Newmont Corporation

Good morning and welcome to Newmont's third quarter 2020 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 this event is being recorded. I would now like to turn the conference over to Jessica Largent, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Newmont's third quarter 2020 earnings conference call. Joining us on the call today are Tom Palmer, President and Chief Executive Officer, Rob Atkinson, Chief Operating Officer, and Nancy Beebe, 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 newmont.com. And now I'll turn it over to Tom on slide three.

Thanks, Jess, and thank you all for joining us this morning. Before I start, I want to take this opportunity to thank Jess Largent, who will be leaving Newmont at the end of the year after more than five years with us. which included three years as head of our investor relations group. For those of you who have not yet had the chance to meet him, I'd also like to introduce Eric Colby, our vice president of strategic communications. Eric was appointed to lead the strategic communications function earlier this year, and he combines both investor relations and communications. Eric has been with Newmont since 2007, including three years working at Yanacocha in Peru, And since 2013, Eric has led multiple transactions as part of our corporate development team, playing a key role in the divestiture of Bata Hijau, the acquisition of Goldcorp, and the formation of the Nevada Goldmine's joint venture. I want to thank Jess for her many contributions to Newmont, the support that she has provided me and my team, and wish her the very best of luck as she embarks on her next adventure. Turning back to results, I'm very excited to share with you our record third quarter performance as we continue to deliver on our purpose to create value and improve lives through responsible and sustainable mining. Turning to our quarterly highlights on slide four. Newmont has the industry's most diverse balanced portfolio of world-class assets that provides stable production with significant leverage to rising gold prices. We have continued to manage through the COVID pandemic from a position of strength. With a proven leadership team, operating model and highly capable workforce, we are building on our track record of superior value creation. I am incredibly proud of how our teams across the world have responded to this pandemic. and the sacrifices people have made and continue to make to support Newmont and the communities in which we live and work. They have set a standard for leadership in our industry. All of our sites are now operational and we delivered record financial results. We produced 1.5 million ounces of gold. and 273,000 gold equivalent ounces from copper, silver, lead and zinc, putting us well on track to achieve our full year guidance this year. We generated significant operating cash flow of $1.6 billion and free cash flow of $1.3 billion, the most in any quarter in Newmont's 100-year history. We have continued to safely advance project work at Tanami, Savika Underground and Musselwhite. We also announced the sale of a royalty portfolio to Mavericks Metals, which closed yesterday, and Exploration joined ventures with Agnico Eagle in Columbia and Kirkland Lake in Canada. Our solid operating performance further improved our financial strength and flexibility. we ended the quarter with $4.8 billion of consolidated cash and reduced our net debt to adjusted EBITDA ratio to 0.4 times. And yesterday, we further demonstrated our confidence in the strength of our business and continued commitment to leading shareholder returns with a 60% increase to our quarterly dividend, which is now $0.40 per share or $1.60 per share annualised. This is the second increase to our dividend this year and reflects the strength of Newmont's portfolio to pay a higher dividend while we continue to advance profitable projects and maintain financial strength and flexibility. Newmont will remain disciplined in everything we do, including being prudent in our approach to capital allocation given the uncertainty in the world today. However, we will have an opportunity to evaluate even further returns to shareholders as we continue to build excess cash. And last but certainly not least, we are the first and only mining company to achieve gender parity amongst our non-executive directors, setting an example at the very top of our organisation that is fundamental for sustained cultural change. Turning to slide five for more detail on our commitment to improving lives. At Newmont, we have a fundamental belief that a commitment to leading environmental, social and governance practices are essential to delivering sustainable long-term value for all of our stakeholders. This starts with our commitment to our people, and the work we are doing to sustainably improve health and safety and create a more inclusive culture across our global business. We continue to perform well against our public sustainability targets to source from local suppliers, hire within the communities near our operations, respond to community complaints in a timely manner, reduce our water consumption and complete planned reclamation activities. We are on track to meet a seven-year target to reduce our carbon emissions by 16.5% by the end of this year, and are also working to develop longer-term science-based targets for emissions, which we plan to release next month. We are committed to fully implementing the global industry standard on tailings management that will help us improve how we manage these types of facilities. We are the second most transparent company in the S&P 500 and place 12th out of more than 200 companies on the corporate human rights benchmark. These achievements are the result of relentless hard work from generations of leaders, lessons learned and improvements made that form the very DNA of Newmont. Turning to slide six, as a mining industry, we must continue to improve our health and safety performance. At Newmont, we have a relentless focus on ensuring that everyone who works in our business can return safely home to their families. As leaders, it is up to us to create a culture in which fatality risks are clearly understood and sustainably managed at all times. Through visible, felt leadership, and the systems we put in place to manage risk consistently across our global business, we are working to significantly improve our safety performance. In response to eliminating fatalities and supporting an injury-free workplace, Newmont made a symbolic change this year, stepping away from our industry's traditional use of a lagging personal injury rate in our bonus programs to measures that are focused on managing the critical controls that must be in place at all times to prevent fatalities. This year we have completed over 40,000 critical control focused conversations in the field. Conversations that have proactively identified and eliminated potential risks that could lead to a fatality. And we've recently begun using digital tools an app across the organisation to facilitate these conversations and capture more robust data that can quickly be analysed and shared across our business globally. On the back of this work, we have reduced our significant potential events by two-thirds compared to 2019. and achieved a six-fold improvement from when I joined Newmont in 2014 and started up on this journey. And despite the significant leadership distraction due to managing COVID this year, we are on track to achieve the lowest personal injury rate in our company's history, with a total recordable injury frequency rate of 0.28 per 200,000 hours worked. It is no coincidence that visible self-leadership focused on fatality prevention is driving a significant improvement in all of our safety metrics. Turning now to industry's best portfolio on slide seven. Among our 12 operating mines and two joint ventures, we have eight world-class assets, each of which delivers more than 500,000 gold equivalent ounces per year. at all in sustaining costs of less than $900 per ounce and with a mine life that exceeds 10 years. Importantly, all eight are located in top tier jurisdictions that we define as countries classified in the A and B ratings ranges by each of Moody's, S&P and Fitch. We firmly believe that we have the right sized portfolio to generate sustainable returns from our world-class, responsibly managed assets located in the best gold mining jurisdictions. Underpinning our asset base are the largest gold reserves in the world with nearly 96 million ounces. We also offer substantial future upside through our gold resource base with nearly 75 million ounces of measured and indicated resources. In addition to this, we have 63 million gold equivalent ounces in our reserves, which includes 15 billion pounds of copper. Importantly, 90% of our reserves are in the Americas and Australia. Exploration always has been and will continue to be a core competency at Newmont. Our disciplined exploration program lays the groundwork for growing our reserve and resource base to sustain stable, steady production and cash flows for decades to come. Turning to slide eight, our portfolio will generate more than 6 billion ounces of gold per year through 2029. This stable production profile is underpinned by our eight world-class assets. our industry-leading exploration program, and our next three development projects, Tanami Expansion 2, which is in execution, and then Ahafo North and Yanakoja Sulfides, both of which are in the late stages of definitive feasibility. As you can see here, our portfolio provides steady production over the next decade, balanced across each of our four regions. This profile is further enhanced by more than 1 million gold equivalent ounces from silver, lead and zinc at Penasquito and copper at Boddington and Yanacocha. Combined, we will deliver more than 7 million gold equivalent ounces per year for the next decade for most of any company in our industry. Turning to our unrivalled project pipeline on slide nine. Our project pipeline is unmatched in the gold industry and is one of the best in the mining industry. There is significant value to unlock as we optimise and advance our longer-term projects and lay the pathway for steady production and cash flow well into the 2040s. Our near-term projects include a half O North, which is the best unmined gold deposit in West Africa and for which we expect to reach a full funds decision early in the new year, and Yanakocha Sulphides, which is also progressing towards a full funds decision next year and has the potential to extend Yanakocha's life well into the 2030s. Looking at the earlier stage projects in our pipeline, you will see two new projects in pre-feasibility, with Parmore at Porcupine which was formerly the Sentry Project, and Oberon at Canami. The Parmore project is a layback to the existing Parmore open pit and is smaller in scope than the prior Sentry Project, which required the relocation of the existing processing facilities in order to access the dome or body. Developing Parmore is expected to extend mine life by another decade. providing us more time to explore the Borden, Hoyle Pond and Dome ore bodies to find the next profitable extension of the Porcupine Mine. Parmor is a great example of Newmont's disciplined investment system, which focuses on value creation and phased investment decisions to maintain our current production profile instead of progressing highly complex, capital-intensive projects. At Oberon, we are very excited that our near-mine exploration efforts continue to identify highly prospective deposits with the potential to further extend life and improve costs at the world-class Tanami asset. Rob will cover some more details on Oberon shortly. At Coffey, we completed our exploration mapping exercise and are closing the camp ahead of the winter season. We remain excited about the potential of coffee to fully optimise the ore body and improve value. In addition to our highly prospective gold projects, we have significant organic exposure to gold copper porphyries, including Norte Vieto, Neve Union and Galore Creek. In fact, if you assume that one of these three megaprojects comes into our production profile at the back end of this decade, Newmont's total production would be around 15% to 20% copper, providing us a natural exposure to a metal of growing importance for reducing carbon emissions and facilitating the ongoing transition to a new energy economy. It's also worth noting that since 2016 I have led the delivery of 10 projects on time and achieving an average internal rate of return of over 30%. Going forward, we will build on this track record by continuing to apply our disciplined and rigorous approach to projects and ensuring Newmont is well positioned to generate superior value throughout the price cycle. Turning to our free cash flow generation potential on slide 10, our balanced portfolio combined with our discipline and operating model, provide significant leverage to high gold prices from the largest production and reserve base in the world. For every $100 increase in gold prices above our base assumption, Newmont delivers approximately $400 million of incremental attributable free cash flow per year. Using our conservative $1,200 gold price assumption, Our base free cash flow will still total more than $5 billion over the next five years. At current gold prices, our portfolio will generate more than $19 billion of free cash flow over that same timeframe. To be clear, this is free cash flow that is entirely attributable to Newmont's account, enabling us to provide industry-leading returns. I'll hand it over to Rob to discuss our operational performance on slide 11.