Q2 2020 Newmont Corporation Earnings Call
[music].
Good morning, and welcome to Newmont's second quarter 2020, <unk> earnings call.
All participants will be in listen only mode.
Did you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After today's presentation, there will be an opportunity to ask a question.
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 second quarter 2020, <unk> earnings Conference call.
Joining us on the call today or Tom Palmer.
And Chief Executive Officer, well back your Chief operating Officer, and Nancy VP Chief Financial Officer.
They will be available to answer questions at the end of the call along with other members of our executive team.
Turning to slide two.
Please take a moment to review the cautionary statement shown here and we're supposed to our STC filings, which can be found on our website at <unk> Dot com.
And now I'll turn it over to Tom on Slide three.
Thanks, Jamie good.
Good morning, Thank you all for joining us coal.
You bought continues to manage through the kind of a pandemic <unk> position of strength.
No doubt divorced battles portfolio, a world class assets.
<unk> stable production with significant leverage to rising gold prices.
Turning to slot pool for look that second quarter highlights.
Oh resilient operating model supported the delivery of solid quarterly results. Despite the ongoing impact so because it depends on their business.
We slightly resumed operations at Cerro Negro Yanacocha, Iliad old Penasquito and bustle one.
Five sought placed into care a bite much earlier this year.
In the second quarter, we produced 1.3 million ounces of gold at all in sustaining costs on a thousand $97 per ounce.
We generated operating cash flow of $668 million.
Free cash flow of $388 million.
And we continued safely advanced project work tenement expansion to.
So baker underground and muscle watch.
Oh investment grade balance sheet combined with liquidity of $6.7 billion provides us with significant financial strength and flexibility.
We ended the quarter with Freeport I'd be adults with cash.
<unk> net debt to adjusted EBITDA ratio to 0.6 times.
We declared a second quarter dividend of 25 cents per share.
Which remains the highest yielding dividend among senior gold producers.
He is also worth noting that over the last 18 months you bought has returned to more than $2 billion to shareholders, demonstrating our track record of industry leading returns.
Yeah, but we have a fundamental belief that strong environmental social and governance performance is not probably the right thing to do.
He is also would indicate although we'll manage business.
Is it sustainable long term value for shareholders and other stakeholders.
In June we published our 16th annual sustainability report.
Which they tells me about strategy approach targets and performance related to material CSG issues ranging from climate water tiling.
Got you sharing even rotce.
Sure to corporate governance Tech strategy ethics and compliance.
[noise] report transparently covers what we've done well.
The way, we have learned lessons and how we plan to improve.
And I encourage you to take some time to read more about if it's in this space like visiting the sustainability fiction well that website at <unk> Dot com.
Turning to slide thought.
Combined with that prison and resilient operating model you most deep bench of experienced leaders and but she was systems, we might a competitive advantage in these unprecedented times.
We will continue to maintain a wide ranging try that protocols at all sites.
Ensuring that we take the health safety and well being about people and communities above all else.
Most we had had employees and contractors test positive for the bars.
Our team and contact tracing prestigious a proven effective mitigating the spread to other employees at local communities.
Two weeks ago, well I get the Dow Boddington operation in Western Australia.
Even though western Australia currently has no committed the spread of this bars.
Right bus controls remain in place at Boddington.
It was great to experience first hand, the work all of the operations are doing to ensure that we do not least because I'm predicting a workforce and communities. During this time.
The competence and pride at Boddington would very hard.
And I've seen there is absolutely focused on slightly delivering to their plans.
Oh I am incredibly proud of all of the employees to how they overcoming the challenges with feis this year.
Focus and resolve.
Across the globe, we are finding new ways to move the business forward.
But better laboring <unk> leveraging technology.
Fostering greater collaboration.
Building, a deep said so community despite having to work a pot.
We're also strengthening our relationships with external stakeholders.
Embracing our core values of safety sustainability.
Take Rudy inclusion and responsibility.
Everyone Guide your with it.
Earlier this year, we established a tweak it being <unk> global community support fund.
To assist ice communities governments and employees.
We didn't put from local stakeholders, we identified three focus areas.
Probably a community Hill.
Food security.
And local economic resilience.
To ensure that out financial support had the most positive impact enriched others, who need it bounced.
Now with its have included.
The provision of personal protective equipment for stop on workers.
The construction, but oxygen plant for regional hospital.
Partnering with local food banks the families they need.
And Mark Wright lending and revolving lines the businesses in house community.
Sadly one area, we have seen significant made as result of time, but its domestic policy.
So we have also partnered with agencies, who serve we met children. He made upsides in targets.
To date, we've distributed nearly $6 billion with another $4 million persist.
Pending completion of the governance process designed to ensure that the funds go with our intended and the utilized effectively.
We committed to managing out bond with collaboration and transparency.
And you can find a regularly update at least over Sippy had organizations want I website.
These efforts will continue in the weeks and months to come.
Hi, just communities couldn't colleagues long after this pandemic it's behind us.
Turning to look at that level diverse portfolio on slide six.
Among our 12 operating volumes in two joint ventures, we had I well Clos assets.
Each of which the lead a bold and 500000 ounces of consolidated production.
Yep.
At all in sustaining cost of less than $900 per gold equivalent ounce.
The board lost that exceeds 10 years.
Importantly, all a lot try to talk to jurisdictions, we define this country's classified in the eye and be writings ranges, but each of Moody's S&P and Fitch.
In addition to <unk> existing World class assets, you bought has to emerging world class assets with Yanacocha <unk> Peru.
Mary in Suriname.
These emerging assets within our portfolio or upside through further optimization and development over the coming needs.
We also had an unmatched project pipeline.
Panama expansion to being executed.
The hop I know you gotta catch a sulfide.
Basing towards two clubs decisions next year.
But just from this foundation that we can create additional got you. That's we optimize the longer term projects and deliver decades of profitable production.
Turning to slide seven.
Al Steidel production profile will generate more than 6 million ounces of gold per year through to 2029.
This decade long production price fall is underpinned by our world class assets.
<unk> industry, leading exploration program.
I doubt three key development projects tend not to which is an execution along with a hospital and you had account yourself thoughts.
This profile is further enhanced with other wanting to hop billion dollars per year of additional revenue from producing between 1.2 to 1.4 million gold equivalent ounces from silver lead and zinc penasquito and copper at boddington.
Combined we will deliver where lot of about 7 million LEED gold equivalent ounces per year, but the next decade.
The most of any company you know industry.
Turning to have free cash flow generation potential on slide <unk>.
We expect to generate substantial free cash flow throw out gold price socket.
Every $100, increasing gold price above our base assumption.
You want to live is approximately $400 million incremental attributable free cash flow yep.
Using how conservative 1200 dollar gold price assumption al Bice free cash flow would still totaled more than $5 billion over the next five years.
And that cowards gully crosses our portfolio will generate more than $17 billion <unk> free cash flow out of it that side Tom price.
In addition, we have the potential for further upside with Tailwinds from favorable oil prices and foreign currency exchange rates.
Looking forward, we are well position to continue executing a capital priorities and staying focused on long term value creation.
With that I'll hand, it over to Rob to discuss our operational performance on slide not.
Thanks, Tom.
Turning to slide 10.
The strength of our diversified global portfolio, along with our operating model and capable workforce continues to be a key differentiator for newborn doing this.
Then to time.
During the second quarter weeks, we executed see nutrition restart plans et cetera negril.
<unk>.
Okay, and its Quito, and musselwhite, which I will discuss more detail shortly.
As Tom mentioned, we continue to maintain extensive protocols across all of our sites to ensure the health and safety ever workforce nearby communities.
And we had been operating with a significantly read your site based workforce, we remain committed to the six delivery of our plans.
As you will recall, we made the important and proactive decision to continue paying our employees through June despite the status of their operation.
Which has impacted our second quarter unit calls.
It was absolutely the right decision and it has been an exchange will factor to lay the safe and efficient ramp up over operations at the school support of our workforce and local communities.
For the second quarter, we incurred approximately $195 million a cure the incidence calls.
And approximately $53 million of corporate 19 specific costs.
The two additional health and safety procedures transportation costs and community support fun disbursements across our entire portfolio.
Over the last few months, we've seen near term headwinds.
Increased health and safety protocols impact operating efficiencies, particularly in the mine.
I got pretty stop eating the elimination of potency thing.
Transport changes impacting productivity.
However, we've been able to partially offset these impacts by reducing the number of people walking site.
Implementing new Rockstar and taking advantage of downtime to plan for longer town efficiency improvements.
We'll touch on the East, Florida, and the regional overviews.
I'm very proud about cheap.
Safely at completion.
Precedent tight.
But as we continued navigating through this global pandemic I can assure you aren't focus to drive efficiency and productivity gains is more important an acute and.
And we are well positioned to deliver a stronger second half of the year.
Turning now to slide 11 from an upbeat on the strongest performance.
At Boddington, we began to reach higher grade in the says that an earlier. This month the team achieved 21 million tons through the plant year to date, which puts them on track to exceed 40 million tons by yearend.
I thought was three year stripping campaign nears completion, we will continue to remain higher grades into 2021.
We continue to invest in their tournament's haulage system, which we expect to be fully operational next year.
Kinda mind delivered yet another solid quarter and the team is continually looking for ways to improve the way we walk.
Just recently the mine implemented even time rosters to improve productivity, let's shift change these.
With the Interstate border closures in quakes in Australia, I am incredibly appreciate that many of the team and their families for their willingness to temporarily <unk> relocate to Darwin. Other problems. This trail ya, allowing us to continue safely operating through this period.
The Kinda mine expansion to project is also progressing and all critical activities continued.
Working with our E. P. C N Worley, we're never approximately 50% through the engineering design and the overall project is about 10% complete.
Travel restrictions did impact second quarter development rates I've ever we recently added a fourth crude to help mitigate the efficiency losses.
In the early July the books coming for the production shaft Foundation was completed.
We placed the second raise bore on surface. So overall things are tracking well.
And two weeks ago. The person buildings for then you can do the underground mine arrived on site after traveling over 2000 miles.
We can't will initially be used for the construction crews and when the project is completed it will be re purpose to accommodate start mining crews to improve the team management and say 18 minutes a day in travel time between the current camp and the money.
We're also progressing our study walkable over on remotely.
Including a review of surface Leer mine.
Mine and process plant infrastructure options and updating the resource model.
Our hydro geological drilling has been delayed but we're working with the traditional willingness to access the area and safely remobilize the team.
The over on deposit continues to grow as an open pit opportunity and the potential to get beyond 2 million ounces as we defined the high grade structures and understand upside to this perspective deposit and how did this further improves our production outlook.
Australians 2020 production cost outlook is unchanged.
Approximately 1.2 million ounces $900 brands.
Yes.
Turning to Africa on Slide 12.
Yeah, I know has seen an up tick in corporate cases over the last two months, but our teams are the team and a half will continue to adhere to strict protocols, not quarantine and contact tracing procedures effective and minimizing the impact your operations.
Achieving delivered solid second quarter performance with high throughput. Despite the planned maintenance shutdown expects to reach higher grade in the fourth quarter.
At a high school, we continue to progress stripping at the ones that instead, because open pits, while advancing underground development the updated mining method at Subika underground.
Development rates. It Subika underground are ahead of schedule and we recently received the raise bore machine, which will further support development program.
The Twentytwenty outlook for Africa is unchanged with 850000 ounces at $870 funds.
Yes.
As we expect to strong second half of the with a high school, reaching higher grade in the open pits subika ramping up talking just from the undergrad.
Turning to slide 15 for an update on the North project.
Yeah, well district provide significant upside potential from the grand opportunities are the ones or a penza and should be as well as from portal.
The key to just 50 kilometers North America existing operations. It is the best on mind gold or is it in West Africa.
Approximately 3.5 million ounces of open pit reserves and more than 1 million ounces of indicated and inferred resource.
Then like a ton of mine in Australia.
The ability to expand this prolific region is underpinned by our successful recent investments and yeah, well mill expansion and Subika underground, which has created a very strong platform for our future.
Our plans include building a standalone mill and the project is expected to produce approximately 260000, then seeker year over a 15 year mine life for an investment of approximately 700 $800 million.
Our project work continues remotely with the team focused on engineering and design work as well as construction procurement and community planning.
We have also been able to advance the permitting process with a guy not eat through both virtual unlimited face to face sections.
And the earlier this month, we submitted our initial environmental impact statement for review.
We also received engineering and design approval from the gone a highway authority for the highway Digoxin, an improvement project, which was a key milestone for the project. We remain on track for a full funds decision in 2021.
Moving to our North America operations on Slide 14.
During the second quarter, the North America region resumed operations at the three sites that were previously Carrington.
At Penasquito, we'd began a phase ramp up and make consistent with the Mexican government regulations.
Government Representatives visited the site, including the federal under Secretary of Mines to review, our protocols and said Penasquito is a leading example for all Mexican my should operate during these times.
We began ramping up in the mill and eating turkeys at the beginning of June and what quickly back to pre cool at record levels in the plant by mid June.
We remain very focused on delivering value from this world class assets by applying our full potential program to eliminate constraints reduce costs and increased productivity and ultimately allow us to extend mine life through <unk> resource conversion.
As previously highlighted we also recently completed the definitive agreement to resolve all outstanding disputes with that said drops convincing which was a significant milestone which not only establishes a clear path forward for both parties to develop a long term partnership to create value and important.
Improve lives.
This agreement signed with the community elected Representatives and will be ratified in a general assembly. It will take place when Corbett 19 gathering restrictions are lifted by the government.
Well talk a plane MCC and be continued with a major interruption during the second quarter.
And at Porcupine, we saw improved recoveries, the greater proportion of war coming from the board than underground.
Musselwhite, we resumed walk on the can being system in early June after working closely with nations lead us and the provincial health authorities want to seek restock plan.
Like early July our contractor segmentation had at school project team on site.
We're on track to complete the conveyor installation by the end of Twentytwenty.
The musselwhite materials handling project will begin mobilizing for completion activities in September to align with the conveyor timeline.
We restarted the mill for stockpile processing on June the 19th and resumed underground mine development work at same time.
I feel potential work at Musselwhite is progressing well and our team successfully completed the diagnoses entirely Bart Chile and pull in there.
Well not work the underground work stream identified approximately 25 opportunities to improve development productivity trucking performance and ore body modeling.
I'm excited about future musselwhite, and the ability to drive valuable operational improvements in the year ahead.
Turning to Eleonore, we restarted the mill in late me after approximately 60 days in care and maintenance.
Earlier this year the main undertook a review of ground support conditions, and we completed some necessary rehabilitation one before ramping up production activities.
We expect to reach more normal levels of production in August as we manage through ongoing travel and logistical constraints.
Construction on the lower mind materials handling system project resumed in L. region with the conveyor belt installation and commissioning of the Fox <unk> BRCA.
We expect the project to be operational in mid August streamlining the transportation to the war to surface.
From the beginning we flagged that eleonore was the operation requiring optimization as Neumanns technical experts critically assess the asset and the opportunities to improve the geotechnical model.
We remain positive on the value we can unlock cameleon. All however, we are taking this prototype to truly integrate the updated geological and geotechnical models to deliver an optimized life of mine plan.
As a result, we expect to lower production baseline for Eylea in all other crops like 250000 ounces per year.
Work is underway with support from our full potential program to ensure the cost base matches this production level.
To support this important work we've made a number of changes to the site leadership team since the beginning of the within your general manager.
Turning manager exploration manager.
Health safety and security manager, who Oh no on board.
This leadership team is driving fundamental changes to how do we operate with a sharp focus on sustainable improvement choosing back to basics principles in order to build a strong foundation in the years ahead.
The North America Twentytwenty outlook has been updated to approximately 1.4 million ounces at $1040 per and yeah, I see with an additional 880000 gold equivalent ounces.
Silver lead and zinc.
This outlook includes the impact was saying previously can maintenance and the changes nearly at all.
Turning to South America on Slide 15.
Marion delivered solid performance in the second quarter as higher recoveries, partially offset more tons mined as the site manage through late season pass.
The team also safely completed planned mill maintenance engine and began to retire agreed as we transition to harm to rule.
Yeah, and a coach of began ramping up in mid may after being can make sense for approximately 60 days.
Mine and mill activities were suspended during the care Nixon's period, but we continue to all critical activities such as water treatment, which enabled ongoing production from the leach pads.
But no restarted the mid me and mining activity resumed in late <unk> and we expect to reach group operations in September.
We're placing catch a main or when the new cata to go Leach pad again and expect to recover these ounces later this year.
However, yana coaches outlook has been updated to reflect leach cycle disruptions and twentytwenty from the timing of war placement.
Et cetera, Negril, we took advantage of the approximately 60 day care and maintenance here to perform a significant amount of mill maintenance and modifications to crude throughput.
The team is managing through several constraints, including government and provincial travel restrictions. In addition to inclement winter weather. So the main this company operating at about 80% capacity.
Given the sites its mind constrain we're running the mill and campaigns in order to ensure cost efficiency until we are back to normal mining rates.
We will potential implementation is underway and the properties remain focused on back to basics mining practices, which includes improving development rates ground control backfill practices.
The Twentytwenty outlook for Cerro Negro has been updated to include colder at least it constraints and our ability to achieve improved development rates and access high grade ore in the fourth quarter.
Looking forward, we remain excited about potential to extend said and that goes my life throat exploration program I.
And we recently secured a large land package of approximately 550 square kilometers near San Diego.
The South America 2020 out because we don't did it took to just over 1.1 million ounces at approximately $1100 trends, Yeah, I S. C, which includes the impact of sites previously and care and maintenance and the Corbett related constrains et cetera in April.
We are also excited about yanacocha sulfites progressing towards the pool funds decision 2021.
So turning to slide 16.
Yeah. The coach has been a cornerstone asset the newmont portfolio for decades, and we continue to see promising drilling results.
As you can see here the first phase of the Sulfites project is focused on develop the most profitable deposits and it's expected to be produced approximately 500000 gold equivalent ounces per annum.
Grew 25 to an extent yanacocha is operations into the 20 <unk>.
As we advance towards a who funds decision next year, we look forward to providing more information on this exciting project injury pools.
So wrapping up with our Twentytwenty outlook on slide 17.
Despite the decision to place fight operations and can meet since we expect to produce approximately 6 million ounces of gold at all in sustaining costs of $1015 per annum twentytwenty with an additional 1 million gold equivalent ounces from co product.
Compared to the outlook provided in mid May production is unchanged, while our cost applicable to sales has been lord to $760 friends and all in sustaining costs is unchanged at $1050 Brent.
Our sustaining capital is increased to $900 million as we've been able to ramp up faster than first anticipated at our operations previously you care and maintenance.
Our total Twentytwenty capital expenditure is expected to be approximately $1.4 billion as increases to sustaining capital are partly offset.
For the changes to the development capital schedule for Tenda mine expansion to.
Just a fast some spend 2021.
For exploration and advanced projects, we've lowered our twentytwenty investment to approximately $350 million.
We are fortunate to have the largest goldrush jobs in our industry at 95.7 million ounces and we completed the majority of our reserve drilling in the first quarter.
However, as we continue to focus on keeping our people see we currently expect to replace approximately 60% to 70% of our targeted reserves delivery by the drilled it from managed operations in Twentytwenty.
We also experienced some <unk> a process the leads at the start of the pandemic I don't know seeing normal turnover times.
We also restarted exploration mapping activities at coffee using 100% your cost base crew and we're prepared to restart greenfields activities as soon as local restrictions are lifted in areas of Africa, Australia and South America.
Our longer term target organically, replacing at least two thirds of reserves depletion over the next 10 years the means firmly intact.
The changes to the way we operate from cool that have been substantial.
And as a pandemic continues to evolve with the potential for a second we're becoming more likely you have to take further measures to protect our workforce and our communities.
And with that I'll turn it over to Nancy to discuss our financial results on slide 18.
Thanks, Rob.
Turning to slide 19 for the financial highlights.
Despite having five operations in care and maintenance, our financial performance improved significantly compared to the prior year quarter.
I'm, stating that tailwinds from favorable gold in oil prices and foreign exchange more than offset the company's related impacts to our business.
During the second quarter Newmont delivered solid results with higher revenue at nearly $2.4 billion, despite fewer ounces sold.
Adjusted net income that $261 million.32 per diluted share.
And adjusted EBITDA of approximately $1 billion.
Cash from continuing operations was $668 million and free cash flow was $388 million I nearly six fold increase quarter on quarter.
Turning to slide 20 for a review of our earnings per share in more detail.
Second quarter GAAP net income from continuing operations was $412 million.51 per share.
Adjustments included 28 cents related to the change in fair value of our equity investments.
Forced that's related to incremental cobot specific costs, such as additional screening protocol.
Transportation costs and community funding disbursements.
Two cents related to tax adjustment and valuation allowance and three cents a better charges.
Taking these adjustments into account, we reported second quarter adjusted net income of 32 cents per diluted share.
While we adjusted approximately $33 million of nonrecurring incremental cobot specific cost from our second quarter net income.
Did not adjust out approximately $195 million related to the five operation temporarily placed into carry maintenance.
Cost here included wages direct operating expenses and noncash depreciation.
It's worth noting that our and I per share would have been 15 cents per share higher if we had adjusted pretty its cost.
Turning to slide 21.
As Tom mentioned Newmont continues to manage through the covert pandemic from a position at the strength.
There has been no change to our industry, leading capital allocation priority.
Which includes maintaining and strengthening our investment grade balance sheet.
Growing our margin through the delivery of our full potential continuous improvement program and growing our reserves and resources.
Through disciplined investments and organic growth.
And finally, returning cash to our shareholders threats sector, leading dividends.
We ended the quarter with liquidity of $6.7 billion and our net debt to EBITDA ratio improved <unk> 0.6 times.
You must focus on leading shareholder returns remain stronger than ever and we declared a second quarter dividend of 25 cents per share.
Over the last six quarters, we have returned more than $2 billion to shareholders through dividends and share buyback a track record that demonstrates our commitment to providing the highest return.
Lastly, while the recent rising gold prices. Notable we will continue to use our conservative assumptions around 1200 dollar mine plans and continue our disciplined around capital allocation.
We will also invest in profitable projects returned cash to shareholders and maintain a strong balance sheet.
Excess cash flows generated from periods of higher gold prices.
Could be used to further improve our balance sheet and provide additional returns to shareholders with that I'll hand, it over to Tom to wrap up on slide 22.
Thanks, Nancy concluding on slide 23.
You bought superior operating model combined without incredibly talented and dedicated workforce, okay to mine timing our position as the world's leading gold company.
Most businesses across the globe have faced unprecedented challenges this year.
I'm very proud of how we have responded and that you bought is I would have a baud al stakeholders did I solid foundation in the beats about uncertainty.
We have the industry's based portfolio.
With World class assets in top tier jurisdictions.
The largest gold reserve base of 96 million ounces.
Significant exposure to other metals.
All of which positions and you bought to reliably produce more than 6 million ounces of gold every year for at least the next decade.
And we will continue to applaud you must disciplined with resolve to deliver cost and productivity improvements to expand margins.
I'm very excited about what the future holds at Newmont.
Beginning with a strong second half to 2020.
Thank you for your continued support and please keep safe and well as we continue to navigate through this pandemic.
With that I'll turn it over to the operator to open the lines for questions.
We will now begin the question answer session.
Ask your question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the key.
You withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble a roster.
And our first question comes from Tyler Langton O.J.P. more.
Again, please go ahead.
Yeah, Good morning type, Rob and I hope Youre doing well and thanks for taking the questions.
I guess just start can you talk a little bit about the risk to production in the second second half like of Koby cases, just increase from current levels around your operations and I guess specifically.
No. Other actions you can takes it to sort of reduced the risks of having to shut down into the five operations that you previously put on care and maintenance and is there sort of less risk not the operations that were never shut down.
Thanks, Tal and and good morning, I'll pick that went up and they might be get oh, well to provide more color as well.
We remain.
All of the protocols with had implies some have you place since much steward might imply Steve any nice places.
Like like Australia, with 'em Boddington instead of mine in both of those parts of the strike the it's not community sprint but.
But the stars is nasty, it's terribly contagious and we are keeping.
As protocols in place that's not just the things we're doing on the operating saw trend social distancing at high chain. It's also about keeping people off the operating Saudi they're not part of the of the workforce required to operate the and my time, the bonds and the processing plants. So.
This far so still a wider rod as we're seeing around the globe. So we have my timing that discipline across every one of our operations in terms of that's protocols. That's the best thing, we can do but didn't but we can control we are concerned and monitoring carefully different parts of the will.
But particularly through South America.
Mexico, Peru, Argentina newest those countries are still struggling terribly with this this farce and we're doing everything we came to support how folks in most parts of the world and part of that is keeping those those protocols thermal implies and ensuring that with with screening folks probably keeping.
Up those sexual distancing behind chain and we're managing the acquired tuning in contact a pricing if we do pick out a case.
Oh, well, but you want to add any further color to that.
Thanks, Tom and Oh, just at a couple of things told to your question Tyler.
I think the other thing that we've been doing through since just had very regular.
Communication with respective authorities and the government and that's included quite a number of site visit so they've seen the standards, which were hearing to and in many cases, you know when people are nor sites, it's actually better than being in the community. So just having that confidence in what we're doing insights and continued to do that is really important.
And I think the other couple of things just to build on the very practical things. It told my line does it we did change all stores before to have you know our sites.
<unk> and that make sure there's less turnover during these times and you know that obviously helps and also just minimizing anything to visits and minimizing the number of people that would go down or sites. So after the last three four months I think we've come up with a number of very successful tactics, but as Tom said the chronic counties.
It's very much the yet and we're not dropping a runs at all.
Great. That's helpful. Then just.
To is quick financial questions with the Goldcorp.
Synergies I think the target was 340 340 million this year.
And in a total of 500 million next year is there sort of any change to those numbers and then just with.
Cap allocation I know sort of that the longer term plan, if it's kind of invest roughly half the free cash on the business and then.
The other half towards sort of dividends repurchases just with the dividends repurchases is there any sort of updated thoughts there or is it something where you're still sort of waiting to see just how the impacts of a of cobot play out.
Thanks, Todd I'll pick up your synergy question last names they seem to pick up the capital allocation question on the on the synergies.
So those numbers. So the 340 made a cash by this year in the father to me in a cash flow next year, which exceeds our initial commitment has 365 million.
From that transaction does most commitments are built into our guidance.
And we are we are delivering on most a lot of this a lot of the value for this year. It's come from a three year is the GE and I sightings about bundle up exploration Gemini. There's this as opposed to 150 million. They this supply chain improvements and then that is the big bets.
You draw worries Penasquito and Penasquito. He is performing very well you decided to what was the shortest a shutdown period for care might that's any ramped up very quickly so penasquito performing synergies at only the.
And so do you want to pick up the capital allocation.
Sure. So it's a really on the capital allocation. We just recently raised our dividend very significantly and so our view is while there's still some mention certainty around coal bed and just understanding the full ramification of that in our operations. We feel like that dividend is very solid for for now and we will continue to consider what we should.
Do with the dividend level going forward and our capital allocation you have it just right as we've indicated before is approximately over the cycle, 50% of that back to the business and 50% at that back to shareholders.
We think we're at the top of the cycle, it's really hard to say right now, but our view at the will continue to evaluate that and continued to look at dividend levels as we put that backdrop, our business plan for next year in place and really understand that the balance sheet ramifications.
Okay, great. Thanks much.
Thanks, I want to take care.
Our next question comes from Craig Barnes I've TD Securities. Please go ahead.
Yes. Thank you Tom will perhaps not said you'd have an ideal what the ongoing cobot related costs would be.
Either in millions of dollars or per ounce.
Ill pick that went up a great answer you might want to build upon up but it's it's that a it's roughly $45 billion, a bump which is around the seven to $9 per ounce, which is around the things would put in place ran hard chain around.
Different different transport that you need to mine touching sensing and the like so that's the that's the cost is saying I'm going to cost you could expect to to have ongoing as we we we continue to have those protocols in place.
Was it includes a bit hot of into to then Michel the productivity impacts Oh.
Mid to claim to be equal between its just as you know how to challenge.
As you because you had different wise for running pretty stopped meetings and all of us productivity impacts that you have that a thriving about that you get some tailwinds and we'll get started doing that.
Good Oh, my rough rule of thumb is that portable up you don't lose about the additional cost about some does a macy's men's.
Nancy be would you read into that.
Yeah, I think that's right so that that translates to about $3, an ounce and the other piece of that is other community.
And that we may spend but that's just as a reminder, does their adjusted out today I see an adjusted EBITDA in at night, but we'll certainly continue to impact free cash flow. So again, it's it's not huge dollars and the overall scheme of things, but we would anticipate incurring knows.
Regular basis for the foreseeable.
Okay. Thank you and just the second question, Tom given the environment, we're in and the amount of free cash flow generating.
Are you doing any early work all contemplating about how you could actually increase production profile.
[noise], Greg no we when looking at all those key projects that are in late stage definitive feasibility studies so.
It's off a north and yet it catches sulfide so they had but like starches definitive defensibility funds next year. They two sizable projects and I have I contribution to that production profile with the ebbs and flows over that 10 years, that's what that's where that focuses.
And that will be I'm, not see significant draws on on free cash flow in to next year and then the other thing you go to balance out with that is that that'll have three significant projects in 10 of our too.
The hoffa north of 10 to kinda sulfide school happening in parallel and it's about balancing that with your you prejudice execution risk.
We will continue to invest a game does those studies that have further up the pop on but we want and that's really the thing for would that I need to go through the proper the big projects money to get through the the proper rigor and process and we will continue to spend on on exploration efforts as well so.
Nothing nothing significant but we'll continue to navigate our budget pop on through its natural course.
Okay. Thank you another way of looking at it is a tower crosses that as we continue to work Oh, a margins flying to potentially so that means more margin.
Joel.
<unk>.
Thanks, Greg.
Our next question comes from Jackie Principal scheme.
No capital markets. Please go ahead.
Hi, Thanks, very much I guess, a first all unless Nancy maybe circling back on the capital allocation and dividend question.
Given where we are at with gold prices today have you have you thought about maybe the difference between.
Increasing the regular dividend versus maybe just topping up with that with a onetime or a special dividend in light of you know maybe the peak gold prices were AD is that something that you guys should think about doing.
Yeah, we look at all those different options and I think as we've talked before there's a host of tools in our tool box ready for years. So we do prefer to consider how our regular dividend travels against the cycle, but I would say at this point in time, we're just in the middle of putting together our 21 business plan.
And so our view would be is let's continue that works see how that next five years stacked up and then we'll be in a really good position to test various tools against that backdrop and see where we are as we continue the journey of capital allocation you know as a reminder, we just increased our debit <unk>. So we feel like that's a very good level throughout.
Cycle and certainly understanding that we are generating more cash at this time, we will as always continue to evaluate the right way to return cash to shareholders.
[laughter] fair enough if if I can also ask on on the full potential program, if I know I know a.
So last couple of months did very difficult, but are you able to give us a bit of an update in terms of how its going at penasquito and and are you. I know you mentioned that you feel its could've been synergies there but are you realizing the the benefits from the full potential program that you were expecting.
Thanks, Jackie <unk> Pos Rob to give you some color on a full potential which has gone very well, but you can fill in some.
Elsewhere.
Thanks, Jackie and and the simple answer is no very much so that.
Oh mention Denise be humble about.
The the rates it we were able to achieve after we came back from a the care and maintenance and really with isn't just a handful of these we were backup to the record levels that we were reaching before so going through the mill, we were well above the 110000 tonnes a day.
Are you know that's not just shows the amount of effort stability. The focus the teams go up there you know we're also making a big improvements in the mine in terms of the way in which we're we're digging walk to make sure. There's no dilution and just the accuracy of what was going through the plant there as well and.
Really across the board at Penasquito, Jackie as you know there is a there is opportunity everywhere in terms of Wade, which were utilizing our equipment the effectiveness of our drill and blast the quality of the blasting and our supply chain you know walking on the the availability of our equipment the effectiveness of our maintain those et cetera on all those.
Parents were seeing improvements and.
No I think you know the longer that we continue to run the more records that were going to break the I saw an answer Jack it's been very positive.
Oh, great. That's that's great to hear thanks, very much up and that's it for anything.
Thanks, Jackie take care.
Our next question comes from for Hot topic of Credit Suisse. Please go ahead.
Hi, Good morning. Thanks for taking my question can you provide just a bit more color on some of the Geo technical issues that Eleonore I know you touched on it during the prepared remarks, and maybe just talking about some of the options that you're looking out to lower the cost there. Thanks.
[noise]. Thank Scott I'm not picked up went up with a little bit of color and then get <unk> provides more details but is only those a similar story.
The the one we Ah we had at a leeville in Nevada that can fit and its extending way to really get an understanding of of the complex chicken globally, you need to take yet your models to an order of magnitude more detail.
No one should go that level of understanding that model you bring geological modeling you can bid up Mecca. Your bond plans and then you appropriate mining methods.
For that whole body. That's the work that we've been doing five about over the last several months you actually using some of the sign for equal you dive 14, Kite Williams, who did that worked very successfully and led that's very successfully.
At label in column that can shift in 16 and now a legal was it a very important part of the the column underground complex second robotic all bonds and and largely because of that excellent work with ideas. So that's that's the work that we now applying.
Too early in the will know that knowledge and skills are applying to where they know.
I would get a rob to give you some more specifics about the only and on currently on Oman issue.
Thanks, Tom and things for the question five and just to reinforce what Tom said is that you know I was amazed that the two key things that you look for an underground mine is a geological model that you could come to Benson and a geotechnical model you could confidence and and you know where we've arrived at that position.
And I think you know when you kind of look back to what we reported earlier in the year, but the reserves and resources that we have got what to do in terms of the store design in terms of our dilution recovery and those are the key things that we continue to to work Cohen.
And on it really is the basics of mining is how do you make sure that you're putting in place stopes and the right sequence and the right size. The you know ups, bringing on new forces are geotext, which caused disruption moving forward. So that when you stand back in terms of course, you know as I spoke about before.
We are resetting eleonore and operation around 250000 ounces moving forward and we have to reset the costs around that and obviously I saved the people numbers and as an example of that.
Pretty cool visit Eleonore reasonable 1200 employees and contractors you know that's definitely going to get down to more like the 900 people level. We've also recognized in our full potential area that set.
The highest cost activities in on development and we know that we've got to increase and improve the development rates that were achieving media and system that the team is very focused on that similarly, with all of our heavy equipment, we had too much good Eleanor and we're basically script.
The the heavy equipment, that's really be focusing on the immense equipment that you need to to run them by end of that size and whether that's the trucks that so does the bolt <unk>. So we all know approaching the the rights coming into a equipment, but obviously that needs less operators it needs last maintainers, Israel and it flows into the.
The cost, but the key thing, which should emphasize it really is around that time, managing that dilution and the recovery and that's where the the team is very much focused on the other key point that we do have coming very much into our favors the commissioning of the the lore mine links system that that is the same so in essence removes the.
To truck.
ER on 500 meter so it's going to provide quite a big productivity take there, but I hope that provides you with some some detail and in terms of what we're doing a daily north and last but by no means least we've got the team in place and we've got the focus there, which will really drive factset harder than than ever before so.
With that.
Okay that helps behind.
That's very helpful. Thank you.
Thanks Uh huh.
Our next question comes from Chris Terry of Deutsche Bank. Please go ahead.
Oh, that's all I'm, not saying grow, but you know going well I said, a few shorter questions hopefully, let's say just sort of on musselwhite, just wanted a little bit more clarity on exact timing men I think it's just spend a little bit of confusion over that are the exact quarter. When we should expect all.
Thanks.
Thanks, Chris Ocull get a rough to pick that went up.
Thanks, Chris Musselwhite, it's going very well that we're expecting the conveyor system to be a up and running come into the year. So it is the fourth quarter.
And ER in December is that kind of timeframe, but we're looking at and just to give you a sense that a you know in terms of progress there that we've got.
Two key can be I'd say that we're doing recruit the conveyor frames Fung you know on one of the to Colombia to stretches would go all the hanging supports and the other so really the critical path is around the fire suppression and then actually poolings, placing the belts, but are you know the ended the year is what we're very much focused on is progressing well Chris.
But the actual I mean, just in terms of the the use of capital I guess, the Capex, Yeah Mana changes in 2020 plus 2021.
And also just thinking about the greenfields exploration that should pull back previously so as it is that is the increase.
Oh, just trying to bid related there's no kind of fundamental changes in any thinking of allocation or anything on that side. You would expect that you ramp up greenfield activities as you get better access to starts in simple terms.
That's right, Chris So you'd expect to say exploration got back to the similar spend as regard to this year a once we get access to those locations and then I'll stick with the if I understood. Your question correctly with development capital you'll see this was focused on the critical path at at 10 am I to you'll see some of that.
That spend that would've been issue fallen to into next year. So you'll you'll see a bit hot development capital in you 2021 as a as a consequence of that I Sistani capital Stein pretty stable, we don't see any bout wife and this is tiny company.
Okay and into two other quick one study the autonomous what the Dunkin' just give an update on.
Where we in terms of Boddington and just if you don't have any more work on other sorts or if there's any updates to the autonomous positioning within the broader business.
So I taught them is telling us is really focused on boddington disappointed Todd.
And that's all progressing are progressing very nicely those trucks will start to roll up enough not too distant future coming out about the factory in a pure yeah.
And I know, it's a an offset caterpillar I CIS test facility being commissioned in the next few weeks just up to ride from Boddington. So we're very well position to have a good I'm kind of people didn't support.
All.
Other operations a way we can just talk you want to take is as I did many years ago with with Fiat chasing the Pilbara you build your pilot saw it Didnt business you prove up what it can do and then you look at how can be modeled across the rest of business. So that stick, one strategically and we'd probably going off those big price.
Did you actually see it a prefeasibility study.
Maybe if I never Union Galore Creek as to how taught them as whole, which could help those projects on proved the economics of ideas and it's nice projects as we optimize them at the PFS stage, and then look to see with instead the application that existing exist together operations, but that's the.
Oh, that's that's the strategic approach what I'd just be on boddington at this point in time.
Thanks, Thanks, Tom I guess the law firm for me you talked a lot about covidien class, but maybe to often to different wise, there's one sought or maybe two slots that youd still most concerned about this thing and most vulnerable I Shouldnt South America, but you ought to give color on a particular started penasquito.
Yanacocha, what could jump, but not as the key risk from a carbon shot.
Yes, it would it's it's a it's the countries that and how those countries are managing.
The pandemic are the ones that concern they I'm very confident about our ability to manage the risk of the spirit of the fiction at any one of their operations protocols are the sign it anyway.
Worry is more around the community sprayed can then that the government's they tend to take action.
And Mexico, and probably would be does that's two countries that me what should we watch carefully.
But nothing nothing in terms of what's happening I saw in its more about how those countries of managing the health crosses.
Thanks, that's it for me all the bus.
Thanks, Mike.
Our next question comes from tenure Jackie conduct of Scotiabank. Please go ahead.
Hi, Good morning, everybody, Rob I, just wanted to circle back on Eleonore now I'm, sorry that I understand it correctly I think originally when we.
Recall there they go quite part probably I think count Alan are viewed as a mine that would be looking some line. The thought of that we had 25000 ounce range or that's out there.
The change that to 50 now if we thought it.
You know is that that's a combination that you now and I can't I I am not enough that is your views on the reserve or is it yeah. There's more dilution [laughter] overall plan or less l. claim that that you have to do on an annual basis not not yeah. That's.
Because of the that pressure that you have to open it up or just trying to understand.
Why.
Have you seen now and and the second part it do you expect to get synergies that you had originally anticipated from the Uh huh.
[noise] Tanya.
Thank you and just to.
Touch base on your question and I Hope I can't go down in the right rooting for you.
But essentially.
Over the last year that so we've had the assets you know just doing more geotechnical investigation through our expense and more geological modeling, including structural geology. Our understanding is so much greater you know so when we've been able to see but we've got in practice with Olson.
Modeling, that's that's being the biggest change and we've been able to adapt and refined so it's really been around the mining practices, which are being put in place to the way in which the or presents and the condition, which the doors and that's essentially what we're dealing with and so it's it's certainly not.
Because the the material is not there is hope we're actually mining it and I think that's that's the key thing, which would certainly see tenure and that's why I still remain very very focused on the opportunity.
We are still doing exploring both you know downward to see if the ore body continues plus I would say on both sides.
Well as the two potential projects and again, none of the through potential projects are rocket science. It truly is the basics and I think that as we get eleonore fit for purpose, you know and its fighting waste around 250, you know we're going to see you know those are those synergies continue and I think it some.
<unk> you know the likes of the support Fraley, nor is not already coming from Denver. The supply chain is now coming from Dan by the G and H is being supported.
From Vancouver, as well is and so we're already seeing the soft synergies there, but in the main itself. It it really is focusing on the basics and making sure that we're mining back full body the way it should be mind.
[noise] I know that it's one that the other eberle synergies tenure I think a really know was 25 million Bucks yeah.
Yeah, Okay, maybe I'll take that offline or something like <unk> and maybe one for now if I could massive what have you look at your balance sheet <unk> and you look at that free cash flow that Ah you know, it's being generated and you did say half of it back on the boat.
Uh-huh factor to our shareholders can you just remind me what the minimum cash.
Balance that you like to keep on the balance sheet to run their business.
So yeah, I would I was sorta site and that 2 billion range, sometimes higher if we're getting ready to enter a period of capital development capital work, but that's probably the minimum at at the lower end of the cycle.
Okay.
Great. Thank you.
[noise] Thanks, Kenya.
Our next question comes from Adam graph of be Riley F. B R. Please go ahead.
Oh. Thank you good morning, Tom Robyn Nancy Thanks for taking my question just <unk>.
Looking at the slides I was struck by the the big impact on gap earnings from the from the change in value from your equity portfolio and was curious if maybe you could discuss the the process and and the speed that you guys are going through those.
Interests, and and how you're sorting through them in deciding what to get rid of and web.
[noise], Thanks, Adam Ahmat pick that went up and get.
Pick up some of that.
That question as well.
There continuing to look at cleaning up that equity portfolio, we talked about.
The the group has some great with equites that we'd.
We didn't see fit with a L.
<unk> going forward and looking at ways that we could potentially package them up and seldom. So that work is is continuing.
And.
Obviously, <unk>, we want to make sure we get to say that you with us as well so I seem to do anything they were still testing the market. Besides that doesn't have the strategic feet.
You will also seen.
Some of the swing set roundabouts, which means Nancy ketchup on that.
You saw that.
They do come off and then.
The first quarter than that you came back up again is marquetry compensate you might be seeing some of that fly through with those equites as.
Is Gulf cross moved around with painting.
Nancy is there anything you'd have to Adams Christian.
Yeah, I would just say that alright, and realized holding gains and losses on that portfolio with about 227 million or 28 cents and then the other piece of that is there was a tax benefit I recognize resulting from those changes. So that's that's really.
That's really the impact of that portfolio and it it's religious I'll attempt to I'm sure.
<unk> around current gold prices.
Sure sure.
Maybe just to change the subject could you guys do you have a schedule or an idea of when you guys might be able to give us some more details.
Guarding.
<unk> and grades and sort of a summarize mind plan for being on a coach that you got you on a quote yourself Bye project.
[noise].
Adam it's probably going to be the next years, we worked through L. Infinity feasibility study wouldn't get it get closer to that flew funds approval.
[noise] or potentially as we as we usually all you could give some more color as we issue L guidance again later this year.
So it look for a milestone like that or cold closer to fool funds.
Preventing uptitling that information was sharing now from memory time with lost is.
Ah Gaudens issue in the same bed.
When would as we revisit that plan and and uptight numbers and update our daughter that we've done but I've been logical place to Tonight to give some more cover on that project.
Alright. Thank you the rest of my questions been answered thanks, a lot guys.
Alright. Thanks.
Our next question comes from Michael Judith Vertical Research partners. Please go ahead.
Good morning Gentleman N Nancy.
<unk>.
Maybe once you should get sure your thoughts on it's been the one year anniversary you for the joint venture, Nevada Your perspective from when it.
Engaged to where you are today and and how you see it from from new months standpoint.
[noise], Yeah from my perspective Malik It was joint venture that should've been done a long time ago and please that we were able to get it.
And the first quarter of lost G and bring those two assets together.
You had he newmont and you're heading back mature headsets that.
Starting to to redo the toilet stages, the lost and declining production profiles and I'll take the ability to bring those all bodies in those processing plants together.
Bruce Laughing too does acids for both organizations and for those communities through.
Northern Nevada, So I think it was a very good transaction that has karate value for.
<unk> and <unk> and the whole is definitely worth more than the somebody individual parts. So I think it was continues familiar to be a very good transaction and quite frankly, I'll think it's the transactions should've been done some time ago and I think.
Do you guys claim Hawaii on about the newborn solid allobaric salt and I'm pleased it's Tom.
Okay, I think everybody agrees with that Florida.
How 'bout relative to production costs, the expectations of America put through relative to what you envision is that you feel that the right track and maybe they can contribute upside because of some of the power of those synergies that you sorry.
[noise] <unk>, certainly, we Oh and as the junior partner in the the J. They were you looking to see the synergies re lost.
And we we continued to to provide support and influence to see the value.
From the synergies coming through there is.
Very straightforward soon a cheese and then there's some that are harder to get as you as you stopped to optimize mom plans ran that that double <unk> double French real so we came to <unk> slow through and we can continue to influence in support and see a nice fly through the table sells I've had I've had to manage true.
The kind of a pandemic as we all have and I'll take a quick Walker and the team.
Done I I got him as joke.
[noise] of navigating through.
The pandemic and and managing all the impacts of Kompromat that impact on but production cost performance continue to work with with verrucous. The operator and can you just say that as soon as each classroom.
That's all for me thank you.
Thanks Bye.
This concludes the question and answer session.
I would like to turn the conference back over to Tom Palmer for any closing remarks.
Well. Thank you all for joining us today and and place as we can take you to manage the the pets with this nasty bars. Please you know when your family's stay in Cape <unk>, well I'm Gonna look forward to talking to you when they're not too distant future. Thank you everybody.
The conference with now concluded. Thank you for attending today's presentation and you may know disconnect.
[noise].