Newmont Corp (NEM) — Q2 2020 Earnings Call Transcript

Thank you and good morning everyone. Welcome to Newmont’s second quarter 2020 earnings conference call. Joining us on the call today are Tom Palmer, President and Chief Executive Officer; Rob Atkinson, Chief Operating Officer; 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 two, please take a moment to review the cautionary statement shown here and refer to our SEC filings, which can be found on our website at Newmont.com. And now, I’ll turn it over to Tom on Slide three.

Thanks Jess. Good morning and thank you all for joining our call. Newmont continues to manage through the COVID pandemic from a position of strength and our diverse balance portfolio of world-class assets provide stable production with significant reach to rising gold prices. Turning to slide four, for a look at our second quarter highlights. Our resilient operating model supported the delivery of solid quarterly results despite the ongoing impacts of the COVID pandemic on our business. We slightly resumed operations at Cerro Negro, Yanacocha, Éléonore, Peñasquito, and Musselwhite. The five sites placed in care and maintenance earlier this year. In the second quarter, we produced 1.3 million ounces of gold at all-in sustaining costs of $1,097 per ounce. We generated operating cash flow of $668 million and free cash flow of $388 million. And we continue to safely advance project work at Tanami Expansion 2, Subika Underground, and Musselwhite. Our investment-grade balance sheet combined with liquidity of $6.7 billion provides us with significant financial strength and flexibility. We ended the quarter with $3.8 billion of cash and have lowered our net debt to adjusted EBITDA ratio to 0.6 times. We declared a second quarter dividend of $0.25 per share, which remains the highest yielding dividend among senior gold producers. It is also worth noting that over the last 18 months Newmont has returned more than $2 billion to shareholders, demonstrating our track record of industry-leading returns. At Newmont, we have a fundamental belief that strong environmental, social, and governance performance is not only the right thing to do, it is also an indicator of a well-managed business that delivers sustainable long-term value for shareholders and other stakeholders. In June, we published our 16th Annual Sustainability Report, which details Newmont's strategy, approach, targets, and performance related to material ESG issues ranging from climate, water, tailings, value sharing and human rights through to corporate governance, tax strategy, ethics, and compliance. The report transparently covers what we've done well, where we have lessons learned, and how we plan to improve. And I encourage you to take some time to read more about our efforts in this space by visiting the sustainability section of our website at Newmont.com. Turning to slide five. Combined with our proven and resilient operating model, Newmont's deep bench of experienced leaders and mature systems remain a competitive advantage in these unprecedented times. We will continue to maintain our wide range of COVID protocols at all sites, ensuring that we keep the health, safety, and well-being of our people and communities above all else. Two weeks ago, I visited the Boddington operation in Western Australia. And even though Western Australia currently has no community spread of this virus, our robust controls remain in place at Boddington. It was great to experience firsthand the work all the operations are doing to ensure that we do not lose focus on protecting our workforce and communities during this time. The confidence and pride at Boddington was very high. And our teammates are absolutely focused on safely delivering their plans. I am incredibly proud of all of our employees for how they are overcoming the challenges we've faced this year with focus and resolve. Across the globe, we are finding new ways to move the business forward, by better leveraging technology, fostering greater collaboration, and building a deep sense of community despite having to work apart. We are also strengthening our relationships with external stakeholders by embracing our core values of safety, sustainability, integrity, inclusion, and responsibility in every engagement with them. Early this year, we established a $20 million global community support fund to assist host communities, governments, and employees. With input from local stakeholders, we identified three focus areas; employee and community health, food security, and local economic resilience, to ensure that our financial support will have the most positive impact and reach those who need it most. Our efforts have included the provision of personal protective equipment for frontline workers, the construction of an oxygen plant for regional hospitals, partnering with local food banks for families in need, and micro-lending and revolving loans for businesses in host communities. Sadly, one area we have seen significant need as a result of COVID is domestic violence. So we have also partnered with agencies that serve women and children in need of safer environments. To date, we have distributed nearly $6 million, with another $4 million in process, pending completion of a governance process designed to ensure that the funds go where intended and are utilized effectively. We are committed to managing our fund with collaboration and transparency, and you can find our regularly updated list of all recipient organizations on our website. These efforts will continue in the weeks and months to come, so that our host communities can thrive long after this pandemic is behind us. Turning to look at our global diverse portfolio on slide six. Among our 12 operating mines and two joint ventures, we have eight world-class assets, each of which deliver more than 500,000 ounces of consolidated production per year, with all-in sustaining costs of less than $900 per gold equivalent ounce and a mine life that exceeds 10 years. Importantly, all are located in top-tier jurisdictions that we define as countries classified in the A and B ratings ranges by Moody's, S&P, and Fitch. In addition to our eight existing world-class assets, Newmont has two emerging world-class assets with the Yanacocha in Peru, and Merian in Suriname. These emerging assets within our portfolio offer upside through further optimization and development over the coming years. We also have an unmatched project pipeline with Tanami Expansion 2 being executed. Both the Ahafo North and Yanacocha Sulfides are advancing towards full funds decisions next year. It is from this foundation that we can create additional value as we optimize our longer-term projects and deliver decades of profitable production. Turning to slide seven. Our stable production profile will generate more than 6 million ounces of gold per year through 2029. This decade-long production profile is underpinned by eight world-class assets, our industry-leading exploration program, and three key development projects; Tanami 2, which is in execution, along with Ahafo North and Yanacocha Sulfides. This profile is further enhanced with over $1.5 billion per year of additional revenue, producing between 1.2 million to 1.4 million gold equivalent ounces from silver, lead, and zinc, Peñasquito, and copper at Boddington. Combined, we will deliver well over 7 million gold equivalent ounces per year for the next decade, the most of any company in our industry. Turning to our free cash flow generation potential on slide eight. We expect to generate substantial free cash flow throughout the gold price cycle. For every $100 increase in gold price above our base assumption, Newmont delivers approximately $400 million of incremental attributable free cash flow per year. Using our conservative $1,200 gold price assumption, our base free cash flow would still total more than $5 billion over the next five years. At current gold prices, our portfolio will generate more than $17 billion of free cash flow over that same timeframe. In addition, we have the potential for further upside with tailwinds from favorable ore prices and foreign currency exchange rates. Looking forward, we are well-positioned to continue executing our capital priorities and staying focused on long-term value creation. With that, I'll hand it over to Rob to discuss our operational performance on slide nine.

Thanks, Tom. Turning to slide 10. The strength of our diversified global portfolio along with our operating model and capable workforce continues to be a key differentiator for Newmont during this unprecedented time. During the second quarter, we executed safe and efficient restart plans at Cerro Negro, Yanacocha, Éléonore, Peñasquito, and Musselwhite, which I will discuss in more detail shortly. As Tom mentioned we continue to maintain the extensive protocols across all of our sites to ensure the health and safety of our workforce and nearby communities. We have been operating with a significantly reduced site-based workforce and remain committed to the safe delivery of our plan. As you will recall, we made the important and proactive decision to continue paying our employees through June, despite the status of their operation, which has impacted our second quarter unit costs. It was absolutely the right decision and has been an essential factor to allow the safe and efficient ramp-up of our operations with the full support of our workforce and local communities. For the second quarter, we incurred approximately $195 million of care and maintenance costs, and approximately $33 million of COVID-19 specific costs related to additional health and safety procedures, transportation costs, and community support fund disbursements across our entire portfolio. Over the last few months, we've seen near-term headwinds as our increased health and safety protocols impact operating efficiencies, particularly in the mine, with staggered pre-start meetings and the elimination of hot seating and transport changes impacting productivity. However, we've been able to partially offset these impacts by reducing the number of people working at site, implementing new rosters, and taking advantage of downtime to plan for longer-term efficiency improvements. Now we'll touch on these further in the regional overviews. I'm very proud of our team and what they've safely accomplished during this unprecedented time, but as we continue navigating through this global pandemic, I can assure you, our focus to drive efficiency and productivity gains is more important and acute than ever. We are well-positioned to deliver a stronger second half of the year. Coming now to slide 11, for an update on Australia's performance. At Boddington, we began to reach high-grade in the south pit. Earlier this month, the team achieved 21 million tonnes through the plan year to-date, which puts them on track to exceed 40 million tonnes by year-end. As our three-year stripping campaign nears completion, we will continue to mine higher grades into 2021. We continue to invest in the Autonomous Haulage System, which we expect to be fully operational next year. Tanami delivered yet another solid quarter, and the team is continually looking for ways to improve the way we work. Just recently, the mine implemented even-time rosters to improve productivity and shift changes. With the interstate border closures in place in Australia, I am incredibly appreciative of the many team members and their families for their willingness to temporarily relocate to Darwin from other parts of Australia, allowing us to continue safely operating through this period. The Tanami Expansion 2 project is also progressing and all critical activities have continued. Working with our EPC partner, we are now approximately 30% through the engineering design, and the overall project is about 10% complete. Travel restrictions did impact second quarter development rates. However, we recently added a fourth crew to help mitigate the efficiency losses. In early July, the box cut for the production chase foundation was completed, and we placed the second raisebore on the surface. So overall things are tracking well. Two weeks ago, the first buildings for the new camp near the underground mine arrived on site after traveling over 2,000 miles. The camp will initially be used for the construction crews, and when the project is completed, it will be repurposed to accommodate our mining crews to improve fatigue management and save 80 minutes a day in travel time between the current camp and the mine. We are also progressing our study work of Oberon remotely, including a review of surface layers, mine and process plant infrastructure options, and updating the resource model. Our hydro-geological drilling has been delayed, but we are working with the traditional owners to access that area and see if we can remobilize the team. The Oberon deposit continues to grow as an open pit opportunity with the potential to exceed 2 million ounces as we define the high-grade structures and understand the upside of this prospective deposit, and how this further improves our production outlook. Australia’s 2020 production and cost outlook is unchanged, with approximately 1.2 million ounces and $900 per ounce all-in sustaining costs. Turning to Africa on Slide 12. Ghana has seen an uptick in COVID cases over the last two months, but our teams at Akyem and Ahafo continue to adhere to the strict protocols, and our quarantine and contact tracing procedures have been effective in minimizing the impact on our operations. Our team delivered solid second quarter performance with higher throughput despite a planned maintenance shutdown and expects to reach higher grade in the fourth quarter. At Ahafo, we continue to progress stripping at the Awonsu and Subika open pits while advancing underground development for the updated mining method at Subika Underground. Development rates of Subika Underground are ahead of schedule, and we recently received the raisebore machine, which will further support development progress. The 2020 outlook for Africa is unchanged with 850,000 ounces at $870 per ounce all-in sustaining costs. We expect a strong second half of the year with Ahafo reaching higher grades than the open pits and Subika ramping up from the underground. Turning to Slide 13 for an update on the Ahafo North project. The Ahafo District provides significant upside potential from the underground opportunities at Awonsu, Apensu, and Subika, as well as from Ahafo Mill. Located just 30 kilometers north of our existing Ahafo operation, it is the best on mine gold deposit in West Africa, with approximately 3.5 million ounces of open pit reserves and more than 1 million ounces of indicated and inferred resource. Similar to Tanami in Australia, our ability to expand this prolific region is underpinned by our successful recent investments in Ahafo Mill expansion and Subika Underground, which has created a very strong platform for our future. Our plans include building a standalone mill, and the project is expected to produce approximately 250,000 ounces per year over a 13-year mine life for an investment of approximately $700 million to $800 million. Our project work continues remotely with a team focused on engineering and design work, as well as construction, procurement, and community planning. We have also been able to advance the permitting process with the Ghana EPA through both virtual and limited face-to-face sessions. Earlier this month, we submitted our initial environmental impact statement for review. We also received engineering and design approval from the Ghana Highway Authority for the highway diversion and improvement project, which was a key milestone for the project. We remain on track for a full funds decision in 2021. Moving to our North America operations on slide 14. During the second quarter, the North America region resumed operations at the three sites that were previously in care and maintenance. At Peñasquito, we began a phased ramp-up in mid-May consistent with the Mexican government's regulations. Government representatives visited the site, including the Federal Undersecretary of Mine to review our protocols, and said Peñasquito is a leading example of how all Mexican mines should operate during these times. We began ramping up the mill and mining activities at the beginning of June and were quickly back to pre-COVID record levels in the plant by mid-June. We remain very focused on delivering value from this world-class asset by applying our full potential program to eliminate constraints, reduce costs, and increase productivity, ultimately allowing us to extend mine life through resource conversion. As previously highlighted, we also recently completed a definitive agreement to resolve all outstanding disputes with the Cedros community, which was a significant milestone, and now establishes a clear path forward for both parties to develop a long-term partnership to create value and importantly improve lives. This agreement was signed with the community elected representatives and will be ratified in the General Assembly that will take place when COVID-19 gathering restrictions are lifted by the government. With Porcupine and CC&V continuing without major interruption during the second quarter, in Porcupine, we saw improved recoveries with a greater proportion of ore coming from the Subika underground. At Musselwhite, we resumed work on the conveying system in early June after working closely with First Nations leaders and the provincial health authorities on the safe restart plan. By early July, our contractor had its full project team on site, and we are on track to complete the conveyor installation by the end of 2020. The Musselwhite materials handling project will begin mobilizing for completion activities in September to align with the conveyor timeline. We restarted the mill for stockpile processing on June 19th and resumed the underground mine development work at the same time. Our full potential work at Musselwhite is progressing well. Our team successfully completed the diagnosis phase entirely virtually in Ahafo Mill. From that work, the underground work stream identified approximately 25 opportunities to improve development productivity, tracking performance, and ore body modeling. I'm excited about the future of Musselwhite and the ability to drive valuable operational improvements in the year ahead. Turning to Éléonore. We restarted the mill in late May after approximately 60 days in care and maintenance. Earlier this year, the mine undertook a review of ground support conditions, and we completed some necessary rehabilitation before ramping up production activities. We expect to reach more normal levels of production in August, as we manage through ongoing travel and logistical constraints. Construction on the lower mine materials handling system project resumed in early June with the conveyor belt installation and commissioning of the fresh rock breaker. We expect the project to be operational in mid-August, streamlining the transportation of materials. From the beginning, we flagged that Éléonore was the operation requiring further optimization as Newmont's technical experts critically assess the asset and the opportunities to improve the geotechnical model. We remain positive on the value we can unlock from Éléonore. However, we are taking the proper time to truly integrate the updated geological and geotechnical models to deliver an optimized life-of-mine plan. As a result, we expect a lower production baseline for Éléonore of approximately 250,000 ounces per year, and work is underway with support from our full potential program to ensure the cost base matches this production level. To support this important work, we've made several changes to the site leadership team since the beginning of the year, with a new general manager, mining manager, exploration manager, and health, safety, and security manager who are all now on board. This leadership team is driving fundamental changes to how we operate, with a sharp focus on sustainable improvement, choosing back-to-basics principles in order to build a strong foundation in the year ahead. The North America 2020 outlook has been updated to approximately 1.4 million ounces at $1,040 per ounce all-in sustaining costs, with an additional 880,000 gold equivalent ounces from silver, lead, and zinc. This outlook includes the impact of the sites previously in care and maintenance and the changes at Éléonore. Turning to South America on slide 15. Merian delivered solid performance in the same quarter, as higher recoveries partially offset lower tonnage mined as the site managed through wet season impacts. The Yanacocha began ramping up in mid-May after being in care and maintenance for approximately 60 days. Mine and mill activities were suspended during the care and maintenance period, but we continued all critical activities such as water treatment, which enabled ongoing production from the leach pads. The mill restarted in mid-May and mining activity resumed in late May. We expect to reach full operations in September. We are placing Quecher Main ore on the new categorical leach pad later this year. However, Yanacocha's outlook has been updated to reflect leach cycle disruptions in 2020 from the timing of ore placement. At Cerro Negro, we took advantage of the approximately 60-day care and maintenance period to perform a significant amount of mill maintenance and modifications to improve throughput. The team is managing through several constraints, including government and provincial travel restrictions, in addition to inclement winter weather. So the mine is currently operating at about 50% capacity. Given the site's mining constraints, we are running the mill in campaigns to ensure cost efficiency until we are back to normal mining rates. Though potential implementation is underway, the priorities remain focused on back-to-basics mining practices, which include improving development rates, ground control, and backfill practices. The 2020 outlook for Cerro Negro has been updated to include COVID-related constraints and our ability to achieve improved development rates and access higher-grade ore in the fourth quarter. Looking forward, we remain excited about the potential to extend Cerro Negro's mine life through our exploration program, and we recently secured a large land package of approximately 550 square kilometers near Cerro Negro. The South America 2020 outlook has been updated to just over 1.1 million ounces at approximately $1,100 per ounce all-in sustaining cost, which includes the impact of the COVID-related constraints at Cerro Negro. We are also excited about Yanacocha sulfides progressing towards the full funds decision in 2021. So turning to slide 16. Yanacocha has been a cornerstone asset of the Newmont portfolio for decades, and we continue to see promising drilling results. As you can see here, the first phase of the sulfides project is focused on developing the most profitable deposits and is expected to produce approximately 500,000 gold equivalent ounces per annum through 2030 and extend Yanacocha operations into the 2040s. As we advance towards a full funds decision next year, we look forward to providing more information on this exciting project in due course. So wrapping up with our 2020 outlook on slide 17. Despite the decision to place five operations in care and maintenance, we expect to produce approximately 6 million ounces of gold at all-in sustaining costs of $1,015 per annum in 2020, with an additional 1 million gold equivalent ounces from core products. Compared to the outlook provided in mid-May, production is unchanged. While our costs applicable to sales have been lowered to $760 per ounce, and all-in sustaining costs remain unchanged at $1,015 per ounce. Our sustaining capital has increased to $900 million as we've been able to ramp up faster than first anticipated at our operations previously in care and maintenance. Our total 2020 capital expenditure is expected to be approximately $1.4 billion as increases to sustaining capital are partly offset by further changes to the development capital schedule for Tanami Expansion 2, which they have fair some spend to 2021. For exploration and advanced projects, we've lowered our 2020 investment to approximately $350 million. We are fortunate to have the largest gold reserves in our industry at 95.7 billion ounces, and we completed the majority of our reserve drilling in the first quarter. However, as we continue to focus on keeping our people safe, we currently expect to replace approximately 60% to 70% of our targeted reserves delivered by the drill bit from our managed operations in 2020. We also experienced some processing delays at the start of the pandemic, but are now seeing normal turnover times. We also restarted exploration mapping activities at Coffee using a 100% Yukon-based crew and we are prepared to restart greenfield activities as soon as local restrictions are lifted in areas of Africa, Australia, and South America. Our longer-term target of organically replacing at least two-thirds of reserves depletion over the next 10 years remains firmly intact. The changes to the way we operate from COVID have been substantial. As the pandemic continues to evolve with the potential for a second wave, it is becoming more likely that we may have to take further measures to protect our workforce and our communities. With that, I'll turn it over to Nancy to discuss our financial results on slide 18.

Thanks, Rob. Turning to slide 19 for the financial highlights. Despite having five operations in care and maintenance, our financial performance improved significantly compared to the prior year quarter, demonstrating that tailwinds from favorable gold and oil prices and foreign exchange more than offset the COVID-related impacts to our business. During the second quarter, Newmont delivered solid results with higher revenue of nearly $2.4 billion, despite fewer ounces sold, adjusted net income of $261 million or $0.32 per diluted share, and adjusted EBITDA of approximately $1 billion. Cash from continuing operations was $668 million, and free cash flow was $388 million, a nearly six-fold increase quarter-on-quarter. Turning to slide 20 for a review of our earnings per share in more detail. Second quarter GAAP net income from continuing operations was $412 million or $0.51 per share. Adjustments included $0.28 related to the change in fair value of our equity investments, $0.04 related to incremental COVID-specific costs, such as additional screening protocols, transportation costs, and community fund disbursements, $0.02 related to tax adjustments and valuation allowance, and $0.03 of other charges. Taking these adjustments into account, we reported second quarter adjusted net income of $0.32 per diluted share. While we adjusted approximately $33 million of non-recurring incremental COVID-specific costs from our second quarter net income, we did not adjust out approximately $195 million related to the five operations temporarily placed into care and maintenance. Costs here included wages, direct operating expenses, and non-cash depreciation. It's worth noting that our adjusted earnings per share would have been $0.15 per share higher if we had adjusted for these costs. Turning to slide 21. As Tom mentioned, Newmont continues to manage through the COVID pandemic from a position of strength. There has been no change to our industry-leading capital allocation priorities, which include maintaining and strengthening our investment-grade balance sheets, growing our margins through the delivery of our full potential continuous improvement program, and growing our reserves and resources through disciplined investments and organic growth. Finally, we are returning cash to our shareholders through a sector leading dividend. We ended the quarter with liquidity of $6.7 billion and our net debt to EBITDA ratio improved to 0.6 times. Newmont's focus on leading shareholder returns remains stronger than ever, and we declared a second quarter dividend of $0.25 per share. Over the last six quarters, we have returned more than $2 billion to shareholders through dividends and share buybacks, a track record that demonstrates our commitment to providing the highest returns. Lastly, while the recent rise in gold prices is notable, we will continue to use our conservative assumptions around a $1,200 mine plan and maintain our discipline around capital allocation. We will invest in profitable projects, return cash to shareholders, and maintain a strong balance sheet. Excess cash flows generated from periods of higher gold prices could be used to further improve our balance sheet and provide additional returns to shareholders. With that, I'll hand it over to Tom to wrap up on slide 22.

Thanks, Nancy. Concluding on slide 23. Newmont's superior operating model combined with our incredibly talented and dedicated workforce is key to maintaining our position as the world's leading gold company. Most businesses across the globe have faced unprecedented challenges this year. I am very proud of how we have responded, and Newmont is able to provide our stakeholders with a solid foundation in the midst of uncertainty. We have the industry's best portfolio, with world-class assets in top-tier jurisdictions, the largest gold reserve base of 96 million ounces, significant exposure to other metals, all of which positions Newmont to reliably produce more than 6 million ounces of gold every year for at least the next decade. We will continue to apply Newmont's discipline to preserve cost and productivity improvements to expand margins. I'm very excited about what the future holds at Newmont, beginning with a strong second half of 2020. Thank you for your continued support. Please keep safe and well as we continue to navigate through this pandemic. With that, I'll turn it over to the operator to open the line for questions.

Yes. Good morning, Tom, Rob, and Nancy. I hope you're all doing well. Thanks for taking the questions. Just to start, can you talk a little bit about the risks to production in the second half, like if COVID cases do increase from current levels around your operations? Specifically, what other actions can you take to sort of reduce the risks of having to just shut down the five operations that you previously put on care and maintenance? Is there less risk at the operations that will never shut down?

Thanks, Tyler, and good morning. I'll pick that one up and then maybe get Rob to provide a bit more color as well. We'll remain all protocols that we've had in place and had a place since March, stored in many places even in those areas, like Australia with Boddington and Tanami, where there is no community spread. But this virus is nasty. It's terribly contagious, and we are keeping those protocols in place. That's not just the things we are doing on the operating sites around social distancing and hygiene. It's also about keeping people off the operating side if they're not part of the workforce required to operate and maintain the mine and the processing plants. So, this virus is still a wider run as we're seeing around the globe. So we are maintaining a discipline across every one of our operations in terms of those protocols. That’s the best thing we can do, the best thing that we can control. We are concerned and monitoring carefully different parts of the world, but particularly through South America, Mexico, Peru, and Argentina as those countries continue to struggle. We're doing everything we can to support our folks in those areas, including keeping those protocols firmly in place and ensuring that we're screening individuals, maintaining social distancing, hygiene, and managing the quarantine and contact tracing if we do pick up a case. Rob, do you want to add any further color to that?

Thanks, Tom. I’ll just add a couple of things, Tom, to your question, Tyler. I think the other thing that we've been doing throughout is just had very regular communication with respective authorities in the government. That's included quite a number of site visits, so they’ve seen the standards at which we're adhering to. In many cases, when people are not on site, it's actually better than being in the community. So just having that confidence in what we're doing at site and continuing to do that is really important. And I think the other couple of things to build on the very practical things that Tom outlined are that we did change rosters before to have our sites with longer rosters. That makes sure there’s less turnover during these times, and that obviously helps. Also, just minimizing anything that visits and minimizing the number of people that we've got on our sites. So after the last three to four months, we've come up with a number of very successful tactics. But as Tom said, the chronic unease is very much here and we're not dropping our guard at all.

Great. That's helpful. I just have two, I think, quick financial questions. With the Gold Corp. synergies, I think the target was $340 million this year and then a total of $500 million next year. Is there any change to those numbers? And then just with capital allocation, I know sort of the longer-term plan is to invest roughly half the free cash flow into the business and then the other half towards dividends or repurchases. With the dividends and repurchases, is there any updated thoughts there? Or are you still sort of waiting to see how the impacts of COVID play out?

Thank you, Tyler. I’ll address your question about synergies, and then I’ll ask Nancy Buese to discuss capital allocation. Regarding synergies, we are expecting $340 million in cash flow this year and $500 million next year, which is more than our initial commitment of $365 million from that transaction. These commitments are incorporated into our guidance, and we are on track to achieve them. This year’s value is primarily driven by three areas: savings from general and administrative expenses, which includes over $150 million in exploration-related G&A; improvements in our supply chain; and significant value contributions from Peñasquito, which is performing exceptionally well. Despite the brief shutdown for maintenance, Peñasquito ramped up quickly, confirming that the expected synergies are being realized. Nancy, would you like to address the capital allocation?

Sure. Really, on capital allocation, we just recently raised our dividend very significantly. Our view is while there's still some uncertainty around COVID, and just understanding the full ramifications of that on our operations, we feel like that dividend is very solid for now. We will continue to consider what we should do with the dividend level going forward. Our capital allocation, as you've indicated before, is approximately over the cycle, with 50% of that going back to the business and 50% going back to shareholders. We think we're at the top of the cycle, but it is hard to say right now. Our view would be that we will continue to evaluate that and continue to look at dividend levels as we put the business plan for next year in place and really understand the balance sheet ramifications.

Okay, great. Thanks so much.

Thanks, Tom. Take care.

Yes, thank you. Tom or perhaps Nancy, do you have any idea what the ongoing COVID-related costs will be? Either in millions of dollars or per ounce?

Yes. I'll pick that one up. Greg, Nancy may want to build upon it. But it's roughly $4 million to $5 million a month, which is around $7 to $9 per ounce—these costs put in place around hygiene and transport need to maintain social distancing and the like. So that’s the cost you're seeing and the costs you could expect to have ongoing as we continue with those protocols. It doesn't include. It's a bit harder then to measure the productivity impacts of needing to clean out a vehicle between changes, or as you do also change and conduct different pre-start meetings—all those productivity impacts are over and above. But a rough rule of thumb is about $4 million to $5 million a month, the additional cost for those measures. Nancy, would you like to add anything to that?

Yes. I think that's right. So that translates to about $3 an ounce. The other piece is other community funds that we may spend. But just as a reminder, those are adjusted out of AISC and adjusted EBITDA and A&I but will certainly continue to impact free cash flow. Again, it’s not huge dollars in the overall scheme of things, but we would anticipate incurring those on a regular basis for the foreseeable future.

Okay. Thank you. And just the second question. Tom, given the environment we're in and the free cash flow you're generating, are you doing any early work or thinking about how you could actually increase your production profile?

Greg, no. What we're looking at is all those key projects that are in late-stage definitive feasibility studies. So it's Ahafo North and Yanacocha sulfides—both late stage and definitive feasibility, full funds next year. They will be sizable project contributions to that production profile with the ebbs and flows over the 10 years. That’s where our focus is. They will be significant draws on free cash flow in the next year. The other thing you have to balance is that they’ll have three significant projects—Tanami 2, Ahafo North, and Yanacocha sulfides—all happening in parallel. So it’s about balancing that around your project execution risk. We will continue to invest in those studies that are further up the pipeline but we won't unnaturally move them. They need to go through proper rigor and process. And we’ll continue to spend on exploration efforts as well. So nothing significant, but we will continue to navigate our project pipeline through its natural course.

Okay. Thank you.

Another way of looking at it is the current process that as we continue to work our margins applying full potential—which improves margins.

Thanks very much. I guess, first, I'll ask Nancy, maybe circling back on the capital allocation and dividend questions. Given where we are with gold prices today, have you thought about maybe the difference between increasing the regular dividend versus maybe just topping up with a one-time or special dividend in light of perhaps the peak gold prices we’re at? Is that something that you guys would consider doing?

Yes. We'd look at all those different options. As we've talked before, there’s a host of tools in our toolbox ready for use. We prefer to consider how our regular dividend travels against the cycle. At this point in time, we're just in the middle of putting together our 2021 business plan. Our view would be, let's continue that work, and see how the next five years stack up, and then we'll be in a really good position to test various tools against that backdrop and see where we are as we continue the journey of capital allocation. As a reminder, we just increased our dividend, so we feel that's a very solid level throughout the cycle and certainly understand that we are generating more cash at this time. We will, as always, continue to evaluate the right way to return that cash to shareholders.

That's fair enough. If I can also ask about the full potential program. I know the last couple of months have been very difficult, but are you able to give us a bit of an update in terms of how it's going at Peñasquito? I know you mentioned that you've realized quite a bit of synergies. But are you realizing the benefits from the full potential program that you were expecting?

Thanks, Jackie. I'll ask Rob to give you some color on the full potential, which is going very well, but if you can fill in some details.

Thanks, Jackie. The simple answer is yes; very much so. Tom mentioned the results we were able to achieve after we came back from the care and maintenance period. Within just a handful of days, we were back up to record levels that we were reaching before. So, at last check, we were well above 110,000 tons a day. That shows the amount of effort, the stability, and the focus that the team has there. We’re also making big improvements in the mine in terms of how we dig the ore to make it more accurate and ensure there is no dilution going through the plant. Really, across the board at Peñasquito, as you know, there's opportunity everywhere in terms of how we're utilizing our equipment, the effectiveness of our drill and blast, the quality of the blasting in our supply chain, working on the availability of our equipment. The effectiveness of our maintenance personnel; on all those counts, we're seeing improvements. The longer that we continue to run, the more records we're going to break there. It's been very positive.

Great. That's great to hear. Thanks very much, Rob. That's it for me. Thanks.

Hi. Good morning. Thanks for taking my question. Can you provide just a bit more color on some of the geotechnical issues at Éléonore? I know you touched on it during the prepared remarks. And maybe just talk about some of the options that you're looking at to lower costs there. Thanks.

Thanks, Fahad. I want to pick that one up with a little bit of color and get Rob to provide some more details. Éléonore is similar to what we had at Leeville in Nevada back in 2015 and 2016. To really understand a complex geotechnical ore body, you need to take your models to an order of magnitude more detail. Once you've gotten that level of understanding and model, you can better map out your mine plans and then decide appropriate mining methods for that ore body. That's the work that we've been doing over the last several months, utilizing people similar to those who led the successful work at Leeville back then. I might get Rob to give you some specifics about the Éléonore mine and the issue.

Thanks, Tom, and thanks for the question. Just to reinforce what Tom said: As a miner, the two key things you look for in underground mining are a geological model that you can have confidence in and a geotechnical model you've got confidence in. And we’ve arrived at that position. When you look at what we reported earlier in the year, the reserves and resources—we know that there's a lot to do in terms of stope design, dilution, and recovery. Those are the key things that we continue to work on at Éléonore. The basics of mining are about ensuring you’re putting in place stopes in the right sequence and size, and not introducing new areas of geotechnical instability which causes disruption. When we step back in terms of costs, we reset Éléonore to an operation around 250,000 ounces going forward, and we need to reset the costs around that. Pre-COVID, Éléonore employed about 1,200 employees and contractors; that certainly needs to come down to closer to 900 people. We’ve also recognized that our full potential area had heavy activities with higher costs, and we know we have to increase development rates. The team is also focused on managing dilution and recovery, which is fundamental. We were carrying too much equipment at Éléonore; we've essentially stripped the heavy equipment down to what we need to operate this mine efficiently. That includes a focus on trucks, loaders, and bolters. We are honing in on appropriate equipment amounts to lower costs. The other key point that plays to our advantage is the commissioning of the lower mine handling system. This will essentially remove the need to truck materials up 500 meters. It will provide quite a productivity kick at Éléonore. But I hope that provides you with some detail regarding what we're doing at Éléonore. Last, but by no means least, we've got the team in place, and we’re focused on driving these efforts even harder. So we’re positioned to propel ourselves forward.

That's very helpful. Thank you.

Hi, Tom, Nancy, and Rob, hope you're going well. I just had a few shorter questions, hopefully. Firstly, just on Musselwhite. Could you provide a bit more clarity on the exact timing? I think there's been a little bit of confusion over the exact quarter when we should expect production.

Thanks, Chris. Musselwhite is going very well, and we expect the conveyor system to be up and running coming into the year. So it is the fourth quarter that we are very much focused on. It is progressing well.

Thanks, Rob. Then just in terms of CapEx, minor changes in 2020 versus 2021. And then also just thinking about Greenfield exploration now that you've pulled back previously. What you are seeing is that increase is all just COVID-related? There's no fundamental changes on allocation or anything on that side? You would expect that you'll ramp up Greenfield activities as you get better access to sites?

That's right, Chris. You'd expect to see our exploration go back to similar spends as we guided this year, once we've got access again. Then, you’ll see, with the development capital, since we're focused on that critical path at Tanami 2, you'll see some of that spend would have been this year, rolled into next year, so you’ll see a slightly higher development capital in 2021 as a consequence of that. Sustaining capital will remain pretty stable; we don't see any bow wave building there.

Okay. And two other quick ones. The autonomous work you’ve done, can you just give an update on Boddington, and if you’ve done any more work on other sites or updates for autonomous positioning within the broader business?

So autonomous, we're really focused on Boddington at this point. That's progressing well, with those trucks starting to arrive from the factory. A caterpillar AHS test facility is being commissioned near Boddington, and we’re well-positioned with Caterpillar dealer support. For other operations, we look to start with a pilot site within the company. We prove up what it can do there, then explore how to model it across business-wide operations. That strategic step is underway, but Boddington remains our focus for now.

Thanks, Tom. Last one for me, you talked a lot about COVID impacts, but maybe just ask you in different ways. Is there one site or maybe two sites that you’d still be most concerned about? Is it Peñasquito or Yanacocha? What are the key risks from the COVID side?

It would be the countries managing the pandemic that concern me. I’m confident we can manage infection risk at our operations, but worry more about community spread and the actions governments need to take. Mexico and Peru are key areas we’re watching closely. Nothing outside of our control, it’s more how those countries manage the health crisis.

Thanks, Tom. That's it for me.

Hi, yes. Good morning, everybody. Rob, I wanted to circle back on Éléonore. To understand it correctly, I think originally when we took over the Gold Corp portfolio, Éléonore was viewed as a mine that would be looking at somewhere in the sort of 325,000-ounce range or thereabout. The change to 250 now, as you reset it, is it due to your views on reserves, or is it there’s more dilution in the overall plan or less stoping that you'll have to do on an annual basis?

Tanya, thank you. To touch on your question, it’s important to say that over the last year, since we’ve had the asset, adopting an understanding of the geotechnical details, we’re doing more work that has enhanced that understanding dramatically. This has led us to adapt and refine our approach on mining practice for scenarios that the ore presents. It’s not a matter of material not being there, but rather how we mine it. I remain focused on the opportunity at Éléonore. We are still exploring both downward and outward, as well as continuing our full potential projects. None of the full potential projects are overly complex; they rely on the fundamentals. Once we get Éléonore fit for purpose at the adjusted 250, we will see continued synergies. Additionally, much of the support for Éléonore now comes from Denver and Vancouver for supply chains. We are seeing some softer synergies in that area, but the key is improving on the fundamental mining practices.

Okay, great. Maybe we’ll take this offline to dive into technical details. Maybe one for Nancy if I could. As you look at your balance sheet, and the free cash flow that is being generated, could you remind us what’s the minimum cash balance you like to keep on the balance sheet to run your business?

Yes. We've talked about it in the past. We don’t have any hard and fast rules. General terms are that we keep in mind certain balances are needed as in certain countries we do have tax leakage coming back to the U.S. So it’s a complex network where we spend capital and generate free cash flow. I would say in that $2 billion range, sometimes higher if we’re getting ready to enter a period of capital development work. So that’s probably the minimum at the lower end of the cycle.

Okay, great. Thank you.

Thank you. Good morning, Tom, Rob, and Nancy. Thanks for taking my question. Just looking at the slides, I was struck by the big impact on GAAP earnings from the change in value from your equity portfolio. Could you discuss the process and the speed that you guys are going through those interests and how you're sorting through them and deciding what to get rid of, and when?

Thanks, Adam. I will pick that up and ask Nancy to add. We're continuing to look at cleaning up that equity portfolio. We talked about the group of equities that we didn't see fitted with our portfolio going forward and looking at ways that we could potentially package them up and sell them. So that work is continuing, and obviously, in the current stock price, we want to ensure we get full fair value for those as well. We are not in a rush to do that. We want to test the market with those. We don’t have a predetermined timeline. Alongside that, we’ve also seen some swings that affect that portfolio; Nancy might touch on how you saw that value come off and then recover as markets rebounded. But bottom line is we’re continuing to assess and clean up that portfolio.

Yes. Our unrealized holding gain losses on that portfolio was about $227 million or $0.28. The tax benefit recognized is resulting from those changes as well. So that's the overall impact of that portfolio relative to valuation around current gold prices.

Could you elaborate on when you might provide us some more details regarding CapEx and grades, and sort of a summarized mine plan for the Yanacocha Sulphide project?

Adam, it’s probably in the next year as we work through our definitive feasibility study work and get closer to that full funds approval, or potentially as we issue guidance later this year. So look for a milestone like that, or closer to full funds, to provide an update. That information we shared now from memory came with last year's guidance, issued in December. Typically when we revisit our plan and update our numbers and guidance, that would be when we logically share more color on that project.

Good morning, gentlemen, and Nancy.

Good morning, Mike.

Tom, could you share your thoughts on the one-year mark since the joint venture in Nevada? What is your perspective on its progress from the beginning to where it is now, and how do you view it from Newmont's standpoint?

From my perspective, Mike, it was a joint venture that should have been done a long time ago—pleased we got it done in the first quarter of last year. The assets' integration was critical as Newmont and Barrick had mature assets that were both entering into twilight stages with declining production profiles. The joint venture enables life into the assets for both organizations and the communities in Northern Nevada. It was a very good transaction, creating value for Newmont and Barrick shareholders, a total worth more than individual components. I see it as a very effective transaction that could have occurred earlier if not for egod, but I'm pleased it’s been done.

How about relative to production costs, and expectations set by Barrick? Is that on the right track, and could that potentially increase due to the synergies you envisioned?

Certainly, we—as the junior partner in the joint venture—are looking to see those synergies realized. There are straightforward synergies and some that are harder to achieve as we start optimizing mine plans around the double refractory. We are looking for those to flow through efficiently and continue working with Barrick as the operator during these COVID challenges. So we’re keen to see those synergies flow through.

That's all for me. Thank you.

Thanks, Bob.

And I'm pleased to say that as we continue to manage the impacts of this nasty virus, please stay safe and take care of your families. We look forward to talking to you again soon. Thank you everybody.