NEWCREST Mining’s gold production fell 5% in the September quarter due to lower grades at Gosowong and slower commissioning at Hidden Valley.

Australia’s largest local gold producer said its quarterly gold production came to 377,084 ounces, down from 397,826oz in the previous quarter.

The fall in production rates came from processing lower-grade ores at Gosowong. Newcrest said it had processed the stockpiles to maintain a high mill throughput while new underground mining areas were brought into production.

At Hidden Valley heavy rain combined with plant commissioning knocked around 15,000oz from Newcrest’s planned production rate.

Telfer continues to be Newcrest’s biggest producer at 162,929oz of gold, down 1942oz from the previous quarter but up more than 10,000oz year-on-year.

Production from Telfer underground fell 5% due to a planned replacement of the hoist ropes and the open pit operations encountered weathered enriched ore, which needed to be blended with harder ore for processing, meaning lower recoveries in the Telfer mill.

Cadia Valley produced 99,734oz, down from 190,367oz in the same period last year, as mining comes to an end at Ridgeway and the focus moves to Ridgeway Deeps, where development work is around 82% complete.

Despite the fall in production Newcrest managed to keep its cash costs under control, with costs falling to $A436 an ounce, down from $476/oz in the previous three months.

Newcrest is ramping up production across three operations – Gosowong, Hidden Valley and Ridgeway Deeps – and is pushing ahead with the Cadia East underground feasibility study.

Approval for the Cadia East development is expected in the March quarter next year. When Cadia East comes into production it will produce around 700,000oz per annum, rivalling production rates at Telfer.

The gold miner hopes to boost production in the 2010 fiscal year to 1.81-1.91 million ounces from 1.63Moz in 2009.

Shares in Newcrest were last at $35.66, down 54c this morning.

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