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spk00: Good morning and welcome to Newmont's second quarter 2023 earnings call. All participants will be in a listen mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll 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.
spk05: Thank you Operator. Good morning everyone and thank you for joining Newmont's second quarter earnings call. Today I'm joined by my executive leadership team including our Chief Operating Officer Rob Atkinson and we'll all be available to answer your questions at the end of the call. I'd also like to introduce our recently appointed Chief Financial Officer Karen Oberman. Karen is a highly experienced financial professional who has held both CFO roles and board seats in the resource and energy sectors. She brings a breadth of global experience, and we are very pleased that she has joined the Newmont team. Before I begin, please note our cautionary statement and refer to our SEC filings, which can be found on our website. Guided by a clear, consistent strategy, Our focus is on running a safe and sustainable mining business to generate long-term value. Our business is underpinned by a strong balance sheet and a global portfolio with the size and scale to make decisions that deliver on our strategy. And while I'm not happy with our ultimate financial results for the second quarter, I am very comfortable with the prudent decisions that we made during the quarter to safeguard our workforce, protect long-term value, and position Newmont to deliver strong performance in the second half of this year and beyond. During the second quarter, Newmont produced 1.2 million ounces of gold and 256,000 gold equivalent ounces from copper, silver, lead, and zinc, generating nearly $1 billion in adjusted EBITDA and more than $650 million in cash from our continuing operations. There were four important decisions that we made during the second quarter. First, we decided to suspend operations at Penasquito to focus on finding an appropriate and sustainable resolution to the current dispute with the union representing our workforce in Mexico. This dispute is associated with a profit sharing agreement that we made with the union leadership only 12 months ago. And in May, we paid our employees their profit sharing bonus for the 2022 year, calculated in strict accordance with this agreement. The union leadership are now demanding more than double the agreed amount and have taken strike action through the withdrawal of labour. At Newmont, Penesquito sits within a strong, balanced global portfolio of operations, a portfolio that is supported by the industry's strongest balance sheet. During this important time for Penesquito, we will remain firm in our resolve and continue to make decisions that protect the long-term value of the operation and benefit our employees, our contracting partners, our host communities, our customers and all of our stakeholders. We strongly encourage the union leadership up to and including Senator Napoleon Gomez to cease this strike action and return their members to work. The second decision we made during the quarter was associated with protecting our workforce at Eleanor from the unprecedented wildfires being experienced this summer in Canada, evacuating the mine and placing the operation on care and maintenance. Third, at Cerro Negro, we made the decision to pause mining for two weeks and complete important safety inspections to ensure that we had the appropriate control environment in place at this remote underground mine and to protect the health and safety of our mining teams working there. And finally, at Achim, we made the decision to process lower-grade stockpiles that were originally planned for the fourth quarter in order to optimize the mine plan, ensuring that we are in a position to safely extract the maximum amount of ore as we complete the current layback in the Achim pit over the next few months. As planned, Higher gold production is expected in the second half of the year and will be driven by higher grades and tonnes mined from both Sabika Underground and Open Pit of the Harfo. Higher grades and tonnes mined at Cerro Negro as the first wave of our district expansions comes online in the third quarter. Higher tonnes mined and processed at Tanami where we will mine the highest grades for the year in the fourth quarter. higher-grade run-of-mine ore processed at the Chim as we return and complete the current layback. And when combined with the higher production that we expect from our two non-managed joint ventures, Nevada Gold Mines and Pueblo Viejo, we remain on track to deliver on our four-year guidance. We ended the quarter with $6.2 billion in total liquidity and maintained an investment-grade balance sheet preserving financial flexibility as we continue through a period of meaningful reinvestment and return a stable dividend to our shareholders. Consistent with our 2023 dividend payout range, we declared a second quarter dividend of 40 cents per share, demonstrating both our ongoing commitment to shareholder returns and our confidence in the long-term strength of our business. We remain on track to close on our acquisition of Newcrest in the fourth quarter and are leveraging the lessons we learned from the successful integration of Goldcorp four years ago as we build out our integration plans. We have also commenced the portfolio optimisation work associated with this transaction, making the important decision in June to defer the Anacotra Sulphides project. This is the first step in delivering significant value through portfolio optimization. And we will continue to evaluate opportunities to re-sequence project capital and rationalize the portfolio of the combined company over the next couple of years. At Newmont, we recognize that a strong safety and sustainability culture is not only an indicator of a reliable, well-run business, It is fundamental to delivering on our commitments to employees, contracted partners, host communities and all of our stakeholders. As we position ourselves to safely integrate Newcrest and enter this next chapter in Newmont's 102-year history, we made an important decision in the second quarter to further strengthen our commitment to responsible gold leadership and increase our focus on safety and sustainability. In June, we promoted Susie Retallick to the role of Chief Safety and Sustainability Officer, reporting directly to me. Susie is an industry leader with more than 20 years of experience in driving values-based decisions. Over the last five years, as our Senior Vice President of Health, Safety and Security, Susie has been instrumental in leading the delivery of a step change in Newmont's safety performance, in particular in the area of fatality risk management. Susie will apply the lessons we have learned from our significant improvement in health, safety and security to further improve our performance in the areas of environment and social responsibility. In this new role, Susie will also support me and my leadership team in the work we need to do as a company and as an industry to create workplaces that are free from harassment, assault, bullying and discrimination. I'll now turn it over to Rob and then to Karen to take us through each of our operations and projects, along with a review of our quarterly financial highlights. Over to you, Rob.
spk04: Thank you, Tom, and good morning, everyone. Turning to the next slide, let's begin in Australia. Boddington delivered another strong performance in the second quarter, increasing both gold and copper production from sustained grades and improved mill throughput. As part of our multi-decade life of asset strategy for Boddington, we have increased our autonomous haulage fleet with five additional trucks as we increase the planned waste movement in both the north and the south pits. This investment into the next laybacks at Barrington will support stable gold and copper production for many years to come. We remain clearly on target to hit our 2023 production guidance, and we are well positioned to deliver more than one million gold equivalent ounces from this cornerstone asset. Moving to Tannamai, the site has recovered extremely well following the record wet weather and extensive flooding experienced in the Northern Territory during the first quarter. We doubled our quarterly gold production in the second quarter and remain firmly on track to land within our full-year guidance ranges and will mine the year's highest grades in the fourth quarter. In addition, we continue to progress the second expansion at Tanami with nearly 50% of the concrete lining of our 1.5-kilometer deep shaft installed. The lining and the furnishing of the shaft continue to be on the critical path as our project team works to deliver significant ounds and cost improvements to our tier one operation in Tanami. Moving up to Africa. In June, I visited both Ahafo South and Achim, as well as our Ahafo North project in Ghana. At Achim, I spent time with the team as we worked through the decision Tom covered earlier to prioritize safety, optimize the mine plan, and maximize the ore extracted as we close out the current layback in the coming months. As a consequence of this work, we expect grades to improve by 35% during the third quarter, positioning the site to deliver significantly higher production in the second half of the year and land within our 2023 guidance ranges. At a half-o-south, we delivered higher production as we accessed the third mining level at Underground ahead of plan. Fined with access to higher grades from the open pit, the AHAFO mill will process higher grade from both Underground and surface in the second half. AHAFO is also on track to commission a replacement conveyor in the third quarter, and it remains on target to hit guidance for the year. And finally, it was great to see firsthand the progress we are making on the AHAFO North The highway relocation and bulk air force continue to progress very well. And with a new mining fleet in place, the project team is preparing to commence pre-stripping in the second half of the year. Moving across to North America. As Tom described, Canada has been impacted by unprecedented wildfires, with Quebec particularly impacted during the second quarter. And in the second week of June, as the fire fronts approach the property, We made the swift and proactive decision to evacuate our workforce and place Eleanor on care and maintenance to protect our employees and contractors. During this time, our first priority was and will always be the safety and well-being of our workforce and local communities. We're now safely ramping up production activities as the forest fire threat continues to abate. And we will continue to monitor the situation in Quebec very closely as we work with the provincial government agencies to assess fire progress and air quality on a daily basis. Moving to porcupine, we delivered another steady performance in the second quarter and remain well positioned to deliver improved production in the second half of the year, driven by higher grades from the Hollinger pit in Q3 and from Borden and Underground in Q4. We continue to progress the Timor project and are preparing for a full funds investment decision later this year. We will complete commissioning of a new water treatment plant in the coming weeks, which will accelerate dewatering of the Timor pit and allow us to commence pre-stripping during the fourth quarter with first ore expected in 2024. At Muscle White, we delivered consistent gold production. as we progress planned development activities that will increase stope availability in the second half of the year, including access to another double lift stope. As a consequence, we expect tons mined to increase by more than 30% and grades to increase by around 15%, supporting a strong third and fourth quarter. And finally, Cripple Creek and Victor delivered solid results due to higher grade and strong recoveries from our heap leach facilities. And now, moving down to South America. Yanacocha delivered a strong second quarter as we begin to realize the benefits from applying our injection leaching technology. At Merion, we continued the planned stripping of the next layback in the Merion pit, and the site is on track to deliver 40% higher grade from the Meraba pit in the third quarter, putting Merion on target to hit full-year guidance. Moving to Cerro Negro, in the third quarter, Tons Mined is expected to increase nearly 30% as the underground ramps up to full productivity following the safety pause that Tom referred to. And Grade is expected to increase by 50% as we begin to access the higher grade stoves from San Marcos, the first of six new deposits associated with the exciting underground district expansion at Cerro Negro. San Marcos will continue to ramp up throughout the year and is expected to reach Finally, as Tom discussed, we made the decision to suspend operations at Penasquito on June the 7th as we focus on finding a resolution to the dispute with the union leadership. We have and will continue to abide by the fair and equitable agreement that is currently in place and that was importantly fully agreed to only a year ago with the union. We will continue to communicate directly with our employees and engage with the union leaders and government officials to find a fair, appropriate and sustainable resolution to this very disappointing dispute. You can expect that we will provide a fulsome update to the market once an agreement has been reached, and we look forward to returning our focus to safe and sustainable mining at Penasquito. And now I'll wrap up in the next slide with our two non-managed joint ventures. Our share in Nevada gold mines and interest in Pueblo Viejo contributed 338,000 ounces of attributable gold production in the second quarter. And we look forward to both joint ventures delivering on their expected strong second halves. And with that, I'll pass it over to Karen to cover our financial results.
spk06: Thank you, Rob. And good morning, everyone. I'm happy to be joining the call today and look forward to presenting our second quarter financial results and answering any questions you might have. Before I get started, I wanted to talk briefly about what brought me to Newmont. When I was doing my due diligence on Newmont, I was excited to learn about the company's clear and consistent strategy, leading approach to safety and sustainability, its global diverse portfolio of assets, and deep project pipeline to position Newmont for long-term success. Joining in May, I've had the pleasure to meet Newmont's senior leaders and the board and spend time with my very talented finance team. And I can say that the strength of our people and capabilities have already far surpassed my initial expectations. Over the coming months, my team and I will be focused on building upon the strong foundation that we have today, partnering with the business to improve our overall financial performance, and driving our disciplined capital allocation strategy with a balance sheet that can support our strategic initiatives throughout the commodity cycle. Turning to the next slide, let's get started with a look at the financial highlights. In the second quarter, Newmont delivered $2.7 billion in revenue at a realized gold price of $1,965 per ounce, adjusted EBITDA of $910 million, cash from operations of $656 million, which includes over $100 million of unfavorable working capital changes. Included in working capital changes were nearly $250 million in tax payments in the second quarter, partially offset by draw on receivables. They would expect the draw on receivables to reverse in future quarters, the tax payments to decrease in the third and fourth quarter as they have in previous years. In total, we generated $40 million of free cash flow for the quarter, which is net of more than $600 million of capital spend as we continue to progress our most profitable near-term projects and position the portfolio for growth, both in ounces and margins in future years. We maintained a strong cash position with $3.2 billion and an attractive leverage ratio of 0.7 times net debt with adjusted EBITDA. We also maintained solid margins in the second quarter driven by higher realized gold prices and steady direct costs. Second quarter gap net income from continuing operations was $155 million, or 19 cents per diluted share. Adjustments included 5 cents related to unrealized mark-to-market losses on equity investments, 3 cents related to transaction costs associated with our pending acquisition of Newcrest, and $0.06 related to tax adjustments and other items. Taking these into account, we reported second quarter adjusted net income of $0.33 per diluted share. And it is also important to note that this number has not been adjusted for the $46 million in operating costs and depreciation at Penesquito since the strike commenced and at Eleanor while the site was proactively shut down due to the wildfires. As Tom and Rob noted, Newmont remains well positioned to deliver a strong performance in the second half of the year and achieve our full year guidance. Second quarter, we declared a dividend of 40 cents per share or $1.60 per share on an annualized basis consistent with the last two quarters and calibrated within our 2023 dividend payout range of $1.40 to $1.80 per share. We have now maintained a dividend yield above 3% for 11 consecutive quarters, and this continues to be the highest dividend per share in the gold sector. With that, I'll turn it over to Tom for an update on the timeline from today through to the close of our acquisition of Newcrest.
spk05: Thanks, Karen. Over the last two months since we announced the binding agreement to acquire Newcrest, My team and I have engaged with many of our important stakeholders, including employees, shareholders, local communities and government leaders. These conversations were aimed at listening to and answering questions, whilst also ensuring that the benefits of the transaction and Newmont's strategic rationale were well understood. Over the next couple of months, we will continue to progress the various regulatory approvals ahead of closing the transaction. primarily in Australia and Papua New Guinea. And I'm pleased to advise we've already received clearance from the Canadian government. Earlier this month, I visited Papua New Guinea for the second time, meeting with various government officials, including Prime Minister James Marape, Deputy Prime Minister John Russo, and Mining Minister Sir Arno Parler. As we continue this engagement, we remain excited for the opportunity to operate Lahia and develop the world-class Wafi Gold Pool project. We are diligently working towards lodging a scheme booklet and filing a proxy statement this quarter with shareholder votes expected in October. We then expect to close the transaction in November and begin the important work to safely integrate the Newcrest teams and operations into our portfolio. then be in a position to provide 2024 guidance for the combined company in February of next year, along with our fourth quarter and 2023 results. With that, I'll thank you for your time today and turn it over to the operator to open the line for questions.
spk00: Thank you. We will now begin the question and answer session. To ask a question, you may press star followed by the number one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star followed by two. At this time, we will pause to assemble our roster. And the first question today goes to Greg Barnes of TD Securities. Greg, please go ahead, your line is open.
spk03: Yeah, thank you very much. Tom, I just want to ask about inflationary pressures and how you see them evolving into the second half of 23 and 24. X any volume improvements you're going to get, which obviously will help on the gold primes basis.
spk05: Thanks, Greg. Good morning. What we're seeing in our direct costs is largely consistent with what we expected as we guided this year. And I might just step through that in a little bit more detail. About half our cost base is labour, about 50% is labour, made up pretty evenly between employees and contractors. Employees largely stable and expect that to remain largely stable through the rest of this year and into next, certainly seeing some settling down in Australia, Canada, United States. Contracted services also have stabilised, so still at a higher cost that we saw with the inflation coming through last year, but largely stabilized, maybe a little bit of easing into the second half of this year, but certainly seeing the volatility come out of that. At 50%, that's a pretty important driver. 30% is materials and consumables, so it's the various reagents, particularly cyanide, explosive, steel for grinding media and the like. We're seeing those largely consistent with what we expected. Natural gas prices have come off, which is then flowing through to the prices that we're seeing for both cyanide and explosives. So a little bit of relief, a few tailwinds with those consumables and would expect that to flow through the second half of this year. We'll see supply of natural gas maybe tighten a bit, which may put a bit more tension on those prices, but certainly expecting to see that stable or a little bit of an improvement and still pretty much holding its own as we look at the grinding media we remove around the place. And then the next big category is fuel and energy, 15%. That's driven by diesel and we've certainly seen some relief in oil prices relative to what we've assumed. And we would expect to see that carry on through the second half of this year, but a volatile commodity and one that will continue to be conservative as we think about our assumptions for that. So a few tailwinds, Greg, are some stability and consistent with what we expected for 2023. Great.
spk03: That's very helpful, Tom. And just a follow-on. In the presentation, you talked about the guidance you're going to provide in February. I'm just wondering how detailed you expect to be in February around Newcrest and your expectations for how that's going to fold into the company in 2024.
spk05: We're certainly working towards being in a position where we can give you a view of 2024 for the combined portfolio, which would include our view of the five Newcrest assets being folded into our operations. If things continue to go to plan in terms of regulatory approvals, shareholder votes and close, integration planning busily being done, we will receive the keys to the car, so to speak, in early November, I would hope. And that gives us time to work through those mine plans, apply the new model lens on those mine plans and the assumptions we make for some of the key input assumptions and certainly working towards being in a position to provide the 2024 guidance for the combined portfolio in the February timeframe.
spk03: And what about the three to five year guidance beyond that? Will that wait?
spk05: We will monitor that and see how those numbers come together. We'll certainly be looking in the 2024 timeframe to provide as much information as we think appropriate, certainly for 2024 in that February timeframe, and then look for a logical time for a capital markets day to share some more information on the combined portfolio and maybe even look to try and include some sort of site visit with that. So that's still work in progress, Greg, but certainly 2024 is in our sights for that February timeframe.
spk03: Great. Okay. Thank you, Tom. That's it from me.
spk05: Thanks, Greg.
spk00: Thank you. And as a reminder, if you would like to ask a question, please press star, followed by one on your telephone keypad. And our next question goes to Anita Soni of CIBC Markets. Anita, please go ahead. Your line is open.
spk07: Hi. Good morning, Tom and team. My first question with regards to the transaction, could you tell me, did the independent advisor or the independent expert for Newcrest reach their conclusion yet?
spk05: Good morning, Anita, and thank you for dialling in. I think what might be a little vacation period for you, so you could hear your voice and hopefully you can get off this call and back to some better use of time. They're still working through that process, so that's... It's in train, working through, but not finished yet. But it's on schedule in terms of when we need that information in order to be able to proceed for the timeline we had in the deck.
spk07: Okay, and then the second question, and then I'll go back into the queue. I'm just trying to get some of the grades that Rob quickly went through in terms of, so let's start with muscle weight. I think they said 30% improvement in tons mined and then grades by 40%. Is that a Q3 or a Q4? If I do that in Q3, I get well above your guide.
spk05: It's certainly starting to see a step up in grade in both Q3 and Q4, pretty consistent across Q3 and Q4 for Musselwhite and Neto. We're opening up, got a nice double lift state coming on, which is going to give us both some improvement in grade and volume. And then we've got some states and some high grade material also coming on as a result of the work in the first half. So pretty consistent grade, Rob, through the second half and certainly seeing a a step up in volume coming out, that will ramp up over the third and fourth quarter. So the highest volume through the mill in the fourth quarter, grade pretty consistent.
spk07: Okay, and then just in terms of, I think it was a HOFA where you were talking, or maybe it was a CHEAM, 35% uptick in grades in Q3, is that correct?
spk05: That's right, Anita. So in a CHEAM, we We stepped out into stockpiles, got the... I mean, if those of you who know Achievement, it's a long, narrow pit. And so as we're getting the last of the ore from the bottom of the pit in the current layback and wanting to bring down the next layback, we want to make sure that we maximise that ore. So we stepped out of the pit, made sure catch benches and the like were all in good shape and swung into the stockpiles we would have been in in the fourth quarter. And now we're back in that ore And so we've basically got rudder mine, high-grade oil from the bottom of the pit coming through. You'll see most of that through the – actually, no, you'll see a good portion of that build through the third and fourth quarter now. So highest grades in the fourth quarter building up through the third.
spk07: Okay. And then lastly, Sarah Negra, I just want to make sure I heard you correctly. So 30% increase in tons mined and 50% increase in grade, but I don't think Rob said which quarter it was. Does that start in Q3 or is it Q4 related?
spk05: You'll see the step up in grade at Cerro Negro pretty consistent through the third and fourth quarter at Cerro Negro. Then you'll actually see quite a step up in TAN's mind as we've got more ability to access ore, particularly as we start to extract ore from San Marcos for the first time. pretty consistent second half across Q3 and Q4 in terms of material coming through the mill and the grades looking pretty consistent through those two quarters. Rob, that's correct. Okay.
spk07: All right. Thanks. I'll leave that there. Thank you.
spk05: Anita, probably one other on a half-o. We've got the stars really lining up in terms of the real sweet spot in the Sebeka open pit, as well as now having the third level of Sebeka underground open, more than 20 draw points open. So we've got both the combination of high grades and tums coming out of open pit and underground at a half-o. So it's another important one to be thinking about as you think about the second half of the year. But that's certainly fourth quarter weight. with those stars lining up on both opens in an underground with mine sequences.
spk07: Okay, thank you very much.
spk05: Thanks, Anita.
spk00: Thank you. The next question goes to Mike Parkin of National Bank. Mike, please go ahead. Your line is open.
spk08: Yeah, thanks. Guys, can you just give a bit more colour in terms of the background on pausing at Sierra Negro for the mining, and does it have, with what you've kind of investigated and decided on a go-forward basis, does it have any material impact on the cost structure of that asset going forward?
spk05: Good morning, Mike. Certainly, absolutely no impact on cost structure going forward. It was, from time to time, certainly my experience and Rob's experience, You'll get an event, and we had a significant potential event in the underground mine that involved a loader that we weren't happy that we had the control environment to be managing at the standard that we'd expect around, basically it was a piece of equipment involved in an incident. It's a remote mine. As you know, Cerro Negro is in a very remote part of Argentina in Patagonia, and we wanted to ensure that the standards that we expect were clear across the four crews that worked there and that we went through the underground mine and did the appropriate inspections to make sure that equipment and conditions underground were well understood. You're obviously working underground in a remote location so it's really important that we can be satisfied that the expectations are well understood and the conditions underground are well understood. We're also entering into a second half, which is a step up in both grade and TAM. So we're moving into a period of time where we're going to be asking the team to step up and be working more fronts. So we took the time to ensure that conditions were clear and expectations were set. There's nothing in terms of additional cost base, it's more about just ensuring that the The leaders at all levels and their mining teams are understanding the standards that we expect and that we can confidently move forward with mining what will be a strong second half for Cerro Negro.
spk08: Okay. So, pretty much to sum up, it's more kind of ensuring operational best practices of Newmont are being executed at that site.
spk05: That's right, Michael. We will do that from time to time. In my experience, there are times when you must always maintain a chronic unease with safety and there will be events that come from time to time. And part of maintaining solid safety performance is recognising when you may need to just pause and ensure everyone's got their mind on the game, understand what's expected and then move forward with confidence. That's something we do from time to time. Certainly at Serenegro we decided that this needed a couple of weeks down. I'd expect as we do our integration planning for Newcrest and think about five new operations coming into our portfolio, think about the work we might do through November and December, that's certainly one of the debates we're having in terms of how do we ensure that the standards that we expect at Newmont are there in place in day one at those new crest operations. So it's something that certainly both Rob and I have done in our careers from time to time when we see a need to reset expectations.
spk08: Okay, excellent. And just one question on Penesquito with respect to the stream. Is there any minimum delivery of silver that you tie to, or are you fully free to shut down and not deliver silver when you're not producing?
spk05: That's correct. That's my understanding, Mike. We'll get the team to just run that to ground. If it's different from that, we'll let you know, but that's our understanding.
spk08: Okay. That's it for me, guys. Thanks so much. Thanks, Michael.
spk00: Thank you. The next question goes to Tanya Jakuskonek of Scotiabank. Tanya, please go ahead. Your line is open.
spk01: Good morning, everyone. Thank you so much for taking my question. I wanted to ask about Penesquito just to get some clarification just from so many news articles that keep coming out. I'm just trying to understand, with the union being on June 8th, I just want to make sure that I understood some of the articles that came out. Has the union gone to paying the workers? Because my understanding was the workers aren't being paid, being on strike, but the union has gone in to pay the workers. Do we know if that's a correct statement from some of the papers I was reading?
spk05: Tanya, that's correct. The union members who are on strike are not being paid by the union that they're members of. And as part of our position at the negotiating table, we're not paying back pay.
spk01: Okay, so the union's not paying and you're not paying. So they haven't been paid since June 8th?
spk05: That's right. So a workforce of some 2,000 people aren't being paid. You've got a much bigger contractor workforce that aren't being paid. You've got an extended community to some 28,000 people that rely upon those wages to receive... see some benefits, they're not being paid. We're the biggest taxpayer in the state of Zacatecas. They're not getting taxes and our contributions are close to $2 billion a year to the Mexican government through both taxes and royalties are not currently being paid. So our message to the union leadership is we have a fair and equitable agreement. We paid in accordance with that and we strongly encourage them to get their members back to work so that we can start paying wages again.
spk01: Yeah, it's just there was an article, Tom, that's saying that the union leader, the union was taking money from their coffers and paying the workers. I just wanted to clarify that. And just how should we think about the cost of the, you know, on a monthly basis being on care and maintenance as we go into July? How should I think, number one, what sort of cost should I be thinking about you incurring on care and maintenance? And number two, would that be coming through the operating costs, or would you take that out and put it under other? Thank you.
spk05: Yeah, thanks, Anita. So you'll see, and I'll get Daniel to catch up with you after the call, but we've got something in our earnings release. If you think about those costs through the month of June, at Penasquito we incurred $23 million of operating costs, another $15 million of depreciation. due to the suspension of operations. So it's down for most of June. That's a pretty good indicator of what that's going to look like.
spk01: Okay. And I would run that through the costs. You're not going to take it out separately. Sometimes we've taken it out and excluded it out of operating costs into other items.
spk05: No, we don't plan to do that, Tanya. So what you described is how best to model it.
spk01: Okay. Thank you for that. And then if I could just go back to Anita's question on just the second half performance with some of the mines that I think would be evenly distributed, a hassle and muscle are going to get higher Q4. Is there any other operation that's going to have a higher Q4? Because when I look at the numbers, you're looking at a production profile. of Q4 being significantly stronger than Q3. Is that how I should think about it?
spk05: That's right, Daniel. We're building towards a strong fourth quarter. You'll have across some of the parts of the world in which we operate, you tend to get a bit more wet weather in the third quarter, so you typically see us have those drier locations that really bring them home in the fourth quarter. Peploviejo ramping up with 40% of Peploviejo, that's an important part of H2. Nevada Goldmines got into a strong second half, that's an important part of our H2. Tanami, we've got pretty consistent tons through the mill in the second half, but we move into our highest grade stoves in the fourth quarter, so that's an important part important story. And I think we've probably covered most of them. Miriam certainly got a stronger second half, pretty consistent across Q3 and Q4. So I think we've covered the key drivers of H1 versus H2 and where the higher fourth quarter would come from.
spk01: Okay. I appreciate that. When you look at the production profile excluding Penasquito, depending on what happens there, it is looking that the fourth quarter is the one that is going to carry quite a bit of weight in order to get your guidance.
spk05: That's right, Tanya.
spk01: If I could just do one final question.
spk05: Sorry? Go for it, Tanya.
spk01: Okay, sorry, I thought you were going to say something else. Just another follow-up on Greg's questions on the inflationary relief that you are seeing. I just wanted to confirm, because some companies are not seeing exactly the same thing, would it be also fair to say that you are seeing cyanide pricing coming down relative to what you have? And I just kind of wonder, in your agreements, to restock your inventories on these lower level prices that are out there. Some contracts or some come up in three months, six months. I'm just wondering when we are expecting you to renegotiate at these lower levels so we can see when those would go through your cost structure.
spk05: Tanya, our supply chain strategy, particularly with our key... Our key commodities is to have strategic contracts that are long term based upon the size of our portfolio and we build into those rise and fall calculations. So we pretty much then become a price taker but at a competitive price and then we'll have flowed through the, as you see prices go up and down, we have some relief in terms of the volatility of our price increases or price decreases, and then with the inventories we have at sites, then it takes a little while for that to flow through. So we are on the back of natural gas prices coming off. We are seeing ammonia prices down, caustic soda prices are also down, and we are seeing improvement in both cyanide cost and explosive costs. So that is flowing through, and it's linked back to that that key commodity price and it's flowing through our contracts as it'll wash through our inventories and we just continue to, through those contracts, take the prices as we've agreed in those contracts and that then takes normally a month or two or three to flow through our inventories.
spk01: Okay. And so those we could see then coming in in Q3 and into Q4.
spk05: Yes, we'll see some of that benefit in Q3 and Q4, absolutely.
spk01: Okay, great. Thank you. I'll get back in the queue. Thank you.
spk05: Thank you.
spk00: Thank you. The next question goes to Brian McArthur of Raymond James. Brian, please go ahead. Your line is open.
spk02: Good morning. Can I just follow up on Penesquita? Tanya covered the ongoing cost, but where's the concentrate situation? Is there concentrate in transit that's off-site, that's provisionally priced, and you're going to have some sales in Q3 if nothing happens? I was looking at your sales versus your production, and I know it varies quarter by quarter and lead versus zinc. Where are we on that? Is there actually a cash... out or inflow to you from concentrate or is it all stuck at site or where's that situation at the moment?
spk05: Good morning, Brian. So there's nothing left at port and all the sales have been recognized in the second quarter. So there's nothing in the supply chain from the mine site to the smelters that hasn't been sold and recognized. And then we have a small amount of concentrate stockpiled on site, but not much. site's been put into care and maintenance in very good nick and everything's safe and secure on site so the expectation that common sense prevails and we've got a workforce back at work we can ramp up very quickly with a lot of experience and being able to ramp up from the pandemic days so we know how to get that big mine back up and running and producing concentrate very quickly so it's pretty clean in terms of in terms of where we sit with the concentrates.
spk02: Great. Thanks very much, Tom.
spk05: Thanks, Brock.
spk00: Thank you. And we have a follow-up question from Anita Soni of CIBC Market. Anita, please feel ahead. Your line is open.
spk07: Sure. Thanks for taking my follow-up. So a few more questions in terms of the details. At Tanami, could you just go over what you're looking for in terms of grades and tons in the Q4, Q3? Yes.
spk05: No problems, Tanya. Q3 pretty consistent. Sorry. Did I call you? Sorry. I'm losing the plot.
spk07: My apologies.
spk05: I did it. That's what Daniel was writing me a note to say. Daniel, if you're still listening, my apologies. And Anita, my apologies. Obviously, I need a holiday. Sorry. I'm embarrassed. That was embarrassing. The high grades are in the fourth quarter. You'll actually see a little bit of a step up in the third quarter from what we were able to see in the second. And then we get into some nice high grade stopes in the fourth quarter. So pretty consistent through the mill and a step up in the third and fourth quarter as they're free and clear of some of the disruption from the weather in the first half. So you see a step up in volume through the mill, but the real grades flow in the fourth quarter. Nothing outrageous, certainly well within the grades that we've seen historically.
spk07: Okay, and then in terms of the projects, I was noticing the spend at the different projects, and Tanami looks, we don't really have sort of like the, or maybe I've lost track of the the amount of time that it's going to take to build out these projects. We are in the process, like a percentage, just from a time standpoint, but a half or north, it seems like the spend is not, it's got the same startup as Tanami Expansion, and I only see about 30% of the spend, whereas Tanami is about half the spend. So could you just give us a little color on the timeframes and the cadence of spending at both Tanami and a half or north?
spk05: Sure, I'll start off, Anita, and Rob might want to build on this, but the Halfo North has really been a first half or a quarter of just getting the work fronts opened up. So a lot of clearing of land, bringing equipment in, and so gearing up with positioning ourselves to really get stuck into doing the pre-strip work and then the civil works to then start constructing the... the processing plant and other infrastructure. So it's in a process of gearing up and then being able to accelerate up in terms of an open pit mine with a processing plant. Tanami, we're in that series process of stepping through the shaft, doing the concrete lining and then bringing in the various facilities that get attached to that concrete wall. So that's in a now starting to get a pretty steady state for that critical path item. The other thing that's largely the surface work in terms of most infrastructure is largely done. So clearly there's a whole bunch of winding equipment to install at the appropriate time on surface and not completely done. But at Tanami, we've got the underground excavations all done, but you're really in that process now of mobilising those construction crews underground to start building out the conveyors and the crushers and all the supporting infrastructure for that. So gearing up to get that work front really going ahead. quite different projects in terms of infrastructure underground, a shaft lining, and then building an open pit mine and the associated infrastructure. Rob, anything you can build on that?
spk04: Anita, I would just emphasise what Tom said. The number of fronts that we're actively working on at Tannermine is far larger than at a half o' north. So every part of that project is getting worked on. And as Tom said, at a half o' north, and seeing it just a month or so ago, The civil works is progressing very, very well. And in the coming months, that's when we will see
spk07: And then in terms of, you know, the, that work, how much has been sort of like, I guess, committed or, you know, how much of that work in the next, in the back half of this year and early next year, do you have a visibility on the, on the cost level? I guess I'm just trying to understand if you haven't, yeah. What I was trying to understand is if, you know, if you haven't really started getting into the guts of it, how, certain are you that the CAPEX guidance range is still good?
spk04: The key thing which I'd certainly say Anita is that you know on the procurement side of things that we have basically secured just about all the supplies for both the projects and I think that protects us enormously. You know the engineering that we've also done on both projects is at a significant level as well so we've got a large degree of confidence You know, the biggest thing, as always, is that with shaft building, you know, we progress down there. And, you know, at the moment, we're aligning that very well. We've got patches of overbreak, which we'll deal with. But at the moment, because of the engineering, the procurement, we're still very much on track.
spk07: Okay, thank you. That's it for my questions.
spk05: Thanks, Anita.
spk00: Thank you. This concludes the question and answer session. I would like to turn the conference back over to Tom Palmer for closing remarks.
spk05: Thanks, Operator. Just a quick one for Mike Parkin's question. Just confirmed there's no minimum payment on the Silver Stream, Mike, if you're still listening on the call. Thank you all for making the time for the call this quarter and please enjoy the rest of your day and thank you for your time. Thanks, everyone.
spk00: Thank you, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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