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PERTH, Jan 24 AAP

January 24 2013, 5:30PM

Gold and copper miner Newcrest has disappointed with worse-than-expected December quarter production, with analysts saying its full year output guidance may be difficult to meet.

The company on Thursday reported a seven per cent increase in gold and copper production for the three months to December 31, compared to the September quarter.

Its mines in Australia, Indonesia, Papua New Guinea and the Ivory Coast yielded 492,906 ounces of gold, up from 460,425 ounces in the September quarter.

UBS analysts said they were expecting gold production of 527,000 ounces at a cost of $681 per ounce.

Newcrest, however, spent $727 for each ounce of the precious metal it produced.

The analysts said December quarter copper production of 19,926 tonnes, up from 18,598 tonnes, was in line with expectations.

Overall, though, they were expecting more from Newcrest's MOPU (million ounce plant upgrade) on Papua New Guinea's Lihir Island, which is a month behind schedule.

"All sites performed below our expectations, none materially, but the cumulative impact was poor," UBS said.

Newcrest maintained its full-year production forecast, but said gold would be at the lower end of the range of 2.3 million to 2.5 million ounces after downgrading expected output from the Kencana deposit at its Gosowong project in Indonesia.

UBS said that meant a significant increase in gold production would need to be achieved in the second half to meet the full year forecast.

However, Newcrest was confident its output would progressively increase over the remainder of 2012/13 and that costs would fall as volumes rise at its Cadia East project in NSW and Lihir operations.

The new Cadia East underground operation is ramping up, reaching the commercial production milestone during the December quarter, while the Lihir upgrade is in the final stages of commissioning.

"The successful completion of these two major projects represents a significant milestone for Newcrest," the miner said.

"Together, Lihir MOPU and Cadia East establish the platform to enable delivery of significant production growth in both gold and copper over the next five years at lower unit cash costs."

Newcrest said the final cost of both projects would be within eight per cent of their budget.

Shares in the company closed 43 cents, or 1.83 per cent, higher at $23.98.

By Rebecca LeMay