Q3 2019 Earnings Call
2019 earnings call.
All participants will be in listen only mode.
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After today's presentation, there will be an opportunity to ask questions.
Please note this event is being recorded.
I would now like to turn the conference over to Jessica larger Vice President of Investor Relations. Please go ahead.
Thank you and good morning, everyone. Welcome to Newmont Gold Corp, third quarter 2019 earnings conference call joining us on the call today, or Tom Palmer, President and Chief Executive Officer role Bakken, Chief operating Officer, and Nancy BZ Chief Financial Officer.
They will be available to answer questions at the end up the call along with other members of our executive team.
Turning to slide two.
Well, let's take a moment to review the cautionary statement shown here and refer to where I see see filings, which can be found on our website at newmont Goldcorp Dot com.
Now I'll turn it over to Tom on Slide three.
Thanks, Jess and thank you all for joining a coal.
It's been just over a month since I moved into the C.D. I roll.
And I'm very honored to be on either can't see in do you want to go coax almost 100 de history.
I know I'm very excited about the strength about portfolio.
Capability about people and the opportunities we had been front Abbas decidedly box superior value for all stakeholders.
Turning to the third quarter.
We delivered solid performance and have made excellent progress in delivering on the value. We promised to establish newmont goldcorp is the world's leading gold business.
Recent highlights include.
Completing three profitable projects on schedule and within budget.
Exceeding our commitments of value delivery from the Gulf Coast acquisition through an acceleration of synergies and full potential improvements.
Closing, the Nevada gold mines joint venture and contributing now Newmont, Nevada, I said seem good order.
And continuing to improve outside to performance and advancing our reputation for sustainability.
Turning to the detailed on slide four.
In the third quarter, we purchased 1.6 billion ounces of gold and all in sustaining cost about $187 per ounce.
Generating $1.1 billion in adjusted EBITDA and $365 million in free cash flow.
We completed thought visits to support the files prices for our red like operation.
We commissioned three projects embolden, the hot mill expansion and kitchen mine.
And we approved the Telemar expansion to project.
Well I'm pleased to report that we are exceeding our synergy targets from the Gulf Coast acquisition with run rate improvements expected to reach $240 million well the ended this year.
Including $60 million in quick wins from Penasquito, and Cerro <expletive> a lot.
We also continue to lead the gold sick they can stewardship.
We declared a quarterly dividend to 14 cents per share putting us on course to return approximately $900 million to shareholders. This year.
We maintained a strong balance sheet without a $5 billion of liquidity.
And we were recognized at the top gold mine out by the Dow Jones sustainability index for leading the S.G. performance.
Leading bonding companies, how about their core an unwavering commitment to safety and sustainability.
Turning to slide five.
As Chief Executive Officer, you can expect from me I relentless focus on ensuring that everyone who works it out business can do sorry safely.
Throughout leadership and through the systems and processes, we put in place to manage risk.
There is nothing more important.
My expectation is that everyone, who works it out business understands the fatality risks associated with their work.
And our ensuring that the critical controls that are required to manage them in place at all times.
I write bus safety culture is one that constantly reinforces <unk> systems site behavior and actively shades lessons learned from serious incidents.
This is fundamental to the well being about people.
Underpins our operating performance.
Turning to look at our global portfolio on slide six.
We have the strongest and most sustainable portfolio in the industry.
No asset to like kind of being the most balanced and favorable jurisdictions in the well with 14 operated bonds and to non operated joint ventures.
With more than 90% about reserves in the Americas and Australia.
Global position provides an unmatched platform near mine brownfield and Greenfield exploration.
As announced in September we have initiated the sales process for red like I.
And interested parties have now completed this thought visits.
We have also divested that position in the NIM, but all I know project in Guinea.
And our strategically reviewing our equity investment portfolio.
Turning to a industry, leading project popped loan on slide seven.
We had the deepest pipeline a world class projects in the gold industry.
Giving us significant project sequencing flexibility.
We will continue to apply a disciplined and rigorous approach to optimize these projects and advanced them throughout investment system.
[noise] consistent project delivery and disciplined operational execution remind the cornerstones, all that business and central to creating long term shareholder value.
This year, we have successfully delivered full projects on four continents.
And in the past month alone declared commercial production the three of those projects.
Kitchen mine.
Hi, Fi mill expansion and bought him.
Catch a mine was safe the delivered on schedule and under budget and is on track to generate any total write a return of 15%.
An improvement from 10% will be approved the project just two years ago.
And we'll have a mill expansion was also brought online within budget for approximately $175 million.
Creasing mill capacity to nearly 10 million tons per annum.
Well studying 75 to 100000 ounces per year about new gold production from 2020 to 2024.
And to Boughten, we're extending the law for the poor coupon complex and leading the advancement of safe and sustainable underground mining globally through started the health and safety controls digital marketing technologies and processes.
And low carbon emission vehicles.
We've also continued to advance profitable growth.
Last month outboard unanimously approved moving the 10 of my expansion to project into the execution phase.
We are very excited about this projects ability to extend law beyond 2040 at a world class tend to my mind, you not core Newmont region.
This project also provides a platform for us to further explore a prolific mineral endowment attainable.
We will provide further de tos on this project in the context about long term guidance at a web cast in December .
We're actually mid term projects yanacocha, so far at Ahafo, North we continue to advance and optimize them throughout definitive feasibility study work.
Bodily looking at the earliest stage projects in our pipeline.
We are taking a patient and deliberate approach to optimizing and sequencing a larger projects.
Including devalue Neon Galore Creek and not have you had talked.
These projects will compete for future capital investment. So we are proactively engaging with our joint venture partners to ensure that the projects only advance opt to specific hurdles are achieved.
Oh robust project pop law and he is a key differentiator in the gold industry.
And provides us with a solid pathway to steady production and cash flow generation for decades to come.
Turning to slide for look at progress on the Goldcorp integration.
Well I'm very pleased with the pace at which we are delivering value from this acquisition.
On the Jay and I front, we had both accelerated and increased the total synergies to $120 million per annum.
This is $35 million and more than 40% higher but our initial <unk> million dollar commitment.
Well supply chain, our team is actively targeting value across several fronts.
Including quick wins through the extension of based pricing and rebates.
And leveraging our increased scale and volume to reduce our input costs.
Oh, well Clos exploration team has identified over $25 million well then you program efficiencies.
Because it wasn't considered in our initial commitment.
Oh full potential program is well and truly underway at the former Gold Cup operations.
We are seeing the seim improvement opportunities that these new operations to those that we have delivered from newmont's assets over the last seven years.
And we are able to accelerate value delivery by leveraging this experience.
We launched full potential at Penasquito at the start of June .
And I've had new amongst strongest team on the ground supporting the sought during they diagnose and design work.
We have made excellent progress.
The saudis tracking to achieve $50 million quick win improvements this year alone.
Full potential has now moved into the into the de lever Fies at Penasquito.
At Cerro <expletive> full potential was kicked off in July .
And the sawdust tracking to achieve $10 million any improvements.
That we also expect to achieve this year.
In just six months since we acquired Gokul, we are exceeding our commitments.
And the tracking towards delivering $240 million in annual run rate improvements body ended this year.
This is two thirds of the commitment we made for the end of 2021 after only six months.
With that I'll turn it over to at Chief Operating Officer, Rebecca Thompson.
Slide nine to review our operational performance.
It's Tom.
Since June of had the opportunity to visit all of our sites and the observations in discussions I had as a result of informed by immediate priorities my highest priority is a renewed and relentless focus on safety.
Followed by ensuring that we're demonstrating a high level of visible and felt leadership in the field.
Secondly, it will be about focusing on the basics to ensure we not only hits our plan, but we better it.
Thirdly, we need to collaborate more across all regions to learn from each other as a whole is worth more than the some of the parts and finally, a strong focus on improving productivity D in the out.
Let's see all I'm very much looking forward to investing in our people and local communities and raising outperformance to drive greater value from what I believed to be unexceptional asset base.
Before reviewing our third quarter operational performance I'd like to congratulate done Genie, our new regional senior Vice President of the North America region.
Dan is an accomplished minor with 27 years of global mining operations experience and most recently was a key newmont leader in Nevada.
He has successfully led teams to deliver step change improvements in safety efficiency and productivity and his appointment reflects our intention to safely improved cost and accelerate operational and efficiency improvements at our six mines in North America.
I'll now provide an overview of the North America sites on slide 10.
In North America, our teams are focusing on safety and operational execution as we work to overcome headwinds and deliver a strong into 2019, and importantly to set ourselves up for long term success.
At Penasquito, an illegal blockade began on September the 14th resulting in a third quarter production shortfall over 11000 gold ounces and 51000 gold equivalent ounces from silver lead and zinc.
The blockade was lifted on October the eat and we started shipping concentrate immediately after the blockade was lifted.
I'm pleased to see progress has been made with both the federal and state governments to help ensure the rule of law is upheld to enable a sustainable operating environment.
On October 22nd we began restarting operations.
And yesterday, we also restarted government sponsored discussions with members of the citrus community exclusively and I look forward to reaching a sustainable and long term win win solution to this local issue.
The site is no safely back to full operation.
The stripping campaign in the meantime, NASSCO pitch is nearing completion, and we expect to maintain higher grades in the fourth quarter and into 2020 .
As Tom mentioned, our full potential work at Penasquito has firmly moved into the deliver phase with the $50 million of quick win improvements.
I'm very excited about the teams work to progress the incremental $200 million of cost and productivity initiatives similar to boddington six years ago. The majority of the improvements are expected to come from the mill with a focus on increasing throughput and reducing maintenance downtime.
At Porcupine, we achieved commercial production at the board an underground mine on October the Forest War from Borden is processed at the existing Porcupine mill and will extend profitable production at the mining complex and Timmins, Ontario.
We also see exploration upside aboard and as a deposit remains open at depth.
At Musselwhite rehabilitation work is nearing completion, and we recently executed contracts for engineering construction and the installation of the new can be our system.
Well so the replacement of the conveyor is underway, we are gifting I hate to on development and building inventory to sustainable levels.
As we head into next year, we plan to three or four stopes available at any one time and going forward very importantly, our plan is to be 18 months ahead, one development work.
Musselwhite is currently operating in a mining area halfway done to mine as we also continue to push the mean decline and exploration drift at the bottom of the mine in order to improve and ensure mining and or flexibility in the future.
We expect to begin recognizing production and sales in the second quarter of 2020 . Once the mill is processing to stockpile material. We are currently trucking to surface.
And we will be back to normal operations in early October when we bring that can be our back online.
The musselwhite materials handling project is tracking to be fully operational by mid 2020 with the shaft installation nearing completion and dry commissioning of the new crushing and conveyor systems well underway.
I'd Eleanor mining continues in horizon, five and we expect to reach higher grades in the fourth quarter.
Third quarter production was slightly lower than expected due to mind sequence.
The operation is developing an integrated geotechnical and mine planning system to determine the optimal approach for safely and sustainably progressing through the lower zones to minimize mining and just stresses.
[noise] full potential has no commenced at Eleonore and we are progressing the key diagnoses of this program.
And we are leveraging our experience from all of our other underground mines to identify the highest value improvement opportunities.
At Red Lake operations fully reserved resumed in October after we completed work to install additional safety controls at lower levels of the mine.
And we recently recommends mining of cushion or.
As the sales process progress as we continue to focus on the safe and efficient operation on this mine.
Finally at C.C.N.V., we expect to finish the year strongly as we recovered the fair differences from the Veal F. One leach pad.
No to discuss our South America operations on slide 11.
At Merian, we delivered steady third quarter performance sustained improvements in mine productivity mill performance, where no transitioning into harder rock, which will present higher grade an improved mine productivity.
Yeah, and coach or delivered solid production with the drawdown of ounces from our existing locking while leach pad.
With catch your main reaching commercial production and toolbar, we expect to see recovery advances from when you cut it you go leach pad in 2020 .
I'd like to congratulate her South America team for safely delivering this important project that will sustain Yana coaches mine life and serve as a bridge to the future growth opportunities in the years ahead.
At Cerro <expletive> , we kicked off our full potential process, which has been in full swing since July and our team has identified $10 million of quick wins, mainly from improving mine development rates, well setting a course to design and implemented opportunities such as shift optimization maintenance schedule.
Okay, and basic operational improvements and I'm looking forward to providing an update on a progression during our guidance webcast.
We are tracking to a strong fourth quarter as we mined in average grade of 315.8 grams per tonne.
Turning now to Australia operations on Slide 12.
A ton of mine, we delivered another solid quarter and expect the fourth quarter to reflect the operations lost cost and highest production for the year as we access higher grade stopes.
At Boddington, our plans stripping campaign in the South pit is progressing very well and during the third quarter, we safely completed mill maintenance activities.
Unit costs have improved with higher ore tonnes mined and a favorable foreign exchange rate.
I think Casey G.M., we continue to strongly focused on increasing mine productivity waltz managing within the constraints of current Geo technical challenges and the associated remediation work in the fitness and pit.
We are optimizing mill recoveries as a morrison starter pit stops to present higher grade or.
As a result of the exclusion zones, we put in place to see if we manage the east and west walls of the pit 2019 production will be impacted by 40000 ounces and we have adjusted a regional outlook accordingly, but above all else, we will always ensure that our workforce to see.
Well, we proactively manage through these geo technical challenges with pragmatic mine plans and a high level of monitoring of all of our high walls.
We also continue to determine the most appropriate design for a lay back to further manage risk and access the gold ounces, which remain in the pit.
Underground operations are progressing well.
On the project front, we're excited that tend of mine expansion to was unanimously approved by our board for execution. The team is progressing development walk and shaft sinking has advanced beyond 210 meters and we expect to commence raise boring in quarter one 2020 .
This is a terrific project, which will deliver significant value increased mine life and provide the platform for further exploration.
No Tour Africa operations on Slide 13.
Uh-huh <unk> delivered another quarter of solid performance as we continued mining higher grades from Subika open pit and realized initial benefits from the successful ramp up of the Ahafo mill expansion project.
The expansion accelerate sufficient processing of war from stockpiles and this would be <unk> underground mine as well as hard to lower grade or from a half was existing pits.
Successful project execution has positioned the operation to generates a strong fourth quarter and a record 2019.
At a team we also delivered yet another solid quarter and are pleased to have recently connected both our Africa operations to our operations support hub and pair.
The process control stuff I know remotely analyzing real time data from achieving and collaborating with the site to deliver Sag mill improvements, we've identified approximately $20 million to $25 million of annual opportunities at achievement Ahafo from throughput and recovery improvements that will be implemented over three years.
Yes.
This is a great example of the value that can be generated from operating as one fully connected global mining business.
Looking forward, we've now established a solid platform to further evaluate growth from this perspective district.
As we continue progressing or underground exploration I'm excited by the potential it subika and adjacent ore bodies and are actively evaluating and prioritizing these growth opportunities on a value there says risk basis.
Wrapping up with our 2019 operational outlook on slide 14.
Our full year outlook now incorporates Nevada gold mines from July the forest, which lowered our production by 45000 ounces improved our overall unit costs and lowered our exploration and advance project spend by approximately $55 million.
We also updated the North America, and Australia regions to include the impacts of the last Penasquito blockade and current mining constraints a key CGM.
These have been partially offset by improved unit costs at boddington.
Our development capital outlook has been more to $550 million as increases for Nevada gold mines, and a high level are offset by lower spend in north and South America.
In summary, we expect to deliver approximately 6.3 million attributable ounces of gold and deliver all in sustaining costs of approximately $965 per items in 2019.
We remain fully focused on safely improving productivity and lowering costs to generate sustainable long term value and we will provide an update on our progress at our guidance webcast on December the second.
With that I'll hand, the door to Nancy on slide 15.
Thanks, Rob turning to slide 16 for the financial highlights.
In the third quarter, we delivered revenue of more than $2.7 billion, which increased 57% over the prior year quarter with the additional sales from the goldcorp assets and higher gold prices.
Adjusted net income of $292 million for 36 cents per diluted share.
Adjusted EBITDA of nearly $1.1 billion, a 70% increase over the prior year quarter.
Cash from continuing operations was $793 million, an increase of 85% driven by higher adjusted EBITDA.
Free cash flow $365 million increase more than $200 million over the prior year quarter.
Free cash flow per share a 44 cents, which we paid 14 cents per share in dividends.
As a reminder, our third quarter results proportionately consolidated the Companys ownership interest in Nevada Gold mines.
For the third quarter or 38.5% Southern Nevada Gold miners joint venture contributed 334000 ounces and generated $234 million EBITDA.
Turning to slide 17 for a review of earnings per share in more detail.
Third quarter GAAP net income from continuing operations was $2.2 billion or $2.71 per share.
The primary adjustment was a two dollar and 88 cents gain related to the creation of Nevada Gold mines.
Again represents the difference between the fair value of Newmont, 38.5% ownership interest in Nevada gold mines, and the carrying value of the new mountain about assets contributed to the joint venture.
Other adjustments included 49 cents related to valuation allowances and other tax impacts.
Three cents related to transaction and integration costs.
And one cents of other charges.
Taking these adjustments into account we reported adjusted net income of 36 cents per diluted share.
Turning to slide 18.
We remain well positioned to execute our capital priorities, including maintaining an investment grade balance sheet.
Testing in the next generation of mines to improve margins and build a stronger reserve base.
And returning cash to shareholders through our sustainable quarterly dividend, a 14 cents per share.
We have one of the strongest balance sheets on the gold sector in September we issued $700 million if that at a rate of 2.8%, which was the lowest 10 years metals and mining coupon ever and as a testament to our leading financial position.
Before using the proceeds to pay off $626 million of that do on October 1st.
Ended the quarter with a cash balance of $2.7 billion.
Looking forward, we are well positioned to continue a trajectory of industry, leading financial performance by executing our capital priorities and staying focused on long term value creation.
Now I'll hand, it back to Tom to wrap up on slide 19.
Thanks, Nancy turning to slide 20.
We are building momentum to deliver a strong fourth quarter.
And ensuring we are taking the necessary steps to position now business for long term success.
We remain focused on the five foundational principles of our strategy.
Keeping up people side with a relentless commitment to safety culture and systems.
Growing margins through the application about operating technical an exploration discipline.
Leveraging our exploration program, an unmatched portfolio to grow reserves and resources.
Optimizing a world class project popped lawn.
And maintaining discipline around capital allocation.
Thank you for your time.
With that I'll turn it over to the operator, we'll open the line for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you're using the speakerphone, please pick up your handset before pressing the key.
To withdraw your question. Please press Star then too.
At this time of a pause momentarily to assemble our roster.
And our first question comes from Mike Parkin of National Bank. Please go ahead.
Hi, guys. Thanks for taking my question looking back at slide eight where you're showing where your and initial kind of target on synergies was and where are you transition to today looks like the genie savings or if that right hand bars chart is a proportional has grown substantially.
Oh, just trying get an idea of what is benefited you know from your initial kind of look to where you are today and then also if you provide any kind of sense of what the break down in that gene a savings would be just ballpark on a percentage basis on a corporate versus the <unk>.
Yes.
Thanks, Thanks pockets Tom here.
So the Jay and I number is $120 million that you see on the right hand side, which is an increase from the initial commitment we made a body taught me in dollars.
That value comes from collapsing two companies into one so it's the the value that comes from no longer having I corporate headquarters in Vancouver, and starting to run Newmont Gokul like we ran newmont before we acquired Gokul. So that the vast majority of that value is coming.
From corporate costs.
And a and it's about the focus we've had on driving down our overhead costs. So that we're running this business as efficiently as we can.
And from my position, we're not finished yet I think there's still more work for us to do to sit these business up to run efficiently and as we move into 2020, you can expect to hear more for me on that.
Great. Thanks, very much and congrats on the progress on that target.
Thanks, Mike.
Our next question comes from Matthew Murphy of Barclays. Please go ahead.
Hi, I'm just had a question on the ramp up at Musselwhite, So when you're talking about rebuilding inventories those are underground inventory or its stope availability or at the actual or at surface.
Thanks, Matthew all past, a mock front across drawback consent to answer your question.
Thanks, Matthew a they simply it's a it's material that we are commonly trucking up from underground to the surface and when those stocks get to the sufficient level will will restart the plant next year, but it is all that's currently being mined halfway down a that the mine.
Okay and then the the reason for not starting the mill till later, it's just it's gonna be insufficient quantities till then is that right.
That's correct you know the best way to run a mill is flat out or not at all and we want to make sure that we're in a position of no starting and stopping.
Sure Okay, and so is this progress inline with what you had previously guided on musselwhite.
It very much is you know and certainly I was up there a couple of weeks ago. So the operation first time and the team is making great progress and I mentioned in the in the discussion that said weve awarded the contract. So segmentation are on board and a you know we really are pushing that project to bring it on a you know.
All by early October next year, so very good progress.
Okay. Thanks, and then just the last one related to Musselwhite is those insurance proceeds looks like 45 million.
Since the fire it or do you expect they get more proceeds there or is there a cap on why you can get.
We do there is a cap and we have not previously disclosed that but suffice it to say, we're working with the carriers and the underwriters now I to settle that claim and our hope is to try to wrap that up by the end of the fourth quarter.
Okay. Thanks, a lot.
Thanks Matthew.
Our next question comes from Chris Terry of Deutsche Bank. Please go ahead.
Hi, Tom and Nancy a few questions from me maybe it could just start at Penasquito sort of moving parts I'm. Just wondering wondering if you could comment on the last technical report you had out versus how we should expect a run right from here I think you mentioned high throughput.
Just a 50 mill full potential savings. So just just wanted to sort of think about how that how that asset shaping up in forward periods. Thanks.
Of course, all I'll pick up that want to maybe parts across to Rob do entity any Carla or the 50 million quick quick wins comes from.
Very straightforward things talking up 14 places ammonia equipment access to requirements packing up and overlaying whites confide us not required and talking to obtain from boddington and shooting those Sag mill. So so runs runs efficiently.
And a bit of work around yeah, we'd is on a polygon on them on and how it did to the polygon. So as Rob talks about some some really basic things we're doing at Penasquito. The thing that gets me really excited about penasquito and the value of that can deliver the parallels between penasquito and boddington odd led the turnaround at boddington either.
Six or seven years and I can see the same story at Penasquito and the opportunity for us to to improve throughput, particularly at the front end of that mill attacking all of that experience from boddington and rapidly applying to penasquito. He's what gets me very excited about the value and the upside that we can deliver from penasquito.
In terms of long term view less than four weeks when providing guidance out for five years, that's probably the best way to give you I am a summary of how penasquito, it's going to shape out by the over the next five years or so.
Okay. Good thing Thanks, Tom and then maybe just a question on on the slide going through the the synergies another way over the 40 to 40 million that you've added the to the 240 just wondered if you could comment on what we should see of that actually flowing through to the.
Caslen, so actually on the operating Harlan thanks.
Yeah the.
You'll start to say.
But that's flowing through but my pots across to the Nancy to that you'd probably better applies to answer that question Yep. So you'll see as we recognize some of the full potential benefits you'll see those in a variety of wage you'll see them and improved cost structure. You may see them in terms of improved production and productivity and a few other places I would say its its.
The balance between cost of production, probably swayed significantly more towards costs and we will continue to refine those numbers as we present them to you over the quarters and recognizing folks want to understand how this is actually flowing through a I see and how will the flow through production and again as Tom mentioned, you'll see most of that represented in our December guidance and that will be the bad.
Asked benchmark for how to how to understand those savings that we get the asking will continue to provide transparency on that as we move forward.
Okay. Thanks, Thanks sensory and then in terms of just just following up on the on the cost as well just a tad them. All I just wondered if you could comment thinking about the expansion the second phase and where that assets out I just wanted to your comment a little bit on what you're saying on the cost reduction from the from the part one.
This is your original expectations and whether the whether the benefits coming through the thanks.
Thanks, Chris again will will provide some more detail to build upon the information we provided previously in a in a few weeks time without long term guidance, but that project continues to to meet our internal rights to return. So we so it continues to present as a.
Very profitable mine and does not expect it will be out a data show you. The some some good cost improvements in a story that continues from the one that we've shared with you at the last 12 months for that to expansion of that operation.
Thanks, Tom and that the last one for me just in terms of the gardens going forward and maybe you'll have more color in the next month, we'll say, but you got to be guiding on an asset by asset basis or going to more of a regional approach like you have industrialists. Thanks.
Chris you'll see the same.
Asset by asset approach for you won't go going forward that you had from pneumonia in the past sorry for the next 12 months, you'll see asset by asset you'll say three years bar rage, and you'll see five used for the portfolio Simons we've done for number of use now.
Thanks, that's it for make good luck.
That's correct.
Our next question comes from Craig Barnes of TD Securities. Please go ahead.
Thank you Rob in your comments at Penasquito, the discussions you're having that you specifically said you're talking to the citrus community only.
I'm wondering where the trucking company and their issues why now.
Oh, it's a it's a good.
Good question, you know and going back to what I said the key a relationship we have is with the communities and that's where it's going to start and finish you know the a the cabin trucking you know live.
It's something that community others elsewhere, but a very simply that our discussions are with that community and that's what we've got to solve you know what's the government both state and federal that we're having a although discussions to make sure that deciduous communities first and foremost and that is we are discussions line that.
Where we are absolutely targeting to deliver a long term sustainable future. So certainly our priorities with that said drills community and Kaveh. We we have to manage Tonight on Oh, no ongoing basis, but our focus again, it's been syndros.
Is it mostly the water issues that you're dealing with it.
Very much a you know the water is is the key part the other thing is that we wanted to have a a an ongoing relationship relationship shouldn't be transactional and a you know we want to make sure. The Syndros community is be is benefiting from the presence of our operation there, but a large parts of that is to have.
Reliable predictable and a high quality source of water. So that sat forms a large part of the discussions, but it's certainly not the only part.
And thanks for that and Tom the Q4 shaping up to be a very good quota north of 1.8 million ounces I I guess from what your guidance suggests like.
I guess, the only issue there as a goal chapada history of loading everything up into the fourth quarter and then there was a bit of a pull back after that is.
Q4 more of a run rates or is it or a one hit wonder and then things pull back how do you see things moving forward.
Well there are number effect is driving yeah strong fourth quarter, and then auto from former Gokul Bassett, you've Gotta Huff a mill expansion, that's that's going to have a full quarter of run right.
Turning to high grade ore Casey, Jamie moving into hard right all at a 10 tomorrow.
So there are a number of forma newmont assets that are contributing to a that fourth quarter. So it's it's the factor of mine sequencing when their minds, reaching some of the hard right all that so dropping the dropping off a high fourth quarter. This year and when we guide in December I will give you saw.
I'm indication threw out guidance as to how 2020 shaping up in terms of.
As of year off half year on half year, a quarter on quarter performance.
And I think Tom if if I could also just add that to one of the the key things that we are doing new she was to make sure that were well set up for the long term future and as an example of that at a Eleonore you know, we're working very closely to make sure that our stoping sequences right that we've gotten that flexibility and also the work that were.
Doing it musselwhite to make sure that we're no longer than that one store position that we were just 12 months ago that we've actually got several stopes. So all of what we're doing is very much focused on the long term and resetting the mines up as such.
<unk> goal to have more of a consistent production profile through the year.
Greg It's it's about following the the mine sequencing how the grade presents through a portfolio that I know foreign operations. So we don't wait on trying and an optimized to get smooth quarter on quarter, we look to optimize on what's the best value and then let those are those mine plant that's more.
On sequence following good order.
Great. Thanks.
Thanks, Greg.
Our next question comes from carry back right of Canaccord Genuity. Please go ahead.
Hi, Good morning, everyone. Just another question on Eleanor and Porcupine I guess when the Goldcorp deal was first done those are potentially or those are.
Deemed as potentially noncore and now that you've had them for almost two quarters I'm. Just wondering you know what you're thinking on those two assets are.
Yes, I just to clarify carry a we never said L. you know was a potential optimization I said, it's a it's a core asked city now business and the exploration potential around eleonore suppose Clos and that's a region that we are very happy to have effort on so I don't know where that stories come from but that's never being the case.
Oh coupon or some really good opportunities around pull coupon to optimize the that operation, particularly as we look to bring in Boston and the contribution from bought in the upside from board and so alpha because we pull coupon is on optimizing the value from that asset.
Yeah. Thanks, and then maybe on the 2020 guidance I think your preliminary numbers at 7.4 million ounces.
Given the blockade at Penasquito.
And you know what's happened with musselwhite and potentially Casey G. M are those three items that you would have had that we should potentially be taking or 2020 numbers down a bit by or are there other items that should offset those when we think about 2020 I know you're in the middle of your guidance process [laughter], It's I its a bit of apples to oranges when you start to come.
Pay from that much God instead, what we're presenting 2020 you got a since much we've formed a joint venture in Nevada Ah. So you'll see the impact of production cost from from that joint venture that we'll we'll talk to a in the in that tough first week of December .
You've got a potential divestment of red like a that comes into that equation, a you've got a different mining sequence from up Penasquito issue as you flagged in terms of when it will not present. So there are number effect as that come into play at Ahafo, we move into a different mining method next year as we we mine the Subika underground mom.
With Sublevel shrinkage mentioned method that wasn't a that wasn't the Bakken much full so there are a number effect is that will that will be different from much for to what we present in the first we could just saying, but what we will provide clear explanation of that let me provide long term gardens.
Okay fair enough. Thank you.
Thanks, Gary.
Our next question comes from Tanya Jackie's Clinic of Scotia Bank. Please go ahead.
Hi, good morning, everybody.
Maybe pick <unk> congratulations on the full potential that's you're saying I ahead of budget. There wanted to ask about 2020, I know that we talked previously that 80% of your expected synergies are going to be captured and 2020, new it'd be exiting the year at 100.
Hi happen since you've been doing better than anticipated.
Something that we think you know you're going to be doing better than that 80% of you change that target at all.
Thanks tenure, it's Tom here, it's a little 40% run right by the end of this year, 80% by the end of 2020 in 100% by the end of 2021 was the the initial commitment that we might so we now sitting at essentially 66% of that run right at the end of 2020 as part of Vale.
Long term guidance again full wakes time will give you an update in terms of highway tracking based upon that guidance against that the initial commitment that we might.
Okay, Alright, I look forward to hearing more about that and maybe just on divestiture.
Mentioned Red Lake potentially not paying 2020 guidance it looks like something could close before yearend.
Oh, we're on track with the prices fear running with just with just just completed the sought visits so we remain on track.
Okay.
All right, let public hearing on that too.
Thanks Daniel.
Our next question comes from Anita Soni of C.I.B.C. Please go ahead good morning, everyone.
Question is with regards to Eleonore could you just talked about the M grade.
The lower grades that you had this quarter and how you see that playing out over the next <unk>.
Thanks, Operator, I'll pass the microphone across to roll back and send to take you through that.
No problem. Good morning, Anita it's really a very simple that a you know we've been working hard to get to the stopes back into a good sequence. So that were minimizing although all the mining stresses that we are looking at Oh, you know certainly higher grade coming into the quarter for.
So very very simply it's it's supposed to issues that I think we're getting back into a better sequence and a the stopes, which are presenting our of a higher agreed. So that's that's sold understood.
All right and then similarly on 'em, Cerro <expletive> lower grades I think you're citing urika and Mariana Norte, He has higher grades in fourth quarter, but as I recall.
Hi, good grades weren't all that high so I'm just I think you had 10 gram per tonne overall this quarter in and I think what I know a record what was left is about 10 grams per tonne material. So it was was there are some pod that you had not mine get that was higher grade.
I'm not 100% sure a to be honest, but certainly you know we've it's a it's set an integral we've just been progressing you know the plan. We're certainly into very high grades are moving forward. A this next quarter, but perhaps Tom Yeah, I think a NATO.
What until we get just to pick up with you after the coal and she can take you through the day talent that that question sure and then just in terms of the I said debt issuance and then repaying the debt on October 1st I'm I'm. Just curious why you didnt use cash balances to just pay off that that move on I know that your net debt to EBITDA.
You know around one at the 1500 dollar goal that we just experience, but it's closer to about 1.5. If he is you know the prior quarters run rate on them on <unk> EBITDA.
Great question, and what we really wanted to do as as we take on both the acquisition of the Goldcorp assets and the JV I wanted to ensure we had maximum financial flexibility. So we had an opportunity at an unbelievable coupon to just refinance that for now but that's one thing we've really continued to think about at todays hi.
Our gold prices debt repayment will be a significant priority. We just wanted to give ourselves some flexibility as we're taking on what newmont looks like today, but you can certainly anticipate as we are experiencing these prices a significant amount of those dollars will be pointed towards debt reduction of those 21 through a 23 that towers. Okay. Thank you and then.
Just a little bit more on the I try to get you to reveal something as everyone else has on the guidance coming up.
D in terms of Musselwhite, when you put at some point 4 million ounces I think that was in June .
It was with Q2 results when you put it.
Or did that did that incorporate the.
At the impact of the Musselwhite fire, which I think happened and in the first we ended the first quarter.
Yeah that the numbers you're quoting they I know they got back to L. gardens from nearly notch. Okay does incorporate the impact of the most a lot for that happened in like much.
All right.
We have been more like the annualized run rate pre fire what's happening in that.
Yeah, that's a good that's a good judgment to Mike.
Great. Thank you very much.
Thanks and item.
<unk>.
Our next question comes from Andrea type of BMO capital markets. Please go ahead.
Thanks, very much for taking my question.
Just a little bit more.
Right.
Tober.
Turning towards commercial production.
If you can walk us.
Yep.
The critical path.
Determining early October is it the completion of.
System or is it.
Handling system.
<unk> commercial by that time so.
More clarity would be useful.
Thanks, Andrew it's it's those it's not linked to the materials handling system. It's the replacement can fire and I'll get Rob to take you through some development no problem. Thanks, Andrew and again. This is a this is a sequence of events so really the.
What we've been working hard on at the moment is the rehabilitation and the de watering, but that had to be done to be completed we've got one more area, which is the transfer point to a demolish and a you know the and salvage and some of the old gear and that will be done over the coming months the.
Contract in place to get a a suitably qualified experienced a contractor was also a parts and that's been awarded and we expect full site mobilization and to be completed by early early January no as Tom mentioned the materials handling. It's it's a very important parts. If you remember that.
You know, we've got a shaft and we've got conveyor and I crusher, that's being commissioned and we're expecting that to be fully commissioned a round about the into the first quarter.
The mechanical completion of the belt, we're expecting to be somewhere towards the end of the secondarily third quarter.
And that's where we can do the PENSCO completion, the technical support and the ramp up to allow us to get a tool. So certainly well so it's not the material handling system the material handling system only comes into it so one with the belt running and that's when we can get the true efficiencies. So we're going to get a a double whammy that when the base.
It comes back it's going to be a lot more efficient the mine in general with the materials handling system as well, but that's the sequence of events that were looking at over the next nine months nine or 10 months.
Right.
When we think about muscle.
Go forward basis in full production.
How many stopes.
Hi.
<unk> able to.
The production expectations and guidance.
That flexibility to look out.
I think a a good rule of thumb is for you know if we if we in for that and certainly I think we will be comfortable for the couple of reasons is it a it gives us the flexibility if there's any challenges with stopes. It also gives us flexibility with grade and the key to all that is making sure that our development is well ahead that.
You know, whether it's at muscle weights or any of our other mines keeping that 18 months in advance so key but a good rule of thumb, we're aiming at just to have at least for.
Just another comment Mike Andrew on putting peeping muscle what is an important milestone in our portfolio of 14, keeping the context about portfolio represents approximately 200 250000 ounces. So one of the advantages of having a portfolio of outsize and spread globally is that we can we can manage through this issue.
But it's a it's that's gotten paid to our portfolio.
And then just one final question just.
Penasquito.
Great.
In the fourth quarter from where they are currently I'm just wondering what kind of step up can we expect there's a fairly significant great difference between.
As previously forecasted for 29.
21, that's so I'm just wondering how much of a step up should we be expecting.
Again, Andrew I'll get 'em, Rob to take you through some of that they too.
Yeah. The grades we are a boat to hit some a good material in the mine after the pre stripping that's been done. So we are going to have assisting viewed where the grid is going to be higher I think a a good drilled a phone is about half a gram per tonne is where we're typically setting for the the final quarter.
Okay. Thank you very much.
Thanks, Andrew.
Our next question comes from John Tumazos of John Tumazos, very independent research. Please go ahead.
Okay. Thank you very much for taking my question could you elaborate a little bit the there was a.
Sentence or two towards the end of the presentation.
<unk> mentioned Galore Creek.
Nor tabby are turned away the union.
[noise] are those projects a year.
Optimistic about because they're very large.
Or because.
The pending data.
Might be developed over the next couple of years as Newmont does their work.
May improve the project or because of the existing data on the project or because you expect higher copper and gold.
Gold prices prove it returns.
Thanks, John It's Tom here, what what 'em, we lock about those three projects that we have sitting at pre feasibility stage. He's the the very long lost that I present, and I can underpin I investment thesis the newmont gokul that that represents a very long lots that can go out through the new.
Two or three decades or beyond.
And where those projects it all three of them in a prefeasibility study sizes. It gives us in in conjunction with that joint venture partners the opportunity to really work on an optimized size projects get good competition for capital going so that the that I present in the <unk>.
In this in the second half of mixed it guide as are the first project that Mike I'm on my come on to extend the law firm from all that business. We look at those projects is doing them in theory snow parallel. So you look at those three projects the opportunity optimize them and then sequence them you can have a three projects come on through the.
Let a part of a 20 twenties into the 20 thirtys and into the 20 forties and really underpinning long law for business.
Thank you.
Thanks, John .
Our next question as a follow up some Anita Soni of C.I.B.C. Please go ahead. Thank you I'm just wondering when you do the eye the December 2nd guidance outlook.
You address reserves at the at the acquired assets at that point or would that be February Q4 for them.
The Nader, it's Tom here its thatll be February .
And we'll make show that we we bring that information out typically we drop a press release, but I think for next year, we'll make sure. We we signaled that under and take you through that information as as that's ready, but it's it's I into the New York exercise for us to complete all that work.
And we'll incorporate I mean, youre your assumptions on where the cost could go.
Well it just sort of benchmark to where you are now.
You are talking you asking the questions I was just yeah reserve you everyday pricing, Yeah reserve pricing I mean, one side of the equation of in a reserve is you know the costs associated with it so yeah I wouldn't expect areas across seem to change from 1200 those.
But I mean, the unit cost assumptions that are used on the other side of equation to say, okay. We're mining at 90 Bucks a ton at Eleonore versus say 110, which as you know I'm just pulling numbers are there, but I'm. Just wondering will include a sort of the benchmarking of what's actually happening at the I'm right now or some.
Future projection of what you think you can deliver yeah for the operating assets will be underpinned by the mine plants. It that underpin that business. So it'll be that the assumptions would have views.
Okay. Thank you.
Thanks for that.
Our next question as a follow up some carry Macquarie of Canaccord Genuity. Please go ahead.
I just want Murph question on not just wondering if you could touch on the coffee project I know you've pushed it back in the development pipeline just wondering what the work plan there it looks like going forward.
Thanks, Gary it some we've pushed that back pretty feasibility because we think this exploration upside potential there that we want to better understand a must feel like <unk> head of exploration, particularly excited about the the opportunity around coffee, but what we're looking at is the doing the drilling program depended upon that resource.
And keep that project in Prefeasibility stage until we can better understand that optimize that project and then then bring it forward in competition with the other project. It's it's a long sought in pre phase.
Great. Thank you.
Thanks, Karen.
This.
This concludes the question and answer session I would like to turn the conference back over to Tom Palmer for closing remarks.
Thank you off writer and thank you everyone for joining us and thank you for your continued interesting pneumococcal. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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