As well as the capex rising to an expected $1.4 billion (versus the feasibility estimate of $1.19 billion), Newcrest also said the performance of the underground contractor was being adversely affected by the labour shortage and that as a consequence, production from underground would be delayed.

No details on the delay were disclosed.

On the plus side, the company said the plant has achieved significantly better throughput rates than nameplate capacity. It also said that with the strong open cut mining performance plus the commissioning of a second processing train next month, “it is anticipated that increased cash flow will be achieved and this will recover the additional capital expenditure in the short term”

Elsewhere on the development front, Newcrest expects to spend $33 million developing the $40 million Kencana project near Toguraci in Indonesia in which it has an 82.5% stake.

Kencana has a total resource of 1.7 million tonnes grading 41gpt (for 2.2 million ounces), with Newcrest expecting to recover around 1.6Moz at a an average rate of 350,000oz per annum. Cash costs are put at US$130/oz and total costs US$172/oz.

First production from the underground mine is expected in late 2006, with development pegged for the last quarter of 2005.

Meantime Newcrest has reported total gold production for the December quarter of 251,041oz at cash costs of $127/oz (compared to 215,656oz at $114/oz in the September quarter), and copper production of 18,439t (19,717t).

Shares in company were off 33c (2%) to $16.48 in early afternoon trade.