Newmont Corp (NEM) — Q2 2015 Earnings Call Transcript

Thank you and good morning everyone. Welcome to Newmont's second quarter 2015 earnings conference call. Joining us on the call today are Gary Goldberg, President and Chief Executive Officer; Laurie Brlas, Chief Financial Officer and other members of our executive team will be available to answer questions at the end of the call. Turning to Slide 2, before we go any further, please take a moment to review the cautionary statement shown here or refer to our SEC filings which can be found on our website newmont.com. And now, I'll turn it over to Gary, on Slide 3.

Thanks Meredith, and thank you for joining us this morning. Newmont continued to deliver strong performance in the second quarter and I’d like to walk you through the highlights now. We reduced our injury rates, maintained steady gold production and lowered our all-in sustaining cost by $14 per ounce compared to the prior year quarter. This performance resulted in our fifth consecutive quarter of positive free cash flow, a $32 increase in adjusted EBITDA and a 17% increase in operating cash flow compared to 2014. We also announced the acquisition of Cripple Creek & Victor in Colorado and advanced the Turf Vent Shaft and Long Canyon operations in Nevada and Merian in Suriname. Finally, we leveraged strong operating performance to pay down debt and return cash to shareholders. Turning to Slide 4 to look at our safety performance, I am pleased to report that we reduced our total injury rates by slightly more than 40% this quarter compared to last year. This constitutes Newmont’s lowest ever injury rate and reflects tremendous dedication by our team and significant improvement by our contractors. I particularly want to acknowledge our teams in Ghana and Suriname, who completed the entire quarter working without injury, proving that our goal of zero harm is achievable. This performance comes down to strong operating discipline, safe facilities and most importantly a sense of accountability for safety that runs throughout the entire workforce. Let’s turn to Slide 5 for other quarter highlights. Our strategy has three elements and we are making progress on all fronts. First, to improve the underlying business, we maintained steady gold production, more than offsetting the impact of divestments, and doubled our copper production. Our gold all-in sustaining costs were just over $900 per ounce, which represents a 14% improvement over the prior year quarter. Second, to strengthen the portfolio, we announced the acquisition of Cripple Creek & Victor in June and expect the transaction to close in early August. CC&V adds cash flow and production and improves our portfolio's mine life, cost, and risk profile. We also announced the sale of Waihi, which will bring total proceeds from the sale of non-core assets to $1.6 billion over the last two years. Turning to organic growth; construction at Turf Vent Shaft, Merian, and Long Canyon is advancing on schedule and on budget. The third part of our strategy is to create shareholder value. We generated nearly $700 million in adjusted EBITDA, up 32% from the prior year and $119 million in free cash flow. This strong performance allowed us to declare a dividend despite lower metal prices and pay down $75 million in debt during the quarter. We’ve remained on track to pay down further debt in 2015. Let’s turn to Slide 6 to look at production. We produced more than 1.2 million ounces of gold and 41,000 tons of copper in the second quarter on an attributable basis. This is slightly more gold than we produced in the prior year quarter and represents a 12% increase after adjusting for divesting Jundee and La Herradura. Operations around the world contributed to the strong performance. At Batu Hijau, gold and copper production continues to rise and we mine higher grade ore. We’ll continue to mine higher grades through 2017 and are reviewing options for developing the next phase of mining. Boddington also delivered strong gold and copper production. The team has leveraged the full potential program to improve productivity in the mine through load and haul efficiency and in the mill via throughput, utilization, and maintenance improvements. Twin Creeks produced more gold as a result of planned grades and volumes and improved autoclave performance. At Tanami, we had another strong quarter, primarily from increased throughput driven by planning and productivity improvements. At KCGM, we’ve commissioned our new ultra-fine grind mills and saw improved production for the quarter. And finally, Yanacocha delivered higher leach and mill production. Turning to Slide 7 and our cost performance, ongoing cost reductions are largely the result of higher productivity and sustainable cost and efficiency improvements. We also benefited from favorable oil prices and exchange rates, which largely offset lower metal prices during the quarter and some delayed timing in our capital expenditures. We expect our costs to increase slightly in the second half of the year, due mainly to lower production volumes at Ahafo and Yanacocha, but we’ll finish the year well within our improved guidance, which I’ll discuss in a moment. This graph shows our progress over the last three years. Our year-to-date all-in sustaining cost is $879 per ounce and we expect to end 2015 having achieved a 20% reduction from 2012. Putting it all together, we are making the most of our opportunities and managing our challenges. Turning to Slide 8, Batu Hijau is running at full capacity and we continue to work with the government to negotiate modifications to our contractual work and to renew our export permit. We also negotiated a new collective bargaining agreement that features reasonable wage increases of 3% in 2015 and 4% in 2016 for our representative workforce. In Ghana, the team has installed 14 megawatts of temporary power generation capacity at Twin and we’ll add another 21 megawatts of permanent capacity at Ahafo by year-end. Both sites are now operating at full capacity. Labor negotiations in Ghana are ongoing and we’ve remained committed to reaching an agreement that offers fair wages and benefits while sustaining profitable operations. Merian remains on track for first production in 2016 with engineering about 90% complete and construction about 25% complete. You can see how we’re progressing on the camp, mill, truck shop, and power plant in this photo; we’ve also stockpiled just over 500,000 tons of higher grade ore. Finally, we’ve begun to work to integrate Cripple Creek & Victor into the Newmont team and into our portfolio. Let’s turn for more detail on Cripple Creek & Victor on Slide 9. CC&V is a surface mine and heap leach operation situated over 100 miles from our headquarters in Denver. The operation is about two-thirds through a $585 million expansion and we expect the remaining development capital to be fully funded by CC&V’s operating cash flow. The expansion includes a new mill to augment production, improve recovery and higher grade ore and add capacity for a potential underground operation. The mill is up and running and expected to reach full production capacity later this year. The expansion also features a new recovery plant and second leach pad, which are expected to be in production in the second half of 2016. CC&V will contribute 350,400 ounces of gold production at an all-in sustaining cost of between $825 and $875 per ounce in 2016 and 2017. These costs exclude further efficiency and optimization improvement opportunities that we’ve identified. For example, we see potential to lower CC&V mining costs by up to 10% by optimizing the mine plan to reduce stripping and eliminate marginal ounces. We also believe we can improve site recoveries by up to 2% by applying Newmont’s proprietary technology. Longer term, surface and underground expansions could also increase CC&V’s value and mine life, but will require further definition and optimization. With that I’ll hand it over to Laurie for an update on financial results.

Thanks Gary and thanks everyone for joining us today. It was a strong quarter for Newmont and I am pleased with our performance. Turning to Slide 11, as Gary mentioned, we continue to see cost improvement across the portfolio. Our second quarter gold cost applicable to sales per ounce and gold all-in sustaining cost for ounce were both 14% favorable to the prior year. These improvements contributed to EBITDA expansion and our fifth consecutive quarter of positive free cash flow. Despite an 8% decline in our average realized gold price, the lower cost from operations led to continued strong financial results. Turning to Slide 12, during the second quarter, we generated more than $440 million in cash from continuing operations, an increase of more than 17% from the year-ago quarter. Adjusted EBITDA was also up 32% from the prior year, due to higher grades and recoveries especially at Batu Hijau, improved oil prices and exchange rates, and ongoing efficiency improvements. Consolidated free cash flow was $119 million during the second quarter including increased development capital spending at our projects such as Merian and Long Canyon. Year-to-date free cash flow now stands at $463 million, almost $400 million higher than the prior year period. We’ve reported adjusted net income of $131 million in the second quarter or $0.26 per share compared to a $101 million or $0.20 last year. Turning to Slide 13 for a review of that, adjusted net income excludes a $0.02 per share gain related to a discontinued operation, a $0.05 per share loss related to impairments and restructuring costs, and a $0.09 per share impairment of certain deferred tax assets. After reconciling for these items, we reported adjusted net income of $131 million, or $0.26 per share, as I noted. The strong quarter operationally was also reflected in adjusted EBITDA of $692 million, up 32% from the prior year. Similarly, adjusted EBITDA excludes impairments, restructuring, acquisition and divestiture costs. Now turning to Slide 14, at the end of the second quarter, our investment-grade balance sheet had over $3.3 billion in cash and equivalents. Excluding the cash we will use to acquire CC&V, adjusted cash is about $2.5 billion. Combining that adjusted cash, our $3 billion revolver, and roughly $200 million in marketable securities gives us nearly $6 billion of liquidity. During the second quarter, we repaid $75 million of debt, primarily towards the PTNNT revolver. We’ve also eliminated Ahafo's remaining loan balance. This brings our year-to-date total debt payments to $280 million and we’ve remained on track to pay down further debt by year-end. We have no significant debt maturities until 2019 and our current net debt-to-book capital of 17.9% is well below the maximum 62.5% for our revolver covenant. Newmont’s strong cash flows and enhanced balance sheet provided us with the confidence to maintain our dividend as we announced earlier this week, despite the average gold price for the quarter of $1,192. Turning to Slide 15, our work to deliver the balance sheet and improve our underlying business separates Newmont from the competition. As our slide indicates, our net debt-to-EBITDA continues to improve and outperform competitor averages. In a $1,200 gold price environment, we are targeting a net debt-to-EBITDA ratio of 1, which we estimate will allow us to maintain an investment-grade balance sheet across a variety of metal price scenarios. To summarize, Newmont’s strong liquidity and cash flow positions us to deliver results across the commodity cycle. We’re comfortable with our relative level of debt and maturity profile, but we’ll continue to look at ways to reduce the absolute debt level and strengthen the long-term viability of our business. And now I’ll turn the call back over to Gary.

Thanks, Laurie. I’ll shift gears now to cover our outlook, turning to Slide 17. We’re revising our production and cost guidance to reflect continued strong performance at our operations and the impact of building Long Canyon Phase 1, acquiring CC&V, and divesting Waihi. We expect to produce between 4.7 million and 5.1 million ounces of gold in 2015, up slightly from our previously published range of 4.6 million to 4.9 million ounces. We also improved our 2015 copper production guidance by about 10% due to a better phase position at Batu Hijau as we’ve been able to make better progress on Phase 6 than we planned. Our revised long-term guidance calls for gold production between 5.2 million and 5.5 million ounces by 2017, a 9% increase from previous guidance. In North America, we expect gold production to increase over the three year period as we complete the Turf Vent Shaft, enter a period of lower stripping at Carlin, and add production from CC&V and Long Canyon Phase 1. In Asia-Pacific, we expect Batu Hijau to contribute steady gold and copper production from higher grade ore over the next three years. A planned expansion at Tanami, if approved, represents additional upside. In Africa, we expect production to decline over the next three years, primarily due to lower grades at Ahafo. The team is developing profitable expansion projects including an optimized Ahafo mill expansion to increase throughput and offset lower grade ore. And the Subika underground mine, which would improve the ore grade and add up to 200,000 ounces of production per year while reducing overall unit costs. These expansions also represent potential upside. In South America, production is forecast to decline in 2015 and 2016 before rising in 2017 as new production at Merian offsets maturing operations at Yanacocha. We are working on an integrated approach to developing oxide and sulfide deposits that could extend profitable production at Yanacocha and expect to review initial study findings in mid-2016. We also revised our cost outlook, turning to Slide 18. Our new cost guidance also reflects a lower exchange rate for the Australian dollar of U.S. $0.80 to the Australian dollar, down from U.S. $0.85 previously. Our oil price assumption remains unchanged at $75 per barrel. We now expect our 2015 gold all-in sustaining cost to fall between $920 and $980 per ounce, a 4% reduction from previous guidance. At the regional level, we’ve reduced our Asia-Pacific cost outlook for 2015 based on ongoing cost and efficiency improvements as well as the lower exchange rate. We also improved Boddington copper costs. In Africa, we lowered our cost outlook due to improved year-to-date performance. Looking out to 2017, we now expect to deliver all-in sustaining costs of between $900 and $1,000 per ounce, down about 3% from our previous range of $925 to $1,025 per ounce. Our long-term outlook for copper costs remains unchanged. Turning to Slide 19 to discuss capital, our capital outlook reflects reduced sustaining capital expenditures at Carlin, Twin Creeks, Boddington, and Batu Hijau, offset by additional development capital needed to complete the CC&V expansion. With these changes, we expect 2015 capital expenditure of between $1.6 billion and $1.8 billion in line with previous guidance. We’ve reduced our 2015 sustaining capital outlook due to operating efficiencies and cost savings as well as a modest shift in timing. Our long-term sustaining capital outlook of between $850 million and $950 million per year remains unchanged. Our project pipeline remains one of the strongest in the sector, turning to Slide 20. We create value by discovering, developing, and operating profitable gold mines, and we’ve improved our ability to do that by optimizing our project pipeline and bringing our best projects forward in a measured and sequenced manner. We remain on track to reach commercial production of the Turf Vent Shaft later this year. The Shaft will allow us to produce an additional 100,000 to 150,000 ounces of higher grade ore at Carlin’s Leeville underground mine. We’re also making good progress at Merian, where we expect to produce between 400,000 and 500,000 ounces of gold at all-in sustaining costs of between $650 and $750 per ounce for the first five years beginning in late 2016. I visited Long Canyon last week and I am pleased with the team’s progress. First production from this new and highly prospective oxide gold district is slated for early 2017. We expect Long Canyon to produce between 100,000 and 150,000 ounces of gold per year at all-in sustaining costs of between $500 and $600 per ounce. In Australia, we expect to reach a decision on our Tanami expansion project later this year. The project involves building a second decline in the underground mine and incremental capacity in the plant to increase profitable production and extend mine life. The Tanami expansion could add incremental gold production of 100,000 to 125,000 ounces per year at lower overall costs for the first five years. If approved, we would expect production and cost improvements in 2017. In Ghana, we continued to evaluate an expansion of our existing Ahafo mill to help offset the impact of lower grade ore. We expect to reach a decision later this year and see the potential to add 100,000 to 125,000 ounces of production at competitive costs. Lastly, we continued to study ways to extend profitable production from Yanacocha’s remaining oxide and sulfide deposits by optimizing sequencing and recovery. We expect to review initial study findings in mid-2016. Turning to Slide 21, exploration is a core competency at Newmont and forms a critical part of our strategy to lead the sector in value creation. Our program focuses on increasing our existing resource base while maintaining the ability to pursue significant new discoveries. Nearly 70% of our forecast 2015 gold production was discovered or defined by Newmont geologists. Early-stage exploration projects that hold the potential to be in production in the medium horizon include the Subika underground in Ghana to give us access to ore grades that are significantly higher than the surface bit. Long Canyon in Nevada where oxide mineralization has been identified over a three-mile strike and remains open in all directions. Northwest Exodus in Nevada is an extension of the Exodus underground mine that would add profitable production and Kacher Maine, which is part of the oxide expansion effort at Yanacocha. Tanami provides a great example of our exploration success. Turning to Slide 22, our exploration team has successfully grown Tanami’s high-grade underground mineralization from 150,000 ounces in 1993 to nearly 11 million ounces. Half of these ounces have already been mined, and about half are still in our reserves and resources. Most of this growth has been driven by extensions of the Callie and Auron deposits; we still hold significant upside. Our team believes there is the potential to double our current reserves and resources at Tanami at comparable grades through extensions at Callie, which remains open at depth, and at Auron, where only 50% of the deposit has been drilled to reserve and resource. Development of two new discoveries, Federation Limb and Liberator, are in close proximity to our existing underground mine and through our brownfields program with targets like the Soolin Footwall where we’ve drilled intercepts of up to 20 meters at grades of 8.6 grams per ton of gold. All of these deposits can be developed relatively inexpensively due to our existing infrastructure with ore processed at our existing mill. Turning to Slide 23 for a closer look at Auron; this long section shows the Callie and Auron deposits along with some of the results of our drilling program to date. The gold color represents our reserves, the dark blue shows our resources, and the light blue shows inventory or material that is not yet advanced to resource status. As you can see, both Callie and Auron have significant growth potential on top of the more than 5 million ounces of currently declared reserves and resources. As I just mentioned, Callie remains open at depth and much of Auron is still undrilled. We are excited about the drill results today, which suggest that extensions are at comparable thickness and grade to what we’re already mining today. The mineralization is mainly free gold, which you can see in this photo. Turning to Slide 24 for a closer look at the Federation Limb. Federation Limb was discovered in 2013 and is located in a structure that is parallel to Callie, where we are mining today. Discovery is significant in terms of potential size, grade, and proximity to existing infrastructure. Federation’s mineralization varies in thickness from 2 to 35 meters and in grade from 2 to 200 grams per ton. We declared an initial resource of 0.5 million ounces at an average grade of 6.9 grams per ton in 2014. This represents about 25% of the potential target and we continue to see higher grades and open mineralization that will be further defined through infill drilling. Finally, turning to Liberator on Slide 25, Liberator is a brand new discovery made just this year located below Federation. Like Federation, Liberator is significant due to its potential size, grade, and proximity to existing infrastructure. Liberator’s mineralization varies in thickness from 2 to 40 meters and a grade from 2 to 30 grams of gold per ton. We intend to further define the deposit and declare the first resource at Liberator in 2016. We are excited about the potential for longer-term growth at Tanami and throughout our portfolio. We’re also prepared to weather headwinds. Turning to Slide 26, we run our business to maintain flexibility in a variety of gold price environments and update our contingency plans on a regular basis. This chart gives you an idea of what we might do differently in a prolonged period of lower or higher gold prices. Under significant pricing constraints, specific actions we would take include delaying stripping campaigns and sustaining capital expenditures, further reducing overhead and exploration costs, and deferring early-stage projects. Similarly, as gold prices improve, we’ll maintain our cost and capital discipline, continue to advance our most promising projects and exploration prospects, and look to accelerate our debt repayment. We are comfortable with how we position the business and believe our success in getting our house in order and optimizing our portfolio and project pipeline is paying off. I’ll wrap up my comments with a quick look at where we are taking Newmont in the future. Our goal is to be the most profitable and responsible gold mining company in the world. We will reach that goal by continuing to deliver our strategy to improve our underlying business by continuously raising our safety, cost, and technical performance, to strengthen our portfolio by building a longer life, lower cost asset base, and to create shareholder value by generating cash, paying dividends, and continuing to strengthen our investment-grade balance sheet. Thanks for your time. I’ll open the floor to questions now, operator.

Yeah, good morning, Gary, and congratulations on a very solid quarter again. It’s a positive trend you’ve got over the past 12 months definitely. A couple of questions, on the power issues in Ghana, can you easily give us a split between Akyem and Ahafo, obviously, Akyem is showing much lower costs and heading in the other direction where Ahafo, I suppose you’ve said grades are coming off?

Yeah, the power consumption in Ghana is about 60 megawatts in total with about 30 megawatts at each of those sites. And what we’ve done is put in the temporary additional power at Akyem, and we’re finishing up by the end of this year some additional permanent capacity at Ahafo. As we look at the potential to add mill capacity there and the potential for underground, we wanted to ensure more permanent power there. We have since June and went back to running at full capacity while we continue to work with the government and look at different ways to address the power situation over the longer term. We’re now in good shape for continuing and sustaining our existing production base going forward.

Thanks, Gary. And then on that - on your slide 26, which is very helpful. As far as when you talk about the reduced or the delayed laybacks and reduced costs, is that specific to certain mines or is that more general? How many mines would that be referring to?

What we’ve done, Andrew, as we build our plans - this is something we introduced last year and continue to refine this year. We actually build our plans starting from a lower gold price and layer on what we would start, what runs, and what doesn’t. So we started at a $900 price and then continued looking at what comes in both with existing operations and projects. So we’ve got a pretty good idea of where we would go and where we’d focus depending on how long we expect these conditions to last.

And just a last one, maybe it’s associated with Kalgoorlie. Obviously, there’s been some noise around sort of stepping away there. Can you just give us an update on operationally how that impacts Newmont and how you see that asset going forward?

No, I think one of the things that we completed in this past quarter, we took over and agreed to a management agreement with Barrick, and we’ve now taken over managing the operation on behalf of the joint venture. It’s still a 50-50 joint venture. We continue to do work and now, with this change, we’re also looking at what we might do both in further bringing our systems and approaches in, but also looking at the exploration upside. So it’s something we continue to assess.

Thanks very much, Gary.

Thanks Gary, Laurie, and everybody. Again, congratulations on the results. I was just wondering with these expansion projects you’re talking about at Tanami and Ahafo, what sort of gold price would you need to press the button on those two projects?

It varies on both of them. At Tanami, quite frankly because they’re both incremental expansions, we see prices that would support good double-digit returns. It could be below even $1,000 per ounce. We’ll give more information as we assess those here in the third and the fourth quarter and bring them forward, but that’s where I see both of those.

Okay. And then following on the layback question, and looking at your results from last quarter, your layback and strip ratios are following most of the mines. Is that normal value variation or was there a degree of adjusting to another price already in your numbers? And then I was observed at Twin Creeks, the strip ratio there is much higher but is not showing up in the cash cost; I just wondered what was driving that?

I’ll take the first part on Carlin and Boddington in terms of strip ratio, because those are probably the two biggest drivers of Carlin being the biggest. I was just out there last week and have a pretty good handle on what’s going on. I think the big difference is that we’ve had material that was originally characterized as waste; it’s now become ore, so that’s a good thing in terms of the mineral model but it also results in lower stripping. So what we’d expected to be stripping is waste is now ore. That ore has a longer haul, and you’ve been out there, so taking it from the Northern pit down to where the mill is does require a longer haul, so that’s taking up the truck capacity and lower stripping. At Boddington, it’s been changes to the mine plan that we implemented earlier this year and really the shape allowed us to reduce some of the stripping not just for this year but going forward.

Okay, got it. Thanks a lot and well done, guys.

Thank you, John.

Thank you very much. Thank you, Gary and team. Just a couple of questions, Gary, if you could in previous calls there’s been more granular discussion on which copper smelting projects in Indonesia that you could be considering investing in as part of the renewal process for the copper concentrate export process here. I know it comes up for renewal in September, could you give us some color on your level of confidence that you’ll get some news on that renewal of the copper concentrate export permit?

Sure, thanks Steven. I think a couple of things. Obviously, we continued to watch and see how Freeport progresses with their discussions because they are, I know, the first cab of the rank with their permit due here this month which is due, as you said, in September. I met with several government officials earlier this year and more recently met with the Minister of Mines and Energy as he was here in the U.S. to just talk about the progress and where we are both in terms of the modifications to our contractual work and the permit extension. We do continue to discuss with several parties the potential of participating in a smelter and supporting the country’s policy of having in-country processing. Those are at different stages with different parties and I am not liberty to get into the details on those other than we continue to progress that. I do think there is a desire in-country to see the operations run as we work together towards a solution. I have encouraged as I was when I visited in March and that resulted in getting our extension in March. We’ve got work to do, and they are just coming out of a holiday period primarily through the month of July, and we’re looking to get re-engaged in detail on these discussions in August with the government.

Great, just as a follow-up on that too. You are going to be benefiting from the Phase 6 high grade. When do you have to make a decision on the pre-strip for Phase 7, and what are the metrics vis-à-vis gold and copper prices that would make it a go or no-go, or is it a forgone conclusion that it is a go at this Phase 7 strip at this stage?

No, Stephen, a good question. It’s one of the things why we are encouraging getting resolution on the contractor work, so we know that we have the certainty in terms of how we’re going to look out in the future for development of Phase 7. Phase 7, we really get into larger spending for stripping in particular early next year, so we’re really targeting through the end of this year, we’ll look at it. The same way we do with all of our different options at different price scenarios to see what makes sense, how it makes sense to bring it forward, and how it makes sense to finance that particular investment because it’s about five years of stripping we’re doing work with the team there to look at ways to maybe reduce that a bit and improve the cost profile and how we can drive things. We just got the full potential program rolled out there and we’re going to see how we can improve our cost position there as well. All those we want to factor in as we make the decision on whether and how to proceed with Phase 7.

Alright, I assume that’s not in the capital guidance that’s been given looking forward?

That’s not in the current capital guidance.

If I can change gears a little bit at Merian, you are using an EPCM contractor, G Corp. This is unusual when we look at what Newmont has done in the past; you’ve always done that sort of internally. Can you discuss a little bit how that process is going and whether you think that you could be looking at using contractors or EPCM contractors of this nature going forward?

Yeah, no, good point. We have sometimes done it internally. For larger projects we’ve actually done it with third parties; you the back goes in the flares and that type. G Mining has had a good history of building projects of this scale, particularly in Suriname, Luis has done a good job there and continues to do a good job for us, so it’s a different model and it’s one that we believe allows us to build projects effectively, safely, and at a lower cost than what we’ve been seeing through some of the other models. So we’re giving it a bit of a try here how it might apply in other places. I think once you start to get much larger projects in this, that model may not fit, but I think for the most of the projects we have in our project pipeline this sort of model is something that makes good sense. So that’s why we’re giving it a try, and as I said we’re seeing good progress there. We’re at 25% project completion year-to-date and that’s progressing very well on the ground.

Great, and just one last question, Laurie, if I might ask, both gold and copper revenues were lower in the quarter than the average price in the quarter; is that just a timing issue on gold and copper concentrate sales?

Definitely on the copper concentrate sale there is a bit of a timing issue. On a year-to-date basis, I think we are pretty solid on gold and we see continuing to hit the numbers for the rest of the year. Copper will get back from that timing gap.

Yes.

Yes, that CCR feeds well affect that and we also have mark-to-market adjustments more still again on the copper and gold.

Thanks, Stephen.

Hey good morning, everybody. Jorge Beristain of DB. I guess my first question is maybe for Laurie, just more of a technical accounting question. Your year-end ‘14 reserves stood at about 82 million ounces and 17 years of mine life, but that’s based on $1,300 gold. So I was wondering if you could provide any kind of sensitivity around where your reserves could go at current spot of around $1,100, and if you believe that from an accounting point of view you are being sufficiently conservative enough using that $1,300 gold price in light of the recent moves?

Yeah, we will certainly evaluate that as we get towards the year-end. And as you know, we have to be at or below the three-year trailing average by SEC requirement. We’ve historically been below that. But given what we’re seeing, you could see some kind of change, and we provided the sensitivity on that in the past what would happen, but we also in those sensitivities assume consistent with the dollar that what we saw a year ago. So I think you’d see some of that adjustment would be mitigated. Gary, you want to add on that?

No, I think we have in those reserve calculations, we left the Aussie dollar at parity, dollar for dollar, and the oil was at a $100 per barrel. So as we assess reserve reporting at the end of the year and make a potential reduction in that reserve price, we would include also those changes in the Aussie oil price and also the improvements we’ve seen in our operating cost throughout the business.

And that wouldn’t have a direct impact or impairment on the balance sheet. What you might see if we reduced our reserves would be a bit higher depreciation and amortization next year as that would imply some shorter mine lives, but there wouldn't be a direct impairment.

Got it, thank you. And just Gary, my second question is a bit more strategic in nature, but seeing last week’s aggressive pullback in some of the gold equities and it does seem like we’re seeing some sort of investor fatigue or and/or capitulation towards gold, and by extension, the gold equities. Could you comment on what you are hearing at the board level, not only at the Newmont board but maybe within the industry as to what the industry is planning to do in order to stay relevant as an asset class towards institutional investors which require certain thresholds for market cap and liquidity, and just in short, is M&A potentially back on the burners in 2016 if we continue to see gold prices below $1,100?

Yeah, I’ll make it clear that M&A isn’t at the top of our priority. We’re really focused on running our existing business well and delivering results. I think it’s been highlighted that continuing to deliver the results that we say we’re going to, continuing to look at ways to improve the businesses, is the way to earn the credibility of shareholders. As an industry, I think we’ve got different participants going after it in different ways. I think we’ll see some that will do well and perform well through this price environment. We’ve got others that I am sure will get challenged just by the nature of how they are going to cover their costs, improve efficiencies. We’ve really focused over the last couple of years with our board on what can be done to sustainably improve efficiencies, not just do something that’s flashy for a year or two. I think that’s just as important from a shareholder standpoint to look at. So our discussions with shareholders, our discussion with our board, and we just completed those discussions here recently with our most recent board meeting. We’re really focused on making sure we continue to deliver, stay within our strategy, ensure the foundation is going well, maintain good financial capacity, keep an eye on the balance sheet, and provide shareholder returns as you saw with a dividend that we believe we are positioned well to pay that dividend even though it fell below our current guideline. Those are the sorts of things that we’ve been discussing. I think in terms of the market, I’ve always been saying keep an eye on both what’s happening with ETFs and what’s happening in China. And I think the announcement last week on China was unfortunately a bit of a negative surprise, but quite frankly, there was an increase in gold reserves that China had. And the underlying fundamentals of demand in China for gold still remain strong. Last quarter was the fourth strongest quarter in gold demand in China. So I think that’s good, I think India continues to play well in that. The overall potential headwinds that people see in the U.S. economy performance and interest rates sit out there. I think quite a bit of that I would expect this price still, but I think where things go actually gets some of those things to happen in terms of interest rates finally moving. So the speculation stops and we move past that stage will be important. But we’re in it for the long term. We want to make sure the business is positioned to work through the different swings, ups and downs. We’re not having to shoot from the hip and come up with short-term approaches to addressing the business fundamentals. I think we’ve really worked hard here at Newmont to make sure that we’ve positioned the business to survive well through these sorts of swings.

Okay, great, thank you. And I just wanted to reemphasize, when I said M&A, I really meant consolidation in terms of potential mergers of equals, but I’ll leave it there. Thanks very much.

Thanks, Jorge.

Yes, good morning, Gary, Laurie. I am David Haughton from CIBC. I’ve got a couple of operational questions for you. In your commentary, Gary, you’d mentioned the watering programs at Batu Hijau having the potential to improve grades going forward nearly down at the bottom of the higher-grade portion that could be affected by the dry season. Does the watering have a material improvement beyond the second and third quarter?

Yeah, I think as we looked at it, and we have to see what happens with the rain as you point out. But we’re about 50 meters below where we expected to be in terms of water level in the pit, and it's because it’s been drier, but we also installed an additional watering pipeline to make sure if rain came more than expected we’re in a better position. So that’s all helped. That could help and that’s one of the things we do in our plans for ‘16 and ‘17 because we would have planned in ‘16 a period where we actually came out of the pit bottom and it could position us better, but that’s part of what we'll assess when we do our ‘16 plan.

Okay, and also as throughput at Batu Hijau has been picking up quite well in the first and second quarters this year. Should we expect it to be at those sort of levels going forward?

I think it’s a combination. As we’re in the lower part of the ore body, the higher grade is also softer ore and higher recovery. So all those go together to really result in the better results.

Okay, just switching continents to Ahafo. You continue to get good cash cost results there but your guidance is quite a bit higher than what we’ve seen in the first half of this year. Are you expecting some higher costs in the second half of the year with potentially all grades being higher strip or some other factors?

The combination of two things; one would be grades are expected to drop in the second half of the year and we also expect to see some higher sustaining capital spending that will occur in the second half of the year.

Okay, and then the last one looking at Tanami exploration. Do any of those exploration results, have any of them been factored into your thoughts on the expansion?

No, at this stage we are basing the expansion completely on what we have in our reserve base, not on resources or the rest of what I just talked about.

Okay, but if you are going to have additional infrastructure on presumably better mobility of fleet, etc. that could put you in good stead for accessing potentially these new portions of the ore body if they pan out?

No, exactly. We’ve got existing infrastructure but also have potential options. When you recall, we had a shaft option for continuing to expand production there. That could become one that we consider, and then there could be other potential incremental expansions at the mill we could do depending on what we’d find. But right now, I want to keep the focus and keep it stepwise on what’s the most logical mix based on what we know. Thanks David.

Yes, thank you and good morning, Gary, Laurie, and team. First question made for Laurie, if you were looking at 2017 cost guidance of $900 to $1,000, if you were to mark-to-market energy at $4, is that where a bit of the range would be low end, high end, or could that be very helpful if we have these types of metrics over the next couple of years?

We’ve provided those sensitivities in the past and those are included in our materials that certainly we’ve used. The midpoint of our guidance would reflect the energy at $8 assumptions that we’ve got right now.

Okay, fair enough. Secondly, when you mentioned that Gary mentioned in his prepared remarks about the net debt-to-EBITDA ratio target of one, could you just characterize how sensitive that is relative to gold prices, additional acquisitions, progress on the development project, is that a hard target, is there a timeframe that’s included there?

No, it’s a general guideline, and it’s not going to be sensitive to development essentially because that doesn’t affect EBITDA; we’ve got that factored in. It’s really that EBITDA will move and I want to make the point that it’s at a $1,200 gold because our EBITDA will obviously be more if the gold price changes. So if we’re at a one, that’s extremely conservative. If we’re at one at $1,200, it would fall down a little bit at $1,100, but we’re still at a very confident investment-grade position.

And I wanted to flush it out, thank you. My final question, Gary, I know you talked about some of the labor issues in Africa and in Australia. What - any sense in North America, is there attraction of labor, productivity, any issues on that front that are coming ahead over the next 12 to 18 months?

No, no real issues in North America, Peru and quite frankly Australia; we continue to see better labor availability which is evident in the much lower turnover rates we’re seeing in our operations in West Africa. So I think that’s a key point; one other thing, and I mentioned we just had the board in. We spent quite a bit of time with the board talking about talent, talking about succession, and what we do to make sure we have a good strong talent pipeline throughout the business. So it’s one we spend a lot of time on and it’s one we feel is important for us as we try to separate ourselves from the rest of the group.

Excellent, I appreciate that. Thank you, good luck, guys.

Thanks Michael.

Hi. Just one question on Akyem. I think this group was a little bit lighter than the prior quarter; could you just elaborate on that?

Yeah, what we had, Anita, in the first quarter in particular, but second quarter for the first two months, April and May, we had lower throughput as we ran the power rationing before we got the rest of the gen sets, the temporary gen sets in. So from June, we are back at full capacity and that was really the big driver on the difference in mill throughput and we’d expect that as I mentioned now that we have the additional power capacity to be achieving the more normal levels going forward.

So the full capacity for the remainder of the year at this point?

That’s correct.

Alright, thank you very much.

Thanks Anita.

Thanks, operator, and thanks again everyone for joining our second quarter earnings call. Our team continues to drive stronger performance across the portfolio and the sector. We’ve remained committed to continually improving the business by making our operation safer and more efficient and to building a longer life, lower cost asset portfolio that thrives in all cycles. Our ultimate goal is to create the value we need to fund profitable growth, pay down debt, and most importantly, generate cash for our shareholders. Thank you for your time and have a safe day.