Newcrest Mining Limited

Good morning and welcome to, everyone. With me today is our Managing Director and CEO, Sandeep Biswas; and our Finance Director and CFO, Gerard Bond.

Please note the company's disclaimers on the first two slides of our presentation. This relate to forward-looking statements, the use of non-IFRS financial information, reliance on third-party information or reserves and mineral resources reporting requirements, a competent person’s statement, and Red Chris foreign estimates.

As you may already be aware, Newcrest is a U.S. dollar reporting entity and all dollar references made in this presentation refer to the U.S.

dollars unless otherwise specified. I’ll now hand the call over to Sandeep.

Thanks, Chris, and good morning, everyone. Today, Gerard and I will take you through our financial results for 2019.

But first and most importantly, I’ll spend a moment talking about the progress we’ve made on safety and sustainability this year. Newcrest has again improved its safety performance.

The 2019 financial year was another year for your fertilities or life altering injuries. It was also a year in which our injury rates were reduced 3%, down to 2.3 per million hours worked.

This is the lowest rate of injuries that the Newcrest workforce has experienced in a very long-time, and pleasingly it is a third consecutive year of improvement in our TRIFR. All-but-one of our operations delivered reductions in injury rates.

At Newcrest, we are proud of our history of safety improvement, but I want to be clear that we remain relentlessly focused on our safety transformation program because we believe it works to keep our people safe. We’ve had almost four years without a fatality and this remains our overarching goal, a company free of fatalities and life altering injuries.

Like our commitment to safety, sustainability is core to the long-term success of Newcrest. The business imperative is straight-forward.

Sustainability drives good operational outcomes. Today, we announced the following sustainability commitments.

Our greenhouse submissions intensity target, pricing carbon emission into our capital investment decisions, a catchment-based approach to water management, and a commitment to no net loss of biodiversity values for new projects. Our aim is to drive innovation in how we operate to improve energy efficiency, water management and our impact on the environment.

And through the application of the taskforce and climate related financial disclosure framework or TCFT, we commit to transparently disclosing our progress against these aims. This year, our public reporting will include the emissions intensity target we’ve announced today, our shadow carbon price, and our approach to climate change governance.

In following years, we’ll start to access climate change scenarios on our portfolio of assets to test our resilience. So, moving now on to our key achievements for the year.

Our key achievement for the year was another year for your fatalities or life altering injuries. Together with reduction in the injury rights I mentioned earlier.

Good financial outcomes are only good if they are delivered safely. So, I’m pleased to say this was a very good year.

Operationally, Newcrest increased gold production by 6%, and copper production by 36%, producing 2.5 million ounces of gold and 106,000 tons of copper. This was powered by record gold production from Cadia.

We met our group production and cost guidance for the year and while on cost, our all-in sustaining cost was a record low of $738 per ounce. This low-cost position allowed Newcrest to generate $804 million of free cash flow in the year when the average realized gold price was $1,269 per ounce.

Pleasingly, all operations were free cash flow positive. Our strong financial performance enabled the board to determine a fully franked final dividend of $.0145 per share.

This means the total dividend in rest to 2019 was $0.22 per share, which is a 19% increase from last year. Finally, in FY 2019, we further progressed our growth options.

Today, we announced the completion of our 70% acquisition of the Red Chris mine in British Colombia, Canada. In March this year, we entered into an agreement with Greatland Gold for the Havieron tenement near Telfer.

And in our recent June quarterly exploration report you would have seen the promising drilling results there. I’ll talk in detail about both of these growth projects shortly.

Turning to the performance of each of our operations. Cadia had an outstanding year setting several operational records and exceeding its production guidance.

Cadia achieved record tons mined and milled, which resulted in gold production of 913,000 ounces and copper production of 91,000 tons. This production was delivered by Cadia at a record low all-in sustaining cost of $132 per ounce.

And during the year, we commenced early works on the next Panel Cave PC2-3. The first of many Panel Caves in the pipeline and a site which has decades of production ahead of it.

Lihir successfully achieved its targeted annual sustainable mill throughput rate of 15 million tons per annum in the June quarter. Although production in the year was slightly impacted by unplanned shutdowns and processing of ore with a higher clay content, Lihir generated free cash flow in excess of $300 million.

This is the fourth consecutive year that Lihir has generated more than $300 million of free cash flow. As a result, Lihir has generated almost $1.3 billion of free cash flow over the last four financial years.

Telfer achieved the top end of its production guidance, producing 452,000 ounces of gold and 15,000 tons of copper. This was a 6% increase in gold production year-on-year, which was primarily driven by strong improvement in recovery rates.

Thanks to the technical capabilities and operating discipline of the processing team at Telfer. We continue to work on ways to optimize Telfer’s operation in order to maximize free cash flow.

In the last quarter of the year, we commenced a really more lower grade ore to dump leach. This enables reduction in the tons being processed through the mill, which in turn has resulted in one of the two mills outside being taken off for 60% of the time saving the energy and consumable costs.

We also continue to test the next generation of caving capabilities at Telfer with our under-catalyst caving project. By developing new and innovative ways of constructing drawbells, we believe we will be able to eliminate the development of undercut levels from the block caving process.

And if successful, we believe this Undercutless approach could reduce the capital cost and construction time of the macro block by 30%. This is a significant saving that has the potential to make ore bodies, which today are not commercial even by traditional block caving methods attractive to mine in the future.

Gosowong produced 190,000 ounces of gold in FY 2019 and generated $29 million of free cash. As previously announced and as required by the revised Gosowong Contract of Work, Newcrest has commenced a sales process to divest at least 26% of our interest by the end of June 2020.

The recent appreciation of the gold price is welcome, but we are well aware that the gold price fluctuates and altering long-term plans based on short-term movements can lead to poor decisions being made. At Newcrest, we remain focused on staying low cost and safely maximizing free cash flow generation, so the benefits of higher prices can flow to our shareholders.

Our hedge program, which was spoken about before provides the operating discipline to safely improve their operational and financial performance to maximize cash flow. This program has helped us achieve the lowest all-in sustaining cost of our peers and we will ensure that we don’t chase ounces for ounces sake.

I’ll now pass over to Gerard, who will outline Newcrest financial results for the year.

Thanks Sandeep and good morning everyone. And let’s begin with profit where statutory profit equaled underlying profit at US$561 million.

As shown on slide, underlying profit was $102 million higher than last year, and the main drivers of this increase were higher gold and copper sales volumes in Cadia. Lower operating costs and lower depreciation expense.

From a revenue perspective, you can see we experienced lower gold and copper prices than the prior year with the average gold price being around $1,270 per ounce. However, this is more than offset by the higher sales volumes.

Weakening your operating currencies, mainly the Australian dollar assisted both operating costs and depreciation. The Australian dollar averaged $0.715 for the year.

The gold price in Australian dollar exchange rate today are far more favorable to Newcrest than what was experienced in the 2019 year. Corporate and other cost appear to be high in FY 2019, but the main driver of this variance is at the prior year had $121 million of insured receipts reported in other income.

Adjusted for insurance proceeds, the remaining $10 million increase related to high levels of exploration, growth, and innovation activities. The only other movement of significance is a higher level of income tax expense, which broadly follows a higher level of profitability.

Our effective tax rate was just under 33%. And the main reasons why this is higher than the 30% corporate tax rate is non-deductible International exploration expenditure.

Turning now to free cash flow, Newcrest generated an impressive $804 million in free cash flow for the year. This is $203 million or 34% higher than FY 2018.

Newcrest strong operating cash flows were powered by Catia’s record performance. The main drivers of the difference between EBITDA and operating cash flow is our net interest payments, which were lower year-over-year as our cash balance rose and our tax payments, which are higher year-on-year following that increased level of profitability.

From this strong operating cash flow of almost $1.5 billion, you can see we continue to invest with total capital expenditure of around $530 million beginning in-line with what we invested last year. As the slide shows, we invested $130 million in production stripping, which is 13% lower than last year, mainly as a result of lower level of pre- stripping at Lihir.

We invested 248 million in sustaining capital, which was in-line with last year. There was higher spend at Cadia, offset by lower expenditure at Lihir and Telfer.

Major project or non-sustaining capital expenditure of $153 million was $12 million higher than the prior year. The main items here related to the expansion in Cadia, Lihir projects focused on enabling mining of the Kapit ore body and the Wafi-Golpu project.

Exploration spend of $78 million were $6 million higher than last year, reflecting an increasing Greenfield exploration in North America and a decrease in spend in West Africa. Finally, our other investing cash flows of $75 million were much lower than last year and this is due to last year being when we invested around $250 million to buy Lundin Gold.

As this next slide shows Newcrest is demonstrated to consistent history of generating strong operating cash flow, which allows us to both invest in the business, and still deliver strong free cash flow. And I draw your attention to the realized gold price over this period represented by the line on the graph.

Gold prices today are much higher. Our consistent approach to investing in our operations and growth pipeline over this period has been made prudently with the long-term value generation and risk-management in mind.

The level of CapEx is not being impacted by short-term gold price fluctuations and nor will be at higher prices. We know that many of our shareholders invest in us to act as a hedge against market uncertainty and our low-cost production means that we're profitable and cash generative when prices are low and we can provide greater returns when prices are high.

This is now the 11th consecutive half year in which Newcrest has delivered positive free cash flow. And this is a real free cash flow.

After all growth investment in taxes, this free cash flow has been applied mainly to debt reduction and increasing dividends to shareholders. In total, Newcrest has generated $4.2 billion of free cash flow over last 5.5 years, which is a great reflection of the efforts of our people, the quality of our assets, and the benefits of our edge program, which looks to safely maximize cash.

This strong free cash flow and debt reduction has placed us well within our financial policy metrics. Our leverage ratio was 0.2 times at year end, which is comfortably below our target of less than two times.

Our gearing ratio was low to just under 5% by the end of June 2019. And considering that at 30 June 2014 gearing was 34%, and leverage was 2.7 times, you can see just how far we’ve come.

Our strong cash position has increased our liquidity coverage to $3.6 million, being $1.6 billion in cash and 2 billion in committed undrawn bank facilities. Finally, we continue to retain our investment grade credit rating, which ensures we have good access to all capital markets.

As some Sandeep announced, we have completed the acquisition of Red Chris, which will be funded entirely from our cash holdings. And this is what a strong balance sheet is about, funding your own growth.

This strong balance sheet and profit performance allowed the board to determine a final dividend of US$0.145 per share. This takes our total dividends in respect of FY 2019 to $0.22 per share, which is a 19% increase in total dividends year-on-year.

We remain very focused on returns to shareholders and have a strong dividend policy that puts shareholders first. It targets a total annual dividend of at least 10% to 30% of free cash flow.

With the dividend being no less than US$0.15 per share. This graph shows that we’ve continued to increase our dividends to shareholders since recommencing dividend payments in FY 2016.

With that, I’ll now hand back to Sandeep.

Thank you, Gerard. Today, we announced changes to our senior leadership team.

This is an opportunity for some renewal of Newcrest's leadership, while also maintaining an appropriate level of senior personal continuity. Craig Jones will be our Chief Operating Officer for PNG, and accountable for Lihir, Wafi-Golpu, and all external relations in PNG.

Phil Stephenson will be Chief Operating Officer for Australia, Indonesia, and Americas and accountable for Cadia, Telfer, Gosowong and Red Chris. Bob Thiele, our current head of Group Technical Services and a deeply experienced mining professional will become our active acting Chief Technical and Projects Officer as we undertake consideration of both internal and external candidates for this critical role.

Craig Jetson has decided to pursue opportunities outside of Newcrest. He will remain with Newcrest until the end of the 2019 calendar year to support the transition.

And due to the reduced reduction of the scope of the Chief Development Officer, Mike Nossal has decided not to continue in this role in the longer-term. Mike will preside over an orderly transition of his current Chief Development Officer responsibilities and will leave Newcrest in the first quarter of calendar 2020.

Gerard Bond, Ian Kemish, and Francesca Lee will remain in their current roles. I want to take this opportunity to record my great appreciation to Craig and Mike for their strong contributions to the success of the business in their time with Newcrest.

By aligning responsibilities and clarifying accountabilities, we can increase the speed at which new ideas and process is going to be implemented. This is a key part of their edge philosophy.

Our aim is to reduce duplication, waste, and complexity so we can unlock more value for our business and shareholders. We continue to maintain our disciplined approach to growth during FY 2019.

As announced last year, we aspire to have exposure to 5 Tier One orebodies either as operations, development projects or equity investments by the end of calendar 2020. In order of preference, we seek to achieve growth through organic growth, Greenfield exploration, early entry partnership to the explorers and acquisitions or mergers, but only when we can see the opportunity to create value through application of one or more of that unique technical capabilities.

During the year, we continued to advance our organic growth opportunities. We’ve advanced the Catia expansion feasibility study, which is expected to be completed during the December quarter.

We’ve proved the gating to execution of the Catia molybdenum plant, which will provide another byproduct revenue stream with production effected in calendar year 2021. At Lihir, we achieved our target of 15 million tons per annum of sustainable mill throughput rate during the June quarter, and we’ll now be targeting sustaining throughput at or around these levels as we shift our focus to improving recovery rates.

Golpu remains a great option for us that we will look to advance once the PNG government is ready to recommence discussions on the core documents unnecessary to obtain the mining lease. Newcrest is a proud heritage of finding and developing world-class ore bodies.

It is fair to say that these discoveries have played a large part in building this company to where it is today. We continue to invest in our exploration team and over the coming slides we will talk about some of the exciting new opportunities in front of us.

Newcrest strives to be seen as a partner of choice for exploration companies, while leveraging our technical strengths such as block caving, our proven exploration expertise and by deploying some of the latest exploration technology that is available. One of the partnerships I would like to highlight is our farm-in agreement with Greatland Gold.

During the year, we gained interest in their promising prospect at Havieron, which is subject to further drilling and study could become a satellite mine for our Telfer operation. I encourage you to look at our quarterly exploration report to see the positive results from this growth prospect.

Today, we announced the completion of the acquisition of 70% of the Red Chris mine in Canada. Our plan is to improve the current operating performance and subject to drilling and further study transform Red Chris into a tier one operation by leveraging our unique block caving capabilities.

The Red Chris acquisition is a measured entry into North America and supports our strategic goals, providing immediate asset and geographic diversification, a large mineral endowment, significant upside opportunity, and utilizes our balance sheet strength and liquidity. We plan to apply a two-stage transformation to the Red Chris operation.

Stage 1, will be to apply a Newcrest Edge transformation approach. This stage is about safety increasing the efficiency of the current equipment with minimal capital outlay.

Stage II will involve applying Newcrest leading technologies, including block caving, coarse ore floatation, mass sensing and sorting, and deep underground brownfield and Greenfield exploration techniques. Now that we’ve completed the transaction, our forward work plan will involve resource and exploration drilling throughout FY 2020, open pit and process plant optimization and studies in the viability of implementing cost or floatation and the block caving design study.

There is a lot of work to be done and we look forward to updating you on the progress. Today, there have only been 89 deep drill holes completed at Red Chris.

These drill holes are spaced so far report that we could easily fit Cadia’s panel cave one and panel cave two in between them. At Cadia, we’ve drilled thousands of drill holes to properly define the ore body.

We look forward to commencing the drilling campaign to fully discover the potential of Red Chris. This is an ore body, which is open at depth and in all directions.

Now to summarize. In times of uncertainty, the gold industry has historically provided a safe haven for investors.

We believe that Newcrest seeks competitive advantages that set us apart in this industry. Their unique long reserve life position, our long-life assets maybe we can continue to produce for decades to come, and we’re not under pressure to replace mines in the high gold price environment when prices for gold assets were elevated.

Second is our lower-cost of production, because having a lot of gold won't create value unless you can achieve strong margins from its extraction. We remain the lowest major gold producer at the lowest cost with our All-in sustaining cost positioned in the first quarter.

We do what we say. We again achieve guidance in FY 2019.

We have a multitude of growth options. We have strong technical and exploration capabilities.

And finally, we’re focused on remaining financially robust. Combine these elements make Newcrest a unique offering in the gold industry.

With that, we’ll open up the line to questions.

Thank you. Good morning, Sandeep.

Three or four quick ones from me if I may please. First of all, with respect to PNG and the political climate there, the change in PM, the pain that perhaps the oil gas industry might be looking at, is there any sort of rate through from that with respect to the conditions that Lihir currently operates under or with respect to the delays that – at Golpu, can you sort of just add a little bit of colors to what your rate of the situation is any implications that are there or not there?

Look, I think any potential implications are more related to the timing of Wafi-Golpu than anything to do with Lihir. Lihir is an established mining operation, a major contributor to PNG, and we’ve received many reassurances around Lihir.

Around Wafi-Golpu, as you know we did sign an MOU with the previous government. There’s now been a legal challenge or the government of Morobe Provincial with the state government in relation to a judicial enquiry into the MOU.

So, we are stalled until, in fact we are prevented to progress negotiations to that stay or order of stay is lifted and when the government is willing and able to continue to negotiate, we will do so.

Okay. Specifically, with Golpu, that dispute that’s a government dispute.

It’s around allocation of royalties, not royalty rate?

That’s our understanding.

Yes, okay. Thank you.

With respect to the people changes Craig, I guess did an amazing job at Lihir, people stuffed around there for 20 years also really clever people, but achieved nothing. He came in turned around, it’s performing well, Red Chris looks like an opportunity for a turnaround guy to come in.

With Craig’s departure, who’s going to execute – lead that turnaround?

So, Mark Adams, our GM from Telfer, prior GM from Telfer he is on the ground leading that turnaround under the guidance of Phil Stephenson and McFadden has been promoted to General Manager of Telfer. With the Newcrest machine of our Edge methodology and what we have learned over the last five years of pursuing this, and we are confident that we can add a lot of value to the current operation at Red Chris and with Mark’s decades of experience in above ground underground mining and any other sort of mining he is a great pair of hands to take on that challenge.

Yes, Absolutely. With respect to the comment around the application or potential application of also looking at Red Chris, does that imply that you actually made some demonstrable progress and if so, when does it actually get implemented at either Telfer or Cadia?

Look, we still, so the test work continues at Red Chris, but there is two aspects to it. Is that technology applicable to the ores above ground or is it more applicable to the stuff from underground.

So, we are going to do that evaluation. So, that will be part of the review of the flow sheet, but currently we expect it to be under the block cave because the two mineralogizes are quite different what’s in the open pit now versus what is under ground.

At Cadia, we continue to do the belt sensing. This is a nuclear device to see if we can differentiate waste from gold and copper.

Copper is relatively easy. We are trying to tune it for gold and see what opportunities there might be as the grade lowers over the next few years at Cadia to start weight rejection on that belt.

So, that’s kind of a monitoring and calibration exercise. And at Telfer, we’ve done the all sorting test and now we’re into some screening test to work out, which is the most cost-efficient way of improving the feed grade.

At the moment as I outlined, we’ve decided to move some of the lower grade stuff to the dump leach and process less ore, but higher grade through the Telfer mill circuit and save the power and associated costs from there.

Okay. Thank you.

And then finally with respect to New South Wales drought Cadia water supply, what are you seeing currently in terms of your water on site and water rights in terms of guaranteed operating period?

We’re very well placed for the next 12 months at least and we continue to work on sourcing more water options where we can, but also working hard on our water recovery, particularly now that a bunch of the tunnels now goes in to the open pit that gives us some unique opportunities to perhaps enhance our water recovery from the pit and then recycle that through without losing as much to the operation.

Okay. Thanks Sandeep.

You’re welcome.

Thank you, Sandeep and team. I just wonder if you can touch on a little bit more about the Cadia progression this year.

We’ve known that the SAG mill has had some issues sometime, looks like – has there been a failure that you’re now rectifying now is that event now occurring and that’s impacting the production for this year. That’s the first part of my question and then if you could give more color on how grade progresses through this year and into next if at all?

Look in terms of the SAG mill, since we had the failure a couple of years ago, it’s under an intensive preventative maintenance regime, including inspections where we take the mill offline to deliberately inspect the coils and rotors and what have you. And as part of that process during this quarter, we had been doing some preventative maintenance work on the mill, which will have had a minor impact on the year.

I think the biggest impact this year in going forward in terms of ounces will be related to the forecast grade decline, and all that information is contained in our briefing pack.

Thank you. And just hang on Cadia for a moment, the Moly plant that you’re moving through to development, just wondering if you can talk through at a high level the economics of this plant?

Look, as you know it all swings on the Moly price, but on our projections, it was made all these projects have to be well north of 15% IRR and we expect this one to be in the region of 20% based on our Moly price assumptions.

Thank you and the project team that’s been working on Golpu, given that Golpu is sort of in a standstill position at the moment, and now being redeployed, can we view that as it being redeployed too expediting Red Chris?

I think out of the two block caves, the first one is actually going to be the new panel at Cadia, so we have redeployed some people to Cadia, and as we learn more about the ore body at Red Chris we will start to work on the block caving team that will do the study for that, but the priority of Red Christ literally as of Monday is to get our GOs on the ground, get the grill rigs up there in the next couple of weeks and start drilling the main zone where we expect the first cave to be, but also doing some extension aspiration out in the gully area.

And just a last follow-up question from me on that. When you have given your guidance on exploration, apologies if this is in all the notes and everything that you put out, your numbers or expiration numbers does that include Red Chris expiration spend or is that something that’s not in the numbers?

So, our broader guidance does not yet include Red Chris. The broader guidance around Red Chris would be issued in the September quarterly.

We know we’re going to do $20 million worth of drilling 100% basis, so our 70% of that $20 million is contained in the exploration line in the exploration guidance and that’s foot noted for clarity.

Thank you very much.

Sure. Thanks very much, good morning Sandeep.

Couple of questions from me, first on Cadia and following up on Dan’s question on the SAG mill maintenance. Can you give us a little bit more data on the timing of the maintenance during this year and then given that you’ve quoted out specifically in the commentary should we expect that the impact will be larger than the impact of the plant shutdown that were conducted during the March quarter of FY 2019 and then of course thinking forward, is this the baseline that we should be expecting for annual plant maintenance at Cadia?

In terms of the inspections on the SAG mill motor and if we find something, we do preventive maintenance and we some repair work. There is one schedule for this quarter, and typically we have a look at this, every six months or so, but that doesn’t mean we necessarily do work on it every six months.

Wherever possible, we plan the inspections within the existing shutdowns, as you know we have regular shutdowns of our mills for relines what have you, and we typically schedule it within that period. It’s only if there is any extra work to do that will detect any longer.

Sure. And then I guess thinking forward, as you said, it’s obviously preventative maintenance, but is the expectation that you have an annual shut in March plus ad hoc preventative maintenance work going forward?

Well, every six months as I say, we will do an inspection and if necessary, we will do some work on it, but it’s wide up like a heart patient, we know how it responds far more than perhaps before the failure. We know the potential mechanisms, and we look for that on a very regular basis.

Understand. Thanks.

Secondly, on the Red Chris integration plan, you did mention that Mark Adams is taking the role of GM. I’m wondering if you can expand a bit further on how the operation is being managed at a side level, specifically wondering the existing site management teams and technical teams are being retained, and then on the concept studies that you’re conducting, again you touched on this, but are these things conducted internally?

Are they using external technical specialists? Are they using existing Newcrest technical personnel or existing Red Chris personnel, just wondering what the approach is in conducting these concept studies?

We’ve been talking about – given its day one, but the approach is Mark and a selection of new Chris people who will join the management team on their way to Red Chris right now. And so, we will be an integrated team.

There will be Red Chris people and New Chris on the new management team and then there is an integration program, which they will be implementing, part of which is the improvement of the operations from their current levels. In relation to the block cave, we use various consultants from time to time, but initially this will be all done by our own people who are specialists in block caving, but as I outlined earlier, we’ve done a lot of thinking around with the existing drill results that have that have been done by Red Chris, but really we need more data.

So, this will be quite an intensive drill program, will be the first order of business. We have one of our geos on site right now and mobilizing other personnel and drill rigs as we speak to begin that campaign.

Sure. I guess given that you’ve provided a bit of tentative outline for those concept studies that you are obviously comfortable with the level of geological knowledge you’ve got at the moment to conduct at least a sort of scoping study level on the block cave and the other [cave]?

At a certain level, but as you know the more data you gather, the more confidence you can have around that study. Ultimately, it is about the resource.

Finally, one for Gerard on tax payments. Cash tax seems to be predominantly December half weighted.

Is this something we should expect going forward or is there any sort of catch up payments we might be expecting in the first half of FY 2020 and then on working cap, obviously a bit of a draw down during the second half of 2019; should we expect this to reverse or hold I guess during the first half of 2020?

On tax, the place we’re repaying the most tax follows the profitability and that’s at Cadia, so therefore Australia and our biggest settling payment occurs in December of each year. So, yes there will be a large cash outflow associated with Australian tax payments, which have been the primary driver of the increase year-on-year.

Working capital varies half and half for various reasons, predominantly activity-related and sales, timings and the like. And you will see from our cash flow waterfall that was in the presentation that it – most of our cash flows typically are weighted in the inflows of weight in the back-half of the year.

As it relates to working capital’s contribution to that, specifically, you'll see year-on-year, it's the minimum says, virtually no change in working capital this year in a cash flow sense. But yes, you're right there are movements in a half and half basis.

Understand. Thanks for the detail, Gerard.

Thanks, Sandeep.

You’re welcome.

Thank you.

Hi, good morning, Sandeep and team. First question just comes in relation to the comment there.

We are talking about reduced scope in the role of the Chief Development Officer. Could you just maybe explain that?

And is there any read-through here to your focus on M&A?

No, the world – so part of the structure, you will see there’s a Chief Technical and Projects Officer role. So, this is about combining all of Newcrest technical horsepower into one unit, where you’ll find projects, you'll find our mining team, our technology and innovation team, our digital team process in terms of – it's pulling all to – all that together into a – which is currently more fragmented into a powerful technical and projects right from technology innovation through to execution.

And the M&A role becomes – the business development role becomes purely M&A and exploration.

Okay, thank you. Then maybe just another one, if you don't mind on Red Chris.

I mean at the time of the acquisition one of the areas you said that there was a key opportunity was obviously a refocus this on more of a – being more of a gold project and especially the recoveries and your target there to get them closer to Cadia. How should we think about that in relation to the difference between the Stage 1 and the Stage 2 transitions that you've outlined here?

Can you achieve much there with just Stage 1 by applying edge?

Look, I think we can and we’ll have a much better idea, obviously, by the time we put our guidance they had in the September quarter and people were just on their way. But if you look at all the results of that, that do exist, you’ll see that as you go further underground, so this is more about Stage 2.

The gold actually increases compared to the copper deep down in the cave and the mineralogy changes. So, there's two ways to look at Red Chris.

One is the current orebody and what can we do on recoveries and throughputs there. And the other piece is, when you go deep underground, what are the different technologies that are applicable to that type of ore that we can start building into the flow sheet in our thinking.

So, that's kind of how we're thinking about it.

Okay, brilliant. Thank you.

Thank you very much, guys. Listen, my question is related to the sort of bigger picture – the bigger picture stuff over the next couple of years.

And I guess, the duration of the company, you put your guidance FY 2020’s Cadia over 800,000 ounces this year. But obviously, based on your expansion studies, you put out some profiles is showing the answers from Cadia are going to pretty much hover over the next three years or so about 400,000 ounces.

And you think that it coincided with a – quite a big increase in the unit cost that I just by an artifact of the production part. But that's obviously not necessarily an issue.

But the question that I have is, as the Newcrest share price continues to go up and up and up, does your position with respect to potential acquisitions to replace that that declining profile change? Is there a point at which you think, what our pipe is pretty reasonably valued, too?

We might reassess how we look at M&A, because you guys have been pretty committed to this sort of early stage, low-cost M&A. Can you talk a little bit about all that please?

Yes. So, if I start with Cadia, just because the ounces decrease over time, I wouldn't necessarily read into the fact that the cost starts spiraling, because, as I've said many times before, you have to look at the copper grade as well.

The copper grade does not drop anywhere near the right of the gold. So, those copper credits that help with the unit cost, actually increase if we – once we deliver what the ultimate size of Cadia will be.

So, that ameliorates the sort of cost impacts Well, then you will see a headline reduction in the ounces as the grade decreases, which has been well known for some time. But in terms of saying, well, do we want to replace those ounces and what have you?

Well, we've heard what we're doing at Red Chris, what we're doing at Havieron, but the temptation, as I outlined in the presentation is to resist the temptation to just fill ounces per ounces shake. Any deal that we may or may not do, or any investment that we make of any sort under very strict guidelines on rates of return and what value that brings to shareholders, we just not going to chase ounces.

And that's why we're looking at things like the organic development of Golpu, the Cadia expansion study, looking at what can we do with Lihir beyond what we've already achieved, once we stabilize where we are, what will the next step be? And that's, frankly when you make the highest returns.

But having said all of that, if there's something that comes up that meets our criteria, likely the investment we just made today in Red Chris, we’ll look at it and we have the firepower and the technical capability to active if we think it makes sense for the company and their shareholders.

Sure, sure. Just to come back to that point on the cost of Cadia over the next couple of years.

If the reduction in ounces from about 800,000 ounces to 400,000 ounces is predominantly driven by grade, even, I mean, you got the copper profiles in there as well, which are pretty steady over that same period. I thought the cost would have gone, going to go off pretty materially if the production halved.

But putting that aside, I mean, some of these other projects that you're coming onstream in the M&A stuff, it's obviously longer dated and it's going to be quite a while before that comes into production profile. And as you probably know, most of the market values gold companies on a combination of [NPZ] and next year's cash flow.

So, all things being equal, three years from now, your cash flow is probably going to be quite a bit lower is, I guess, where I'm going. And I'm not suggesting that you do the ounces to ounces sake at all deciding that your pipe is, you pipe is pretty valuable at the moment and so the question remains, does that change how you look at things?

I mean, it sounds like the right opportunity present itself, you’ll assess it, but I think you've answered the question.

Yes, again, just on Cadia, look at gold equivalent ounces, and you'll see that there's a slightly different picture than what you might do by just having the gold production.

Okay, sure.

I take your point, but our discipline in how we go about running our business and how we spend our money is one of the reasons that certainly, I get told that our shareholders support us.

Sure. Understood.

Thanks, Sandeep.

Cheers.

Good morning, Sandeep. Good morning, team.

Just want to touch on Lihir and Telfer, if I can. Just firstly, the mill throughput at Lihir staying at 15 million tons or thereabout.

Can you may be just talk through why now the more moderated approach at Lihir versus those previous targets or 15 to 17? And whether you – whether they are still in place, but whether they are probably a little bit more longer-term than what they were previously?

Yes. I think what we're seeing is that, Lihir has come up so quickly in terms of its rates, but we've got to go and I think I spoke about this last the half year.

What we need to do is, really double down on the reliability and availability of the equipment. So, we're not having such big differences in quarters in relation to throughput rates that we steady that out much more than it is now.

We are recognizing we do have some quarters with higher plant shutdowns than what have you, and really the work on our recoveries to get them back up, while producing at that rate, which is all enhanced by better reliability and availability. And as that works gets completed and executed, we’ll be better placed to look at what the next step-up for Lihir may or may not be.

That's the rationale behind it, Sophie.

Okay, that's great. And then just also on Telfer, you talked about currently working on optimizing the operation there.

You've obviously got Havieron there. You continue to call out.

Can you maybe just talk through sort of the more medium-term plan over the next sort of two to five years in regards to where you can see Telfer going? You've obviously taken down one of the two mills, you've taken off 60% of the time, does that ultimately go to one train?

And then how Havieron sort of fits into that picture?

Well, I think what you're finding, because the changes that we've made now is – certainly optimizes the cash flow situation. So, there are lot of great stuff going to the dump leach and saving costs and lifting the grade in the current mill.

But you're right. So, it's really to work on our current orebodies, and we continue to do existential exploration at Telfer as well, by the way.

I mean, we're not necessarily looking for the next big dome, but there's lots of interesting smaller deposits, which we think may be able to add to the current operation of Telfer. But the plan at Havieron is how do we really find out very quickly what the scope of what we have there.

And we've got four drill rigs there at the moment, and we'll put as many as we need to find out what we have there. And then it'll be about how quick can we get in there, provided that there's a feasible mine there, and mine that stuff out and track at Telfer.

I mean, the beauty of having the Telfer infrastructure, there is subject to Havieron being feasible in us going to mine it, all you have to do is mine it and then you just track the order Telfer. The thing that's unusual about Havieron in relation to the Paterson is the grades that we're seeing.

I mean, we're not used to seeing these sort of grades in the region. So, that's particularly interesting.

And if it all holds up, it certainly gives us a much more economic – potential economic outcome by tracking, as you know, tracking high-grade stuff is a lot better than tracking low-grade stuff.

Sure. And so just in terms of those drilling efforts in and around Telfer, would that also include potentially increasing your holdings on the Paterson range?

We're always on the lookout for exploration properties. But I think people are starting to tweak that Telfer’s infrastructure is very valuable from a viewpoint of early to market with mines, and we are having a lot of people knocking on our doors is, what I'll say at this point.

Okay, that's great. Thank you.

Yes. Good morning, guys.

Yes, just a sort of longer-term question, really, you’ve got a couple of big development projects on the horizon. But given that – Wafi’s delayed, but hopefully we see some progress there and it move into development in the next little while.

But then you've got Red Chris, which it sounds to me is, potentially fast tracked, or at least you have the motivation to try and fast track it. I’m just wondering how you look at the balance between those two projects, both from a – sort of a timing perspective, CapEx perspective.

And is there a scenario where you see yourself sort of building both at the same time?

I have no qualms about building both at the same time. We have all the technical horsepower and the balance sheet to do that without a problem.

We were thought through all of that, and I mean it's not just off the cuff comment. We – if that were the case, we're perfectly comfortable that we're capable of handing it.

Okay, thanks. That’s all for me.

Thanks for taking my call. I'm just curious about how I should be thinking about the potential upside from technology at Telfer?

And then kind of a related question is, you see the key driver of value there being that kind of technology, unlocking efficiencies or is it exploration or some kind of combination of the two, like how do you think about that?

Well that’s a very good question. I mean there's a whole suite of stuff around exploration targeting and technology, and speaking about the Telfer region, I mean initial indications, which is quite exciting is the Havieron deposit is structurally different to the domes you find at Telfer and the question is, does that make us think differently about some of the ground at Telfer.

So, there is always a learning and innovation technology piece there. As the grades at Telfer are quite low implementing some form of arrangement that sees a rejection of the waste ore before the high-cost milling process is something that I think that Telfer is quite amenable to.

So, we're certainly pushing along our studies and test work in that area. So essentially, you're treating you are treating the way you want to treat and rejecting the stuff you don’t want to treat before you start spending the high cost.

So, that is one area. And the other one is the undercutless block cave trials that we were doing at Telfer.

You will recall a couple of years ago we were looking at - or a year ago at block caving some of the material underground at Telfer when at the end of the sub-level curve. That didn’t prove economic in terms of delivering the rates of return we are looking for.

But if suddenly you were to have – cut the cost by 30% of the installation of the cave and speed that up, that may make a difference. I’m not saying, it will – may make a difference on how we view the possibility of doing a cave at Telfer and would certainly flow over to any caves that we would do.

The multiple panels at Cadia, at Golpu and at Red Chris. So, they are just three examples.

And can you talk about the results of the testing of the ore sorter for example, like what you are seeing there?

I mean the ore sorter proved quite successful and we are in a position of getting 80% of the material into about from memory 25% to 35% of the volume. So, that was quite successful from a test work viewpoint.

Then you’ve also got to look at what is the capital cost of such an installation and what’s the return, but also which we are in the process of trying now is, is there a low-cost methodology such as screening technology that can be used to screen out the waste in – maybe not as well sorted as an ore sorter, but certainly more economical given the lower capital cost. So, it is not just a question of technical success, you have to be pragmatic about which one gives you the better return.

So, we look at it with both lenses if you like.

Yes. Well, it makes sense.

Thanks Sandeep.

Thank you.

Thank you, guys. Just while we're talking about ore sorting, Sandeep, can you tell us about, generically technology, what's the impediment?

It sounds like obviously – maybe the CapEx is especially high. It doesn't sound like it was a slam dunk for you guys to embrace that given you're now looking at maybe some screening sort of solutions as well.

But generically speaking, what are the limitations on ore sorting? Why doesn't everyone use ore sorting everywhere?

Well the technology is just emerging. I mean the sensors and scanning technologies that you are getting is improving at faster, faster rate as you look at the technology and the digital processing capabilities.

But all the ores are different, right? I mean some low-ores lend themselves to ore sorting and some don’t.

And gold is particularly difficult because of the sensing, I mean x-ray, all that stuff works for copper and other materials, but gold is very different. So, if you are going to just use x-ray as you got to make sure your gold follows a copper and what have you.

So, - but ultimately it is an economic trade-off and we’ve got to make these decisions carefully. If you look at Cadia, we are looking at a nuclear source.

So, it is not that one suits – there is no panacea for ore sorting because it is ore dependent. So, that is the first answer.

And secondly, we will have to look at which is – where does it make sense and where doesn’t it, and that is just an economic evaluation, but the technology is my view going to used much broader in the industry as we go forward and you get mines that have lower grade ore, coming into situations where they milling process is more expensive because of power cost and size of capital. So, there is a market there.

It is only just opening up, but it is all dependent.

Okay, thanks. And just on Telfer as well, for the avoidance of any doubt, absent any other technology, the current kind of life expectation of Telfer, correct me if I'm wrong, coincides with the end of your current hedging program.

So, as per your sort of plans and budgets, is that right, sort of 2023?

Yes, they are about 2023, 2024, yes.

Yes. Okay.

And then if I can swing on to Gosowong with a similar question, obviously, the – it feels a bit like the decline is coming quickly now at Gosowong. And you probably disagree with that sentiment.

But what's the remaining kind of mine life as per your plans look like there? And what are the opportunities to sort of keep that asset rolling along perhaps with a shorter sustained mine life?

Well, Gosowong has had a two-year mine life for all the time that I’ve been in Newcrest because it is just one of those ore bodies, but there is no question that this mine life is coming to an end. It’s – my view is Gosowong will be there for much longer as a lower ounce mine, not the rates that we mined it in the past.

So, we continue to operate it. As you know, we are under an agreement to sell at least 26% and we’re in the process of doing that.

And we will see what comes out of that whole process.

So, there's a bit – is there some more scope as part of that progress? Maybe you'll end up selling the whole lot if the price is right, et cetera, et cetera.

That's a bit more of a broader umbrella?

Yes, look, we will judge the bids on its merits, but certainly that is something we will be open to.

Yes. Okay.

Then I had two quick questions for Gerard, which are probably reasonably mechanical. Just to be clear, Gerard, so the 800 or so, you're going to pay – you're going to shell out for Red Chris, that will be factored into your free cash flow calculations as per a dividend estimate when we're looking forward into 2020, correct?

Cash flow and – yes. Remembering that the dividend policy has a minimum dividend payment of $0.15 a year.

Yes. And it's over the full year, too, yes, yes.

And then just quickly on tax or the question earlier. But just apologies for everyone else on the line, but can you just, for my benefit, explain in a little bit more detail the lag or the latency on that tax payment – cash tax payment mechanism, please?

In Australia, you are depending on what your profitability was in one period. You will get installment notices that are based on the year just gone and then you have to pay depending on the rise and fall of your – some of your tax returns you will be basically increasing the rate of payments that you make on a quarterly basis or half yearly basis, monthly basis or should I say, during the year.

So, as Cadia’s profitability has lifted those rates have – payments have increased and the settling payment occurs in the December period and as Cadia’s profitability has increased year-on-year that is settling payment in December is higher year-on-year.

Yes, yes, yes. And so, there's sort of, what, a 3, 4-month lag from when you submit your accounts effectively then to when you settle up that cash tax.

That final settlement payment is inclusive of your final submitted tax return.

Thank you. And just one last question on stripping at Lihir.

The uptick this year, is that a function of better prices, gives you a little bit more cash flow, a bit more flexibility? Or is this an uptick in stripping, which has always been part of the mine plan?

Perhaps just a little bit more granularity around the drivers at Lihir, please.

Yes, it has always been part of the mine plant. As you know some time back when we changed the whole methodology on how to get to the Kapit ore body we outlined a sequence of pits as opposed to the plan from way back to build the dam in the ocean and go straight for Kapit.

So, it's all part of that mine plan we unveiled probably 3 to 4 years ago and it is just part of that life of mine plan.

Okay. Thanks very much.

Okay. Thank you everybody.

We find a little bit over time there and we have other call scheduled for the media. So, look, I’ll just wrap up the call today.

And look, wish everybody having a safe day today. Thank you.