Chairman’s Review
During 2003/04, Newcrest re-affirmed and built upon the Company’s long-term strategy – operating as a responsible, efficient and low-cost gold and copper producer.
The commissioning of the Telfer project in Western Australia and the smaller but higher grade Cracow project in Queensland will reinforce Newcrest’s strategy even further. Together, the two projects will almost double the Company’s current level of production and substantially add to Newcrest’s financial strength.
As foreshadowed in my report to shareholders last year, the successful start-up of the Telfer project will represent a further step change in the Company’s development. As with the Cadia Hill, Gosowong and Ridgeway projects before it, the impact of the major capital investment in Telfer will have an immediate effect, generating substantial revenue as Telfer builds up production.
The Company’s improving financial strength will be directed to optimising debt levels and maintaining strong returns to shareholders. We expect the high capital returns of the past years gradually to give way to an increased flow of dividends as debt is reduced.
The merit of Newcrest’s strategy and the success of its implementation were broadly endorsed by the sharemarket with a strong re-rating of the Company’s share price during the past year. Newcrest is now firmly placed in the ASX Top 50.
The Company’s sharemarket performance results directly from its preferred strategy of organic growth by the discovery and efficient development of world-class gold and copper operations. This strategy has reduced the Company’s requirement for upfront capital, while at the same time delivering a higher margin with better returns and lower risk.
Your Board remains committed to growing the Company further. In the current world gold environment, organic growth through successful exploration will remain a key component of that plan. The Board has already committed to a progressive step-up of both brownfields and greenfields exploration during the coming years.
The Cadia Valley and Telfer regions are now firmly established as major gold districts, with each region expected to support several large mines for many years to come. Developments at Gosowong and Cracow demonstrate clear potential for each to emerge as an important new gold district. Newcrest will continue to target exploration in these areas. At Boddington evaluation studies are continuing.
Brownfields exploration in these regions is the most efficient use of capital for Newcrest’s growth. It enhances the prospects for success and shortens the time needed to bring new discoveries to production. This approach has served Newcrest well in the past and the Board is committed to maintaining it.
During the past year, the Company’s corporate governance practices have been extensively reviewed, particularly in light of the ASX Corporate Governance Council Principles of Good Corporate Governance and Best Practice Recommendations. Newcrest’s practices, which demonstrate a high level of compliance with the ASX Principles, are reported in detail later in this Annual Report.
In addition to satisfying the formal requirements of the ASX, Newcrest’s Board and management have developed an extensive framework for assessing and managing key risks and threats to Newcrest’s future prosperity. The aim is to improve the consistency of the delivery of key outcomes for the Company’s shareholders in the future. The recent simplification of the Company’s gold and foreign exchange hedge book is clear evidence of that approach.
The successful implementation of the Company’s strategy is due to the hard work and commitment of the people at Newcrest. The Board will continue to ensure that the Company makes an appropriate investment in its people so that they can achieve their full potential. This will enable Newcrest to continue to deliver on its long-term strategy and produce acceptable outcomes to all stakeholders.
[Signature]
Ian Johnson
Chairman