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Dam wall breach to hit Newcrest in pocket

 

Newcrest expects to downgrade full-year production and cost guidance after its Cadia goldmine was shut down for the second time in less than a year.

Production at Newcrest's largest and lowest cost mine was halted at the weekend following a breach at a tailings dam, but the ASX-listed firm said it cannot yet estimate how much the closure and clean up will cost.

Newcrest's first-half profit - announced last month - already dropped by half as a result of an earthquake that halted production in Central West NSW for three months last year.

The company did not say whether the latest disruption was because of a quake, but the government's Geoscience Australia Earthquakes site reported a 2.7-magnitude seismic event southwest of Cadia late on Thursday evening.

"Whilst it is too early in the evaluation and recovery process for Newcrest to provide an indication of the extent to which FY18 production, capital and cost guidance will be impacted, this event will adversely impact guidance," Newcrest said in a statement.

Shares in Newcrest dropped 86 cents, or 4.0 per cent, to $20.73 by 1500 AEDT on Monday.

RBC Capital Markets mining analyst Paul Hissey said the mine has just recovered from last April's disruption.

"Of additional concern will likely be the potential impact this could have on the local community," Mr Hissey wrote in a note.

"While there appears to be no impact outside the mining lease, management of community concerns will be important to ensure that the business retains its right to operate,"

Mr Hissey said Newcrest was active in its communication with residents and one of the area's largest employers.

Newcrest said there had been "no observed" environmental damage and that the wall has not moved since Friday night.

It added that it does not use substances such as mercury, cyanide and arsenic at the site, which is 25km south of Orange.

Newcrest managing director Sandeep Biswas, said the miner was still plotting a recovery plan.

"The safety of our people and the community, together with the highest standards of environmental compliance, are paramount and remain our focus as we investigate," Mr Biswas said.