Australia’s largest gold producer,
Normandy holds varying interests in 16 gold mines, in Australia, Canada, New Zealand, Brazil, Chile and Ivory Coast. Earnings were down 6.7% from the last half of calendar 1999 (which is the first half of Normandy’s current fiscal year), largely owing to the sale of Normandy’s industrial minerals division. A lower realized gold price, combined with high fuel and royalty costs, is to blame.
The company divested itself of non-core industrial minerals assets prior to the June 30, 2000, fiscal year-end, for a combined consideration of A$219 million. The divestiture was part of a rationalization and strategy to focus on gold.
For the three months ended Dec. 31, the company’s share of production was 565,695 oz., up 4% from the previous quarter. Increased output from Tanami (87.4%-owned), Bronzewing (wholly owned) and Pajingo (half-owned) offset lower production from Jundee (wholly owned) and the Kalgoorlie Super Pit (half-owned).
Total cash costs of A$300 per oz. (US$160 per oz.) were relatively unchanged, despite extensive scheduled maintenance at Kalgoorlie operations, unseasonable rains in North Queensland and higher fuel prices. The total production cost for the December quarter was A$406 per oz.
For the first six months of fiscal 2001, cash and production costs averaged A$299 and A$394 per oz. Normandy realized an average hedged price of A$553 per oz., some A$60 per oz. above spot price.
The company’s managed hedge book at fiscal year-end totalled 13.3 million oz. at an average A$552 per oz., of which 10.5 million oz. at A$565 per oz. were committed. These contracts are not subject to hedge calls. The hedge position represents 61% of reserves.
Boddington
At the end of fiscal 2000, proven and probable reserves increased by 5.6 million oz., or 34%, to 21.8 million contained ounces, while resources expanded by 5.2 million oz., or 11%, to 53.8 million contained ounces. Reserves at Normandy-managed operations were estimated using a gold price of A$450 per oz. (US$250 per oz.).
The increase in reserves and resources was largely a result of the inclusion of attributable ounces from the 44.4%-held Boddington expansion project. A reserve, based on a A$425-per-oz. open-pit shell, is estimated at 390 million tonnes grading 0.87 gram gold, containing 10.9 million oz. gold and 470,000 tonnes copper. The resource totals 726 million tonnes grading 0.84 gram, or 19.7 million oz. and 800,000 tonnes copper.
Annual throughput of 25 million tonnes, utilizing high-pressure grinding rolls, would result in yearly production of 600,000 oz. gold at a cash cost of below A$300 per oz. With capital costs estimated at A$460-560 million, the project has a payback of 4.5 years against a mine life of 20 years. A review of the project by each of the joint-venture partners is under way. The joint venture includes
“The key gold division is far more robust today than a year ago,” says Robert Champion de Crespigny, chairman and chief executive officer. In the 6-month period, gold operations generated an operating profit of A$275 million, before amortization and depreciation, versus A$205 million in the comparable period of fiscal 2000. Last year’s sale of Big Bell, together with the closures of the Kaltails and White Devil mines, has been offset by full ownership of the Yandal operations and record production at Tanami.
Big four
Yandal, Kalgoorlie, Tanami and Pajingo, all of which are in Australia, are Normandy’s four largest gold contributors represent a 77% contribution for the first half of fiscal 2001. Each turned an improved performance over the year-ago period, with ownership. Only two operations — Mt. Leyshon (76.4%-owned) and Boddington (44.4%-owned) — reported lower operating profits, and, at both, reserves are nearly exhausted.
Attributable production from TVX Normandy Americas and its five mines for the 6-month period was 103,313 oz. at a total cash cost of A$280 per oz. Ownership of TVX Normandy is divided between
Golden Grove, a wholly owned zinc-copper operation in Western Australia, contributed nearly 10% of cash flow in 2000. For the first six months of fiscal 2001, the operation generated an operating profit of A$34.6 million, a 21% increase over the year-ago period.
Ore at Golden Grove is sourced from two underground mines: Scuddles and Gossan Hill. The deposits comprise stratiform sheet-like zones of predominantly sphalerite-rich massive sulphides. Chalcopyrite-rich sections are present, in addition to underlying epigenetic stringer sulphides.
For the first six months of fiscal 2001, Golden Grove produced 109,635 tonnes of contained zinc concentrate grading 53.2%, or 109 million lbs. payable zinc, off 4% from the same period a year ago. Total cash costs were up 7% over the corresponding period a year ago, at A60 per lb. zinc (US34 per lb.), including precious metal credits, whereas production costs totalled A73 per lb. (US41 per lb.)
Between the September and December quarters, zinc production fell 38% to 41,773 tonnes, with the scheduled processing of lower-grade zinc ore and the beginning of a copper campaign. During the quarter, copper production totalled 8,978 tonnes of low precious metal copper concentrate grading 25.2%, and 2,565 tonnes of high precious metal copper concentrate grading 14.1% copper, 1,602 grams silver and 17.2 grams gold per tonne. Copper cash and production costs were estimated at A$1.21 per lb. and A$1.45 per lb., respectively.
Proven and probable zinc ore reserves at Golden Grove are pegged at 2.6 million tonnes grading 12.1% zinc, 0.3% copper and 1.1% lead, plus 1.2 grams gold and 103 grams silver. Copper reserves are believed to be 4.6 million tonnes grading 3.9% copper, 0.2% zinc, 0.5 gram gold and 15 grams silver.
Cash flow from operations, before capital and exploration expenditures, increased 26% to A$192.9 million in the first half of fiscal 2001. At Dec. 31, 2000, Normandy had A$257 million in cash and a net debt of A$1.38 billion, with current-year borrowing maturities of A$110 million. Net-debt to net-debt-plus-equity is 55%.
An interim dividend was maintained at A2.5, representing a 70% payout ratio.
Normandy has proposed a restructuring of its 62% stake in Australian Magnesium Corp., which has spent A$160 million advancing the Stanwell magnesium project in central Queensland. A feasibility study recommended development of a 96,000-tonne-per-year plant to produce high-quality magnesium metal and magnesium-based alloys, primarily for supply to the automotive industry. Capital costs are estimated at A$1.1 billion.
Upon securing funding for the project, Normandy intends to spin-off its interest in Australian Magnesium to its shareholders. The time frame for such a move could be anywhere from six months to two years. Normandy has 1.76 billion shares outstanding and is trading on the Australian Stock Exchange at A91 in a 52-week range of A$1.10-83.
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