Q2 2021 Newmont Corporation Earnings Call
Good morning, and welcome to Newmont, <unk> second quarter, 'twenty 'twenty 1 earnings call.
All participants will be in listen only mode.
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After todays presentation, there will be an opportunity to ask questions. Please.
Please note this event is being recorded.
I'd now like to turn the conference over to Eric Kobe, Vice President of Investor Relations and Communications. Please go ahead.
Good morning, and thank you for joining Newmont second quarter 2021 earnings call today, we have Tom Palmer, Rob Atkinson and Nancy busy they.
They will be available to answer questions at the end of the call along with other members of our executive team.
Please note our cautionary statement on slide 2 and refer to our SEC filings, which can be found on our website.
Now I'll turn it over to Tom on Slide 3.
Thanks, Gary Good morning, and thank you all for joining our call.
In my Newmont celebrated its 100th birthday.
Marking a major milestone in our company's long history of creating value and improving lives through sustainable and responsible mining.
And while the organization has certainly evolved our strategy remains clear.
We are focused on delivering value to all of our stakeholders from our world class portfolio of long loss responsibly managed assets located in the best gold mining jurisdictions.
Turning to slide for for summary of our quarterly performance.
During the second quarter Newmont produced 1 for 5 million ounces of gold and over 300000 gold equivalent ounces from copper silver lead and zinc as we build momentum for a strong second half of the year.
We generated operating cash flow of nearly $1 billion and free cash flow of 570 items of which 97 per se is attributable to give up.
In May we completed the acquisition of J T called consolidating our position in the holiday perspective, Golden Triangle District for British Columbia.
And last week, we announced the approval of our Hopper growth project.
Expanding our existing footprint in Ghana, and adding more than 3 million ounces of gold production for <unk> model.
This project is expected to deliver an internal rate of return above the 30 per se at current gold prices and all of his exciting exploration opportunities throughout the land package.
Supported by our leading portfolio of operations and projects, we continue to apply a disciplined approach to our capital allocation priorities.
Even after the redemption of our 2021 C United C&I probe and the completion of the J T Gold acquisition, we have $7.6 billion in total liquidity.
We have sustained our net debt to EBITDA ratio of 2 times.
Maintaining our financial flexibility, whilst we continue to reinvest in our business and return cash to our shareholders.
Yesterday, we declared a second quarter dividend of 55 states 9 kt and industry, leading dividend yield although the trade off per se.
Sit within our established framework, a second quarter dividend demonstrates our confidence in the strength of both our portfolio and operating model to generate sustainable long term value.
In June we published 2 important ESG focused reports that touch every part of their business and operations.
The first without 17th annual sustainability report, which continues to provide a transparent and data outlook ESG performance.
Focusing on the issues in metrics that matter most to our stakeholders.
The second well that first climate strategy report.
Which focuses on al <unk> to achieving a science based climate targets.
And aligns with reporting guidelines from the task force on Colombia related financial disclosures.
These reports outline the key sustainability strategies that are embedded email business and our culture at newmont.
Turning to slide 5.
Newmont is broadly recognized for a robust and disciplined practices when it comes to sustainability reporting.
The day that sector and among all corporate reporters.
And our long history of taking a leading approach to environmental social and governance practices has positioned us as the gold sector's recognized sustainability laid out.
You must strong ESG performance creates long term value for our stakeholders and drive superior business results for delivering safer more efficient and reliable operations.
Greater productivity from we'll manage resources.
The ability to operate effectively in a broad range of jurisdictions.
A proactive approach to managing risks and emerging issues and most importantly, a reputation built on trust based relationships and a track record of delivering on our commitments.
Earlier this month, we hosted a webcast to provide an overview of our ESG journey.
What we have done well Wally is loaded lessons at our plans for continued improvement.
If you weren't able to join US I would invite you to listen to the replay which is posted on our website.
Turning now to slide 6.
Newmont is the world's leading gold producer with an unmatched portfolio of World class long life operations.
Among our 12 operating mines and 2 joint ventures, we have 9 world class assets.
Each of which delivers more than 500000 gold equivalent ounces per year.
And all in sustaining cost of less than $900 per ounce.
And with a mine life exceeding 10 years.
And we believe that way, we choose to operate matters.
It is important to note that all of our World class assets are located in top tier jurisdictions that we define as countries classified in the eye and be writing strategies by each of Moody's S&P and Fitch.
Newmont has the best portfolio of assets located in the most favorable gold mining jurisdictions.
When coupled with the quality of our people and our integrated operating model positions us to generate sustainable returns for decades to come.
Turning to slide 7.
Our portfolio will produce steady gold production of more than 6 million ounces per year through at least 2030 balance.
Balanced across each of our 4 regions.
This profile is further enhanced by the production of more than 1 million gold equivalent ounces from silver lessons, Inc. At Penske, Tom and copper at Boddington and unique culture.
Combined we will deliver nearly 8 million gold equivalent ounces per year for the next day guide.
The most of any company in our industry.
Moving to slide 8.
Our project pipeline is unmatched in the gold industry and its 1 of the best in the mining industry.
There is significant value to unlock as we optimize and advance our longer term projects in light of that pathway for steady production and cash flow well into the 2014.
We continue to advance our mid term projects.
Including Anna coaches sulfides.
We are preparing for a full funds approval in December of this year.
With a multi decade boardwalk that provides exposure to gold copper and silver the sulfides project generates profitable production and offers additional upside to extend mine life at this cornerstone asset.
We are also executing the second expansion project at Panama.
Through the development of a 1.6 kilometers day production shaft and supporting infrastructure. This project supports the thoughts future at the long life and low cost producer.
And it also provides a platform for us to further explore a prolific mineral endowment in the Panama District.
And as mentioned previously we are pleased to announce that funding for the development of a hopper North has been approved and this project has now advanced into the execution phase.
Turning to the next slide for some more detail.
Earlier this month, our board of directors approved for funding for the half for North project.
Expanding our existing footprint in Ghana, and adding more than 3 million ounces of gold production for an initial 13 year mine life.
Located approximately 30 kilometers north of our existing a half of south operations.
The Hopper North project will include for open pit mines and the construction of a standalone mill to produce approximately 300000 ounces per year at very attractive all in sustaining costs.
The project is expected to deliver in a total writer for return about a 30 per se that current gold prices.
Our hopper low is a significant Gulf bond by any measure.
We have conducted extensive regulatory and community engagement.
Including meetings with traditional latest and local government agencies and public forums to ensure that we earn and maintain social acceptance throw out half of those losses.
We will work to correct lasting value for highest communities through enhanced local sourcing and hiring.
1 key aspect of our highest north is that workforce planning.
Which includes a target to achieve gender parity in the workforce when operations begin.
We are very excited about progressing a half of Noah and look forward to bringing you updates as we develop this new mine over the next 2 years.
Turning to slide 10.
The global pandemic has and will continue to challenge all of us for some time to come.
And our commitment to protect the health and safety of our workforce and host communities remains our top priority.
We believe that the COVID-19 vaccine is critical in combating the spread of the virus.
We are encouraging at work force to get vaccinated as soon as they become eligible and we are working with our local communities and host governments to improve availability and deployment and all of our managed operations.
These efforts are supported by our global community support fund, which is seeking to help with vaccine Rollouts vaccinate education and awareness campaigns.
We are seeing some of the whole aspects that I shouldn't rights in the United States and Canada, largely due to the widespread and early availability in those countries.
But until the vaccine is available to everyone around the world our people and operations will continue to be affected by this virus.
And recent outbreaks of Cheyenne, just how difficult this pandemic continues to be.
Testing protocols and the resilience of our people and systems.
The impacts of the pandemic are also driving cost inflation around the globe.
We are now expecting cost escalation of around 3% thought per se for materials energy and labor and.
And we expect these pressures to continue true until at least the end of next year.
We are currently working on our 2022 business plan.
During that the higher costs from inflation and the application at a wide range in controls and safety protocols are built into our assumptions going forward.
However, despite the impacts from Covid, we remain in line with our guidance ranges.
As a reminder, our thought it's Brian just a plus or -5 for savings from the midpoint, we published in December 2020.
We are on track to achieve the midpoint to low end for production at the midpoint to high input costs.
Production remains back half weighted for the year with approximately 53% expected in the second half of the year.
As a reminder.
Cost guidance assumes a 1200 delek Gulf profit.
At today's gold prices, you can expect an additional 20 to $30 per ounce for production taxes and royalties.
As we look ahead towards the second half of this year.
We will remain diligent in supporting the vaccination efforts that are urgently needed around the world.
And we encourage everyone to get payer vaccine as soon as they are eligible.
Ensuring that we are all doing our part in this global pandemic.
And with that I'll turn it over to Rob Atkinson for a more detailed look at our global projects for operations over to you Rob.
Thanks, Tom Tom.
Turning to slide 12, I'll give an update on our regional performance starting with Africa.
Achieving delivered another strong performance during the second quarter as higher ore grades from changes in the sequencing largely offset more tonnes mined due to challenges for shovel availability.
The site is well positioned to deliver solid production throughout the year expecting to reach its highest production during the fourth quarter.
Uh-huh for continues to be a solid contributor delivering higher grade material from our underground operations to offset unplanned mill maintenance and Paris.
As speaker, we continues to progress the development of a new underground mining method sub level shrinkage.
And we expect to see steady increases in grade and underground ore tonnes mined in the second half of the year.
In addition, we expect to reach higher ore grades from the open pit operations in quarter, 3 and for positioning a handful to deliver a strong finish to 2021.
And that's for finalizing the permitting process with the Canadian EPA, Our board of directors approved for funding of the Ha from North project earlier this month.
Spending will ramp up in the second half of the year.
All critical path equipment orders have been placed in support of initial construction activities to ensure a timely execution of the project.
The development of this prolific ore body will leverage our proven operating model with the project and resulting main receiving functional and technical support from our existing world class a handful size operation as we create the next generation of mining in Ghana.
Turning to slide 13.
Turning my delivered solid results in the second quarter as higher ore grades more than offset unplanned mill maintenance and longer haul distances from the bottom of the mine.
In late June we detected a first positive COVID-19 cases at Panama.
Working closely with government representatives and other key stakeholders, we rapidly made the decision to place to site in care and maintenance beginning on June 26 to reduce the spread of the virus.
The health of our workforce and communities right across Australia.
To thank our team in Australia for their rapid response and courageous decisions during such an extraordinary and dynamic safety circumstances.
And I am proud of the resilience and strength of our workforce as we continue to learn from and manage the impact and consequences of this virus.
Although our second quarter was largely unaffected we are forecasting a 40 to 50000 items impact for the remainder of the year as a result of the care and maintenance period.
We began ramping up out of care and maintenance in July the 13th and today's Panama and is now operating at 90% and despite the impacts from Covid, we continue to advance Tena mine expansion too.
During the second quarter, we progressed, the hoist structure and our work on the mine shaft remaining on track to deliver significant items cost and efficiency improvements from the first half of 2024.
Yeah.
Boddington achieved near record quarterly mill performance, reaching nearly 11 million tonnes processed during the second quarter.
And we continue to expand the use of the gold industry is first the total this whole fleet.
And today, we are operating 20 trucks in the south pit and we remain on track to deploy the entire fleet of 56 trucks by the end of quarter 3 the efficiencies from autonomous haulage, coupled with improved performance from the mill will continue to drive performance at Boddington.
The improved mill performance helped to offset lower tonnes mined from ongoing shovel reliability and geotechnical challenges in the south pit, which has the potential to impact our ability to reach as much of the higher grades as we have planned in the second half of the year.
Turning to slide 14.
And as scheduled delivered another consistent quarter as we continued to execute on our plan for potential enhancements and the most recent improvements in metal recovery rates will continue to support for delivery into the future.
The work we've done to optimize payment schedule since we acquired the site in 2019 demonstrates our ability to successfully operate and enhance value at large complex open pit mines.
The <unk> is well positioned to remain a strong performer throughout 2021, as we continued to realize higher than planned tonnes mined and improved recoveries from the pyrite Leach plant.
<unk> delivered lower tonnes mined due to unplanned fleet maintenance and the site continued to experience geochemistry challenges during the second quarter, resulting.
Resulting in lower grades and recovery.
Mill performance was offset by higher Leach pad recoveries and grid improvements are expected during the second half of the year, helping to partially overcome some of the challenges experienced in the first and second quarter.
At Porcupine mill and ongoing equipment maintenance has resulted in lower tonnes mined and processed during the quarter.
As we look towards the second half of the year, we expect underground development and grades will improve.
And last month, our full potential program identified 20 initiatives at Porcupine, which will deliver efficiency improvements in the coming months.
As mentioned previously we continue to closely monitor the impacts from Covid at Musselwhite.
In April we made the decision to temporarily suspend operations for 5 days to reduce exposure to the virus, resulting in mill stoppages reduced underground development and more personnel on site in late April and early May.
We expect that these challenges will persist in the second half of the year and we are continuing our full potential work at musselwhite focused on increasing development rates and driving productivity.
Eleonore delivered another strong quarter as development rates and mill throughput continued to improve over the prior quarter and prior year.
Offsetting the impact of lower personnel, let's say due to COVID-19 and.
In addition, the site continues to increase the use of tele remote mucking equipment, which have helped to increase tons mined and drive important improvements to safety and efficiency.
We will continue to be a solid contributor during 2021, as we expect to sustain consistent production from stable tonnes mined and processed throughout the year.
Turning to slide 15.
Despite heavy rainfall in the second quarter net.
<unk> remains a strong performer in the South American region.
The site continues to utilize the nor blending strategies to optimize mill performance and during the second quarter Marin delivered lower throughput as a site focused on processing harder higher grade ore.
In the second half of the year Marion will continues to transition from softer saprolite to harder ore, resulting in higher production from improved grades and steady throughput.
Cerro <expletive> continues to improve productivity and performance as the site continues to manage through the evolving pandemic.
During the second quarter, Cerro <expletive> delivered higher ore grades and despite reduced personnel from Covid. The site continues to increase ore tonnes mined and processed each quarter.
Due to the pandemic Cerro <expletive> has delivered low development rates over the past year low.
Limiting access to higher grade ore in the late 2021 and into 2022.
However, the sites is progressing future growth projects, such as the development of Sanmark costs and exploration in the Eastern District.
Yeah and of course <unk> has also experienced significant challenges due to the pandemic impacting productivity through the year.
Yet despite the challenges from the virus.
<unk> delivered higher grades and recovery from the Leach pads. In addition to an increase in grade and ore tonnes mined from the <unk> pit.
As we look towards the second half of the year, you had a coach who will focus on optimal or placement on the leach pads at the site has transitioned to reach only operations ahead of the development of your adequate yourself fights.
The adequate yourself H project has the potential to extend Yannick, which is world class operations well beyond 2040.
Adding profitable production from 1 of the largest and most prolific gold districts in South America for decades to come.
And despite potential impacts from the elections in Peru, and the impacts of Covid. The project is progressing well.
The team is focused on critical path activities, such as advanced engineering and procurement as we prepare for full funds approval in December of this year.
And with that I'll hand, it over to Nancy on Slide 16.
Thanks, Bob turning to slide 17 for the financial highlight newmont.
Newmont delivered strong performance in the second quarter with over $3 billion in revenue an increase of $700 million from the prior year quarter, driven by higher sales volume and metal prices.
Adjusted net income of $670 million or 83%.
Our diluted share.
Adjusted EBITDA of nearly $1.6 billion, an increase of over 60% from the prior year quarter.
And strong free cash flow of $578 million.
Also an increase of about 50% from Q2 of 2020.
Yesterday, we declared a regular quarterly dividend at <unk> 55 per share.
An increase of 30 or 120% over the prior year quarter.
With a yield of about 3.5% at our current share price Newmont is among the top 10 per cent of the S&P is large cap dividend payers.
Turning to slide 18 for a deal.
Our adjusted earnings per share in more detail.
Second quarter GAAP net income from continuing operations was $640 million or <unk> 80 per share.
Adjustments included 3 expenses related to the unrealized mark to market gains on equity investments too.
<unk> related to reclamation and remediation adjustments at historical mining site.
<unk> related to tax adjustments and valuation allowance and 2 tenths of other charges.
Taking these adjustments into account we reported second quarter adjusted net income of 83 cents per diluted share an increase of almost 160% or 51%.
For the prior year quarter.
As a reminder, due to our status as a U S. GAAP filer, our adjustments to net income do not include $19 million of incremental costs incurred this quarter as a result of the Covid pandemic.
Adjusting for these costs would have resulted in approximately <unk> <unk> of additional net income per share in the second quarter.
And we expect these costs to continue throughout the year as we prioritize the health and safety of our work force and local communities.
Turning now to slide 19.
Under our Conservative 1200 dollar gold price assumption newmont expects to generate $3.5 billion of attributable free cash flow over a 5 year period.
In addition for every $100 increase in gold prices above our base assumption.
The reversed $400 million of incremental attributable free cash flow per year.
Newmont is the only company in the gold mining industry with the ability to generate these levels of attributable free cash flow, allowing us to balance study reinvestment in the business continue to strengthen our balance sheet and also provide superior shareholder returns through our industry, leading dividend framework and opportunistic share by.
Max.
Turning to slide 20 for more about our dividend.
Our dividend framework provides shareholders with a stable base annualized dividend of $1 per share at a $200 gold price.
Along with the potential to repay 40% to 60%.
Incremental attributable free cash flow generated at gold prices above our plan.
We will continue to review our dividend each quarter with management and our board evaluating our operational and financial performance and outlook semiannual 8 to give us maximum flexibility in determining our dividend within the framework.
The dividend declared yesterday it was consistent with our first quarter dividend calibrated at an 1800 dollar gold price assumption and a 40% distribution of incremental free cash flow.
Our second quarter dividend demonstrates our confidence in our future outlook and our ability to maintain capital discipline.
Turning to slide 21.
We continue to drive the business with our clear capital allocation priorities, which include reinvesting in our business through disciplined investment in exploration and organic growth projects.
Maintaining our financial strength and flexibility and.
And returning cash to shareholders.
During the second quarter, we delivered on each of these priorities.
<unk> are profitable reinvestment in the business.
Particularly with the execution of the Panama expansion the approval of a high flow north and the advancement organic that's just all right.
Investing in exploration with 55 drill rigs working around the globe.
Completing the GT gold transaction in May of this year.
Maintaining our industry, leading dividend established within our framework to provide stable and predictable returns.
Purchasing 2.4 million shares translating to approximately $150 million of our $1 billion share buyback program.
And maintaining a strong balance sheet with a net debt to EBITDA ratio of 2 times.
Giving us the flexibility to reduce our debt outstanding by $550 million with available cash and still maintain cash balances of $4.6 billion at the end of the quarter.
We are confident in our ability to continue delivering strong results and free cash flow to maintain our disciplined approach to capital allocation.
The progress we made in the first and second quarter enables newmont to return over $1 billion to shareholders in the first half of this year, while we continued to reinvest in our business and support our operations with a strong and flexible balance sheet.
With that I'll hand, it back to Tom on Slide 22.
Thanks, Nancy and I'll wrap it up on slide 23.
I'm privileged to lead an organization with a proven track record and a long history of value creation.
Capitalizing on the strength of our people assets and integrated operating model Newmont is well positioned to lead the industry with our commitment to create value and improve lives through sustainable and responsible mining.
As the company moves into its next 100 years, we remained focused on delivering value to all of our stakeholders from our world class portfolio of long life responsibly managed assets located in top tier jurisdictions.
With that I'll turn it over to the operator to open the line for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
If youre using a speakerphone, please pick up the handset before pressing the keys.
To withdraw your question. Please press Star then 2.
At this time, we will pause momentarily to assemble our roster.
And our first question comes from Tyler Langton of Jpmorgan. Please go ahead.
Yeah. Thanks, Good morning, Tom Robin and Nancy.
Just I guess I had a question on Covid and I know, it's probably tough to calculate but do you have a sense.
Sort of the impact.
From Covid restrictions on production.
In Q2 and interest as you look out to the for the second half I mean, Robbie mentioned the impact Tanner my brother or any other sort of operations just have sort of you know sort of a delta Varian spreads you know that you are kind of.
He you know sort of watching you know for risks to production.
Thanks, Tom I'll pass across to Rob that we are certainly continuing to manage the virus across just about every 1 of al <unk> for Rob might be even a bit of color as you slipped around the globe.
Thanks Tyler.
If a cana start off in Australia.
Obviously, the 10, a mine that we had that for supposedly keys.
You get 2 weeks completely shut down and you know it takes a little while to ramp up.
And China minus net back up at about 90%. So it's 2 weeks plus a few days, but the biggest worry we've got in Australia.
Each 1 of the states and territories have different rules and regulations and are not necessarily living free travel between the states and the quarantining and we've obviously got people that work at the different states. So that's that's a risk moving forward that we're carefully watching carefully managing in Australia, but really in terms of.
The biggest area, where we're still worried about South America.
It is by far in a way that's where we've had the biggest impacts certainly at Cerro <expletive>.
We've had several key outbreaks and we've had to shutdown several times in the in the second quarter.
Vaccines are starting to get through there.
Building up in similar yen, a courtyard that vaccines are coming through but it's the absenteeism Tyler.
As the biggest unpredictable thing that.
You can sometimes have shovel operators a way you can have mill operates as a way.
That causes the biggest challenge, but certainly with the vaccines and that parts of the world.
From the very positive for us in terms of Canada.
Mentioned about muscle white that we had that week in April and May where we had to go into care and maintenance so that that had a significant impact but again at each 1 of the Canadian sites yet.
Level of absenteeism has sometimes been 3 or 4 times higher than what we've typically had a net that really impacts the development etcetera and the key thing that I wanted to get across is the sites are actually managing the situation very very well, but it is the unpredictability of the virus.
<unk>.
That's the challenge we've got with the vaccines coming on we're certainly very hopeful that that will reduce but.
It's a very difficult question to actually put you put your finger on taller for build upon that we will continue to make decisions that put the health and safety that workforce and local community is front and center in that Panama example, it was midnight on a product.
Net positive cash came through within 2 hours that <unk> made the decision to put the operation into care and maintenance.
750 people backing their rooms quarantined.
And everything slightly buttoned up with demand and had notified 900 people who'd.
Who would fluid volume than the previous 48 hours to ensure that value.
Going into home quarantine and doing the appropriate appropriate testing and we will continue to make those decisions and courageous decisions.
To ensure the health and safety above all else.
As we look around highway managing those impacts.
With a portfolio of our size with the strength, we have a balanced portfolio around the globe. We believe that we can continue to accommodate this pandemic impacts within the guidance that we provided.
That's very helpful. And then just switching to have on north and I know there was just a slight increase and and the capex with a full funds decision versus the previous guidance and I'm just trying to get a sense.
For the current Capex guide and sort of what level of put cost does that assume is it sort of more recent prices for things like materials and energy.
And I guess the same question you know also for you know for for the costs or.
Are you assuming kind of more you know sort of average prices over the past several years, just trying to get a sense you know sort of the.
The impact that sort of you know sort of current inflationary transcript could potentially have on the capex.
And operator out there.
Yeah. Thanks, Tom we certainly in the slot.
Bump in the capital cost from what we've been guiding previously was was looking at current pricing and looking at Covid impacts and we have already placed orders on a number of critical path items, which is really locking up pricing and schedule.
And we're doing some of that <unk>, so far just flow to to ensure that we can manage by schedule and cost. So this COVID-19 impacts that but also wholesale we've already done some work to locking locking contracts and pricing. So it takes into account on a capital cost of the considerations around.
Current.
Fleishman pressures in Covid.
And from an operating since 2 a couple of these out.
Before that operation comes online we do expect these inflationary pressures to be cyclical.
And Mike will be thrown out the other side of that soccer ball the time Hopper north is up and running and producing.
Great.
It makes sense that's it for me thanks, so much.
Tom.
The next question comes from Fahad Tariq of Credit Suisse. Please go ahead.
Hi, Good morning, just building on the last question about the Covid impacts may be just remind us where some of the production offsets are coming from the second half for the year by that I mean, which operations are expected to kind of make up for some of these COVID-19 issues predominantly in South America and Australia.
Thanks for Howden and good morning.
Al needle moving thoughts really really drive.
Our portfolio.
Movements.
Hockey hockey spices.
<unk> is pretty flat, having very solid year, but it's pretty consistent half on half quarter on quarter.
Boddington.
I was down at Boddington about 3 weeks ago watching autonomous haulage and action and spending some time.
In the south pit and the ESI Firefly back just looking at our work to move move down into the high grade ore. So we.
Moving into the high grade over in the latter part of this year and Rob talked a bit about.
The importance of managing some of the geotechnical challenges in some of the equipment reliability challenges are really importantly, we have that discipline and focus to get to that high grade ore body tens of COVID-19 contributor.
Panama has got some high grade in the latter part of the year and so very pleased that we're able to navigate the true that positive case back up and running very smoothly.
And we will enter into some higher grade stopes at Panama in the latter part of the year and the other 1 is <unk>, we've got a stronger second half in the hopper as well.
We get certainly as the underground so Baker underground sub-level shrinkage comes on but also as we get into some high grade ore out of the items pizza.
For Peanuts, caito stronger second half for boating, Panama in a half a day of the operation submitted for nodal.
Okay, that's really clear thanks, My only other question John.
On the Anacortes sulfides as you work towards the full funds decision.
If there wasn't a situation where your joint venture partner was unable to contribute as much for their funding because the balance sheet issues et cetera would there be appetite from newmont to maybe consider buying out.
For the larger stake of the project.
Okay.
We are very excited about <unk> sulfides were very excited about for the long long life potential of sulfides.
Sulfide project is built off.
And the economics are built off the first 5 what we call. The first wife, which is another lybeck, Indiana catch up that IP and.
And Chuck you cut your underground.
A second wave and a third wave and our fourth wave of sulfides or that come. After you have installed that processing infrastructure. It's a story that will play out.
Collyn did for Newmont from the early to mid <unk> and over the last 25.30 years.
So where we.
We're very excited about the potential for Anika shall we see <unk> as a cornerstone asset and a key a key district that we want to be in for very long, Tom and it's and it's gold and copper, which we're very excited about so we used the opportunity when we think about M&A activity. We look a look at where we can consolidate in districts like we did with <unk>.
In the Golden Triangle.
Over the early part of this year and certainly if we could consolidate our position at an operating asset.
In a prolific district in R&D on a culture at that opportunity presented and we could pick up more of that asset for fair value, we would be interested.
That's very clear thank you.
Thanks for hub.
The next question comes from Josh Wolfson of RBC. Please go ahead.
Josh We can't hear you if you might be a mutual something.
Operator, it looks like March.
Have a connection issue with Joseph Yes.
Yes, we will move onto Greg Barnes of TD Securities. Please go ahead.
Thank you Tom I'm, just trying to understand the boddington commentary because.
It seemed to imply that you wouldn't get it get as much high grade in the second half a day is perhaps expected, but you still expect production to be up.
Stronger yet.
Just trying to reconcile us true comments.
Thanks, Greg So we're moving we're moving down into the higher grades in the south pit. So as you move into those high Greg you progressively start to build into our hallmark writes for the coming out of the sale and obviously feeding into the mill.
So you are going to see we will see I train depart production in the second half as you do that.
It's really going to be that mine sequence of how much of that hard right you get by December 31, and how much tip cyber into January as we move through so it's going to be a stronger.
Second half because we're entering the high growth area. It's about how many weeks in the 6 months, we get to that high grade materials.
And how much is coming up for medium grade stockpile into <unk> absolutely humming.
It will progressively increase and that's just how much that high grade we can.
Creep into 2021 versus stepping into 2022.
Thats, what we are very focused on in terms of making sure we stepped down those benches manage the manage the <unk>.
Page hard journey to ensure that we're looking out for the geotechnical issues and then we've had we've had some reliability issues with a very large hydraulic shovel.
Engine issues and very large hydraulic oil pump issues that you wouldn't typically seen nice machines. So working with the working very closely with the supplier of that machine to machine, we get that reliability and maximize the amount of high grade ore, we get into the second half.
Okay.
So theres going to be a little less production from boddington, the second half of it perhaps than you were previously expecting as well.
I think I'm hearing.
Potentially there is a risk that some tipped into into the early part of 'twenty, 1, but we are up.
We are still we're still at 6 months in front of US Greg said, we're still very much focused on model for market share we manage that page to another very very carefully as I said I was down there for a period of time about 3 weeks ago spinning been a favorite of Tom Colombia that shovel.
And in that Pete with Monte team, just understanding how they're working their way through that.
Okay.
And Tom your comments about inflationary pressures in the second half for the year into 2022, I think that's a bit of a change from perhaps for you.
I don't think you are seeing much impact from those cost pressures, but now it does appear to be coming true.
Where is it coming through from.
Yeah. Thanks, Greg It is as we as we sit as we've been sitting them right in the middle of Vale <unk> business planning process now so as we as that global supply chain team and starts to.
To look at some of those those trends we are seeing.
Across I mean, Chris.
30% of Al Carey These LIBOR.
And we are seeing both in.
In Canada and Australia.
Labor markets.
For for mining and so we are seeing that as being an uptick.
Certainly certainly bypass countries over the course of this year and we expect to see that flow.
Through at least all of next year.
And the materials and energy makeup the next.
40% to 45% across labor materials and energy you've got you've got our cost base and we are seeing in terms of steel and fuel oils as we pull together our plans work with us various supplies.
That uptick.
Bundled low to get aggregated altogether, we're seeing the order of about that Fob port per cent.
We're seeing it not structure, we are seeing it as cyclical, but we are seeing net buying through in and considering that that will play out for at least all of 2022 and starting to factor that into our planning process. We've got.
Our continuous improvement program for potential which is very mature that we are leaning into hard to look for where we can offset.
Some of those headwinds, but we certainly are seeing that inflation trend and of course, it does set us up nicely for.
Some pretty positive Gulf profit outlook, saying that but essentially we're pulling together the detailed analysis for our business plan that we are seeing that translate through.
Okay.
Likely upward pressure on 2022 cost guidance.
Unless you have the compliance.
That's right Greg.
As we see midstream in our planning process looking at about that around about that 5% aggregated number.
Okay, great. Thanks, Tom.
Thanks, Greg.
Okay.
The next question comes from Jackie <unk> of BMO capital markets. Please go ahead.
Hi, Thanks, very much I guess I'll, just sort of follow on Greg's question on inflation. So you kind of warning that you're expecting to see inflation on the operating cost side and it sounds like maybe on the capital cost side too with things like steel.
But your guidance is.
More or less unchanged I guess it looks like there's a there's a few areas at least in 2021 on both development and sustaining capex guidance for them.
Actually seen it go down by a little bit and it looks like also maybe in 2023 with development Capex.
How should we be thinking about the guidance.
Is this something that I mean did you have a simple wiggle room built into it that the income.
Is this sort of filling in or is there any risk that we might see either your capex for your Opex guidance go up by by subsequent quarters by yearend.
Thanks, Jackie so for 2021, we're certainly saying on the cost side.
Somewhere between the midpoint in the high end, so that high index plus 5%. So we began to track some way within day. So we as we sit here today and looking at some of those inflationary pressures.
So that we can and will accommodate.
This year.
Within that certainly as we look to 2022 went out and update our long term guidance in December when we sort of thing that cost pressure I was just talking with Greg about.
And on the development capital side.
We we had built into.
With the <unk> and we have built into the Hopper north.
Our understanding of where cost is and thats accommodated within.
The outlook, we've given for both those projects.
We are continuing to Derisk <unk> yourself thoughts, where we are on critical path. We are getting share may get factory slots and process system.
Different critical path items for for instance, oxygen plants from the lock. So we're making sure. We're managing that process ahead of a full funds decision so that when they come out.
With hopefully a full funds decision in December that the what we got to as accommodating some of those capital cost inflationary pressures.
And then it's.
On the development capital solid as we got.
Upside less the inflationary pressures more of a sequence of those projects is you've got a different COVID-19 impacts.
How is the spend profile looking for our Hopper North Ni Kennecott yourself was in our Panama is more going to be the influence all of our development capital number in 2022 versus 23 versus <unk> 24.
Alright that makes a lot of sense. Thank you for thank you for clarifying that maybe I'll just follow up with the point on yen of course yourself items.
Tom I know you've been asked 100 times, probably already but.
With the changes in Peru, with the recent election and it looks like.
There's a formal signing deals.
Is there anything that would that you could see between now and December that would make you some pause on sanctioning yeah nickel sulphide Sir.
Independent of the project itself Im talking more about the political or regulatory environment is there anything that.
Where are you or are you fairly confident that you'd be able to manage that and whatever.
Whatever environment urine.
Yeah. Thanks, Jackie is certainly I think a very important stapes for declaration of President could see next.
Next step for us will be to to see how he assembles these cabinet.
And then when we know who we can engage with and understand that.
We're about to embark upon a couple of billion dollars investment in the <unk>.
In the country I think.
It's clear that they acknowledged the importance of mining to Peru's economy.
In a country, that's probably the worst hit from the pandemic around the world.
So the opportunity to have.
To have an investment into the into the mining industry Thats going to hope for Peruvian economy on.
Im optimistic that that.
That discussion will be well received as we can start engaging with the new cabinet.
With 80 per route for 30 years again cut yourself thoughts will position us to be in Peru for at least another 30 or 40 years that we are taking a very long term view on this decision.
But pleased to see that we've got our decision in the election, which will allow US then to start engaging over the next 6 months with some of those key leaders in government.
Thank you very much that's all my questions. Thanks, Tom.
Thanks Jackie.
The next question comes from Tanya Jackie Ho from Deutsche Bank. Please go ahead.
Great. Good morning, everyone and thank you for taking my question.
Just maybe for Rob.
Bob or Tom I, just wanted to follow back on total for inflation question Chris.
For the 3% to 5% Zone, you mentioned labor in Canada, and Australia, I, just wanted to dig deeper and if theres any aspects of labor.
I assume much higher I mean for.
Additionally, pressures honest with underground miners I'm, just trying to understand.
Pockets of that that for Karen. Thank you song.
Yes. Good morning tenure think thank you for question.
We are certainly seeing in Canada high demand for key technical staff.
<unk> projects around the country and then so you're starting to see that viability of folks moving moving on to 2 different opportunities.
And we're saying that that impact in terms of operators and by tenants for the demand for gain and particularly <unk> got.
The fly in flight operations that he's being able to switch from from 1 plant to another. So we are we are seeing those pressures.
Im heating up.
Our market in Canada, and very similar in Western Australia, where you've got a.
Very significant boom happening on the back of <unk>.
Rick what on oil prices very high demand.
But in the construction of the of the expansions too.
Well, it's the expansion does auto months' to maintain throughput.
High demand for <unk>.
Operators, Montana's and technical paper segment set professionals.
In an environment that Rob was talking about earlier, where the state governments to provincial governments in Australia constantly opening closing borders and South ASI is a real push on to the pulling out of the state.
So you've got that reliability stop being within state and we locked with I have in Australia, those interstate pressures for still some Tom to come given the.
Slow tie coupled of the vaccination, which is certainly the pie in the process now with the Delta strength of ours, 1 of the things that we're doing which is going to significantly offset the.
The pressure on operators in particular is the implementation of autonomous haulage at Boddington and if you think about a fleet of 36 trucks across 4 ships and then the additional numbers of people you have to cover.
<unk> and annual leave and those sorts of things.
Youre talking of the order of 190 people.
That are no longer needed to drive trucks, because youre running autonomous autonomously and that takes some pressure out of the system in terms of.
In terms of that life of pressure for a price in Montana.
But its lots of projects in both of those countries.
And limited supply on by professionals and operators in Montana.
Do you have anything for that.
I think the only thing for that.
Tom.
Tanya.
It also applies to contractors where maintenance shuts.
Net.
There is such demand competing priorities and as Tom said, if you are trying to do a major shift in Western Australia, and you're limited to contractors. There sometimes you can't do all the work you need to.
As such you would go to <unk>.
Deferred work etcetera, and similar to what Tom said in Canada, We've also seen exploration.
Contractors also lift their prices as well so those are definitely the 2 toughest from Cortez markets.
Okay, and then maybe if I can get a bit of clarity on material energy I understand but just from material are you just seeing on steel cement volume I, maybe just add a little bit more clarity exactly on the material side.
Yes.
Predominantly steel.
But we're seeing it come through.
On the materials side.
And what we'd also talking on a net materials when we think about that.
Net element of our cost tenure is frightening.
So it's particularly as we've got concentrate we're moving out of <unk> and boddington.
Saying fright cost increase so that would be the 2 materials areas that we're seeing that pressure.
And then just on 2 other assets that Tom we didn't touch on or maybe boddington, we did a little bit can you just remind me of what exactly the geotechnical issue is in the pack.
Rob do you want to pick that 1 up as we bring up interest in China, it's quite seasonal issues, there as well as Australia.
That part of the world tends to get quite heavy rain.
And when you've got heavy rain, there's always the risk to the walls, where we stand off a little bit further.
That's something which we've been we've been managing very very carefully so things as practical as that and just for a piece of information that this month of July as being some of the record rainfalls in Australia. So we've just had to stand off the wall is a little bit further and that causes a slight slowdown in the trucks.
And then and then making sure youre, keeping a catch benches clear Richard stepping down so if you're starting to see because of because of some of that.
That weather I mean, if you remember in the Boddington pit tenure when you're there for years ago. It was quite a fractious materials. So it's making sure you got that spices claimed to keeping the keeping your catch benches client and making sure you got that hard Janus is stepping down so you're not creating problems for yourself into the future because youre not looking after you've been charging.
And then just on.
The goldstrike roaster I don't know if Rob can share with us the impact of that.
That top roaster portion of that will start being down for for Q3, what that would be over him unpack for you like you gave us for Panama.
Sure and Rob's Robison regular.
Robyn Greg with Talker every way for every couple of weeks. So its the its the mill fitting the roster and its a slippery on the mill that had the fire and is being replaced Robin what gives a bit of color on and our understanding of the impact from an NGL perspective.
Certainly China is it.
Obviously it has been a major for area window in end of May we are expecting to come up.
Sometime in September.
What the team at MGM has been able to do is run a different type of feet. There whether it's the high carbon materials to make sure that there's still material that we're going through that particular mill, but in terms of the impact.
When we look at the roster and also some of the challenges that are occurring at turquoise Ridge. We are looking at for for Newmont about 40000 ounce impact.
Okay.
Robin.
I'm sorry Tanya.
That's in Q3 for your shaft.
For those taken out for the rest of the rest of the year after.
Okay.
And Robert Robert and I are also hitting up to across the Elko on Sundays for our quarterly Board meeting, So we'll get a chance to Tom.
I have a bit of a locally as well.
And if I could just squeeze 1 more in just on low just on the status of the illegal miners that are going on in Ghana, and maybe what's happening there.
<unk>, Steve, let's take coatesville here as well.
<unk> stay from a pick up day 1.
I'll kick off Steve and Tom 1 of the key things that sees it.
Year to date the zone.
They've been quite a remarkable.
Turnaround there in terms of actually on site the presence of the illegal miners on the sites has been managed particularly well.
The Canadian authorities are working closely with us to make sure that.
Were not only targeting.
The illegal miners, but also where the gold is getting processed is also getting sold and.
The response from the Canadian authorities has been first class at the same time, we've increased our intelligence monitoring a response.
Cetera, so in many ways the way in which we are managing what we can manage on site is actually going quite well with a clear partnership with the Canadian authorities.
There's obviously been some issues offsite and perhaps Steve if you want to just talk about that.
Sure. So I guess I would just add that.
As Rob was saying, we obviously really rely on the government authority provide security as well as having our own security as you know we're committed to the voluntary principles on security and human rights those.
Trainings are always ongoing.
In this particular case there were several dozen individuals.
Who clearly we're intent on conducting illegal mining activities and the government need to engage in protective action. We have a robust ASM program, we focus on maximizing local hiring local procurement and alternative livelihood work, we'll continue to do that partner as closely as we can.
The government and also the local stakeholders and traditional authorities, where after all are the owners of the land.
And.
We believe that the steps being taken will calm the situation now but.
We're watching it very carefully.
Thank you so much for go from my questions.
Thanks Tanya.
The next question comes from Anita Soni of CIBC World markets. Please go ahead.
Good morning, everyone.
For the question I guess is that just a little bit more on the clicks cash.
Or any inflationary pressures that youre seeing.
As I look at the.
Guidance, you said you would be midpoint to top end of the guidance range for them are plus or -5% for prior year to date, you've hit the middle of that range. So is that to say the second half of the year could be.
On the cost plus 5% or higher for from second half on constitution.
Yeah, 1 of the 1 of the things took too.
To monitor without cost guidance as we guided a 1200 dollar gold price.
And so when you see our year to date actual costs that include production taxes and royalties of some <unk>.
20 to $30, an ounce because we're being up at around $800. So its factory.
Factoring in that $20 to $30, assuming gold price size. Its current levels will continue to flow through in our actual costs going forward.
Okay.
John.
I'm not sure if that made it better or worse, but let me think about that.
The second question I guess would be around.
Moving to the second half of the year or sorry, moving into 2022 and thinking about the a D. A.
The guidance, you've given on cost for him.
Moving to summarize all the commentary I think you're basically saying development costs are encapsulated already in the 2 guidance you've given for the 2 projects.
I think Stan.
For our Hoffman, Oregon autonomy.
And then secondly, sustaining costs and operating costs are seeing a 3% to 5% increase in that.
I guess I'll kind of input and labor escalation does it include COVID-19 impacts as well.
Yes, yes, so we are and we're building our plans now.
But we are incorporating we do expect those COVID-19 protocols and costs to continue into next year. So we are building assumptions around those into.
Into our cost as we build our plan and that when I talked at 3% to 5% that's including in our provisions we Mike for that.
Okay and then.
As you mentioned John at $200 Gold. So is there any thought to increasing that.
That number for next year, so that when we when we look at this chart next year.
Those royalties.
Better captured with that with a higher gold price.
We're certainly we certainly maintaining a discipline internally with our business plan to build at that $1200 assumption to ensure we've got.
But the robustness.
And that discipline in our culture and way to biting at the moment, how we think about providing our cost guidance for next year, whether we Montana and assumption on a 1200 pillar.
Revenue.
Gulf Ross for whether we were to touch it to some other numbers that we are considering that as we as we put together our numbers Nathan did you want to make a comment yes, Anita I would also add as we will continue to provide you with sensitivity around all of the important drivers. So even at a 1200 dollar gold price youll be able to articulate and make good assumptions about <unk>.
Gold prices and output. So for example, the comment that Tom made on the taxes and royalties.
That's higher than 1200, we will continue to guide clarity around nodes, you can get a better extra or even at the $200 level.
Okay, Alright, thank you very much.
Thanks Anita.
Okay.
The next question comes from Mike Parkin of National Bank. Please go ahead.
Hey, guys. Thanks for taking my questions.
In Peru, you know Theres, certainly seems to be a.
A fair bit of issue and not specific to Yannick codeshare, but to just the mining industry in general about kind of a lack of investment in and flow of moneys earned back into local communities can you give us some color in terms of.
What your stakeholder engagement has been like with your local communities that are impacted by Anna coach and what if anything you're kind of planning to do differently.
If you do go ahead with a full funds decision on on the sulfide project.
Thanks, Mark Great question and pass it across to stakeholder. So to give you some color in terms of some of the aspects of the work we're doing them.
Thanks, Tom and thank you Mike for the question, Yes, I think as you know mining is a pillar.
And core.
Really a cornerstone for the Peruvian economy, and we've been there for well over 3 decades, now and our relationship with <unk>.
Has really improved over the years obviously.
John coaches, a huge presence in catamarca and our community has grown substantially over time.
There have been challenges for sure with regard to.
Delivery of value.
Coming from the Central government.
From a taxes as to where that money gets distributed and over time.
With different administrations, you've seen more or less funds come back into the region obviously.
We value through extensive employment local hiring local content.
And I would say honestly that as hard hit.
Peru, and <unk> have been in this COVID-19 pandemic environment.
Our relationship is.
Is it really strengthened during this period of time.
In fact, we just had a vaccination clinic open up our offices in Catamarca and I believe it's the only mining company, that's been able to do that in Peru to date.
So.
Our intention certainly is and has been to focus on the value provided to our stakeholders in catamarca relationship not only with the many communities around our operation, but also with the regional government continues to strengthen our intention would be throughout this process to continue to work with them to find ways, especially as we look.
Look at moving forward.
With sulfides in maximizing that value.
Certainly we would want to partner with the central government on determining how to best provide for return.
Of those dollars back into the community and I would also encourage you to take a look at our sustainability report on the programs that we have.
More broadly in Catamarca and the efforts we've made in the economic contribution net that's occurred.
Alright, thanks for that.
And 1 other 1 just back to mentioning how freight is weighing in on the inflation can you are you seeing any major challenges with access to securing container availability you know reading a few reports out there, saying, that's becoming quite a challenge.
It's something that's impacting either the movement of concentrate or.
For supplies into sites or.
Whatever color you can kind of provide would be appreciated.
Yes, Thanks, Mark we're not we're not seeing any impact on that perspective around price.
Great. Okay. That's it for me guys. Thanks very much thanks.
Thanks Mark.
This concludes our question and answer session I would like to turn the conference back over to Tom Palmer for closing remarks.
Thank you operator, and thank you all for joining us today in place for.
<unk> continues to play out.
And healthy and Mccarthy of families. Thanks, everyone.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Yeah.
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