Newmont Q3 2023 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to Newmont's Third Quarter 2023 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Tom Palmer, President and Chief Executive Officer. Please go ahead.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thank you, operator. Good morning, everyone, and thank you for joining Newmont's Third Quarter Earnings Call. Today, I'm joined by my executive leadership team, including Rob Atkinson and Karyn Ovelmen, and we'll all be available to answer your questions at the end of the call. I'd also like to introduce Natascha Viljoen, who officially joined the Newmont executive leadership team at the start of this month. Natascha is a seasoned industry leader and brings more than 30 years of technical, operational and executive leadership experience across a diverse range of commodities, and we are very excited to have her join our team at Newmont.

Before we begin, please note our cautionary statement and refer to our SEC filings, which can be found on our website. During the third quarter, we continued to execute on our long-term strategic plan, underpinned by a very clear and focused strategy. We are leveraging our leadership and collective experience, along with the strength of our global portfolio and operating model to build a resilient and sustainable future for Newmont. Our pending acquisition of Newcrest is a significant event for our industry. It combines two of the sector's top senior gold producers to set the new standard for sustainable, responsible gold and copper mining. I think this Is a very exciting and transformational time for Newmont and all of our stakeholders.

But before we provide an update on the Newcrest transaction and what's to come, I'd like to start with a review of our safety performance. As a company, we have been on a very intentional and significant safety journey, and we are proud that Newmont has not had a fatality in five years. During this time, we redesigned our fatality risk management system to ensure our standards and critical control verifications were focused on risks and behaviors that could result in a fatality. We have completed more than 1.6 million interactions by our leaders in the field that were focused on the critical controls that must be in place at all times to prevent fatalities.

We modified the safety targets in our annual incentive program to deliberately move away from the traditional lagging personal injury rates to the leading metrics, focused on fatality risk reduction and fatigue management. And we focused on doing a few things really, really well, including pre-start meetings, pre-task hazard assessments and infield verifications. As a consequence of these actions, we have experienced a significant improvement in our safety performance, which is evidenced by the metrics you see here on this slide. Whether health and safety is an area where you must always maintain a sense of chronic we still experience at least one significant potential event every eight days.

Each and every one of these are an opportunity to learn from and improve because the safety of our workforce must be considered in everything that we do, every hour, every shift and every day. Turning to our quarterly highlights. During the third quarter, Newmont produced 1.3 million ounces of gold and 10,000 tonnes of copper, generating $933 million in adjusted EBITDA and over $1 billion of cash from continuing operations, a 53% increase over the prior quarter, and we declared a dividend of $0.40 per share from our established framework. Over the last few months, we achieved a number of important milestones at our key development projects, including fully mining the upper section of the new production shaft at Tanami in Australia, receiving full funds approval for the Pamour project Porcupine in Canada and reaching commercial production at the San Marcos deposit at Cerro Negro in Argentina.

Importantly, earlier this month, we also reached a resolution with the union at our Penasquito mine in Mexico. And we are now focused on safely returning our teams to work and ramping up operations at its Tier one polymetallic mine. Throughout the negotiations to resolve this issue, we maintained a strong position and held steadfast to our values, honoring the collective bargaining agreement that we had in place and ensuring that we protected the long-term value for this mining operation, our workforce, local communities and all of our stakeholders. This unnecessary strike has caused significant hardship for many, many people.

And our focus this quarter, we are on the safe ramp-up of our operations, along with the seamless integration of the Newcrest assets into Newmont's global industry-leading portfolio. Now that we have a resolution to the strike at Penasquito, we are updating our outlook for the remainder of the year to incorporate the following three impacts. The first is to reflect the suspension of operations at Penasquito for early June to mid-October. The second is to reflect the lower than anticipated production from both Nevada Gold Mines Pueblo Viejo. And the third is to reflect lower throughput at the Ahafo mill, and Rob will provide some more details on these matters in a moment.

So for 2023, we now expect to produce 5.3 million ounces of gold from the current Newmont portfolio, with a resulting all-in sustaining cost of $1,400 an ounce. As a reminder, our full year results for 2023 that will report in late February next year will incorporate around seven weeks of production from the five acquired Newcrest assets with the transaction currently on track to close on Monday, the 6th of November.

I'll now turn it to Rob and then Karyn to take us through the quarterly results and the important work ahead to deliver a strong fourth quarter, then I'll provide an update on the Newcrest transaction and what will be the focus of our integration efforts from day one. Over to you, Rob.

[Rob Atkinson, Executive Vice President and Chief Operating Officer at Newmont]

Thank you, Tom, and good morning, everyone. I'll begin my discussion around the high-margin Tier one assets in our portfolio today, starting with Boddington. During the third quarter, I had the opportunity to visit Boddington and spend time with the team as they continue to ramp up the planned waste movement in the North and the South pits and prepare for the planned mill maintenance shutdown in the fourth quarter. Laybacks are progressing well, and Boddington delivered solid production in the third quarter as expected. The strong quarterly performance has helped to offset the impact from mill maintenance and unusually wet weather. Despite the heavy rainfall in the third quarter, effective utilization for the autonomous whole fleet has improved significantly compared to this time last year.

Funds mined are expected to increase in the fourth quarter. And I'm pleased to say that we have successfully completed the commissioning of a further five new Cat autonomous haul trucks to accelerate stripping in 2024 and position this cornerstone gold copper mine to reach higher grades in 2025. Turning to Tanami. Our Tier one mine in the Northern Territory continues to deliver consistently strong results. following the record wet weather and extended flooding experienced in the region during the first quarter of the year. We achieved record mill throughput in August, beating the previous record we set in March of this year.

And we continue to expect to reach the year's highest rates and production levels in the fourth quarter. However, we are closely monitoring the impact and the status of the very large wildfires currently burning in the immediate vicinity of Tanami and in the Northern Territory, and we will continue, as always, to prioritize the health and the safety of our workforce. We also continue to progress our second expansion project at Tanami, and I was encouraged to see the headway the team is making during my recent visit. We've achieved a significant milestone in the concrete lining of our 1.5 kilometer deep shaft, fully aligning the upper sections and removing the mid-shaft And as is typical with projects of this size, we will review the project plan as we commence the lining of the lower sections, taking into account the work that has been done so far, the current ground conditions and the overbreak needing to be mitigated in the lower section of the shaft.

Once complete, this project will deliver significant ounce and cost improvements, further strengthening the already strong margins at our Tier one operation at Tanami, and we look forward to providing an update with our guidance in February of next year. Turning to Ahafo. As Tom mentioned, third quarter mill throughput was impacted by routine condition monitoring by our asset management team, identified hairline fractures to one of the large grinding mills at Ahafo. To reduce any further deterioration to the and to prevent a catastrophic failure, we made the decision to operate at less than full capacity, bringing throughput to around 60% for the third quarter.

We have in October swapped the gut tiers between our two milling circuits at Ahafo to ensure our most productive milling circuit is able to run at 100%. This will allow Ahafo to run at approximately 80% of until we again reached full processing rates in the second quarter of 2024 when we will install a brand-new Also, during the quarter, Ahafo accessed higher-grade ore from Subika Underground and successfully commissioned the replacement conveyor ahead of schedule and below budget. The Ahafo North project continues to progress as planned, and we have access to all critical parcels of land to commence construction of the processing plant and mine services facilities.

Airports are ongoing, heavy mining equipment is being assembled and commissioned, contractors are fully mobilized, and we remain on track to commence pre-stripping of the first mining area called the pit in the fourth quarter of this year. Turning to Penasquito. As Tom mentioned in his opening remarks, we reached a definitive agreement with the union and received approval from the Mexican Labor Court on October 13. We have safely restarted operations, and the ramp-up is progressing well so far. We are anticipating a return to full productivity in the next two to three weeks, and we have restarted waste stripping in the Penasquito pit and are now feeding the crusher with ore from the Chile Colorado pit.

We are importantly also continuing to strongly focus on the engagement with our workforce. This unnecessary strike caused significant hardship for all of our employees, contractors communities, suppliers and customers. Penasquito is the largest employer in Zacatecas with a direct workforce of more than 5,000 and another 28,000 people in neighboring communities who are part of the mines local and national supply chain, service providers and contractors. As we look ahead to the exciting and profitable future for Penasquito, we will continue to honor our commitments, work closely with all of our stakeholders with the law and the collective bargaining agreement and work to protect the long-term value of this Tier one polymetallic mine.

Moving to our non-managed joint ventures. Through our joint venture partnerships, Newmont has an interest in four Tier one assets Cortez and Turquoise Ridge. The joint ventures are core to Newmont's portfolio and contributed 352,000 ounces or 27% of attributable gold production in the third quarter. As Tom mentioned, reported performance from our non-managed operations has been below expectations for the year, impacting our ability to achieve our production and cost targets for 2023. We have adjusted our projections for both Pueblo Video and Nevada Gold Mines and look forward to an improved performance in the fourth quarter from our joint venture partners.

On top of the 800,000 ounces of gold produced from our Tier one operations and joint ventures, the remainder of Newmont portfolio contributed approximately 500,000 ounces of profitable gold production, an increase of more than 100,000 ounces compared to the second quarter, and we anticipate solid results from these efforts through the rest of the year. Before I hand it to Karyn, I'd like to take a moment to cover a few highlights from our development projects we are currently executing. On top of the achievements that I already noted at our second expansion at Tanami and Ahafo North, we also achieved key milestones at Cerro Negro, Porcupine and At Cerro Negro, we declared commercial production for San Marcos across the six ore bodies associated with this exciting district expansion.

This opens up a further 650,000 ounces of high-grade gold, which will be mined over the coming 10 years. This milestone was delivered on time and on budget, and we expect to start realizing the benefit from these high-grade stopes in the fourth quarter of this year. At Porcupine, the Pamour project has been approved for full funds by the Board. This opens up a further 2.1 million ounces of gold and will be mined over the coming 11 years, which helps extend the Porcupine complex operational life to at least 2035. Our mining team will commence pre-stripping in the fourth quarter and are tracking well to produce in 2024.

And finally, we advanced our underground project to Akyem to the feasibility stage, where drilling from the surface has already delivered results that are beyond our initial expectations. And with that, I'll pass it over to Karyn to cover our financial results.

[Karyn Ovelmen, Executive Vice President and Chief Financial Officer at Newmont]

Thank you, Rob. Let's get started with the financial highlights. During the third quarter, revenue was $2.5 billion at a realized gold price of $1,920 per ounce, and adjusted EBITDA was $933 million, was up 10% from the third quarter of last year, driven by higher gold prices and lower direct operating costs. We also generated $1 billion of cash from operations and $397 million of free cash flow for the quarter, which is net of more than $600 million of capital spend as we continue to move through a period of significant reinvestment back into our business. And we closed the quarter with a steady cash position of $3.2 billion in a leverage ratio of 0.7 times net debt to adjusted EBITDA. From a financial standpoint, our goal is to maintain a best-in-class investment-grade balance sheet while funding value-accretive projects and delivering healthy returns. And in recognition of Newmont's ongoing balance sheet strength and financial flexibility, I'm pleased to say that we have received a first time A- rating from Fitch with a stable outlook.

We also maintained solid margins in the third quarter, despite the challenges that Rob mentioned at Penasquito, Ahafo and our non-management joint ventures. Third quarter GAAP net income from continuing operations was $157 million or $0.20 per diluted share. Adjustments this quarter included $0.14 related to revisions in reclamation and remediation plans at former operations, $0.05 related to unrealized mark-to-market losses on equity investments, $0.02 related to transaction costs associated with our pending acquisition of Newcrest and $0.05 related to tax adjustments and other items. Taking these into account, we reported third quarter adjusted net income of $0.36 per diluted share.

As a reference to those modeling included in our quarterly results are $131 million in operating costs and depreciation at Penasquito. This quarter, we declared a dividend of $0.40 per share or $1.60 per share on an annualized basis. This dividend was declared within our established framework calibrated at a gold price of $1,700 million per ounce and in line with our 2023 dividend payout range of $1.40 to $1.80 per share. Newmont had paid over $5 billion in dividends since closing the Goldcorp transaction in 2019, demonstrating our commitment to our shareholders. On the close of the Newcrest acquisition, Newmont will integrate five new operations into our robust global operating model.

February of next year, we expect to provide our 2024 outlook for the combined company with our fourth quarter and full year results. Consistent with our process, our outlook will inform our 2024 dividend payout range, which we will calibrate within our established dividend framework. As a reminder, we assess the variable portion of our dividends annually in alignment with the business planning cycle, projected cash flows and the current macroeconomic environment. Similar to this year, our 2024 dividend payout range will apply to our fourth quarter dividend to be declared in February and will be reviewed and approved by our Board of Directors each quarter.

For a longer-term view of our portfolio, we will apply a disciplined and thoughtful approach to setting market guidance for the combined company. We expect to provide our long-term outlook after we've had some time on the ground with the Newcrest assets and following our annual strategy session with our Board of Directors, which typically takes place in June. We look forward to and providing more information on the exciting opportunities ahead for both current and future stakeholders.

And with that, I'll pass it on to Tom for an update on the Newcrest transaction.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Karyn. The combination of Newmont and Newcrest represents an exceptional value proposition for shareholders and all our other stakeholders. Through an unrivaled platform, featuring the industry's best talent, growing the highest concentration of Tier one assets in the most favorable jurisdictions, Newmont is uniquely positioned to generate superior returns for decades to come. Recognizing the strategic rationale to create the industry's strongest portfolio of world-class gold and copper assets, 96% of votes cast by Newmont shareholders and 93% of votes cast by Newcrest shareholders were overwhelmingly in favor of this transformational transaction.

All of the regulatory approvals and shareholder votes now secured, we expect to close the transaction on Monday, the 6th of November, and set the new standard for gold and copper mining across the industry. Following the close of the transaction, the core of our portfolio will be 10 Tier one assets, representing more than half of the world's top-tier gold mines. And these assets will have the scale, mine life, cost profile and resilience to position Newmont to deliver strong and stable returns for several decades. Leveraging the learnings from operating our current Tier one assets, along with our comprehensive asset strategy work, we will be applying the strength of our operating model, our people and our systems with the newly acquired Tier one assets in Lihir and Cadia as well as Brucejack and Red Chris in our emerging Tier one district of British Columbia.

There is no doubt that Newmont will be operating the world's best gold copper portfolio under one umbrella, benefiting from our existing portfolio, operating model, sustainability practices and disciplined capital allocation process. Every one of our assets is managed through our integrated global operating model, supported by a big bench of experienced leaders and subject matter experts with a track record of safely delivering value. And within this global operating model, we will have six regional business units, each led by a dedicated managing director. From the start of November, Natascha will assume accountability for our Australian business unit, led by Mia Gous, our North American business unit led by Bernard Wessels and Papua New Guinea, where we have Alwyn Pretorius returning to Newmont to head up this newly established business unit.

Through early 2024, Rob will continue to have accountability for our African business unit led by Dave Thornton, our Latin American and Caribbean business unit led by Mark Rogers, and our Peruvian business unit led by Rahman Amoadu. We are very fortunate to have Rob as a continuing member of our executive leadership team, particularly during this important integration period. Natascha and Rob will work together closely in the coming months, and both leaders will be pivotal in delivering synergies for the Newcrest acquisition and driving operational results that demonstrate our position as the benchmark gold equity. In just a few days, we'll be welcoming our Newcrest colleagues to Newmont.

And on day one, my extended leadership team and I will be on site across every Newcrest location. As we begin our integration work with the Newcrest team, we'll be focused on three key systems that have been fundamental to our success at Newmont. The first is our fatality risk management program, which is at the very core of our safety approach. And put simply, great companies do not kill people. Second is our Respect@Work program, a key benefit from bringing these two companies together is the alignment in our values and culture, in particular, around safe and inclusive workplaces. We have the opportunity to learn from each other with the programs we both have in place.

Like many other companies in the mining industry, we know there are systemic issues that allow sexism, racism, discrimination, harassment and bullying to continue to be experienced in our workplaces. These disrespectful behaviors have no place at Newmont. And we'll be working together to take actions to create a workplace with everyone is welcome and safe. The third key system is our full potential program, which will commence rolling out at both Lihir and Cadia in November to support the delivery of our synergy commitments. Full Potential is a program that I have led at the Newmont over the last decade. It is the most sustainable improvement program that I've worked with in my 35-year career in the industry, and it was key to delivering over $1 billion in synergies from our acquisition of Goldcorp some four years ago.

However, Full Potential delivers much more than just cost savings and productivity improvements. It sustains and improves our culture by breaking down barriers and encouraging active participation, global collaboration and sharing lessons learned across our organization. During our due diligence work back in May, we identified and committed to $500 million in annual synergies across three categories: G&A, supply chain and Full Potential. As we look ahead to the closing of the transaction and the delivery of these synergies over the first 24 months, we are very excited about the long-term value and opportunities it will bring to both sets of stakeholders and our combined workforce.

This transaction creates the best possible collection of Tier one gold and copper assets in the industry, all supported by the industry's best talent, technical capabilities, sustainability practices and disciplined capital allocation process. We'll also increase our investor outreach, welcoming shareholders from Australia that will form an important part of our shareholder base as we look to establish and then grow our listing on the ASX. We have a long history and a shared heritage in Australia, and we will be strengthening our presence in this key mining jurisdiction. We're upon the close of this transaction, around 30% of our revenues will be derived.

We're looking forward to welcoming the experienced and talented team at Newcrest and providing our first integration update on the combined business for the first quarter of next year. And with that, I thank you for your time today and turn it over to the operator to open the line for questions.

Questions and Answers

[Operator]

[Operator Instructions] The first question today comes from the line of Lawson Winder with Bank of America. Please go ahead your line is now open.

[Lawson Winder, Analyst at Bank of America]

Great, thank you very much operator. Thank you for taking the question, Tom and team. You've all discussed the likelihood for the combined company to have lower production than a combined eight million ounces annually. What is the urgency with which you intend to sell any noncore assets to reduce from that level and improve the overall combined portfolio?

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Lawson, for the question. In terms of it, as Karyn talked about in terms of us taking time to work through the longer-term outlook with more like a midyear then we will run a Capital Markets Day to share that, what we'll look to do almost immediately after close is we have a reserve and resource, review team. We call it our 3R review. We have that team going in each of the five operations at Newcrest and establish the reserve and resources to the Newmont definition.

And then with that reserve and resource review done, we're going to establish Newmont-based resource models. and then start to develop our mine plans based upon previous best demonstrated performance and then have those start to convert into business plans, and then we'll iterate and work those. So we'll certainly work to reduce a 2024 budget for the combined portfolio, but we're going to take our time to really understand and work those mine plans to understand the potential of those operations, ensure we can deliver on those operations, but also understand projects across that portfolio and how they together.

So that's going to be work will do diligently over the -- starting in early November for the first few months of next year. In terms of the full portfolio of 17 managed operations, as I've described in my remarks, Lawson, we can very comfortably manage those operations within our global operating model. Listen, this is an intensive purposes is a bolt-on of five operations in the Newmont's operating model.

Two operations in the Australian business unit. When I was running the Australian business units some years ago, I had that number and a couple more from memory, two operations into North American business unit. Bernard Wessels is very capable to accommodate those two operations and manage them and then standing up our new business unit in Papa New Guinea.

And as I mentioned, one of the very best leaders I've been work at Newmont, Alwyn Pretorius, who retired to go work on his family farm in South Africa, is coming back to Newmont and stand up that business unit. So someone who's very experienced having run very successfully our business unit in Africa some years ago and then our Latin American business unit.

He understands developing world, he understands Newmont and he is really well placed to stand up that new PNG business. So we will capably run those 17 operations and his team will look at where the opportunities might be to optimize our portfolio. We have a commitment of $2 billion over the first 24 months. That will be a combination of project resequencing, come part of that business planning work that we'll do, but we'll also be looking to where the opportunity is to rationalize our portfolio.

And we'll be looking at those operations that are tier two, and we have a number of Tier two operations in our portfolio. Several has a potential to grow to tier one, but we have a number that include in Tier two and work through a very structured process to think about how we might rationalize the portfolio. But we are very comfortable also to be able to run 17 operations in our business.

[Lawson Winder, Analyst at Bank of America]

And if I could follow up just one final question on your Full Potential comments in your prepared remarks and synergies. Can you comment on which assets might get the greatest attention for that program post closing on the NCM side? And put another way, is there a Penasquito in the NCM portfolio that could materially exceed expectations included in the initial synergy guidance?

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Lawson $500 million, $200 million is attributable to our Full Potential work. There are two Penasquitos in the Newcrest portfolio, Lihir and Cadia. That's where we're focusing our time and attention of the $200 million we see the order of $90 million coming out of Lihir as we think about the opportunities to improve the work we do around the mine, the basics of mining from and blast and maintenance asset management work.

So we're presenting the best ore consistently the in that processing plant. We'll have people on the ground next month to start really getting in and understanding those opportunities that we saw during due diligence. I think we certainly plan to tell a story out of Lihir very similar to the story we've told out at Penasquito. And then Cadia, the other very large Tier one operation in the Newcrest portfolio.

We see opportunities in the processing plant. Big block cave mine, roughly 35 million tonnes a year coming out of that underground mine. The opportunities we see are to work the bottlenecks in the processing plant, the availability, the reliability, getting consistent throughput through the crushing and grinding circuit so that we've got consistent to the service and then improve both throughput and recovery.

Again, very similar to where we've worked Penasquito with a big mill, crushing and grinding circuit with multiple plantation service. So Penasquito story and the Boddington story in terms of work in the mill is where we see the analogy or the analog to Cadia and then working on mine at Cadia is very similar to the work that Rob and the team led at Penasquito to deliver significant improvement out of that mine to present a very hungry mill at Penasquito.

[Lawson Winder, Analyst at Bank of America]

Fantastic. I look forward to further updates and congratulations.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks.

[Operator]

The next question comes from Daniel Morgan with Barrenjoey. Daniel please go ahead your line is open.

[Daniel Morgan, Analyst at Barrenjoey]

Hi, Tom and team. My first question is about the issues that you had this year, how much all of the issues you've had that has led to the production downgrade today? How much does that follow into 2024? Obviously, Penasquito doesn't. But can you just run through some of the assets and whether some of the issues run into 2024?

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Daniel, and good morning to you. I think it and thank you for staying up in Australia to listen in, and thank you for your coverage. But if you look at the big assets in the Newmont portfolio today, Penasquito is now that we're up and running, we're very confident that there's been a reset of expectations with our workforce and the union that them. So we go into 2024 very confident about the ability to the cost and productivity improvement safely at that operation.

The impact on 2024 is the mine sequence. So where we were in the mine sequence when the operations were suspended means that what we thought would happen in 2024 will be different now. So polymetallic mine, so we're in the Chile Colorado pit, which is more on the other metals and gold. So we won't swing back into Penasquito now to therefore, it will be the balance of metals that come out of Penasquito that will be different in 2024, and the gold equivalent ounces large At Ahafo, we will be nursing the girth gear that's now on the mill.

So there's two big SAG mills at Ahafo. The girth gear on the main feed to the process plant is 2/3 and the throughput for the mill is now and that can run at 100%. We'll now nurse the girth gear with the hairline cracks on the small amount, about 1/3 of the throughput until the end of the first quarter, start of the second quarter of next year. So the processing plant at Ahafo will run at around 70%, 80% of throughput as we get through that very managed transition.

There are probably the two impacts on our big Tier one operations we think in the 2024. We still to see plants out of our non-managed joint ventures, they like about 30% of Newmont's portfolio today. At Pueblo Viejo, we're commissioning a very significant expansion to a pressure oxidation circuit. So as that is understood and plants are built in 2024, that will reflect the latest information from that commissioning exercise.

And then three big mines in Nevada and as you work through 2023 and then understand impacts on 2023 performance and what that means for mines other things in 2024 potentially some impacts there that we'll learn about in the next couple of months as we work with our joint venture partners on those plants. So hopefully, Daniel, that gives you some color as to how we think about the impacts from 2023 into 2024.

I think the important thing is that were all of the events we've had this year, all of that metal is still in the ground. And this is just a process of the time at which that metal present. None of those issues have any impact in terms of the reserves that we have, and it's just the timing at which they can be converted into metal and sold.

[Daniel Morgan, Analyst at Barrenjoey]

That's probably a good segue, Tom, into my next question, which is the market can sometimes get fixated on short-term issues and forget that the gold is still there. So if the market does do that in the share price underperforms as it has year-to-date, is it an opportune time at some point soon to look to a buyback to maybe communicate to the market that there is long-term value in the share price and the market may not be pricing in?

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Daniel. That's certainly say for anyone looking at Newmont's stock today, there's some tremendous buying out there in terms of the transaction we're about to close and the portfolio that we'll be in less than two weeks' time. Daniel, the process we'll work through. We'll diligently work through our business planning for what I was mentioning in the answer to the previous question, we've got five new assets to develop Newmont base mine plans to and work through a process of determining our 2024 budget and continuing in parallel work on the longer-term plans.

That will then inform our capital allocation process, which for us is ensuring we're maintaining a strong balance sheet, ensuring that we're directing appropriate levels of cash towards reinvestment back in the business to extend life and the growth and ensure we've got returns available to our shareholders. Our capital allocation strategy as returns first and foremost been through our dividend framework.

So we'll work through our business planning process, particularly for 2024 year and look to how we calibrate our dividend framework when you think about assumptions about gold price, the cash flow we generated and some of the other macroeconomic events that will be impacting our business in our world at that time. That will be the primary debate and discussion we'll have.

But as we have that debate and we present those numbers to our Board and we look at the cash we're generating, we look at our share price, it is an area that we will continue to debate as a second order capital allocation element returns to shareholders and whether there would be some benefit in terms of how we're seeing the business and whether there will be any benefit in seeking permission from the Board to establish a buyback program.

So it'll be part of the debate. But our first order returns to our shareholders is through the dividend framework.

[Daniel Morgan, Analyst at Barrenjoey]

Thanks so much, Tom and I look forward to meeting you in a couple of weeks.

[Operator]

Our next question comes from the line of Tanya Jakusconek with Scotiabank. Please go ahead Tanya your line is open.

[Tanya Jakusconek, Analyst at Scotiabank]

Good morning everybody and thank you so much for taking my question. Just have a couple that I just need some clarity on. Tom, can we just go back to the Newcrest merger that is pending. Can we just talk about Newcrest's reserves and resources? When you report your guidance in February of 2024 for the year and your reserves and resources, will you be adjusting those reserves and resources based on your inputs just like you did with Goldcorp when you took over, you've made adjustments from the reserve to the resource category?

And if so, can you review with us some of the mines that we may see some shift. That's my first question.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Tanya. Yes, you can expect something very similar to what took place when we acquired Goldcorp. So we'll have a team -- a technical team on the ground across those five operations through November and December assessing the reserves and resource at each of those operations and assessing those against our Newmont definition. So we obviously report under SEC rules and Newcrest report under So there will be some differences in terms of what is classified as a reserve and resource and then we also have a very high standard at Newmont, right?

A Newmont reserve is a higher standard in the industry. So you will see some back and forth. The various announcements we've made since we announced the binding agreement, you'll see us talk about a couple of instances about reserves and resources, and you'll see us report them separately for the two companies because there are two different definitions for those. So we are working towards with our February time frame to update reserves and resources for the combined portfolio.

And in terms of any sort of signaling, we haven't -- and I think it's important that everybody is we had access to a data room for four weeks back in April and May to assess and to submit a binding offer and to determine our synergy values and to make some judgments about portfolio optimization. Since that time, both companies are required to run as independent companies.

And so we have had an integration team working on planning for integration, but we have not had any access to any additional Newcrest information since that time. we get the keys to the car on Monday, the 6th of November. That's the first time we get access to reserves and resources, mine plans and the can start that work. So it's in front of us, Tanya, in a couple of weeks' time.

[Tanya Jakusconek, Analyst at Scotiabank]

Okay. So there isn't anything that you can think of, for example, the Lihir where some of those reserves, I think, is about three million ounces or thereabouts in the reserve category that need the additional layback from the, I think, the dam wall to be included, whether something like that could shift from reserves to resources given Newmont's stricter definition. Have you -- I'm just giving that as an example.

I'm just wondering if there's anything between the two accountings, the two IFRS and U.S. GAAP on the reserves just is glaring to you at this point.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Nothing is that level of granularity, Tanya, but our expectation is similar to the Goldcorp experience. You will see -- without going into specifics, you will Newcrest reported reserves in some instances move into Newmont reported resources. You've also seen -- I think many people fully understand as we move from interest reporting to accounting to U.S. GAAP accounting, our definitions for the stockpiles and for sustaining capital and other things can change.

Our coproduct, byproduct accounting will which change. There'll be some moving parts around all of that as well. But we don't have that granularity yet, Tanya.

[Tanya Jakusconek, Analyst at Scotiabank]

Okay. So -- and then just on the long-term guidance, I think I heard that, that will be provided after the Board strategy meetings in June. So should we be thinking midyear for a five-year guidance outlook?

[Tom Palmer, President and Chief Executive Officer at Newmont]

That's what we're planning to do, Tanya. And what do we want to get through that good working session with our Board and then really look to set up the Capital Markets Day where we can come together and work through that longer-term view, certainly the five-year, and certainly with the portfolio on where will be looking to show the five- to 10-year view of the strength of this portfolio.

But we certainly want to work with those mine plans over the first few months of next year in order to really have a wrap-up story to share with the market.

[Tanya Jakusconek, Analyst at Scotiabank]

Okay. And then just maybe on any more severance and/or restructuring costs that we are going to be incurring in Q4? Or have these all been taken in Q3?

[Tom Palmer, President and Chief Executive Officer at Newmont]

The severance costs in Q3 largely unrelated to this transaction that was associated with the reset work happening down at Yanacocha as we're ramping down there, and we've got folks taking some voluntary redundancies. So we will start to see the transaction-related severances flow in the fourth quarter, and then they'll flow into the third quarter of next year where you'll see that probably the larger numbers will be in the first quarter of next year than the fourth quarter of this year.

[Tanya Jakusconek, Analyst at Scotiabank]

Okay. So more cost in Q4 and Q1 to come. And then my last question is I just kind of would like.

[Tom Palmer, President and Chief Executive Officer at Newmont]

[Indecipherable]

[Tanya Jakusconek, Analyst at Scotiabank]

Yes. Okay. With the transaction, yes. And then just my last question is just your view on sort of all of these index rebalancing from now until year-end. Could you give us some overall qualitative information in terms of what quantitative do you have in terms of how you see all of these index rebalancing occurring or what your view is on year-end? Too hard with all this movement in the share prices as we look at the stock, yes.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Tanya. Lots of moving parts happening at the moment, certainly with the in that process at the index rebalancing as Newcrest coming off the ASX and our secondary listing coming on the ASX and all of that work happening as well as the volatility in terms of gold price movements. And so there's lots of moving parts affecting stock performance at the moment.

When we look at the -- we look at our modeling getting thrown out the other side of the rebalancing between the -- our head stock in the New York Stock Exchange and the secondary listing in the ASX, it's likely to be a month or two for that to settle out. So we anticipate -- and certainly as we've had conversations with shareholders in Australia and describing what we're going to anticipate happening quite a bit of volatility in liquidity before things start to settle out in terms of New York Stock Exchange and ASX.

We think there'll be some movement of potentially up to AUD10 billion that could flow the other. We also anticipate that we'll have something in the order of AUD10 billion to AUD15 billion market cap sitting on the ASX, representing 20% to 30% of our market cap. That where the starting point will lean into and then look that secondary listing, alongside our primary listing.

So we get some modeling that sort of shows some scenarios as to where we may land between New York Stock Exchange and ASX. and that -- and we fully anticipate that it will be volatile and liquid for a month or a couple of months before it settles down and get a line of sight on the Board.

[Tanya Jakusconek, Analyst at Scotiabank]

Okay. So what I take on that is some outflows from now until year-end with all of this rebalancing and then settling in and then obviously on a positive side with the Australian listing.

[Tom Palmer, President and Chief Executive Officer at Newmont]

The positive side of the Australian listing with a very savvy mining investment community and some very sticky funds with the big super funds there and lots of interest as we then go to that investment community. And then you'll also see -- I think you'll see positive trends is from a passive standpoint with our larger market cap as things settle out, I think you're going to see some of that flow as well. So noisy, but there's some very good signs as to what this portfolio is going to be able to attract.

[Tanya Jakusconek, Analyst at Scotiabank]

I appreciate it, thank you so much for taking my question.

[Operator]

Our next question comes from Josh Wolfson with RBC. Please go ahead your line is now open.

[Josh Wolfson, Analyst at RBC]

Thanks so much. I understand there's a lot of moving parts here. But is it possible to provide some goalposts or some indication of what the cost structure looks like even just for the Newmont portfolio going forward? When we take a look at the numbers, fourth quarter, based on guidance, looks to be an annualized rate of six million ounces, which is, let's call it, average for the company, and the implied AISC is closer to about $1,350, which would be quite a bit higher than where the company was discussing costs at least for 2024 under the old structure. So I understand a lot of moving parts, but just anything on inflation or costs for some the Newmont portfolio going forward.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Josh. I mean it's a tricky one this year because of some of the events we've managed, which are really impacting ounce production. There has been slowing impact on cost. But when we look through that to our direct cost base, it's very much in line with what we're expecting for this year. And then as we look into next year, that direct cost base is looking pretty steady.

So it's sort of staying at the levels that we've seen and the sort of stabilizing out of inflation very much as we look into next year is doing a planning work, at least the direct cost base looks very similar this year. So for us, it will be working through the ounce profile for this combined portfolio. But thinking about -- we'll think about our portfolio in a couple of different chunks as we we're doing our plan.

What will be the Tier one operations and the emerging Tier one operations that we manage and how we think about those. We'll be thinking about three non-managed joint ventures that will have in our portfolio, Nevada Gold Mines, Pueblo Viejo And then we'll be thinking about those Tier two assets and how we manage those Tier two assets and those that would be more likely to be part of that portfolio optimization.

So we think about what's our cost base for the Tier one operations, emerging Tier one portfolio that we manage. We will be challenging our non-managed joint ventures around their cost base. And then we're looking at how we manage our Tier two assets going forward. So we'll be having those debates in and build our business plans. But the high-level answer to your question is our direct cost base is very consistent with what we see this year, and we'll be working to ensure that we've got some of those that we're throwing out the other side of some of those challenges that we've had with bush fires and flooding, a strike and manufacturing with

So we'll certainly be looking at the plan for 2024 being pretty consistent in that profile for those operations a pretty consistent cost base.

[Josh Wolfson, Analyst at RBC]

Got it. Okay. And then another question, I'm not sure if you can provide any details or review of this. But following the Newcrest recent operating update, I'm just wondering the performance of these assets, has that affected your views on maybe some of the complexity or the strategy for integrating this portfolio or maybe how you're going to manage that process?

[Tom Palmer, President and Chief Executive Officer at Newmont]

No, Josh, nothing's changed from our due diligence. We are crystal clear on how we will manage those operations and how we will integrate them into our operating model, and we're well advanced in -- well advanced in planning in terms of what we'll do on day 1, week 1, month one and the first 100 days. So there's nothing about anything happened in the sort of the more recent times that changes our long-term view on those assets and how we integrate

[Josh Wolfson, Analyst at RBC]

Great. Thank you very much.

[Operator]

Our final question today comes from Anita Soni with CIBC World Markets. Anita, please go ahead your line is open.

[Anita Soni, Analyst at CIBC World Markets]

Thank you Tom and team for taking my question. So the first one I think was -- is related to capital allocation. When you deliver on the $2 billion in portfolio optimization, can you give us an idea whether or not that could be used to support a dividend, if needed? Or do you think you have uses for that capital in terms of reinvesting in your portfolio?

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Anita. So the portfolio optimization will come from two categories. One will be resequencing the projects of the combined portfolio. And so the -- you match the two portfolios together, that would have been the cash going towards development projects and reinvesting, that will change, and that will then lead to free cash flow that we're generating be informing the decisions we make around calibrating our dividend framework.

So that portfolio optimization will actually lead to generating free cash flow for support of the dividend. Then the portfolio optimization with the proceeds that we received from divestments of assets. First and foremost, we would bring that on to our balance sheet -- to strengthen our balance sheet and then make judgments about how we use the cash on our balance sheet. And certainly, as we did with the Goldcorp, we look back to our Goldcorp experience and we look at where our -- to the answer of the earlier question, we look at where our share price is trading, we have a robust view of where we value.

And if we thought that there was some opportunity to buy back some shares, so that would be a debate we would have with our Board. But the first and foremost, that cash will come on to our balance sheet and be used to strengthen and bolster the balance sheet of the combined organization.

[Anita Soni, Analyst at CIBC World Markets]

Okay. Second question, just more a little more on the nitty-gritty. Looking at Boddington, is that an appropriate run rate this quarter? Is that kind of what you'll be doing in terms of throughput in grades as you go into 2024 and continue with that layback? Or will that become more, I guess, exacerbated and more stockpile use and more waste stripping happening?

[Tom Palmer, President and Chief Executive Officer at Newmont]

Certainly, as we -- a bit of a high sustaining capital, Anita, was around getting our hands on five trucks to get after the -- and we had access to those five trucks are getting in early, I think, after the waste movement in the North pit to really start to open up the North and South pit to the high-grade ore. So we'll move through 2024 and 2025 into some more waste movement, some run of mine ore coming into the plant, but also starting to supplement that stockpile.

So you will see a movement into in that normal cycle of and moving into more waste and some stockpiles and so some lower gold and copper in that normal band that Boddington operates through. So you will see a bit of that dynamic playing out in 2024, 2025 before get back into the high-grade ore

[Anita Soni, Analyst at CIBC World Markets]

Okay. And then the final question is with regards to the projects, particularly Tanami, where I think you pared back some -- revised your development capital number citing the rainfall events that you had. I just wanted to understand when you guys review the projects and the capital? And where you basically -- do you think you're okay on your capital at Tanami expansion to right now?

Or should we be expecting to see an update there? And I ask this because we've seen unit cost escalation across the board, and we just haven't had an update on those capital numbers for about a year or so.

[Tom Palmer, President and Chief Executive Officer at Newmont]

Thanks, Anita. So we've reached an important milestone at Tanami, where the mid-shaft the upper part of the of the shaft and now we're at that mid-shaft level setting up the infrastructure and then get after the lining of the lower part of the shaft. So it's an important milestone for you pause and understand the working -- what you've learned from mining the top part of the shaft, how you're going to apply those learnings to the bottom half of the shaft and what the condition of the bottom half of the shaft as now going to the run

That work is happening right now. As we're seeing in the Australian market, I think the key cost pressure in capital projects is labor. And so just ensuring we understand the labor. We have a favor there and full crews as we get set to go for that second round of shaft lining. That work is live as we're working that through as part of our planning processes and doing our cost and schedule for the run that would certainly be something that we would be expecting to provide an update with our 2024 guidance in the latter part of February next year. So we're at the milestone of the project and it's nice to lined up with 2024 -- February 24 update.

[Anita Soni, Analyst at CIBC World Markets]

Okay. So just on that note, can you just go versus February 2024, you will provide guidance for the combined portfolio for 2024 -- sorry, for 2024 only. And then June, you will provide the combined portfolio -- or midyear, you'll provide a five-year for the combined portfolio. Is that correct?

[Tom Palmer, President and Chief Executive Officer at Newmont]

That's correct, Anita.

[Anita Soni, Analyst at CIBC World Markets]

Okay. And then lastly, on the dividends, what you had said it for next year, that would be in February as well, right?

[Tom Palmer, President and Chief Executive Officer at Newmont]

2024 dividend would be -- the dividend would be calibrated for 2024, and we will be sharing that information with our guidance in February 2024.

[Anita Soni, Analyst at CIBC World Markets]

Okay, thank you. That's it for my questions.

[Operator]

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

[John Charles Tumazos John Tumazos, President and Chief Executive Officer at Newmont]

Thanks, operator, and thank you all for taking the time to our call today, and please enjoy the rest of your day. Thank you.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Tom Palmer, President and Chief Executive Officer
• Rob Atkinson, Executive Vice President and Chief Operating Officer
• Karyn Ovelmen, Executive Vice President and Chief Financial Officer
• John Charles Tumazos John Tumazos, President and Chief Executive Officer

Analysts

• Lawson Winder, Bank of America Co.
• Daniel Morgan, Barrenjoey
• Tanya Jakusconek, Scotiabank
• Josh Wolfson, RBC
• Anita Soni, CIBC World Markets