Newmont Corp (NEM) — Q3 2020 Earnings Call Transcript

Thank you and good morning everyone. Welcome to Newmont's third 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 2. 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 3.

Thanks, Jess, and thank you all for joining us this morning. Before I start, I will take this opportunity to thank Jess Largent who will be leaving Newmont at the end of the year after more than five years with us, which included three years as Head of our Investor License Group. For those of you who have not had the chance to meet him, I also like to introduce Eric Colby, our Vice President of Strategic Communications. Eric was appointed to lead a strategic communications function earlier this year. And he combines both Investor Relations and Communications. Eric has been with Newmont since 2007, including three years working at Yanacocha in Peru. Since 2013, Eric has led multiple transactions as part of our corporate development team, playing a key role in the divestiture of Batu Hijau, the acquisition of Goldcorp, and the formation of the Nevada Gold Mines joint venture. I would like to thank Jess for her many contributions to Newmont, the support that she has provided to me and my team, and wish her the very best of luck as she embarks on her next adventure. Turning back to results, I'm very excited to share with you our record for third-quarter performance as we continue to deliver on our purpose to create value and improve lives through responsible and sustainable mining. Turning to our quarterly highlights on Slide 4. Newmont has the industry's most diverse, balanced portfolio of world-class assets that provide stable production with significant leverage to rising gold prices. We have continued to manage through the COVID pandemic from a position of strength. With a proven leadership team, operating model, and highly attractive workforce, we're building on our track record of superior value creation. I'm incredibly proud of how our teams across the world have responded to this pandemic and the sacrifices these people have made and continue to make to support Newmont and the community in which we live and work. They have set a standard for leadership in our industry. All of our projects are now operational and we delivered record financial results. We produced 1.5 million ounces of gold and 273,000 gold equivalent ounces from copper, silver, lead, and zinc, putting us well on track to achieve our full-year guidance this year. We generated significant operating cash flow of $1.6 billion and free cash flow of $1.3 billion, the most in any quarter in Newmont's 100-year history. We have continued to sign advanced project works at Tanami, Subika Underground, and Musselwhite. We also announced the sale of our royalty portfolio to Maverix Metals, which closed yesterday, and exploration joint ventures with Agnico Eagle in Colombia and Kirkland Lake in Canada. Our solid operating performance further improved our financial strength and flexibility. We ended the quarter with $4.8 billion of consolidated cash and reduced our net debt to adjusted EBITDA ratio to 0.4 times. Yesterday, we further demonstrated our confidence in the strength of our business and continued commitment to leading shareholder returns with a 60% increase to our quarterly dividend, which is now $0.40 per share, or $1.60 per share annualized. This is the second increase to our dividend this year and reflects the strength of Newmont's portfolio to pay a higher dividend while continuing to advance profitable projects and maintain financial strength and flexibility. Newmont will remain disciplined in everything we do, including the prudent approach to capital allocation, given the uncertainty in the world today. However, we will have an opportunity to evaluate even further returns to shareholders as we continue to generate excess cash. And last, but certainly not least, we're the first and only mining company to achieve gender parity among our non-executive directors, setting an example at the very top of our organization that is fundamental to sustaining cultural change. Turning to Slide 5 for more detail on our commitment to improving lives. At Newmont, we have a fundamental belief that a commitment to leading environmental, social, and governance practices is essential to delivering sustainable long-term value, with all of our stakeholders. This starts with our commitment to our people and the work we're doing to sustainably improve health and safety and create a more inclusive culture across our global business. We continue to perform well against our public sustainability targets to source from local supplies, invest within the communities in our operations, respond to community complaints in a timely manner, reduce our water consumption, and complete planned reclamation activities. We're on track to meet a seven-year target to reduce our carbon emissions by 16.5% by the end of this year, and are also working to develop longer-term science-based targets for emissions, which we plan to release next month. We're committed to fully implementing the global industry standard for talent management that will help us improve how we manage these types of facilities. We're the second most transparent company in the S&P 500 and placed 12th out of more than 200 companies on the Corporate Human Rights Benchmark. These achievements are the result of the hard work from generations of leaders, lessons learned, and improvements made that form the very DNA of Newmont. Turning to Slide 6, as a mining industry, we must continue to improve our health and safety performance. At Newmont, we have a relentless focus on ensuring that everyone who works in our business can return safely home to their families. As leaders, it is up to us to create a culture in which fatality risks are clearly understood and sustainably managed at all times. Through visible safety leadership and the systems we put in place to manage risk consistently across our global business, we're working to significantly improve our safety performance. In response to eliminating fatalities and supporting an injury-free workplace, Newmont made a symbolic change this year. We are moving away from the industry's conventional use of lagging personal injury metrics in our bonus programs to a mission that focuses on managing the critical controls that must be in place at all times to prevent fatalities. This year, we have completed over 40,000 critical control-focused conversations in the field, conversations that have proactively identified and eliminated potential risks that could lead to a fatality. We’ve also recently begun using digital tools, introducing an app across the organization to facilitate these conversations and capture more robust data that can be quickly analyzed and shared across our business globally. On the back of this work, we have reduced our significant potential events by two-thirds compared to 2019 and achieved a six-fold improvement from when I joined Newmont in 2014 and started out on this journey. Despite the significant leadership distractions due to managing COVID this year, we're on track to achieve the lowest personnel injury rate in our company's history with a total recordable injury frequency rate of 0.28 for 200,000 hours worked. It is no coincidence that visible felt leadership focused on fatality prevention is driving a significant improvement in all of our safety metrics. Turning now to the industry's best portfolio on Slide 7. Among our 12 operating mines and two joint ventures, we have eight world-class assets, each of which delivered more than 500,000 gold equivalent ounces per year, all-in sustaining costs of less than $900 per ounce, and mine lives that exceed 10 years. Importantly, all eight are located in top-tier jurisdictions that we define as countries rated A and B by Fitch, Moody's, S&P, and Fitch. We firmly believe that we have the right-sized portfolio to generate sustainable returns from our world-class responsibly managed assets located in the best gold mining jurisdictions. Underpinning our asset base are the largest gold reserves in the world with nearly 96 million ounces. We also offer substantial future upside to our resources pipeline with nearly 75 million ounces of measured and indicated resources in addition to 63 million gold equivalent ounces in reserves, which includes 15 billion pounds of copper. Importantly, 90% of our reserves are in the Americas and Australia. The exploration pipeline will continue to be a core competency at Newmont. Our disciplined exploration program lays the groundwork for growing our reserves and resource base to sustain stable, steady production and cash flows for decades to come. Turning to Slide 8, our portfolio will generate more than 6 million ounces of gold per year through 2029. This stable production profile is underpinned by our eight world-class assets, our industry-leading exploration program, and our latest three development projects: Tanami Expansion 2, which is in execution, and Ahafo North and Yanacocha Sulfides, both of which are in the late stages of definitive feasibility. As you can see here, our portfolio provides steady production over the next decade, balanced across each of our four regions. This profile is further enhanced by more than 1 million gold equivalent ounces from silver, lead, and zinc at Penasquito and copper at Boddington and Yanacocha. Combined, we will deliver more than 7 million gold equivalent ounces per year for the next decade, the most of any company in our industry. Turning to our unrivaled project pipeline on Slide 9. Our project pipeline is unmatched in the gold industry and is one of the best in the mining sector. There is significant value to unlock as we optimize and advance our long-term projects, setting the pathway for steady production and cash flow well into the 2040s. Major projects include Ahafo North, which is the best on mine gold deposit in West Africa, for which we expect to reach a full funding decision early in the New Year, and Yanacocha Sulfides, which is also integrating towards a full funding decision next year and has the potential to extend Yanacocha's life well into the 2030s. Looking at the earlier stage projects in our pipeline, you will see two new projects increasing visibility. With Pamour and Porcupine, which is formerly the CC&V project, and Oberon and Tanami. The Pamour project is the existing Pamour Open Pit and is smaller in scope than the prior CC&V project, which requires a relocation of the existing processing facilities to access the Dome mine. Developing Pamour is expected to extend mine life by another decade, providing us more time to explore the Dome whole value to find the next profitable extension of the Porcupine mine. Pamour is a great example of Newmont's disciplined investment system, which focuses on value creation and tight investment decisions to maintain a current production profile instead of progressing Hoyle complex capital-intensive projects. At Oberon, we're very excited that Newmont exploration continues to identify prospective deposits with the potential to further extend life and reduce costs at the world-class Tanami asset. Rob will cover some more details on Oberon shortly. At Coffee, we completed our exploration mapping exercise and the camp closure I think we just stated. We remain excited about the potential at Coffee to fully optimize the orebody and improve value. In addition to our highly prospective gold projects, we have significant organic exposure to gold and copper projects including Norte Abierto, Nueva Unión, and Galore Creek. In fact, if you assume that one of the three mega projects completed their production profile at the back end of this decade, Newmont's total production would be around 15% to 20% copper, providing us a natural exposure to a metal of growing importance for reducing carbon emissions and facilitating the ongoing transition to a new energy economy. It's also worth noting that since 2016, I have made the delivery of 10 projects on solid budgets, achieving an average internal rate of return of over 30%. Going forward, we will build on this track record by continuing to apply our disciplined and rigorous approach to projects and ensuring Newmont is well-positioned to generate superior value throughout the project cycle. Turning to our free cash flow generation potential on Slide 10. Our balanced portfolio, combined with our disciplined operating model, provides significant leverage to high gold prices from the largest production and reserve base in the world. For every $100 increase in gold prices 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 $19 billion of free cash flow over that same timeframe. To be clear, this is free cash flow that is entirely attributable to Newmont's accounts, enabling us to provide industry's leading returns. With that, I will hand it over to Rob to discuss our operational performance on Slide 11.

Thanks, Tom. Before jumping into the regions, I'll start with a general COVID update. Across our portfolio, we've continued our wide-ranging controls and safety protocols to place the health, safety, and well-being of our teams and our communities above all else. While we've had employees and contractors test positive for the virus, our effective testing, contact tracing, and quarantine procedures have proven to be effective in mitigating the spread to other employees and local communities. In the second quarter, five sites were in care maintenance, but all five sites were operational in the third quarter. Penasquito ramped up quickly and was achieving pre-COVID record levels in the plant by mid-June. Éléonore and Musselwhite ramped up early in the third quarter, and Yanacocha has returned to nearly full capacity. Cerro Negro is currently operating at about 60% of normal capacity, as the site continues to be impacted by ongoing travel restrictions in Argentina due to the virus. We're working closely with local authorities and unions and mitigating the efficiency impacts of reduced staffing levels by consolidating our mining and processing efforts in the near term. I'm incredibly proud of the commitment of all our teams during these difficult times, and the efforts they have demonstrated day in and day out to work and produce safely. Turning to Slide 12 for an update on Australia's performance. At Boddington, we delivered solid third-quarter production on the back of higher grades, which partially offset the wet weather that impacted mining productivity. As the stripping campaign winds down, we expect to benefit from higher grades through 2022. Boddington is expected to finish the year strongly with higher production and lower operational costs in the fourth quarter. The Autonomous Haulage System is progressing well and remains on track to be fully operational in the first half of 2021, which will further enhance Boddington's safety and productivity, while also extending mine life. The team continues to work very closely with Kant, as we prepare to become the world's first open-pit gold mine with an Autonomous Haulage Truck fleet. The Kant 9-star system has been installed, and we’re expediting the delivery of the AHS trucks with 14 of the 29 arriving ahead of schedule before year-end. Tanami delivered another strong quarter with higher grades that helped offset COVID-related travel restrictions and quarantine protocols impacting productivity. The team remains focused on improving productivity through optimized shift, roster, and flight schedules. Despite the challenges over the course of 2020, Tanami remains on track to produce 500,000 ounces this year. Tanami Expansion 2 is progressing well, with around 40% of engineering work complete and close to 20% of the overall project complete. Earlier this month, we achieved a significant milestone completing the pilot hole, which provides us the ability and guidance we need to develop a new 5.4-meter-wide shaft from both the top and the bottom. Construction for the camp is well underway, with around 75% of the new surface buildings in place. We continue to review the schedule and capital for this project to understand the full impact of potential delays due to the ongoing impact of COVID. Looking further ahead, we have significant near-mine exploration upside with extensions to existing deposits at Oberon, which has the potential to grow beyond 2 million ounces. Oberon is an open pit deposit located only 28 kilometers north of the Tanami Underground mine and has the potential to grow production beyond the current 500,000 ounces per year. As Tom mentioned, Oberon is in prefeasibility, and we've been remotely progressing our study work by evaluating mine planning scenarios and resource level updates. Recently, we resumed fieldwork after working in close collaboration with traditional owners to access the area and safely remobilize our hydrogeological drilling efforts. Exploration drilling is planned to resume after the upcoming wet season. Turning to Africa on Slide 13. As a team, we delivered solid third-quarter performance with higher throughput and recoveries, and we expect to reach higher grades in the fourth quarter, which will continue through 2021. At Ahafo, our investment in this world-class asset continues to deliver value. Our transition to a more productive underground mining method is progressing very well with development rates ahead of schedule. During the quarter, we ramped up mining four to five stores concurrently in various locations of the mine, reducing congestion, and increasing tonnages. Higher grades from underground will help offset the stripping campaigns at Awonsu and Subika open pits through next year. At Ahafo North, we continue to advance the permitting process with the Ghana EPA and the team is focused on engineering and design work, as well as construction, procurement, and community planning. As Tom mentioned, we remain firmly on track for a full funding decision in 2021. When approved, our plans include building a standalone mill to produce approximately 250,000 ounces per year over a 13-year mine life for an investment of approximately $700 million to $800 million. Ahafo North's functional and technical resources will be supported from our current Ahafo operation, leveraging our proven operating model to reduce duplication in the region. Turning to our South America operations on Slide 14. Merian delivered solid third-quarter performance as we processed stockpiles to help offset fewer tonnes mined, and we expect higher grades in the fourth quarter as we advance into the harbor ore. Yanacocha ramped up from 80% capacity in July to near full capacity in September. In the third quarter, we processed higher leach tonnes and returned to more normal levels of throughput in the mill. As expected, the inability to place leach tonnes in the second quarter will impact Yanacocha through 2020. However, the team is working hard to improve leach cycle times. At Cerro Negro, we're focused on operating as efficiently as possible to help mitigate the ongoing impacts of the travel restrictions caused by the virus. As a result, we're currently running the mill in campaigns, and the team continues to demonstrate resiliency despite facing inclement weather in the third quarter and complexities of managing varying workforce availability changes. Mining is focused on development in the Marianas complex, but we are forecasting a slower ramp-up delaying access to higher-grade stores into 2021, while we work with the authorities on a longer-term plan to return to normal operations by the end of the year. It is worth noting that Cerro Negro is only approximately 4% of Newmont's year production. So as Tom previously mentioned, we're well on track to deliver our 2020 guidance. Looking ahead, we remain very excited about Cerro Negro, which has the potential to become the largest gold producer in South America. We have more than doubled our land position, and the mine and its surroundings are highly prospective and underexplored. Our exploration team has identified significant district field potential with more than 100 million prospects and ranked Cerro Negro as one of the most prospective land packages in our entire global portfolio. We're also very excited about Yanacocha Sulfides progressing to a full funding decision in 2021, and we will continue to share additional details as our definitive feasibility study progresses. So wrapping up with North America on Slide 15. Peñasquito delivered solid third-quarter performance as we safely and efficiently ramped up from care and maintenance. While the site continues to manage through COVID-related workforce challenges, we've been able to maintain our record levels through the plant and successfully completed a two-week mill maintenance shutdown in September, setting the operation up for a strong fourth quarter. Our full potential program continues to drive value from this world-class asset. We’re currently focused on improving fragmentation through our blasting process, and we continue to make enhancements to the front end of the mill to further improve throughput. In addition, we fully ratified the sustainable agreement with the Cedros community in August, which also helps us to explore our large land package that is currently only 20% explored. At Musselwhite, we successfully ramped up from care maintenance in the third quarter, and we started stockpile processing. I’m delighted to say that we achieved mechanical completion of the conveyor system yesterday and have started the important process of wet commissioning. Over the coming weeks, the conveyors will be tested to ensure all components of the conveyor belts are safe and fully operational as expected. I very much look forward to completing the full commissioning and reaching nameplate capacity of the belts in December. Also, just last week, this project completed over 100,000 hours without a lost-time injury. Again, I'm very proud of the great work of our sites and project teams, along with our contractors, to ensure that we keep the health and safety of every teammate at the forefront of every shift. Development rates at Musselwhite are exceeding plan, and commissioning of the materials handling project has begun and is expected to be fully completed in November. Overall, Musselwhite is very well-positioned to be fully operational as we enter 2021 and will be back stronger than ever before. At Éléonore, our third-quarter performance improved as the site ramped up from care maintenance. Ongoing COVID-related restrictions continue to impact staffing levels, but development rates ramped up in September and we're back to operating at normal capacity. Our site leadership team remains focused on improving efficiency and productivity and is driving fundamental changes in how we operate at approximately 250,000 ounces of annual gold production with a sustainably lower cost base. We've made significant progress restructuring and reducing the overall number of site personnel. Yet morale has improved and production levels are on the rise, which speaks to the cultural change taking place at Éléonore. Through our full potential program, we've delivered $24 million of value year-to-date and expect to continue to deliver meaningful cost improvements in 2021 and beyond. Earlier this year, we commissioned the Lower Mine Material Handling project safely and under budget, which will significantly streamline the transportation of water surfaces as we transition to higher production rates from the lower levels of the mine in the years ahead. Our exploration drills at Éléonore are returning very encouraging results, both laterally and at depth, and we're improving our understanding and interpretation of the geological model. We have also advanced our understanding of the district's geological framework, which will inform our 2021 drill program and targets less than 20% of the property drill tested to date. Porcupine delivered solid third-quarter results, and the site is improving underground development rates with several new initiatives underway that will increase tonnes mined and processed in 2021. Moreover, CC&V also delivered strong results from an increase in tonnes mined and reaching higher grades at the bottom of the crescent pit. And with that, I'll turn it over to Nancy to discuss our financial results on Slide 16.

Thanks, Rob. Turning to Slide 17 for the financial highlights. We delivered our strongest ever quarterly performance across several financial metrics, including record free cash flow of $1.3 billion, of which 97% is attributable to Newmont. Year-to-date, we have generated $2.3 billion in free cash flow, of which 96% is attributable to Newmont. Other notable third-quarter results include revenue of nearly $3.2 billion, adjusted net income of $697 million or $0.86 per diluted share, adjusted EBITDA of more than $1.6 billion, an increase of 54% from the prior-year quarter, and cash from continuing operations of $1.6 billion ending the quarter with a strong cash position of $4.8 billion. We ended the quarter with liquidity of nearly $8 billion and our net debt to EBITDA ratio improved to 0.4 times. Earlier this month, S&P moved Newmont's outlook from stable to positive due to strong free cash flow prospects and reconfirmed our BBB credit rating. As a reminder, our financial results proportionally consolidate the company's ownership interest in Nevada Gold Mine that do not include the contributions from the company's investment in Pueblo Viejo, which appears in equity income versus in our operating results. For the third quarter, our 40% of PV reported 87,000 ounces of production and would have added an additional $115 million of EBITDA. Turning to Slide 19 for a review of our earnings per share in more detail. Third quarter GAAP net income from continuing operations was $611 million or $0.76 per share. Adjustments included $0.07 related to the change in fair value of our equity investments, $0.03 related to incremental COVID-specific costs such as additional screening protocols, transportation costs, and community fund disbursement, $0.10 related to pension settlement changes from the Nevada Gold mine transaction, $0.03 related to tax adjustments and valuation allowance, and $0.07 of other charges. Taking these adjustments into account, we've reported third-quarter adjusted net income of $0.86 per diluted share. While the adjusted EBITDA reflects approximately $32 million of non-recurring incremental COVID-specific costs from our third-quarter net income, we did not adjust out approximately $35 million of care and maintenance costs to Yanacocha, Cerro Negro, and Musselwhite ramping up in the third quarter. With that, I'll hand it over to Tom on Slide 19.

Thanks, Nancy. Turning now to Slide 20. Our capital allocation philosophy remains unchanged and continues to balance the following three priorities: reinvesting in our business through disciplined investments in exploration and organic growth projects; maintaining financial strength and flexibility to sustain the business across cycles; and returning cash to shareholders. Newmont continues to set new standards as the clear industry leader in shareholder returns, which we further differentiated with a 50% increase in our quarterly dividend that we announced yesterday, bringing our quarterly dividend to $0.40 per share and an annualized dividend rate to $1.50 per share. This was our second substantial dividend increase this year, demonstrating the strength and stability of our business. Turning to Slide 21 for more details. During 2019 and 2020, we will have returned more than $2.5 billion to shareholders through dividends and share buybacks, an amount that is more than a total of our next eight competitors combined. Our employees' take the third quarter dividend represents a 186% increase from the third quarter dividend in 2019 and highlights the strength of our financial position and our ability to continue delivering an industry-leading dividend while simultaneously investing in and developing our most profitable projects. Our most recent dividend increase adheres to our newly established dividend framework. This framework provides our shareholders with the stability of a dividend of $1 per share calibrated at a $400 gold price assumption and the potential to receive 40% to 60% of the incremental free cash flow generated at gold prices above $1,200 per ounce. Our third quarter dividend was calibrated at a conservative and stable $1,500 gold price assumption. As we have disclosed previously, Newmont generates incremental free cash flow of approximately $400 million for every $100 change in gold price above $1,200. So at a $1,500 gold price, we would generate approximately $1.2 billion of incremental free cash flow annually. Our third quarter dividend increase was calibrated to share 40% of that incremental $1.2 billion free cash flow that Newmont will generate at a $1,500 gold price. That 40% is approximately $490 million. This equates to $0.60 per share annualized, an increase of $0.60 per share compared to the prior $1 per share dividend. As a result, we’re pleased to offer our shareholders an annualized dividend of $1.50 per share. We chose a conservative $1,500 assumed gold price for the calibration of our third quarter dividend to maintain financial discipline and prudence as well as to instill stability and predictability into our dividend increase framework. We will typically reassess the gold price semiannually and recommend incremental dividend increases when we believe gold prices have revised to levels of at least $300 per ounce higher than those applied to establish our prior dividend increase. While the dividend will be reviewed quarterly by our board, the framework is designed to ensure stability and predictability and we will evaluate additional dividends in gold price increments of approximately $300 per ounce. In addition to this framework, we have a number of tools about deploying excess cash based upon the circumstances at the time. These include further strengthening the balance sheet for debt repayments, opportunistic share buybacks, and additional dividends. Our commitment to industry-leading shareholder returns is evidenced by our track record, and we’re confident that our operational delivery and discipline will enable us to continue to enhance that record of outperformance. With that, I will wrap it up on Slide 22. Over the last 18 months, Newmont has assembled the gold industry's leading portfolio, our world-class operations and projects in top tier jurisdictions, and will deliver more than 7 million gold equivalent ounces per year for the next decade and beyond. Our ability to generate substantial free cash flow across various price points is unmatched, and our significant leverage to high gold prices was demonstrated by our record third quarter free cash flow of $1.3 billion. As we continue in our 100th year, Newmont is leading the gold mining industry with a foundation that is stronger than ever and a proven strategy to deliver long-term value while improving lives. I'm very excited about what the future holds at Newmont, and I look forward to keeping you updated on our performance. With that, I will turn it over to the operator to open the line for questions.

Hi, good morning. I have one question. I didn't see anything about synergy targets in the presentation, and I'm wondering if there have been any changes. Can you provide an update on whether the cash flow synergy targets are still set at $500 million for next year? How is that progressing? Any additional information you could share would be appreciated.

Okay, thanks, Fahad, and good morning. I will talk regarding some cash results and then give you some full results of where we're delivering net value. Yes, we're on track to deliver facility targets, as we've committed, $500 million next year is still very much our commitment that's incorporated in our long-term guidance. I will update our long-term guidance in December in accordance with that. Just this week we have been meeting with our board to review our plan, which forms the basis of our guidance. But I remain very confident we will deliver at least $500 million of free cash flow next year. And as I say, it is still already in our long-term guidance. Rob, you want to give a few stories?

Thanks, Tom and thanks for the question, Fahad. I find a way the engine of our predominance is in Penasquito and that team continues to do particularly well and have exceeded this year. The key areas that we're focused on are primarily the front-end of the processing plant to allow more water flow through the mill. And we've successfully done that in stages. In terms of the mining initiatives, it is about improving fragmentation to enable better throughput through the plant, but also just bringing greater discipline into how we blast, how we market, how the shovels dig, etc. Beyond that, we've also moved into the total cost of ownership and the supply chain side of things. So, the procurement of non-OEM engineered parts, just to name a few, but we've got 45 initiatives on the order and they're all delivering good value. So, I'm very, very pleased with how things are going.

Good morning, hope everyone's doing well. Just first question, I guess with sort of COVID cases rising. Is there any increased risk of the shutdown at the mines, especially, I guess, the mines that were previously impacted? And then just with the Cerro Negro, I guess it's operating at 65%. Is it really to get back to 100% or is it really just based on having travel restrictions ease or are there other sort of alternatives you can look at?

Good morning, Tyler. Thank you. There is absolutely nothing wrong with the Cerro Negro operation. The constraints are all around the travel restrictions, but everyone in Argentina will be managing to keep people safe and healthy. We continue to apply our protocols with discipline across every one of our 12 managed operations, no matter where they are in the world. So in Australia, where there is no spread, there is no community virus in Western Australia or the Northern Territory with Boddington and Tanami respectively. We still maintain all of our protocols at those operations to ensure that we manage the risk of this virus spreading. We still have some 10,000 people who are not in operating partner and office environments working virtually, again to protect the health and safety of the communities in which we live and work. Rob Atkinson will give you a story about Penasquito and the work that's being done, which will be mirrored across every one of our operations to ensure that we keep people healthy and safe. It's a good story that really demonstrates the extra effort that people are going through, the resilience in our business and why I'm so incredibly proud of our Newmont workforce. Rob?

Thanks, Tom. And really just to build on that is that it also highlights how Newmont is living and managing through the constitution with the virus. The Penasquito to give everybody on the line, a sense that when we talk about COVID testing, it's easy to think, yes, that's fairly simple. But in Mexico, we have 18 testing centers, seven at various airports throughout Mexico, seven at various major bus stations throughout Mexico, and four testing stations onsite. We also have 56 nurses and personnel operating those 18 centers. And as you can imagine, since COVID started, we have performed tens and tens of thousands of tests to ensure that our people are safe to go to the site. We are testing before people leave the site so they can go back to the communities safely and safely. But I think that story from Penasquito really highlights just as Tom said, the effort and commitment that our teams have to ensure that we operate throughout this virus very, very safely.

Thanks. That’s helpful. And then just at the two projects for next year for Yanacocha and Ahafo North, can you maybe give us a sense of when you actually might make a decision? And is there any risk just from COVID sort of pushing those decisions out?

Thanks, Tyler. I will pick up Yanacocha. Ahafo North will come first, it will be early in the New Year. Ahafo North is working through with the EPA on the final permit. It's absolutely down the middle of our warehouse. The blueprints are the same as the original Ahafo; very, very straightforward mine to do, repeat a mine mill, 20, 30 kilometers from the existing Ahafo operation. A lot of the work, particularly in the first four months, is a relocation of the road and then clearing topsoil and starting initial works, all of which is done with the local Ghanaian workforce. We can build off the project that is still in place at Ahafo, having just recently finished the Ahafo mill expansion and the underground. So very well-positioned with Ahafo North and lots of water bodies closed. Yanacocha Sulfides, in the second half of next year, still doing the final engineering work around the feasibility study. Again, pretty straightforward in terms of bringing that project 12-months approved. So the layback of the existing Yanacocha pit mine today at Yanacocha starts deploying equipment to layback. And at the Yanacocha underground mine, which we have developed quite extensively, both will advance. The key word is around the construction of a concentrator. We will apply on the existing footprint and again, as you approve that project and do your early works, a lot of that is civil works to lay the foundations for substantial processing plants, so not unique COVID-related restrictions to being able to bring that project on as we enrich them.

Thank you, Tom, just rehashing your commentary on the dividend framework. Did I understand correctly that you will reassess the dividend every six months now going forward based on the gold price?

Our board will look at every quarter, Greg. But I look back at a semiannual gold price period. So if you look at the discussion we went through with the board this week including that dividend, we look back at the semiannual period track on is the first half of this year, gold was averaging around $1,550 for the first half of the year. We took a conservative view to lower that to $1,500 and applied a 40% on the lower end of that range to that $1,500. So we'll look every quarter as a board but they look back over that semiannual period.

Okay. So in Q1, if you look back over the second half of 2020 let’s say the average $1,900 which is exactly will, you do something like $1,800 as the basis of dividend?

I think as you use our framework and I did those calculations, and you saw that in your report this morning, that is absolutely the discussion that our board will be going through. So you could do that calculation side of 40% to 60%, could be somewhere between 0 to 20, 0 to 40, that would be subject to the board looking at not just the gold price but a number of other factors. But that's just sort of the discussion we’ll be having that framework allow us to have that discussion and allows you and the investment community to make those determinations.

And since I'm interested in your comments on copper and the projects in your portfolio, is that an expression of increasing interest in copper or just a factoid out there that those projects have copper exposure from an interesting angle?

Yes, it's just purely a factoid. We don't need to do anything other than develop an organic project pipeline, we'll get a natural exposure to copper at a time it will be an important thing in the global community.

Hi, Tom, Nancy and Rob, a couple of questions from me, first on the cash balance now at $4.8 billion, just seeing that the mechanics of that looking back, I guess the last couple of years, you have had a balance about $2 billion or so I think. Generally, it's a reasonably high cash balance. But as you think about going forward, as a cash yield, you pay somewhat into dividends, and then you show it on our numbers become net cash relatively quickly. How do you think about the actual cash balance? So what you'll do with that? Is that you're going to be used to pay debt, or what physical will you do with the actual cash? Thanks.

Yes, absolutely. I'll take that one. You got this right. We have indicated publicly that we would like to keep cash balances, somewhere in the $2 billion to $3 billion range. I think in the time of COVID uncertainty that remains prudent. We've also indicated that we’ll continue to use that cash for things like paying down our 2021 through 2023 debt, things like the share buybacks that we initiated last year, and certainly contributions to the dividend as well as reinvesting in our business. So all of those things combined will give us that financial flexibility and optionality. But yes, in today's world, I think holding a bit more cash on the balance sheet is certainly something we'll continue to do.

Okay, thanks. Thanks, Nancy. And then just in terms of the project pipeline on Slide 9, you talked about Ahafo North and Yanacocha Sulfides, 750, I think so the Ahafo North CapEx and Yanacocha Sulfides' second half next year decision, can you just remind us the time period and the rough capital that that would be spent over? I think it's a pretty long-dated project, but just wanted to get an update. Thanks.

Thanks, Chris. It's around $2 billion, where 51.35% is in Yanacocha, so it's roughly a $1 billion attributable to Newmont's account and it's a three-year development. You look at the three big capital projects, and if you look at our going to model our development capital going out on the back of those, certain pieces for Tanami, certain pieces for Ahafo North, and a billion for Yanacocha Sulfides over the next four maybe five years. That's about roughly I'll say on development capital. That's another important factor behind our primary work that allows us to share excess cash to our shareholders.

Okay, that makes sense. So next year, those two main updates and then looking at Slide 9, any of the other sort of pre-feasibility type projects will move to the next stage?

Yes, I think the ones to keep in mind that will mean our project pipeline is what we don't show and is seeking a shaft at Turquoise Ridge around 38.5% of that; our expansion which we earn 40% of that getting close to full funding. So there are a couple of other very important catalysts within the Newmont portfolio and then we will be continuing to optimize the three big mega projects will operate more at a norm. And we have to do one of those at one time, very end of that mix. So far more and overall on the second underground of Ahafo, Apensu moving underground Ahafo seems to layback push through execution. And then Coffee, we’re just starting up a drilling program in calendar winter. Coffee would be another potential Ahafo North type project that we could bring through the follow-on, so plenty of activity happening in that feasibility study front.

Okay, that's clear. And the last one for me with the automation at Boddington due I think early next year what's the latest thoughts on how long you'd assess that for before you'd maybe look at other sites and rolling that out on other operations?

We don't need to do much assessing at the time; relative further, I implemented the first autonomous mine in the Pilbara almost 10 years ago. It is proven technology; there's no piloting or assessing, it's changing a fleet either, and it's about the business case. So once you went through the existing operations and you got to have enough logged in front of you and a value proposition to change that obviously. Boddington presented that business case, so there has to be business case, and then just some, a very important part of that statement is improving lives. We're going to think about those communities in which we live and work and whether Autonomous Haulage is part of that equation when you think about some of the locations we’re in. We'll continue to assess whether there's opportunities for Autonomous Surface Haulage. There are plenty of opportunities for underground autonomy, and we are doing quite a bit of that already. So I expect to see more underground autonomy before another open pit. The real opportunity for us is to increase the value proposition around those mega projects with sort of pre-feasibility. When you have within your portfolio an autonomous operation, you can train and bolster your operations and underpin a base case for those projects; that's too big a risk to be doing your first trial with sort of fall into a brand new project. So that's one of the strategic elements of that.

Thanks, guys. Thanks for taking my question. I would want to delve a little bit further into Slide 9 and Slide 10, which was the capital and the projects? So I think you just mentioned that Coffee, you were talking about them in the context of Tanami and Ahafo North. So do I understand mean that the capital would be in the range of $700 million to $800 million? Is that what you trend out that way?

Not quite, Anita. I think it'd be a lower number. I categorized by the two broad categories I have for projects are major and mega. For major projects, anything $300 million could be anything from $300 million up to $1 billion. And then mega project is anything greater than $1 billion, that's actually consistent from my experience with the projects, a different way we implement those two types of projects. So Coffee is similar size to Ahafo North, more accountable, I'd say different place of the work.

So it's more along the range of like 250,000 ounces, 300,000 ounces rather than five.

Yes, yes.

Okay, all right. Second question. Just, I'm trying to understand this free cash flow profile that you have a little bit further. Not included in there is the Ahafo North and Yanacocha Sulfides and obviously all the other projects that we've talked about, but what is included is Tanami which is in execution, right?

That's correct, Anita. So that's one of those projects moving to full fund. Then those projects will take some of the free cash flow that we're showing there, however, that's only showing free cash flow from gold. It's not showing the free cash flow from the other metals, so that that challenge you read from both of those perspectives.

All right. But it does include the gold all that kicks in for those but I think was only kicked in around 2024, 2025 anyway, right?

Those projects are in the back end of five years. But they are very important projects, I'm excited to be able to bring them forward and show you what those projects stood for in terms of production protocol and cost.

Okay. And then with respect to exploration, that's something that I'm just interested in. Looking at the exploration budget going forward next year, do you guys have an idea of whether or not you’ll see the same increase? Or, what are you looking at this stage?

This is the time for year-on-year increases in exploration, Anita, 80% of that being in Newmont; it’s been around conversions and extending lives.

Hi, Tom, and everyone. You intrigued me on the MR open pit Century project have gotten pretty quiet since the merger, it's coming back to life. What's changed from the prior owner was saying about Century versus smaller pits not moving any buildings? Just curious, what kind of tax rate could it be? Thanks.

Thanks, Mike, and we're really pleased with the question from you each quarter. Look forward to having a question from you each quarter. I will pass it over to Rob to give you some color on that.

Hey, Mike. Good morning. It really is the simplicity of it and the lack of complexity. It obviously is an existing name that just needs to be watered. We've got a good geological model there; we can use the current plant infrastructure. It also provides us with kind of 10, 11, 12 years of mine life that allows us to further explore the bottom, the oil pond, and the ore bodies. It really was just a fairly simple value equation. We just don't know the simplest road, but also the most value-accretive road.

So where do you go from here with this project? I'm trying to get some numbers on some timeline?

We’re just doing the studies at the moment. As that slides indicated is that we’re still at the early stages. I expect we'll be able to give you more of a timeline in next year, once we've progressed a bit more. Just as a rule of thumb, we're expecting it's going to be a three to four-year kind of planning, preparation stage. We're expecting around the 12- to 13-year kind of life at between 150,000 to 200,000 short tons. That's broad brush, but certainly, it’s early days. The team is working hard on at the moment to come up with suitable main designs and watching schedules and certainly in the New Year, we'll be able to provide more color.

Okay. And I guess that's turning to Oberon; I can't remember if that was discussed when we were at Tanami there in November, a couple of years ago. Maybe just remind me where that is and to set things pretty exciting.

Yes, Mike, I wasn't on that tour, but we have touched on it in terms of the geological overview that Chris Robinson mentioned, although we've conducted drilling since your last update.

No, not one. But it literally is just a stone's throw away. It’s less than 30 kilometers from the underground.

Hope you had a strong arm.

And certainly, there's a huge amount of synergies that we can get there. It is an open pit, but it's also got underground potential as well. So in terms of proximity, it very, very close which allows us to potentially use the existing infrastructure. That’s certainly one that the team is focused very hard on, as I mentioned that the drilling program, we've struggled this year because of COVID, not being allowed to drill on average on land. We've got those approvals and hold for the right season where you can pad again.

Yes, hi. Good afternoon, every person and everyone. Just maybe, you mentioned briefly about ESG in your prepared remarks, etc. Thinking about from the energy standpoint, when you're looking at your development projects, obviously, you're probably really looking like, I'm always looking them from the best environmental and social efforts from a development standpoint, but any queries or thoughts on less decarbonizing from that standpoint, or, are you looking into investments that you haven't talked about until the development work, that may lead towards some requirement versus improving that metric from a currency standpoint?

Thank you, Michael. We are setting our sights on our targets for 2030 while also establishing an aspirational goal for 2050. As we look ahead, we can better understand how we contribute to the global community through our project development and operations. Our portfolio is naturally shifting toward underground mining, which allows us to lower our emissions and carbon footprint as we transition from open pit to more underground operations. We're considering the sources of our energy; by converting our power supply and utilizing grid power, we can impact suppliers to promote reduced intensity. For example, in Ghana, we assisted in installing solar power cells connected to the grid as part of these efforts. If we're committed, we must reflect on our investments to ensure we are sustainable, focusing on reducing our emission intensity through the adoption of more electric equipment. The shift to autonomous hauling will enable us to replace diesel trucks since automation eliminates the human element of engine operation. We are exploring alternative fuel sources and already factor in a carbon price of $20 and $40 per ton for our major investments. Our continuous improvement program emphasizes energy efficiency, which enhances cost-effectiveness, productivity, and lowers emissions. It’s important for the industry to engage in discussions about where we invest our resources in relation to these targets, as well as in developing technologies that can lead us to a carbon-neutral future. To be a leader in this industry, we must show our commitment through our actions, and we are engaged in these discussions. Please stay tuned for our new targets next month as we continue to explore ways to minimize our impact in the coming weeks and months.

If I could just add just to build on that, Michael it's Dean Gehring, who leads our Technical Services also employing some key specialists in this domain. We've got power and electricity specialists, which will really help us in terms of not only managing the current power that we're pulling from that, whether it's the stranded power or whether it's from the grid. But also working with the suppliers, as Tom said about the future, whether it's gas plants, solar plants, or other types of electricity plants. So again, it isn't just where the targets are; we're actually building the teams that we need to do that work.

Thank you, operator, and thank you everyone for joining us today. Please stay safe and well, along with your families. Thank you.