Newmont Corp (NEM) — Q4 2021 Earnings Call Transcript

Good morning, and thank you for joining Newmont's Full Year and Fourth 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 a strong finish to the year and has maintained its position as the world's leading gold company with our unmatched portfolio of operations and projects in the most favorable mining jurisdictions. As we move into our next 100 years of sustainable and responsible mining, Newmont will continue to create long-term value for all of our stakeholders and differentiate ourselves through our clear strategic focus, superior operational performance and an unwavering commitment to leading ESG practices. Turning to our highlights for 2021. Newmont continued to operate from a position of strength in 2021, leveraging our scale and mine life to deliver strong ESG operational and financial performance. First and foremost, our focus has remained on protecting the health and well-being of our workforce and local communities as the world continues to grapple with the pandemic. We continue to be recognized for our leading ESG performance, building new pathways to decarbonization and publishing our first climate strategy report. And during the fourth quarter, we safely commissioned the gold industry's first autonomous haulage fleet at Boddington and formed an industry-leading strategic alliance with Caterpillar to achieve zero emissions mining and support Newmont's climate initiatives. We finished the year strongly, meeting our updated full year guidance and producing 6 million ounces of gold at all-in sustaining costs of $1,062 per ounce. And in addition, produced 1.3 million gold equivalent ounces from copper, silver, lead and zinc. These results generated $4.3 billion in cash from continuing operations and $2.6 billion in free cash flow. More than 99% of which is attributable to Newmont and available to execute on our balanced and disciplined capital allocation priorities. We refinanced near-term debt with the mining industry's first sustainability-linked bond, preserving Newmont's financial strength and flexibility as we further align our financing strategy with our ESG commitments. In 2021, we returned $1.8 billion through our clear dividend framework and completed $525 million of share repurchases, leading the gold sector in shareholder returns. We also completed the acquisition of GT Gold, continue to advance our most profitable near-term projects. And two weeks ago, we announced the acquisition of Buenaventura's interest in Yanacocha, increasing Newmont's ownership in one of the largest and most productive gold mines in South America. We have successfully operated in Peru for more than 30 years, and we have a deep knowledge of Yanacocha and the value that it brings to Newmont's stakeholders. Since 1993, Yanacocha has produced nearly 40 million ounces of gold. And similar to our acquisition of GT Gold in British Columbia's Golden Triangle, this transaction is in line with Newmont's strategy of district consolidation, enhancing our ownership of world-class assets in proven mining jurisdictions. Increasing our ownership in Yanacocha also means that Newmont is increasing our stake in the sulfides project, which is the next exciting chapter in Yanacocha's long and profitable history. With a multi-decade mine life from just the first phase, this project will generate profitable production of more than 500,000 gold equivalent ounces per year at attractive all-in sustaining costs. Importantly, the metal producing sulfides will be approximately 45% gold, 45% copper and 10% silver, substantially increasing Newmont's copper position as the world transitions to a green economy. And looking ahead, we are already evaluating the second and third phases of the sulfides project, which has the potential to both increase production and extend mine life well beyond 2040. We are very fortunate to have had a strong partnership with Buenaventura over several decades and look forward to continuing to work with the people of the Cajamarca region and local agencies to sustainably and responsibly develop the next phases of Yanacocha's long life. Turning now to the strategic value that differentiates our portfolio. Each year, Newmont's portfolio of operations will produce more than 60 ounces of gold, along with nearly 2 million gold equivalent ounces from copper, silver, lead and zinc. Combined, that is nearly 8 million gold equivalent ounces per year for at least the next decade, the most of any company in our industry. At Newmont, we have created a robust and diverse portfolio of operations and projects around the globe with the scale and mine life to deliver strong long-term results. Among our 12 operating mines and two joint ventures, over 90% of our attributable gold production comes from top-tier jurisdictions. And with the opportunity to acquire the outstanding 5% ownership in Yanacocha, 11 of our 12 managed operations will be 100% owned, ensuring that our stakeholders receive the full benefit from Newmont's clear strategic focus and superior execution. Underpinning our portfolio is a robust foundation of reserves and resources. Including our recent acquisition of an increased interest in Yanacocha, Newmont's reserve base now sits at 96 million ounces of gold and 68 million gold equivalent ounces from other metals, predominantly copper. We also offer substantial upside through a resource base of over 112 million ounces of gold, and a further 112 million gold equivalent ounces from other metals, which includes almost 30 billion pounds of copper. Through our industry-leading organic project pipeline, we have multiple opportunities to increase copper production through the development of Yanacocha Sulfides, Saddle North, Norte Abierto, Nueva Union and Galore Creek, providing natural exposure to a metal of growing importance for reducing carbon emissions and facilitating ongoing transition to a new energy economy. Reserve replacement is a long-term process. And as Newmont has done for many years, we develop and implement plans that target replacing our annual depletion on average over time. In 2021, we replaced more than 80% of reserve depletion despite the challenges created by the pandemic. And it is important to note that this does not include the 3 million ounces of gold reserves we just acquired through our purchase of Buenaventura's interest in Yanacocha. At Newmont, we firmly believe that the COVID-19 vaccine is critical in combating the spread of the virus and preventing severe illness and death. As you can see in this slide, the vaccination rates at our managed operations exceed national rates in all of the jurisdictions in which we operate. Last September, we took the important step of deliberately moving towards a position where all of our global workforce will be required to be vaccinated. To support this, Newmont continues to deliver vaccination awareness programs, while also working with local communities and governments to both provide and improve access to the vaccines. And one of the most meaningful contributions that our leaders have made in the fight against COVID-19 is the time that they have spent with their teams, holding individual meetings, answering difficult questions, coordinating facilitated sessions with health professionals and guiding our workforce as they make the important decision to protect themselves and their loved ones. We are very proud of the work we have done and we will continue to be a values-driven organization that makes decisions that prioritize the health and safety of our workforce and local communities above all else. Over the first two months of this year, the Omicron surge has impacted our operations and the mining industry as a whole. Fortunately, due to our high vaccination status, the severity of any positive cases has been low. Our workforce remains healthy, and we are well positioned as we emerge on the other side of this current surge. However, as a consequence of safely managing through this surge, we expect that our production results in the first quarter of 2022 could be impacted by as much as 150,000 ounces. Around one third of that impact is coming from our Canadian operations and Cripple Creek & Victor. Its flight capacity constraints at our fly-in, fly-out operations and close contact isolation protocols have impacted productivity. Another third comes from Africa, where we are experiencing COVID-related supply chain disruptions and global border closures, which are impacting the availability of skilled workers from Australia, and the delivery of critical spares and equipment. And the final third comes from our operations in Australia, but we are seeing the impacts of productivity and labor availability as we adhere to interstate border closures and close contact isolation protocols. We are closely monitoring the reopening of the Western Australian border, which is currently planned for March 5. And this may lead to a surge of cases impacting the mining industry in that state. However, the reopening of this border will also allow one third of our team at Tanami who live in Western Australia to now move freely between work and home for the first time in months. As we near the end of February, we are encouraged to see declining case counts and have reported only one hospitalization associated with the Omicron surge. Despite the challenges presented by managing the Omicron surge, we remain on track to end the year within our guidance ranges. We expect the production and unit costs will substantially improve each quarter with approximately 53% of our production weighted to the back half of this year, driven by Boddington, Ahafo, Cerro Negro and our Canadian operations. And with that, I'll turn it over to Rob and then Nancy for a more detailed look at our fourth quarter performance. Over to you, Rob.

Thank you, Tom, and good morning, everyone. To echo what Tom said, the pandemic continues to present challenges across our operations and the mining industry as a whole. I'm very proud of the resilience of our people and our systems and I'd like to recognize the very significant efforts that continue to be applied at all of our operations in order to keep our teams safe and healthy. Turning to the next slide. Let's take a deeper look, starting with Australia. Tanami delivered another strong performance in the fourth quarter as higher rates and strong mill performance more than offset impacts to productivity from COVID. And despite a tightening labor market and heightened protocols, the team added more than 800,000 ounces in reserve additions through drilling. We expect Tanami to remain a solid contributor throughout the year due to steady production and higher grade as we progress our investment in the second expansion at Tanami, a project with the potential to extend mine life beyond 2040. The team continues to advance the construction of the headframe. 80% of the nearly one mile deep shaft has now been reamed and more than 80% of the project engineering procurement has been completed, an important step in locking in long lead time materials and limiting exposure to rising costs. At Boddington, we delivered the site's best quarterly performance of 2021. Overcoming challenges encountered during the third quarter and reporting improved production and lower costs as the team reached higher gold and copper grades in the South pit. We expect tonnes mined and grade to further improve starting in the second quarter with 52% of production expected in the second half of the year. And I'm very pleased to announce that the gold industry's first autonomous haulage fleet at Boddington has reached full productivity, increasing ore tonnes mined in the fourth quarter and positioning Boddington to deliver a strong performance this year. Early in 2020, our Newmont team came together with our partners at Caterpillar to plan, construct, test and deploy the gold sector's first fully autonomous haul truck fleet. And despite facing some challenges while fine-tuning this new technology to operate in a deep open pit mine for the first time, the Boddington AHS project was completed on budget and in record time, a major accomplishment for Newmont and the industry as a whole. Today, our autonomous trucks are operating at parity with a conventional haul truck. And we have a deep pipeline of optimization projects aimed at improving consistency, efficiency and productivity throughout the year. The introduction of this technology allowed the site to replace 41 conventional trucks with 36 autonomous vehicles, resulting in important safety improvements and substantial cost savings over the long term. Already, our AHS fleet has moved over 45 million tonnes of material, and these trucks have traveled more than 1 million kilometers, generating tremendous results so far. Vehicle damage has declined nearly 50% in 2021 compared to 2020 and tire damage decreased 93% from more controlled and efficient haulage. But more importantly, we've reported zero injuries in the mines since going live in October last year. In addition to improving productivity, and autonomous haul fleet is fundamentally safer, removing the exposure to potential vehicle interactions and the risks associated with fatigue. In November, we took another step forward in the use of technology to improve mining, announcing our revolutionary strategic alliance with Caterpillar to deliver first-of-a-kind battery electric autonomous vehicles at Tanami and CC&V as we make progress towards achieving zero emissions mining. We will look to leverage our team of experts within both Newmont and Caterpillar, along with the lessons that we've learned at Boddington as we continue to implement important improvements to safety and productivity throughout our portfolio, while also building pathways to decarbonization. Shifting to North America. Peñasquito delivered another strong quarter with sustained mill performance and higher gold grade. The site is expected to deliver lower gold production and steady coal product production this year due to the planned sequencing at the Peñasco and the Chile Colorado pit, combined with lower grade and harder ore coming from the Chile Colorado pit. Stripping in the Peñasco pit will continue through 2022, and the site will also begin stripping the next phase of the Chile Colorado pit in the second half of the year. In the first half of this year, Peñasquito will increase capital spend as the site expands camp facilities, ensuring that our team members have the appropriate privacy and accommodation to get proper rest, as well as improving our ability to manage the spread of any future surges of COVID variants. Turning to our Canadian operations. Éléonore delivered solid fourth quarter results due to improved ore tonnes mined and milled. In addition, the site added more than 800,000 ounces in reserves from drilling and favorable revisions. Musselwhite generated the year's strongest quarterly performance from high-grade mine and improved mill performance in the fourth quarter. And Porcupine delivered consistent fourth quarter results as higher throughput and recovery rates helped to offset less high-grade ore being mined from oil pond. In addition, the site continues to advance the Pamour project, just 10 kilometers from our existing plant infrastructure. This project involves a significant layback of the Pamour pit and will extend mining at Porcupine through 2035. The Pamour pit will need to be dewatered as part of this project and the concrete foundations for the associated water treatment plant have been completed. Study work is progressing as the project prepares for full funds approval in the second half of this year. And finally, at CC&V, the mine continued to experience lower grades and recoveries in the fourth quarter, in addition to lower labor availability due to COVID. Turning to Africa. Akyem delivered another solid performance in the fourth quarter from higher grade, sustained throughput and strong recoveries. Akyem has begun stripping the next layback, extending mine life and providing future optionality as we continue to evaluate underground and open pit growth opportunities. Ahafo delivered a strong finish to the year, adding more than 400,000 ounces in reserve additions from drilling and generating a 19% production improvement over the prior quarter due to higher tonnes mined from the Subika open pit, coupled with strong mill performance, which more than offset challenges with labor and equipment availability at our Subika underground operation. These challenges were driven by COVID-related supply chain disruptions and international border closures at a time that we are ramping up sublevel shrinkage at Subika Underground. Consequently, we are expecting production at half or to be weighted around 60% to the second half of this year as we increase underground tonnes and reach higher grade. And finally, in Africa, we continue to advance our Ahafo North project. In the fourth quarter, we received a tailings storage facility and water infrastructure permits from the EPA and we expect to gain full land access later this year as we work together with local communities and regulators to develop this prolific ore body. Now turning to South America. Merian remains a strong performer, delivering higher throughput and steady grade in the fourth quarter, while adding nearly 400,000 ounces in reserve additions primarily from drilling at the Maraba open pit. Production is expected to slightly increase this year as ore grade continues to improve through the first half and the site continues to utilize our ore blending strategy to maintain strong mill performance. Yanacocha continues to deliver leach-only production while we develop the first phase of the sulfides project. Early stage engineering continues to progress as the pandemic allows and accommodation facilities for the construction and full-time workforce are expected to be completed in the first half of the year as the site prepares for an investment decision in late 2022. And finally, productivity and performance continues to improve at Cerro Negro as higher ore tonnes mined were partially offset by lower grade in the fourth quarter. We expect production this year to remain in line with 2021, with around 55% weighted toward the second half of the year. Our team continues to advance the San Marcos decline and the first wave of district expansions, which includes the development of the Marianas and Eastern Districts to extend operations beyond 2030 and provide a platform for further exploration and future waves of expansion. The drilling and airport contracts have been put in place, and Cerro Negro added more than 1.1 million ounces to reserves from drilling in the Eastern District, more than offsetting revisions and reinforcing the growth potential in this highly prospective and underexplored gold district. We look forward to bringing you further updates about our progress at Cerro Negro as we bring this project for full funds approval next year. And with that, I'll turn it over to Nancy on the next slide.

Thanks, Rob. Through discrete portfolio and proven operating model, Newmont is able to generate the highest levels of attributable free cash flow in the gold sector. And our disciplined approach to capital allocation allows us to maintain financial strength and flexibility, while balancing steady reinvestment into our future and industry-leading returns to our shareholders. In 2021, we continued to strengthen our balance sheet, ensuring that we are well positioned to sustain our business and continue leading the industry for decades to come. Let's start with a look at the financial highlights. As you can see, Newmont delivered a strong finish to the year. In the fourth quarter, Newmont achieved a record $3.4 billion in revenue, driven by higher sales volumes and strong gold prices; adjusted net income of $624 million or $0.78 per diluted share; adjusted EBITDA of nearly $1.6 billion for the quarter and a record $6 billion for the full year; and strong free cash flow of nearly $900 million for the quarter, an amount entirely attributable to Newmont. Our unmatched cash flow generation enables Newmont to provide superior shareholder returns, largely through our clear and stable dividend framework. This week, we again declared a regular quarterly dividend of $0.55 per share, resulting in a dividend yield of approximately 3.5% and positioning Newmont among the top 10% in the S&P 500. In addition to our dividend, we continue to execute on our second $1 billion opportunistic share repurchase program, a separate and independent tool that does not impact our dividend payouts. Since December 2019, Newmont has repurchased over $1.5 billion in share buybacks at an average price of less than $49 per share, contributing significant value to shareholders. With an additional $475 million left on the current program, we will look to execute on opportunities over the next 10 months to repurchase our shares. Fourth quarter GAAP net loss from continuing operations was $61 million or $0.08 per share. Adjustments included $1.10 primarily related to noncash reclamation adjustments at non-operating sections of the Yanacocha site. Based on our ongoing studies of water management and closure activities, the liability was increased by $1.6 billion, of which approximately one third relates to the estimated cost to construct two additional water treatment plants over the next five years, and the remainder of the increase relates to ongoing closure operating costs, which we estimate include over a period of 50 years. Adjustments also include $0.21 related to the sale of the KCGM Power business and the South Arturo asset exchange with Nevada Gold Mines, $0.05 related to unrealized mark-to-market gains on equity investments and $0.02 of other charges. Taking these adjustments into account, we reported fourth quarter adjusted net income of $0.78 per diluted share. Our balanced global portfolio, combined with our discipline and integrated-operating model, provides significant leverage to higher gold prices from the largest production base in the world. And for every $100 increase in gold prices, above our base assumption, Newmont delivers $400 million of incremental attributable free cash flow per year. Nearly 18 months ago, we led the gold industry by announcing our dividend framework, differentiating ourselves with a clear and decisive strategy to provide stable and predictable returns to our shareholders. This framework provides a stable base dividend and returns 40% to 60% of the incremental attributable free cash flow generated above a $1,200 gold price. The fourth quarter dividend declared was consistent with the last four quarters, calibrated at an $1,800 gold price assumption and a 40% distribution of incremental free cash flow. Since introducing our framework, Newmont has returned more than $2 billion through dividends alone, demonstrating our confidence in the long-term value of our business and our commitment to leading returns. Our capital allocation priorities remain unchanged with a clear strategy to reinvest in our business through exploration and organic growth projects, to maintain financial strength and optionality in our balance sheet, and to continue to provide industry-leading returns to shareholders. Throughout the year, we delivered on each of these priorities by progressing our profitable reinvestment into the business with the advancement of our near-term projects and an ongoing commitment to our robust exploration strategy. Delivering the first autonomous haulage fleet in the gold mining industry, improving safety and productivity at Boddington, advancing district consolidations with the GT Gold transaction and increasing our ownership in Yanacocha, returning $2.3 billion to shareholders through dividends and opportunistic share buybacks, issuing the industry's first sustainability-linked bond, efficiently refinancing near-term maturities and resulting in no debt due until 2029, and maintaining a strong balance sheet with $8 billion in liquidity and a net debt-to-EBITDA ratio of 0.2x, preserving Newmont's financial strength and flexibility to sustain the business across price cycles. 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 all of our stakeholders. With that, I'll hand it back to Tom to wrap up.

Thanks, Nancy. Over the last year, as we celebrated our 100th anniversary, it has been an important milestone to pause and reflect on our company, our industry and the lessons we have learned. Our clear strategy lays the groundwork to truly differentiate Newmont as we position ourselves to continue leading the gold industry today and well into the future. And as we begin a new year, I am confident that our clear strategic focus, proven operating model, superior execution and leading ESG practices will enable Newmont to deliver long-term value to all of our stakeholders through sustainable and responsible mining. With that, I'll turn it over to the operator to open the line for questions.

Thanks for taking my two questions. First, Tom, you made a comment about 150,000 fewer ounces in Q1. How should we be thinking about the rest of the year? Will those ounces be made up? Or should we be thinking that this is a net negative to the midpoint guidance for the year?

Thanks, Fahad. We still expect to be within guidance. So we see opportunities to work to recover some or all of those ounces. Clearly, we're only at the coming to the latter end of February. So plenty of opportunities in front of us. We're going to be weighted to the second half of the year with a couple of our big assets, Ahafo and Boddington in particular. So it's how those have the sequence of those mines shape up and how we move through and the grades it presents. But we certainly see ourselves firmly within guidance for production costs. So ten months in front of us, plenty of opportunity to work through from the Omicron surge.

Okay. That's clear. And then my second question, we haven't heard much on full potential improvements in 2022. Could you maybe give an overview of any targets or guidance for the year? And whether or not the cash cost guidance that has been provided already incorporates that?

Thank you, Fahad. The cash cost guidance indicates nearly $300 million in full potential improvements, specifically $290 million overall. I want to highlight some of our key initiatives. One major contributor will be at Musselwhite, where we aim to reduce the time it takes to return to the mine after a blast and extend the underground shift length. These are fundamental operational enhancements. We are also identifying opportunities in drilling and the speed of slot raises at Éléonore, which is another important focus. At Peñasquito, we are concentrating on maximizing equipment availability and operational time. Additionally, we are improving recoveries in the sulfide plant and enhancing the feed circuit, especially as we start processing harder ores from the Chile Colorado pit. These are some of our primary initiatives. Recently, we conducted a refresh at Boddington, which could represent additional upside to the full potential work included in our plan. Boddington was the first site where we implemented the full potential initiative back in 2014, and it has undergone several refreshes over the past eight years, consistently discovering new value. Looking ahead this year and next, the significant opportunity at Boddington lies in our autonomous haul fleet. With the predictability and control provided by this fleet, we are focusing on two key aspects: minimizing delays and maximizing the speed of the autonomous haul trucks. Since these trucks consistently position themselves at designated spots, there is a substantial opportunity to reduce queue and hang times at shovels. We see exciting prospects at Boddington from this recent refresh, which is not reflected in the outlook provided last December.

Thank you for taking my questions and congrats on ending a strong year and great reserve base. I have a couple of questions. Just if I could start Tom or Rob, on just on the quarterly guidance, so I understand correctly, 53% weighted to the second half. You've given us Boddington half of Cerro Negro, how about the Canadian asset distribution? And how should I think about Peñasquito, another one of your big assets?

Thanks, Tanya, and good morning. I might start with Peñasquito, I'll then work backwards. So Peñasquito on a gold basis is about 50-50. So pretty consistent through the year when you look at gold. In the Canadian assets, Musselwhite is 60-40 split, very much seeing as a fly-in-fly-out operation at Musselwhite in this first quarter with the Omicron surge you've seen those impacts are weighted to the second half 40-60. The other two Canadian sites are around 45-55. If you move into South America, Cerro Negro is about 45%, 55%. Boddington in Australia is following the portfolio, 47%, 53%. And Ahafo, and it's particularly driven by two things, both Subika related both open pit and underground, we're moving to higher grades in the Subika open pit as we move through that layback and as we start to get equipment and people back moving into the underground and start to get more access to broken stocks, you'll see more material move through from the underground mine. So Ahafo is 40-60. The portfolio at 47-53.

Okay. And then the only other one I think you mentioned was Cripple Creek, which is second half weighted?

That's right. Cripple Creek is 43-57. So weighted 60-40 through the second half. And that's linked to recoveries coming off the heap leach, so the timing of the grades of gold you place in the recoveries coming through in the second half.

That's very, very helpful. And I don't know if Nancy could chime in on the capital distribution, if there's anything we should be aware of on the capital going through the year.

I've got it here. So development capital, as we look through the year is sitting at about weighted to the first half, 55-45. So slightly weighted to the first half. And if I look at our sustaining capital, it's about the same, 55-45. So that's a development capital weighted slightly to the first half, Tanya.

We should expect improved free cash flow in the second half of the year as we manage capital and see better asset performance. Additionally, I wanted to ask about Yanacocha Phase 2 and 3. Tom, could you share your thoughts on how you're viewing those two phases?

Thank you, Tanya. The Yanacocha sulfides project primarily involves the establishment of a concentrator and a lava pressure oxidation facility, enabling us to process the sulfide ore. To fund this project, we plan to extract from the Yanacocha Verde open pit, which contains lower-grade ore that we'll process through the concentrator as we develop our first underground mine at Yanacocha Chaquicocha. We are currently advancing from the high wall of the pit to develop the underground mine. This will be mixed with the concentrate, resulting in the production of copper, gold, and silver. Over the past 30 years, we've extracted 40 million ounces of oxide ore from Yanacocha, and, like in previous mining operations in Nevada, significant sulfide deposits lie beneath the oxide ore. Our drilling and studies aim to identify the next deposits to supply the processing facility. This facility will process sulfide ore within the current Yanacocha footprint for many decades, similar to the roaster at Mill 6 in Nevada. We are exploring various phases of deposits, and we expect additional ounces from both the Yanacocha open pit and Chaquicocha underground, which will help extend operational life at current rates. As we optimize the processing facility and can handle different grades of ore, the Phase 2 deposits will provide further opportunities to increase throughput and prolong life into the 2040s and beyond. I hope that clarifies our approach.

Yes. And then is the third phase the phase that you think about Conga and Caliche or. No?

No. The third phase involves existing sulfide deposits within the current boundaries of Yanacocha. When considering our long-term strategy, it is crucial to establish a solid foundation for ongoing operations. This foundation enables us to better engage with the workforce and the surrounding communities, which in turn allows us to plan for the long-term integration of Conga and Caliche over the future timeframe. Therefore, Phases 2 and 3 provide additional potential.

Phase 4 then? All right. It’s another phase for you to work on. If I could just two other quick ones. I just wanted to understand on the reclamation obligation, understand the one that Yanacocha had a lot to do with water, but maybe think about just your overall portfolio in the industry in general. Tom or Rob, should I be thinking that these reclamation obligations, we will start to see some bigger numbers come out of other assets within your portfolio given all of the new legislations going through? Like can you give us any color on what you're seeing in terms of reclamation obligations?

Sure. Tanya, the reclamation obligations are largely influenced by Yanacocha. The disturbed area is about 75% the size of Manhattan, and there are significant volumes of water due to the rainfall in that region. Additionally, the sulfides project does not create further reclamation needs; we are essentially operating within the existing footprint. The same methodology we use at Yanacocha applies throughout our business. We account for a 50-year reclamation obligation. If we need to treat water, as we do at Yanacocha, we assume that treatment will continue for 50 years, using current technology for those assumptions. The potential for a long-term operation like Yanacocha to incorporate technology that improves water management and processing adds value to our projections. This approach is consistent across our entire portfolio. Yanacocha is the primary operation, followed by Peñasquito, which has significantly lower obligations, and then Cripple Creek, Victor, Porcupine, and Boddington. So, Yanacocha stands out, followed by Peñasquito, and then the other operations in terms of closure obligations.

We're not seeing anything, Tom, right now, legislation that will make you change anything in your approach for additional money?

No, we are focused on the rehabilitation we are doing and capturing and treating mine-affected water. Whether required by regulation or Newmont’s standards, we treat the water to either drinking water standards or agricultural standards based on the catchment area for the water we discharge.

I want to return to the Yanacocha project for a moment. With the change in your partnership structure or the acquisition of Buenaventura's stake, now that you own nearly the entire project, does this affect your approach in any way, such as timing or other considerations? Does it eliminate any limitations you may have faced with the partnership, like funding capabilities? How are you approaching this now compared to before you acquired the stake?

Thanks, Jackie. There is no change to the timetable; we are working towards a late 2022 approval. We're focused on ensuring that we can clearly see how the pandemic will allow us to mobilize a workforce. We continue with early work and long lead time procurement. We expect to have the autoclave vessel on the construction site by the end of the year as we seek full funding, which will significantly reduce the risk of the project. Another critical path item we are addressing is advancing the engineering to a level where we can obtain an accurate cost estimate to secure full funding and mitigate project execution risks. Best practices in mining and oil and gas for large multibillion-dollar projects involve achieving a high level of engineering. A significant portion of our expenditure this year is on that engineering work with both Bechtel and Hatch. We will ensure that the pandemic allows us to mobilize a workforce of over 3,000 people, and that our engineering efforts provide accurate cost estimates. We will continue with procurement, and late 2022 is the ideal timeframe for us to progress and seek full funding.

And you didn't mention anything about the government. There's nothing that you need to see or get assurances on the government side to make a full funds decision. I think I heard you say earlier, you're pretty comfortable, but is there anything on that side that you're waiting for?

We’re not waiting for anything, Jackie. While the government is undergoing some changes, the bureaucracy in Peru is functioning as it always has. The government has indicated that any tax changes, if they occur, will be modest. Given the current dynamics in Congress, the likelihood of significant changes seems reduced. As I mentioned to Tanya, we view this as a long-term investment and are confident that we can work through the current administration to secure full funds approval. So, there is nothing pending on that front.

One other question just on a change of subject, I guess, on the share buyback, I know you pushed back the expiry of your share buyback program. But you've now done over half of $1 billion. Is there any thought to expanding the program to raising the total buyback size, I guess, as you get closer to that $1 billion. Can you maybe just talk about how you think about how much of that you're planning to execute this year and if there is an opportunity to raise that?

Thanks, Jackie. We certainly look at share buybacks as we have done over the last, as Nancy was talking about in the prepared words. It's our second program, and we've bought back $1.5 billion at less than $49 a share in today's prices, that's a very significant return on investment. So we see it as a tool that is independent to our dividend framework. We believe in talking with our Board that the remaining roughly $500 million in the next 10 months of this year is adequate for us to be able to execute on that aspect of our capital allocation priority, and we will have the discipline as we've demonstrated to only go back in and buy our stock where we see that, that makes good sense. And as we near the end of the year and sit down and talk with our board, we'll see a debate whether it makes sense to think about having another program as we move into 2023. So that will be part of an ongoing discussion with our Board as we look at our different capital allocation priorities. But to answer your question, we think there's ample opportunity with what we've got available to us over the next 10 months to do what we need to do. And we have the cash available to execute on both our dividend framework and on our share buyback.

Tom and Rob, I wanted to revisit the topic of the autonomous haulage fleet. The statistics you presented on Slide 12 are quite impressive. Can you share what insights you've gained since ramping it up? Are you discovering additional opportunities for similar investments across the portfolio? Also, could you provide an idea of the savings generated in terms of reduced wear and fewer operators?

Thanks, Cleve. I think that's a terrific question for Rob and he will certainly make sure that he talks about our alliance with Caterpillar and Cripple Creek and Victor and Tanami as well as other things. Over to you, Rob.

Thanks, Tom and Cleve. Starting with Boddington, the performance is very encouraging. As mentioned earlier, we are now operating at the traditional level of the trucks, which is great to witness in such a short timeframe. We still have numerous opportunities to enhance efficiency, including optimizing speed, improving shovel sequencing, reducing hang time, refining hot seating, and enhancing refueling processes. Our focus remains on the Boddington haul fleet to not only match conventional hauling but to surpass it significantly. The analytics we have, especially through our partnership with Caterpillar, allow us to share data like never before, enabling in-depth analysis. Autonomous haulage is about continuous improvement, and that's the opportunity we see at Boddington. We are just beginning a long process, and it's going to be exciting. I look forward to discussing ongoing improvements. Regarding other opportunities, as Tom mentioned, the partnership and strategic alliance with Caterpillar is very promising. The initial focus will be on automation at CC&V, where we believe the cost benefits will significantly enhance operations. We are also exploring autonomous options at Tanami in the underground sector, and we have plans for the Pamour project, sublevel shrinkage at Subika, and Yanacocha's underground mines. There are many great opportunities to deploy this proven technology. However, the success of this technology lies not just in implementation, but in how we utilize it, particularly the data, which is where the excitement is. We have much potential for improvement ahead.

Yes, that's very clear. I have one more question regarding the dividend and capital allocation. It's encouraging to see a positive outcome at Yanacocha after about a year or 1.5 years of uncertainty. However, this situation does increase Newmont's capital expenditure obligation at the mine. I'm curious if this impacts your position within the 40% to 60% range for incremental free cash flow returns. Nancy, I believe you mentioned in your prepared remarks that you are currently at the lower end of the range, specifically at 40% with $1,800 gold. Does this situation alter that assessment with the additional capital expenditures expected this year and next year? Additionally, regarding your cash usage, are you open to using cash for continued stock buybacks? I noticed that the cash balance slightly decreased in 2021. Ultimately, how are you assessing the current cash balance? Would you consider using more cash for stock buybacks, or do you expect it to remain flat by the end of the year?

Thank you, Cleve. Our dividend framework is based on our base dividend of $1 per share, which supports our long-term reinvestment in the business. The projects are expected to be profitable and return value, particularly with gold priced at $1,200 and the Yanacocha sulfide having additional metals involved. Hence, our approach prioritizes reinvestment before we distribute the base dividend of $1 per share. For every $100 increase beyond that, we generate an additional $400 million in free cash flow each year, of which we distribute 40%. This approach is strong and remains unaffected by our reinvestment decisions. Nancy, would you like to discuss our cash balances and our policy on dividends and share buybacks?

Yes, exactly, as Tom said, is we can create opportunities on all fronts in terms of reinvestment in the business, the dividend structure and the share buyback. And as we ended the year with over $5 billion in cash on hand and $8 billion of liquidity, we do have the ability to do all of that. And so that's what you'll see us focus on is that reinvestment in the Yanacocha consolidation does not impact those numbers or limit us in any way. And you'll see us continue to work with our Board and evaluate opportunities for the dividend over time. So yes, we are pegged at the $1,800 and 40% right now, we'll always look at opportunities to consider raising that if appropriate.

Okay. I guess, Nancy, just quickly, does the higher CapEx at Yanacocha change where you are relative to the 40%? Or is it relatively?

Cleve, no. Absolutely, no.

Yes, okay, okay. Very clear. Thank you, guys.

Thanks, Cleve. Operator, I'm conscious that folks on this call will want to get to another call at the top of the hour. So if you maybe just take one more and we'll make sure we've got you free and clear at the top of the hour.

Congratulations on a really good finish to our year. Tom or Nancy, just on your cost outlook for this year, you mentioned 150,000 ounce production impact you're expecting in the first quarter. Obviously, Brent crude today is at $104 a barrel because of Russia-Ukraine. Are you thinking any differently about your gold CAS or ASIC guidance than you were two, three months ago? And within that, are you thinking about any of the components differently, energy, transport, labor, et cetera?

Thanks, Adam. I'll take that one. There are two main factors related to the current situation in Ukraine. We are seeing an increase in oil prices, which affects our diesel costs, and natural gas prices are also rising. Natural gas is used to produce ammonia, which is essential for making our explosive ammonium nitrate. Energy costs account for about 15% of our operating costs, while labor represents 50% and materials and consumables make up roughly 30%. As we planned for this year, considering the expected volatility and uncertainty around COVID, we included cost escalations in our guidance. Therefore, many of the current challenges have already been factored into our cost guidance. At this point, we do not anticipate that the Omicron surge or other recent events will hinder our ability to achieve the all-in sustaining cost per ounce we previously guided. To give you a sense of sensitivity, for every $100 increase in gold prices, we generate $400 million in free cash flow. Given that gold is currently priced above $1,900, while we guided at $1,800, it makes a big difference. In contrast, a $10 increase in oil prices results in only $15 million of free cash flow. There’s a notable distinction between how sensitive we are to gold prices compared to oil prices.

Thank you for that, Tom. And then just one last one on the sequencing of costs, you mentioned that cost per ounce will decline for obvious reasons as the year progresses. But would you care to give us any more context in terms of the degree of change by quarter, just in the event that we're perhaps underestimating the 1Q impact of the production loss or any other sequencing that you would have us be mindful of in terms of our cost modeling?

The cost will closely align with production numbers. Therefore, costs are influenced by production as we analyze the trends across our portfolio and various assets we've discussed. Costs will track this trend, meaning that as production rises, costs will decrease by similar percentages.

Thanks very much.

Thanks, Adam. I think that's probably it, operator.

Thank you, operator, and thank you, everyone, for making the time to the call today, and please look after yourselves and continue to stay safe and healthy. But thank you, everyone, for your time.