Q3 2020 Newmont Corporation Earnings Call
Good morning, and welcome to Newmont's third quarter 2014 earnings call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions. Please.
Please note. This event is being recorded I would now like to turn the conference over to Jessica Largent, Vice President of Investor Relations. Please go ahead.
Thank you and good morning, everyone. Welcome to Newmont's third quarter 2020 earnings Conference call. Joining me on the call today are Tom Palmer, President and Chief Executive Officer.
[laughter], Chief operating officer, and yesterday, the Chief Financial Officer.
I 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 were hurt your IP.
Please see filings, which can be found on our website at <unk>.
And now I'll turn it over to Tom on Slide three.
[music] daycare and thank you all for joining us this morning.
Before I start taking this opportunity to say just larger who will be leading name on it at the end of the more than five years.
Which includes trees <unk> Investor Relations group.
Today's if you do not have the chance to meet him, but also like you to juice every colby.
Pretty good pretty communications.
He was appointed to lead is pretty communications function earlier this year.
Combine both Investor relations.
Okay.
Harry <unk>, David evolved since 2007, including three is where he got to countries Peru.
Since 2013, Eric has led multiple transactions as part of our corporate development team playing.
Playing a key role in the divestiture about each out yes.
The acquisition of Golf course, and the formation that amount of gold mines joint venture.
I want to thank Jim for his many contributions to newmont.
Cool, but she has provided me and my team and wish him. The very best of luck and she is back on her next adventure.
Turning back to resell.
I'm very excited to share with you our rental growth.
Quarterly performance as we continue to to to leave up on outlet.
To create value and improve lives through responsible and sustainable mining.
Turning to a quarterly highlights on slide four.
Do you want to hurt the industry's most diverse eligible called young well club.
That provide stable production, we significant leverage to rising gold price.
We have continued to manage through the current pandemic a position of strength.
With a proven leadership team operating model and highly capable workforce. We are building on our track record of superior value creation.
Well I'm incredibly proud of our teams across the world have responded to the pending anda.
And the second part is people have night and continue to mine.
To support the launch and the humidity in which we live and work.
Hi standard for leadership, you know industry.
All of that thought now operational.
And we delivered record financial results.
We produced 1.5 million ounces of gold.
And 273000 gold equivalent ounces from called <unk> silver lead and zinc.
Putting us well on track to achieve our full year guidance this year.
We generated significant operating cash flow of $1.6 billion.
And free cash flow of $1.3 billion the mice.
Any color not India wants 100 year history.
We have continued decidedly bad project work at 10 <unk>. So they are on the ground and also what.
We also announced the style of a royalty portfolio to members metals, which choirs get Tonight.
And they range from joint ventures, do they make our eagle in Colombia and couldn't like you kinda.
Yeah solar operating performance further improved our financial strength and flexibility.
We ended the quarter with $4.8 billion of consolidated cash.
And reduced our net debt to adjusted EBITDA ratio 2.4 times.
And yesterday.
We further demonstrated our confidence in the strength of our business and continued commitment to leading shareholder returns with a 60% increase due at quarterly dividends.
Which is now 40 cents per share or $1.60 per share annualized.
This is the sales increased 12 dividend this year.
It reflects the strength of your mom portfolio to pay a high dividend well, we continue to advance profitable projects.
And maintain financial strength and flexibility.
Yeah, we'll remain disciplined in everything we do.
Including being prudent approach to capital allocation given the uncertainty in the world today.
However, we will have an opportunity to evaluate even further returns to shareholders as we continue to build excess cash.
And last but certainly not least.
We are the first.
Only mining company to achieve gender parity amongst a non executive director.
City. An example at the very top of our organization. They span the major cause of style and cultural change.
Turning to slide five for more detail on our commitment to a pretty large.
At your model, we have a fundamental belief.
Commitment to leading environmental social and governance practices are essential to delivering sustainable long term value all about cycles.
It starts with our commitment to have Paypal.
And the work we are doing to sustainably improve health and safety and create a more inclusive called job across our global business.
We continue to perform well against that public sustainability Todd.
Sourced from local supplies.
Within the communities their operations.
Responded community compliance in a timely manner.
Reduced water consumption and complete planned reclamation activities.
We are on track to meet a seven year target to reduce our carbon emissions by six they have to say well the end of this year.
And also working to develop longer term so it's nice targets for emissions.
Which we plan to release next month.
We are committed to fully implementing global industry standards from Thailand management.
It will help us improve how we manage these topics facility.
We are the second most transparent company in the S&P 500.
And placed 12.
More than 200 companies on the corporate human rights benchmark.
These achievements are the result of relentless hard work from generations of latency.
Lessons learned any preface my fault, because every day and I don't mean mark.
Turning to slide six.
And the mining industry, we must continue to improve our health and safety performance.
At Newmont, we have a relentless focus on ensuring that everyone who works in our business can return type the home to their families.
As late as it is up to us to.
Creating a culture in which fatality risks I clearly understood and sustainably manage at all times.
Through visible so leadership.
And the systems, we put in place to manage risk consistently across our global business, we are working to significantly improve outside the performance.
In response to really body fatalities, and supporting an injury free workplace yeah.
You want my eye symbolic change this year.
Stepping away from the industry's conditional use all by lagging personal injury right no bonus programs.
These measures that are focused on managing the critical controls that must be implied at all times to pervade fatalities.
This year, we have completed over 40000 critical control focused conversation in the field.
Conversations that have proactively identified and eliminated potential risks that could lead to a fatality.
And we have recently begun using digital tools introducing it across the organization to facilitate these conversations.
And catch up more robust tight up that can quickly be analyzed and shape across that business globally.
On the back of this work we have reduced l. significant potential if they just bought two thirds compared to 2019.
And achieved a six fold improvement from when I joined the amount in 2014 and started out on this journey.
And despite the significant leadership distraction due to managing cost, but this year.
We are on track to achieve the lowest personal injury right in our company's history.
With a total recordable injury frequency right <unk> going to pay a 200000 hours worked.
It is no coincidence that visible felt leadership focused on fatality prevention is.
He is driving a significant improvement in all about safety metrics.
Turning now to the industry's best portfolio on slide seven.
Among out 12 operating mines and two joint ventures, we have world class assets.
Each of which delivered more than 500000 gold equivalent ounces per year.
And all in sustaining cost less than $900 per ounce.
And with the mine life, but makes the 10 years.
Importantly, all eyes are located in top two jurisdictions that we define as countries classified in the eye and be writings ranges, but each of Moody's S&P and Fitch.
We firmly believe that we have the right size portfolio to generate sustainable returns from our world class Responsibly managed assets located in the best gold mining jurisdictions.
Underpinning our asset base.
Are the largest gold reserves in the world.
With nearly 96 million ounces.
We also offer substantial future upside throughout the old resource by.
With nearly 75 million ounces of measured and indicated resources.
In addition to these.
We have 63 million gold equivalent ounces reserves, which includes 15 billion pounds of copper.
Importantly, not here to say that our reserves are in the Americas and describe it.
[noise] expiration or what type of thing and will continue to be a core competency at newmont.
Our disciplined expiration program buys the groundwork for growing our reserve and resource space, just a sign stable steady production and cash flows for decades to come.
Turning to slide.
Our portfolio will generate more than 6 million ounces of gold Korea through 2029.
This stable production profile is underpinned by our world class assets.
Our industry, leading exploration program.
And our next three development projects Tamar expansion too, which is then execution and then I'll hop bundle and Yanacocha sulfides, both of which are in the late stages of definitive feasibility.
As you can see here.
Hopefully I provide steady production over the next decade balance.
Balanced across each of our four regions.
[noise]. This profile is further enhanced by more than 1 million gold equivalent ounces from silver lead and zinc at Penasquito.
And caught up at Boddington and Yanacocha.
Combined we will deliver more than 7 million gold equivalent ounces per year for the next day guide.
The most of any company you know industry.
Turning to our unrivaled project pop on on slide nine.
Our project pipeline is unmatched in the gold industry.
As one of the best in the mining industry.
There is significant value to unlock as we optimize and advance our longer term projects.
Why the pathway to steady production and cash flow well into the 2040.
Now near term projects include a half I know.
Which is the bit on mine gold deposit in West Africa.
And for which we expect to reach a pool funds decision early in the new year.
And yet a coach the sulphides.
Which is also progressing towards a full funds decision next year.
Potential to extend that yanacocha slot well into the 2030.
Looking at the early stage projects in our pipeline you will see two new projects, we pretty visibility.
With more coupon, which was formerly the century project.
Overall.
Panama.
The Palm oil project, he's a light back to the existing Pobal open pit.
And it's smaller in scope than the price increase project.
Which required the relocation of the existing processing facilities in order to access the time for Bonnie.
Developing a more is expected to extend mine life by another decade, providing us more time to explore the border.
Oil palm and I'm full body.
To find the next profitable extension for coupon mine.
Tom or is a great example of newmont's disciplined investments system.
Which focuses on value creation and phased investment decisions to maintain a card production price fall instead of progressing holiday comp base capital intensive projects.
And overall, we are very excited that our name on exploration efforts continue to identify holic or prospective deposits.
Hey, Joe to further extend law and improved cost at the World class Panama after it Rob.
Rob will cover some more details on either on shortly.
[noise] and coffee, we completed our exploration mapping exercise the closing the cash ahead of the winter season.
We remain excited about the potential of Colby fully optimized the old body and improved value.
In addition to our hobbies perspective gold projects, we have significant organic exposure to gold copper porphyry, including note Debbie I thought maybe you know on Anglo Craig.
In fact, if you assume that one of the three mega projects come due out production profile at the back end of this decade.
Total production would be around 15% to 20% comp up for.
Following up a natural exposure to a measureable growing importance for reducing carbon emissions and facilitating the ongoing transition to a new energy economy.
It's also worth noting that since 2016 I had laid the delivery of 10 projects on time and budget achieved.
Achieving an average internal rate of return of over 30%.
Going forward, we will build on this track record, but continuing to apply disciplined and rigorous approach to projects and ensuring you Monty is well positioned to generate superior value throughout the price cycle.
Turning to our free cash flow generation potential on slide 10.
Our balanced portfolio.
Combined with our disciplined and operating model provides significant leverage to high gold prices from the largest production and reserves in the world.
But every $100 increase in gold prices above our base assumption yes.
Newmont delivered approximately $400 million of incremental attributable free cash flow per year.
Using our conservative 1200 dollar gold price assumption.
Nice free cash flow, we still try to more than $5 billion over the next five years.
At current gold prices now portfolio will generate more than $19 billion of free cash flow over that same timeframe.
To be clear this is free cash flow that is entirely attributable to newmont's account.
I only asked to provide industry leading returns.
With that I'll hand, it over to ROE to discuss our operational performance on slide 11.
Thanks, Tom before jumping into the regions I will start with a general corporate update.
Across our portfolio, we have continued our wide ranging controls and safety protocols to place the health safety and well being of our teams and our communities above all else.
Well, we've had employees and contractors test positive for the virus, our effective testing contact tracing in corn team procedures have proven to be effective in mitigating the spread to other employees and local communities.
In the second quarter, we had five sites of care maintenance and all five sites, we're operational in the third quarter.
[noise] Penasquito ramped up quickly and was achieving pre recorded record levels and the planned by mid June.
Eleanor and musselwhite ramped up early in the third quarter and Yanacocha has returned nearly full capacity.
Cerro Negro is currently operating at about 60% of normal capacity as the site continues to be impacted by ongoing travel restrictions in Argentina due to the virus.
We are working closely with the local authorities and unions and our mitigating the efficiency impacts of reduced staffing levels by consolidating our mining and processing efforts in the near term.
I'm incredibly proud of the commitment of all of our teams during these difficult times and the efforts that they have demonstrated de India to work and produce safely.
Turning to slide 12 for an update on Australia's performance.
At Boddington, we delivered solid third quarter production on the back of higher grades, which partially offset the wet weather that impacted mining productivity.
As the stripping campaign winds down we expect to benefit from higher grades through Twentytwenty two.
Washington is expected to finish the year strongly with higher production and lower operational cost in the fourth quarter.
The tone of this whole that system is progressing well and remains on track to be fully operational in the first half of Twentytwenty, one which will further enhance boddington safety and productivity, while also extending mine life.
The team continues to work very closely with cat as they prepare to become the world's first open pit gold mine with an autonomous whole truck fleet.
The cat nine star system has been installed and we are expediting the delivery of the issue if chess trucks with 14 of the 29, arriving before year end ahead of schedule.
10 of mine delivered another strong quarter with higher grades, which helped offset call that relate to travel restrictions and quarantine protocols that impact productivity.
The team remains focused on improving productivity through optimized shift roster and flight schedules.
And despite the challenges over the course of Twentytwenty Tenda mine remains on track to produce 500000 ounces this year.
Ton of mine expansion, two is progressing well with a rise in 40% of engineering work complete and close to 20% of the overall project complete.
Earlier this month, we achieved a significant milestone completing the pilot hole, which provides us the ability in guidance, we need to be able to develop the new 5.4 meter wide shot from both the top and the bottom.
Construction for the camp is well underway with around 75% of the new surface buildings in place.
We continue to review the schedule and capital for this project to understand the full impact of potential delays due to the ongoing impact of Corbett.
Looking further ahead, we have significant near mine exploration upside with extensions to existing deposits and it over on which has the potential to grow beyond 2 million ounces.
Overall and as an open pit deposit located only 28 kilometers to the north of the 10 of mine underground mine and has the potential to grow production for the operations beyond the current 500000 ounces per year.
As Tom mentioned overall isn't Prefeasibility and Weve been remotely progressing our study work by evaluating mine planning scenarios and resource model updates.
Recently, we resumed feel look after working in close collaboration with traditional owners to access area and safely Remobilize, our hydro geological drilling efforts.
Exploration drilling is planned to resume after the upcoming wet season.
Turning to Africa on Slide 13.
At achieving we delivered solid third quarter performance with higher Throughputs and recoveries and we expect to reach higher grades in the fourth quarter, which will continue through 2020 one.
At a high level our investment in this world class asset continues to deliver value.
Our transition to a more productive underground mining methods to become the Grand is progressing very well with development rates ahead of schedule.
During the quarter, we ramped up to mining four to five stopes concurrently in various locations of the mine, reducing congestion and increasing tonnage is.
Higher grades from the underground will help offset the stripping campaigns in the one soon subika open pits through next year.
And then I have one off we continue to advance the permitting process with the Ghana EPA and the team is focused on engineering and design work as well as construction procurement and community planning.
As Tom mentioned, we remain firmly on track for a few funds decision Twentytwenty one.
When approved our plans include building a standalone mill to produce approximately 250000 ounces per year over a 13 year mine life for an investment of approximately $700 million to $800 million.
And I have one offs functional and technical resources will be supported from our current cooperation leveraging our proven operating model to reduce duplication in the region.
Turning to our South America operations on Slide 14.
Maryann delivered solid third quarter performance as we process stockpiles to help offset lower tonnes mined and we expect higher grades in the fourth quarter as we advance into the harder ore.
Yes, the codeshare ramped up from 80% capacity in July to near full capacity in September.
In the third quarter, we processed higher leach tonnes and return to more normal levels of throughput in the mill.
And as expected the inability to police leach ounces in the second quarter will impact yanacocha through Twentytwenty that the team is working very hard to improve lead cycle times.
At Cerro Negro, we're focused on operating as efficiently as possible to help mitigate the ongoing impacts of the travel restrictions caused by the virus.
As a result, we are currently running the mill in campaigns and the team continues to demonstrate resiliency despite facing inclement weather in the third quarter and complexities of managing bidding workforce availabilities shift changes.
Mining is focused on development and the Marianas complex, but we are forecasting a slower ramp up drilling access to higher grade stopes into Twentytwenty, one while we work with the authorities on a longer term plan to return to normal operations by the end of the year.
It is worth noting that Cerro Negro is only approximately 4% of newmont's two year production. So as Tom previously mentioned, we are well on track to deliver our 2020 guidance.
Looking ahead, we remain very excited about it said in April which has the potential to become the largest gold producer in South America.
We have more than doubled our land position and the mine and its surrounding areas are highly perspective and under explored.
Our exploration team has identified significant district scale potential with more than 100 known prospects and ring said in April was one of the most prospective land packages in our entire global portfolio.
We're also very excited about Yanacocha sulfides progressing to fool funds decision in Twentytwenty, one and we will continue to share additional details as our definitive feasibility study progress.
So wrapping up with North America on Slide 15.
Penasquito delivered solid third quarter performance, as we safely and efficiently ramped up from care maintenance well.
While the site continues to manage through corporate related workforce challenges, we've been able to maintain a record levels through the plant and we also successfully completed the tubing mill maintenance shutdowns September setting the operation up for a strong fourth quarter.
Our full potential program continues to drive value from this world class asset and we are currently focused on improving fragmentation through our blasting process and we continue to make enhancements to the frontend of the mill to further improve throughput.
In addition, we fully ratified the sustainable agreement with the Syndros community in August, which also helps us to explore our large land package that is currently only 20% to explore.
At Musselwhite, we successfully ramped up from care maintenance in the third quarter and restarted stockpile processing.
And I'm delighted to see that we achieved mechanical completion of the conveyor system yesterday and have started the important process.
Mission.
Over the coming weeks, the conveyors will be tested to ensure all components of the conveyor belts are safe and fully operational as expected and I very much look forward to completing the full commissioning and reaching nameplate capacity of the belts in December.
Also just last week. This project completed over 100000 hours without a lost time injury.
Again, Im very proud of the great work of our sites and project teams along with our contract to 70 patients to ensure that we keep the health and the safety of every teammates in the forefront of every shift.
Development rates at Musselwhite are exceeding plan and commissioning of the materials handling project has begun and is expected to be fully completed in November.
We are also officially kicked off our full potential program musselwhite building on the virtual efforts over the last several months overall musselwhite is very well positioned to be fully up and running as we enter 2020, one and we'll be back stronger than ever before.
At Eleonore, our third quarter performance improved as a site ramped up from care maintenance ongoing.
Ongoing corporate related restrictions continue to impact staffing levels. The development rates ramped up in September and we are back to operating at normal capacity.
Our sales leadership team remains focused on improving efficiency and productivity and is driving fundamental changes to how we operate at approximately 250000 ounces of annual gold production with a sustainably lower cost base.
We've made significant progress restructuring and reducing the overall number of site personnel, yet morale has improved and production levels are on the rise which speaks to the cultural change taking place at Eleonore.
Through our full potential program Weve delivered $24 million of value year to date and expect to continue to deliver meaningful cost improvements in 2020, one and beyond.
Earlier this year, we commissioned to lower mine materials handling project safely and under budget, which will significantly streamline the transportation award to surface as we transition to higher production rates from the lower levels of the mine in the years ahead.
Our exploration drills at Eleonore are returning very encouraging results, both laterally and at that.
We are improving our understanding and interpretation of the geological model.
We have also advanced our understanding of the district's geological framework, which will inform our 2020 one drill program and target is less than 20% of the property drill tested to date.
Porcupine delivered solid third quarter results and the sites is improving underground development rates with several new initiatives underway that will increase tons mined and processed 2020 one.
And CMV also delivered strong results from an increase in tons mined and reaching higher grades at the bottom of the crescent.
And with that I will turn it over to Nancy to discuss our financial results on slide 16.
Thanks, Rob turning to slide 17 for the financial highlights.
We delivered our strongest ever quarterly performance across several financial metrics, including record free cash flow of $1.3 million of which 97% is attributable to newmont.
Today, we have generated $2.3 billion in free cash flow.
Of which 96% is attributable to newmont.
Other notable third quarter results include revenue of nearly $3.2 billion.
Adjusted net income.
$697 million or 86 cents per diluted share.
Adjusted EBITDA of more than $1.6 million, an increase of 54% from the prior year quarter.
And cash from continuing operations of $1.6 billion, ending the quarter with a strong cash position of $4.8 billion.
We ended the quarter with liquidity of nearly $8 billion and our net debt to EBITDA ratio improved 2.4 times.
Earlier this month S&P newmont outlet.
Both the positive and strong free cash flow prospect and reconfirmed, our triple B credit rating.
As a reminder, our financial results proportionally consolidated company's ownership interest in Nevada Gold mine, but do not exclude the contributions from the company's investment, but let me echo which appears in equity income versus our operating results.
The third quarter, our 40% of PV reported 87000 ounces of production and would have added an additional $115 million EBITDA.
Turning to slide 19 for a review of our earnings per share in more detail.
Third quarter GAAP net income from continuing operations was $611 million or 76 cents per share.
Adjustments included seven cents related to the change in fair value of our equity investment.
Three cents related to incremental committed specific costs, such as address additional screening protocol transportation costs.
Andy Finance person.
And then related to pension settlement changes related to the Nevada gold mines transaction.
Three cents related to tax adjustment and valuation allowance.
Seven cents of other charges.
Taking these adjustments into account.
Reported third quarter adjusted net income of 86 cents per diluted share.
While the adjusted EBITDA for approximately $32 million of nonrecurring incremental covance specific costs, our third quarter net income, we did not adjust out approximately $35 million of care and maintenance costs.
I didn't catch at Cerro Negro and musselwhite ramping up in the third quarter.
With that I'll hand, it over to Tom on slide nine.
Thanks, Dan.
Turning now to slide 20.
Our capital allocation philosophy remains unchanged and continues to balance the following three priorities.
Reinvesting in our business through disciplined investments in exploration and organic growth projects.
Maintaining financial strength and flexibility to sustain the business across cross cycles.
And returning cash to shareholders.
Newmont continues to set new standards as the clear industry leader in shareholder returns.
We further differentiated with a 60% increase in our quarterly dividend that we announced yesterday.
Bringing our quarterly dividend to 40 cents per share annualized dividend rate to $1.50 a share.
This was our second substantial dividend increase this year debt.
Demonstrating the strength and stability of our business.
Turning to slide 21 for more details.
During 2019 and 20.
We will have returned more than $2.5 billion to shareholders through dividends and share buybacks.
At amount.
It is more than the total although mixed eight competitors combined.
Our 40 cents per share third quarter dividend represented a 186%.
The increase from the third quarter dividend in 2019.
And highlight the strength of our financial position and our ability to continue time industry, leading dividend, whilst we simultaneously investing and develop our most profitable projects.
Our most recent dividend increase will say within our newly established dividend framework.
This framework to provide our shareholders with the stability of advice annualized dividend of one dollar per share cash.
Calibrated.
1200 dollar gold price assumption.
And the potential to receive 40% to 60% of the incremental free cash flow generated.
Gold prices above $1200 per ounce.
Our third quarter dividend.
Was calibrated conservative and stable 1500 dollar gold price assumption.
As we have disclosed previously.
Generates incremental free cash flow of approximately $400 million for every $100 change in the gold price above 1200.
So had initiated the Peight hundred dollar gold price, we would generate approximately $1.2 billion of incremental free cash flow annually.
Our third quarter dividend decrease with calibrated to shed 40%.
All that incremental $1.2 billion free cash flow.
It will generate.
In addition, $5800 gold price.
14 sales is approximately $490 million.
This equates to 60 cents per share annualized.
An increase of 60 cents per share annualized overemphasize, one dollar per share dividend.
As a result, we are pleased to offer our shareholders an annualized dividend of $1.60 per share.
We chose a conservative $1500 ashamed gold price for the calibration of effort would have dividend to maintain financial discipline and prudence.
As well as to instill stability and predictability into our dividend increase framework.
We will typically reassess the gold price semi annually and.
And recommend incremental dividend increases when we believe gold prices have revised at levels of at least $300 per ounce haul out that we have qualified to establish outcry dividend increase.
While the dividend will be a fixed quarterly by our board.
The framework aims to ensure stability and predictability.
And we will evaluate the additional dividend in gold price increments of approximately $300 per ounce.
In addition to this framework, we have a number of tools available to deploy excess cash based upon the circumstances at the time.
These include further strengthening the balance sheet through debt repayments.
Opportunistic share buybacks and additional dividends.
Our commitment to industry, leading shareholder return is evidence by our track record.
We are confident our operational delivery and discipline.
Allow us to continue to enhance that record performance.
With that I'll wrap it up on slide 12, you to.
Over the last I think.
Over the last 18 months, yes.
Newmont has assembled the gold industry leading portfolio.
A world class operations and projects in top tier jurisdictions.
And we'll deliver more than 7 million gold equivalent ounces per year for the next decade and beyond.
Our ability to generate substantial free cash flow across the product cycle is unmatched.
Now significantly reached a high gold prices was demonstrated by our recall third quarter free cash flow of $1.3 billion.
As we continue to have 100.
Newmont is leading the gold mining industry with a foundation that is stronger than it up.
And a proven strategy to deliver long term value while improving loss.
I'm very excited about what the future holds at Newmont and I look forward to keeping you updated on our performance.
With that ill turn it over to the operator to open the line for questions.
We will now begin the question and answer session to ask.
Good question you May Press Star then one on your Touchtone phone.
Are you seeing speakerphone, please pick up your handset before pressing Nicky.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question today comes from Todd.
With credit Suisse.
Hi, Good morning, just one question for me I didn't see in the presentation anything on.
Synergy targets and what maybe maybe if that change or not.
But in any case can you provide some color on the cash flow synergy targets still 500 million for next year, how is that progressing.
And anything else you could tell us on that front would be great.
Yes, thanks, Thanks, a lot and good morning.
Ill kick off and pass that and give you some stories of women delivering that value. Yes, we are on track to deliver.
The synergy target as we've committed.
The $400 million next year. He is still very much now commitment and.
Thats incorporated in our long term guidance.
We will update our long term guidance.
In December that audits webcast just this week with a meeting with our board to review, our plan, which forms the basis for that guidance.
But I remain very confident we will deliver at least $500 million of free cash flow next year and as I say it is bill already.
Rob do you want to give a few stores. Thanks, Tom Thanks for the question, but you know.
By far and away the engine of our predominant synergy with.
Is it penasquito and that team continues to do particularly well and.
Have over exceeded this year and as a remainder the key here is that we're focused on are primarily the frontend of the process plant to allow more or to flow through the mill and we've successfully done that.
In spades.
In terms of the mining initiatives it is about improving the fragmentation to enable.
More dumped to go through that.
Glenn, but also just being greater and greater discipline into highly blast hybrid demarcate the shovels dig it cetera, but beyond that we've also moved into the total cost of ownership in the supply chain side of things so.
For the procurement of non OEM Hmm pawns.
Just to name, but a few but.
We've got 45 initiatives on the Golden their older delivering good value. So very very pleased with how things are going.
Thanks, a lot.
Thank you.
Our next question comes from Tyler Langton with JP Morgan.
Hi, Good morning Hope everyone is doing well just first question I guess what.
Sort of couple of cases rising I guess is there do you see any increased risk that's the shutdowns at the mines, especially I guess the mines.
That were previously impacted and then just with the Cerro Negro I guess, it's operating at 65% is it really to get back to 100% is it really just based on having travel restrictions ease or I guess are there other sort of alternatives you can look at.
Hi, good morning, Thank you.
Nothing wrong with the Cerro Negro operation the constraints or around the cover restrictions that everyone in Argentina will be managing to keep pace.
Well site and healthy we continue to apply kind of protocols with discipline across every one of our 12 managed operations.
No matter, where they are at work so when it's dry area, where there is not a sprint. The recent community are associated with some of the strategic hold an open territory boddington kind of July respectively. We still maintain all their protocols as operations to ensure that you manage the risk is now see bars spreading we still have some.
Sales of Paypal to pit.
Not a melt rights or an office environment working virtually again.
The Hilton side inside the communities in which we live and work.
What a modest relative do is give you a story.
Around penasquito the work, that's being done which would be mirrored across every one of our operations to ensure that we could get.
Paypal Hilton side, there is a it's a good story that really demonstrates.
The extra people going to the resiliency of our business and why I'm, so incredibly proud of their workforce.
Thanks, Tom and really just to build on that is that it also highlights Newmont has you know is living in managing.
The current situation with the virus.
Penasquito, so give everybody on the line of sands.
When we talk about corporate testing, it's easy to think Thats fairly simple, but in Mexico. We've got 18 testing centers, we've got seven at various airports throughout Mexico. We've got seven at various major bus stations throughout Mexico, and we have good for testing.
Patients on site.
That also has required to staff it was up with nurses and we've got 56 nurses and personnel operating those 18 cents us and as you can imagine since Qubits started we have performed tens and tens of thousands of tests to make sure that our people are safe to go to the site and all.
Also we're testing before people leave the site. So they can go back to the communities safely and that with the full knowledge. There are clear the virus, but I think that story from Penasquito really highlights just as Tom said the effort and the commitment that our teams have to make sure that we operate throughout this virus very very safe.
Thanks, that's helpful and then.
Just with the two projects for next year for Yanacocha and Ahafo North.
You make us a sense when next you might make a decision and is there any risk just from covance sort of.
Pushing those decisions out.
Thanks, Tom I'll call them pickup program when it should be helping a little comfort there'll be early.
Something like that and we're just working through the eyes of the funnel permits.
It's absolutely down the middle of our wheelhouse.
The blueprints.
I am as the original half our chain and Marion.
Very straightforward mine to mine and mill.
Turning 30 kilometers from existing hospital operation and a lot of the work, particularly in the first 12 months is.
A relocation of a road and the clearing of.
Top soil and starting the initials that was all of which is done with local benign workforce and we build off the project.
That still implies a hopper, having just recently finished the Ahafo mill expansion.
And so Baker underground, so very well positioned.
With a half I know and business I've locked in light of what it was fun laws to be noted sales to be crossed I gotta catch us all thought is second half of next year.
Still doing the final engineering work around that definitive feasibility study and again.
Pretty straight forward in terms of bringing that project on most approved so far these layback of the existing gotta catch that I had pizza with mining today.
At Yanacocha sales deploying equipment to that Atlanta.
As the China got your underground mine, which we've already developed quite extensively so, but but sources of all well advanced the key word is around the the the construction of a concentrated.
And the one I Clive on the existing footprint and again as you prove that project and do your early works a lot of that is civil works to prepare the foundations for quite substantial processing plants are not see any cabot related restrictions to be able to bring that project orders as we reach from funds.
Great. Thanks, so much.
Thanks, Tom.
Our next question comes from Greg Barnes with.
TD Securities.
Thank you Tom just rehashing of commentary on that dividend framework.
I understand that Youre reassess the dividend every six months now going forward. Thanks.
Based on the call.
Our board will look at it every quarter Greg.
Back.
At a semi annual called cross period.
If you look at the discussion we went through with the board. This week to improve that dividend. We look back the semiannual period, we look back on the first half of this year goals averaging 50.
50 for the first half of the able to a conservative due to a level that 50 to 100 and above 40%. So the lower end of our range to that 1500. So we'll look every quarter.
As a as I.
As a board.
Look back over that semiannual period.
Okay. So in Q1, if you look back over the second half of 29.
20 lets say we averaged 1900.
It looks like we will.
You do something like 1800 as the basis of dividend.
I think as you use that framework and and Mike do those calculations are nothing hopeful that in your report this morning, but it's absolutely the discussion that our board will be going through so you could do that calculation side of 40% to 60% would be somewhere between Telus 20 tools for that.
Would be subject to the board looking at not just that gold price, but also a number of other factors, but that's just a little discussion that we'll be we'll be having that framework allows us to have that discussion and allows you with the investment community to Tomatoes determinations.
Just I was interested in your comments on copper and the projects in your portfolio.
Is that an expression of increasing interest in copper or just a factoid out that that those projects have copper exposure. It's an interesting angle just let's just purely effect to it but we don't need to do anything other than developing organic project offline, we will get a natural excited a culpa at a time when we will be.
Potent meddling in that level.
<unk> level.
Okay. Thank you.
Thanks, Greg.
Our next question comes from Chris Terry with Deutsche Bank.
Hi, Tom Nance and Robert a couple of questions from me first one on the cash balance now at full point I go in and just just thinking about the mechanics of that looking back I guess the last couple of years. You have you have had it down to about 2 billion also I think.
But generally.
It's a reasonably high cash balance, but as you think about going forward as that cash sales you probably somewhat into dividends and then you showed on our numbers become you know net net cash relatively quickly how do you think about the actual cash balance so what you'll do with that is that going to be used to pay debt. So.
What physical will you do with the actual cash thanks.
Yes, absolutely I'll take that when you've got it just right. We have indicated publicly that we would like to keep cash balances somewhere in that 2 billion to 3 billion dollar range and I think in time, that's how that uncertainty that remains prudent. We've also indicated that we will continue to use that cash for things like paying down our.
21 through 23 that things like the share buyback that we.
They did last year, and certainly contributions to the dividend as well as reinvesting in our business. So all of those things combine well give us financial flexibility and Optionality, but yes in today's world I think holding at that more cash on the balance sheet is certainly something we will continue to do.
Okay. Thanks. Thanks. Thanks.
Just in terms of the project topline on on Slide nine you talked about offered an orphan and Yanacocha sulfides.
750, I think you said for the offer no capex and Yanacocha sulfides second half next year decision.
Cancer modest that time period, and the the rough capital that that would be spent over I think it's a pretty long dated project, but just wanted to get an update thanks. Thanks for its round on the studios.
Were 51.3 pockets and interest in Yanacocha. So it's roughly be in those two months account and its.
It's a three year development. So if you look at the Big beat the three big capital projects and if you look at out.
Sort of model out development capital going up on the back of a 72. The tandem on 754 will have an open a billion or.
For Yanacocha sulfides over the next four by little bit in the five years, that's about that's about roughly now I'll spend on development capital I appreciate it.
And that's.
Another important factor behind our dividend Prime movies, we've got steady be in those in.
Starting capital steady $400 million combined between advanced projects and exploration and roughly a steady 800 to be intelligent development capital that we'd want to lifetime at prime and allows us to shakes its cash to the shareholders.
Okay that makes sense. So next year those two mine updates and then looking at slides and on any of the other sort of pre sales feasibility top projects that would move to the next guy.
Yes, I think they want to keep in mind that will be now.
Project pot lines, but we don't show amazed.
But we are seeking a shaft at turquoise ridge.
Got it and how it fits into that.
By the Io expansion, which we own 40% of that.
Getting close to two funds are there a couple of other very important.
Catalyst within Newmont portfolio, and then we will be.
Continuing to optimize.
The three big Mega projects that will create and what have you hit on it a norm on the other day one of those one time very into this stake I know in the next so powerful and over on the younger second underground in the Hopper peso.
Moving underground up at least the life exited shape, all those will push through execution and the coffee. We're just buttoning up our drilling program as we go into winter and coffee would be another potential ahafo north type project that we could be bringing through.
Follow on so you get kind of want to hop I know thats copies go to potential follow on from that so plenty of activity happening that prices are going to be 75.
Okay, that's great and the last one for me.
With the automation.
According to Andrew said early next year.
What's the latest thoughts on how long you assess that full before you maybe look at other thoughts on rolling that out on on on other operations.
We don't need to do much the fixing of autonomous always its proven nominal implemented the first autonomous mine in the Pilbara almost 10 years ago. So its proven technology. There's no politician are assessing its its challenging a fleet over and it's going to it's got a business case, so what you work through their existing operations.
This is what I have.
Enough lots in front of you and a value proposition to change yet I flick boddington presented that business guys. So there has to be business guide and then just as some very important part of that purpose statement is in improving loss.
And we have to think about those communities in which we live and work and with the weather Thomas Haulage is part of that equation. When you think about some of the locations that we're in so well.
We will continue to assess whether there's opportunities for.
Thomas surface hole, which is plenty of opportunities for underground autonomous operation, we're doing quite a bit of that already.
So I I expect you will see more underground autonomous before another open pit the real opportunity for us is to improve the value proposition around those mega projects that have great visibility when you've got that when you have within your portfolio and autonomous.
Operation you can train and you will pull us up in that operation and underpinned by size projects typically a risk to be doing it was you first rodeo with iPhone was sold into the brand new projects. So that's one of the strategic elements of appointed.
Thanks, So a question it will give us.
All right. Thanks, Chris.
Our next question comes from Anita Soni with CBC World markets.
Thanks, guys. Thanks for taking my question I wanted to delve a little bit further on slide nine and.
10, which was the capital.
So I think you just mentioned that coffee you were.
Talking about them in the context of Panama.
So do I.
Do I understand I mean that the capital would be in range of that 700 $800 million that what's your time drydock.
Quite a later on but I think it is the low enough of it on I categorize the two broad categories, what type of projects, a majesco and make a summary.
A major project made anything it's in the hundreds of these adults could be anything from.
$300 million up $2 billion, and then a mega project is degraded a bit, especially the different why my experiences projects. It's a different different why implement those two types of projects. So.
Coffee the seamless saw wise to Ahafo north.
For a tandem I'd say that the complexity of the work so okay.
That's more along the range of like 250 to 250000 ounces 300000 ounces.
Okay.
Yes, yes.
All right second question just.
I understand its free cash flow profile, but you have a little bit further.
Not included in the Hopper.
Hopper, North Yanacocha sulfides, and obviously all the other projects we've talked about but what is included is Panama execution right.
That that's correct. So that that's a month as projects move into full funds.
As projects will type.
Some of the free cash by that we're showing there however.
Suddenly showing free cash flow from Gaulke, it's not showing the free cash flow from the other metal so that.
And as we read from both of those perspectives.
But it does include the gold all that kicks in for those but I think both only kicked in around 2024 25 right.
Those projects are in that's probably just through the back end about out audit back in about five years.
Yes, Eric Bolton project, some omics audit to be out to bring them forward and tell you what those projects to advise our production profile that cost.
Okay, and then with respect to exploration that's something that.
Just look at the exploration budget going forward next year do you guys have an idea of.
Whether or not they'll stay the same increase or what are you looking at the stage.
We it's the five year on year so.
So it's about $250 million in exploration.
No.
And I'd just add that Spain is his name on it's in around conversions and extending long.
Okay I think that's all I have thank you.
Right. Thanks.
Okay.
Our next question comes from Mike John Lennon with Bank of America.
Hi, Tom and everyone.
Got you and trigger we all know the RMR open Petra.
Country project gone pretty quiet since the merger, it's just coming back to life, what's changed from what the prior owner.
By saying about century versus smaller pet you're not moving any buildings just curious.
Curious what kind of tax rate kind of base. Thanks.
Thanks, Mark and really please begin the question from.
The photo Christian review each quarter.
Topic first of all to give you some color on bundle.
Yes, Mike Good morning, it's it really is the simplicity of it and the lack of complexity and to be honest that.
Obviously, it's an existing mine that just needs to be deepwater a we've got a good geological model. There. We can use the current plan to infrastructure and it also provides us with that kind of 10 11 12 years of mine life that allows us to further explore the bottom the hoyle pond and the door more bodies.
So it really was just a fairly simple value equation and we just thought that was that the simplest road, but also the most value accreted right.
Oh, what do you go from here with this project. So I think thats Im trying to get some numbers are some timeline.
Well, we are just doing the studies at the moment and as that Slades indicated is that we are still at the early stages.
So I would expect we will be able to give you more of a timeline and next year. Once we've progressed as a bit more but just to kind of rule of thumb that we're expecting in AWS, it's going to be a three to four year kind of planning.
Planning preparation stage and then we're expecting no render the 12 year 15 year came to life at.
Between 150 200000 in scheme of things. So that's that's broad brush, but certainly Mike. It's early days and the team is working hard on it at the moment to come up with suitable main designs and de watering schedules in the sales.
Certainly in the new year, we'll be able to provide more color.
Okay, and I guess turning to overall I was that I can't remember if that was discussed.
We're at top of my there in November or a couple of years ago.
Maybe I'll just remind me.
Where that is and assess things pretty exciting.
Yeah, Mike its.
Again, I wasn't on that to US, which is digital I think mark we might have touched on it in terms of the geological overview of the Chris Province, Indeed, but we've done a power drilling since since your update or no phones, but it literally is just a stone's throw away, it's less than 30 kilometers from that.
The underground.
I also had a strong.
And certainly this is a huge amount of synergies that we can get there. It is an open pit, but is also got underground potential as well. So in terms of proximity is very very close which allows us to potentially use the existing infrastructure and that certainly one that the team is focused.
It's very hard on as I mentioned that.
The drilling program.
We've struggled this year because the cobot not being allowed to drill on Aboriginal line, but weve got those approvals and post the wave season, we get straight back to it again.
Okay, well thanks for that I look forward to the next trip to China by maybe November I will say, thanks that would be fantastic, there's a lot to show off.
Thanks, Bob.
Our next question comes from Michael Dudas with vertical research partners.
Yes, hi, good good afternoon, everybody I guess for United Fire everyone.
Just maybe just on you mentioned briefly about CSG in your prepared remarks et cetera.
Thinking about from the energy standpoint, when you're looking at your development projects, obviously, you're probably re look I always look them from the best environmental and social efforts from a from a development standpoint, but.
Any news or thoughts on.
Decarbonizing and from that standpoint or.
Are you looking to two investments that we haven't talked about in some of the development work that may lead towards some that we require some investments to.
To improve that metric from a from a carbon free standpoint.
Thanks, Mark the we were.
Rob Rob Manning throughout 2030 targets that Weve re sitting out.
Our mission targets, but Tom then intensity such as this on site.
And we're also providing an aspirational target for 2015.
And because we have got a loan loss.
Portfolio, we can actually see after that far and start to talk about how we support that level can.
Community.
In terms of how we develop out.
Projects in our operations.
We have ample folio has a natural move to underground mining so as we move to more underground.
We reduced by fail emissions on intensity income sizes.
We don't warehouses are coming from but we can do to convert our and we were pulling power the grade.
Well the supplies to do and how we can encourage supplies too.
We've improved the conditions.
Emissions intensity for instance in Ghana, we supported the installation of a solar panel sales that go into the agreed to as part of that that process and then if we are serious.
The way to be thinking about what were doing with their investments to ensure that we are we reducing emissions intensity. So that is the move to more electric equipment.
The move to Tom this whole budget going to allow us to do five trucks.
You are more efficient because it because the automation.
It doesn't have the human element in terms of have as engines are operated.
We need to look at different fuel sources.
We already apply a carbon price to some of that case basements 20.
But are you able to Tom Ford It was a time to assess what we do now.
Full potential program have a continuous improvement program a key element of that is increasing energy efficiency.
Which brings improved cost improved productivity.
And reduced emissions.
And we need to think about and now industry needs to be caught all.
The discussion around where are we putting our money where our mouth is with these targets and with our aspirations and starting to develop technologies that can ultimately lead to a copper neutral world and their bikes were having right now I think if you if you want to be a.
The leader in this industry.
Then you have to be demonstrating through your actions the.
The installation so we're having those device instituted we that we're going to talk about tail and Mutiga next month.
And they continue to talk about how we can utilize in the in the weeks and months beyond that.
So if I could just add to that.
Just to build on that Michael that's a deal.
Dean gearing, who leads our technical service is also employing some key specialists in this domain and Weve got power and electricity specialists, which will really help us in terms of not only managing the current her that were pulling from that whether its the stranded power or whether it's from the grid.
But also working with the suppliers as Tom said about the.
The future.
Whether it's gas plant solar plants.
Those type of.
Electricity plan, so again it isn't just but it's.
Targets is we're actually building the teams that we need to do that work.
But cell phones are encouraging thanks John.
Thanks, Bob.
This concludes our question and answer session and I would like to turn the call back over to Tom Palmer for any closing remarks.
Thank you operator, and thank you everyone for joining us today in place you and your families by type and well. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now.