PERTH (miningweekly.com) – The board of triple-listed gold miner Newcrest Mining has approved a C$135-million investment at the Red Chris mine, in British Columbia, after obtaining the necessary regulatory approvals.

The company on Thursday announced that it had started the construction of the box-cut for the exploration decline at Red Chris. Work on the exploration decline and associated infrastructure was expected to follow on from the completion of the box-cut and would be subject to further regulatory approvals.

Newcrest acquired a 70% interest in Red Chris in 2019. The existing project was built and is being operated as an openpit mine, however, Newcrest has identified the potential to have an operating block cave from 2027, to allow the project to become a tier one operating asset.

The miner is expected to deliver on a number of milestones for the Red Chris operation over the next 12 months, including an initial resource estimate in March, and a prefeasibility study in the September quarter.

“The commencement of construction of the box-cut is a significant milestone in the objective of having a block cave in operation at Red Chris in the next five to six years,” said Newcrest MD and CEO Sandeep Biswas.

“Drilling activities have confirmed the presence of high grade pods in the upper sections of the macroblocks and we are evaluating a number of options to mine these pods with the aim of generating cash flows prior to the completion of the block cave.

“Together with the support of our stakeholders, we are excited about the potential to transform Red Chris into a tier one asset through the application of our industry-leading block caving technology.”

Meanwhile, Newcrest on Thursday also unveiled the potential for an additional 1.4-million ounces of contained gold to become available as mill feed for its Lihir operation, in Papua New Guinea (PNG), between 2022 and 2034, while reporting record free cash flows for the half-year ended December.

The miner told shareholders that over the past six months Newcrest’s understanding of the argillic ores at Lihir had improved significantly. Further work has identified less argillic ores are present in Lihir’s future ore feed than previously thought and through plant modifications and operational improvements the processing of these ores has improved.

The Lihir mine optimisation study, has confirmed that the level of argillic ore is not expected to be as high a proportion of ore feed in the future as previously thought and the level of argillic feed is expected to be less than 40% of mill feed which is the target for operational stability.

The mine optimisation study had five key outcomes, including the potential to provide an additional 1.4-million ounces of gold from Lihir between 2022 and 2034, a deferral of the Seepage Barrier project and its associated $470-million capital cost by 18 months, and the identification of the potential to safely steepen the pit wall angelse in Phase 14 that could potentially provide access to a further 400 000 oz to 600 000 oz of contained gold between 2023 and 2025.

Newcrest will undertake a separate prefeasibility study in the coming months to investigate this potential additional production.

Meanwhile, the ASX-, TSX -and PNGX-listed miner on Thursday also reported statutory profits of $553-million for the six months to December, which was up 134% on the previous corresponding period.

Earnings before interest, taxes, depreciation and amortisation rose 52% in the same period, to $1.14-billion, while revenues increased by 21%, to $2.17-billion. Group gold production for the interim period was down 2%, to just over one-million ounces, copper production was up 11%, to 69 320 t, while realised gold prices increased by 26% to $1 826/oz, and realised copper prices increased by 17%, to $3.12/lb.

“In 2018 we set ourselves some ambitious targets to Forge a Stronger Newcrest. Our progress and achievements over the past three years have put us in a very strong position to not just weather the global uncertainty associated with Covid-19, but to keep our eyes firmly on our future growth agenda. We have a fabulous position in our industry, with a long reserve and resource life, a unique set of technical skills, a very strong balance sheet, numerous organic growth options in progress and exciting exploration pipeline,” said Biswas.

He noted that the strong financial results for the half-year indicated how much the increased gold price had translated into improved profitability, record half year cashflow and an increase in returns to shareholders in the form of a fully franked dividend of 15c, which was 100% higher than last year.

“The board has approved a new dividend policy that retains the minimum dividend of 15 c a share per annum but more than doubles the target percentage of free cash flow to be paid in dividends to 30% to 60%. This change in policy allows shareholders to benefit from the stronger free cash flows that result from higher gold prices and is supported by Newcrest’s robust balance sheet with its minimal near-term debt obligations.

“This year we have leveraged our technical capabilities to establish a pathway to unlock significant value from Lihir. I am particularly pleased with the work done in the period to better understand and manage the argillic clays together with the finalisation of an optimised mine plan that is expected to reduce the levels of argillic mill feed presentation in the future. Our approach to mining Phase 14 has the potential to bring a considerable amount of high grade mineralisation from resource into production in the very near future, which in turn has the potential to significantly increase gold production and increase profitability and free cashflow. We are progressing a study with an aspiration for Lihir to be a one-million-ounce-plus producer each year for around 10 to 12 years from 2023 at around 15-million tonnes a year milling rates,” said Biswas.