Newcrest PFS Slashes Cost of Cadia Expansion

Through a freshly conducted prefeasibility study (PFS), Newcrest Mining (ASX:NCM) has determined that expanding its Cadia East gold operation in New South Wales will cost $252 million less than originally expected.

Newcrest estimates that total capital expenditure will come in at $598 million, with the plant and underground materials handling expansion running $58 million. The bulk of the cost will come from developing PC2-3, the next macro block, with the price of that coming to $540 million.

The PFS also outlines an internal rate of return of 21 percent with a payback period of eight years, and a net present value of $887 million.

Newcrest Managing Director and CEO Sandeep Biswas discussed the progress Cadia’s expansion plans have made over the last two years, highlighting heightened throughput capacity and reduced costs.

“Two years ago we set out to expand Cadia to 32mtpa for an expected cost of $310m, today we announce expanding the plant to 33mtpa for $58m with potential to grow to 35mtpa,” Biswas said in a statement. “The study has delivered a $252m saving and an additional 1mtpa of throughput capacity.”

The company’s PFS assesses a number of different expansion cases, ranging from 30 to 40 million tonnes per year. The mining rate profile analysis shows that 33 million tonnes per year is an achievable, sustainable long-term mining rate, with 35 million tonnes per year being the upper limit of Cadia’s capability until production ramp up in 2027.

According to the study, reliably expanding the processing plant past 35 million tonnes per year would require a third concentrator and an additional $440 million in capital expenditure.

The expansion proposed through the PFS looks to add a new secondary crushing circuit for the concentrator 1 milling circuit, which includes a crusher with a secondary screening feed, a pebble crusher and a 1.5-megawatt ball mill.

Newcrest plans to release a feasibility study for the expansion by the first half of 2020.

The company’s Cadia Valley operation is one of Australia’s largest gold-mining sites, and consists of three mines: Cadia East, Ridgeway and Cadia Hill. Cadia East began commercial production in January 2013, while Ridgeway and Cadia Hill are both currently on care and maintenance.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.