Newmont Corporation

Good morning and welcome to Newmont Gold Corp's second quarter 2019 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. Please note that 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 Gold Corp's second quarter 2019 earnings conference call. Joining us on the call today are Gary Goldberg, Chief Executive Officer, Tom Palmer, President, and Nancy Beezy, Chief Financial Officer. They will be available to answer questions at the end of the call, along with other members of our executive team. Turning to slide two. Please take a moment to review the cautionary statement shown here and refer to our SEC filings, which can be found on our website at newmontgoldcorp.com. And now I'll turn it over to Gary on slide three.

Thanks, Jess, and thank you for joining our call. We delivered strong performance in the second quarter and continued our work to establish Newmont Gold Corp. as the world's leading gold business. Highlights for the quarter included... closing the deal to acquire Goldcorp with the overwhelming support of our shareholders, making steady progress on integrating assets and aligning teams with our proven strategy, completing an historic joint venture with Barrick to create the world's largest gold-producing complex, and meeting our ongoing commitment to deliver leading operational, financial, and sustainability performance. Turning to the details on slide four. The first pillar of our strategy is to deliver superior operational execution. In the second quarter, we produced 1.6 million ounces of gold and delivered all-in sustaining costs of $1,016 per ounce and continued to improve costs and efficiencies across the portfolio. We're on track to achieve a run rate of $365 million in annual improvements from the Gold Corp acquisition by early 2021. And we launched our full potential continuous improvement program at Penasquito and Cerro Negro. This program has delivered more than $2 billion in improvements since 2013. The second pillar of our strategy is to sustain a global portfolio of long life assets. During the second quarter, we approved the Iwansu Layback to extend the life at Ahafo's open pit mine We supported the completion of the Nevada Gold Mines joint venture, and we continued to advance profitable projects, including the Ahoffo Mill expansion, Ketcher Main, and Borden, all of which will reach commercial production later this year. The third pillar of our strategy is to lead the gold sector in profitability and responsibility. In the second quarter, we returned $590 million in dividends to our shareholders. maintained a strong balance sheet with an investment grade credit rating and nearly $5 billion of liquidity, and we were recognized as one of the top companies in the world for our leading social, environmental, and governance performance. This performance starts with running safe operations, turning to slide five. While our combined safety performance improved in the second quarter, we remain focused on achieving zero harm across our portfolio. That focus includes reporting and sharing significant events that hold the potential to impact safety and embedding our fatality risk management program to test the controls we have in place to prevent accidents and injuries. Over the last six months, we've also been driving efforts to eliminate live maintenance work as another effective way to protect our people from injuries. We were honored to be recognized as one of the world's leading corporate citizens by Corporate Responsibility Magazine and the only mining company to make the list for our performance. This recognition is a tribute to the commitment our teams bring to leading sustainability performance and a key measure of how well we run our business. Turning to a look at our global portfolio on slide six. Our operations are based in four regions and managed under our proven operating model. Taken together, Newmont Gold Corp offers investors an unparalleled portfolio of mines, projects, and reserves in favorable jurisdictions. In fact, 90% of our reserves are based in the Americas and Australia. Sustainable gold production, targeting between 6 and 7 million ounces per year, with another $1.5 billion of annual revenue from copper, zinc, lead, and silver production, and the financial flexibility needed to continue investing in profitable growth and delivering an industry-leading dividend. Finally, we offer strong leadership and a wealth of technical expertise to make the most of these assets. I visited Eleanor and Porcupine last week, and I was pleased to see the progress the teams are making to align and integrate these operations, and the ongoing work by the combined teams to make the Nevada Gold Mines joint venture a success. With that, I'll turn it over to Tom on slide seven to discuss our operational performance and recent integration work. Thanks, Gary.

Before reviewing our operational performance and integration work, I'd like to take a moment and welcome Rob Atkinson, our new Chief Operating Officer. who you will hear from next quarter. Over the past 25 years Rob has delivered step change improvements in safety, productivity and sustainability in the mining sector. We are excited to have Rob on board as he brings a demonstrated commitment to building strong safety cultures and to leading and empowering teams to achieve meaningful business results. With his capability and experience Rob's addition to our leadership team will help to drive the delivery of value we have identified through our combination with Goldcorp. Now, beginning with a review of our regional performance on slide eight. Our North American operations were impacted by near-term challenges in the second quarter, but performance is expected to improve in the second half as we work to fully integrate the Goldcorp assets and set them up for sustainable future success. At Penasquito, Operations safely ramped back up in June and concentrate inventories are almost back to normal levels. During the shutdown the team brought forward maintenance on various plant and equipment. The remainder of 2019 and into 2020 grades are expected to steadily improve as we complete the stripping campaign in the main Penasco pit. And we also launched our full potential program at that operation and I'll touch a bit more on that later. On June 17, we began good faith dialogue with the trucking company and the Cedros community. And just last week, the team hosted a session on site where stakeholders were able to see firsthand the focus we have on environmental compliance, water efficiency, social development, and long-term community water plans and more. At Musselwhite, the rehab at the conveyor ramp is around 70% complete. Secondary egress has been successfully established, allowing us to recommence both development activities and work on the materials handling project earlier this month. The focus for the remainder of 2019 will be on replacing the conveyor system and using this period as an opportunity to get ahead on development work. At Eleanor, we have begun accessing higher grade in the Horizon 5 zone. and preparations are underway to launch full potential in the fourth quarter. We also continue to advance the materials handling project to improve productivity from lower levels of the mine. At Porcupine, the boredom project remains on schedule to reach commercial production in the fourth quarter. And at Red Lake, production of Koshinur was ramping up in the second quarter. However, in early July, we proactively paused the underground operations in order to strengthen our controls following an in-depth review of an historical underground area. Partial underground operations resumed a few days later following the implementation of additional controls. And over the course of this quarter, we'll be installing some further control measures and expect to return to full underground operations during Q4. Turning to CC&V, we delivered steady production during the quarter and have signed a Toll Milling Agreement with Nevada Gold Mines to continue processing concentrate in Nevada. In the second quarter, our Nevada operations performed as planned, with Carlin safely completing its annual shut on Mill 6. And on July 1st, we closed the Nevada Joint Venture and Barrick assumed operatorship of Nevada Gold Mines. We look forward to working together and supporting the Joint Venture's efforts to unlock significant value over the years ahead. Turning to South America on slide nine. Yanacocha delivered another solid quarter with continued higher grades from the Tapato Este pit and drawdown of the La Quinoa leach pad. And a myriad continued productivity improvements helped offset seasonal wet weather. At Cerro Negro, second quarter performance was in line with our expectations and we anticipate a stronger second half as we reach higher grades from the Eureka and Mariana Norte. We launched full potential earlier this month with a focus on improving development and mining rates, maximising recoveries and applying our asset management methodologies at that operation. Looking forward, Ketcham Main continues on schedule with commercial production expected in the fourth quarter. Turning to Australia on slide 10. Tanami delivered another solid performance coming off higher grades in the first quarter and we are starting to see the cost benefits from the transition to natural gas fired power. Boddington continues to progress the stripping campaign in the South Pip and expects to reach higher grades in Q4. We recently advanced our autonomous haulage study with the potential to reach a full funds decision later this year. If approved the project is expected to improve costs and mining productivity by converting the fleet of 39 haul trucks to autonomous operation using the CAT command system. At KCGM, geotechnical remediation work on the east wall of the Phimiston pit is ongoing. We're starting to see production from the Morrison starter pit and expect to reach higher grades in the second half. And Tanami Expansion 2 continues advancing towards a full funds decision in the second half. Engineering works are ongoing and shaft sinking has progressed beyond 150 metres. Turning to Africa on slide 11. ACHIEM again delivered strong quarterly production on the back of higher grades and new full potential initiatives associated with optimising grinding and improving recoveries. At AHAFO we continue to benefit from higher grades in both the Sabeka open pit and underground. We recently approved funding for further laybacks of the Iwansu pit While we anticipate first gold from these laybacks in the fourth quarter of this year, the majority of the benefits flow from 2024 to 2029. These laybacks extend the life of AHAFO's surface mines by another four years. And the AHAFO mill expansion is nearing completion, with commissioning expected to start next month and commercial production in the fourth quarter, keeping us on course for a record year in Africa. Following our review of geotechnical assumptions at the Sabika underground mine, we are assessing mining methods for the lower levels of that mine. As we conduct this review, we are mining more laterally and as a consequence have reduced our 2019 outlook by approximately 40,000 ounces. Looking forward, at a half an hour north, we continue to work through the permitting process, engaging with the relevant government agencies and building upon our relationships with traditional leaders and local communities. So putting it all together, we delivered 1.6 million ounces and all in sustaining costs of approximately $1,000 per ounce in the second quarter. With our global and balanced portfolio allowing us to overcome headwinds at select sites with continued solid execution across the rest of our operations. Turning to review of our operational outlook on slide 12. Our 2019 guidance includes a full year for the Newmont operations, including a full year for our Nevada sites, and a partial year for the former Goldcorp operations from April 18 to December 31. Our outlook has been updated to include the impacts from the blockade at Peniskito, the conveyor fire at Musselwhite, the installation of additional safety controls at Red Lake, and the impacts from the slip in the gold quarry pit at Carlin in late 2018. 2019 is second half-waited as we ramp up our HAFO mill expansion and Borden projects and reach higher grades at Cerro Negro, Penasquito and Eleanor. The standing capital of $985 million includes investments in tailage storage facilities expansions at AHAFO and Penasquito, BLF2 leach pad expansion at CC&V, in addition to infrastructure, equipment and on-growing underground mine development throughout the portfolio. Development capital of $575 million includes spend on a half a mill expansion, Ketchamain, Borden and conveyor remediation works at Musselwhite. In summary, we expect to deliver 6.5 million ounces of gold and all in sustaining costs of $975 per ounce in our first partial year as a combined company. This operational outlook does not include any of the benefits that will flow from our full potential work at Penasquito and Cerro Negro or from supply chain improvements where we are actively progressing work. Turning to slide 13 for a look into our early successes. We have made excellent progress in the first 90 days of integration. On the G&A front, we recently completed our organisational design work to resize the Vancouver office from a corporate headquarters to a regional office. This work has already captured $40 million per annum in labour savings to date. We have realised a further $10 million per annum in non-Labour G&A synergies through the consolidation of insurance and benefit programs, real estate and other quick wins. We have commenced the next phase of this work which shifts the focus from Vancouver to target duplication across the operating businesses. Turning to our supply chain work, Newmont's experienced supply chain team is actively chasing value across several fronts. Quick wins are being achieved through the extension of best pricing and rebates, and we are also leveraging our increased scale and volume to seek improvements on some of our input costs. Our full potential program is well underway at Penasquito, recently kicked off at Cerro Negro and we're preparing to launch at Eleanor in the fourth quarter. At Penasquito, full potential began in early June and we have our key subject matter experts on the ground working with the site team, focused on opportunities in the areas of mining, processing, asset management, G&A and external spend. Another example of applying our technical expertise to turn these former Goldcorp assets around is our Strategic Resource Development Program. This program lays the groundwork for future business plans by testing an extensive set of mine plan options across a wide range of interrelated variables. The output from this work ensures that we are pursuing the optimal development and value path for our operations. At Muscle White, our strategic resource team is working with the site to understand the entire value chain and review critical trade-offs in physicals, financials and risk to develop the best value for that operation. In summary, our structured approach to delivering value has us well on our way to achieve the cash flow improvements of $365 million per annum. We expect 40% of the improvements to be realised this year, ramping up to 80% next year, and 100% by 2021. Looking further ahead at our project pipeline on slide 14. Another key value proposition in our combination with Goldcorp is our industry-leading project pipeline. Leveraging our project delivery track record, it provides the opportunity to establish a foundation for steady production and cash flow for decades to come. This pipeline gives us significant flexibility, and we will continue to advance only those projects that meet our minimum hurdle rate of 15% at a $1,200 gold price. As previously mentioned, we recently approved the Iwansu layback, and this project is now shown in execution, along with Musselwhite Materials Handling and the three projects we expect to complete in the fourth quarter this year, the Harfo Mill Expansion, Ketchamain and Borden. It's also worth noting that we shifted the coffee project from definitive feasibility to pre-feasibility as we take a step back to perform further exploration, confirm the resource, advance permitting activities and improve our understanding of the asset. As part of our integration and annual planning work, we will continue to evaluate all projects through our rigorous and disciplined investment system. I look forward to providing updates on our project portfolio as well as our optimization work on the six former Goldcorp assets to deliver long-term value as we move ahead. With that, I'll hand it over to Nancy on slide 15.

Thanks, Tom. Turning to slide 16 for the financial highlights. Before we jump in, it's important to note that results reflect the performance of Goldcorp assets from April 18th until June 30th. In the second quarter, We delivered revenue of $2.3 billion, which increased 36% over the prior year quarter with the additional sales from Goldcorp assets and higher realized gold prices. Adjusted net income of $92 million, or 12 cents per diluted share. And adjusted EBITDA of $679 million, a 25% increase over the prior year quarter. Cash from continuing operations was $301 million, a decrease of 25% driven by lower net income and higher accounts receivable at Boddington and Penesquito, with Penesquito concentrate shipments recommencing in mid-June and port congestion at Boddington that delayed shipments near quarter end. Outstanding concentrate receivables at these two operations was more than $150 million, which we expect to collect in the third quarter. Those movements also contributed to a free cash flow decrease of approximately $220 million over the prior year quarter, along with higher investments in development projects. We have collected $45 million of insurance proceeds related to the conveyor fire at Musselwhite, of which $14 million was recorded as an offset to cost applicable to sales in the second quarter. As you will see in our detailed results, there are specific accounting and policy differences for the newly reported Goldcorp assets. including a reset in the basis of assets and liabilities to fair value. And there are changes to reporting for differences between IFRS and U.S. GAAP and the adoption of Newmont accounting policies. Some of these items include differences in the classification of certain investments as sustaining or development capital, the exclusion of resources and the calculation of depreciation expense, and the impact on costs applicable to sales without deferred stripping costs. Other notable differences include co-product accounting at Penesquito, changes to the accounting for the mine Silverstream contract, and the inclusion of Cerro Negro's Argentinian export tax in our AISC calculations. Turning to slide 17 for a review of earnings per share in more detail. Second quarter gap net income from continuing operations was $1 million. Primary adjustments included 16 cents, comprised of $0.14 related to transaction and integration costs from the Goldcorp acquisition, such as severance payments, legal and banking fees, and consulting costs, and $0.02 related to the Nevada joint venture transaction, including costs related to defense, $0.04 related to reclamation and remediation charges at legacy Newmont sites, $0.05 related to a change in the fair value of equity investments, and $0.04 related to gains from the sale of exploration properties in North America. Taking these adjustments into account, we reported adjusted net income of $0.12 per diluted share. I want to take a moment to thank the Newmont Goldcorp finance team and all the work they've accomplished to support the successful integration of the businesses and coordination with Barrick to successfully transfer ownership of our Nevada assets to the joint venture. As a reminder, our results for the third quarter will proportionally consolidate Newmont Gold Corp's ownership interest in Nevada gold mines for the terms of the joint venture agreement. We will present these results as a separate segment in our financial statements, including the various elements of the P&L for disclosure purposes. Turning now to slide 18. We remain well positioned to execute our capital priorities, including maintaining an investment grade balance sheet, investing in the next generation of mines to improve margins and build a stronger reserve base, and return cash to shareholders. Newmont Gold Corp has one of the strongest balance sheets in the gold sector, supported by a cash balance of $1.8 billion, even after paying off $1.25 billion of outstanding Gold Corp debt at closing and returning approximately $590 million to shareholders in the second quarter. After the completion of several key financing activities in April, including a reset of our five-year $3 billion revolving credit facility and a successful exchange of Goldcorp notes, we maintained financial flexibility with a net debt to adjusted EBITDA ratio of 1.5 times. We also demonstrated our continued commitment to returns through a special dividend of 88 cents per share and a common dividend of 14 cents per share. Wrapping up with our 2019 corporate outlook on slide 19. We continue to invest in our future to secure the long-term stability of our business. For 2019, our support cost outlook is $325 million, which includes a portion of synergies from the GoldCorp combination, but also contemplates managing the Nevada operations from our Elko regional office through June 30th. We are on track to deliver an annualized run rate of $85 million in G&A savings for 2020. Our interest expense is expected to be $280 million from our new debt profile. And our depreciation and amortization outlook is just over $2 billion. Investment in exploration and advanced project is expected to be $450 million. With near mine and greenfield exploration occurring across all regions, and ongoing investments in advanced projects as we progress the next phase of future growth. Finally, our consolidated adjusted tax rate is forecast to be in a range of 34% to 39% using a $1,200 gold price. Going forward, Newmont Gold Corp. is well positioned to continue a trajectory of industry-leading financial performance by executing our capital priorities and staying focused on long-term value creation. And now I'll hand it to Gary to wrap up.

Thanks, Nancy. Turning to slide 21. Newmont Gold Corp delivered a strong first half in 2019. We are well positioned to build on that performance in the second half and for decades to come. We'll continue to focus on generating long-term value for our shareholders by executing our strategy, which is to deliver superior operational excellence by focusing on safety, and a culture of continuous improvement, sustain a global portfolio of long-life assets by investing in the next generation of minds, technology, and leaders across our business, and to lead the gold sector in profitability and responsibility by maintaining high standards and living up to expectations of how a leading business should operate. I'll end by saying thank you to our team and to our investors for your support. It has been an honor to lead Newmont Gold Corp. I'm proud of what we've accomplished together over the last seven years, and I'm excited about the future for the business. I have great confidence in Tom and his new leadership team as he takes over the reins as CEO on October 1st. And I have great confidence in this team's ability to build on a strong foundation and advance Newmont Gold Corp's position as the world's leading gold company. 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 JP Morgan. Please go ahead.

Thanks. Good morning, Gary, Nancy, Tom. It's been great working with you, Gary. Best of luck in your new endeavors. I was just wondering with the new accounting, Nancy, that you spoke of, how much of the lower earnings are related to that? the change in loss of deferred stripping and the more conservative accounting. Have you thought about the impact that we've seen with these results as a result of the accounting?

Yeah, thanks, John. And absolutely, that's something we wanted to telegraph very early on because we knew there would be some significant differences. I would say the difference between IFRS and U.S. GAAP is probably the most material piece. and we'd be happy to walk you through those in a bit more detail, and then certainly some changes between policies and, as we've talked about, the difference between development versus sustaining CapEx is probably the key piece of it, as well as the coproduct versus byproduct accounting at Penesquito. So, yeah, that's probably a fairly material difference in the way you would have seen things reported at the Gold Corp level, and we're very comfortable walking folks through the details of those to help make sure you're bridging those to the way we'll be accounting for those going forward. But yeah, our goal was not to surprise the market with that, but we've tried to telegraph that there would be some fairly material changes.

And then one of the things that seems a little bit counterintuitive is the switch from being able to depreciate underground mines against the reserve and resources. Now, I understand that just using reserves as per GOP is a more conservative way of working, but it seems impractical, particularly as you and other miners become more focused on underground mines. What's your thoughts on that, and would it be possible to lobby the SEC to change that?

Yeah, totally understand the request there, and we don't disagree with you. However, we are settled a bit by the requirements of U.S. GAAP, so that might take more than just Newmont's desire to turn that around. But we totally understand the thoughts, but U.S. GAAP really requires us to only use reserve life to calculate depreciation.

Right. And then just if I may, Sabika, you mentioned that there had been a change to the mining plan there. What's going on?

John, it's Tom here. I'll pick that one up. As we look at some of the ongoing work and looking at some of the stresses as you move into the depths deeper into that mine, we're seeing higher stresses. So we're taking a step back to look at our mining method, particularly the type of backfill we might need for that. So as we step back and understand that, we've just moved out of mining laterally so we can work through that mine planning process through the course of the business planning process this year. So I'd I'd expect as we move through to provide our longer-term guidance, the latter part of this year, that we can provide more insight into that. But it's how we manage higher stresses in that mine as we move into some deeper parts of it.

Okay. Great, thanks. Best of luck, Tom, in the new role, and best of luck, Gary, in your new endeavours. Thank you.

Thanks, John.

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

Hi Gary, Tom and Nancy and all the best for you Gary and Tom in your new role. A couple of questions from me. Just starting on the new guidance, the 6.5 million ounces for 2019 taking into account from April on the Goldcorp assets. How do we think about that number you provided in the context of the ongoing full potential program from here and as you transition into 2020 and moving forward? Is that a number you've largely reset as such and then you'll build from that with any optimization on full potential or can we still think about 2020 and beyond as still pretty fluid depending on the outcomes of your review of the assets in the coming six months? Thanks.

Thanks, Chris. Tom here. I'll pick that one up. The approach that we take with all of our operations and the full potential approach we take in coming in and running full potential at those operations is to start with previous best demonstrated performance and understand what you've done in the past and then building a plan on that basis that's underpinned by a robust resource model that's then feeding a mine plan. And then we start to build some stretch in that in terms of improvement. That's the starting point that Full Potential has as it comes into Penasquito and Serenegro and Eleanor, as well as our existing former Newmont operations. So that's the basis at which we have worked with our 14 operations to develop our guidance for this year, and that's the process that we're using to build our business plans for 2020 and beyond for Newmont Gold Corp. What we do with Full Potential is when we have a Full Potential program, We go through a diagnosis phase and then a development phase. Coming out of the development phase, you then have a series of projects that have clear value delivery linked to them, resources and accountabilities and a timeframe. It's only when we have those clearly defined projects in place that we build them into our plans and our guidance. As I said in my comments, you won't see full potential benefits built into 2019 guidance because that work is only just starting at Penasquito and Cerro Negro. we would expect to see some of those benefits for those two sites flowing into our 2020 business plan and our 2020 numbers. So we're very disciplined and rigorous in the way we look at our mine plans and the way we apply our full potential program.

Okay, thanks Tom. And then just thinking about the medium term, should we expect updated guidance on forward years from later this year And what's the sort of updated timing on any divestments in that prior sort of six to seven million ounce range that you talked about on the last quarter? Thanks.

Thanks, Rhys. I'll pick up the first part of your question and pass across to Gary for the second part. We're right in the middle of our normal annual business planning process at the moment. That's the standard process we run through. As we work through that process and present a business plan to our board, The latter part of this year for approval will then follow up with longer-term guidance, and we're currently targeting our standard timeframe of December to be sharing that with you.

And just to follow up on the divestment question, just a reminder, there was no need to do any divestments as part of this acquisition and the whole process that we've gone as we've worked with Barrick to support and develop the Nevada Joint Venture. We want to make sure we get in, get a good look at all the operations and projects that we've brought in with the Goldcorp acquisition to make sure, as we did with Newmont five years ago, well, five to six years ago, in terms of going through all the assets to make sure they're delivering as strongly and as well as possible before we move forward with that process. So that's where we're focused.

Thanks, Gary. And the last one for me, just on a couple of assets specifically. on Musselwhite and pushing out the timeline on the repair work there. Should we assume that that can ramp up pretty quickly in 2020 or is it too early to say what the impact might be on that year? And then for Penasquito specifically as well, did the blockade have, I was just wondering if you could go through a few more details on the impact that that had on perhaps mining, inventory levels, other factors around the mine as well, just to think about the second half and going forward. Thanks.

Chris, Tom again. I'll pick both those up. So at Musselwhite, the fire damaged the full two and a half kilometre conveying system. So it's a process of rehabbing. So you have to remove all the damaged structure and rehab the ground control in a two and a half kilometre decline. We are well advanced, 70% complete on that rehab work. I was at Musselwhite a few weeks ago, able to see that work in progress and they're doing an excellent job in terms of ensuring that they're setting up that rehab for the long term in a mine that has a very long life. We're right in the throes now of assessing bids for the fabrication installation of a new conveyor. So ultimately our timing will be determined by those bids coming in so we will gain greater understanding of that in the coming weeks. It will be into 2020 though before that conveying system is commissioned and up and running. We are back in working on the materials handling project. That project was well advanced when it was paused because of the fire so we're very much getting into the final stages of that project. We'll be moving through commissioning in the latter part of this year and having it ready and available in the new year as that conveying system comes up. Our focus at Musselwhite is to ensure that there is the appropriate level of development work, that we have the appropriate number of stopes open and that we have the drifts out to do the exploration work to map out the future of that mine so that when we have that conveying system up and running we have the appropriate number of open stopes and the ability to be able to maintain the appropriate number of open stopes going forward. So I fully expect that when that mine comes back up, when that conveying system comes back up, it will come up very smoothly and we'll be able to hit whatever the appropriate rate is out of that mine very smoothly and quickly. In terms of Penasquito, as a result of that blockade, there were no impacts on the operation itself. It was managed very appropriately in a care and maintenance situation. and we did a lot of maintenance work through that downtime period. It also has ramped up very smoothly. We have been able to move concentrate to market very effectively, although, as Nancy indicated, both Peniskito and Boddington have a little backlog of concentrate sales from the second quarter that will flow into the third quarter. The concentrate inventory levels by now are back to normal. The mine is running well. The plant is running well. The impact on the second half of this year, we'll still move into higher grades for gold, silver and lead. Grades stay about the same for zinc. But as a result of the 50-day shutdown, we'll see some of those higher grades that we were expecting in the fourth quarter to move into 2020. And so we'll see that in our 2020 guidance as we bring that out later in the year.

Thanks, Tom. That's all from me. All the best to you and Gary. Thanks. Thanks, Chris.

Our next question comes from Fahad Tariq of Credit Suisse. Please go ahead.

Hi, good morning. Thanks for taking my question. Just going back to the Gold Corp synergies for a second, can you clarify the cadence of the synergies? I thought I heard you say 40% this year, 80% next year, and 100% by 2021. And if that's the case, this year, is it right to say that none of that 40% of the 365 would be full potential? It's all coming from GNA and supply chain and just some clarity around that would be helpful.

Tom again I'll pick that one up you're pretty much spot on so a lot of the early quick wins are from GNA which we're seeing now and what we're still more to pursue as we move from Vancouver out to the operating sites there's the quick wins that come from supply chain in terms of rebates, extensions for the equipment at Goldcorp sites, so you just see quick wins from supply chain and G&A, with G&A being the lion's share of that 40% this year. You'll then start to see next year both supply chain improvements and full potential flow as we start to deliver on improvement projects at Penasquito and Cerro Negro. And then as we move through the other gold corp assets through the course of next year, you'll start to see the remainder of that flow primarily from full potential with some additional supply chain. So GNA, some supply chain, full potential really kicking in in 2020, 2021.

That's helpful, thanks. And just as a quick follow-up, any surprises or anything interesting you've learned so far from the full potential work at Penesquito and Cerro Negro? Anything that has been different than perhaps your initial assumptions when you first did the due diligence on the mines? Thanks.

No surprises from our due diligence. There is everything that I'd expect to see that we're seeing. And I think there's the real, the value proposition of Newmont's operating model, sitting and having these six gold corbasses come into our operating model and seeing the journey that we've been on at places like Bonnington and Tanami applied to operations like Penasquito and Serenegro absolutely hold water. and nothing's changed in my mind in terms of what we saw during due diligence and what we've seen over the first 90 days of running these operations. There's a need for technical rigour and discipline. We bring that. We've got key technical expertise. We're seeing some real opportunities in the full potential space. I think in Peniskito, and I'm heading down there this afternoon, particularly the interface between the mine and the mill, which we see and have continued to pursue at Boddington. We see the real opportunities there at Penasquito. At Serenegro, it's going to be a real focus around mining and development rates underground. There's a real opportunity there. We believe we have the skills and expertise to bring improvements in that space at Serenegro. So no surprises at all. Thank you.

Our next question comes from Greg Barnes of TD Securities. Please go ahead.

Thank you. Tom, just listening to what you're saying about the development at Muscle White and how the focus there is to get that ahead of where you have been, I suppose, is that a continuing theme you're seeing across the Gold Corp operations? Is that just wasn't the development work done or stripping required to meet the needs of the mills?

Is that the biggest problem in your mind? To be frank, Greg, yes. There was not the work done on exploration, there wasn't the work done on development, and that's absolutely fundamental in either an open pit or an underground mine. So as we look at Musselwhite, Musselwhite had one stope open before the fire. That's unacceptable. How many would it need, Tom? It depends. We'd have to do our work on understanding the value, but you'd expect a mine the size of Musselwhite... with the size of their stoves, to have five or six stoves open at any one time. So before we recommission that conveying system, we expect to have the development work done to not only have six stoves ready to go, but the stoves that come beyond those and the exploration drifts to be understood. I mean, Musselwhite is a tanami in Canada, so we need to be out in front of the mining work to be doing the exploration work to be mapping out that... the future potential of that operation. So our focus is, now that we've got secondary egress, is to be in there doing the development work so that when the conveying system's ready, we can maintain the appropriate levels of throughput through that mine, but also be doing the work to understand its future life.

So was there a similar lack of development at Cerro Negro and Eleanor as well?

It's a similar theme. The theme we saw through our due diligence was the opportunity for us to come in and apply our rigor and discipline and operating model to those operations.

But how long, Tom, do you think it's going to take you to get these operations to where you want them to be?

Again, as we talked about, as we marketed this transaction, there is 24 months, possibly up to 36 months for some of these operations to really get them to the level of performance that we would expect. It's a very similar journey if you look back over Newmont over the last six or seven years and where a Boddington or a Tanami was back in 2012 or 13 to where it is today. There's a good two or three years of work to get those operations set up for sustainable long-term value delivery.

That's very helpful. Thanks, Tom.

Our next question comes from Carrie McIlroy of Canaccord Genuity. Please go ahead.

Hi, good morning. Just had a question on Saranegro and Eleanor. Saranegro, I think that tons of throughput in the quarter is around 3,400 tons. I know Goldcorp was pushing 4,000 tons. I think you've talked in the past about maybe that was too aggressive. I'm just wondering, should we assume a run rate similar to Q2, or what throughput expectations should we expect over the balance of the year and similarly on LNR?

Thanks, Kerry. You won't hear us talk about tons per day. out of the former Goldcorp operations. You'll hear us talk about... It might be tonnes per year, but you're certainly going to hear us talk about what's the highest value or the best value out of those operations. In terms of the Cerro Negro, we are moving into a couple of higher-grade zones. So you'd expect to see both higher-grade and increased volume coming out of those underground mines in the second half, which is going to contribute to... to a back half weighted Cerro Negro for 2019. Similarly for Eleanor you are moving into some high grade areas of Horizon 5 and 6 that will help back half weight Eleanor for this year.

Should we assume that the rate of ore going into the mill will be more variable going forward?

You can expect the rate going through the mill to be consistent going forward but what we'll be focused on is what's the combination of mine and mill that's going to deliver the best value for those operations. That will be a changing language you can expect to hear from Newmont Gold Corp.

And again for the balance of the year is that going to be similar to Q2 or is it going to be different than Q2? Obviously you've mentioned higher grades in the back half.

Essentially, one thing to remember, second quarter didn't start with all these Goldcorp assets. We didn't start accounting for them until April 18th, so that wasn't a full three months of production. So keep that in mind when you look at the numbers.

Okay, and then maybe one other question. On 2019, clearly, you know, there was a lot of issues this year with the Penesquito and Muscle Weight Fire. I think your previous proforma guidance for 2020, 2021, 7.4 to 7.5 million ounces, Is there anything that you've seen so far that you think those numbers would change materially or more or less, you think you can still get to those certain numbers, you know, again, barring any improvements from the full potential?

We are right in the middle of our planning process at the moment and as I talked earlier in terms of we step back and ensure we understand the resource model that's underpinning mine plans, the resource risk, the investment in exploration we need to do to be managing a resource risk and then building mine plans off the back of operating assumptions that are based on previous best demonstrated performance and then have improvement built into those. We're going back to those technical fundamentals for all 14 operations across Newmont Gold Corp. And as we're building those production profiles and then starting to move into the costs and so on and so forth, we're seeing production profiles that are consistent with what we expected coming into this transaction.

Okay, fair enough. Thank you.

Our next question is from Tanya Jakosconic. of Scotiabank. Please go ahead.

Good morning everybody. I think that's me. I have to shorten my name. Gary, first of all, good luck to you on your next adventure. It was really great working with you. All the best. Just a few things for myself. Maybe Tom, just coming back to AHAFO, just on the Sabica Underground. I appreciate your talking that you see additional, more stresses than you were expecting as you go deeper. Can you just let us know, is this just in a certain portion of the ore body that this is occurring where you would have to adjust, or is this general for the whole ore body?

It's for the Sabica ore body, Sabica underground ore body, it is a general increase in stress as you move through depth. So it's then stepping back and saying, well, what's the mining method that best suits that stress condition and associated with that, what's the appropriate backfill? So as we step back and look at that, it's starting to look like a mining method that might be more bulk-type mining, which ultimately, I think, as we're working our way through that, has the opportunity to extend the life of Sabika Underground because it will give us access to more ore. It's about working through understanding that stress mining method and then looking at the upside opportunity of that changing mining method. But it is generally, as you move at depth in that ore body, you're seeing higher stresses, and therefore we have to think about what's the best mining method to match those.

Okay, and when will that work be done by?

We're doing that work now. It's being built into our business plans for this year and going forward, so hopefully We would expect to see that incorporated into our long-term guidance that we come out with in December.

That was the change in AHAFO guidance that we saw from your previous guidance. Is it safe to assume all of the change in the Nevada guidance was the gold quarry adjustment?

That's correct. At AHAFO, we're mining laterally rather than heading down. That's the impact there. And, yes, the 70,000 ounces that we've been indicating from the gold quarry impact from the slip last year is what you're seeing us take up in that guidance for our Nevada assets that we've just issued.

Okay. And then maybe just on coming back on the Goldcorp assets, you know, clearly your statement on the fact that there's a lack of underground development to sustain these assets at these, you know, longer term, and this has to catch up. So, Tom... If this is the case, how confident are you on the guidance that you gave us for 2019? Do we have enough development to meet the guidance numbers you put out?

Yes, we do, and I'm very confident in the guidance numbers we put out. We've applied Newmont rigor to arriving at those numbers, and I'm very confident in those numbers.

At those underground operations?

Yes. Okay. In some instances, Tanya, the development's there for now. But at Tanami, we have great control drilling out three years in front of us. We've got a 10-year life out in front of us. That's the expectation that I have for these Gold Corp assets as well. So the example I gave at Musselwhite's here and now, there are other examples where we need to make sure we're managing these assets for the long term.

Okay. So meeting the 66, you know, 100 tons a day at Alunor 4000 at Sierra Negro, you have the stopes you need to make that for this year.

We have the development work required to meet our production guidance for this year out of those former gold corp assets.

Okay. And then maybe on Panosketo, just on the open pit, you said it ramped up nicely. Are you seeing improvement in grade in Q3 in the month of July? Are you starting to see that?

Yeah, we'll start to see improvement in grade across gold, silver and lead coming through. Yes, we're seeing it in the third quarter, and then you'll see it kick up more in the fourth quarter. So you're going to see more of that in the fourth quarter than the third, but yes, we are seeing that coming through from that mine as expected.

Okay, so no surprises right now for Penesquito.

Absolutely.

I'm sorry, I didn't ask on the throughput. Is the throughput back to 110,000 tonnes a day?

We'll have the throughput to deliver our guidance for 2019. Okay.

Okay. Okay, look forward to seeing that. Thank you.

Our next question comes from Anita Sonny of CIBC. Please go ahead.

Hi, good morning, everyone. Just in terms of the capital guidance, I think you've talked about it a bit, but I was just trying to figure out how do I think about 2020 given the guidance that you have for this year? So, I guess my first question was, and was somewhat addressed, that was Goldcorp undercapitalizing, but it sounds like there needs to be a catch-up in capital. So if I was looking at this, would it be fair to just basically annualize the numbers that you've put out, given that this is about three-quarters of a year for the Goldcorp assets for 2019?

Anita, tell me, that's a fair assumption.

All right. And then just moving on to – so then Cerro Negro would be, you know, given that it's sort of $80 million – sorry, not $80 million, $70 million going forward for three-quarters of a year, we're looking at $100 million per annum at Cerro Negro. Between development and sustaining capital?

Yeah, I think, Anita, at this point in time, that's a good estimate to make. As I say, we're right in the middle of our planning process at the moment, so we'll be able to give you better guidance on that when we have our numbers later in the year. But for now, I think that's appropriate.

Sure. And then maybe, Nancy, you could give me some clarity on the demarcation between development capital and sustaining capital. I understand Goldcorp was not as conservative as you guys are, but I'm just trying to understand what the $40 million in development capital at Eleanor is related to. I mean, is that just catching up? You're calling that catching up on underground development work? Is that what it is?

Anita, I don't have the details on that specific bit, but I will double-check on that for you. I think it's really, as you captured it, it's a more conservative view from Newmont's view and things that we would consider sustaining CapEx versus development.

I'm just trying to understand where you still draw the line, though, at that it's development capital. I mean, historically, people would think of development capital as gross-related capital, and it doesn't sound like you guys are forecasting any growth of the Gold Corp assets.

Right, so again, it's a policy difference, and we would be more conservative in that view, and it would take, under our definition of development capital, we probably have a bit more in terms of a hurdle to get through before we would call it that. So I think that's really the biggest difference, and again, we can walk you through some of the details of that offline if that's helpful.

An example, Anita, Tom here, you do have in that development capital number for this year the material handling system at Musselwhite.

Yeah, and I understand. Sorry, Eleanor. It's probably related to Borden. Porcupine is probably related to Borden. I get the muscle white. I'm just trying to understand, you know, Eleanor and Ceronegro, or presumably there's not a lot of growth coming down the pipe, or there's no real big projects happening. It's just a matter of catching up on sustaining. So just moving on to Penesquito, and, you know, maybe you can help me out with this offline, but it does look like you already had pretty good grades going into – This quarter, throughput was obviously low and recoveries were obviously low. And I was just trying to understand, on the recovery side of the equation, are you confident in the PLP and the guidance that they had put, that Goldcorp had put out for about 80% recovery rates coming out of gold in the PLP circuit, considering that it only did 57 this quarter? I mean, how much of that was related to the shutdown? How much will it rebound?

Yeah, Anita, I wouldn't look at the numbers out of... this quarter for those few days and draw any conclusions. Because in commissioning the facility, you bring some low-grade material, higher carbon material through that circuit to get it back up and running again. So a key part of my visit down there, heading down there this afternoon, it's just to understand how that whole circuit is performing, including PLP, and that they've got the plans in place to deliver on their commitments for... for production this year from all circuits in the processing plant at Penasquito, including PLP.

Okay. And, I mean, the grade already in the quarter, though, I think was decent. I'm just kind of struggling through the change between ounces and short ton and your new methodology, but it does look like it was around 0.8 gram per ton material in the historical sense of the way Goldcorp reported it. So I'm just wondering why you decided to put high-grade material through the mill when the recoveries were low.

Yeah, I wouldn't look at a few days operation this quarter and draw any conclusions. It was really a ramping up facility. So even now, we're only a couple of weeks in with a big processing plan like that. A couple of weeks into July, I'd let things settle down and see what the Q3 numbers look like.

All right. Okay. Thank you very much.

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

Newmont Gold Corp. delivered solid second quarter results, and we look forward to an even stronger second half as we continue to lead the gold sector in profitability and responsibility. Thank you for joining us and for your interest in Newmont Gold Corp.

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