ounces of gold and 2.2 million tonnes of copper. The significant upside potential for Red Chris is becoming clear. Results at our new East Ridge discovery continue to expand the footprint of the mineralized corridor with the latest drill results intersecting a high-grade mineralization within the Eastern extent of this prospect, and it also remains open to the East and at depth. We also have the potential for early mining of the high-grade pods in the East Zone. We continue to study this option in parallel with the block cave studies, and this could bring forward the benefit of this high-grade material into our cash flows while we develop the cave. Havieron 1 has a compelling future based on the pre-feas study outcomes, which were based on only a small proportion of the initial mineral resource estimate. We have had excellent growth drilling results at Havieron during the first half, including the highest-grade mineralization drill result outside of the Southeast Crescent Zone. This intercept was within the Eastern Breccia corridor. And as you can see on this slide, it sits outside of the inferred mineral resource estimate. The results also confirm the likelihood that the Havieron region hosts additional high-grade zones, indicating significant potential for further resource growth. We have experienced some difficulty with poor ground conditions at Havieron during the period, which has impacted the progress of the exploration decline. And our team is currently working to understand the potential impacts to the project schedule and how we can recover some of the lost time. We still expect first ore production from Havieron in FY’24, and we will provide updates as more information comes to hand. Our team is also working hard to progress some exciting opportunities to extend the mine life at Telfer, including in the open pit and underground. The West Dome Stage 5 cutback is also progressing well, and we expect this project to support continuity of the Telfer operations into FY’24. We were absolutely delighted to announce the agreement to acquire Pretium Resources in November last year. And we are very pleased that the Pretium security holders voted overwhelmingly in favor of the transaction last month. The transaction positions Newcrest as the leading gold miner in British Columbia’s Golden Triangle, a region that we know well already, where we have established strong stakeholder relationships and where we are very pleased to be expanding our presence. Brucejack is one of the highest-grade operating gold mines in the world and will drive a material increase in mineral resources, ore reserves, annual gold production and cash flows as well as asset and geographic diversification. It has exciting exploration potential, and the large mineral endowment provides both near-mine and district-scale exploration opportunities. As I said, it is been a very busy time for Newcrest. And as highlighted on this slide, we have a number of important milestones approaching us in the near term. We remain on track to release several feasibility studies over the next year, and we are confident these studies will provide even more upside for Newcrest. And we also expect to close the Pretium deal this quarter, after which we will provide the market with a more fulsome update on our plans for Brucejack. Overall, we are thrilled on how our portfolio is positioned and is developing going forward. We will have exposure to six Tier 1 ore bodies, five of which will be operating with an unmatched reserve life advantage compared to our peers. We continue to have a strong and strategically advantageous presence in Australia with Havieron, Telfer, and our world-class Cadia mine is also set to deliver strong cash flows and earnings for our business for many years to come. And we have accelerated our aspiration to be a one million ounce plus producer for Lihir from FY’24. Our equity interest in Lundin Gold, owner of the Fruta del Norte mine, offers significant value. And the financing facilities we acquired from Lundin have provided us with over $160 million in cash flows to date. This is a genuinely exciting time for Newcrest and highlights our commitment to deliver superior returns to our shareholders. I will now pass over to Kim, who will discuss Newcrest’s financial performance for the first half and a very strong balance sheet position.

Kim Kerr: Thanks, Sandeep, and hello, everyone. In the current period, we delivered an underlying profit of $298 million and all-in sustaining cost margin of $502 per ounce and an operating cash flow of $423 million. Our first half performance was in line with our expectations following the planned replacement and upgrade of the Cadia SAG mill motor and lower production at Lihir. As highlighted by Sandeep, we expect our operating and financial performance to improve in the second half, and we are on track to deliver our FY’22 group guidance. Newcrest continues to monitor the impact of cost inflation across the global industry. In the first half, our results were impacted by rising concentrate freight costs driven by tightness and challenges in the sea freight market. We are also seeing labor and consumable costs increase with growing demand, constrained supply and the impact of underlying commodity price increases. And we were also impacted by the strengthening Australian dollar and, of course, additional costs to manage COVID across the business. Importantly though, Newcrest continues to be proactive and collaborate with our suppliers to identify ways to manage these cost pressures and improve our cost profile. And we have worked hard over many years to get Newcrest into a financial position where it can pursue profitable growth opportunities when they arise. I am pleased to say that we have invested just under $500 million in major capital projects and exploration activities during the first half. And in December, we announced the sale of our portfolio of 24 royalties for total cash consideration of approximately $37.5 million. This transaction highlights our capital discipline across our whole business and unlock further value for our shareholders. This slide highlights strong balance sheet and long-dated debt maturity profile. At 31 December 2021, we have access to $3.2 billion of liquidity, and our next corporate bond debt repayment is not due until 2030. We will draw down on this existing liquidity to fund the cash element of the Pretium offer consideration, and we will still retain considerable capacity to execute our pipeline of organic growth projects at Cadia, Red Chris, Havieron and Lihir. Our strong free cash flow and debt reduction over many years has placed Newcrest well within our financial policy metrics. Our leverage ratio of 0.2 times at 31 December 2021 remains well below our target of being less than two times EBITDA. And our gearing of 4.5% is significantly below our target of being less than 25%. We also retain our investment-grade credit rating, which gives us good access to all capital markets if and when needed. Our dividend policy is clear. We look to pay dividends that are sustainable over time, having regard to our cash flow generation, growth opportunities, financial metrics and balance sheet with annual total dividends being at least USD 0.15 per share on a full-year basis. Based on these considerations, we have announced an interim fully franked dividend of USD 0.075 per share, which will be paid at the end of March. And with that, I will now hand back to Sandeep.

Sandeep Biswas: Thanks, Kim. So what does all this mean for Newcrest? Well, we believe it shows that Newcrest is a unique investment in the gold industry. Our long-life, high-margin production is expected to be delivered at an extremely competitive all-in sustaining cost, which means strong profits and margins even at lower gold prices. We have an outstanding organic growth portfolio. And with the addition of Brucejack soon, we will be producing well over two million ounces of gold over the next decade or so. Our substantial and increasing exposure to copper exclusively in Tier 1 jurisdictions is also exciting for our shareholders, and we have even more growth options not included in our base case projections. We remain relentlessly focused on safety, building an empowered and inclusive culture and building our sustainability credentials across all dimensions. With our excellent exploration and technical capabilities and our strong balance sheet, we are very well positioned for the future. This is a fabulous place for the company to be, and we believe this makes us a very attractive investment proposition for all investors. With that, we are now open to questions.

Operator: Thank you [Operator Instructions]. Your first question comes from Mitch Ryan from Jefferies. Please go ahead.

Mitch Ryan: Good morning, Sandeep and team. Thank very much. I just wanted to focus on Stage 14 out of Lihir. With the ground support trials concluded, I’m just wondering if you could give us some metrics around sort of the cost of inflation that we may be thinking about and also how you will be treating those costs. Will that be going to operating costs? Or will you be capitalizing them?

Sandeep Biswas: I think on 14A, and Kim may know this, but there is - obviously, it is partly capital and partly operating. But the good news from the geotech works that you are talking about is that we are seeing that the ground conditions are better than what we assumed, which is really good news. And the anchors are all testing fine. So I think that methodology that we - and this is what we are doing in the trials to make sure it works, demonstrate that it does work and it is better than expected. So that is good news. In terms of cost inflation, I mean, that would depend from place to place. I mean this is - equipment and people are already mobilized and the drills are already on site. So the only exposure there is if there is any further inflation in labor or something like that, but it is a highly specialized and small crew. So I wouldn’t expect any major changes in relation to the 14A development. But in terms of the CapEx OpEx split, I just don’t know that off the top of my head..

Kim Kerr: You will see a bit of a mix coming through that. So the infrastructure that Sandeep has talked about that is on site and the waste movement, you will see that coming through capital. And as we work throughout our ore, you will see some mining costs coming through. So there is a bit of a mix of treatment over the next few years as we work through that.

Mitch Ryan: Thank you. And my second question relates to Cadia, just following the SAG mill upgrade. I was just wondering if you could sort of - you said it is running at full capacity. So just to confirm, that is running at sort of the 32 million tonne per annum throughput rate or - not above? And can you -.

Sandeep Biswas: So we are in the process of testing its limit, as you can imagine. So we did stockpile ore during the time that the SAG mill was out for replacement. And now the team is in the process of fine-tuning it and making sure that we can really optimize and chew through that stockpile while the mine ramps up to meet that approval rate that we are getting. And obviously, our target is 35 million tonnes, in line with our permit. So we are just in the middle of that process. But it was a very smooth transition over, and it seems to be operating extremely well.

Mitch Ryan: Okay. Thank you. I will pass it on.

Operator: Your next question comes from Daniel Morgan from Barrenjoey. Please go ahead.

Daniel Morgan: Hi Sandeep and team, first question just on Lihir. Now you have given greater COVID costs in your guidance today. Just wondering if there is also a productivity issue we should be thinking about. I mean looking at Lihir, it has to have a very strong second half to meet the lower end of guidance. I’m just wondering if you could elaborate on your confidence in some of the drivers on why improvement will occur in the second half. Thank you.

Sandeep Biswas: Yes. No, it is a very good question. COVID costs have increased than what we expected due to all the number of isolations, et cetera, that we have had. But a very important point on COVID is along with other mines in PNG, Lihir has now gone to the endemic phase of management as opposed to pandemic. So what we are doing is only treating people and isolating people who are symptomatic, which is what you do in the endemic phase. It is been done successfully elsewhere in PNG, and that will obviously de-constrain any issues we otherwise would have had in terms of isolating positive cases. So that is an important step to free up our productivity because that has been impacted due to COVID and et cetera. The other drivers will be access to 14A high grade. That was limited during the heavy rains of the last half. But this is where the pumps I referred to that we are going to put in there will allow us to de-water much quicker after rain events and get into that high grade at the base of Phase 14. And as we are getting more and more into Phase 15 and the pre-strip is being done, we will be getting access to higher amounts of medium to high grade from Phase 15. Look, this is not going to impact this year that much, but towards the tail end of Q4, we will also start to see some ore from Phase 14a. But that is going to have more of an impact in future years.

Daniel Morgan: Okay. You highlighted ground conditions at Havieron impeding progress to date just on that decline. Can you expand on this? Is it just near surface this issue has arise or is it an issue you think in the - an ongoing issue?

Sandeep Biswas: We were always anticipating issues in the - as you get through the first 400 meters of cover. And what we are finding as we started the decline, those conditions were worse than we imagined. I mean you could only do limited cuts before you had to shore it all up again. Otherwise, you’d have the materials sort of real around the side. So that slowed us down a lot. We have changed the design a little bit. So we were going to go on a decline straight if you can - so straight but at a decline and then step down to the next level. We have brought that forward where we are now going down in the spiral earlier in the decline and then continue the decline after that. This is to try and get through that 400 meters of cover as soon as we possibly can and get into the better ground conditions so we can start accelerating. Now exactly what the impact of all of that is, we are working through now. But that is fundamentally the issue that we have encountered.

Daniel Morgan: And you highlighted the copper opportunity at Wafi-Golpu. Again, just wondering if you could elaborate on if there is any movement at all in government relations from what we have seen.

Sandeep Biswas: Well, just literally in the last two or three weeks, there is been a movement on the ranch, so to speak. So lots more discussions with the state negotiating team. But they are going to go into election mode very soon. So I don’t really anticipate an agreement before the government has to go into caretaker made. But we are right in the middle of another flurry of discussions. And it is one of those things of you take the ball forward in incremental steps, and this is an opportunity to potentially to take the ball forward. But I don’t know that we will necessarily get an agreement before the election. I mean you can never tell, but it is unlikely, in my view.

Daniel Morgan: Okay. Thank you very much Sandeep and Kim.

Operator: The next question comes from Levi Spry from UBS. Please go ahead.

Levi Spry: Hi Sandeep thanks for the call. And maybe just following up on the Golpu question. So what are you doing? Are you updating any studies or is there any project works happening at all?

Sandeep Biswas: No. It is essentially a caretaker mode. We have got a small team up there. I think given the - I mean we have had a couple of false starts in the past. I think the intent now is let’s get an agreement and then let’s focus on the critical path, which is about some of the infrastructure work, which we had started, but we stopped because, as you know, we had an MOU with the government, which then got put on ice as the government changed. If we start on that work again, that scope is already fixed, and we know what to do, set up for the box card and starting the decline. And while all that is occurring, we will relook at the study and obviously reestimate it but more and more importantly, bring some of the improvements that we have learned since the time that Golpu was originally designed in terms of caving, in terms of tunneling and also in terms of process flow sheet design.

Levi Spry: Okay. Thank you. And just in terms of Pretium, so most of the approvals have come through. You talk about completion this next quarter - this quarter.

Sandeep Biswas: This quarter.

Levi Spry: Yes. How do we model it? Yes. So how do we model it? What is the economic interest? When will it start flowing through?

Sandeep Biswas: Well, for an engineer like me, I would say the day we take over, we start there our ounces. But Kim, you might want to give a more sophisticated answer than that.

Kim Kerr: I think the engineer covered it quite well. So from the day that we do get the completion, that is when we will start consolidating it, as you see with all of our other fully owned operations. So 100% from whenever that date that actually is.

Levi Spry: Okay. So two questions. questions. When will you be in a position to give us guidance post that? And what is backdated? So does it commence from when it was approved? Is it a black box type arrangement or how do we think about what is happening right now?

Kim Kerr: So it is from the day that it completes. There is no backward stating. So whenever that date actually is, we will be consolidating both the financials and the production numbers from that date forward, no backdating. And I think in regards to guidance, we will get the team on the ground on that day. And once we spend some time getting through the detail of speaking closely with the management and the like, we will be in a much better position to put some meaningful guidance out to the market.

Levi Spry: Okay. Thank you. So just moving on to Telfer. So extending mine life to FY’24, but just this idea of maybe a - what happens after that, I guess? How are we thinking about plans for production post that in combination with Havieron?

Sandeep Biswas: Yes. So I mean the first target is to make sure there is no gap between Telfer and Havieron. And from what we are finding from our drilling that we are doing in addition to the West Dome cutback, there may be another potential cutback that we are now doing some more drilling on to see if that stacks up. And as you know, underground, we have moved from trying to find another big ore body underground to incremental discovery, which is proving highly successful. We are finding all sorts of pods, some with quite high grade, that we are discovering and mining as we go. So we will aim to continue that. And first win would be to make sure there is no gap between Telfer and Havieron. And the second one is do we run it in parallel. Have we found enough to just run it in parallel with Havieron? We will dedicate one of the lines to Havieron in that scenario, and the other line, this is the production train in the mill with focus on Telfer or if that was that scenario.

Levi Spry: Okay. Thank you. And last one, sorry, I’ve been cheeky with so many. But just in terms of the longer-term guidance, so less than $500 an ounce all-in sustaining cost by FY’30. Pretty amazing headline. How could that change? It is a long way away. There is a lot of copper involved there. There is not much gold. There is not life extensions at Telfer. Yes. A lot of copper production subsidizing, I guess, high-cost Lihir. Just walk us through.

Sandeep Biswas: But Lihir, once it is - yes, because Lihir is such a high fixed cost business, you get smashed when your ounces are down. But when your ounces are up, as they will be with the higher grade coming through as we get deeper and deeper into carpet, that margin and contribution from Lihir goes up dramatically as it pertains to all-in sustaining cost coming down and obviously the margin going up. And the copper flowing through from Red Chris, along with the gold ounces, are extremely cheap ounces. I think they are negative in all-in sustaining cost. And that base case we described - what are the price assumptions for that base case, Kim? I think it is - is it -.

Kim Kerr: I just have to look that up. Sorry.

Sandeep Biswas: Kim, I think it is $3 -. Anyway, we published all this a few months ago, but it is nowhere near where the spot prices are today. So the risk would come from timing and delivery of our projects. And obviously copper and copper price from the byproduct credit viewpoint. But prices stay where they are, which I mean, who knows? Then it might look even better.

Levi Spry: Okay, thank you. Thanks.

Operator: [Operator Instructions] Next question comes from Al Harvey from JPMorgan. Please go ahead.

Al Harvey: Hey, Sandeep, Sandeep, just one for me. On the Telfer reserve, you mentioned that you have removed O’Callaghans from the reserve, like pending strategic tech and financial studies. So that is a fairly sizable share of Telfer’s copper resource. Can you just talk us through that review and how material that is in terms of mine life and general plans there at Telfer and with Havieron?

Sandeep Biswas: Yes. O’Callaghans has never really been factored into the mine life of Telfer itself. That would have to be a stand-alone, or we’d have to dedicate some of the infrastructure in the processing to treat the ore because that is got a lot of - it is got a lot of zinc in it. It is got multiple minerals in it. So that - but the reason we took it out is that original study is a bit long in the tooth. And so we have taken it - it is still in the resource, but I think it has gone from a reserve. So as part of this review - and a lot of this is associated with the market, right? I mean if you - if we focus purely on costs, we’d be mining O’Callaghans today. It is all about how much material it brings on the market and how do you make sure that the market is ready to receive it and that the price - that the price isn’t necessarily influenced by you coming online. So these are the considerations we will look closer into. I mean these sort of materials are becoming more important going forward, and there will be a time where I think that will make sense. But we have got a lot on our plate at the moment. It doesn’t affect the Telfer base case, and we thought it was prudent to make that call.

Operator: The next question comes from Anthony Barich from S&P Global Market Intelligence. Please go ahead.

Anthony Barich: Hi, So you spoke about your net zero road map on its way and Brucejack, obviously, having one of the lowest emissions profiles in the world. Just wondering with the carbon tax going up there in British Columbia, how do you manage the risk of the rising price there and does it matter - does it impact the operations economics necessarily or not so much because of the high renewables uptake in the grid?

Sandeep Biswas: Yes. It really is the high uptake of renewables. And speaking with the BC government, I mean they have a plan to make sure that they are 100%, not just 90%, whatever is percent carbon-free, at least as it pertains to the hydropower going on to the grid. And Pretium are already well advanced in their thinking on how to electrify their loader fleet, and together with all the work we are doing at Newcrest. I think the places where you have hydropower like there and FDN and Red Chris, it is a real privilege to benefit to only have to focus on on-site emissions really because the off-site will look after themselves from your feed. So it allows us to really get some traction as this technology - electrified technology comes into mainstream in relation to on-site emissions.

Anthony Barich: Just as an industry, do you see gold mines going underground perhaps a bit more given that they seem to have a more favorable emissions profile or is it not as simple as that, operationally?

Sandeep Biswas: It is hard to see the economic drivers. So this is carbon costs, et cetera, et cetera, that would form - that would make you go - it will be unusual situation that, that would force you to go underground instead of surface. But I think the technology both on surface and underground of electrification, coupled with decarbonizing the incoming, I mean, that is obviously - that is the obvious way to go. And then whether you go underground or on surface depends on the ore body you have as opposed to something else driving you that way. And yes, I’m a big technology fan, and I just see that sort of the technology, particularly on on-site emissions, really starting to accelerate as we go forward.

Operator: Your next question comes from Simon Mawhinney from Allan Gray. Please go ahead.

Simon Mawhinney: Hi good morning. Sandeep, Sandeep, would you mind commenting, please, on your 6% annualized return on equity as reported as compared to the greater than 20% IRR post tax that these projects apparently deliver at spot prices?

Sandeep Biswas: Well, these are all great projects going forward, Simon. I mean there is - I mean that is a future-looking projection of these projects, which will all deliver high returns. And over time, we should start seeing that number that you quote improving over time.

Simon Mawhinney: So your - I guess your incumbent asset base is prejudiced relative to your incremental capital spend. Is that the right way to interpret that?

Kim Kerr: If I may, there is probably recognition that Lihir is a very large part of our asset base and obviously a historical asset purchase. And that is the one, Simon, that you will see is driving our current return on capital versus what you will see in those future studies.

Simon Mawhinney: Okay, thank you. And the second question I have, and I only have two. With respect to Pretium, you mentioned it is accretive to Newcrest’s EBITDA and cash flow. And any acquisition of a profitable company or asset would do exactly that. And I think it is an unhealthy focus. I’m curious, when will Newcrest shift its focus to per share metrics?

Sandeep Biswas: Well, Simon, we don’t look at per share metrics, but the reasons for buying into Pretium go beyond just being accretive from an EBIT - I mean it is a major strategic play for us. We believe there is a lot more upside in what is contained in the existing ore body and future exploration. And that is where the big value driver will come from, and that will flow both into absolute metrics and per share metrics.

Simon Mawhinney: And when you make these acquisitions, do you compare them to your own share price - or your own shares, I should say - our shares, I should say?

Sandeep Biswas: Yes, we do. But that is just a whole broad set of things that we look at because we can’t just look at the per share metrics on the day of acquisition. We have to look about what can we do with the asset and look at it on that basis, right, in addition to what it does strategically in terms of asset, geographic diversification, yes, things like your emissions profile, et cetera. So it is not just a single metric decision. There is multiple facets, as you know and would appreciate, Simon, when we evaluate any potential investment. In this particular case, that happens to be an acquisition.

Operator: Your next question comes from Peter O’Connor from Shaw and Partners. Please go ahead.

Peter O’Connor: Good morning, Sandeep, just want to circle back to a few questions. So Havieron decline. Just to get some - clear the answer that you gave, you are putting down a decline which is going straight down but at a decline. You have now gone more to a spiral. That is quite a change in such an early stage of a decline. The condition is that bad and is that something we should be deeply concerned about?

Sandeep Biswas: We were going to - well, we are concerned about the progress we are making. We sort of said the design always had a spiral. But it was further down the decline, and then we spiral down and then continue the decline. All we have done is brought that spiral forward. So it will essentially be the same tunnel length more or less. It is just that spiral piece comes forward as opposed to where it was originally going to go just so we get vertically down quicker.

Peter O’Connor: And the condition is more related to a particular stratum or an aquifer? Or is it broad-based across that sort of first 400 meters?

Sandeep Biswas: At the moment, where we are now, and obviously, it is variable where we are now, it seems fairly evenly distributed.

Peter O’Connor: Okay. And to Telfer, when you talked about the mill and potentially running Telfer longer and then using the two trains split between Telfer and Havieron. Previously, I think on calls, you talked about campaigning. Is that still the way you think about packaging and setting the ore through the mill given the size of Havieron versus Telfer or is that comment you made different to that prior comment?

Sandeep Biswas: So we will be modifying the design of one of the trains mainly to take into account the high-grade ore from Havieron, particularly copper. This is in the flotation and the leaching section. And so we will dedicate one train to Havieron. Now initially, at the lower tonnages, we expect to campaign. But if as we hope over time that we can expand the mining rate and size of Havieron, then once you get above around 6 million tonnes, around that plus, then you probably go to a continuous-type operation, bearing in mind each of these lines have about 10 million or 11 million tonnes capacity. So they have a limited turndown ratio. But because of the mineralogy and the grade of the broader Telfer ore bodies, you would just use that through the other train and not mix it with Havieron.

Peter O’Connor: Got it. Okay. And just back to the - yes. That makes sense. Appreciate the color. Pretium, just to try and pencil - hone in on that guidance. So you closed this quarter. Is the guidance from weeks after that, months after that? Should we get an FY’22 June quarter number or do we have to wait for an FY’23 full-year number? Just honing in on Levi’s question -.

Sandeep Biswas: Yes. No, it is a good question. I don’t want to pin myself down to an answer right now. We didn’t even have feet on the ground from an operational sense. But we do know how important it is that we say what we are going to do and what our plans are. So that will be one of our priorities, is to get the information to you guys as soon as we are comfortable with something we can put our - put our monitor on.

Peter O’Connor: Can I finish with just a contentious question? Sorry, Sandeep, there is been a lot of headlines lately about mining industry and poor culture across a broad range of companies and the industry in general. It looked like you outed yourself last week via the AFR in like a semi-editorial. Is there any comments you’d like to broaden or share with this forum regarding that?

Sandeep Biswas: Yes. I think the way I - the way it has been - so when I first started, as you know, back in 2013, 2014, we were in a spot of bother as a company, as you can - as you would remember. And it really needed a very top-down command and control style leadership to get the operations to where they need to repair the balance sheet, get the focus on cash and really pull ourselves out of the hole we have got ourselves into. And that took a lot of hard work, and there were some tough discussions, both collectively and individually. But as we pulled out of that, I’m going to say around 2018, 2019, we started to move towards a more collaborative style of leadership, and there was many leadership programs put in place. And this is the top-down, starting with me. And then what we also did back when the transformation started is we started our cultural index, the OHI, because we wanted to make sure that the culture was improving along with the business, not that the business improvement was compromising culture. And all the data was telling us that at a high level, our culture was improving because our OHI index increased every year until 2019, where we started off at the bottom of the lowest quartile in 2014. And by the time 2019 came along, we were just inside the first quartile, which - of improvement in culture. So that was very good. But we had to skip 2020 because of the pandemic. And then in 2021, our OHI index dropped down into the top of the second quartile. But what it also showed because along with the numbers, you get a lot of comments from people is, yes, everyone understood what we had to do during the turnaround phase. But society is changing. People’s expectations are changing. And they want to be more involved in running the business and really being clustered to take more control and less command and control. And as we have started that journey, back in ‘18, ‘19, we realized we need to amp it up again. So about one year, 1.5 years ago or thereabouts, we started our inclusive leadership program, starting with me and the ExCo and down through the organization, where the big focus was on psychological safety and how do you lead in a more inclusive manner. And we are just in the process of ramping that up to psychological safety. We are now saying that is going to be at the same level as physical safety in terms of how we approach it. And we are now preparing our next wave of the NewSafe type of methodology, which has been so successful in changing our physical safety culture. We are going to turn that on to psychological safety. So there is a heap of work going in the area, a lot of it driven by the feedback from our people, in fact, almost all of it and our various surveys and indicators and what have you. So it is something we have been taking seriously for some time. We will amp it up again. And we, and I particularly, recognize the need for change and totally committed to it.

Operator: Your next question comes from Matt Greene from Credit Suisse. Please go ahead.

Matt Greene: Hi, thanks. Sandeep, I think it was about a year ago, you introduced a new capital management program policy. And in there, you highlighted share buybacks. So just keen to hear your kind of thinking around that just given where Newcrest is trading relative to some of your global peers and also just the performance of the underlying commodities there. So just if you could just provide some color on what you need to see to justify a buyback.

Sandeep Biswas: Well, look, I mean, if we didn’t have the big CapEx projects we have got in front of us, you could argue we should be doing a buyback now. But we have to balance that with our capital projects profile coming forward to add that fundamental value to the stock itself. But I mean the Board thinks about these things, every 6 months or so or in between if required. And it is not off the agenda, but we have to consider buybacks in relation to the other commitments that we have both now and going forward in relation to deployment of capital.

Matt Greene: Got it. That is great. And then just a couple on Cadia, if I may. Just the SAG upgrade and just the ramp-up of the float cells there. Are you able to provide some color as to how the performance has been through January and into February?

Sandeep Biswas: Look, it is going well. I don’t think we have tested its limits yet, and that is what the site is doing. So right now, I think it is too early to say. But over the next couple of months, as we slowly increase its capacity - and the thing to remember is all the bits of the project aren’t finished yet. So it may be that we may not be able to push it to its absolute limit until the other bits and pieces are in place during the course of the year. So it will be that balance. But within the constraints of the current plan, we are testing the - what can the SAG mill do, right? And I’m hoping that, as usual, with these things, they can do better than nameplate. I’m not saying it will, but that is what I’m hoping.

Matt Greene: Alright that is great. Thanks for the color. That is all for me. Thanks very much.

Operator: Your next question comes from [Stephen Henderson] from Henderson Trading. Please go ahead.

Unidentified Analyst: Good morning, Sandeep. Sandeep, I was interested in the Havieron figures where the move from inferred to indicated resource is somewhere in the region of, I think, 0.6 million, 0.7 million ounces of gold. The actual overall resource doesn’t appear to have moved particularly, if at all, despite some phenomenal real success. I’m just wondering if you could add a bit more color to how that is being viewed.

Sandeep Biswas: We just haven’t put another resource around it, right? I mean I think it is as simple as that. So once we - and now we have done a fair bit. I think we announced that, I can’t remember when it was, a couple of months ago, that we have done a lot of that resource definition drilling. We are now moving more to growth drilling. We will be able to, over the coming period, look at publishing a new resource once all that data is analyzed and the various designs are put in place and what have you. So it is not something that we are not focused on. It is just that it is got to be informed by the drilling. And then as you know, there is a pile of work that is got to be done before you can, under the JORC code, register it as a resource or a reserve.

Unidentified Analyst: Yes. And so any further upgrade to - or MRE 2, for want of a better phrase. Is that in any way linked to the negotiations for the additional 5%, which I take it is begun now? There is - certainly the window for that to commence was the middle of February as we move those anyway.

Sandeep Biswas: It has commenced. We commenced those discussions in December, but it is not linked to that. I mean that follows a very different process. And this is more technical driven as opposed to anything along those lines.

Unidentified Analyst: So one could expect to see an MRE update independent of any - what could be - what could be a lengthy process in the 5% negotiations depending on whether an agreement can be that?

Sandeep Biswas: Yes. We don’t want to couple those two things. I mean one is project related. The other is a discussion between two shareholders. Or JV partners is probably technically more the right word.

Unidentified Analyst: Okay. Thank you.

Sandeep Biswas: Well JV partners is probably technically more the right word.

Unidentified Analyst: Yes. Thank you.

Operator: There are no further questions at this time. I will now hand back to Mr. Biswas for closing remarks.

Sandeep Biswas: Alright. Well, thank you very much for dialing in everyone, and thanks. So for the questions and have a safe day.

Operator: That conclude our conference for today. Thank you for participating. You may now disconnect.