Newmont Corporation

Good morning and welcome to Newmont's third quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd now like to turn the conference over to Tom Palmer, President and Chief Executive Officer. Please go ahead.

Thank you, operator. Good morning and thank you for joining Newmont's third quarter 2022 earnings call. Today I'm joined by Rob Atkinson and Nancy Beazey, 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 SEC filings, which can be found on our website. Newmont delivered a solid third quarter. and we remain well positioned to respond to the challenging market environment that our industry faces today. As we have done for more than 100 years, Newmont continues to leverage our leadership, collective experience and the strength of our global portfolio with the size and scale to build a resilient and sustainable future. Supported by our clear long-term strategy, we continue to focus on doing what we do best. delivering stable production from our responsibly managed portfolio of world-class assets, while investing in our future and creating value for all of our stakeholders. During the third quarter, Newmont produced 1.5 million ounces of gold and nearly 300,000 gold equivalent ounces from copper, silver, lead and zinc. As improved productivity and higher grades built to offset the typical wet season impacts we experience every third quarter at our operations in the Southern Hemisphere. We remain on track to achieve our full year guidance ranges as we build momentum for strong production in the fourth quarter. We continue to reinvest into our business, advancing our near-term projects, including the construction of the production shaft at Tanami and the development of our new mine, Ahafo North, along with a layback of the Parmore Pit at Porcupine and the first wave of district expansions at Cerro Negro. With $6.7 billion in total liquidity, we have maintained an investment-grade balance sheet with the financial flexibility to balance steady investment into our most profitable growth projects with strong shareholder returns. Last week, we declared a third quarter dividend of 55 cents, set within our established dividend framework, which is calibrated at an $1,800 gold price. This dividend demonstrates our confidence in our diverse global portfolio and our commitment to providing leading returns to shareholders. During the third quarter, we published our inaugural tax and royalty contribution report, providing an overview of our tax strategy and economic contributions. As the world's leading gold company, we have a responsibility to generate shared value through our contributions in taxes and royalties, as well as job creation and economic development in the host communities and countries where we operate. And we believe that transparency is a prerequisite for building and maintaining trust with all of our stakeholders. You can find this report on our website, along with several others that provide details around our non-financial reporting and leading approach to environmental, social and governance matters. In early 2020, Newmont made a symbolic change around how we manage our safety performance. Stepping away from the mining 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. During the third quarter, we completed more than 160,000 interactions by our leaders in the field that were focused on these controls. This is a process we call critical control verifications. Since we made this change more than two years ago, Our leaders have now completed over one million critical control verifications, proactively identifying and managing the risks that could lead to a fatality, and helping to ensure that our workforce returns home safely to their families and friends after each and every shift. At Newmont, we have a diverse global portfolio of operations that we are managing to safely and responsibly deliver steady production over the long term. This year, we again expect to produce 6 million ounces of gold and 1.3 million gold equivalent ounces from copper, silver, lead and zinc, consistent with our full year outlook and the most of any company in our industry. This year is very similar to last year, with higher production expected in the fourth quarter to bring home a strong finish to the year. This production will be driven by higher grades at both Boddington and Miriam, in addition to improved mining rates and mill performance. Increased production from Sabika Underground at Aharfo, as mining rates improve with access to additional draw points, which in turn will deliver higher grade ore to the mill. Improved productivity at our Canadian operations, where each site is positioned to deliver higher grade during the fourth quarter. and higher production expected from Nevada gold mines, driven by both higher grade and higher tons mined from open pits at Carlin and Cortez, along with improved autoclave performance at Turquoise Ridge. In addition to higher production volumes, we also expect to have lower unit costs in the fourth quarter as we continue to take action to reduce or offset our exposure to elevated input prices and labor costs. We are working on improving productivity through increasing and optimizing truck payloads in both our open pit and underground haul truck fleets. Improving underground development rates through increased equipment effectiveness and the implementation of jumbo bolting and operations where this machine has not been used before. And leveraging our asset management operations support network. which is now remotely monitoring 3,500 fixed and mobile assets on a continuous basis. Through this work, we have seen all truck wheel motor lives increase by 85% and truck engine lives increase by 40%. We're also working to reduce our consumption of high-cost input materials through the use of new technology and alternatives. For example, We are on track to achieve a 25% reduction in grinding media consumption through the use of high chrome specialty forged balls, which have a much lower wear rate than the traditional steel ball. We are also reducing our consumption of cyanide through the use of best practice process control logic across our 12 operations. Importantly, We are continuing to drive to lock in best-in-class prices, reduce volatility in our long-term contracts, and manage our supply chains to ensure that we have key materials and consumables in sufficient quantities across all of our operations. The impact from these cost and productivity measures, coupled with higher production volumes, have us on track to deliver lower unit costs in the fourth quarter, giving us the confidence in our ability to achieve our full year guidance for 2022. I'll now turn it over to Rob for a more detailed look at our performance during the third quarter and what we can expect this quarter from our 12 managed operations and near-term projects. Over to you Rob. Thanks Tom and good morning everyone. During the third quarter between Tom and I we had the opportunity to visit six Mosquito, Tanamine, Merion, Porcupine, Cerro Negro, and Cripple Creek Invicta. It's been very impressive to see firsthand the resilience and the dedication that our people continue to demonstrate each and every day. Last month, I was also able to spend some time in Nevada, meeting with the new leader of NGM, Peter Richardson, and his extended team. It was a good opportunity to review the important work NGM is doing to further strengthen their And as Tom just described, across our global business, we are putting a significant focus on and effort into improving safety, cost, and productivity. So turning to the next slide, let's get into my update, starting with our operations in Africa. Achievement remained a solid contributor in the third quarter, with higher tons mined, steady grade, and sustained meal performance. In the fourth quarter, we expect to see an 8% increase in grade and a 30% increase in ore tons mined as we resequence our mining resources from the current layback due to being significantly ahead of our planned phase positions. As a result, ACHIEME is on track to deliver its strongest production performance of the year in the fourth quarter. Moving to AHAFO South, grade and mining rates continued to improve through the third quarter, increasing gold production by 20,000 ounces compared to the second quarter. We expect production at Ahapo to increase yet again in the fourth quarter, on the back of higher grades from the Sabika open pit, combined with an increase of high-grade ore tons from Sabika Underground. We now have up to 20 draw points available in the Sabika Underground, and with similar numbers expected in Q4, we are in a strong position to deliver on the increase in ore tons. record production drill meters while continuing to advance the development of the third production level in the mine. An additional underground production drill arrives in November, further assisting the delivery of the planned development for the fourth quarter and the resulting ore tons in 2023. And finally, we continue to progress the development of our new greenfield mine, Ahafo North. Engineering is more than 90% complete. and procurement sits at 70%, with the first wave of heavy mining equipment having been delivered and assembled on site and is now ready to commence work. We are continuing to progress towards gaining full land access, with approximately 75% of all the required activities now complete, including crop and land compensation and resettlement negotiations. Important stakeholder engagement work with local communities, traditional leaders and regulators continue, and we remain on track to gain full land access for this important project in early 2023. And now, turning to our operations in South America. Cerro Negro delivered another solid performance in the third quarter, as lower Productivity from this remote site continues to improve, in particular development meters which have allowed us to access higher grades from the Amelia deposit. And I'm also pleased to announce that Cerro Negro is the first mine in Argentina to implement the AutoMine technology, a tele-remote operating system for underground loading and hauling. The implementation of this technology has eliminated safety risks associated with operator exposure underground, has allowed for the recovery of more ore from each of the stoves, has reduced equipment damage, and really importantly, in the Argentinian context, increased underground working time. We've had tremendous success with tele-remote operations at our Australian and Canadian underground mines, and this is yet another example of the value added through the rapid replication of leading practices across our global operations. Turning to Marion. we delivered slightly lower production compared to the second quarter due to very heavy rain in the third quarter and a mill maintenance shutdown. Merion is well positioned to deliver a strong finish to the year as we sequence into approximately 5% higher grades in the Meraba pit and deliver improved mill performance versus Q3 as a result of improved availability from the maintenance work that was performed. And finally, Yanacocha continued to deliver solid results. We saw improved recoveries from the use of a richer leaching solution, helping to offset lower tons mined and placed on the leach pads. And now, over to our operations in North America. Penesquito delivered another very strong performance in the third quarter, increasing gold production by more than 50% due to higher grade from the Penasco pit, whilst maintaining steady levels of silver, lead, and zinc production. It is important to note that 60,000 gold equivalent ounces in finished goods inventory at Penasquito was built up at the end of the quarter, as a shipment of gold-bearing lead concentrate that was produced at the end of September was not sold until the fourth quarter, partly due to impacts on shipping logistics from earthquakes and heavy rain in western Mexico. Looking ahead, and it is important to note, gold production as we mine around 35% lower gold grade ore from the chilly Colorado pit, which is part of our planned mine sequence in this large polymetallic mine. Moving to CC&V, we delivered steady production from higher tons mined in the third quarter. We expect production to remain consistent into the fourth quarter as we continue to optimize ore placement and reduce unit costs at this leach-only operation. And turning to Canada, Eleanor, Musselwhite and Porcupine all delivered improved production in the third quarter, a combined increase of more than 20,000 ounces compared to Q2. At Eleanor, we continued to increase staffing levels, especially those associated with critical roles, and improved productivity amid a very competitive labour market, delivering improved production from higher ore grade in the third quarter. In Q4, we will see an increase in the number of available stoves ready for ore extraction, improving our mining flexibility with four stoves available at all times. And we continue to increase our staffing levels, and importantly, we expect to be back to full complement by the end of this year. At Musselwhite, we delivered higher grade ore from the PQ deeps area in Q3, in grade in the fourth quarter as we mine our first double list stope in PQ deeps. And finally, at Porcupine, we mine higher grades from both the Hoyle Pond and Borden underground mines in the third quarter. In the fourth quarter, Hoyle Pond has a strong pipeline of stopes available, which will contribute towards a 10% higher grade compared to Q3. And in addition, as a result of the optimization of our maintenance into 2023, allowing for higher mill availability during the fourth quarter. And we continue to progress work on the Pamore project, a layback with the ability to extend mine life at Porcupine through to 2035. The work to dewater Pamore has commenced, with the interim water pumping and treatment plant successfully starting up after receiving all of the necessary permits. And now turning to our two operations in Australia. Boddington delivered lower gold and copper production compared to the second quarter as the site was impacted by very significant rainfall associated with some extreme winter weather in Australia's southwest. Some network outages which impacted the autonomous haul truck fleet and lower mill throughput due to crusher and conveyor maintenance in August were also contributors to Boddington's third quarter performance. Waddington is well positioned to finish the year strongly, as we sequence into a section of the South Pit with higher gold grades, approximately 12% higher than those in Q3. We have also resolved the network issues, and South West Australia is now moving into the typical hot, dry summer weather pattern. And turning to Tanamine, we delivered solid production results compared to the second quarter, due to sustained ore grades, tons mined, and mill performance, and we expect production to remain relatively consistent in the fourth quarter. We continue to progress the second expansion project at Tannemine, and we have now reached an important project milestone, completing the reaming of the 1.5 kilometer deep production shaft and the installation of the head frame and hoisting infrastructure. Lining of the shaft has commenced, And in the photo, you can see being lowered into the shaft what is called a stage or a Galloway, and that will be used to conduct this specialized work. Shaft lining will take around two years to complete and will be conducted in parallel with the installation of the major underground infrastructure, such as crushers, conveyors, ore bins, and pumping stations. The underground development work is largely completed, and we are now commencing the associated civil and structural works. And with that, I'll turn it over to Nancy on the next slide.

Thank you, Rob, and good morning, everyone. Let's start with a look at the financial highlights. In the third quarter, Newmont delivered $2.6 billion in revenue at a realized gold price of $1,691 per ounce, an adjusted EBITDA of $850 million, with our free cash flow being impacted by unfavorable working capital movements of more than $300 million in the third quarter. These items included a $95 million payment associated with the previously communicated Penesquito profit-sharing agreement reached during the second quarter, an $83 million payment of accrued severance related to the planned Ghanaian employment model change, and $80 million of sales value from the buildup of inventory at Penesquito, as Rob has mentioned. In the third quarter, we invested nearly $700 million through capital, exploration, and advanced project spend as we continue to progress our near-term projects, make progress toward achieving our climate targets, and orient the portfolio for the future of Newmont. Last week, we declared a regular quarterly dividend of 55 cents per share for the eighth consecutive quarter, in alignment with our dividend framework and calibrated at an $1,800 gold price. Compared to the second quarter, adjusted net income declined 19 cents by relatively consistent production and direct costs. This was due to lower metal prices for copper, gold, silver, and zinc, as average realized gold prices decreased nearly $150 per ounce in the third quarter. In addition to lower metal prices, we also experienced lower sales volumes during the third quarter, driven by the timing of concentrate sales at Penesquito. These impacts, along with other immaterial items, resulted in third quarter adjusted net income of $212 million, or 27 cents per diluted share. Underpinned by the largest production base in the sector, Newmont has established a healthy liquidity position to allow for balance sheet strength and flexibility in light of the current global economic conditions. During my tenure at Newmont, we have intentionally worked to provide clarity around our discipline in capital allocation for how we reinvest in our business and provide returns to shareholders. Grow our cash balances to $3.7 billion with total liquidity of $6.7 billion, while returning more than $6 billion to shareholders in dividends and share buybacks since 2019. Responsibly manage our long-term debt through refinancing at historically low coupon rates and in alignment with our ESG targets. and achieve a net debt to EBITDA ratio of 0.5 times, below our target of 1.0 times. With an investment grade balance sheet and no debt due until 2029, Newmont's financial position provides a platform on which to support the next decade of production performance and reinvestment into the business. As I reflect on the last six years I've spent at Newmont, I am so proud of the work that we have accomplished to build financial strength and flexibility as well as a framework for our capital priorities. And as I move to my next opportunity, I remain confident that Newmont will continue to prioritize long-term value to its shareholders. And with that, I'll turn it back to Tom.