Australian Miner Newcrest Defends Against Legal Claims

on Oct 3, 2012

On 2 October 2012, Mineweb reported that the Australian gold producer Newcrest Mining Limited (ASX:NCM) was gearing up to fight legal action by the junior miner Gold and Copper Resources (GCR), with the claims in question threatening Newcrest’s expansion of the Cadia gold mine in New South Wales.

In a news release, Newcrest, Australia’s largest gold producer, said it had been served four legal actions, with two of them disputing the awarding of exploration licences to Newcrest by the NSW Government, and particularly Exploration Licence (EL) 3865. Mineweb reports that in 2011, GCR lodged another complaint about the same licence, implicating that Newcrest and an employee at the Department of Primary Industries had acted fraudulently regarding the licence in question.

As noted in the Newcrest press release, the third legal action concerns a “breach of confidence in respect of GCR exploration technology”. Mineweb reports that the technology in question is GCR’s large scale gradient array induced polarisation technology which has been used at the Oyu Tolgoi mine in Mongolia. CGR noted that it had exclusive rights to use the technology in the Orange district in NSW, where Newcrest also has operations.

!m[](/uploads/story/512/thumbs/pic1_inline.png)The fourth claim against Newcrest is related to “permitting of activities beyond the current mining lease borders at Cadia”. At present, GCR holds several exploration licences totalling more than 2,000 square kilometres in the Orange region, with all of GCR’s prospects lying within 50 kilometres of Newcrest’s Cadia Valley operations. Newcrest notes that GCR is seeking to expand its operations, including by challenging existing Newcrest exploration tenure in the region.

Since part of the legal claims refers to Newcrest’s mining borders at Cadia, they can potentially threaten the Australian miner’s expansion in the area, with the company planning to invest $1.3 billion into Cadia East over the next five years. As noted on the Newcrest’s website, Cadia Valley is one of Australia’s largest operations, comprising the Cadia Hill open pit mine, and the Cadia East and Ridgeway underground mines. The miner reports that in the financial year ending 30 June 2012, the Cadia mine produced 473,195 ounces of gold and 44,778 tonnes of copper. The East Cadia underground mine, which is being constructed at a cost of about $1.9 billion, is expected to increase the annual production rate at Cadia Valley Operation to 26 million tonnes per annum.

Yet, Newcrest has dismissed GCR’s legal claims, noting that “these matters are not material and do not adversely impact either day to day operations at Cadia or the commencement of commercial production at the Cadia East project.”
In August, Newcrest said that its full-year profit rose 23 percent and forecast higher annual production in 2012. Bloomberg reported at the time that the company was aiming to increase gold production to a range of 2.3 million to 2.5 million ounces in the current fiscal year from 2.29 million ounces a year earlier, as the East Cadia mine is also expected to contribute to the projected increase in output. Gold producers have been expanding mines to boost production to cope with rising costs while benefitting from prices poised to increase for a 12th consecutive year.


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