Newmont Corp (NEM) — Q3 2021 Earnings Call Transcript

Good morning, and thank you for joining Newmont's Third Quarter 2021 Earnings Call. Today, I'm joined by Rob Atkinson and Nancy Buese, along with other members of our executive team, and we will be available to answer questions at the end of the call. Before I begin, please note our cautionary statement and refer to our SEC filings, which can be found on our website. Newmont delivered on a challenging third quarter, generating strong free cash flow, continuing to provide industry-leading shareholder returns, and investing in profitable projects, including our latest Ahafo North, which was approved by our board in July. This quarterly performance was achieved even as we continue to manage through the evolving complexities of the global pandemic, and we remain committed to protecting the health and well-being of our workforce and local communities. Throughout the mining sector, we are continuing to see the non-health-related challenges caused by the pandemic, including labor shortages, rising input costs, and supply chain disruptions. As an industry leader, Newmont is well-positioned to respond to these challenges by leveraging our proven operating model and balanced global portfolio to deliver long-term value from our responsibly managed assets. Turning to our quarterly results, let's take a look at the highlights. During the third quarter, Newmont produced 1.4 million ounces of gold and 315,000 gold equivalent ounces from copper, silver, lead, and zinc. We generated operating cash flow of $1.1 billion and strong free cash flow of $735 million, of which $715 million is attributable to Newmont. Supported by our clear strategic focus, we continue to apply a disciplined and balanced approach to our capital allocation priorities. With $7.6 billion in total liquidity, we have sustained a net debt-to-EBITDA ratio of 0.2 times, maintaining our financial flexibility, while we continue to reinvest in our business and return cash to our shareholders. Earlier this month, we announced the transition to a fully autonomous haulage fleet at Boddington, an important milestone for both Newmont and the gold industry as a whole. Our fleet of 36 trucks will improve safety and productivity at this cornerstone asset. We also continue to invest in and develop our most profitable near-term projects, including Tanami Expansion 2, Ahafo North, the change to a more productive underground mining method at Ahafo South, and Yanacocha Sulfides. This quarter, we completed nearly $100 million of opportunistic share repurchases at an average price under $56 per share, and we declared a third quarter dividend of $0.55 per share, resulting in a dividend yield of over 4%. Twelve months ago, we announced our industry-leading dividend framework, establishing a clear pathway for stable and predictable returns. Over the last four quarters, Newmont has returned more than $2 billion to shareholders through dividends and share buybacks, demonstrating our confidence in the long-term value of our business and our ability to maintain financial flexibility while steadily reinvesting in our operations. At Newmont, we have created a robust and diverse portfolio of operations and projects around the globe, and we believe that where we choose to operate matters. Among our 12 operating mines and 2 joint ventures, over 90% of our attributable gold production is from top-tier jurisdictions, which we define as countries classified in the A&B ratings ranges by Moody's, S&P, and Fitch. Underpinning our asset base is the gold industry's best organic project pipeline of both greenfield and brownfield opportunities, managed through our integrated operating model with a proven track record of delivering value to all of our stakeholders. Newmont has maintained an unmatched and industry-leading project pipeline, laying the pathway to steady production and cash flow well into the 2040s. Every one of our operations has near-mine exploration opportunities that can leverage our existing infrastructure and extend mine life. With the stability and depth of our brownfield portfolio, we are able to explore in some of the most prospective greenfield districts in the world in a disciplined and deliberate way. This quarter, we've continued to advance our near-term projects, including the second expansion at Tanami in Australia's Northern Territory. Through the development of a 1.6-kilometer deep production shaft and supporting infrastructure, this project supports the site's future as a long-life and low-cost producer while providing a platform to further explore a prolific mineral endowment in the Tanami district. The development of Ahafo North, approved in July, expands our existing footprint in Ghana, adding more than 3 million ounces of gold production over an initial 13-year mine life, and the Yanacocha Sulfides project will extend mine life at this cornerstone asset for decades to come. Newmont remains committed to the Yanacocha Sulfides project and will be investing at least $0.5 billion through 2022 to advance critical path activities, including detailed engineering, long lead procurement, earthworks, and the installation of accommodation facilities for the construction workforce. As previously announced, given the current status of the pandemic in Peru and the potential for more contagious variants, we have extended our full funds decision for the sulfides project to the second half of 2022 and will progress the project as the pandemic allows. Two weeks ago, I had the opportunity to visit Peru and engage with government leaders and other key stakeholders to talk about a safe and mutually beneficial path forward. I'm encouraged by these interactions and look forward to this next chapter and to Yanacocha's long and profitable history. The global pandemic has and will continue to challenge all of us for some time to come. I'd like to take this opportunity to recognize the very significant efforts that are being implemented across all of our operations to keep our workforce and local communities safe and healthy. As you can see in this photo, Rob had the opportunity to be in Ghana last quarter and experience firsthand the important work our team is doing to manage through the COVID pandemic with agility and resolve. In 2020 and 2021, Newmont has invested more than $2.7 million for COVID relief and local support in Ghana, and $1.4 million in health screening and security measures to protect our people and their families. Through our partnership with Ghana Health and Education Services, these investments helped to establish wide-ranging protocols and controls at both Ahafo and Akyem, distribute medical equipment and PPE at our mines, regional health facilities, and other regional institutions; purchase PCR machines for effective testing and research; donate cold storage units for temperature monitoring and vaccine storage; raise awareness and share important health and safety messages through local radio programs; and fund programs that provide essential lesson plans for students during school closures. We're also focused on supporting the vaccination effort in Ghana and are working with the American Chamber of Commerce in Ghana and Ghana Health Services to secure and deploy nearly 100,000 vaccines in the area. At Newmont, we firmly believe that the COVID-19 vaccines are critical in combating the spread of the virus, and until global vaccination rates substantially improve, our people and operations will continue to be affected. We are now deliberately moving toward a position where ultimately, all of our global workforce will be fully vaccinated, and we are closely monitoring and adhering to the national vaccination mandates already in place. We are taking this important step because we fundamentally believe that the vaccine is crucial to supporting the recovery from the pandemic around the world. Since March of last year, our focus has been on operating responsibly and efficiently while protecting the health and safety of our workforce and local communities from this virus. Since the government imposed restrictions on movement and the ongoing application of COVID-related protocols, in addition to competitive labor markets in Canada and Australia, we continue to experience productivity impacts at many of our sites. Due to these impacts and some unexpected equipment reliability and weather-related challenges, we have decided to update our full-year 2021 guidance. We now expect to produce approximately 6 million ounces of gold just below our original guidance range, and we are reaffirming our original guidance of 1.3 million gold equivalent ounces from copper, silver, lead, and zinc. Combined, that results in 7.3 million gold equivalent ounces, the most of any company in our industry and an improvement of almost 400,000 ounces compared to last year. Updates from our original gold production outlook are largely due to challenges at Boddington, including unusually severe weather and heavy rainfall, shovel reliability, and operational delays associated with managing bench hygiene as mining moves into deeper sections of the pit. This was combined with the continued ramp-up of the autonomous haulage fleet as the site fine-tunes this technology for operation in a deep open-pit mine for the first time in the mining industry. As a result, Boddington delivered lower tonnes than expected, impacting our ability to reach higher grades and reducing Boddington's full-year gold production estimate by approximately 140,000 ounces. As Rob will discuss later, we remain confident that the overall efficiencies delivered by autonomous haulage will more than offset any short-term impacts on production at Boddington this year. Also at Nevada Gold Mines, we are experiencing the consequences of the challenges noted by our operating partners in their release last week. Carlin and Cortez are expected to be at the low end of their annual guidance ranges, largely due to the impact of the breakdown and repairs to the mill at Carlin's Goldstrike roaster, and Turquoise Ridge is now expected to be below its annual guidance range. As a consequence, annual gold production from Nevada Gold Mines is expected to be at the low end of our annual guidance range. In addition to this, as I commented earlier, the global pandemic continues to evolve and impact all of our operations. Tanami was placed into care and maintenance in late June and early July, and we are continuing to experience lower productivity as a result of COVID-related absenteeism and the tightening of the labor market in Canada. The impact from lower production volumes, coupled with higher mill prices, has also increased costs for the year. For 2021, gold cost applicable to sales are expected to be $790 per ounce, and all-in sustaining costs are expected to be $1,050 per ounce. It's important to note that our regional guidance was established using a $1,200 gold price assumption, and we continue to use this assumption for our long-term mine planning and reserve modeling to ensure that we maintain discipline across all of our operations. However, due to the sustained high gold prices throughout this year and in response to feedback from the investor community, we are providing our updated full-year cost outlook using an $1,800 gold price assumption. We expect these gold prices to continue through the fourth quarter, adding approximately $50 per ounce to our all-in sustaining costs from inflation, higher royalties, and production taxes. Finally, we are decreasing our development capital estimate from $850 million to $700 million, with a portion of our spending associated with the second expansion at Tanami moving into 2022, but not impacting project schedule. We're currently working to finalize our business plan for 2022, and today, we have a much better understanding of the impacts from the global pandemic than we did at this time last year. Looking ahead to 2022, we anticipate that the production costs at an $1,800 gold price assumption will be similar to this year. Gold production is expected to improve by around 5% compared to 2021 as we continue to manage the impacts from pandemic-related labor shortages on productivity across our operations. CAS and AISC per ounce are expected to be largely in line with 2021, as we're factoring increased costs from inflation, high metal prices, and ongoing COVID-related safety protocols into our assumptions going forward. Capital in 2022 remains unchanged from our original outlook as we enter a period of significant reinvestment, an important component in growing production, improving margins, and extending mine life. These reinvestments back into our business will enable Newmont to steadily increase production and improve costs over time from our portfolio of world-class long-life operations. We look forward to providing you additional detail on our long-term outlook in our annual guidance webcast in early December. With that, I'll turn it over to Rob for a more detailed look at our global projects and operations. Over to you, Rob.

Thank you, Tom, and good morning. As Tom mentioned, the pandemic continues to present challenges across our operations and joint ventures, and I am proud of our people who continue to safely deliver day in and day out. While COVID infection rates are declining and vaccination rates are improving near our operations, the knock-on effect from supply chain disruptions and tightening labor markets is creating new complexities to manage. There is increased pressure on input commodity prices such as steel and diesel in addition to unpredictable freight costs and timing of deliveries. As an example, digital costs have increased significantly in recent months, adding $7 per ounce to our all-in sustaining costs compared to the previous quarter and over $15 per ounce compared to the previous year. We are also keeping a close eye and working hard to reduce voluntary attrition rates across our global business and halt labor markets, particularly in Canada and Australia, by creating a focused effort on employment due to a significant labor shortage impacting productivity. These inflation trends may show up in future contract renewals, and we expect that we could start seeing additional impacts as early as the fourth quarter. While it is difficult to predict whether these trends will persist for the long term, I am confident that our scale, strong partnerships, and proven operating model position Newmont to secure the most competitive supply contracts and limit the impacts on productivity and costs. Turning to our regional updates, starting with South America. Merian remains a strong performer in the South American region and is celebrating the 5th anniversary since declaring commercial production in October 2016. The site continues to utilize an ore blending strategy to optimize mill performance, helping to offset unplanned mill maintenance and minor delays from heavy rain at the start of the quarter. Additionally, Merian delivered higher tonnes mined and grade processed, and we expect this trend to continue for the remainder of the year and into 2022. Cerro Negro continues to improve productivity and performance, significantly increasing tonnes mined and processed in each quarter. The site team is managing the impacts from the pandemic as well as possible, and I am proud of the mitigation efforts, shift change optimization, and overall efficiency improvements delivered to help offset disruptions from earlier in the year. Given the effects of the pandemic, the site has delivered lower development rates in 2021, limiting access to higher-grade ore and reducing production in the fourth quarter and into 2022. Yet, despite challenges from the virus, the site continues to progress future organic growth projects, including the development of San Marcos and the expansion in the Eastern District, which have the potential to extend mine life beyond 2030. Yanacocha has also experienced continued challenges from the pandemic impacting productivity, mainly due to reduced labor availability. To offset these challenges, the site implemented mine sequencing changes, focusing on higher grades, efficient haul truck routes, and optimal ore placement on the leach pads. As a result, Yanacocha delivered a high grade of ore and improved recovery from the leach pads. As discussed in our third quarter 10-Q, we continue to progress detailed study work to further define water management requirements, along with other closure activities, and we will provide an update on this with the fourth quarter result. As Tom mentioned, we're progressing the Yanacocha Sulfides, a project with the potential to extend mine life at this cornerstone asset well beyond 2040. Turning to our North American region. At our Canadian operations, Musselwhite, Eleonore, and Porcupine continue to be impacted by COVID absenteeism and a tightening of the Canadian labor market, and we expect these sites to be at the low end or below our annual production guidance ranges. We expect these labor trends to continue into 2022, with the effects being particularly impactful at Musselwhite and Eleonore as labor shortages and access to specialized services have resulted in lower tonnes mined and processed than planned. Porcupine delivered higher tonnes mined from the Hollinger open pit, helping to balance the impact of higher than expected levels of graphite in the oil plant underground, which resulted in drilling delays, and as a consequence, resulted in less high-grade ore being mined from underground. I visited our Canadian operations last month, and I'm pleased to report that we are making significant inroads at Musselwhite, Eleonore, and Porcupine to increase development rates through the use of jumbos and tele-remote loaders in driving productivity hard through the execution of our full potential initiatives. With the full support of our subject matter experts deployed to these sites, these initiatives will improve efficiency and production. Moving to CC&V, the mine experienced lower grades and recovery in the third quarter. However, higher tonnes mined and changes to mine sequencing during the third quarter are expected to increase leach pad production in the fourth quarter and into 2022. Finally, Penasquito delivered another strong performance in the third quarter due to higher tonnes mined and processed, in addition to strong recovery rates from a number of full potential improvements. Since acquisition, Penasquito has delivered over $375 million in free cash flow improvements, with more than 80% of this value delivered from mining and processing improvements, which continue to generate value today and will do so well into the future. Shifting to Australia, Tanami delivered solid performance in the third quarter as higher grades helped to offset lower tonnes mined and processed due to COVID-related care maintenance periods in late June and early July. Although this period has reduced the site's full-year production by approximately 40,000 ounces, Tanami is fully operational, performing very well, and is expected to deliver a strong finish to the year. In addition, the team further advanced Tanami Expansion II, and during the third quarter, we progressed the construction of the head frame and have now completed nearly 70% of the reaming of the nearly 1-mile deep shaft, remaining on track to deliver significant ounces, cost, and efficiency improvements in the first half of 2024. As Tom mentioned, Boddington experienced heavy rainfall in the third quarter, impacting the ramp-up of autonomous haulage and reducing tonnes mined. I'm pleased to share that Boddington continues to achieve superior mill performance, reaching nearly 11 million tonnes processed during the third quarter. We are also proud to deliver the gold industry's first autonomous haul truck fleet, the first of its kind in our sector. I'd like to thank our team and our partners at Caterpillar for their ongoing partnership, dedication, and drive as Boddington continues to ramp up the truck fleet to full productivity and fine-tune the technology for a productive operation in a deep open pit mine. Delivering this project on time and on budget during a global pandemic is an enormous accomplishment, leveraging Newmont's scale, technical expertise, and partnerships to manufacture, deliver, assemble, commission, and operate a fleet of 36 autonomous trucks in less than 18 months. As we look ahead, we expect to reach improved grades and achieve higher tonnes mined, due in part to efficiencies from autonomous haulage, increasing production in the fourth quarter and into 2022. Finally, turning to Africa. Ahafo delivered another consistent performance despite very heavy rainfall in the third quarter, as higher throughput and strong recoveries helped to offset unplanned mill and equipment maintenance. The site is well-positioned to reach higher grades and deliver its highest production of the year during the fourth quarter. Ahafo delivered a very strong third quarter. This higher tonnage mine for the Subika open pit, along with improved mill performance, helped to offset challenges with haul truck availability at our underground operation. At Subika, we continue to progress the development of our new underground mining method, sublevel shrinkage, and we expect to reach full production by year-end as planned, improving grade and underground tonnes mined. In addition, the team continues to advance Ahafo North. We have begun mobilizing key personnel, and I'm pleased to say that engineering is approximately 80% complete. We continue to engage with local communities and regulators to ensure a mutually beneficial path forward as we develop this prolific orebody and create the next generation of mining in Ghana. With that, I'll turn it over to Nancy on the next slide.

Thanks, Rob. Through the strength of our assets and integrated operating model, Newmont is in the best financial position in its 100-year history, building long-term value with the most disciplined and balanced approach to capital allocation in the industry. Let's take a look at the financial highlights. In the third quarter, Newmont delivered $2.9 billion in revenue at an average realized gold price of $1,778 per ounce. Adjusted Net Income of $483 million or $0.60 per diluted share. Adjusted EBITDA of over $1.3 billion, a decrease from the prior year's quarter due to lower gold prices, lower sales volumes, and cost pressures stemming from the global pandemic, and strong free cash flow of $735 million, of which 97% is attributable to Newmont. Although quarterly free cash flow is lower than our record performance last year, we achieved a 27% improvement compared to the second quarter. Our unmatched cash flow generation allows Newmont to provide superior shareholder returns, largely through our industry-leading dividend framework. This week, we declared a regular quarterly dividend of $0.55 per share, which is an increase of 38% over the prior year and consistent with our last three quarters. With a yield of approximately 4%, our regular dividend is the highest in the gold industry, placing Newmont among the top 10% of the S&P's large-cap dividend payers. The third quarter GAAP net loss from continuing operations was $8 million or $0.01 per share. Adjustments included $0.46 related to a loss recognized on the pending sale of the Conga mill assets, currently in care and maintenance in Peru. The sale of these assets reduces the storage costs while we maintain long-term optionality around the future development of the project. Adjustments also include $0.12 related to unrealized mark-to-market losses on equity investments, $0.10 related to reclamation and remediation adjustments at historical mining sites, $0.08 related to tax adjustments and valuation allowance, and $0.01 of other charges. Taking these adjustments into account, we reported third quarter adjusted net income of $0.60 per diluted share. As a reminder, due to our status as a U.S. GAAP filer, our adjustments to net income do not include $23 million of incremental costs incurred this quarter as a result of the COVID pandemic. Adjusting for these costs would have resulted in approximately $0.03 of additional net income per share, and we expect these costs to continue throughout the year as we prioritize the health and safety of our workforce and local community. Newmont's dividend framework is based on our unmatched ability to generate attributable free cash flow. For every $100 increase in gold prices above our base assumption of $1,200, Newmont delivers $400 million of incremental attributable free cash flow per year. Newmont is the only company in the gold mining industry with the ability to generate these levels of attributable free cash flow. As Tom mentioned, we announced our dividend framework one year ago, providing shareholders with a stable base annualized dividend of $1 per share and the potential to receive between 40% and 60% of the incremental attributable free cash flow generated above the $1,200 gold price. This framework provides stable and predictable industry-leading returns for our shareholders and demonstrates our confidence in our long-term outlook and our ability to maintain capital discipline. The third quarter dividend declared was consistent with our second quarter, calibrated at the $1,800 gold price assumption, and a 40% distribution, and incremental free cash flow. We continue to review our dividend on a quarterly basis with our Board, evaluating our operational and financial performance and outlook over a long period of time. Our capital allocation priorities remain clear: to reinvest in our business through exploration and organic growth projects, to maintain financial strength and optionality on our balance sheet, and to provide industry-leading returns to shareholders. Throughout the year, we delivered on each of these priorities by progressing our profitable reinvestment in the business, particularly with the advancement of the Tanami expansion, Ahafo North, and Yanacocha Sulfides. Delivering the first autonomous haulage fleet in the gold mining industry has improved safety and productivity at Boddington, and we have returned more than $1.3 billion to shareholders through dividends and nearly $250 million through opportunistic share buybacks while maintaining a strong balance sheet with $7.6 billion in liquidity and a net debt-to-EBITDA ratio of 0.2 times, preserving Newmont's financial strength and flexibility to sustain the business across price fluctuations with one of the industry's lowest weighted average costs of debt at 4.3%. As we look ahead, we are confident in our ability to deliver on our disciplined capital allocation priorities, creating long-term value for the business, and maintaining our position as the world's leading gold company. With that, I'll hand it back to Tom to wrap up.

Thanks, Nancy. Newmont has an unmatched portfolio of world-class long-life operations and an organic project pipeline that is the best in the industry. While we and the broader mining industry continue to face a range of challenges brought forth by this global pandemic, I am confident that our key strategic focus, proven operating model, superior execution, and leading ESG practices has positioned Newmont to remain the world's leading gold company and continue to deliver long-term value to all of our stakeholders. With that, I'll turn it over to the operator to open the line for questions.

Hi. Good morning. Thanks for taking my question. Maybe, first on Slide 11 on the North American operations. Can you talk a little bit about what steps are being taken to address the absenteeism at Musselwhite and Eleonore? As far as I can tell, some of your Canadian competitors aren't facing similar issues. I'm just curious, what exactly is happening there and what steps are being taken? Thanks.

Thanks, Fahad, and good morning. I'll pass the question across to Rob. We're seeing a combination of two things that I think Rob can expand on in terms of actions we're taking. Voluntary attrition, particularly at the company, on the fly-in, fly-out site, is still at levels that you typically expect in a FIFO site, in the low teens, 12%, 13%. What we're seeing on top of that is the compounding absenteeism associated with COVID. So you can get 10% to 15% absenteeism on top of that where people are unable to attend work because of COVID-related absences. But that sits behind the number, two of our three sites are FIFO sites, and I'll let Rob talk to some of the actions we're taking to mitigate and control that trend.

Thanks Tom, and Fahad, the other thing I'd just mention to build on what Tom said is certainly, during the third quarter, we experienced some of the highest infection rates of COVID in Canada and, in particular, at Musselwhite, we were up to 15% absenteeism because of what Tom spoke about. We've taken the basic steps where every person who's absent is being case-managed, and we are managing the reasons behind each absence. Additionally, we have a very focused team dedicated to the Canadian labor market to ensure we are bringing in new employees and onboarding them as quickly as possible. Ultimately, as the vaccination rates increase and protocols are put in place, we will effectively manage this situation. There's nothing overly complex; it’s all about doing the basics well.

Okay, great, and then maybe just switching gears to Ahafo. I don't think the guidance changed for the full year, so it implies a really high production rate in Q4. Rob, maybe if you could just speak to that. Is that the expectation?

Fahad, I'll pick that up and again throw across to Rob. But we are certainly going to see a strong fourth quarter out of Ahafo compared to the first three quarters, which were pretty consistent. Rob will continue to talk to the drivers behind that strong fourth quarter.

Certainly, that underground mining method is coming along very well, and we did our first firing earlier in the year for the sublevel shrinkage, so we are seeing higher grades come through there, and the performance of Ahafo in general in the open pit and in the mill has been very positive. Again, the factors around the underground decision we made are really starting to bear fruit, along with good productivity elsewhere in the operation.

Okay, great. That's it for me. Thank you.

Thanks, Fahad.

Hi. On costs, could you walk us through what you're currently seeing down to specific items such as consumables and other raw materials? How you're working to mitigate inflation from the CapEx and OpEx perspective going forward? And based on what you're seeing in Q4, how should the cost trajectory look into 2022?

Thanks, Michael. I'll kick-off and get Rob to provide some color. I'll also ask Dean Gehring, our Chief Technology Officer who is accountable for our global supply chain, to make some comments on trends as well. We've been flagging at the end of last quarter that we're seeing cost inflation trends starting to flow through now, and it's part of our fourth quarter story. We are seeing those reflected, at least into 2022, and that was part of our earlier comments about how we're starting to see 2022 shape up. For now, it appears that 2022 will primarily focus on cost escalation. We're looking at an overall average inflation rate of around 5% across materials, energy, and labor. However, within this total, we see some specific areas where costs have decreased. Rob, do you want to add any details?

Thanks, Tom. To answer what Michael asked in terms of what we're doing to offset it, our focus remains on all operations through our full potential initiatives, which are not only designed to assist in productivity but to reduce costs as well. For example, at Penasquito, we're seeing significant benefits from improved recovery, which we have focused on. In our Canadian sites, we've shifted to jumbo rigs instead of McClean bolters and tele-remote loaders, which has markedly improved productivity. Even at Cerro Negro, we've implemented further equipment optimization, reducing our fleet size while ensuring we're running it as efficiently as possible. But overall, our full potential initiatives remain critical to managing these factors. Dean, would you like to add to that?

Yes. Thanks, Rob. One significant area where we see the largest variability is in freight. Freight makes up about 2.5% to 5% of all our landed costs for major consumables. We need to keep that in perspective. To mitigate this, we are using opportunities available in our global supply chain and assessing our operations in a comprehensive manner to maximize the amount of freight we transport in either ships or containers. This will help us achieve the best pricing possible. We are also implementing transparent pricing mechanisms that are largely based on input pricing for many of the commodities we use, which helps to soften the impact of inflation that we see.

Then could you talk about your view on industry consolidation? Just all the things you just mentioned would seem to point to more scale as the more effective way to operate in this environment.

Thanks, Michael. Certainly, I see our industry having many publicly listed companies in the gold space, which is an order of magnitude more than any other commodity. This suggests there is an opportunity for consolidation given the additional pressures we face. Elevated gold prices may hold off some consolidation. I believe the push to achieve 2030 carbon reduction targets and ambitions for net-zero by 2050 will likely necessitate consolidation in the industry, so I predict climate change will prompt that rather than short-term cost escalations.

Understood. Thank you very much.

Thanks, Michael.

Thank you. Tom, I just want to understand the deployment of the autonomous truck fleet at Boddington. I know you did it on time on budget, but you seem to be having some challenges getting it working the way you want it to work. What are those challenges and what are you doing to address it?

Thanks, Greg, and good morning. The key challenge behind commissioning the autonomous fleet was associated with the significant weather we experienced at the mine during the commissioning phase. Now that we've moved through that period, we have successfully commissioned the trucks and addressed some of the earlier tuning issues. Rob can provide more details on how the fleet is performing now that we have had about a month of fully autonomous operation at the mine.

Thanks, Tom, and thanks for the question, Greg. Certainly, with every passing week, the autonomous haulage is becoming more productive. Since we initiated, we've achieved over 600,000 kilometers and processed around 21 million tonnes. All machines are interconnected. At the start of September, we were around 53% effective utilization, which is a critical metric for ensuring our trucks are working productively. We have now increased that number above 61% over the last week, even hitting around 68%, 69% during individual shifts. We need to achieve this on a consistent basis, but we are pleased with the progress. One of the critical things, particularly for next year, is that we have projected next year’s total tonnage to average about 135,000 tonnes out of the pit. We’ve already achieved 160,000 tonnes. While we still have tuning left to do, particularly with regard to road conditions and widths, overall, we feel that things are progressing well, and we have great support from Caterpillar on-site.

I'm not sure what 68% EU means, Rob.

Sorry, Greg. EU stands for effective utilization. Essentially, it indicates how often the truck is operating productively. Typically, when humans operate the trucks, there are delays such as lunch breaks or rest periods, which affect utilization rates. We've found that automation significantly improves this metric.

Okay, so what's the targeted EU for the autonomous fleet versus a human fleet, I guess?

The target for effective utilization is around 68%, and we expect to reach and surpass this target day in and day out next year.

Okay, great. Thank you.

Thanks, Greg.

Thank you very much for taking my questions. I appreciate the disclosure for the 2022 preview on the expectations. Looking at the existing 5-year guidance, there was some expectation for cost reduction into 2022. Given what you've experienced this year, should we still expect that trajectory longer-term? Or is there a potential that some of the operating improvements might be offset by the trends you're seeing?

Thanks, Josh, and good morning. You will see costs at Newmont and in the industry rise because of the escalation pressures that we've been discussing. However, the cost improvements are still forthcoming at Newmont due to reinvestments we're making in our business. We will continue to see improvements from Boddington with the autonomous haulage and from efficiencies introduced with projects like the shaft at Tanami. The underground mining method at Subika and near-mine projects like Ahafo North and Yanacocha Sulfides will all deliver improved costs over a five-plus year guidance period. With the investment deferments related to COVID, we may see production impacts continuing into 2023, but robust cost strategies will remain in place.

Okay, thank you, and then on the capital numbers. Similarly, there have been a number of changes for some of the existing projects and sequencing, obviously, with Yanacocha Sulfides. How should we be thinking about that? It sounds like the baseline sustaining capital numbers may need to be higher long-term. Is that a reasonable assumption?

Josh, the baseline sustaining capital for our portfolio is really near $1 billion. It may appear as $951 million one year and $1.50 billion the next. As I look at our business plan, the spending will remain steady at around $1 billion. The development capital spent, with the delays from Tanami Expansion 2 and Ahafo North, will need to be examined. I'll pass it to Rob for specific insights.

Thanks, Tom. Tanami Expansion 2 is progressing well, and we have a good handle on costs. The major parts of the cost at Tanami are linked to shaft outfitting. Labor rates in Australia are a current concern, but we've got strong contractor support. So, delays may arise, but nothing worrying at this stage. For Ahafo North, we have pre-ordered equipment, and the engineering is progressing well.

Thank you very much.

Thanks, Josh.

Good morning, everyone. Thank you for taking my questions. Rob, can I just keep you on, again, just to clarify on Boddington? You mentioned earlier the EU and I didn't know what that was either, but wanted to just make sure I understood that with the rain hopefully behind us, keeping the roads clear and clean, that these automated trucks are performing as expected, given they keep stopping. So I'm wondering if we've resolved the issues that caused them to stop?

Yes, Tanya, regarding communication, the system has been designed such that if there is a communication issue for any reason, the system stops. We have successfully resolved most of these issues, and the road condition has improved significantly. The autonomous trucks can detect various issues on the road. While we still have rains impacting conditions occasionally, the focus and attention have been considerable. The roads are indeed in good shape, and the technology is well-tuned. Once the rains stop, we anticipate improved performance. Overall, the fleet is already performing well.

Tanya, the fleet is performing at record levels or required levels, even during a wet October at Boddington. We're about to enter summer in Western Australia, and we expect very strong performance as the winter rains wane.

We're getting better grades on top of that, right?

Yes, we're sitting right on top of the higher grades in the South at Boddington.

Maybe just still in Australia. Rob, on Tanami expansion, like you mentioned, that deferral of $150 million in capital has not impacted the timeline. Can you just share more details on what exactly is being deferred? Should I take that $150 million and add it to the 2022 capital? Which I think Tom mentioned was going to be similar, like no change to CapEx for 2022. So maybe just some clarity there.

In terms of the CapEx, Tanya, it's going to be spread over '22 and '23. It's not all going to come in '22. The main work consists of completing the reaming and starting to outfit the shafts. The work remains very much on track, and the capital will be appropriately spread over the next couple of years instead of just next year.

Tanya, to answer your broader question, our development capital spend will remain similar levels to what we've guided for '22 and '23. What you'll see in '24 is a bit more capital in direct proportion to the delays from the three key projects, specifically Yanacocha Sulfides. We anticipate similar spending levels overall.

Okay, great, that's helpful. And then, Tom, I'll have you on, just two questions for you. You mentioned supply chain disruptions. I'd like to get better clarity on what you're seeing there. As we are also seeing these inflationary pressures come through the cost structures, are we looking at you adjusting gold prices for your reserves and resources next year? Also, given the higher gold price, can we see higher gold price guidance for costs for next year?

Thanks, Tanya. We will continue to use a long-term price assumption of $1,200 for mine planning and reserve/resource estimations to maintain discipline in our strategic decision-making. We will provide guidance for costs based on an $1,800 gold price assumption for next year, and all-in sustaining costs will reflect those inflationary factors, which we are currently assessing, along with production numbers that will drive our cost planning.

Certainly, Tanya. The primary impact from supply chain disruptions is seen in logistics, particularly in the availability of inland shipping and freight. We are currently addressing challenges associated with truck driver shortages. Manufacturers are working back toward normal output levels, but we expect supply chain pressures to persist through the end of the year.

Thank you for that. Thanks, Tom, I just wanted to ensure those costs were based on an $1,800 assumption and not $1,200, and then I have to adjust upwards. So thanks for the clarity.

Thanks, Tanya. Operator, for those still on the call, we're ready for the next question.

Hi. So a couple of questions still remain. You said that the cash costs are around $790 million and your prior guidance was $650 million to $750 million, right? Now you're saying, 6.2% as the production number. So you're at the low end of your original guidance range on production. I just want to backtrack that 5% escalation and how much additionally on the price change? Then just seeing it, that gets you to that $790 million. So could you tell me how much the royalties would impact the terms in the gold price first?

So, Anita, just to make sure I've understood your question. So you're talking about 2022?

Yes. I'm talking about 2022, and I'm just saying, I'm basically looking at the fact that you're talking about 5% escalation. That would have said, that's about $35 an ounce. So I guess we're not at the midpoint because we're not on midpoint on production. So I would be at the higher end on that, trying to get to the $790 million if there are some missing components to get to $790 million?

You're correct in the production impact, inflation impact of about 5%, and then you've got your production taxes and royalties. The combination of those three will bridge the gap between our $1,200 to our $1,800 number in 2022.

Is the royalty impact about $15 to $20 per ounce?

No, more. At least $30.

Okay. $30 per ounce, and then the $115 million Tanami deferral, you maintain the $2 to $2.2 million for 2022. I would've expected that, I guess, to go up if you're deferring to Tanami CapEx? Or is it just a matter that the net is being pushed out consistently, so the 2022 spend related to Tanami is being pushed into 2023 and perhaps some into 2024. Is that the way it works or is there some offset?

No, it's essentially that wave is moving for Tanami from '21 into '22 and what's in '22 moving into '23, and then if you look at our overall development capital number, there's some Ahafo North numbers that we assumed in '21 but move into '22 and then push out into '23 and '24. Given those, so, development capital will be calculated at levels as previously noticed, so we are providing a like-for-like basis.

The new guidance in December will continue to not include the Yanacocha Sulfides spend, because it hasn't really gotten full funds decision?

Yanacocha Sulfides spend is included in our current guidance. The Yanacocha Sulfides spend with a delay in full funds approval to the second half of the year will be in our updated guidance in early December. The nature of the timing of that project, when you look at a five-year view of our production, will show that you only see a very small contribution from the gold and copper coming to our profile. The benefits of that won't be fully realized until '27, '28, and beyond. Therefore, while we will monitor the spending, we won't see that impact immediately in our five-year guidance.

So just to reiterate, the intense capital spend that you have in the next two years includes the Yanacocha Sulfides spend, the $2 billion number for the next few years?

Yes, it does.

Okay. All right. Thank you. Sorry, and potentially as a point, the fall-off in 2024, that also includes the Yanacocha Sulfides spend?

Yes, that's correct. What you see in our development capital spend over the five years in our current guidance includes the big items noted as Tanami 2, Ahafo North, and Yanacocha Sulfides.

Okay. Thank you.

Thanks, Anita.

Hi, good morning. I think you just answered my question there, but one other thing I just wanted to follow-up on is Conga. So I have three questions. What triggered this to do this now? Was there anything related to changes in government or anything? Second, you mentioned a total book value of $570 million for $68 million, and you talked about equipment and assets. I assume the $68 million is for equipment and assets and something else. Any clarity on this? And finally, there's still $900 million on the books. Is there stuff there that you can use in Yanacocha Sulfides, other equipment, or stuff? I'm just trying to figure out exactly what that transaction is.

Thanks, Brian, and I'll take your first and third questions, and I'll ask Nancy to address the book value. The $900 million still present includes deposits and infrastructure previously constructed, including a significant dam as part of the infrastructure. When we had the mill, it was large, formerly the largest in the world, but still quite unique. When we received interest in purchasing this equipment from a buyer with a suitable place for it, we saw it as an opportunity to dispose of it, saving the ongoing costs of care and maintenance. Nancy, can you address the book value aspect?

Yes. The carrying value reflects what was on the books minus depreciation over the period we've held it. The loss is just attributed to the actual sale, but nothing more than that. It's been on our books for quite some time.

Great. Thank you very much.

Thanks, Brian.

Good morning, and thanks for taking my question. Another follow-up on the Tanami expansion. I just wanted to get some clarity on the fact that we've delayed $150 million of CapEx but kept the overall CapEx budget flat versus the previous guidance. What gives you confidence that the overall budget won't inflate given the tightness that we're seeing in the labor markets and so on? That's the first question.

Thanks, Danielle. I’ll kick off and then pass to Rob. The nature of where we are with Tanami, having nearly 70% of the shaft already sunk, puts us in a position for linear processes concerning outfitting. We're very clear on the contracted work thanks to our leading contractor and ample progress made thus far. We have confidence in both our schedule and spending levels. Rob, do you want to provide any additional insights?

Certainly. The Tanami 2 task is executing well, and we are on track. We've pushed through some of the initial challenges, and our engineers are working diligently. The focus on expertise in reaming and lining the shaft is paramount, which we are managing keenly. We see no further concerns at this point in time.

The risks mainly relate to moving personnel to the site due to COVID-related travel restrictions, which will ease in the first quarter. As vaccination rates rise in Australia, it should alleviate many challenges in logistics to help us move personnel to keep the work moving.

Thank you. That's very useful, and on a completely different topic. For Penasquito, have you seen any impacts from the new labor law introduced in September that limits the use of contractors? Does that impact you at all?

None whatsoever, Danielle. We fully comply with those legal requirements and are managing those accordingly. In fact, Penasquito is performing well and hitting its targets.

Thank you. That's useful.

Thanks, Danielle.

Good morning, everyone. Thanks very much for taking my questions. Tom, on your production comments for next year, given what you've experienced this year, what gives you confidence in the 5% growth forecast for next year, and along somewhat similar lines, how do you feel about the 2023 outlook that you gave last December in light of what you've seen thus far this year?

Thanks, Adam. I am very confident in the projected production numbers. We rely on our world-class assets to underpin this forecast, especially from our operations in Boddington and Tanami. In Australia, we are nearing the end of major COVID disruptions. The significant efficiencies we expect from autonomous haulage will further mitigate challenges and enable us to confidently project next year’s production. Ahafo South is progressing well with underground development, and Penasquito is currently performing well. However, some impacts from COVID on development rates may linger into 2022 and 2023, affecting our overall five-year outlook. That said, I remain optimistic about our ability to achieve our targets.

I appreciate that. On the inflation topic, you mentioned on the last call that you expected the inflation at the 5% mark to run through at least the end of next year. I'm just wondering, based on your experiences in previous cycles, how long do these inflation cycles typically last? At what point should we expect this inflation to subside? Is this a case of high prices preventing growth?

Thanks, Adam. The current inflationary environment is somewhat uncharted territory. While I don't view it as a structural challenge, I suspect it will remain cyclical and may last longer than traditional cycles due to ongoing impacts from COVID-19. We'll continue to provide details in our '22 guidance in terms of how we're managing inflation, but predicting the precise timeline for its return to baseline levels would be speculative.

I really appreciate that, Tom. Thank you.

Thanks, Adam.

Thank you, operator, and thank you to everyone for joining us. Please take care of your health and safety, especially as we approach the winter months in the Northern Hemisphere. Thank you for your time, everyone.