Newmont Corporation

Good morning and welcome to Newmont's third 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 Tom Palmer, President and Chief Executive Officer. Please go ahead.

Good morning and thank you for joining Newmont's Third Quarter 2021 Earnings Call. Today I'm joined by Rob Atkinson and Nancy Beezy, along with other members of our executive team. And we will be available to answer questions at the end of the call. Before I begin, please note our cautionary statement and refer to our FDC filings, which can be found on our website. Newmont delivered on a challenging third quarter. generating strong free cash flow, continuing to provide industry-leading shareholder returns, and investing in profitable projects, including our latest, a half a north, which was approved by our board in July. This quarterly performance was achieved even as we continue to manage through the evolving complexities of the global pandemic, and we remain committed to protecting the health and wellbeing of our workforce and local communities. Throughout the mining sector, we are continuing to see the non-health-related challenges caused by the pandemic, including labour shortages, rising input costs and supply chain disruptions. As an industry leader, Newmont is well positioned to respond to these challenges by leveraging our proven operating model and balanced global portfolio to deliver long-term value from our responsibly managed assets. Turning to our quarterly results, let's take a look at the highlights. During the third quarter, Newmont produced 1.4 million ounces of gold and 315,000 gold equivalent ounces from copper, silver, lead and zinc. We generated operating cash flow of $1.1 billion and strong free cash flow of $735 million, of which $715 million is attributable to Newmont. Supported by our clear strategic focus, we continue to apply a disciplined and balanced approach to our capital allocation priorities. With $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. Earlier this month, we announced the transition to a fully autonomous haulage fleet at Boddington, an important milestone for both Newmont and the gold industry as a whole. Our fleet of 36 trucks will improve safety and productivity at this cornerstone asset. We also continue to invest in and develop our most profitable near-term projects, including Tanami Expansion 2, the Harfo North, the change to a more productive underground mining method at Ahaso South and Yanacocha Salt Flags. This quarter, we completed nearly $100 million of opportunistic share repurchases at an average price under $56 per share. And we declared a third quarter dividend of $0.55 per share, resulting in a dividend yield of over 4%. Twelve months ago, we announced our industry-leading dividend framework, establishing a clear pathway for stable and predictable returns. Over the last four quarters, Newmont has returned more than $2 billion to shareholders through dividends and share buybacks, demonstrating our confidence in the long-term value of our business and our ability to maintain financial flexibility while steadily reinvesting in our operations. At Newmont, we have created a robust and diverse portfolio of operations and projects around the globe. And we believe that where we choose to operate matters. Among our 12 operating mines and two joint ventures, over 90% of our attributable gold production is from top tier jurisdictions, which we define as countries classified in the A and B ratings ranges by each of Moody's, S&P and Fitch. Underpinning our asset base is the gold industry's best organic project pipeline of both greenfield and brownfield opportunities, managed through our integrated operating model with a proven track record of delivering value to all of our stakeholders. Newmont has maintained an unmatched and industry-leading project pipeline, laying the pathway to steady production and cash flow well into the 2040s. Every one of our operations has near mine exploration opportunities that can leverage our existing infrastructure and extend mine life. With the stability and depth of our brownfield portfolio, we are able to explore in some of the most prospective greenfield districts in the world in a disciplined and deliberate way. This quarter, we continue to advance our near-term projects. including the second expansion at Tanami in Australia's Northern Territory. 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, while providing a platform to further explore a prolific mineral endowment in the Tanami district. The development of a Harpo North. Approved in July, this project expands our existing footprint in Ghana adding more than 3 million ounces of gold production over an initial 13-year mine life, and the Anacotia sulphides project, which will extend mine life at this cornerstone asset for decades to come. Newmont remains committed to the Anacotia sulphides project and will be investing at least half a billion dollars through 2022 to advance critical path activities, including detailed engineering, long-lead procurement, earthworks, and the installation of accommodation facilities for the construction workforce. As previously announced, given the current status of the pandemic in Peru and the potential for more contagious variants, we have extended our full funds decision for the salt waste project to the second half of 2022 and will progress the project as the pandemic allows. Two weeks ago, I had the opportunity to visit Peru and engage with government leaders and other key stakeholders to talk about a safe and mutually beneficial path forward. I was encouraged by these interactions and look forward to this next chapter in Latiana Coaches' long and profitable history. The global pandemic has and will continue to challenge all of us for some time to come. I'd like to take this opportunity to recognise the very significant efforts that are being applied at all of our operations to keep our workforce and local communities safe and healthy. As you can see in this photo, Rob had the opportunity to visit Ghana last quarter and experience firsthand the important work our team is doing to manage through the COVID pandemic with agility and resolve. In 2020 and 2021, You've already invested more than $2.7 million for COVID relief and local support in Kaurna, and $1.4 million in health screening and security measures to protect our people and their families. Through our partnership with Kaurna Health and Education Services, these investments help to establish wide-ranging protocols and controls at both a HAFO and a CHIM. distribute medical equipment and PPE at our mines, nearby health facilities and other regional institutions, to purchase PCR machines for effective testing and research, to donate cold storage units for temperature monitoring and vaccine storage, to raise awareness and share important health and safety messages through local radio programs and fund radio programs that provide essential lesson plans for students during school closures. We are also focused on supporting the vaccination effort in Ghana and are working with the American Chamber of Commerce in Ghana and Ghana Health Services to secure and deploy nearly 100,000 vaccines in the area. At Newmont, we firmly believe that the COVID-19 vaccines are critical in combating the spread of the virus. And until global vaccination rates substantially improve, our people and operations will continue to be affected. We are now deliberately moving towards a position where ultimately all of our global workforce will be fully vaccinated. And we are closely monitoring and adhering to national vaccination mandates already in place. We are taking this important step because we fundamentally believe that the vaccine is a critical part of supporting the recovery from the pandemic around the world. Since March of last year, our focus has been on operating responsibly and efficiently while protecting the health and safety of our workforce and local communities from this virus. Due to government-imposed restrictions on movement and the ongoing application of COVID-related protocols, In addition to competitive labour markets in Canada and Australia, we continue to experience productivity impacts at many of our sites. Due to these impacts and some unexpected equipment reliability and weather-related challenges, we have decided to update our full-year 2021 guidance. We now expect to produce approximately 6 million ounces of gold just below our original guidance range. and we are reaffirming our original guidance of 1.3 million gold equivalent ounces from copper, silver, lead and zinc. Combined, that is 7.3 million gold equivalent ounces, the most of any company in our industry and an improvement of almost 400,000 ounces compared to last year. Updates from our original gold production outlook are largely due to challenges at Boddington, including unusually severe weather and heavy rainfall, shovel reliability and operational delays associated with managing bench hygiene as mining moves into deeper sections of the pit. This was combined with the continued ramp-up of the autonomous haulage fleet as the site fine-tunes this technology for operation in a deep open pit mine for the first time in the mining industry. As a result, Boddington delivered lower expense than expected, impacting our ability to reach higher grades and reducing Boddington's full-year gold production estimate by approximately 140,000 ounces. As Rob will discuss later, we remain very confident that the overall efficiencies delivered by autonomous haulage will more than offset any short-term impacts on production at Boddington this year. Also at Nevada Goldmines, we are experiencing the consequences of the challenges noted by our operating partners in their release last week. Carlin and Cortez are expected to be at the low end of their annual guidance ranges, largely due to the impact of the breakdown and repairs to the mill at Carlin's Goldstrike Roaster. And Turquoise Ridge is now expected to be below its annual guidance range. As a consequence, Annual gold production from Nevada gold mines is expected to be at the low end of our annual guidance range. In addition to this, as I commented earlier, the global pandemic continues to evolve and impact all of our operations. Katamai was placed into care and maintenance in late June and early July. and we are continuing to experience lower productivity as a result of COVID-related absenteeism and the tightening of the labour market in Canada. The impact from lower production volumes, coupled with higher metal prices, has also increased costs for the year. For 2021, gold costs applicable to sales are expected to be $790 per ounce, and all the sustaining costs are expected to be $1,050 per ounce. It's important to note that our original guidance was established using a $1,200 gold price assumption. And we continue to use this assumption for our long-term mine planning and reserve modelling to ensure that we maintain discipline across all of our operations. However, due to the sustained high gold prices throughout this year, and in response to feedback from the investor community, we are providing our updated full-year cost outlook using an $1,800 gold price assumption. We expect these gold prices to continue through the fourth quarter, adding approximately $50 per ounce to our oil and sustaining costs from inflation, higher royalties and production taxes. Finally, we are decreasing our development capital estimate from $850 million to $700 million. with a portion of our spending associated with the second expansion of Tanami moving into 2022, but not impacting project schedule. We are currently working to finalise our business plan for 2022, and today we have a much better understanding of the impacts from the global pandemic than we did at this time last year. Looking ahead to 2022, we anticipate that production costs at an $1,800 gold price assumption will be similar to this year. Gold production is expected to improve by around 5% compared to 2021 as we continue to manage the impacts from pandemic-related labour shortages on productivity across our operations. CAS and AISC per ounce are expected to be largely in line with 2021 as we build in increased costs from inflation, high metal prices and ongoing COVID-related safety protocols into our assumptions going forward. Capital in 2022 remains unchanged from our original outlook as we enter a period of significant reinvestment, an important component in growing production, improving margins and extending mine life. These reinvestments back into our business will enable Newmont to steadily increase production and improve costs over time from our portfolio of world-class long-life operations. We look forward to providing you additional detail on our long-term outlook in our annual guidance webcast in early December. And with that, I'll turn it over to Rob for a more detailed look at our global projects and operations. Over to you, Rob. Thank you, Tom, and good morning. As Tom mentioned, the pandemic continues to present challenges across our operations and joint ventures, and I am proud of our people who continue to safely deliver day in, day out. While COVID infection rates are declining and vaccination rates are improving near our operations, the knock-on effect from supply chain disruptions and tightening labor markets is creating new complexities to manage. There is increased pressure on input commodity prices, such as steel and diesel, in addition to unpredictable freight costs and timing of deliveries. As an example, diesel costs have increased significantly in recent months, adding $7 per ounce to our oil and sustaining costs compared to the previous quarter, and over $15 per ounce compared to the previous year. We are also keeping a close eye and working hard to reduce voluntary attrition rates across our global business. And hot labor markets, particularly in Canada and Australia, are creating an unprecedented labor shortage impacting productivity. These inflation trends may show up in future contract renewals, and we expect that we could start seeing additional impacts as early as the fourth quarter. And while it is difficult to predict whether these trends will persist for the long term, I am confident there are scale, strong partnerships, and proven operating model positions Newmont to secure the most competitive supply contracts and limit the impacts on productivity and costs. Turning to our regional updates, starting with South America. Merian remains a strong performer in the South American region. and is celebrating their fifth anniversary since declaring commercial production in October 2016. The site continues to utilize an ore blending strategy to optimize mill performance, helping to offset unplanned mill maintenance and minor delays from heavy rain at the start of the quarter. Additionally, Merian delivered higher tons mined and grade processed, and we expect this trend to continue for the remainder of the year and into 2022. Cerro Negro continues to improve productivity and performance, significantly increasing tons mined and processed each quarter. The site team is managing the impacts from the pandemic as well as is possible. And I'm proud of the mitigation efforts, shift change optimization, and the overall efficiency improvements delivered to help offset disruptions from earlier in the year. Given the effects of the pandemic, the site has delivered lower development rates in 2021, limiting access to higher-grade ore and reducing production in the fourth quarter and into 2022. And yet, despite challenges from the virus, the site continues to progress future organic growth projects, including the development of San Marcos and the expansion of the Eastern District, which have the potential to extend mine life beyond 2030. Yanacocha has also experienced continued challenges from the pandemic, impacting productivity, mainly due to reduced labour availability. To offset these challenges, the site implemented mine sequencing changes, focusing on higher-grade, efficient haul truck routes and optimal ore placement on the leach pads. As a result, Yanacocha delivered higher-grade ore and improved recovery from the leach pads. As discussed in our third quarter 10Q, we continue to progress detailed study work to further define water management requirements, along with other closure activities. And we will provide an update on this with the fourth quarter results. And as Tom mentioned, we're progressing the Anacocha Sulfides, a project with the potential to extend mine life at this cornerstone asset well beyond 2040. Turning to our North American region, At our Canadian operations, Musselwhite, Eleanor, and Porcupine, we continue to be impacted by COVID absenteeism and a tightening of the Canadian labour market, and we expect these sites to be at the low end or below their annual production guidance ranges. We expect these labour trends to continue into 2022, with the effects having been particularly impactful at Musselwhite and Eleanor. as labour shortages and access to specialised services has resulted in lower tonnes mined and processed than planned. Porcupine delivered higher tonnes mined from the Hollinger open pit, helping to balance the impact of higher than expected levels of graphite in the Hoyle Pond underground, which resulted in drilling delays and, as a consequence, resulted in less high-grade ore being mined from the underground. I visited our Canadian operations last month and I'm pleased to report that we are making a lot of positive inroads at Musselwhite, Eleanor, and Porcupine to increase development rates through the use of jumbos and tele-remote loaders, and driving productivity hard through the execution of the suite of our full potential initiatives. With the full support of our subject matter experts deployed to these sites, these initiatives will improve efficiency and production. Moving to CC&V. The mine experienced lower grades and recovery in the third quarter. However, higher tons mined and changes to mine sequencing during the third quarter are expected to increase leach pad production in the fourth quarter and into 2022. And finally, Enosquito delivered another strong performance in the third quarter due to higher tons mined and processed, in addition to strong recovery rates from a number of full potential improvements. Since acquisition, Penesquito has delivered over $375 million in free cash flow improvements, with more than 80% of this value delivered from mining and processing improvements, which continue to generate value today and will do so well into the future. Shifting to Australia, Tannamine delivered solid performance in the third quarter, as higher grades helped to offset lower tons mined and processed as a consequence of the COVID-related care maintenance period in late June and early July. Although this period has reduced the site's full year production by approximately 40,000 ounces, Tannamine is fully operational, performing very well, and is fully expected to deliver a strong finish to the year. In addition, the team further advanced Tannamine Expansion 2, And during the third quarter, we progressed the construction of the head frame and have now completed nearly 70% of the reaming of the nearly one-mile deep shaft, remaining on track to deliver significant ounce, cost, and efficiency improvements in the first half of 2024. As Tom mentioned, Barrington experienced heavy rainfall in the third quarter, impacting the ramp-up of autonomous haulage and reducing tons mined. I'm pleased to share that Barrington continues to achieve superior mill performance, reaching nearly 11 million tonnes processed during the third quarter. We are also proud to deliver the gold industry's first autonomous haul truck fleet, the first of its kind in our sector. I'd like to thank our team and our partners at Caterpillar for their ongoing partnership, dedication and drive as Barrington continues to ramp up the truck fleet, to full productivity and to fine-tune the technology for very productive operation in a deep, open-pit mine. Delivering this project on time and on budget during a global pandemic is an enormous accomplishment, leveraging Newmont's scale, technical expertise and partnerships to manufacture, deliver, assemble, commission and operate a fleet of 36 autonomous trucks in less than 18 months. As we look ahead, we expect to reach improved grades and achieve higher tons mined due in part to the efficiencies from autonomous haulage, increasing production in the fourth quarter and into 2022. And finally, turning to Africa. Achievement delivered another consistent performance despite very heavy rainfall in the third quarter. as higher throughput and strong recoveries help to offset unplanned mill and equipment maintenance. The site is well positioned to reach higher grades and deliver its highest production of the year during the fourth quarter. AHAFO delivered a very strong third quarter, as higher tons mined from the Sebeka open pit and improved mill performance helped to offset challenges with haul truck availability at our underground operation. At Sabica, we continue to progress the development of our new underground mining method, sub-level shrinkage, and we expect to reach full production by year-end as planned, improving grade and underground tons mined. In addition, the team continues to advance a half a mil off. We have begun mobilizing key personnel, and I'm pleased to say that engineering is approximately 80% complete. We continue to engage with local communities and regulators, to ensure a mutually beneficial path forward as we develop this prolific ore body and create the next generation of mining in Ghana. And with that, I'll turn it over to Nancy on the next slide.

Thanks, Rob. Through the strength of our assets and integrated operating model, Newmont is in the best financial position in its 100-year history, building long-term value with the most disciplined and balanced approach to capital allocation in the industry. Let's take a look at the financial highlights. In the third quarter, Newmont delivered $2.9 billion in revenue and an average realized gold price of $1,778 per ounce. Adjusted net income of $483 million, or 60 cents per diluted share. Adjusted EBITDA of over $1.3 billion, a decrease from the prior year's quarter due to lower gold prices, lower sales volumes, and cost pressures stemming from the global pandemic. And strong free cash flow of $735 million, of which 97% is attributable to Newmont. Although quarterly free cash flow is lower than our record performance last year, we achieved a 27% improvement compared to the second quarter. Our unmatched cash flow generation allows Newmont to provide superior shareholder returns, largely through our industry-leading dividend framework. This week, we declared a regular quarterly dividend of $0.55 per share, an increase of 38% over the prior year and consistent with our last three quarters. With a yield of approximately 4%, our regular dividend is the highest in the gold industry. placing Newmont among the top 10% of the S&P's large-cap dividend payers. Third quarter gap net loss from continuing operations was $8 million, or $0.01 per share. Adjustments included $0.46 related to a loss recognized on the pending sale of the Conca Mill asset, currently in care and maintenance in Peru. The sale of these assets reduces storage costs while we maintain long-term optionality around the future development of the project. Adjustments also include $0.12 related to unrealized mark-to-market losses on equity investments, $0.10 related to reclamation and remediation adjustments at historical mining sites, $0.08 related to tax adjustments and valuation allowance, and $0.01 of other charges. Taking these adjustments into account, we've reported third quarter adjusted net income of $0.60 per diluted share. As a reminder, due to our status as a US GAAP filer, our adjustments to net income do not include $23 million of incremental costs incurred this quarter as a result of the COVID pandemic. Adjusting for these costs wouldn't result in approximately $0.03 of additional net income per share. and we expect these costs to continue throughout the year as we prioritize the health and safety of our workforce and local community. Newmont's dividend framework is based on our unmatched ability to generate attributable free cash flow. For every $100 increase in gold prices above our base assumption of $1,200, Newmont delivers $400 million of incremental attributable free cash flow per year. and Newmont is the only company in the gold mining industry with the ability to generate these levels of attributable pre-cash flow. As Tom mentioned, we announced our dividend framework one year ago, providing shareholders with a stable base annualized dividend of $1 per share and the potential to receive between 40% and 60% of the incremental attributable pre-cash flow generated above a $1,200 gold price. This framework provides stable and predictable industry-leading returns for our shareholders and demonstrates our confidence in our long-term outlook and our ability to maintain capital discipline. The third quarter dividend declared was consistent with our second quarter, calibrated at an $1,800 gold price assumption and 40% distribution than incremental free cash flow. And we continue to review our dividend on a quarterly basis with our board, evaluating our operational and financial performance and outlook over a long period of time. Our capital allocation priorities remain clear. To reinvest in our business through exploration and organic growth projects, to maintain financial strength and optionality on our balance sheet, and to provide industry-leading returns to shareholders. Throughout the year, we delivered on each of these priorities. by progressing our profitable reinvestment in the business, particularly with the advancement of the Tannerman expansion, Ahoppa North, and Yannicoche Assault Bikes, delivering the first autonomous haulage fleet in the gold mining industry, improving safety and productivity at Boddington, completing the GT Gold transaction in May of this year, returning more than $1.3 billion to shareholders through dividends, and nearly $250 million through opportunistic share buybacks, and maintaining a strong balance sheet with $7.6 billion in liquidity and a net debt to EBITDA ratio of 0.2 times, preserving Newmont's financial strength and flexibility to sustain the business across price cycles, with one of the industry's lowest weighted average cost of debt at 4.3%. As we look ahead, We are confident in our ability to deliver on our disciplined capital allocation priorities, creating long-term value for the business and maintaining our position as the world's leading gold company. And with that, I'll hand it back to Tom to wrap up.