March 19, 2018 / 11:53 AM / a month ago

UPDATE 2-Australia's Newcrest Mining cuts cost estimates for Wafi-Golpu JV

* Wafi-Golpu JV capital expenditure estimates cut

* Newcrest Mining’s fiscal 2018 guidance hit by Cadia mine closure

* Harmony to consider various capex funding options (Adds Harmony funding options)

JOHANNESBURG, March 19 (Reuters) - Newcrest Mining has cut capital and operating cost estimates for its Wafi-Golpu joint venture in Papua New Guinea.

The new estimates announced on Monday are based on an updated feasibility study that expects sustaining capital, which is the capital cost incurred after the start of commercial production, to be A$2.56 billion ($1.97 billion), less than its previous guidance of A$3.73 billion.

“The improved business case set out in the updated Feasibility Study clearly demonstrates the world-class nature of this multi-decade project,” said Managing Director and Chief Executive Sandeep Biswas.

“At Newcrest we are excited to have this tier 1 asset in our portfolio with an IRR (internal rate of return) of 18 percent, first quartile production costs and decades of operating life.”

Newcrest, which co-owns the gold and copper prospect with South Africa’s Harmony Gold Mining Company, added that it expected total operating costs to be $17.33 per tonne, well below its previous estimate of $23.95 a tonne.

Harmony, whose half-year profits rose 49 percent last month on improved performance at its South African operations, said it could “easily” fund the first three years’ capital expenditure itself, but may look to bank funding thereafter.

The firm will make a decision on funding sources in the next 12 months.

“When we come up with our funding, we would consider equity, of course - but we think this is fundable without equity,” said financial director Frank Abbott.

In an update last week, Newcrest said its fiscal 2018 guidance would be adversely affected by the closure of its flagship Cadia mine after damage to a tailings dam wall. (Reporting by Aditya Soni in Bengaluru; Writing by Tanisha Heiberg in Johannesburg; Editing by Kevin Liffey)

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