Newmont Corp (NEM) — Q2 2019 Earnings Call Transcript

Thank you, and good morning, everyone. Welcome to Newmont Goldcorp's second quarter 2019 earnings conference call. Joining us on the call today are Gary Goldberg, Chief Executive Officer; Tom Palmer, President; and Nancy Buese, Chief Financial Officer. They will be available to answer questions at the end of the call along with other members of our executive team. Turning to slide 2. Please take a moment to review the cautionary statements shown here, and refer to our SEC filings, which can be found on our website at newmontgoldcorp.com. And now, I'll turn it over to Gary on slide 3.

Thanks, Jess, and thank you for joining our call. We delivered strong performance in the second quarter and continued our work to establish Newmont Goldcorp as the world's leading gold business. Highlights for the quarter included: closing the deal to acquire Goldcorp with the overwhelming support of our shareholders; making steady progress on integrating assets and aligning teams with our proven strategy; completing a historic joint venture with Barrick to create the world's largest gold-producing complex; and meeting our ongoing commitment to deliver leading operational, financial, and sustainability performance. Turning to the details on slide 4. The first pillar of our strategy is to deliver superior operational execution. In the second quarter, we produced 1.6 million ounces of gold, and delivered an all-in sustaining cost of $1,016 per ounce, and continued to improve costs and efficiencies across the portfolio. We're on track to achieve a run rate of $365 million in annual improvements from the Goldcorp acquisition by early 2021, and we launched our Full Potential continuous improvement program at Peñasquito and Cerro Negro. This program has delivered more than $2 billion in improvements since 2013. The second pillar of our strategy is to sustain a global portfolio of long-life assets. During the second quarter, we approved the Awonsu layback to extend the life at Ahafo's open pit mine. We supported the completion of the Nevada Gold Mine's joint venture, and we continued to advance profitable projects including the Ahafo Mill Expansion, Quecher Main, and Borden, all of which will reach commercial production later this year. The third pillar of our strategy is to lead the gold sector in profitability and responsibility. In the second quarter, we returned $590 million in dividends to our shareholders; maintained a strong balance sheet with an investment-grade credit rating, and nearly $5 billion of liquidity; and we were recognized as one of the top companies in the world for our leading social, environmental, and governance performance. This performance starts with running safe operations. Turning to slide 5. While our combined safety performance improved in the second quarter, we remain focused on achieving zero harm across our portfolio. That focus includes reporting and sharing significant events that hold the potential to impact safety and embedding our fatality risk management program to test the controls we have in place to prevent accidents and injuries. Over the last six months, we've also been driving efforts to eliminate live maintenance work as another effective way to protect our people from injuries. We were honored to be recognized as one of the world's leading corporate citizens by Corporate Responsibility Magazine, and the only mining company to make the list for our performance. This recognition is a tribute to the commitment our teams bring to leading sustainability performance and a key measure of how well we run our business. Turning to a look at our global portfolio on slide 6. Our operations are based in four regions and managed under our proven operating model. Taken together, Newmont Goldcorp offers investors an unparalleled portfolio of mines, projects, and reserves in favorable jurisdictions. In fact, 90% of our reserves are based in the Americas and Australia. Sustainable gold production, targeting between 6 million and 7 million ounces per year with another $1.5 billion of annual revenue from copper, zinc, lead, and silver production and the financial flexibility needed to continue investing in profitable growth and delivering an industry-leading dividend. Finally, we offer strong leadership and a wealth of technical expertise to make the most of these assets. I visited Éléonore and Porcupine last week, and I was pleased to see the progress the teams are making to align and integrate these operations and the ongoing work by the combined teams to make the Nevada gold mine's joint venture a success. With that, I'll turn it over to Tom on slide 7 to discuss our operational performance and recent integration work.

Thanks, Gary. Before reviewing our operational performance and integration work, I'd like to take a moment and welcome Rob Atkinson, our new Chief Operating Officer, who you will hear from next quarter. Over the past 25 years, Rob has delivered step-change improvements in safety, productivity, and sustainability in the mining sector. We are excited to have Rob on board, as he brings a demonstrated commitment to building strong safety cultures and to leading and empowering teams to achieve meaningful business results. With his capability and experience, Rob's addition to our leadership team will help drive the delivery of value we have identified through our combination with Goldcorp. Now beginning with a review of our regional performance on slide 8. Our North American operations were impacted by near-term challenges in the second quarter. The performance is expected to improve in the second half, as we work to fully integrate the Goldcorp assets and set them up for sustainable future success. At Peñasquito, operations safely ramped back up in June and concentrate inventories are almost back to normal levels. During the shutdown, the team brought forward maintenance on various plant and equipment. The remainder of 2019 and into 2020, grades are expected to steadily improve as we complete the stripping campaign in the main Peñasco pit. We also launched our Full Potential Program at that operation, and I'll touch a bit more on that later. On June 17, we began good-faith dialogue with a trucking company in the Cedros community. And just last week, the team hosted a session on-site. The stakeholders were able to see firsthand the focus we have on environmental compliance, order efficiency, social development, and long-term community water plans and more. At Musselwhite, the rehab of the conveyor ramp is around 70% complete. Secondary egress has been successfully established, allowing us to recommence both development activities and work on the materials handling project earlier this month. The focus for the remainder of 2019 will be on replacing the conveyor system and using this period as an opportunity to get ahead on development work. At Éléonore, we have begun accessing higher grade in the Horizon five zone and preparations are underway to launch Full Potential in the fourth quarter. We also continued to advance materials handling project to improve productivity from lower levels of the mine. At Porcupine, the Borden Project remains on schedule to reach commercial production in the fourth quarter. And at Red Lake, production at Cochenour was ramping up in the second quarter. However, in early July, we proactively paused the underground operations in order to strengthen our controls following an in-depth review of a historical underground area. Partial underground operations resumed a few days later, following the implementation of additional controls. Over the course of this quarter, we'll be installing some further control measures and expect to return to full underground operations during Q4. Turning to CC&V. We delivered steady production during the quarter and have signed a toll milling agreement with Nevada gold mines to continue processing concentrate in Nevada. In the second quarter, our Nevada operations performed as planned with Carlin safely completing its annual shutdown on Mill 6. And on July 1, we closed the Nevada joint venture and Barrick assumed operatorship of the Nevada gold mines. We look forward to working together and supporting the joint venture's efforts to unlock significant value over the years ahead. Turning to South America on slide 9. Yanacocha delivered another solid quarter, with continued higher grades in the Tapado Oeste pit and drawdown at La Quinua leach pad. And at Merian, continued productivity improvements helped offset seasonal wet weather. At Cerro Negro, second quarter performance was in line with our expectations, and we anticipate a stronger second half as we reach higher grades from the Eureka and Marina Norte. We launched Full Potential earlier this month, focusing on improving development and mining rates, maximizing recoveries, and applying our asset management methodologies at that operation. Looking forward, Quecher Main continues on schedule, with commercial production expected in the fourth quarter. Turning to Australia on slide 10, Tanami delivered another solid performance coming off higher grades in the first quarter. And we are starting to see the cost benefits from the transition to natural gas-fired power. Boddington continues to progress the stripping campaign in the South Pit and expects to reach higher grades in Q4. We recently advanced our autonomous haulage study, with the potential to reach a full funds decision later this year. If approved, the project is expected to improve cost and mining productivity by converting the fleet of 39 haul trucks to autonomous operation, using the Cat command system. At KCGM, geotechnical remediation work on the east wall of the Fimiston pit is ongoing. We are starting to see production from the Morrison starter pit and expect to reach higher grades in the second half. And Tanami Expansion 2 continued advancing towards a full funds decision in the second half. Engineering works are ongoing, and shaft sinking has progressed beyond the 150 meters. Turning to Africa on slide 11, Akyem again delivered strong quarterly production on the back of higher grades. At Ahafo, we continue to benefit from higher grades in both the Subika open pit and underground. We recently approved funding for further laybacks of the Awonsu pit. And while we anticipate first gold from these laybacks in the fourth quarter of this year, the majority of the benefits flow from 2024 to 2029. These laybacks extend the life of Ahafo surface mines by another four years. And the Ahafo Mill Expansion is nearing completion, with commissioning expected to start next month and commercial production in the fourth quarter, keeping us on course for a record year in Africa. Following our review of geotechnical assumptions at the Subika Underground mine, we are assessing mining methods for the low levels of that mine. As we conduct this review, we are mining more laterally and as a consequence have reduced our 2019 outlook by approximately 40,000 ounces. Looking forward, at Ahafo North, we continue to work through the permitting process, engaging with the relevant government agencies and building upon our relationships with traditional leaders and local communities. By putting it all together, we delivered 1.6 million ounces and an all-in sustaining cost of approximately $1,000 per ounce in the second quarter. With our global and balanced portfolio allowing us to overcome headwinds at select sites with continued solid execution across the rest of our operations. Turning to a review of our operational outlook on slide 12, our 2019 guidance includes a full year for the Newmont operations, including a full year for our Nevada sites and a partial year for the former Goldcorp operations from April 18 to December 31. Now outlook has been updated to include the impacts from the blockade at Peñasquito, the conveyor fire at Musselwhite, the installation of additional safety controls at Red Lake, and the impacts from the slip in the Gold Quarry pit at Carlin in late 2018. 2019 is second-half weighted as we ramp up the Ahafo Mill Expansion and Borden projects and reach higher grades at Cerro Negro, Peñasquito, and Éléonore. Sustaining capital of $985 million includes investments in tailings storage facilities, expansions at Ahafo and Peñasquito, VLF2 leach pad expansion at CC&V in addition to infrastructure equipment and ongoing underground mine development throughout the portfolio. Development capital of $575 million includes payment in Ahafo Mill Expansion, Quecher Main, Borden, and conveyor remediation works at Musselwhite. In summary, we expect to deliver 6.5 million ounces of gold, an all-in sustaining cost of $975 per ounce in our first partial year as a combined company. This operational outlook does not include any of the benefits that will flow from our Full Potential work at Peñasquito and Cerro Negro or from supply chain improvements where we are actively progressing work. Turning to slide 13 for a look into our early successes. We have made excellent progress in the first 90 days of integration. On the G&A front, we recently completed our organizational design work, resizing the Vancouver office from a corporate headquarters to a regional office. This work has already captured $40 million per annum in labor savings to date. We have realized a further $10 million per annum in non-labor G&A synergies through the consolidation of insurance and benefit programs, real estate, and other quick wins. We have commenced the next phase of this work, which shifts the focus from Vancouver to target duplication across the operating businesses. Turning to our supply chain work. Newmont's experienced supply chain team is actively chasing value across several fronts. Quick wins are being achieved through the extension of best pricing and rebates, and we are also leveraging our increased scale and volume to seek improvements on some of the input costs. Our Full Potential program is well underway at Peñasquito, recently kicked off at Cerro Negro, and we're preparing to launch at Éléonore in the fourth quarter. At Peñasquito, Full Potential began in early June, and we have our key subject matter experts on the ground working with the site team focused on opportunities in the areas of mining, processing, asset management, G&A, and external spend. Another example of applying our technical expertise to turn these former Goldcorp assets around is our strategic resource development program. This program lays the groundwork for future business plans of testing an extensive set of mine plan options across a wide range of interrelated variables. The output from this work ensures that we are pursuing the optimal development and value path for operations. At Musselwhite, our strategic resource team is working with the site to understand the entire value chain and review critical trade-offs in physicals, financials, and risks to develop the best value for that operation. In summary, our structured approach to delivering value heads us well on our way to achieve the cash flow improvements of $365 million per annum. We expect 40% of the improvements to be realized this year ramping up to 80% next year, and 100% by 2021. Looking further ahead at our project pipeline on slide 14. Another key value proposition in our combination with Goldcorp is our industry-leading project pipeline. Leveraging our project delivery track record it provides the opportunity to establish a foundation for steady production and cash flow for decades to come. This pipeline gives us significant flexibility, and we will continue to advance only those projects that meet our minimum hurdle rate of 15% at a $1,200 gold price. As previously mentioned, we recently approved the Awonsu layback, and this project is now shown in execution along with Musselwhite materials handling, and the three projects we expect to complete in the fourth quarter this year: Ahafo Mill Expansion, Quecher Main, and Borden. It's also worth noting that we shifted the Coffee project from definitive feasibility to pre-feasibility as we take a step back to perform further exploration, confirm the resource, advance permitting activities, and improve our understanding of the asset. As part of our integration and annual planning work, we will continue to evaluate all projects through our rigorous and disciplined investment system. I look forward to providing updates on our project portfolio as well as our optimization work on the six former Goldcorp assets to deliver long-term value as we move ahead. With that, I'll hand it over to Nancy on slide 15.

Thanks, Tom. Turning to Slide 16 for the financial highlights. Before we jump in, it's important to note that results reflect the performance of Goldcorp assets from April 18 until June 30. In the second quarter, we delivered revenue of $2.3 billion which increased 36% over the prior year quarter with the additional sales from Goldcorp assets and higher realized gold prices; adjusted net income of $92 million or $0.12 per diluted share; and adjusted EBITDA of $679 million, a 25% increase over the prior year quarter. Cash from continuing operations was $301 million, a decrease of 25% driven by lower net income and higher accounts receivable at Boddington and Peñasquito with Peñasquito concentrate shipments recommencing in mid-June and port congestion at Boddington that delayed shipments near quarter end. Outstanding concentrate receivables at these two operations were more than $150 million, which we expect to collect in the third quarter. Those movements also contributed to a free cash flow decrease of approximately $220 million over the prior year quarter along with higher investments in development projects. We have collected $45 million of insurance proceeds related to the conveyor fire at Musselwhite, of which $14 million was recorded as an offset to cost applicable to sales in the second quarter. As you will see in our detailed results, there are specific accounting and policy differences for the newly reported Goldcorp assets, including a reset in the basis of assets and liabilities to fair value and our changes to reporting for differences between IFRS and U.S. GAAP and the adoption of Newmont accounting policies. Some of these items include differences in the classification of certain investments as sustaining or development capital, the exclusion of resources in the calculation of depreciation expense and the impact on cost applicable to sales without deferred stripping costs. Other notable differences include coproduct accounting at Peñasquito, changes to the accounting for the mines’ Silver Stream contract, and the inclusion of Cerro Negro's Argentinian export tax in our AISC calculations. Turning to slide 17 for a review of earnings per share in more detail. Second quarter GAAP net income from continuing operations was $1 million. Primary adjustments included $0.16 comprised of $0.14 related to transaction and integration costs from the Goldcorp acquisition, such as severance payments, legal and banking fees, and consulting costs; and $0.02 related to the Nevada joint venture transaction including costs related to defense; $0.04 related to reclamation and remediation charges at legacy Newmont sites; $0.05 related to a change in the fair value of equity investments; and $0.04 related to gains from the sale of exploration properties in North America. Taking these adjustments into account, we recorded adjusted net income of $0.12 per diluted share. I want to take a moment to thank the Newmont Goldcorp finance team and all the work they've accomplished to support the successful integration of the businesses in coordination with Barrick to successfully transfer ownership of our Nevada assets to the joint venture. As a reminder, our results for the third quarter will proportionately consolidate Newmont Goldcorp's ownership interest in Nevada gold mines for the terms of the joint venture agreement. We will present these results as a separate segment in our financial statements including the various elements of the P&L for disclosure purposes. Turning now to slide 18. We remain well positioned to execute our capital priorities including maintaining an investment-grade balance sheet, investing in the next generation of mines to improve margins and build a stronger reserve base, and return cash to shareholders. Newmont Goldcorp has one of the strongest balance sheets in the gold sector, supported by a cash balance of $1.8 billion even after paying off $1.25 billion of outstanding Goldcorp debt at closing and returning approximately $590 million to shareholders in the second quarter. After the completion of several key financing activities in April, including a reset of our five-year $3 billion revolving credit facility and a successful exchange of Goldcorp notes, we maintain financial flexibility with a net debt-to-adjusted EBITDA ratio of 1.5 times. We also demonstrated our continued commitment to returns through a special dividend of $0.88 per share and a common dividend of $0.14 per share. Wrapping up with our 2019 corporate outlook on slide 19. We continue to invest in our future to secure the long-term stability of our business. For 2019, our support cost outlook is $325 million, which includes a portion of synergies from the Goldcorp combination, but also contemplates managing the Nevada operations from our Elko regional office through June 30. We are on track to deliver an annualized run rate of $85 million in G&A savings for 2020. Our interest expense is expected to be $280 million from our new debt profile, and our depreciation and amortization outlook is just over $2 billion. Investment and exploration in advance projects is expected to be $450 million with near-mine and greenfield exploration occurring across all regions and ongoing investments in advanced projects as we progress in the next phase of future growth. Finally, our consolidated adjusted tax rate is forecast to be in the range of 34% to 39% using a $1,200 gold price. Going forward, Newmont Goldcorp is well positioned to continue a trajectory of industry-leading financial performance by executing our capital priorities and staying focused on long-term value creation. And now I'll hand it to Gary to wrap up.

Thanks, Nancy. Turning to Slide 21. Newmont Goldcorp delivered a strong first half in 2019. We are well-positioned to build on that performance in the second half and for decades to come. We will continue to focus on generating long-term value for our shareholders by executing our strategy, which is to deliver superior operational excellence by focusing on safety and a culture of continuous improvement; sustain a global portfolio of long-life assets by investing in the next generation of mines, technology, and leaders across our business; and to lead the gold sector in profitability and responsibility by maintaining high standards and living up to expectations of how a leading business should operate. I'll end by saying thank you to our team and to our investors for your support. It has been an honor to lead Newmont Goldcorp. I'm proud of what we've accomplished together over the last seven years, and I'm excited about the future for the business. I have great confidence in Tom and his new leadership team as he takes over the reins as CEO on October 1st, and I have great confidence in this team's ability to build on a strong foundation and advance Newmont Goldcorp's position as the world's leading gold company. Thank you for your time. And with that, I'll turn it over to the operator to open the line for questions.

Thanks. Good morning, Gary, Nancy, Tom. It's been great working with you, Gary. Best of luck in your new endeavors. I was just wondering with the new accounting, Nancy, that you spoke of how much of the lower earnings are related to that? The change in the loss of deferred stripping and the more conservative accounting. Have you thought about the impact that we've seen with these results as a result of the accounting?

Yes, thanks John. And absolutely that's something that we wanted to telegraph very early on because we knew there would be some significant differences. I would say the difference between IFRS and U.S. GAAP is probably the most material piece, and we'd be happy to walk you through those in a bit more detail. And then certainly some changes between policies and as we've talked about, the difference between development versus sustaining CapEx is probably the key piece of it, as well as the co-product versus by-product accounting at Peñasquito. So, yes, that's probably a fairly material difference in the way you would have seen things reported at the Goldcorp level, and we're very comfortable walking folks through the details of those to help make sure you're bridging to the way we'll be accounting for those going forward. But yes, our goal was not to surprise the market with that, but we've tried to telegraph that there would be some fairly material changes.

And then one of the things that seems a little bit counterintuitive is the switch from being able to depreciate underground mines against the reserves and resources. Now, I understand that just using reserves, as per GAAP is a more conservative way of working, but it seems impractical particularly as you and other miners become more focused on underground mines. What's your thought on that? And would it be possible to lobby the SEC to change that?

Yes. Totally understand the request there, and we don't disagree with you. However, we are settled a bit by the requirements of U.S. GAAP, so that might take more than just Newmont's desire to turn that around. But we totally understand the thoughts, but U.S. GAAP really requires us to only use reserve life to calculate depreciation.

Right. And then just if I may, at Subika, you mentioned that there's been a change in the mining plan there. What's going on?

John, it's Tom here. I'll address that question. As we assess the ongoing operations and the increased stresses encountered as we delve deeper into the mine, we are noticing higher levels of stress. Therefore, we are stepping back to reevaluate our mining methods, particularly the type of backfill required. We've recently shifted from lateral mining to better navigate our mining plan through this year's business planning process. I anticipate that as we progress, we will be able to offer more detailed long-term guidance later this year. This will include insights on how we are managing the increased stresses as we explore the deeper areas of the mine.

Okay. Great. Thanks. Best of luck, Tom, in the new role and best of luck, Gary, and others. Thank you.

Thanks, John.

Hi Gary, Tom, and Nancy, and best wishes to you, Gary, and Tom in your new roles. I have a couple of questions. Regarding the new guidance of 6.5 million ounces for 2019, considering the updates from April on the Goldcorp assets, how should we interpret that figure in the context of the ongoing Full Potential program as you transition into 2020 and beyond? Is this a number that has been significantly reset, and will you be building upon it with any optimization from Full Potential? Or can we anticipate that 2020 and future projections remain somewhat flexible based on the outcomes of your asset review in the next six months? Thank you.

Thanks Chris. Tom here, I'll pick that one up. Look, the approach that we take with all of our operations and the Full Potential approach we take in coming in and running full potential at those operations is to start with previous best demonstrated performance and understand what you've done in the past and then building a plan on that basis that's underpinned by a robust resource model is then feeding a mine plan. And then we start to build some stretch in that in terms of the improvement. That's the starting point that Full Potential has as it comes into Peñasquito and Cerro Negro and Éléonore as well as our existing or former Newmont operations. So that's the basis at which we have worked with our 14 operations to develop our guidance for this year and that's the process that we're using to build our business plans for 2020 and beyond for Newmont Goldcorp. What we do with Full Potential is when we have a Full Potential Program we go through a diagnosis phase and then a development phase. Coming out of a development phase, you then have a series of projects that have clear value delivery linked to them, resources and accountabilities, and a time frame. It's only when we have those clearly defined projects in place that we build them into our plans and our guidance. So as I said in my comments, you won't see Full Potential benefits built into our 2019 guidance because that work is only just starting at Peñasquito and Cerro Negro. We would expect to see some of those benefits for those two sites flowing into our 2020 business plan and our 2020 numbers. So we're very disciplined and rigorous in the way we look at our mine plans and the way we apply our Full Potential Program.

Thanks, Tom. Regarding the medium term, should we anticipate our updated guidance for future years later this year? Also, what is the updated timing for any divestments in the 6 million to 7 million ounce range that you mentioned last quarter? Thank you.

Thanks Chris. I'll pick up the first part of your question and pass it across to Gary for the second part. We're right in the middle of our normal annual business planning process at the moment. That's the standard process we run through as we walk through that process and present our business plan to our board in the latter part of this year for approval. We'll then follow up with longer-term guidance and we're currently targeting our standard timeframe of December to be sharing that with you.

To follow up on the divestment question, I want to emphasize that there was no requirement for divestments related to this acquisition. Throughout the process of collaborating with Barrick on the Nevada joint venture, we have aimed to thoroughly assess the operations and projects we acquired from Goldcorp. We want to ensure that, similar to our approach with Newmont five to six years ago, we evaluate all assets to confirm they are performing at their best before we proceed with any divestment actions. That is our current focus.

Thank you, Gary. Regarding Musselwhite, should we expect that the repair work timeline can accelerate in 2020, or is it premature to determine the potential impact for that year? Additionally, could you provide more details about the blockade at Peñasquito and its effects on mining inventory levels and other operational factors as we look towards the second half of the year and beyond? Thank you.

Chris, I'll address both points. At Musselwhite, the fire caused damage to the entire 2.5-kilometer conveyor system. We are currently in the process of repairing it, having completed about 70% of the rehabilitation work after removing the damaged structures and addressing ground control in a 2.5-kilometer decline. I visited Musselwhite recently, and I can say the team is making great progress, focusing on long-term stability for a mine with a lengthy operational life. We are now reviewing bids for the fabrication and installation of a new conveyor, and our timeline will depend on those bids. We expect the conveyor system to be operational in 2020. We have also resumed work on the materials handling project, which was already significantly advanced before the fire caused a pause. We are in the final stages of that project and plan to commission it later this year, ready for use in the New Year when the new conveyor system is up and running. Our priority at Musselwhite is to ensure the right level of development work, maintaining enough stopes open and having the necessary drifts mapped for future exploration. I am confident that when the conveying system is operational again, we will smoothly return to our targeted production rates. Regarding Peñasquito, the blockade did not negatively affect operations, as we managed the situation effectively through care and maintenance, allowing us to perform maintenance work during the downtime. The ramp-up has gone smoothly, and we have effectively transported concentrates to the market, although, as Nancy mentioned, there is a slight backlog of concentrate sales from the second quarter that will carry into the third quarter. Currently, concentrate inventory levels have returned to normal, and both the mine and plant are functioning well. In the second half of this year, we expect to continue processing higher grades of gold, silver, and lead, while zinc grades will remain stable. Due to the 50-day shutdown, some of the higher grades anticipated in the fourth quarter will be pushed into 2020, and we will include that in our guidance later this year.

Thanks Tom. That’s all for me. All the best to you and Gary. Thanks.

Thanks Chris.

Hi good morning. Thanks for taking my question. Just going back to the Goldcorp synergies for a second. Can you clarify the cadence of the synergies? I thought, I heard you say 40% this year, 80% next year, and 100% by 2021. And if that's the case this year, is it right to say that none of that 40% of the $365 million would be full potential? It's all coming from G&A and supply chain? Just some clarity around that would be helpful.

Tom, I'll take that one. You are mostly correct. We are currently seeing many of the early quick wins from G&A, and there are still more opportunities as we transition from Vancouver to the operating sites. The quick wins in supply chain involve rebate extensions for the Goldcorp site, which is enhancing our operations. We expect to realize quick wins in both supply chain and G&A, with G&A making up the majority of the 40% this year. Next year, you will see full potential improvements in supply chain as we execute enhancement projects at Peñasquito and Cerro Negro. Additionally, as we advance through the other Goldcorp assets next year, you will notice the rest of the improvements flowing in, mainly from full potential, along with some further supply chain gains. G&A, some supply chain enhancements, and full potential will be significantly activated by 2020-2021.

That's helpful. Thanks. And just as a quick follow-up, any surprises or anything interesting you've learned so far from the Full Potential work at Peñasquito and Cerro Negro? Anything that has been different than, perhaps your initial assumptions when you first did the due diligence on the mines? Thanks.

No surprises from our due diligence. There is everything that I expect to say that we are seeing, and I think there's the real value proposition of Newmont's operating model sitting and having these six Goldcorp assets come into our operating model, and seeing the journey that we've been on places like Boddington and Tanami applied to operations like Peñasquito and Cerro Negro absolutely have water, and there's nothing's changed in my mind in terms of what we saw during due diligence and what we've seen over the first 90 days of running these operations. There's a need for technical rigor and discipline. We bring that. We've got key technical expertise. We're seeing some real opportunities in the full potential space. I think in Peñasquito, and I'm heading down there this afternoon, particularly the interface between the mine and the mill, which we see and have continued to pursue at Boddington. We see the real opportunities there at Peñasquito. And Cerro Negro is going to be really focused around mining and development rights underground. There's a real opportunity there. We believe we have the skills and expertise to bring the improvements in that space at Cerro Negro, so no surprises at all.

Thank you.

Thank you. Tom, just listening to what you're saying about the development at Musselwhite and have the folks there just to get that ahead of what you have been I suppose. Is that a continuing theme you're seeing across the Goldcorp operation, that just wasn't the development work done or stripping required to meet the needs of the mills? Is that the biggest problem in your mind?

To be frank, Greg, yes. There was not the work done on exploration, and there wasn't the work done on development, and that's absolutely fundamental in either open pit or underground mine. So, as we look at Musselwhite, Musselwhite had one stope open before the fire. That's unacceptable. We will not have...

Now, how many would it need, Tom?

It depends. We need to understand the value, but a mine the size of Musselwhite, with the scale of their stopes, would generally have five or six stopes operational at any given time. Before we can restart that conveying system, we intend to complete the development work to ensure that not only six stopes are ready, but also that there are additional stopes and exploration drifts prepared. Musselwhite is comparable to our Tanami operation in Canada. Therefore, we must be proactive in our mining efforts to conduct exploration work and map out the future potential of that operation. Our focus now, having established secondary egress, is to engage in development work so that when the conveying system is operational, we can sustain the necessary throughput in the mine while also working to understand its long-term viability.

So was that similar lack of development of Cerro Negro and Éléonore as well?

It's a similar thing. The thing we saw through our due diligence was the opportunity for us to come in and apply our rigor and discipline and operating model to those operations.

How long Tom, do you think it's going to take you to get these operations to where you want them to be?

Again as we talked about, as we marketed this transaction, there is 24 months, possibly at the 36 months for some of those operations to really get them to the level of performance that we would expect. It's a very similar journey. If you look back over Newmont over the last six or seven years, and we're at Boddington or at Tanami was back in 2012 or 2013 to where it is today, there's a good two, three years of work to get those operations set up for sustainable long-term value delivery.

Okay. That’s very helpful. Thank you, Tom.

Hi. Good morning. Just got a question on Cerro Negro and Éléonore. Cerro Negro I think that tonnes throughput in the quarter is around 3,400 tonnes. I know Goldcorp was pushing 4,000 tonnes. And I think you've talked in the past about maybe that was too aggressive. And I'm just wondering should we assume a run rate similar to Q2? Or sort of what throughput expectations should we expect over the balance of the year and similarly on Éléonore?

Thanks Carey. So you won't hear us talk about tonnes per day out of the former Goldcorp operations. You'll hear us talk about – it might be tonnes per year, but you'll certainly hear us talk about what's the highest value or the best value out of those operations. In terms of Cerro Negro, we are moving into a couple of higher-grade zones in – so you'd expect to see both higher grade and increased volume coming out of those underground mines in the second half, which is going to contribute to a back-half-weighted Cerro Negro for 2019. Similarly, for Éléonore you are moving into some higher-grade areas of Horizon five or six that will help back-half weight Eléonore for this year.

So should we assume that the rate of – before going into the mill will be more variable going forward or –

No, you'd expect the right going through the mill to be consistent going forward. But what we'll be focused on is what's the combination of buying a mill that's going to deliver the best value for those operations that will be a change in language you can expect to hear from Newmont Goldcorp.

And again for the balance of the year is that going to be similar to Q2 or is it going to be different in Q2? Obviously, you've mentioned higher grades in the back half.

Yes. Essentially one thing to remember second quarter didn't start with all these Goldcorp assets. We didn't start accounting for them until April 18. So that wasn't a full three months of production so keep that in mind when you look at the numbers.

Okay. And then maybe one other question on 2019 clearly there's a lot of issues this year with the Peñasquito and Musselwhite fire. I think your previous pro forma guidance for 2020, 2021 is 7.4 million to 7.5 million ounces. Is there anything that you've seen so far that you think those numbers would change materially? Or more or less do you think you can still get to those certain numbers again barring any improvements from the full potential?

Carey, we're right in the middle of our planning process at the moment. And as I talked earlier in terms of – we stepped back and ensure, we understand the resource model that's underpinning mine plans to resource risk, the investment in exploration we need to do to be managing our resource risk and then building mine plans off the back of operating assumptions that are based on previous best demonstrated performance and then have improvement built into those. So we're going back to those technical fundamentals for all 14 operations across Newmont Goldcorp. And as we're building those production profiles and then starting to move into the cost and so on and so forth, we're seeing production profiles consistent with what we expect to come into this transaction.

Okay. Fair enough. Thank you.

Good morning, everybody. I think that's me. Just wanted to – I have to shorten my name. I just wanted to – Gary first of all good luck to you on your next adventure. It was really great working with you. All the best. Just on a few things from myself. Maybe Tom just coming back to Ahafo just on the Subika Underground, appreciate your talking that you see additional more stresses than you were expecting as you go deeper. Can you just let us know is this just in a certain portion of the ore body that this is occurring why you will have to adjust? Or is there a general for the whole ore body?

It's related to the Subika Underground ore body, where we observe a general increase in stress as we go deeper. We need to assess which mining method is most suitable for these stress conditions and the appropriate backfill to use. As we evaluate this, we are considering a mining method that may lean towards bulk top mining. This approach could potentially extend the life of Subika Underground by providing access to more ore. The key is to understand how the stress affects the mining method and to explore the opportunities that come with changing our approach. Generally, deeper metal bodies experience higher stress levels, which requires us to determine the best mining method to accommodate those conditions.

Okay. And when will that work be done by?

We're doing that work now. It's being built into our business plans for this year and going forward. So, we would expect to see that incorporated into our long-term guidance, so that we'll come out with it in December.

Okay. And then just on the change in Ahafo guidance that we saw from your previous guidance. Is it safe to assume that all of the change in the Nevada guidance was due to a Gold Quarry adjustment?

That's correct. So you saw at Ahafo, we're mining laterally rather than heading down. So that's the impact there.

Yeah.

And yes, that's the 70,000 ounces that we've been indicating from the Gold Quarry impact from the slip last year is. What you're seeing take up in that guidance for our Nevada assets that we just issued.

Okay. Coming back to the Goldcorp assets, your statement about the lack of underground development to sustain these assets long term indicates that we need to catch up. So Tom, given this situation, how confident are you in the guidance you provided for 2019? Do we have sufficient development to achieve the guidance numbers you announced?

Yes, we do. And I'm very confident in the guidance numbers we've put out. We have applied Newmont rigor to arrive with those numbers. And I'm very confident in those numbers.

That goes to underground operations?

Yes.

Okay.

In some cases, we currently have development for 10 years. For example, at Tanami, we have excellent control with drilling planned for three years ahead and a 10-year lifespan projected. I expect the same for the Goldcorp assets. The situation at Musselwhite is indicative of our current position. Additionally, there are other instances where we need to ensure we manage these assets for the long-term.

Okay. So meeting the 6,600 tonnes a day at Éléonore, 4,000 at Cerro Negro, you have the stopes you need to make that for this year?

We have development work required to meet our production guidance for this year out of those former Goldcorp assets.

Okay. And then maybe on Peñasquito, just on the open pit, you said it ramped up nicely. Are you seeing improvement in grade in Q3 in the month of July? Are you starting to see that?

You will start to see improvement in grade across gold, silver, and lead coming through. Yes. We're seeing it in the third quarter. And then you'll see it kick up more in the fourth quarter. So as you're going to see more of that in the fourth quarter than the third. But yes we are seeing that coming through from that mine as expected.

Okay. So no surprises right now for Peñasquito? I'm sorry. I didn't ask on the throughput. Is the throughput back to 110,000 tonnes a day?

We'll have the throughput to deliver our guidance for 2019.

Okay. Okay, look forward to seeing that. Thank you.

Newmont Goldcorp delivered solid second quarter results. And we will look forward to an even stronger second half as we continue to lead the gold sector in profitability and responsibility. Thank you for joining us and for your interest in Newmont Goldcorp.