The king is dead, long live the king — whoever he may be. For employees of Newcrest Mining the past few weeks has been a case of wait and see as the big gold miner searches for a replacement for former chief executive, Gordon Galt, who resigned suddenly last month citing family reasons.

The news shocked the market, which knocked 6% off Newcrest’s share price in just one day, suggesting it was happy with Galt. At press time speculation was rife about who might take over one of Australian gold mining’s pre-eminent positions. The favourite money is on two internal candidates: finance general manager, Gary Scanlan, and strategic planning manager, Peter Lester.

Further drilling late last year confirmed the Ridgeway orebody robustness. The new mine will be an important sweetener for Newcrest, taking away some of financial tartness stomached to get Cadia Hill up.

The reason Galt was liked has much to do with the development of the Cadia-Ridgeway mining complex in New South Wales and the fact that Newcrest has undergone a great revival.

It was only three years ago Newcrest had hit rock bottom. The company had huge problems at its flagship Telfer mine in Western Australia, was experiencing delays in getting its Gosowong Indonesian gold project off the ground and worst of all a $470 million foray into the Normandy group with a view to a takeover went horribly wrong.

Metal recoveries from Cadia Hil have exceeded budget forecasts thanks to a seamless start-up and innovative technology.

The solutions were to clean up the Gosowong and Telfer messes and to put its faith in a project called Cadia Hill near Orange in NSW’s central west. Development of Cadia was a gutsy move — the grades were hardly sparkling and the $441 million capital cost not exactly ideal for a miner with an already weakened balance sheet. But Galt and his team soldiered on, and to their credit, in October 1998, the mine was opened.

Given the relative size of the operation, Cadia’s seamless start-up and ability to outperform projected cost parameters have subsequently been warmly greeted by the market.

In the past financial year the mine produced 253,670oz of gold and 21,605 tonnes of copper at an average cash cost of $257/oz and production cost of $409/oz. A total of 52 million tonnes of ore and waste was mined from the open cut at a cost of less that $1.00/t.

The company is particularly happy with the rates of its two Demag H485SP hydraulic shovels and 10 (later set to rise to 20) Caterpillar 793C 235-tonne haul trucks which are exceeding anticipated productivity levels.

More than 14.5Mt of ore was processed through Cadia’s concentrator, and reconciliation of this ore calculated that tonnes were 14% above reserve predictions, copper grade 9% higher and gold grade 1%. This result is extremely encouraging as the grades of the global resource for the three Cadia deposits (Cadia, Cadia-Ridgeway and Cadia East) average a very modest 0.71gpt gold and 0.29% copper.

Newcrest reported that early teething problems with its 13m semi-autogenous grinding mill had been addressed. The company said by modifying start-up procedures together with improved operating strategies using modified shell liners it was able to increase discharge rates and hence hit budgeted throughput targets. Total material treated for the past financial year was 4% ahead of budget and costs were 8% below budget at $3.49/t.

“The most significant factor in the concentrator operation has been the performance of the process in metal recovery,” Newcrest said. “The innovative flash float gravity circuit performed above expectations, recovering 15% of total gold produced. Coupled with metallurgical improvements in reagent usage, this has lifted gold recovery overall by 6%. A number of trials and programs have been developed for the coming year to further improve total metal recovery.”

Early signs have been positive for Cadia, but Newcrest can ill-afford to relax given the huge economies of scale needed to make a profit. This is why Cadia-Ridgeway, 3km north-west of Cadia Hill, is so important — not only will the underground mine be able to wear some of the infrastructure costs currently attributed to Cadia Hill but it will help smooth over the economics of the open cut substantially. Some reports suggest the saving could be in the order $200 million off the total cost of mining over the life of the Cadia and Ridgeway operations.

Stage one of the Ridgeway development was completed in January last year when Newcrest spent $26 million to drive a 2.5km development decline into the orebody.

Stage two kicked off in February 1999 (and ran to September) at a further cost of $35 million and involved further development, drilling and the completion of the final feasibility study.

Trial mining has started at Ridgeway for metallurgical testwork and subject to the necessary departmental approvals this year, Newcrest board approval for the mine was anticipated soon, which would enable construction to begin around the first quarter of 2000-01. Production rates were yet to be formally finalised, however, an initial proposal envisaged a 200,000oz gold and 15,000t of copper per annum operation.

Ridgeway really came into its own in September last year when the deposit was firmed up by merging all the data from the surface drilling, underground drilling and exploration work in the form of a cross-cut at the 5330RL.

This lifted 23Mt of the total resource (of 39Mt grading 2.9gpt gold and 0.85% copper) into the measured category (using a 2gpt gold cut-off). The resource is open at depth.

Regionally the news around Cadia Hill keeps getting better. Newcrest is now in the throes of conducting a conceptual bulk underground mine study of the wide intervals of moderate grade copper-gold mineralisation encountered by drilling at Cadia East, directly east of Cadia Hill but separated by a fault.

Better intersections have included 184m at 2gpt gold and 0.72% copper in hole NC556 and 142m at 3gpt gold and 0.42% copper in hole NC520. Initial exploitation would be via open cut but there is also underground potential.

The reality is that the Cadia-Ridgeway valley might ultimately become a 500,000ozpa complex? While this is great news for the company and for NSW, the problem is that big Australian-owned gold miners are a dying breed. Newcrest would be certain to attract corporate attention if its combined Australian output approaches the 1 million ozpa level — that’s if the prying eyes are not looking already.