Newmont Corporation

Good morning and welcome to the year end in fourth quarter 2018 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 today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. 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 full year and fourth quarter 2018 earnings conference call. Joining us on the call today are Gary Goldberg, Chief Executive Officer, Nancy Beezy, Chief Financial Officer, and Tom Palmer, President and Chief Operating Officer. They will be available to answer questions at the end of the call, along with other members of our executive team. Turning to slide two. Please take a moment to review the cautionary statement shown here and refer to our SEC filings, which can be found on our website at newmont.com. Turning to slide three. Here you will find additional information on the proposed transaction between Newmont and Gold Corp. Our preliminary proxy statement was filed this morning and is also available on our website. Now I'll hand it over to Gary on slide four.

Thanks, Jess. Good morning, and thank you all for joining this call. Newmont finished the year with a strong fourth quarter as we reached commercial production at Subicca Underground, delivering another profitable project on time and within budget. But before we get into the details, I want to congratulate our Newmont team for continuing to stay focused on meeting our commitments and for laying the groundwork to lead the gold sector in profitability and sustainability. Turning to more details on slide five. In 2018, Newmont delivered superior operational execution, which we demonstrated by producing 5.1 million ounces of gold at all in sustaining costs of $909 per ounce, overcoming geotechnical challenges and the impacts of planned stripping campaigns in North America and Australia, generating $640 million in cost and efficiency improvements from our full potential continuous improvement program, more than offsetting inflation, and bringing total improvements to more than $2 billion since 2013, and advancing our most promising digital initiatives to improve safety, optimize how we mine and process ore, improve process control systems, and monitor mobile equipment health from a centralized base. We also strengthened our global portfolio of long-life assets in all four regions. In North America, we completed the Twin Creeks Underground and Northwest Exodus projects, extending mine life and adding lower-cost production in Nevada. We delivered the Cripple Creek and Victor Concentrate project to improve recoveries, and we advanced Long Canyon Phase II to feasibility study. In South America, we commissioned the new primary crusher at Merion, mined first gold at Ketcher, Maine, ahead of schedule, and declared first reserves at Yanacocha Sulfides. In Australia, we progressed the Tanami Power Project to pave the way for a second expansion of this world-class asset. In Africa, we reached commercial production at Sabika Underground, adding higher-grade, lower-cost production at a HOFL while advancing future growth opportunities throughout the region. And we outperformed our global exploration targets by adding 6.7 million ounces of reserve and 9.5 million ounces of resource by the drill bit. Finally, we progressed in our goal of leading the gold sector in both profitability and responsibility by generating adjusted EBITDA of $2.6 billion and maintaining an investment-grade credit profile with over $6.3 billion of liquidity, returning approximately $400 million to shareholders through an industry-leading dividend and share repurchases, reflecting confidence in our ability to deliver returns while investing in profitable growth, and being recognized as the mining sector leader in sustainability, management performance, and for the advancement of diversity and inclusion in the workplace. I'll expand on this topic on slide six. We finished the year with a total recordable injury frequency rate of 0.40, which was a 13% improvement from 2017. However, this performance was overshadowed by the deaths of seven colleagues. While we will never fully recover from these losses, we have made every effort to learn from them, strengthen our controls, and share our lessons across the mining industry. Managing risk and embedding controls to prevent fatalities remain at the heart of our safety program and safer operations are also the foundation for driving further efficiency. We remain focused on driving visible, felt leadership by reinforcing key safety systems and behaviors among our employees and contractors. Our long-term success also rests on the standards we set and the values we uphold. In 2018, we were honored to be recognized as the top mining company in the Dow Jones Sustainability Index for the fourth consecutive year and to be named one of the Wall Street Journal's top 250 best managed companies. Newmont's commitment to inclusion and diversity was also recognized by the National Association of Corporate Directors and in Bloomberg's Gender Equality Index. This recognition speaks to the caliber of our team, as well as our success in executing our strategy and living our values. Turning to cost and production on slide 7. Our track record shows a steady trajectory of improvement as our full potential program more than offset inflation and helped to mitigate the unit cost impact from planned stripping campaigns at Carlin, Twin Creeks, and Boddington. And through continued outperformance across our portfolio, we delivered 5.1 million attributive allowances at all-in sustaining costs of $909 per ounce in 2018, below our full-year guidance of $915 to $955 per ounce. Looking forward, 2019 all-in sustaining costs are expected to be $935 per ounce, with lower cost production at Sabica Underground and reduced power costs at Tanami, helping to offset headwinds such as geotechnical challenges at Carlin and KCGM and input cost pressures. In 2019, we expect to produce approximately 5.2 million ounces, driven primarily by higher grades at O'Hoffel and the completion of the O'Hoffel Mill expansion, which offsets lower grades in North America and ongoing stripping at Boddington. Turning to our latest projects on slide eight. In November, we reached commercial production at Sebeka Underground in Africa, on schedule and within budget. And we are currently executing three projects that will be completed before the end of 2019. In South America, we're extending oxide production through Ketcher, Maine, where we reached the first gold in December, and mining continues on schedule. In Africa, we continue to make good progress on the Ahafo Mill expansion, which together with Sabica Underground will extend profitable production until at least 2029. Finally, in Australia, our Tanami Power project is nearing completion to lower costs and emissions while facilitating future growth. These projects are expected to deliver an average internal rate of return above 20%. Turning to our reserve and resource delivery on slide 9. In 2018, we added 6.7 million ounces of reserves, exceeding our exploration target of 4 million ounces, all by the drill bit. We achieved these results while maintaining the same $1,200 reserve gold price as the prior year. Exploration also added 9.5 million ounces of resources, more than offsetting the conversion of resource ounces to reserves. We also added 5.3 million ounces of resource through our acquisition of a 50% interest in the Galore Creek project. As you can see on this waterfall chart, reserve additions of 6.7 million ounces exceeded depletion of 6.1 million ounces, but were offset by revisions of 3.6 million ounces, largely driven by ore body and metallurgical model changes at Phoenix, and pit design changes at Carlin, driven by increased costs and the removal of a layback at Gold Quarry. Our reserve additions were spread equally across our four regions, and our resource additions were primarily in Australia and South America. Positive additions and revisions to our resource base included a first-time declaration of 2.2 million ounces from Yanacocha sulfides as this project moved into definitive feasibility, 800,000 ounces at Tanami from conversion of resource ounces at Oran, 600,000 ounces at CC&V due to mine planning improvements, 550,000 ounces at Boddington from drilling and pit optimization, and 360,000 ounces at AHAFO due to improved wall control guidelines allowing for steeper slopes. Our average reserve grade also increased 4% to 1.19 grams per ton, largely due to higher grade additions from several of these sites and the reclassification to resource of lower grade ounces at Carlin and Phoenix. I want to acknowledge our exploration and our operations teams for their collaboration in delivering these results. With that, I'll turn it over to Nancy on slide 10 to discuss our financial performance.

Thanks, Gary. Turning to slide 11 for the financial highlights, I'm pleased to report strong fourth quarter results consistent with our back half weighting. Compared to the prior year quarter, we delivered a 6% increase in revenue to more than $2 billion, adjusted net income of $214 million, or 40 cents per diluted share, and adjusted EBITDA of $759 million, an increase of 5%. Cash from continuing operations was $742 million, a slight decrease compared to $748 million last year. Turning to slide 12 for a view of earnings per share in more detail. For the fourth quarter, we reported a small loss in our gap net income from continuing operations of $3 million, or approximately break-even. Adjustments for the quarter included $0.08 related to impairments to assets and investments. 23 cents related to valuation allowances and other tax impacts, and 9 cents related to a change in the fair market value of our marketable equity securities portfolio and the impact of reclamation and restructuring charges. Taking these adjustments into account, we delivered fourth quarter adjusted net income of 40 cents per diluted share. Turning to our full year results on slide 13. Comparing 2018 results to the prior year, Our revenues held steady at $7.3 billion, despite planned stripping at Boddington and Twin Creeks, along with geotechnical headwinds at Carlin and KCGM. We generated net income of $718 million, or $1.34 per diluted share. And we delivered adjusted EBITDA of $2.6 billion. Cash from continuing operations was $1.8 billion, a decrease of approximately $300 million compared to the prior year primarily due to the timing of cash tax payments. And in 2018, we declared dividends of 56 cents per share, demonstrating our commitment to shareholder returns. Turning to the full year adjustments to earnings per share on slide 14. Here you see the impacts of impairments on our GAAP net income from continuing operations of 76 cents per share, which primarily occurred in the third quarter and related to assets and exploration properties in North America. Other adjustments for the year included $0.03 related to valuation allowances and other tax impacts and $0.02 due to other items. Taking these adjustments into account, we delivered full-year adjusted net income of $1.34 per diluted share. Turning to our capital priorities on slide 15, Newmont continues to have one of the strongest balance sheets in the gold sector with liquidity of more than $6 billion and a net debt-adjusted EBITDA ratio of just 0.3 times. we remain well positioned to execute on our capital priorities, including maintaining an investment-grade credit profile, investing in the next generation of mines to improve life and build a stronger reserve base, and returning cash to shareholders. For 2018, we delivered nearly $400 million in returns to shareholders through our dividends and share buybacks. And in 2019, we expect to maintain an industry-leading dividend of $0.56 per share. We will also continue with our share repurchase program, which aims to offset potential dilution by maintaining a constant share count. In summary, we're well positioned to continue our trajectory of industry-leading financial performance by focusing on value generation over the long term. And now I'll pass to Tom for discussion of our operations, starting on slide 16.

Thanks, Nancy. In 2018, we delivered solid performance across all four regions. driven by a culture of continuous improvement. As Gary mentioned, our full potential program generated $640 million in cost efficiencies and productivity improvements, exceeding our targets and continuing to offset headwinds. I would like to thank all of our teams for demonstrating our commitment to share ideas and learn from each other's success. We are clearly seeing the benefits from this global collaborative approach. Looking forward, We remain excited about advancing several technology initiatives, including Smart Mine, Advanced Process Control and Connected Worker, which will take our performance to the next level. These technology programs are also being applied on a globally consistent basis. Turning to slide 17, UMOD is anchored in four regions where we have the stability and the proven operating model we need to create value over the long term. Over the last few years, our team has executed on our strategy and set up our business for success over the long term by optimising the portfolio for the monetisation of non-core assets, advancing profitable growth and adding more than 2 million ounces of gold production at all the sustaining costs of about $750 per ounce, investing in exploration across the cycle to support a stable production profile with approximately 70% of our production and reserves located in the United States and Australia and strengthening our balance sheet to provide us financial flexibility. Turning to review of our regional performance starting with North America on slide 18. The region produced more than 2 million ounces of gold in 2018 at all in sustaining costs of $928 per ounce. At Carlin, geotechnical challenges impacted performance during the year but the site delivered a strong fourth quarter on the back of improving grades at Leeville. The region is advancing work to improve our geotechnical risk management which will help inform our pathway for optimising Carlin's mine plans and safely re-entering Gold Quarry. As a consequence of the Gold Quarry remediation work, production may be impacted by approximately 70,000 ounces in 2019 However, it should be noted that Gold Quarry is only expected to contribute 5% to 10% of Carlin's total production over the next three years, and we expect to recover some of these ounces over the medium term. In January, we reached a three-year labour agreement at Carlin, our only operation in North America covered by a collective labour agreement. The updated agreement covers approximately 1,500 employees and is in line with the assumed wage increases in our guidance. CCMV also entered the year strongly with the expected drawdown of stockpiled concentrates and recovery of deferred leach production from earlier this year. The concentrate project is fully operational and we are seeing the expected recovery improvements at both CCMV and Carlins Mill 6. At Phoenix we saw higher gold grades and improved mill recovery and at Twin Creeks we generated steady production with higher grades from the underground and continued full potential improvements. And last month, the Long Canyon Phase 2 project advanced a feasibility study as work continues to inform our approach to the site's open pit and underground growth potential. Looking forward, the region also continues to progress studies of near-mine underground expansions at Carlin and CCNV, whilst advancing studies at Galore Creek with TEC. Turning to South America on slide 19. In 2018, the region produced approximately 670,000 ounces of attributable gold at all-in-sustaining costs of around $800 per ounce, an improvement of more than 7% from the prior year. At Yanakocha, our optimised mill blending strategy improved recoveries and allowed for processing high-grade ore from the Tapato estate pit, resulting in steady production at lower costs. At Merion, continued improvements in mine and mill productivity through full potential delivered very strong performance in the fourth quarter, with the new primary crusher in place to help sustain mill throughput as the site transitions from saprolite to harder rock starting later this year. Development at Ketchamain is progressing on course as stripping and leach pad construction continues to plan. In December, we produced first gold from an existing leach pad and remain on track to reach commercial production in the second half of this year. This project serves as a bridge to developing Yanacocha's extensive sulphides deposits in the years ahead. In January, we advance the sulphides project to the definitive feasibility stage. In the first phase of this project, we will process sulphide material from the Yanacocha Verde open pit and Chuckycocha underground mine, both of which are located within Yanacocha's current operational footprint. The ore will be processed through an integrated flow sheet, including new flotation, pressure oxidation, neutralisation, solvent extraction and electric winning facilities. Upon reaching commercial production, we expect the project to produce approximately 500,000 consolidated gold equivalent ounces per year for the first five years, from 2024 to 2028, and a total of around 6.5 million gold equivalent ounces through to 2039. We expect to make a full funds decision on Yanacocha sulphides in 2020 and the project has a three-year development schedule. Additional sulphide resources that are not currently included in the first phase of the project are expected to further extend the life of the Yanacocha operation. Turning to Australia on slide 20, the region produced over 1.5 million ounces of gold in 2018. at all in sustaining costs of $845 per ounce. At a well-classed Tanami asset, we delivered record production of just under 500,000 ounces, supported by a strong fourth quarter driven by higher grades. And earlier this month, we received approval from the Northern Territory Government to introduce gas to the pipeline, allowing commissioning on gas to commence at the Tanami Power Project. Gas is now being introduced into the pipeline and we remain on track to have connected to gas generator power by the end of this quarter. Once operational, Tanami's power costs will reduce by 20%, resulting in a net cash savings of $35 per ounce, whilst lowering carbon emissions by 20%. This power project also sets the stage for the next phase of profitable growth at Tanami. Study work on Tanami Expansion 2 continues to progress towards a full funds decision in the second half of this year. Tanami Expansion 2 has the potential to extend mine life to 2040, reduce operating costs by approximately 10% and add an incremental 100,000 ounces per year from 2023 through 2027. In addition to the study work, sinking of the shaft for Tanami Expansion 2 has now progressed beyond 70 metres. At Boddington, we delivered record mill throughput in 2018 of 40.2 million tonnes. This was delivered on the back of sustained full potential improvements over the last six years, the most recent being an optimised maintenance strategy that through improved reliability allowed us to move from four major shuts to three in 2018. Stripping on the south pit laybacks will continue as planned through 2019 and into 2020 before we reach higher grades in 2021. At KCGM the team is managing through geotechnical challenges which reduced mining activity in the back half of 2018. Remediation work is ongoing and we expect to continue drawing down stockpiles this year to help offset reduced mining rates. Stripping in the Morrison Starter Pit commenced in November and we achieved first production in December ahead of schedule. Morrison Starter opens up an additional mining area in the Fimmerston Pit and allows the site to sustain operations whilst we continue to work to optimise our longer term mine plans. Morrison Starter is expected to contribute approximately 150 to 200,000 ounces through 2021. The remaining Morrison resource is being evaluated as part of KCGM's broader gold and mild growth study. Now over to Africa on slide 21. The region produced 850,000 ounces of gold at all in sustaining costs below $800 per ounce. At Achim, strong performance came as a result of continued full potential improvements, most notably within the process plant. where the team has reduced the frequency and duration of mill shuts and delivered higher than expected throughput and recovery. Looking forward, the site is targeting further cost efficiency improvements by reducing parts and services spending associated with regular mill maintenance. And at a half-o, increased tons and grade contributed to a strong fourth quarter. The Beaker Underground reached commercial production in November on schedule and within budget and the team is making good progress on the AHAFO mill expansion. Civil construction of the primary crusher is completed, leach tanks have been placed and structural work on the stockpile feed conveyor and sag mill is complete. AHAFO is looking forward to a strong 2019 with higher grades expected to continue from both the Sabika open pit and underground, combined with the mill expansion project reaching commercial production in the second half of this year. Finally we continue to advance our regional growth studies and are working to prioritise our various opportunities on a value versus risk basis. Looking further ahead at our project pipeline on slide 22, our pipeline is amongst the best in the gold sector in terms of depth and capital efficiency and it gives us the means to maintain steady production whilst growing margins, reserves and resources. Projects included in our outlook are the current and sustaining capital projects you see here, Quechua Main in Peru, the Ahafo Mill Expansion and the layback of the Iwansu Pit at Ahafo and the Tanami Power Project in Australia. Three mid-term projects that will improve our outlook are Yanacocha Sulfides, Ahafo North and Tanami Expansion 2, shown here in green. Finally, we continue to invest in progressing our longer-term projects, shown here in dark blue. This pipeline lays the foundation for steady long-term production and profitability, turning to slide 23. Here's a look at our production profile for the next seven years through to 2025. Annual gold production is forecast to remain around 5 million attributable ounces, and our share of global mine production is also expected to grow over this period. This profile includes production from existing operations, as well as the sustaining and current projects included in our guidance. The green layer shows production from our mid-term projects, Yanakocha Sulfides, Ahafo North and Tanami Expansion 2, which are not included in our guidance. And the dark blue layer shows the longer-term projects, including Long Canyon Phase 2, Chukikocha Oxides and Achim Underground, all representing further upside. Overall, Newmont's stable asset base and robust project pipeline represent a distinct competitive advantage. Now I'll hand it back to Gary on slide 24.

Thanks, Tom. Turning us to slide 25. In January, we announced an agreement to combine with Goldcorp with the vision of creating the world's leading gold business as measured by assets, people, prospects, and value. Newmont Gold Corp. will operate a world-class portfolio of assets on four continents with the ability to target sustainable and profitable production of between 6 and 7 million ounces of gold annually and have the benefit of additional revenue of about $1.5 billion from other products including silver, zinc, and copper. We will have the sector's best project pipeline and exploration portfolio in terms of both quality and depth. and these prospects translate to the gold sector's largest reserve and resource base with long-term leverage to the gold price. Finally, we will continue to have the financial flexibility to execute our capital priorities, deliver sustainable shareholder returns through an industry-leading dividend, and maintain an investment-grade balance sheet. We expect the transaction to close in the second quarter following our special stockholder meetings in April, and receipt of all necessary regulatory approvals. In the meantime, we are working to ensure a smooth transition and integration as we position the business to deliver industry-leading returns for decades to come. Newmont Gold Corp's value proposition is unparalleled. We expect to generate $100 million in annual pre-tax synergies from G&A savings and a streamlined supply chain, and we plan to achieve additional benefits from the application of our proven full potential continuous improvement program. Where we have proven we can deliver sustainable cost efficiencies and productivity improvements of approximately $75 per ounce once fully ramped up. This equates to about $165 million per year. Combined with the $100 million of annual synergies, these efforts have the potential to deliver more than $2.5 billion in total value creation. Further upside is expected through project optimization and sequencing, asset divestments, and an increased and focused investment in the exploration potential of these assets. Newmont Gold Corp's operations and project pipeline provides the foundation for steady, profitable production, stable cash flow generation, and improving costs over the long term. and gives us significant optionality and the ability to continue to advance only those projects that meet our minimum hurdle rate of 15% at a $1,200 gold price. I recently had the opportunity to visit Red Lake and Muscle White, meeting with more than 600 people in crew meetings at the sites. I am pleased by the quality of the talent that I met and the future operational potential of these assets. Our teams will be working diligently over the coming weeks to close the transaction, and we anticipate providing an update to our 2019 guidance in due course, along with a view of our longer-term guidance later this year at our Investor Day. We're very excited about this combination and have clear implementation plans in place to create the world's leading gold business. Thank you for your time, and 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 you are using a speakerphone, please pick up your 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 John Bridges of J.P. Morgan. Please go ahead.

Good morning, Gary and everybody, and many congratulations on the results. Good to see some answers showing up from the sulfide project in Yanacocha. I was just wondering, to what extent is this the last word and to what extent is it a vehicle to attach on these you know, satellite or neighboring deposits, which look as if they can create nice synergies. How does that work?

I think I'll start off here and then hand over to Tom. When you look, this really just involves our Chaki Kocha deposit and part of the Verde deposit, which sits off to the side. But there's other satellite deposits, as you point out, John, that are not yet included in here because we're doing some additional exploration work. I don't know, Tom, if you've got anything to add.

Thanks Gary and John. John, one of the areas we're looking at for additional oxide is in the Chuckie Kocher Underground we're seeing some additional oxide that might help serve as a further bridge between oxides and sulphides at Yannick Kocher and also share some infrastructure in terms of the underground development for the Chuckie Kocher Underground. But there is quite extensive sulphide deposits across that existing operational footprint at Yannick Kocher. Vodayat and Pit Chakikotcher Underground represent phase one, but there are some other quite exciting deposits that serve to be able to feed in beyond that phase one stage of the project.

Yeah, I guess you're quite busy with other things at the moment, but are there any catalysts with respect to talking to neighbours about working other deposits into the infrastructure you've got there, the footprint?

I think that's one that we're open to, John, when it comes to Galeno and Michikei and how that might fit with Conga. But I think, like we're looking at with the Goldcorp transaction, when's the right time to bring those in, and we can look at proper sequencing and how that might work best.

Okay, great. I appreciate it. Thanks a lot, guys. Thanks, John.

Our next question comes from Matthew Murphy of Barclays. Please go ahead.

Morning. I'm just wondering what some of the comments on full potential and I guess there was some mention on costs playing a role in some of the reserve reduction. Just interested in what you're seeing generally in the industry on cost inflation and whether you still think you have enough you know, low-hanging fruit or, you know, potential to take cost out and continue to keep costs flat.

Thanks, Matthew. Tom Palmer here. We are seeing some headwinds, say, in Australia in particular, where the iron ore market's heated up, so the labour market's warmed up in Australia. So seeing attrition a little bit higher. So we're seeing some headwinds in that area but our full potential program and the commitment each of our operating general managers make every year in their planning process is to offset inflation and we have assumptions for inflation built into our planning process to ensure that they have baked into their plans clear projects that can offset inflation as a minimum and then deliver beyond that and we've been able to do that Over the last several years, we see it in our plans going forward, and we're confident that we've still got a pipeline of projects that can continue to, at a minimum, offset inflation.

Okay, thanks a lot. And then just a quick, highly specific one. Sorry, hopefully this doesn't put you on the spot, but we were just trying to reconcile the CC&V mill production in Q4. It looked like it was double inflation. roughly what would be implied from throughput, grade recovery, etc. Does that have something to do with drawing down stockpiles or something?

That is linked to the concentrates we now produce at CCMV that we had been stockpiling whilst we got our logistics process in place to ship them to Carlin's Mill 6. and we drew down all of those concentrates that we'd stockpiled through the year. So what you're seeing in the fourth quarter is all of that concentrate reproduced through 2018 getting processed through Carlin's MIL-6 at improved recovery than what you would have seen at CCMV's MIL-6 and helping contribute to improved recoveries in Carlin's MIL-6. So that's what you're seeing in those numbers for CCMV in the fourth quarter.

Great, thanks.

Our next question comes from Chris Terry of Deutsche Bank. Please go ahead.

Hi, Gary, Tom and Nancy. Thanks for taking my questions. The first one I had is just how we think about the progression of this year. So if the deal is to close in 2Q, would you expect that you would then give combined guidance shortly after that for the company and would it also include say three to five years out as well, or will that take some time? The second question I had is just around the proxies that have been announced. Just trying to reconcile some of the CAPEX numbers that you provided in December and the numbers that are given there for Goldcorp and for Newmont. Just struggling to square a couple of the numbers. Maybe you could just step through what's in those proxy CAPEX numbers in particular. Thanks.

Sure thing, Chris. A couple of things. In regards to guidance, what we'd look to do once we close is to provide an update to 2019 guidance after we've closed and gone through the process to make sure we've got a good understanding of how to properly present, because we do look at costs in particular differently than Goldcorp has historically. So we'll come out with that guidance. In terms of longer-term guidance, we'd look to target our investor day at the end of the year. Right now we're looking in either November or December to hold that investor day to provide the longer-term guidance and outlook for the combined business. In regards to the proxy question, I'd probably need to get more specifics because that's a backward-looking document and is not looking forward, so I'm not clear exactly what you want to cover there, but we're happy if you want to get back to us with the detail on that, we can provide it.

Thanks for the call, Gary. It's 2019 and forward CapEx numbers and then free cash flow assumed within the business. You take the forward CapEx numbers for Newmont, they look higher than the numbers given in the December CapEx numbers. I'm just trying to work out the forward CapEx reconciliation.

Yeah, Chris, the proxy is really mostly backward-looking, so probably the best thing to do is take the Newmont guidance that we gave you in the December period, assume for the Newmont bit that stays the same for now, and then let us give you more information after the transaction closes relative to the Gold Corp spend and assets. I think that will be the best way to put things together for 2019, and then certainly we'll give you the full view. We want to make sure we reconcile all the components. There are significant differences between the way the two companies have reported and and we want to get that very right before we make that public. So give us a little bit of time, but post-closing we'll give you a clear view on 2019 numbers at least.

Okay, thanks Nancy. And the last one for me, just in terms of the updated guidance and what we should expect, if you back out any potential divestments that might occur from the existing assets on the Newmont side, would we expect the Newmont guidance would stay the same? As in for the existing assets?

Yeah, at this stage, we wouldn't be projecting any asset sales. I think that's something that we typically don't hang the for sale sign out there. So clearly, we're going to go through a process like we've done with Newmont over the last five years, where we assess all of our assets, both operating assets and projects on a value versus risk basis. and go through in detail, making sure we understand what their full potential is before we'd move forward. So at this stage, especially for the 2019 guidance that we provide in due course after close, I wouldn't anticipate seeing any asset sales in there.

Okay. Thanks, Chris. Thanks, Chris.

Again, if you have a question, please press star, then 1. And our next question will come from Anita Sani of CIBC. Please go ahead.

Hi. Good morning, everyone. My question is with regards, again, to the proxy. It's just a little bit more on this free cash flow projection. I realize it's a backward-looking document, but can I understand what kind of assumptions you used first off on the gold corp side of the equation? What gold price were you assuming? And also, does your projections for free cash flow reflect the 2.2 to 2.4 million ounce guidance that they put out and the further implications of that?

Yeah, so in terms of projections for the Goldcorp piece, they use a $1,300 long-term gold price, and so that's what we have baked in. So that's sort of the baseline. And then I guess your question about cash flows, Again, this is all just based on the initial modeling and the basics from an accounting point of view. So if there's further details on that you're trying to get to, let us help you try to work through because they're meant to give a view, but again, this is a preliminary view of accounting valuation based on the business model and the deal model. We still have additional work to do. The valuation itself will change up to until including the date of closing.

Right. No, I understand there's going to be differences in cost, but the capex and revenue seems like it should be pretty straightforward. And then on your side of the equation, on Newmont's, and I think this is what Chris was driving at, the prior guidance that you guys had put out was around about, and I hesitate to say guidance, but if you add the two, the guidance of about $500 to $600 million that's in a chart, and then also in another chart says $500 million of ongoing development capital, sort of gets you to about a billion dollars. whereas the proxy is saying in some years it's 1.2 to 1.3 for you. So I'm just curious as to what precipitated that increase in CapEx.

Yeah, again, kind of coming back to the basis of the proxy, that is not guidance that's provided in there. So when you see the spend numbers relative to capital, I wouldn't translate that to guidance. Let us give that to you once we actually get closed. because it's really an accounting view based on a model, and we haven't gotten – let us do the work to give you proper guidance about spend.

Okay. All right. Thank you. So you said it was $1,300 gold for Goldcorp-sided equation. What did you use for yours?

$1,200.

$1,200 for yours? Okay. All right. Thank you very much.

Yeah, Anita, maybe just as you – We get the next call, and just to give some high-level numbers, we're talking of targeting 6 to 7 million ounces out into the future, the foreseeable future. What we see here over the next five years is roughly $800 million a year in development costs on a combined basis, and roughly about a billion dollars a year on sustaining capital. So that total is kind of a high level. We'll have to get into the details, and we'll give much more detail as we get into the providing guidance near the end of the year with the investor day.

Our next question comes from Tanya Jackuconic of Scotiabank. Please go ahead.

Good morning, everybody. Just maybe a question for Tom, just coming back to the reserves. Tom, can you give us a little bit more details on the 3.6 million ounce revisions that happened between Phoenix and Gold Quarry, I guess Carlin, and what exactly happened? happened there.

Thanks Tanya. At Phoenix more infill drilling allowed us to improve our resource models and get better reconciliations between the model and what we're mining and processing. So it was really a process of of continuing to refine and optimise our models for infield drilling and then making those adjustments to it so that we have more reliability and predictability in terms of what we have in the ground and what we actually produce through the plant. So it was a process of continuing to tidy up and improve those models at Phoenix. And at Carlin, two laybacks in the Gold Quarry pit that as we got to the point in our planning processes where we're optimising those laybacks, we're able to improve the performance of one of the laybacks and actually pull ounces out of one of the laybacks out of the second layback into the first layback. So we improved one layback but that led to the other layback becoming uneconomic in terms of our reserves requirements and so it pushed out. So it's really about at Carlin going through that stage of our mine planning and doing the optimisation on the next phase of laybacks coming through.

And that Phoenix, they improved the reconciliation that you did with the infill drilling. Did you just find that these ounces just were not there?

Yeah, there's some of that issue. It's a complex multi-metal ore body. So as you get in and do your drilling, it's about getting better confidence about what's in the ground between the Fortitude and Bonanza pits. And it was a process of, as we start to do the additional drilling and and bring that drilling into the resource model and then bring that into our mine plans that we've got better confidence in that material. So yeah, there's some metal that we previously thought was there that wasn't there. Some metal moves into resource whilst we do more work.

What sort of drill spacing did you use? Oh, we could take it offline.

That's fine. Thanks, Tanya. That would be fantastic. Sounds like a good idea, Tanya.

Yeah, thank you.

Thanks, Tanya.

Our next question comes from Michael Dudas of Vertical Research Partners. Please go ahead.

Hi.

Hi. Good morning. Can you hear me? Yes.

Go ahead, Michael.

Yes. Three quick ones. First, like 2018, you had more second-half weighted results. Can you comment a bit about how that's going to flow through for 2019? Secondly, as you're combining the best of the best and you're going through the analysis of the merger with Goldcorp, given your development projects right now, is there any change to the timing currently, and is that still kind of yet to be determined when you bring everything else on board? And third, you mentioned your Muscle White and Red Lake business. Gary or Tom, have you been to all the major operations yet with the Goldcorp? Any other maybe color that you've received or what you're expecting to find as you finish up? Thank you.

Okay, I'll have Tom start with the 18 to 19 comparisons.

Thanks, Michael. Our 2019 won't be as heavily weighted to the fourth quarter as 2018 was. We had a Tanami, Mirian, a HAFO, CCMV and Carlin, all fourth quarters that were heavily weighted in 2018. There will be a slight weighting to the second half and fourth quarter. mainly around the half a mil expansion coming on stream in the second half of 2018. So we'll see increased volume come through and some wading to the second half and into the fourth quarter, but not the same level that you saw in 2018.

I think then moving on in terms of as we go through both in terms of project sequencing but more specifically going through and assessing talent and getting to a position to be able to name the senior leaders of the new company, we're going through a very detailed process. I know between Tom and I with a number of meetings with the Goldcorp team and with our own team as we go through that process, look to have that in a position that by the time we get to close that we're able to name essentially the senior leadership team across the combined Newmont Gold Corp organization. So working through that, a very detailed, rigorous process, and one that's wanting to make sure we get to meet the people and take the proper amount of time as we go through this process. I think on your last question, I did have the opportunity to visit Muscle White in Red Lake last week, and I didn't mention that it was a little cold up there too, but that's besides the point. We have, as we've done our due diligence across the entire business and portfolio, had the opportunity to go to every one of the operating sites as well as had detailed discussions around all the projects. And we continue to go through. I look forward to, and Tom does as well, to get around to visit all the sites in due course, but that won't happen here over the next couple weeks. That will be over the next several months as we work through that process. Trust will be much warmer in Florida next week. Enjoy, guys.

Thank you.

See you there. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Gary Goldberg for closing remarks.

Thank you for joining our call this morning. We're pleased with our performance in 2018, but as always, our commitment is to take it to the next level by delivering steady gold production at competitive costs and continuing to invest in the next generation of minds, leaders, and technology, and staying ahead of the pack in terms of the value we create and the standards we uphold. Thank you for joining us, and have a safe day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.