Newmont Corporation

Good morning and welcome to Newmont's second quarter 2021 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 Eric Kolbe, Vice President of Investor Relations and Communications. Please go ahead.

Good morning, and thank you for joining Newmont's second quarter 2021 earnings call. Today we have Tom Palmer, Rob Atkinson, and Nancy Beezy. They will be available to answer questions at the end of the call along with other members of our executive team. Please note our cautionary statement on slide two and refer to our FCC filings, which can be found on our website. I'll now turn it over to Tom on slide three.

Thanks, Eric. Good morning, and thank you all for joining our call. In May, Newmont celebrated its 100th birthday, marking a major milestone in our company's long history of creating value and improving lives through sustainable and responsible mining. And while our organisation has certainly evolved, our strategy remains clear. We are focused on delivering value to all of our stakeholders from our world-class portfolio of long-life, responsibly managed assets located in the best gold mining jurisdictions. Turning to slide four for a summary of our quarterly performance. During the second quarter, Newmont produced 1.45 million ounces of gold and over 300,000 gold equivalent ounces from copper, silver, lead and zinc as we build momentum for a strong second half of the year. We generated operating cash flow of nearly $1 billion and free cash flow of $578 million, of which 97% is attributable to Newmont. In May, we completed the acquisition of GT Gold, consolidating our position in the highly prospective Golden Triangle District of British Columbia. And last week, we announced the approval of our Halfo North project, expanding our existing footprint in Ghana and adding more than 3 million ounces of gold production over a 13-year mine life. This project is expected to deliver an internal rate of return of over 30% at current gold prices and offers exciting exploration opportunities throughout the land package. Supported by our leading portfolio of operations and projects, we continue to apply a disciplined approach to our capital allocation priorities. Even after the redemption of our 2021 senior notes in April and the completion of the GT Gold acquisition, we have $7.6 billion in total liquidity. We have sustained a net debt to EBITDA ratio of 0.2 times, maintaining our financial flexibility whilst we continue to reinvest in our business and return cash to our shareholders. Yesterday, we declared a second quarter dividend of $0.55, maintaining an industry-leading dividend yield of over 3.5%. Set within our established framework, our second quarter dividend demonstrates our confidence in the strength of both our portfolio and our operating model to generate sustainable long-term value. In June, we published two important ESG-focused reports that touched every part of our business and operations. The first was our 17th Annual Sustainability Report, which continues to provide a transparent and detailed look at our ESG performance, focusing on the issues and metrics that matter most to our stakeholders. The second was our first Climate Strategy Report, which focuses on our approach to achieving our science-based climate targets and aligns with the reporting guidelines from the Taskforce on Climate-Related Financial Disclosures. These reports outline the key sustainability strategies that are embedded in our business and our culture at Newmont. Turning to slide five. Newmont is broadly recognised for our robust and disciplined practices when it comes to sustainability reporting, both within our sector and among all corporate reporters. And our long history of taking a leading approach to environmental, social and governance practices has positioned us as the gold sector's recognised sustainability leader. Newmont's strong ESG performance creates long-term value for our stakeholders. and drive superior business results through delivering safer, more efficient and reliable operations, greater productivity from well-managed resources, the ability to operate effectively in a broad range of jurisdictions, a proactive approach to managing risks and emerging issues, and most importantly, a reputation built on trust-based relationships and a track record of delivering on our commitments. Earlier this month, we hosted a webcast to provide an overview of our ESG journey, what we have done well, where we have learned lessons and our plans to continue improvement. If you weren't able to join us, I would invite you to listen to the replay which is posted on our website. Turning now to slide six. Newmont is the world's leading gold producer with an unmatched portfolio of world-class long-life operations. Among our 12 operating mines and two joint ventures, we have nine world-class assets, each of which delivers more than 500,000 gold equivalent ounces per year at all inter-standing costs of less than $900 per ounce and with a mine life exceeding 10 years. And we believe that where we choose to operate matters. It is important to note that all of our world-class assets are located in top-tier jurisdictions that we define as countries classified in the A and B ratings ranges by each of Moody's, S&P and Fitch. Newmont has the best portfolio of assets located in the most favourable gold mining jurisdictions. that when coupled with the quality of our people and our integrated operating model, positions us to generate sustainable returns for decades to come. Turning to slide seven, our portfolio will produce steady gold production of more than 6 million ounces per year through until at least 2030, balanced across each of our four regions. This profile is further enhanced by the production of more than 1 million gold equivalent ounces from silver, lead and zinc at Penesquito and copper at Boddington and Yenicocha. Combined, we will deliver nearly 8 million gold equivalent ounces per year for the next decade, the most of any company in our industry. Moving to slide 8. 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. We continue to advance our mid-term projects, including Yanacocha sulphides, where we are preparing for a full funds approval in December of this year, With a multi-decade mine life that provides exposure to gold, copper and silver, the sulphide project generates profitable production and offers additional upside to extend mine life at this cornerstone asset. We are also executing the second expansion project at Tanami. Through the development of a 1.6km deep production shaft and supporting infrastructure, this project supports the site's future as a long-life and low-cost producer and it also provides a platform for us to further explore a prolific mineral endowment in the Tanami District. And as mentioned previously, we are pleased to announce that funding for the development of Ahafo North has been approved and this project has now advanced into the execution phase. Turning to the next slide for some more detail. Earlier this month, our Board of Directors approved full funding for the Ahafo North project. expanding our existing footprint in Ghana and adding more than 3 million ounces of gold production over an initial 13-year mine life. Located approximately 30 kilometres north of our existing Ahafo South operations, the Ahafo North project will include four open-pit mines and the construction of a standalone mill to produce approximately 300,000 ounces per year at very attractive oil and sustaining costs. The project is expected to deliver an internal rate of return of over 30% of current gold prices. A half a north is a significant goldmine by any measure. We have conducted extensive regulatory and community engagements, including meetings with traditional leaders and local government agencies and public forums to ensure that we earn and maintain social acceptance throughout a half a north life cycle. we will work to create lasting value for host communities through enhanced local sourcing and hiring. One key aspect of AHAFO North is our workforce planning, which includes a target to achieve gender parity in the workforce when operations begin. We are very excited about progressing AHAFO North and look forward to bringing you updates as we develop this new mine over the next two years. Turning to slide 10. The global pandemic has and will continue to challenge all of us for some time to come. And our commitment to protect the health and safety of our workforce and host communities remains our top priority. We believe that the COVID-19 vaccine is critical in combating the spread of the virus. We are encouraging our workforce to get vaccinated as soon as they become eligible, and we are working with our local communities and host governments to improve availability and deployment at all of our managed operations. These efforts are supported by our Global Community Support Fund, which is seeking to help with vaccine rollouts, vaccine education and awareness campaigns. We are seeing some of the highest vaccination rates in the United States and Canada, largely due to the widespread and early availability in these countries. But until the vaccine is available to everyone around the world, our people and operations will continue to be affected by this virus. And recent outbreaks have shown just how difficult this pandemic continues to be, testing our protocols and the resilience of our people and systems. The impacts of the pandemic are also driving cost inflation around the globe. We are now expecting cost escalation of around 3% to 5% for materials, energy and labour, and we expect these pressures to continue through until at least the end of next year. We are currently working on our 2022 business plan, ensuring that the high cost of inflation and the application of our wide-ranging controls and safety protocols are built into our assumptions going forward. However, despite the impacts of COVID, we remain in line with our guidance ranges. As a reminder, our guidance ranges are plus or minus 5% from the midpoints we published in December 2020. We are on track to achieve the midpoint to low end for production and the midpoint to high end for costs. Production remains back half weighted for the year with approximately 53% expected in the second half of the year. As a reminder, our cost guidance assumes a $1,200 gold price. At today's gold prices, you can expect an additional $20 to $30 per ounce for production, taxes and royalties. As we look ahead towards the second half of this year, we will remain diligent in supporting the vaccination efforts that are so urgently needed around the world. And we encourage everyone to get their vaccine as soon as they are eligible. ensuring that we are all doing our part to end this global pandemic. And with that, I'll turn it over to Rob Atkinson for a more detailed look at our global projects and operations. Over to you, Rob. Thanks, Tom. Turning to slide 12, I'll give an update on our regional performance, starting with Africa. Achim delivered another strong performance during the second quarter. as higher ore grades from changes in sequencing largely offset lower tons mined due to challenges with shovel availability. The site is well positioned to deliver solid production throughout the year, expecting to reach its highest production during the fourth quarter. A half-oak continues to be a solid contributor, delivering higher-grade material from our underground operations to offset unplanned mill maintenance and power outages. At Sabica, we continue to progress the development of our new underground mining method, sub-level shrinkage, and we expect to see steady increases in grade in underground ore tons mined in the second half of the year. In addition, we expect to reach higher ore grades from the open pit operations in quarter three and four, positioning the HAFO to deliver a strong finish to 2021. And after finalising the permitting process with the Ghanaian EPA, our Board of Directors approved full funding of the Hathor North project earlier this month. Spending will ramp up in the second half of the year, and all critical path equipment orders have been placed in support of initial construction activities to ensure timely execution of the project. The development of this prolific orebody will leverage our proven operating model with the project and resulting mine receiving functional and technical support from our existing world-class AHAPO South operation as we create the next generation of mining in Ghana. Turning to slide 13, Canamine delivered solid results in the second quarter. as higher ore grades more than offset unplanned mill maintenance and longer haul distances from the bottom of the mine. In late June, we detected our first positive COVID case at Tanami. Working closely with government representatives and other key stakeholders, we rapidly made the decision to place a site on care and maintenance beginning on June 26 to reduce the spread of the virus and protect the health of our workforce and communities right across Australia. I'd like to thank our team in Australia for the rapid response and courageous decisions during such an extraordinary and dynamic set of circumstances. And I'm proud of the resilience and strength of our workforce as we continue to learn from and manage the impacts and consequences of this virus. Although our second quarter was largely unaffected, we are forecasting a 40 to 50,000 ounce impact for the remainder of the year as a result of the care and maintenance period. We began ramping up out-of-care maintenance on July the 13th, and today Tannamine is now operating at 90%. And despite the impacts from COVID, we continue to advance Tannamine expansion too. During the second quarter, we progressed the hoist structure and our work on the mine shaft. remaining on track to deliver significant ounce, cost, and efficiency improvements in the first half of 2024. Warrington achieved near-record quarterly mill performance, reaching nearly 11 million tons processed during the second quarter. And we continue to expand the use of the gold industry's first autonomous haul fleet. And today we are operating 20 trucks in the South Pit, and we remain on track to deploy the entire fleet of 36 trucks by the end of quarter three. The efficiencies from autonomous haulage, coupled with improved performance from the mill, will continue to drive performance at Boddington. The improved mill performance helped to offset lower tons mined from ongoing shovel reliability and geotechnical challenges in the South Pit, which has the potential to impact our ability to reach as much of the higher grades as we have planned in the second half of the year. Turning to slide 14, Penesquito delivered another consistent quarter as we continue to execute on our planned full potential enhancements. And the most recent improvements in metal recovery rates will continue to support planned delivery into the future. The work we've done to optimize Penesquito since we acquired the site in 2019 demonstrates our ability to successfully operate and enhance value at large complex open pit mines. The site is well positioned to remain a strong performer throughout 2021 as we continue to realize higher than planned tons mine and improve recoveries from the fire outreach plan. CC&V delivered lower tons mine due to unplanned fleet maintenance, and the site continued to experience geochemistry challenges during the second quarter, resulting in lower grades and recovery. Mill performance was offset by higher leach pad recoveries, and grade improvements are expected during the second half of the year, helping to partially overcome some of the challenges experienced in the first and second quarter. At Porcupine, mill and ongoing equipment maintenance has resulted in lower tons mined and processed during the quarter. As we look towards the second half of the year, we expect underground development and grades will improve. And last month, our Flow Potential Program identified 20 initiatives at Porcupine, which will deliver efficiency improvements in the coming months. As mentioned previously, we continue to closely monitor the impacts from COVID at Musseline. In April, we made the decision to temporarily suspend operations for five days to reduce the spread of the virus. resulting in mill stoppages, reduced underground development, and lower personnel at site in late April and early May. We expect that these challenges will persist in the second half of the year, and we are continuing our full potential work at Musselwhite, focused on increasing development rates and driving productivity. Eleanor delivered another strong quarter, as development rates and mill throughput continued to improve over the prior quarter and prior year, offsetting the impact of lower personnel insight due to COVID. In addition, the site continues to increase the use of tele remote mucking equipment, which have helped to increase tons mined and drive important improvements to safety and efficiency. LA&R will continue to be a solid contributor during 2021, as we expect to sustain consistent production from stable tons mined and processed throughout the year. Turning to slide 15, despite heavy rainfall in the second quarter, Merion remains a strong performer in the South American region. The site continues to utilize an ore blending strategy to optimize mill performance, and during the second quarter, Merion delivered lower throughput as the site focused on processing harder, higher-grade ore. In the second half of the year, Merion will continue to transition from softer sacralite to harder ore, resulting in higher production from improved grades and steady throughput. Cerro Negro continues to improve productivity and performance as the site continues to manage through the evolving pandemic. During the second quarter, Cerro Negro delivered higher ore grades, and despite reduced personnel from COVID, The site continues to increase ore tons mined and processed each quarter. Due to the pandemic, Cerro Negro has delivered low development rates over the past year, limiting access to high-grade ore in the late 2021 and into 2022. However, the site is progressing future growth projects, such as the development of San Marcos and exploration in the Eastern District. Yanacocha has also experienced significant challenges due to the pandemic, impacting productivity through the year. Yet, despite the challenges from the virus, Yanacocha delivered higher grades in recovery from the leach pads, in addition to an increase in grade and more times mined from the Karachugo open pit. As we look towards the second half of the year, Yanacocha will focus on optimal oil placement on the leach pads and as the site has transitioned to leach-only operations ahead of the development of Yanacocha sulfides. The Yanacocha sulfides project has the potential to extend Yanacocha's world-class operations well beyond 2040, adding profitable production from one of the largest and most prolific gold districts in South America for decades to come. And despite potential impacts from the elections in Peru and the impacts of COVID, the project is progressing well. The team is focused on critical path activities, such as advanced engineering and procurement, as we prepare for full funds approval in December of this year. And with that, I'll hand it over to Nancy on slide 16.

Thanks, Rob. Turning to slide 17 for the financial highlights. Newmont delivered strong performance in the second quarter, with over $3 billion in revenue, an increase of $700 million from the prior year quarter, driven by higher sales volumes and metal prices. Adjusted net income of $670 million, or 83 cents per diluted share. Adjusted EBITDA of nearly $1.6 billion, an increase of over 60% from the prior year quarter. And strong free cash flow of $578 million, also an increase of about 50% from Q2 of 2020. Yesterday, we declared a regular quarterly dividend of $0.55 per share, an increase of $0.30, or 120%, over the prior year quarter. With a yield of over 3.5% at our current share price, Newmont is among the top 10% of the S&P's large cap dividend payers. Turning to slide 18 for review of our adjusted earnings per share in more detail. Second quarter gap debt income from continuing operations was $640 million or 80 cents per share. Adjustments included 3 cents related to the unrealized mark-to-market gains on equity investments, 2 cents related to reclamation and remediation adjustments at historical mining sites, two cents related to tax adjustments and valuation allowance, and two cents of other charges. Taking these adjustments into account, we reported second quarter adjusted net income of 83 cents per diluted share, an increase of almost 160% or 51 cents over the prior year quarter. As a reminder, due to our status as a U.S. GAAP filer, our adjustments to net income do not include $19 million of incremental costs incurred this quarter as a result of the COVID pandemic. Adjusting for these costs would have resulted in approximately two-thirds of additional net income per share in the second quarter, and we expect these costs to continue throughout the year as we prioritize the health and safety of our workforce and local communities. Turning now to slide 19. Under our conservative $1,200 gold price assumption, Newmont expects to generate $3.5 billion of attributable free cash flow over a five-year period. In addition, for every $100 increase in gold prices above our base assumption, Newmont delivers $400 million of incremental attributable free cash flow per year. Newmont is the only company in the gold mining industry with the ability to generate these levels of attributable free cash flow, allowing us to balance steady reinvestment in the business, continue to strengthen our balance sheet, and also provide superior shareholder returns to our industry-leading dividend framework and opportunistic share buybacks. Turning to slide 20 for more about our dividend. Our dividend framework provides shareholders with a stable, safe, annualized dividend of $1 per share at a $1,200 gold price, along with the potential to receive 40% to 60% of the incremental attributable free cash flow generated at gold prices above our plan. We will continue to review our dividend each quarter with management and our board. evaluating our operational and financial performance and outlook semi-annually to give us maximum flexibility in determining our dividend within the framework. The dividend declared yesterday was consistent with our first quarter dividend, calibrated at an $1,800 gold price assumption and a 40% distribution of incremental free cash flow. Our second quarter dividend demonstrates our confidence in our future outlook and our ability to maintain capital discipline. Turning to slide 21, we continue to drive the business with our clear capital allocation priorities, which include reinvesting in our business through disciplined investments in exploration and organic growth projects, maintaining our financial strength and flexibility, and returning cash to shareholders. During the second quarter, we delivered on each of these priorities by progressing our profitable reinvestment in the business particularly with the execution of the Tanami expansion, the approval of Oaxaco North, and the advancement of Yonacocha sulfide. Investing in exploration with 55 drill rigs working around the globe. Completing the GT Gold transaction in May of this year. Maintaining our industry-leading dividend established within our framework to provide stable and predictable returns. repurchasing 2.4 million shares, translating to approximately $150 million of our $1 billion share buyback program, and maintaining a strong balance sheet with a net debt to EBITDA ratio of 0.2 times, giving us the flexibility to reduce our debt outstanding by $550 million with available cash and still maintain cash balances of $4.6 billion at the end of the quarter. We are confident in our ability to continue delivering strong results and free cash flow to maintain our disciplined approach to capital allocation. The progress we made in the first and second quarter enabled Newmont to return over $1 billion to shareholders in the first half of this year while we continue to reinvest in our business and support our operations with a strong and flexible balance sheet. With that, I'll hand it back to Tom on slide 22.

Thanks, Nancy, and I'll wrap it up on slide 23. I am privileged to lead an organisation with a proven track record and a long history of value creation. Capitalising on the strength of our people, assets and integrated operating model, Newmont is well positioned to lead the industry with our commitment to create value and improve lives through sustainable and responsible mining. As our company moves into its next 100 years, we remain focused on delivering value to all of our stakeholders from our world-class portfolio of long-life, responsibly managed assets located in top-tier jurisdictions. With that, I'll turn it over to the operator to open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And our first question comes from Tyler Langton of JP Morgan. Please go ahead.

Yeah, thanks. And good morning, Tom, Robin, Nancy. Just, I guess, I had a question on COVID. I mean, I know it's probably tough to calculate, but do you have a sense, you know, sort of the impact from COVID restrictions on production in Q2? And then just as you look out to the second half, I mean, Robbie mentioned the impact at Tanami, but are there any other sort of operations just as sort of, you know, sort of the Delta variant spread, you know, that you're kind of So particularly, you know, sort of watching, you know, for risk to production.

Thanks, Tyler. I'll pass across to Rob that we are certainly continuing to manage the virus across just every one of our locations. But Rob, maybe you have a bit of colour as you slip around the globe. Thanks, Tyler. And if I can start off in Australia, that obviously the tanamine that we had that first positive case and You know, you get two weeks completely shut down and, you know, it takes a little while to ramp up and Tannermine is now back up at about 90%. So it's two weeks plus a few days. But the biggest worry we've got in Australia is that each one of the states and territories have got different rules and regulations. And they're not necessarily allowing free travel between the states and the quarantining. And we've obviously got people that work at the different states. So that's a risk moving forward that we're carefully watching and carefully managing in Australia. But really in terms of the biggest area which we're still worried about is South America, is that by far and away that's where we've had the biggest impacts. Certainly in Cerro Negro, we've had several key outbreaks and we've had to shut down several times in the second quarter. But vaccines are starting to get through there. and building up in similar Yanacocha that vaccines are coming through. But it's the absenteeism, Tyler, which is the biggest unpredictable thing that you can sometimes have shovel operators away, you can have mill operators away, and that causes the biggest challenge. But certainly with the vaccines in that part of the world, that's certainly very positive for us. In terms of Canada, you know, I mentioned about Muscle White that we had that week. in April and May, where we had to go into care and maintenance. So that had a significant impact. But again, at each one of the Canadian sites, the level of absenteeism has sometimes been three or four times higher than what we've typically had. And that really impacts the development, et cetera. And the key thing that I want to get across is that the sites are actually managing the situation very, very well, but it is the unpredictability of the virus. And that's the challenge we've got. But with the vaccines coming on, we're certainly very hopeful that that will reduce. But it's a very difficult question to actually put your finger on. Tyler, if I build upon that, we will continue to make decisions that put the health and safety of our workforce and local communities front and centre. In that Panama example, it was midnight on a Friday night that that positive case came through. Within two hours, that team had made the decision to put the operation into care and maintenance, have 750 people back in their rooms quarantined and everything safely buttoned up at the mine site, and had notified 900 people who had flown home in the previous 48 hours to ensure that they were going into home quarantine and doing the appropriate testing. And we will continue to make those decisions and courageous decisions to ensure health and safety above all else. As we look around how we're managing these impacts with a portfolio of our size, with the strength we have of a balanced portfolio around the globe, we believe that we can continue to accommodate these pandemic impacts within the guidance that we've provided.

No, Ray, that's very helpful. And then just switching to HOPWA North, and I know there was just a slight increase in the CAPEX with the full funds decision versus the previous guidance. And I was just trying to get a sense, you know, the current CAPEX guidance, what level of input cost is that assumed? Is it more recent prices for things like materials and energy? And I guess the same question also for the cost, or are you assuming more average prices over the past several years, just trying to get a sense of the impact that current inflationary trends could potentially have on the CapEx and operating costs there?

Yeah, thanks, Tyler. We certainly... And that slight bump in the capital cost from what we've been guiding previously was looking at current pricing and looking at COVID impacts. And we've already placed orders on a number of critical path items, which is really locking up pricing and schedule. And we're doing some of that for the Anacocha sulphides as well to ensure that we can manage both schedule and cost. So there's COVID impacts, but also we've already done some work to lock in contracts and pricing. So it takes into account on a capital cost the considerations around current inflation pressures and COVID. And from an operating sense, a couple of years out before that operation comes online, we do expect these inflationary pressures to be cyclical and may well be thrown out the other side of that cycle by the time half our north is up and running and producing.

Great. Makes sense. That's it for me. Thanks so much. Thanks, Sal.

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

Hi, good morning. Just building on the last question about the COVID impact, maybe just remind us where some of the production offsets are coming in the second half of the year. By that I mean which operations are expected to kind of make up for some of these COVID issues, predominantly in South America and Australia. Thanks.

Thanks, Vahar, and good morning. It's our needle-moving sites really drive our portfolio movements on a on a half-year to half-year basis. So Penasquito's pretty flat. It's having a very solid year, but it's pretty consistent half-on-half, quarter-on-quarter. Boddington, we are... And I was down at Boddington about three weeks ago watching autonomous haulage in action and spending some time in the South Pit and the SO5 layback, just looking at our work to move down into the high-grade ore. So we are moving into the high-grade ore in the latter part of this year. And Rob talked a bit about... the importance of managing some of the geotechnical challenges and some of the equipment reliability challenges. So really important we have that discipline and focus to get to that high-grade ore. So Boddington's a key contributor. Tanami has got some high-grade in the latter part of the year, and so very pleased that we're able to navigate through that positive case back up and running very smoothly, and we'll enter into some high-grade stoves at Tanami. in the latter part of the year. And the other one is Harpo. We've got a stronger second half in a Harpo as we get... Certainly, as the underground, Savika underground sub-little shrinkage comes on, but also as we get into some high-grade ore out of the open pit. So, flat for Penosquito, stronger second half for Bonnie, Canamina, Harpo, and they're the operations that move the noodle.

Okay, that's really clear. Thanks. My only other question, just on the anticoagulant sulfides, as you work towards the full funds decision, if there was a situation where your joint venture partner was unable to contribute as much to the funding because of balance sheet issues, et cetera, would there be appetite from Newmont to maybe consider buying out a larger stake of the project? Thanks.

We're very excited about Yannacocha sulphides. We're very excited about the long-life potential of sulphides. So the sulphides project is built off and the economics are built off the first wave, what we call the first wave, which is another layback of the Yannacocha 3rd A PIP and Chuckycocha Underground. So there's a second wave and a third wave. and a fourth wave of sulphides ore that come after you've installed that processing infrastructure. It's a story that will play out like Carlin did for Newmont from the early to mid-90s and over the last 25, 30 years. So we're very excited about the potential of the Anacocha. We see the Anacocha as a cornerstone asset and a key district that we want to be in for a very long time, and it's gold and copper, which we're very excited about. So if the opportunity, when we think about M&A activity, we look at where we can consolidate in districts, like we did with GT Gold in the Golden Triangle over the earlier part of this year, and certainly if we could consolidate our position at an operating asset in a prolific district in our Anjana culture, if that opportunity presented and we could pick up more of that asset for fair value, we would be interested.

That's very clear. Thank you. Thanks for that.

The next question comes from Josh Wolfson of RBC. Please go ahead.

Josh, we can't hear you. You might be on mute or something. It looks like we might have a connection issue with Josh.

Yes, we will move on to Greg Barnes of TD Securities. Please go ahead.

Yes, thank you. Tom, I'm just trying to understand the Boddington commentary, because Rob seemed to imply that you wouldn't get as much high grade in the second half of the year as perhaps you expected, but you still expect production to be up stronger in the second half of the year. I'm trying to reconcile those two comments. Thanks, Greg. So we're moving down into the higher grades in the South Pit. So as you move into those higher grades, you progressively start to build into higher, higher grades that are coming out of the South Pit and obviously feeding into the mill. So you are going to see, we will see a trend of high production in the second half as you do that. It's really going to be that mind sequence of how much of that high grade you get by December 31st. and how much tips over into January has been moved through. So it's going to be a stronger second half because we're entering the high-grade area. It's about how many weeks in the six months we get of that high-grade material and how much is coming off a medium-grade stockpile into a mill that is absolutely humming. So it will progressively increase. It's just how much of that high-grade we can creep into 2021 versus tipping into 2022. and that's what we're very focused on in terms of making sure we step down those benches, manage the bench hygiene to ensure that we're looking after the geotechnical issues, and then we've had some reliability issues with a very large hydraulic shovel, both engine issues and very large hydraulic oil pump issues that you wouldn't typically see in these machines. So working very closely with the supplier of that machine to ensure we get that reliability and maximise the amount of high-grade oil we get in the second half. Okay. So there's going to be a little less production from Bonington in the second half of the year perhaps than you were previously expecting is what I think I'm hearing. Potentially. There's a risk that some tips into the early part of 21, but we are... We're still six months in front of us, Greg, so we're still very much focused on making sure we manage that bench turnover very, very carefully. As I said, I was down there for a period of time about three weeks ago, spending a fair bit of time climbing over that shovel and in that pit with the mining team, just understanding how they're working their way through that. And Tom, your comments about inflationary pressures in the second half of the year into 2022, I think that's a bit of a change from perhaps what you were saying at the beginning of the year, where I don't think you were seeing much impact from those cost pressures, but now it does appear to be coming through. Where is it coming through from? Thanks, Greg. As we've been sitting down, we're right in the middle of our business planning process now, so as our global supply chain team then starts to look at some of those trends, we are seeing across... I mean, 50% of our CAS is labour, and we are seeing both in Canada and Australia quite hot labour markets for mining. And so we are seeing... That has been an uptick, certainly in both those countries, over the course of this year, and we expect to see that flow through at least all of next year. And then materials and energy make up the next 40% to 45%. So across labour materials and energy, you've got our cost base. And we are seeing, in terms of steel and fuel and oils, as we pull together our... our plans, work with those various suppliers at that uptick and fund it all together, aggregate it all together, we're seeing the order of about that 5%. We're seeing it not structural, we are seeing it as cyclical, but we are seeing that flying through and considering that that will play out for at least all of 2022 and starting to factor that into our planning process. We've got our continuous improvement program, Full Potential, which is very mature, that we are leaning into hard to look for where we can offset some of those headwinds, but we certainly are seeing that inflation trend. And, of course, it does set us up nicely for some pretty positive gold price outlook as we're seeing that. But it's as we're pulling together the detailed analysis for our business plan that we are seeing those trends flow through. Okay, so likely upward pressure on 2022 cost guidance. That's right, Greg. And as we see here, midstream in our planning process, looking at about that, around about that 5% aggregated number. Okay, great. Thanks, Tom. Thanks, Greg.

The next question comes from Jackie Prisbolowski of BMO Capital Markets. Please go ahead.

Thanks very much. I guess I'll just sort of follow on Greg's question on inflation. So you're kind of warning that you're expecting to see inflation on the operating cost side, and it sounds like maybe on the capital cost side too with things like steel. But your guidance is more or less unchanged, I guess. It looks like there's a few areas, at least in 2021, on both development and sustaining capex guidance. where we've actually seen it go down by a little bit. And it looks like also maybe in 2023 with development CapEx. So how should we be thinking about the guidance? Is this something that, I mean, did you have sort of a wiggle room built into it that the inflation is just sort of filling in? Or is there any risk that we might see either your CapEx or your OpEx guidance go up by subsequent quarters, by year end? Thanks.

Thanks, Jacqui. So for 2021, we're certainly seeing on the cost side somewhere between midpoint and the high end. So that high end is plus 5%. So we're going to track somewhere within there. So as we sit here today and looking at some of those inflationary pressures, so that we can and will accommodate our costs this year within that. Certainly as we look to 2022 and update our long-term guidance in December, we're certainly seeing that cost pressure I was just talking with Greg about. And on the development capital side, we... We have built into the Tanami and we've built into the Harbour North our understanding of where cost is, and that's accommodated within the outlook we've given for both those projects. We are continuing to de-risk Yanacocha sulphides where we're on a critical path. We are getting... Ensuring we get factory slots and prices for some different critical path items, for instance, oxygen plants and the like. So we're making sure we're managing that process ahead of a full funds decision so that when we come out with, hopefully, a full funds decision in December, that what we guide through is accommodating some of those capital cost inflationary pressures. And then on the development capital side as we go, I'd say less the inflationary pressures, more the sequence of those projects, as you've got different COVID impacts. So how is the spend profile looking for a half a North and a Yannick O'Sullivan and a Tanami is more going to be the influence of our development capital number in 2022 versus 23 versus 24.

All right, that makes a lot of sense. Thank you for clarifying that. Maybe I'll just follow up with the point on the anticoagulant sulfides. Tom, I know you've been asked this a hundred times probably already, but with the changes in Peru with the recent election and it looks like a formal signing of Casillo, is there anything that you could see between now and December that would make you pause on sanctioning anticoagulant sulfides or independent of the project itself? I'm talking more about the political or regulatory environment. Is there anything that would worry you or are you fairly confident that you'd be able to manage that in whatever environment you're in?

Thanks, Jackie. Certainly, I think a very important step is the declaration of President Castillo. Next step for us will be to see how he assembles his cabinet and then we know who we can engage with and understand that we're about to embark upon a couple of billion dollar investment in their country. I think it's clear that they acknowledge the importance of mining to Peru's economy and a country that's probably the worst hit from the pandemic around the world. And so the opportunity to have an investment into the mining industry that's going to help the Peruvian economy, I'm I'm optimistic that that discussion will be well received as we can start engaging with the new cabinet. We've been in Peru for 30 years. Yanacocha Sulfides will position us to be in Peru for at least another 30 or 40 years. So we are taking a very long-term view on this decision. But pleased to see that we've got a decision in the election which will allow us then to start engaging over the next six months with some of those key leaders in government.

Thank you very much. That's all my questions.

Thanks, Tom.

Right. Thanks, Jackie.

The next question comes from Tanya Jackusconic of Scotiabank. Please go ahead.

Great. Good morning, everyone, and thank you for taking my questions. Just maybe coming to Rob or Tom, I just wanted to follow back on to this inflation question. Appreciate the, you know, the three to five percent. And you mentioned labor in Canada and Australia. I just want to dig deeper if there's any aspects of labor that you're seeing a much higher inflationary pressures on. Is it underground miners? I'm just trying to understand if there's pockets there. That's the current that you're seeing.

Good morning, Tanya. Thank you for the question. We are certainly seeing in Canada high demand for key technical staff, a number of projects around the country, and so you're starting to see that mobility of folks moving on to different opportunities. And we're seeing that impact in terms of operators and maintainers for the mine. Again, in particular, we have got the fly-in and fly-out operations that ease being able to switch from one plane to another. So we are seeing those pressures in a heating-up market in Canada. And very similar in Western Australia, where you've got a very significant boom happening on the back of record iron ore prices. So very high demand. both in the construction of the expansions to those iron ore mines to maintain throughput, a high demand for operators, maintainers and technical people, so professionals, in an environment that Rob was talking about earlier where the state governments, the provincial governments in Australia are constantly opening and closing borders. And so there's a real push on to the employing out of the state so that you've got that reliability of your staff being within state. And we're likely to have in Australia those interstate pressures for still some time to come given their slow take-up of the vaccination, which is certainly they're paying the price for now with the Delta strain of the virus. One of the things that we're doing which is going to significantly offset the pressure on operators in particular is the implementation of autonomous haulage at Boddington. If you think about a fleet of 36 trucks across four shifts and then the additional numbers of people you have to cover shift breaks and annual leave and those sorts of things, You're talking of the order of 180 people that are no longer needed to drive trucks because they're running autonomously and that takes some pressure out of the system in terms of that labour pressure for operators and maintainers. But it's lots of projects in both those countries and limited supply on both professionals and operators and maintainers. Rob, did you have anything to add? I think the only thing I would add, Tom, is Tanya. It also applies to contractors where maintenance shuts that, you know, there is such demand, competing priorities. And as Tom said, if you're trying to do a major shut in Western Australia and you're limited to contractors there, sometimes you can't do all the work you need to. And as such, you've got to kind of do it. deferred work, et cetera. And similar to what Tom said in Canada, we've also seen exploration contractors also lift their prices as well. So those are definitely the two toughest and hottest markets.

Okay. And then maybe if I can get a bit of clarity on material energy, I understand, but just on material, are you just seeing it in steel? Is it cement? Is it cyanide? Maybe just a little bit more clarity exactly in the material side.

Yeah, it's predominantly steel that we're seeing come through on the materials side. And what we're also tucking underneath materials when we think about that element of our costs, Tanya, is freight. So particularly as we've got concentrate we're moving out of Penistito and Boddington, we are seeing freight costs increase. So that would be the two materials areas that we're seeing that pressure.

And then just on two other assets that we didn't touch on, or maybe, well, Boddington we did a little bit. Can you just remind me of what exactly the geotechnical issue is in the pit?

Rob, do you want to pick that one up as we bring our benches down? Yeah, Tanya, there's quite a seasonal issue there as well, is that Australia, that part of the world, tends to get quite heavy rain. And when you've got heavy rain, there's always the risk to the walls where we stand off a little bit further. And, you know, that's something which we've been managing very, very carefully. So it's things as practical as that. And just for a piece of information that, you know, this month of July has been some of the record rainfalls in Australia. So we've just had to stand off the walls a little bit further. And that causes a slight slowdown in the trucks. And there's making sure you're keeping your catch benches clear as you're stepping down. So if you're starting to see, because of some of that weather, I mean, if you remember in the Boddington pit, Tanya, when you were there a few years ago, it was quite a fractious material. So it's making sure you've got those faces clean, you're keeping your catch benches clean and making sure you've got that hygiene as you're stepping down so you're not creating problems for yourself into the future because you're not looking after your bench hygiene.

OK. And then just on the Goldstrike roaster, I don't know if Rob can share with us the impact of that portion of the roaster being down for Q3, what that would be as an impact to you like you gave us for Tamami.

Sure. And Rob and Greg would talk every week or every couple of weeks. So it's the mill feeding the roaster and it's the sipping on the mill that's had the failure and is being replaced. And we'll not give a bit of colour in our understanding of the impact from an MGM perspective. Yes, certainly, Tania. Obviously, it has been a major failure. It went down end of May. We're expecting it to come up sometime in September. What the team at NGM has been able to do is run a different type of feed there, whether it's the high-carbon materials to make sure that there's still material that we're going through that particular mill. But in terms of the impact, when we look at the roaster and also, you know, some of the challenges that are occurring at Turquoise Ridge, we're looking at, for a new one, about 40,000 ounce impact. Okay. Robin. Sorry, Kenya.

That's in Q3 for your share. For the rest of the year.

For the rest of the year. Okay. Rob and I are also heading up across to Elko on Sunday for our quarterly board meeting, so we'll get a chance to have a bit of a look-see as well.

And if I could just squeeze one more in, just on the status of the illegal miners that are going on in Ghana, maybe what's happening there.

Rob or Steve, we've got Steve Gottsfield here as well, so Rob or Steve, want to pick up that one? I'll kick off, Steve. And Tanya, one of the key things I'd say is that year to date, there's actually been quite a remarkable turnaround there in terms of actually on site. The presence of the illegal miners on the site has been managed particularly well. that the Ghanaian authorities are working closely with us to make sure that, you know, we're not only targeting the illegal miners, but also where their gold is getting processed is also getting sold. And, you know, the response from the Ghanaian authorities has been first class. At the same time, we've increased our intelligence, our monitoring, our response, et cetera. So in many ways, the way in which we are managing what we can manage on site is actually going quite well with a clear partnership with the Ghanaian authorities. There has obviously been some issues off-site, and perhaps, Steve, if you want to just talk about that.

Sure. So I guess I would just add that, you know, as Rob was saying, we obviously rely on the government authority to provide security as well as having our own security. As you know, we're committed to the voluntary principles on security and human rights. Those trainings are always ongoing. In this particular case, there were several dozen individuals who clearly were intent on conducting illegal mining activities and the government needed to engage in protective action. We have a robust ASM program. We focus on maximizing local hiring, local procurement, and alternative livelihood work. We'll continue to do that, partner as closely as we can with the government and also the local stakeholders and traditional authorities who, after all, are the owners of the land. And, you know, we believe that the steps being taken will calm the situation now, but we're watching it very carefully.

Thank you so much for taking my questions.

Thanks, Kenya.

The next question comes from Anita Sunny of CIBC World Markets. Please go ahead.

Good morning everyone. So the question I guess is just a little bit more on the input cost or the inflationary pressures that you're seeing. So as I look at the guidance, you said you would be midpoint to top end of the guidance range and the plus or minus 5%. So far here to date, you've hit the middle of that range. So is that to say the second half of the year could be on the plus 5% or higher for the second half cost this year?

Yeah, one of the things to monitor with our cost guidance is we guide it at $1,200 gold price. And so when you see our year-to-date actual costs, they include production taxes and royalties of $20 to $30 an ounce because we've been up at around $1,800. So it's factoring in that $20 to $30, assuming gold price stays at its current levels, will continue to flow through in our actual costs going forward.

okay um i'm not sure if that made it better or worse but let me think about that um the um the second question i guess uh would be around um the moving to the second half of the year or sorry moving into 2022 thinking about the uh the um guidance that you've given on costs so if i'm going to summarize all the commentary i think you're basically saying development costs are encapsulated already in the two guides you've given for the two projects um as they stand uh for alhafo north and tanami um and then secondly sustaining costs and operating costs you're seeing a three to five percent increase and that uh includes um i guess all kind of input and labor escalation does it include covet impacts as well yes

Yes, so we are building our plans now, Anita, but we are incorporating. We do expect those COVID protocols and costs to continue into next year. So we're building assumptions around those into our costs as we build our plan. And when I talk that 3% to 5%, that's including any provisions we make for that.

Okay. And then, as you mentioned, it's done at $1,200 gold. So is there any thoughts to increasing that number for next year so that when we look at this chart next year, would those royalties be better captured with a higher gold price?

We're certainly maintaining our discipline internally with our business plan to build at that $1,200 assumption to ensure we've got – got the robustness and that discipline in our culture. And we're debating at the moment how we think about providing our cost guidance for next year, whether we maintain an assumption on a $1,200 revenue gold price or whether we were to charge it to some other number. So we're considering that as we pull together our numbers. Nancy, did you want to make a comment?

Yeah, Anita, I would also add is we will continue to provide you with sensitivities around all the important drivers So even at a $1,200 gold price, you'll be able to articulate and make good assumptions about different gold prices and outputs. So, for example, the comments that Tom made on the taxes and royalties at prices higher than $1,200, we will continue to guide clarity around those so you can get a better picture even at the $1,200 level. Okay. All right.

Thank you very much. Thanks, Anita.

The next question comes from Mike Parkin of National Bank. Please go ahead.

Hi, guys. Thanks for taking my questions. In Peru, you know, there certainly seems to be a fair bit of issue, not specific to Yanacocha, but to just the mining industry in general about kind of a lack of investment and flow of monies earned back into local communities. Can you give us some colour in terms of what your stakeholder engagement has been like with your local communities that are impacted by Yannick Ocean. What, if anything, you're kind of planning to do differently if you do go ahead with a full funds decision on the Sol5 project?

Thanks, Mark. Great question, and I'll pass it across to Steve Goddard to give you some color in terms of some of the aspects of the work we're doing there.

Thanks, Tom, and thank you, Mike, for the question. Yeah, I think, as you know, mining is a pillar and really a cornerstone for the Peruvian economy, and we've been there for well over three decades now. And our relationship with Cajamarca has really improved over the years. Obviously, the Yannick culture is a huge presence in Cajamarca, and our community has grown substantially over time. There have been challenges, for sure, with regard to – delivery of value coming from the central government in form of taxes as to where that money gets distributed. And over time, with different administrations, you've seen more or less funds come back into the region. Obviously, we value through extensive employment, local hiring, local content. And I would say, honestly, that as hard hit as Peru and Cajamarca have been in this COVID pandemic environment, our relationship has really strengthened during this period of time. In fact, we just had a vaccination clinic open up in our offices in Cajamarca, and I believe it's the only mining company that's been able to do that in Peru to date. Our intention certainly is and has been to focus on the value provided to our stakeholders in Cajamarca. Our relationship not only with the many communities around our operation but also with the regional government continues to strengthen. Our intention would be throughout this process to continue to work with them to find ways, especially as we look at moving forward with sulfides, in maximizing that value Certainly, we want to partner with the central government on determining how to best provide a return of those dollars back into the community. And I'd also encourage you to take a look at our sustainability report on the programs that we have more broadly in Caja Marca and the efforts we've made and the economic contribution that's occurred.

All right. Thanks for that. One other one. Back to mentioning how freight is weighing in on the inflation. Are you seeing any major challenges with access to securing container availability? Reading a few reports out there saying that's becoming quite a challenge. Is that something that's impacting either the movement of concentrate or supplies into sites or... whatever color you can kind of provide would be appreciated.

Thanks, Mike. We're not seeing any impact on that perspective around freight.

Okay, that's it for me, guys. Thanks very much. Thanks, Mike.

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

Thank you, operator, and thank you all for joining us today. And please, as this virus continues to play out, stay safe and healthy and look after your families. Thanks, everyone.

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