Australia's largest gold miner, Newcrest Mining Limited (ASX: NCM), officially opened its low cost Cadia East underground gold mine yesterday.
It also happens to be Australia's largest underground mine, and one of the world's largest gold and copper deposits, estimated to contain 47 million ounces of gold. (At current gold prices, that's worth around US$61 billion!)
Cadia East, located 250kms west of Sydney, has been operating since January, but is still ramping up to full production rates, which it won't hit until 2016. As Newcrest boss Greg Robinson puts it, "We are optimising production and reducing costs, but it is not where we want it yet."
The mine is Newcrest's lowest cost producer, with total all-in sustaining costs of a measly $381 an ounce last quarter. That's well under the cost of most major gold mines around the world. Many of Australia's ASX-listed gold miners like Silver Lake Resources Limited (ASX: SLR), Regis Resources Limited (ASX: RRL), Kingsgate Consolidated Limited (ASX: KCN) and Northern Star Resources Ltd (ASX: NST) have all-in sustaining costs of around A$1,000 an ounce or higher.
The current price of gold has been hovering between US$1,280 to US$1,330 an ounce, thanks to strong physical demand from the world's biggest gold consumers in India and China. Mr Robinson says he expects the cultural significance of gold in those countries to continue to drive buying of physical gold – much of it for jewellery.
Cadia East is expected to be Newcrest's flagship mine for many years to come – with production expected to continue for at least the next 30 years. And while Newcrest might be Australia's largest gold miner, it is still totally dependent on the gold price over which it has no control.
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