Newcrest Mining Limited Annual Report 2015 1 Key Achievements Financial Year 2015 2 Results at a Glance 4 Chairman’s Report 5 Managing Director’s Review 6 The Board 8 Forging a Stronger Newcrest 9 Safety 10 Operations/ Projects/ Exploration 22 Sustainability 24 Mineral Resources and Ore Reserves 32 Corporate Governance Statement 33 Diversity and Inclusion 34 Financial Report 35 Directors’ Report 38 Operating and Financial Review 62 Letter from the Chairman and the Chairman of the Human Resources and Remuneration Committee 63 Remuneration Report 90 Auditor’s Independence Declaration 91 Consolidated Income Statement 92 Consolidated Statement of Comprehensive Income 93 Consolidated Statement of Financial Position 94 Consolidated Statement of Cash Flows 95 Consolidated Statement of Changes in Equity 96 Notes to the Consolidated Financial Statements 139 Directors’ Declaration 140 Independent Auditor’s Report 142 Shareholder Information 144 Five Year Summary IBC Corporate Directory Newcrest is one of the world’s largest gold mining companies, with operating assets in four countries, predominantly in Australia and the South-West Pacific region. The Company’s key priorities are safety, operating discipline, cash generation and profitable growth. 1 Cadia Valley 100% Newcrest 4 Gosowong 75% Newcrest 7 Bonikro 89.89% Newcrest 2 Telfer 100% Newcrest 5 Wafi-Golpu 50% Newcrest 8 Namosi 69.94% Newcrest 3 Lihir 100% Newcrest 6 Hidden Valley 50% Newcrest 7 4 3 6 5 8 2 1 Key Achievements Financial Year 2015 Improved operational and financial performance ▶ 12% lower All-In Sustaining Cost (1) of USD 789/oz ▶ Gold production up 1% and copper production up 12% year-on-year ▶ Statutory profit (2) of AUD 546 million and Underlying profit (1) of AUD 515 million ▶ EBITDA margin (1) increased to 39% Stronger cash flow and balance sheet ▶ Free cash flow (1) of AUD 1,086 million ▶ Net debt reduction of AUD 174 million Future value identified ▶ Lihir pit optimisation study expected to be completed by the end of 2015 ▶ Retention of Telfer likely to provide better value than alternatives, initial cutbacks approved ▶ Revised approach to Golpu announced in December 2014, feasibility study for stage one nearing completion (1) For this reference and other references to non-IFRS financial measures throughout this annual report, refer to the information in the Operating and Financial Review in the Directors’ Report regarding non-IFRS financial measures. (2) Statutory profit is profit after tax attributable to owners of the Company. NEWCREST MINING ANNUAL REPORT 2015 1 Results at a Glance Operational performance ▶ Gold production 2,423 thousand ounces; copper production 97 thousand tonnes ▶ All-in Sustaining Cost of AUD 941 per ounce (USD 789 per ounce) ▶ All-in Sustaining Cost margin of AUD 533 per ounce (on average realised gold price of AUD 1,474 per ounce) Projects and studies ▶ Cadia East Panel Cave 1 propagated to surface Q2 2015 ▶ Golpu stage one feasibility study and stage two pre-feasibility study nearing completion Profit and cash flow ▶ Statutory profit of AUD 546 million ▶ Underlying profit of AUD 515 million ▶ Free cash flow of AUD 1,086 million ▶ Cash flow from operations of AUD 1,589 million ▶ EBITDA margin of 39%; EBIT margin (1) of 23% Balance sheet ▶ Cash and undrawn committed debt facilities at 30 June 2015 of approximately AUD 3,155 million (USD 2,423 million) ▶ Gearing of 29.3% (1) For this reference and other references to non-IFRS financial measures throughout this annual report, refer to the information in the Operating and Financial Review in the Directors’ Report regarding non-IFRS financial measures. GROUP GOLD PRODUCTION GROUP COPPER PRODUCTION UNDERLYING PROFIT (thousand ounces) (thousand tonnes) (A$ million) 2,423 97 515 2015 2015 2015 2014 2,396 2014 86 2014 432 2013 2,110 2013 80 2013 446^ 2012 2,286 2012 76 2012 1,084 2011 2,527* 2011 76 2011 1,058 1% INCREASE 12% INCREASE 19% INCREASE * Production from the former LGL operations included from the acquisition date of 30 August 2010 ^ Comparative 2013 information has been restated to reflect the adoption of Interpretation 20 – Stripping Costs in the Production Phase of a Surface Mine 2 NEWCREST MINING ANNUAL REPORT 2015 12 months to 12 months to % 30 June 2015 30 June 2014 Change Gold produced (ounces) 2,422,568 2,396,023 1 Copper produced (tonnes) 96,816 86,118 12 Gold price realised (AUD per ounce) 1,474 1,408 5 Sales revenue (AUD million) 4,344 4,040 8 EBITDA (1)(2) (AUD million) 1,673 1,514 11 EBIT (1)(2) (AUD million) 980 821 19 Statutory Profit/(loss) (3) (AUD million) 546 (2,221) – Underlying Profit (2)(4) (AUD million) 515 432 19 Operating cash flow (AUD million) 1,589 1,037 53 Capital expenditure (AUD million) 564 843 33 Return on capital employed (ROCE) (2) (5) (percent) 8.0 6.4 25 Gearing (Net Debt/Net Equity and Equity) (2) (6) (percent) 29.3 33.8 (13) Interim and Final Dividend AUD cents per share 0 0 0 (1) EBITDA is ‘Earnings before interest, tax, depreciation, amortisation and significant items’. EBIT is ‘Earnings before interest, tax and significant items’. EBITDA and EBIT are used to measure segment performance and have been extracted from Note 6 ’Segment Information’ on page 108. (2) EBIT, EBITDA, Underlying profit, Return on capital employed and Gearing are non-IFRS financial information and have not been subject to audit by the Company’s external auditor. Refer to the Operating and Financial Review section of the Directors' Report for further information regarding Non-IFRS financial measures. (3) Statutory profit/(loss) is profit/(loss) after tax attributable to owners of the parent. (4) Underlying profit is profit after tax before significant items attributable to owners of the parent. Refer to page 56 for further details. (5) Return on Capital Employed is calculated as EBIT divided by average capital employed. (6) Gearing is calculated as net debt to net debt and equity. Refer to page 55. EBIT CASH FLOW FROM OPERATIONS FREE CASH FLOW (A$ million) (A$ million) (A$ million) 980 1,589 1,086 2015 2015 2015 2014 821 2014 1,037 2014 133 2013 745^ 2013 1,147^ 2013 -1,147^ 2012 1,590 2012 1,726 2012 -1,029 2011 1,544 2011 1,729 2011 -565 19% INCREASE 53% INCREASE 717% INCREASE NEWCREST MINING ANNUAL REPORT 2015 3 Chairman’s Report The focus on cash is delivering results, with AUD 1,086 million of free cash flow generated in the year, AUD 953 million higher than the previous financial year. The past year has been characterised by improvements in our During the year, we made a number of changes to the operational and financial performance, driven by our focus Company’s Executive remuneration framework, following on operational discipline and cash flow generation. consultation with a number of shareholders. These changes are detailed in the remuneration report contained herein. This strengthened operational performance has been marred We have also introduced minimum shareholding requirements by our safety performance. We experienced two fatalities over for all Executives and Directors. the course of the financial year, and a further two fatalities in July and September 2015. This loss of life is of deep concern In July 2015, I announced changes to the Board. Following to the Newcrest Board and management – we are directly Tim Poole’s resignation, effective 30 July 2015, and Vince involved in reviewing the investigations of these incidents Gauci’s decision to retire following the Annual General and are seeking to ensure that the learnings arising from Meeting on 29 October 2015, two new appointments were these incidents are applied to the prevention of future announced. Xiaoling Liu joined the Board on 1 September 2015 fatalities. Entrenching a safe workplace culture through and Roger Higgins will join on 1 October 2015. The process improved major hazard controls and safe behaviour is one of Board renewal will continue over the coming years to ensure of the pillars of our business improvement plan. an orderly transition and renewal of skills and experience. With their extensive operational and executive experience, Newcrest’s business improvement program, which we call I expect Xiaoling and Roger will make an excellent contribution ‘Edge’, has been central to the Company’s improved operating to the Board and I would like to thank both Tim and Vince for and financial performance. Newcrest delivered a statutory their valued years of service. profit of AUD 546 million in the current year, AUD 2,767 million higher than the previous financial year, which included asset In Sandeep’s first full year as Managing Director and Chief impairments of AUD 2,353 million. Executive Officer, he has overseen significant operational and financial improvement. This is the commencement Underlying profit of AUD 515 million was AUD 83 million of a phased transformational plan. The Edge program has higher than the previous financial year, assisted by increased been rolled out across the Company, and is delivering an revenues from the ramp-up of higher margin production at unrelenting focus on safety, operational discipline, cash and Cadia East along with beneficial impacts from the weakening profitable growth, underpinned by a culture of accountability Australian dollar. and personal ownership. The focus on generating free cash flow is delivering results I would like to take this opportunity to thank Newcrest’s with AUD 1,086 million of free cash flow in the year, which employees and contractors for their commitment and was AUD 953 million higher than the previous financial year. contribution to our strong financial results over the past This has enabled us to reduce net debt by USD 819 million year. I would also like to acknowledge our host communities in the 2015 financial year.