Newmont Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 27, 2023

There are 8 speakers on the call.

Operator

Good morning, and welcome to Newmont's First Quarter 2023 Earnings Call. All participants will be in a listen only mode. 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.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining Newmont's 1st Quarter Earnings Call. Today, I'm joined by Rob Atkinson and Brian Tabault, along with other members of our executive leadership team, and we'll all be available to answer questions at the end of the call. Before I begin, please state our cautionary statement and refer to our SEC filings, which can be found on our website. Dimont continues to lead the gold industry in safety, sustainability, profitable production and shareholder returns.

Speaker 1

Our solid Q1 performance is underpinned by our unmatched portfolio of world class assets, our proven operating model, A balanced disciplined approach to capital allocation and most importantly, our values driven commitment to leading sustainability practices. With a strong outlook combined with the strength of our team and the quality of our assets, we remain on track to continue safely delivering long term value To all of our stakeholders. During the Q1, Newmont produced 1,300,000 ounces of gold And 288,000 gold equivalent ounces from copper, silver, lead and zinc, generating nearly $1,000,000,000 in adjusted EBITDA And all in line with the expectations we provided in February for Q1. We continue to expect the gold production for this year We'll be weighted 55% to the second half, and we remain firmly on track to achieve our full year guidance ranges. With $6,500,000,000 in total liquidity, we continue to maintain an investment grade balance sheet, Providing the financial strength to sustain our business throughout the price cycle as we continue to invest in our most profitable growth projects And return cash to our shareholders.

Speaker 1

Through our established dividend framework, we declared a Q1 dividend of $0.40 per share, Demonstrating both our ongoing commitment to shareholder returns and the confidence that we have in our business. During the Q1, we further rationalized Newmont's portfolio with the sale of our interest in Triple Flag, Generating $179,000,000 in cash proceeds. And we remain on track to deliver an incremental $440,000,000 Of full potential cost of productivity improvements this year, a key part of Newmont's continued efforts to deliver stable production and strong margins Sustainability, integrity, inclusion and responsibility. They have been developed and embedded over a long period of time And through multiple generations of leaders at Newmont. Together, they are fundamental to how we run our business, where we choose to operate And how we conduct ourselves on a daily basis.

Speaker 1

Last week, Newmont launched our 19th Annual sustainability report and our 2nd annual taxes and royalties contribution report, providing a detailed and And next month, we will issue our 3rd annual climate report, outlining Newman's climate related risks and opportunities, Our strategic planning around various climate change scenarios and the specific actions we are taking to reduce our carbon footprint. Each of these reports are part of a robust set that detail our company's management of the sustainability areas that matter most to our stakeholders And to our business. At the very core of Newmont's leading sustainability practices is our commitment to driving a fatality, injury and illness free workplace. And this begins with a disciplined laser focus On safety fundamentals. In the Q1, we completed more than 172,000 interactions By leaders in the field that were focused on the critical controls that must be in place at all times to prevent fatalities.

Speaker 1

To highlight one of the direct consequences of this work, compared to the same quarter last year, In Q1, we experienced a 56% reduction in potentially fatal incidents or what we call significant potential events. This improvement could not have been achieved without our dedicated workforce and the supporting systems that we have in place To maintain and improve our safety culture. Last month, we recognized several members of our team through our annual CEO Safety Awards, acknowledging those teams and individuals that set the standard for high quality health and safety practices. From a pool of over 50 nominees, we selected winners in 3 categories, SAFE leader, Safe team and partner in safety. We are really proud to be able to recognize the dedication demonstrated by our team members each and every day.

Speaker 1

We are also proud of our heritage as a values driven organization with a clear purpose. We have learned that achieving our purpose requires strong governance and a commitment to accountability and transparency. As part of that commitment, Newmont has been disclosing our sustainability performance since 2,004. Among the key highlights shown on this slide from our 2022 sustainability report is one of the most important focus areas for the mining industry today, Creating a safe, healthy and equitable workplace, one that values our differences And ensures that everyone feels safe and is safe working at Newmont. Over the last 18 months, The mining industry has come under significant scrutiny following a West Australian parliamentary inquiry into issues of sexism, Racism, harassment and bullying in the workplace.

Speaker 1

I'm disappointed to acknowledge that Newmont is not immune for this unacceptable behavior That is taking place in workplaces across the world. And it is vital that as leaders, we make sustainable changes To address and eliminate these behaviors. To manage our response, last year, I appointed a senior operational leader reporting directly to me and tasked with listening to our workforce To better understand what is being experienced, so that we can make lasting and meaningful change. Over the last few months, More than 1,000 people have provided thoughtful feedback and personal experiences through 100 focus groups And more than 150 1 on 1 interviews, assisting us in understanding the extent, nature And recall of these behaviors in our organization. We will remain transparent in our acknowledgment of these behaviors Andrew provided an overview of the emerging themes from these conversations in our annual sustainability report.

Speaker 1

This ask and listen process is helping us to identify the improvements required in our systems, the symbolic actions that we can take And now changes in our leadership behaviors that will drive a sustainable change in our workplaces. I'll now turn it over to Rob and then Brian to take us through each of our operations and key development projects, Along with a review of our quarterly financial highlights, then I'll wrap up with a brief update on our proposed acquisition of Newcrest. Back to you, Rob.

Speaker 2

Thank you, Tom, and good morning, everyone. Since the start of the year, I visited 3 of our 4 regions at Newmont. I spent underground with the team at Tanamine reviewing the status of our expansion project at this world class asset with Mia Gaus, Our Senior Vice President in Australia and our experienced leadership team. I traveled to Ghana to see firsthand the progress at our Subika Underground Mine And there are Haapo North project with Dave Thornton, our Senior Vice President in Africa. And I also traveled to each one of our sites in Canada, Eleonore, Musselwhite and Porcupine to review the productivity improvements we are achieving under the leadership of our North American Senior Vice President, Bernard Wessels.

Speaker 2

And as Tom just described, our sites and regional leaders are very focused on safely delivering their plans, Whilst continually working to create a safe and inclusive environment for each person working at our operations. So turning to the next slide, let's begin with an update from South America. Enniskito continues to deliver strong mill performance, Largely due to the implementation of our full potential program over the last 4 years and with the ongoing support from our operations support networks. With more than $300,000,000 in annual synergies from processing improvements alone, our team has been hard at work further debottlenecking Penasquito's processing circuit, improving flotation and filtering capacity, as well as optimizing maintenance schedules to increase mill availability. And as a direct result, Penasquito processed 9,900,000 tonnes in the Q1, putting us on track to mill an impressive 37,000,000 tonnes of ore In 2023, mining continues in the Chile, Colorado pit as planned.

Speaker 2

And whilst gold production was lower when compared to the 4th quarter, It was completely in line with the expectations that we had previously communicated due to mine sequence at this very large polymetallic mine. Linked to this sequence, co production was strong this quarter, generating $266,000,000 in revenue due to higher silver, Lead and zinc grades being delivered from the Chile, Colorado pit. And also please note that 55,000 gold equivalent ounces In finished goods inventory at Penasquito was built up at the end of the quarter as a result of planned timing on concentrate shipments. This concentrate has since been sold and the revenue will be realized in the 2nd quarter. Also in Q2, we expect both gold and silver grades to decline by around 10% compared to Q1 due to the planned mining sequence With the full expectation that higher silver, zinc and lead grades in the second half and resulting gold equivalent ounces We'll offset the planned lower gold grades in 2023.

Speaker 2

We expect gold and coal production at Penasquito to be weighted around 55% to the second half of this year. Turning to our leach only operations in Peru, Yanacocha delivered steady results in the Q1. Production is expected to increase by more than 20% beginning in the second quarter when we start to realize the benefits our continued use of our injection leaching technology combined with our re leaching programs. At Merrion, our team has begun the planned stripping of the next layback in the Merrion pit. And as reflected in our guidance, this will result in higher waste tons being mined And lower ore tonnes in ore grade being processed this year.

Speaker 2

And finally, in Argentina, Cerro Negro delivered another solid quarter Due to higher underground mining rates and mill throughput, gold production is expected to steadily increase each quarter from a combination of sustained productivity improvements And the progression of the first wave of our district expansions at Cerro Negro. We anticipate production We'll be weighted around 56% to the second half of this year with the site on track to add high grade ounces from San Marcos beginning in the Q3. Now turning to Australia. Auditington continued its momentum from the 4th quarter, Delivering strong gold and copper production in the Q1, whilst also completing a planned 7 day preventative maintenance shutdown of the processing plant. And as we look ahead, the site is expected to deliver improved results during the Q2 supported by steady ore grades and strong mill performance.

Speaker 2

And as we ramp up waste stripping in the South Pit in the second half of the year, we expect to increase total material mines around 20,000,000 tonnes per quarter, Helping to maintain steady gold and copper production despite planned lower ore grades being delivered to the mill. Moving up to Tanami. And as previously discussed, the Northern Territory in Australia experienced record wet weather And associated extensive flooding during late 2022 and the start of 2023, which resulted in the complete closure of the main access route for supplies to Tanami from late December, with the Tanami track only being fully reopened and able to transport normal loads in late February. As described during our last earnings call, this road closure impacted our ability to move key consumables to site, Resulting in the depletion of all of our wet weather stocks on-site and the cessation of milling operations And gold production for 32 days during Q1. However, during this period, our team remained agile And responded to this event with mining operations continuing and ore being stockpiled in front of the mill.

Speaker 2

Scheduled maintenance was moved forward to reduce downtime in subsequent quarters. And in partnership with the Northern Territory government and local contractors, We successfully repaired and reopened the Tanamine track. Due to these efforts, Tanamine expects to recover most of the ounces from event over the course of 2023 and is on track to more than double gold production in the Q2. It's also important to note that all of our key consumable stocks at site have returned to normal operating levels, and we have continued to progress Our second expansion at Tanami. The team has now completed more than 565 meters of the concrete shaft lining In addition to a camp extension to accommodate our current and future workforce.

Speaker 2

And despite the temporary closure of the main access route during the Q1, The project remains on track to deliver significant ounce and cost improvements in the second half of twenty twenty five. And now moving to Africa. Our team delivered lower ore grades in the Q1 as our team commenced stripping of the next layback In line with the expectations previously communicated, strip ratios will remain high throughout the year as planned With stronger gold production expected in the 2nd and third quarters due to higher grades coming through. At Ahafo, we delivered a solid quarter, A strong mining rates and plant throughput partially offset lower grades due to planned underground rehabilitation That impacted access to high grade material at the Subik underground. During Q1, the site experienced a conveyor failure That impacted 1 of the 2 conveyor systems transporting ore from the secondary crusher to the mills.

Speaker 2

However, the team was able to put a system in place bypass the conveyor and offset any impact to production. As a result, Ahafel remains on track to achieve its annual guidance range The steady increases to production each quarter still expected as we open up additional drop points in the Sibig underground. We anticipate gold production at Ahafo will be weighted around 60% to the second half of this year due to higher mining rates And the delivery of more high grade ore to the mill over the course of the year. Our Ajo North project continues to progress well With approximately 85% of the total land area available for construction. And as you can see in the photo on this slide, We have transported a large portion of the necessary civil construction and mining equipment from Ahafo South to Ahafo North as we prepare to develop this next important phase of our Ahafo complex in Ghana.

Speaker 2

Now moving across to North America. As discussed during our last earnings call, our North American operations have made tremendous progress due to the guidance from our experienced team of leaders, The strength of our integrated operating model and the support from our proven full potential program. Starting with CC and V, our leach only operation remains A solid contributor with slightly lower production compared to the previous quarter due to waste stripping in the Globe Hill pit as planned. At Eleonore, the site delivered another strong quarter driven by improved mining rates and mill performance compared to the 4th quarter. And these improvements combined with the progress we've made in workforce stability will enable Eleonore to continue generating steady production levels throughout the year More than offsetting planned or ore grade.

Speaker 2

Musselwhite delivered lower ore grade and mining rates compared to the 4th quarter As the team focused on backfill activities to expose higher grade stopes and when combined with the efficiency improvements achieved through double lift stoping, Musselwhite is expected to deliver increased production each quarter in 2023 with nearly 56% of production anticipated in the second half of the year. And finally, Porcupine delivered higher ore grade and improved tonnes mined, largely offsetting the impact from planned mill maintenance during the Q1. The Pamor project continues to progress well as we prepare for an investment decision in late 2023. Collectively, our Canadian sites have improved production by 26% to the same quarter last year, primarily due to our continued focus on closely managing labor vacancies and absenteeism, Also improving productivity and reliability with greater access for our leadership and full potential teams post the Canadian border restrictions. Eleonore, Musselwhite and Porcupine each achieved their highest quarterly performance in terms of development meters.

Speaker 2

And for comparison, this is an overall improvement of 37% versus Q1 2022. And also as a direct consequence, tonnes mined improved 26% and ore tonnes processed also increased 7%. These very pleasing results are a true testament to the power of our operating model and its ability to replicate leading practices Across our global operations. And these improvements will be on just the ounces delivered. We have also seen the significant event frequency rates at our 4 North American operations cut in half due to an increased focus on critical control verifications, Proving once again that a strong safety culture is key to delivering on our commitments.

Speaker 2

Finally, to our 2 non managed joint ventures, our 38.5 percent ownership of Nevada Gold Mine And 40% interest in Pueblo and Bejewel contributed 321,000 ounces of attributable gold production in the 1st quarter, representing 20% of our combined non managed joint venture production guidance for the full year. As highlighted at our full year earnings presentation in February, a tragic workplace fatality occurred at our joint venture Nevada Gold Mines. The The fatality occurred at the Carlin Goldstrike underground operation on the 23rd January and a detailed investigation was carried out by our JV partners, Which included one of Newmont's most senior safety leaders as a key member of the investigation team. MGM and Newmont's executive leaders have also met to discuss and share safety strategies, interventions and tactics to help ensure tragedies of this nature do not occur again at NGM. Both of these joint ventures are core to the Newmont portfolio, and we look forward to continuing to work with our managing partner to help ensure A safe and productive future for Nevada Gold Mines and Pueblo Viejo.

Speaker 2

And with that, I'll pass it over to Brian to cover our financial results. Over to you, Brian. Thanks, Rob, and

Speaker 3

good morning, everyone. Let's get started with the financial highlights. In the Q1, Newmont delivered $2,700,000,000 in revenue at a realized gold price of $1906 per ounce, driven from 21% of our anticipated full year production And including $376,000,000 from our copper, silver, lead and zinc co products, adjusted EBITDA of $1,000,000,000 And cash from operations of $481,000,000 which includes $360,000,000 of unfavorable working capital movements, partly due to the timing Concentrate shipments at Penasquito. As stated previously, we are currently in a period of meaningful reinvestment. The capital spend for the Q1 of $526,000,000 as we continue to progress our near term projects and position our portfolio to be profitable resilient for decades to come.

Speaker 3

Additionally, through the continued rationalization of our portfolio, we sold our stake in Triple Flight, generated $179,000,000 of proceeds contributing to Newmont's strong liquidity profile at the end of the quarter with $3,500,000,000 of cash on the balance This investment grade balance sheet continues to be an integral part of our capital allocation strategy, maintaining financial strength and flexibility while balancing sustainable reinvestment and leading shareholder returns. 1st quarter GAAP net income from operations was $339,000,000 or $0.42 per diluted share. Adjustments included $0.05 related to a gain from the sale of our interest in Triple Flag As part of our ongoing portfolio optimization, dollars 0.05 related to unrealized mark to market gains on equity investments and $0.08 related to tax adjustments. Taking these into account, we reported 1st quarter adjusted net income of $0.40 per diluted share, relatively in line with the previous quarter, Despite lower production as planned and previously communicated, these results also include the impact from higher average realized gold price, Lower sales volumes, including the impact from the timing of concentrate sales at Penasquito as mentioned earlier And lower total costs applicable to sales, driven by lower overall production and higher gold prices. And as a reminder, this higher gold price environment We anticipate the unit costs will decline as production increases and inflationary pressures stabilize, improving margins and strengthening our financial position.

Speaker 3

As a reflection of the confidence in our business and our strong financial position, this morning we declared a Q1 dividend of $0.40 per share or $1.60 per share on an annualized basis, set within our established framework and in line with our Q4 dividend. This continues to be the highest dividend per share in the gold sector and remains within the top 20% of large cap dividend payers in the S and P 500. With this dividend declared, Newmont will have returned $4,500,000,000 to shareholders through dividends since introducing our framework in October 2020. And we have now maintained a dividend yield above 3% for 10 consecutive quarters. And with that, I'll pass it back to Tom.

Speaker 1

Thanks, Brian. I'd now like to provide an update on our potential acquisition of Newcrest. To briefly recap the key events and milestones over the last 3 months. On February 5, Newmont confirmed that we had submitted a non binding proposal Then on February 15, Newcrest advised that they had rejected our proposal, but offered to provide us access for limited non public information. After negotiating an appropriate non disclosure agreement, we were provided access to this information.

Speaker 1

As part of this process, my executive leadership team and I, along with some of our key subject matter experts, held a face to face meeting with the Newcrest management team. After reviewing this additional information, we submitted a revised non binding proposal to the Board of Newcrest with the following terms: A proposal to acquire 100 percent of the issued share capital by way of an Australian scheme of arrangement Under which Newcrest shareholders would receive 0.4 Newmont Shares for each Newcrest share. Newcrest would have the right to fund and pay shareholders a special dividend of up to US1 $10 per share to realize the value of franking credits And that the Newmont offer is best and final, subject only to no superior proposal emerging. On April 10, the Newcrest Board then agreed to grant Newmont access to confirmatory due diligence to enable us to put forward A binding proposal. Newmont has been provided exclusivity for a 4 week due diligence period that ends at midnight on May 11.

Speaker 1

Our proposed acquisition would combine the assets and talent of 2 of the sector's top senior gold producers and set the new standard for safe, profitable and responsible gold mining. Newmont has a long history and a shared heritage with Newcrest, establishing our Australian subsidiary way back in 1966, A subsidiary that would become Newcrest some 25 years later. And as part of that shared history, Our companies also have shared commitments to a strong safety culture and leading sustainability practices, which is in addition To the complementary portfolios of world class assets located in low risk mine jurisdictions. Our proposed acquisition would strengthen our established position in Australia, creating efficiencies and value with a shared workforce, technical expertise and large scale supply chain optimization. And it would build upon the district potential In British Columbia's highly prospective Golden Triangle, through a combination of operating mines and development projects That would deliver value through shared technology, mobile capabilities and orebody experience.

Speaker 1

With our scale and track record of successfully managing some of the world's top Tier 1 assets, This transaction would leverage Newmont's experience from the Goldcorp acquisition where we have demonstrated over the last 4 years That we can generate meaningful improvements to performance, stability and profitability, especially at large Open pit and underground operations. Since we closed the Goldcorp acquisition just over 4 years ago, On April 18, 2019, we have delivered more than $1,000,000,000 in annual synergies, Significantly exceeding our initial commitment of $365,000,000 More than 3 quarters of this synergy value Was generated by focusing on the fundamentals of mining and processing and achieved the disciplined application Of our proven full potential program and leveraging our Newmont operating model with an experienced team of leaders and subject matter experts. Penasquito, as the only Tier 1 asset in the Goldcorp acquisition, has been the main driver of this value, Generating more than $700,000,000 in annual synergies. At this very large open pit mine, We have increased the average payload on our fleet of 85 large 330 ton haul trucks Like 17 tons per load with scope for further improvement. This translates to an additional 12,000,000 tonnes of material moved per year for next to 0 cost.

Speaker 1

Combined with other load and haul improvements, we have increased the annual total material move to Penasquito by more than 20% Compared to 2020 with no additional equipment. Then turning to the processing plant at Penasquito, We have worked to understand and then address the bottlenecks in the crushing, grinding and flotation circuits of this complex polymetallic operation, delivering a 7% increase in annual throughput compared to 2020, Which translates to around $300,000,000 in free cash flow improvements each year from this operation. The Goldcorp acquisition involved the integration of 5 new operations, of which 1 Penasquito was a Tier 1 asset. It also involved the entry into 3 new jurisdictions. By comparison, Our proposed acquisition of Newcrest would also involve the integration of 5 new operations, but importantly, only one New jurisdiction.

Speaker 1

And notably, 2 of the operations, Cadia and Lihir, are Tier 1 assets, With Red Chris and Brucejack representing a Tier 1 district in the Golden Triangle of British Columbia.

Speaker 2

In the 4 years since April 2019,

Speaker 1

we have delivered on our value proposition and exceeded the commitments that we made. We have strengthened our position as the industry's recognized responsible gold leader. We have enhanced our portfolio through the successful integration I'll perform a Goldcorp assets into our Newmont operating model, delivering over $1,000,000,000 in annual synergies. We have optimized our portfolio, generating over $2,000,000,000 in proceeds from the divestments of Red Lake, Our share of both KCGM and Continental Gold, along with the continued rationalization of our non core equity portfolio, Notably, dollars 1,500,000,000 of the proceeds from these divestments was delivered within the 1st 12 months of the acquisition closing. And we have led the industry on capital returns, Returning more than $5,500,000,000 to shareholders over the last 4 years, while also completing over 1 point $5,000,000,000 in opportunistic share buybacks.

Speaker 1

Finally, our successful integration of the Goldcorp assets That's far beyond the synergies, assets divestments and leading shareholder returns. We have led the alignment of Former Goldcorp organization with Newmont's purpose, values, experience and culture. We have fully implemented Newmont's Safety systems and processes. We have integrated our sustainability goals and targets. Through our disciplined capital allocation process, The former Goldcorp assets have significantly benefited from the combined entity's free cash flow generation capability, And we have learned to operate in 3 new jurisdictions and forge lasting community and host country relationships.

Speaker 1

So in closing, I'm not able to provide any further details on the Newcrest proposal at this time as it is a live engagement. But I want to be clear with everyone on today's call that we will continue to be disciplined As we work through the due diligence process and determine synergies, and we will act in the best interest of our shareholders.

Speaker 2

Thank you for your

Speaker 1

time today. And with that, I'll now turn it over to the operator to open up the lines for questions.

Operator

Thank you. We will now begin the question and answer session. The first question comes from Jackie Kozlowski from BMO Capital Markets.

Speaker 4

Thanks very much for taking my question. And I'm going to apologize because I acknowledge that you've just mentioned you don't Want to give more information about the Newcrest transaction, but if I ask on that anyway. Let's say you finished the due diligence On the schedule, where the exclusivity period is still intact and it's approved by all shareholders. Can you talk a little bit about Time line for so when the earliest transaction closing would be and so what your thought to be for Integration of the assets?

Speaker 1

Yes. Thanks, Jackie. I'll attempt to answer question as best I can, whilst respecting the need for the ability the restrictions on being able to comment. We'll certainly in due diligence. So 1st and foremost, we'll go through that due diligence process.

Speaker 1

That's an exclusivity period for 4 weeks. But we'll remain disciplined in terms of understanding that information and assessing that and making our judgments and decisions. And it is a core capability of Newmont. We have a Part of our operating model is the capability of our operating and technical teams. And so when it comes to due diligence, we have a very strong team who are very experienced doing this work.

Speaker 1

So We are applying the full force of the Newmont organization on this due diligence exercise and we'll work diligently through that process and then make our judgments. Assuming that that will work well

Speaker 2

and sorry, Jackie?

Speaker 4

Sorry. Sorry, sorry. Go ahead. I'm sorry. I didn't mean to interrupt.

Speaker 1

Sorry, Jackie. Assuming that progress And we were we reached a binding agreement. Then there would be the regulatory approvals to work through. You've got the Australian, Papua New Guinea, the United States and Canada. And so it really becomes an understanding of those approval pathways and ultimately moving close is dependent upon that.

Speaker 1

That's still a little bit into the future and work in progress. So that normally takes a few months to work through those steps. In terms of one of the real strengths of and the strategic rationale of this deal of which there are many, One of the real strengths is that we already have an operating model and an infrastructure in Australia and in Canada. So if you think about an integration exercise, we already have Mia Gauss and a full business unit operating out of Australia. General managers report to me.

Speaker 1

We have a finance team, an HR team, a legal team, a sustainability and external relations team and technical team. So an integration in Australia involves 2 operations becoming part of Mia's team. She currently has Boddington and Tanami. When I was RSVP down in Australia, we had Boddington, Katamai, we had Waihi over in New Zealand, we had Jundee, we had KCGM. So we're scalable in terms of being able to accommodate additional operations.

Speaker 1

Exactly the same circumstance plays out in Canada, where we already have Eleonore, Musselwhite, Porcupine, Cripple Creek and Victor reporting through to Bernard Vessels and his North American leadership team. So again, Bruce, Jack and Red Chris can fit very comfortably into that scalable organization. For Lihir, Papua New Guinea is a new jurisdiction very similar to when we were in Indonesia with Tata Hijal. I joined Newmont over 9 years ago as the Senior Vice President Indonesia, based in Jakarta, managing the external relations with Indonesia and the Baader Hejo operation. And I think there are some analogies Between how I think about or how we think about, over here in a PNG and what we did very successfully for many, many years in Indonesia.

Speaker 1

So Jackie, hopefully that gives you some flavor of how we think about integration.

Speaker 4

No, that's helpful. Thanks, Tom. I mean, I think When you talked or when the media talked about this transaction initially, the thought was sort of a year end or early 2024 closing. But I would expect That as this process has gone on, that gets pushed back. Is that fair?

Speaker 4

Like, you'd be kind of mid-twenty 24 at the earliest time frame? I'm just thinking from a modeling perspective.

Speaker 1

Yes, Jackie. I think that's too far into the future. It's best you can look into the crystal ball. Working through those approval process is still We're in the hands of working through appropriate approval processes, but I think it's a shorter time frame than what you just articulated.

Speaker 4

Okay. Okay. That's helpful. Thank you. And maybe just as a follow-up question or a related question.

Speaker 4

You've mentioned Maybe potential sanctioning decision or investment decision for Pemore in late 'twenty three. And I know previously you've talked about Yanacocha Sulfides Investment decision as well. Can you talk a little bit about like what you're going to be looking for Either independently of this Newcrest transaction or potentially in light of this Newcrest Transaction, what you're looking for in order to make a positive sanction decision on the projects that you've got in your portfolio today?

Speaker 1

Thanks, Jackie. Maybe I'll talk specifically to Pomor. I mean, Pomor is a layback of an existing open pit. So it's when really it's As we deplete the ore out of Hollinger, the middle of Timmins, we move across to Pammaw, that we're already dewatering as part of the closure plans, Then, Amora is really Hollander's replacement in terms of the provision of the lower grade orders to supplement Ordered and oil ponds are higher grade underground ore through the mill at Porcupine. So it's a very straightforward Layback open pit replacement investment decision.

Speaker 1

We're just working through the diligent process of working towards the full funds at the end of the year. We've got some early long lead items coming in, in terms of getting some fleet on the ground as the water comes out of that pit to be able to get a good start at it. So That's sort of in that sort of sits there independent of anything else that may be happening. It's just a natural progression of events In that mine and that decision, assuming it continues to meet our hurdle rates, will enable Occupier to run for And many more years to come profitably. Yanikocha Sulfides, we've got Dean Goering, still dedicated to the Chief Development Officer, Peru, Focused on understanding all options for, again, a coach of sulfides through to and including Not proceeding with the project and putting it into care and maintenance.

Speaker 1

And Dean is still diligently working through that process With the team in Peru, and we've got a second half of 2024 decision to be made there. So That is also independent of anything that may be happening externally. That is a process that Deane will continue to work through with that time frame in mind. If I mean more generally, if we were to be Successful in the acquisition. I would point you to our track record with Goldcorp Within the 1st 12 months, we did work to rationalize the portfolio and to look to resequence projects so that we might have We stayed true to our capital allocation strategy in terms of the strength of our balance sheet, a steady reinvestment in the business And leading returns to our shareholders.

Speaker 1

And that would be the same strategy that we would apply if we were in a situation where we were Working through an integration of a combined portfolio. The mantra at Newmont, which has been a key philosophy of how we approach our work For well over a decade, it's value over volume and value over volume would apply if this transaction were to be successful.

Speaker 4

That's really helpful. Thanks very much for the color. Thanks, Tom.

Speaker 1

Thanks, Jackie.

Operator

Thank you. We now have Tanya Jakusconek from Scotiabank.

Speaker 5

Great. Good morning, everybody. Thank you so much for taking my questions. I'm just going to circle back, Tom, if I can, just on the Newcrest Potential acquisition. Just wanted to check with you, do we not require also Mexican approval For that as well or is that not needed?

Speaker 1

No. I don't believe there's Mexican approvals needed, Tanya, I think it's the jurisdictions in which they're operating. So I've just looked at Peter. I don't believe that's the case.

Speaker 3

I believe so at all. Yes.

Speaker 5

Okay. So it's only the 4 that you mentioned. Okay. That's helpful. Thank Just one less country to deal with.

Speaker 5

And then just on the shareholder votes, just to confirm that you need 66 and 2 thirds Vote of the Newcross shareholders and 50 point plus 1 for Newmont. Just want to make sure that I have those right.

Speaker 1

Tanya, I was just checking with the team. You break up a little bit on the set, Tanya. So we're just checking the percentage points. So it's 50 plus 1 for Newmont. I believe that's the case, and it's 2 thirds for Newcrest.

Speaker 1

We believe that's the case. If that's incorrect, Tanya, we'll circle back and clarify that.

Speaker 5

Okay, perfect. Thank you so much. I really appreciate that. And just wanted to just talk about your co product guidance for the year. We were quite low sorry, we're a bit too high, I think, on Q1, and so you came in a bit lower.

Speaker 5

Can you just kind of guide me Drew, and I know Rob did this, and I think I missed some of it. But just on the overall for Newmont, how should I think about the co products Going through the year, I know we talked about it at Penasquito that I think we were supposed to have an improvement 2nd half weighted for the year. I just want to know 55% weighted for the year, but I just want to know as new month for a whole, how should I be thinking of the co products?

Speaker 1

Yes, certainly, certainly from starting point, the co product will be firmly within guidance. There's no changes there. And then in terms of the weighting, The if I look across the Boddington and Enniskito is where we have the co products, Tanya, so copper at Boddington Boddington were in the higher grades in the first half, moving to lower grades as part of the mine sequence in the second. So Copper production, 52 first half, 48 second half, copper production out of Boddington. And then when you look at Penasquito, we are weighted to the second half for silver, lead and zinc.

Speaker 1

Silver, 44,000,000,000 first half to second half. Zinc, about 40,000,000, 1st half to second half. And led about 45, 55 first half to second half. And as I say, the GEO for the year Certainly within the guidance ranges that we've provided.

Speaker 5

Yes. No, that's very helpful. Thank you. I was a bit off on that one. And then if I could just finally ask just maybe your thoughts about the Mexican law or changes thereof and what your thoughts and how you're reading into that please?

Speaker 5

And thank you.

Speaker 2

Yes. Thanks, Tanya. Maybe for

Speaker 1

the others on the call that might not be following Mexico as closely. Just in the last week or so, the Congress in Mexico approved an amendment to a version of initiative that's around reforming a legal framework for the mining industry. So it's got through Congress and in their legislative process that now continues through into the Senate for further debate and discussion. So there's still some uncertainty around the scope of the reform. So it's It's difficult to speculate on what the impacts might be on the mining industry or specifically on Newmont.

Speaker 1

So as this is working its way through, we're certainly going through our process So doing our legal reviews of what's been proposed in that initiative and closely monitoring that process, But working also through the Mexican Mining Chamber, who has taken the lead with this matter on behalf of the mining industry in Mexico. It's an important legal reform. And so we would expect And hope that the Senate promotes some open and constructive dialogue with all Parties that are involved. And that's just not the mining companies. That's the communities, the local and municipal governments and the lawmakers responsible for analyzing this initiative.

Speaker 1

So it's in that stage where we would hope and expect that there is a very active discussion and debate on this reform. There are some when you start to review mining frameworks, it is an opportunity to promote greater competition, To promote greater transparency in the sector, to work towards better safety and compliance standards, Provide more job opportunities and have benefits in terms of social and economic benefits. So I would hope that that debate Is conducted well and with the full group of stakeholders involved and looking to improve Circumstances in Mexico as a consequence. So early days, long way to go. Our expectation and our hope There is a critical debate that takes place in Mexico.

Speaker 5

And is your understanding that whatever claims you have in effect would be grandfathered from Any changes on tenure, etcetera?

Speaker 1

That's our understanding, Tanya. As I say, that's our understanding, but we're working through to make sure we fully understand that. It's more about Sonny, it's more about Future concessions as opposed to current.

Speaker 5

Okay. Great. Thank you so much.

Speaker 3

Thanks, Dan.

Operator

Thank you. Our next question comes from Fad Tariq of Credit Suisse.

Speaker 6

Hi, good morning. Thanks for taking my two questions, both related to the Canadian operations. Maybe first, Rob, you were talking a little bit about improvements in labor availability. Can you just give some more color? Is that more or less resolved now?

Speaker 6

Do you have You know the right number of people on-site across the Canadian operations? Thanks.

Speaker 2

Good morning, Fahad. Yes, we do. We're really focused on 2 areas, very strong recruitment We've been able to do that very successfully across the three operations and also just really making sure that Our current workforce are turning up for work. So a very strong focus on absenteeism and leave management and those are both paying off very significant dividends. So The situation we had last year is vastly different this year.

Speaker 2

So we're in good shape.

Speaker 1

Okay, good. That's good

Speaker 6

to hear. And then, as a follow-up on the Canadian operations, it sounds like the milling operations, mining operations, Lots of productivity improvements year over year, but the ASIC remains elevated. Is there something that's part of the equation that maybe we're missing? Is it just

Speaker 2

I'll touch on the first issue that you mentioned is Without a doubt, the performance in Canada has been very, very positive across the board in terms of the development meters And also the material movement, etcetera. So we're very, very pleased with the physical performance. And that also goes into the way in which the plant operates, our recoveries, solution losses, Etcetera as well as the underground. So across the board, we're very pleased with the productivities. But Brian has got some detailed answers in terms of the ASICs.

Speaker 3

Yes. Thank you, Rob, and thanks for the question, Fahad. I think as it relates to them also, I think if you look at our earnings release, Our ounces sold were lower and our sustaining capital is a bit higher for the quarter. And that's largely in line with what we expected for Musselwhite for the period. So that's what drove the higher ASIC.

Speaker 6

Okay. Perfect. That makes sense. That's it for me. Thank you.

Speaker 1

Thanks, Fahad.

Operator

We now have Anita Soni from CIBC World Markets.

Speaker 7

Hi, good morning Tom and team. I guess my first Question is with respect broadly to strategy and the acquisition of Newcrest. So you were talking about how Your operations are scalable. And I was just trying to understand, are we to understand that when you If you were to acquire Newcrest that your intention would be to basically run the 2,000,000 ounces of assets that they have and add that to the 6 or so 1,000,000 ounces and you'd be a, I guess, 7,000,000 ounce producer or would there be some asset rationalization in there And you're going forward, Flynn?

Speaker 1

Yes. Thanks and good morning. Anita, I think there's probably 2 parts to answer that question. We have an operating model It is scalable to be able to integrate the existing 5 operations at Newcrest with our 12 managed operations And manage those operations safely and effectively. But our focus is on value over volume.

Speaker 1

So we still have a lot of work to do in the context of Newcrest. It would be inappropriate to comment specifically on Newcrest given it's a live engagement. But we certainly look back at our playbook and our experience with Goldcorp where we divested KCGM, Red Lake, Continental Gold within the 1st 12 months and brought in the $1,500,000,000 in proceeds. So As we work through our due diligence on this live transaction and we think about portfolio rationalization, value over volume and synergies, We've got 4 years of experience and muscle memory, capability within our team that we draw upon. And We look to that experience to then think about this potential opportunity.

Speaker 1

So I know I'm being a bit vague Because it's a live engagement, but hopefully, you can see the playbook that we have followed over the last 4 years with value over volume Being front and center.

Speaker 7

Sure. Okay. Remind me of the divestitures that you did with the Goldcorp transaction. I think there were just 2, right? Red Lake and

Speaker 1

So it was Red Lake. Our 50% share in KCGM. And if you recall, we've had an interest in Continental Gold and the Meridica project In Colombia, so we completed those 3 divestments within the 1st 12 months. That was $1,500,000,000 And then we spent the last 4 years cleaning up the non core equity portfolio, which Triple Flag was the last One of the last pieces of that, that's actually brought in over $700,000,000 of proceeds over the last 4 years.

Speaker 7

Okay. And then, I guess my next question would be, I mean, it's been about 4 years since the last major transaction. If this deal were to close, do you think you'd be done for a while? Or would you be looking to do something else? I thought I'd ask.

Speaker 1

This is a live engagement. We will remain disciplined in terms of decisions we made as to whether it proceeds or not. And we know very, very well if we were successful what's involved in integrating and delivering synergies. If this were to come off, it's a transformational transaction. And our focus would be on delivering on our commitments, and we have The experience of knowing what's involved in that and we will be applying all of that experience For some time to deliver that value.

Speaker 7

Okay. I just want to ask one more question. So the not with relation to the transaction, but a little bit more on the operation. So I did notice that you mentioned in your ASIC commentary that costs were higher as a result of lower volumes and royalties On higher gold price, so that's the world's good problem to have. But the comment about lower consumables And input, is that could we read into that?

Speaker 7

We're starting to see some input cost Pressure is alleviating, like how should we think about that over the course of the year from a unit cost perspective, not necessarily from a volume perspective?

Speaker 1

Sure. Thanks, Anita. The lower consumables, primarily the fact that Panama was down for 30 with the weather impacts in the Northern Territory. That's the main contributor to that Q1 Explanation for consumables in terms of the cost base. As you said, the Q1 unit cost is driven by The 21% waiting in the Q1.

Speaker 1

As we look at the end of March and then thinking about the remaining 9 months, The assumptions we made around inflation across our cost base, 50% of our cost base is labor, but employees and contracted services. Next 30% is consumables. The next 15% is Fuel and Energy, the assumptions we have made after the 3 months of the year are holding true. So not seeing Any alleviation on our assumptions yet, we're watching that very closely. But I'm not seeing anything that's Particularly different from what we've assumed.

Speaker 7

Okay. So you're good for the ending up at 920 at the midpoint of the guidance range for the year at this point?

Speaker 1

Yes, that's the CAS, isn't it? Yes. Yes. Still on track for landing on that midpoint of our guidance, as you say.

Speaker 7

Okay. Thank you very much.

Speaker 1

Thanks, Anita.

Operator

We now have Greg Barnes from TD Securities.

Speaker 6

Yes. Thank you. Tom, I

Speaker 1

just wanted to ask about your views on the safety culture at MGM and What in your perspective, perhaps improvements that could happen there? Yes. Good morning, Greg. I'm going to kick off and Rob Spence Rob will talk to Peter at At NGM every couple of weeks. And so we there's a very close working relationship and often that is about Yes.

Speaker 1

Less so around ounces and costs and also around how we can work together on safety improving safety performance. And Yes. So probably a couple of comments I think, Greg, is it's important we always have a chronic unease Around Sage Performance, although we've had a period of time where we've been fatality free as an organization. I've certainly, in my 35 years in mining, lived through some tragic fatal accidents. And we still have, on average, every 10 days a significant potential event that could have been a fatality.

Speaker 1

So it's a sense of chronic unease and the things you need to be doing to understand your fatality risks And those critical controls that need to be in place. We don't spend a lot of time on the ground in the operations that we don't manage. So we don't have that in-depth knowledge of what may or may not be happening on the ground and an operation that we don't manage. But we do have a whole bunch of things that we do and we look to share. And I think that's the best thing that we can do, Whether it be with NGM as a non managed joint venture or whether it be with a mining company we've got no working relationship with, but we're in the same industry.

Speaker 1

But Robert, maybe give you a flavor as how we think about supporting, whether

Speaker 2

it be NGN or anyone else when it comes to some of the things we try and do when it comes to improving sighting performance. Thanks very much, Tom. And just building on that, Greg, is that we certainly are very, very open to sharing that We've been on a journey, which has had an awful lot of lessons in the past. And those lessons have led to some of the systems that we've developed and we're very open to sharing those and we have shared those with Our colleagues at NGM, there's certainly very good people at NGM who are working very hard and the tragedies have really Shukran to the core and they're really doing a lot of work in terms of the planning. And when I referred to the discussions that we had, it was about Just bouncing off one another what we've done, what's worked for us and what they believe could work there.

Speaker 2

But They certainly had some challenges, major turnover, etcetera, a lot of new people at Nevada Gold Mines. And They are very committed to changing there, but we have shared our fatality risk management system. We have shared our methodology in terms of the importance of the pre starts, the importance of visible and felt and engaged leadership. We have shared our views on very much a caring culture. And those are the things which I'm absolutely sure will be Julie considered and taken on board, but the conversations we have, make no mistake that Peter Richardson and the team Certainly working very hard to improve their safety performance.

Speaker 1

Okay. Thank you for that. And Tom and Rob, perhaps your views on the safety culture at Newcrest, If you have any, I can talk about it even.

Speaker 2

Yes. Thanks, Greg. We

Speaker 1

It's something that is part of the when we think about confirmatory due diligence, there's the all the stuff you do going into data rooms and pouring Resource models and mine plans and the like, an important part of confirmed due diligence He's getting on the ground. So whether it be Newcrest or any other potential acquisition we might be looking at, What's very important for us in making our judgment about whether it's a fair value and a transaction we proceed with is getting on the ground With our technical people, but also senior leaders. So as we think about due diligence and site visits, Folks like Rob, Aaron Punah, Dean Gearing, all on my team With the Bernard vessels, the Mirgausses, the Francois Hardi, so all very senior operational leaders. So whether it be in the context of a live engagement or any other due diligence we do, having senior leaders on the ground Spending you only need to spend a day, but you learn a lot walking around an operation within a day In terms of the culture of that operation, in particular, in the safety culture, and that is a very important part of our due diligence process and certainly part of the A due diligence process that we would be doing in this live engagement.

Speaker 1

So can't comment specifically on This particular engagement, but rather that it is an important part of our decision making process and we send our most senior people to site And safety and safety culture is a fundamental part of that due diligence process. Okay, great. Thanks, Tom. Thanks, Greg.

Operator

We now have Mike Parkin of National Bank.

Speaker 3

Thanks guys. All my questions have been answered. Congrats on the good quarter.

Speaker 1

Okay. Thanks Mike. Good to hear your voice.

Operator

We have our final question on the line from Anita Soni of CIBC World Markets.

Speaker 7

Hi, thanks for taking my follow-up. So I just wanted to talk about the issues you talked about in Western Australia. I feel that if it was important enough to make your conference call, we should probably delve into that a little bit more. And I do recall meeting the gentleman that you appointed, I can't recall his name, but to head up that initiative. But it's no secret that Newcrest has been at the center of some of these issues.

Speaker 7

So I'm just trying to understand how You know, ultimately, you propose to improve some of their operations, but also deal with, you know, the Cultural issues that Newcrest has around sexual harassment and Respect at Work. They have a program in place called Respect at Work, which I'm not sure if it's yielded any results yet or not, but I just wanted to see how you guys were thinking about that and would approach that. Obviously, you acknowledge that you've had some issues yourself, But I just want to see how you're thinking about that in the context of a larger company that is now far more focused in Australia.

Speaker 1

Yes. Thanks, Anita. Really, really important question. And Alex Bates is the name of the person who you're remembering who's It was the Senior Vice President of our Australian operation and has been working directly for me over the last year, spending time in each of our Our sites in, as I say, in those small focus groups and 1 on 1 discussions, These are issues that exist in society. And so it's every workplace, whether it be mining or everywhere else and around the world.

Speaker 1

And I can say that with confidence now because we're in 8 countries around the world and Alex has completed his engagements at every one of our operations And the consistency and the stories and the personal experiences reflect that these issues exist in every society and certainly in the countries that we work in. So it exists in every workplace, including ours, and I'm confident to say every other mining company as a result. When we think about the work we need to do to change behaviors and improve workplace culture, I very deliberately asked Alex to do the work. 1, because he has the operational experience. He understands Operations and what happens on Saturday nights and on back shifts, on night shifts and all the rest of it.

Speaker 1

He also is representative of the group of people whose behavior needs to change in order for us to change the culture in the workplace. It's those people with power and privilege. It's people with power and privilege who need to change their behavior. And typically, in our mining industry, certainly in the Western world, they look a lot like Alex, they look a lot like me. They're middle aged white men.

Speaker 1

And so it is about creating dissonance in terms of whose behavior needs to change and how do we change our behavior to create And more respectful workplace. When I think about any potential transaction and integration, Whether it be Newcrest or any other company, I would our approach would be to apply The same things that we're going to have to do within our own operations in terms of setting expectations for what is Acceptable behavior, to be equipping our leaders with the skills to understand what is inappropriate behavior and address it Early on to ensure that we're creating safe work environments. Many mining operations have accommodation camps. How are we thinking about safe work environments in our accommodation camps? Not only for the men and women who work In our mining operations, but importantly for those people who cater and clean in those accommodation villages.

Speaker 1

How do we ensure that we have the person at the center of any event that occurs? And we're supporting the person as we work through Any particular issue that may present in terms of bullying, harassment, racism and the like. So that the actions that we're looking to develop and take At Newmont, if we were successful in acquiring Newcrest, would be exactly the same actions that we would be applying At a set of Newcrest operations. So nothing specifically that we do. We have a lot of work to do.

Speaker 1

The industry has a lot of work to do. Quite frankly, society has a lot of work to do to improve the behavior that's in workplaces around the world.

Speaker 7

Okay. Well, thank you for that work. As a woman in mining and one who spent some time in the field, It's definitely important work for sure. Thanks.

Speaker 1

Thanks for the question, Anita. I think operator, is that it for questions?

Operator

Yes. I can confirm this concludes the question and answer session. I'd like to turn the conference back over to Tom Palmer for some closing remarks.

Speaker 1

Thanks, operator, and thank you everyone for your time this morning, and please enjoy the rest of your day. Thanks all.

Operator

Thank you all for joining. I can confirm that that's concluded today's call. Please have a lovely day, and you may now disconnect your

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Earnings Conference Call
Newmont Q1 2023
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