INTERVIEW: Australia Newcrest Says No Telfer Problems-2-
Newcrest shares opened 2.5% weaker Thursday - as other Australian gold equities gained on the back of rising gold prices - after speculation late yesterday that engineers at Telfer had been working on the pyrite extraction plant a lot longer than expected.
"Eighty percent of their production is hedged, and if they do have production problems the margin for error is slim," one dealer said, adding there is some risk of a profit warning before the company's upcoming quarterly production report.
"I don't know where that one came from," Palmer said from the company's Melbourne headquarters.
"Sometimes I reckon analysts try to do this to try to get a little more volatility in the stock so they can play around with their options and make a quid on the side," he said.
After a series of delays and production setbacks during Telfer's ramp-up, the pyrite plant is viewed as key to the mine's ability to process higher-grade ore and reach its annual capacity of 800,000 troy ounces.
"Nothing's changed in terms of our production target," Palmer said.
"We've been telling the marketplace that we expected to get the plant finished in January now for a year and that's what's happened, so where the rumors have come from I don't know."
He declined to comment on the company's earnings expectations for the just ended quarter and current fiscal year, except to say: "As I said, things are on track."
Palmer said he wasn't aware of how Australia's new tax rules would affect the company's hedge position in a rising gold price environment.
Confident Of Boddington Go-ahead
Meanwhile, he confirmed that Newcrest and its two partners in the Boddington redevelopment project in Western Australia had received the project's revised feasibility study.
A decision on whether to go ahead with the estimated A$1 billion-plus project depends on the timing of each partner's board meetings, he said.
"I don't have any doubt that the mine will go ahead," Palmer said, adding, however, that the decision is in the hands of each board.
He declined comment on Newcrest's ongoing efforts to find a buyer for its 22.2% stake in Boddington as the Australian company seeks to focus on operations and projects it either owns outright or controls, such as Telfer.
Last month, a Newcrest spokesman said the company was in the final stages of assessing bids for the stake, with an update on the sale process likely in the coming quarterly report.
Newcrest hired ABN AMRO to find a buyer for Boddington after Newmont and AngloGold Ashanti rejected Newcrest's asking price, speculated to be up to A$300 million.
Palmer declined to confirm whether the sale process is subject to a positive development decision but did say a go-ahead would make the sale process much easier.
"Obviously if the three joint venture partners said they weren't going to develop it then it's not much of a thing to sell anymore," he said.
If it goes ahead, Boddington is expected to produce up to 800,000 ounces of gold a year, competing with both Newcrest's Telfer and the Kalgoorlie Super Pit to be Australia's biggest gold mine. First production from the mine is scheduled for 2008.
NCM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
