Newcrest Mining's quarterly production is likely to be hit after the gold producer it confirmed a mill at a major mine will remain out of action.
Newcrest on Thursday said a mill at its Cadia gold and copper mine in NSW was shut in mid-October after developing a motor problem. An inspection has now revealed the problem is worse than expected, and will take at least another five weeks to be fixed.
The mill handles about 70 per cent of the ore produced at Cadia, which in turn accounts for a quarter of Newcrest's production. Cadia is also Newcrest's highest-margin operation.
The shutdown is likely to impact output in the December quarter, but Newcrest could still make up production later in the year to achieve its FY 2106 guidance, Morningstar analyst Matthew Hodge said.
Shares in Newcrest fell more than seven per cent on the news. The stock closed down $1.05 cents, or 7.63 per cent, at $12.72.
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The company said it will install a conveyor to transport ore to reduce the impact at Cadia, but that construction would take six weeks.
The problem comes on top of a poor September quarter, in which production fell 13 per cent from the previous quarter, in part due to two deaths at its mines.
Those fatalities had resulted in operations being suspended for 11 days at Cadia and for 33 days at Hidden Valley in Papua New Guinea.
"It is too early to define any impact on FY16 production and cost guidance," chief executive Sandeep Biswas told shareholders at its annual general meeting in Melbourne.
Newcrest, Australia's largest gold producer, reported a massive financial turnaround in 2014/15, making a $546 million profit after the previous year's $2.2 billion loss.
The company has said it expects to deliver between 2.4 million to 2.6 million ounces of gold this financial year.
Newcrest will continue to focus on further lowering its cost base to help it ride out volatility in gold and copper prices, Mr Biswas told shareholders.
"We cannot control the gold price, but we have been working very hard on bringing our unit costs down. Whilst this is a good position to be in, we will continue our focus on reducing our costs per ounce," he said.
Newcrest currently operates at an all-in sustaining cost of $US789 per ounce, the lowest among its peers.
Spot gold prices currently trade around $US1,153.73 per ounce.
Earlier, shareholders overwhelmingly approved all resolutions at the AGM, including the company's report on executive pay, helping it to avoid a 'second strike' and a potential spill of the board.
