Newmont Corp (NEM) — Q2 2024 Earnings Call Transcript

Thank you, operator. Good morning, everyone, and thank you for joining our call. Today, I'm joined by my executive leadership team, including Natascha Viljoen and Karyn Ovelmen, and we'll all be available to answer your questions at the end of the call. Turning to the next slide, please note our cautionary statement and refer to our SEC filings, which can be found on our website. Before I cover our results for the quarter, I'd like to take a moment to provide an update on the important work we are doing to reinvigorate our safety systems. Following the tragic loss of four of our colleagues over the last year, we initiated a comprehensive, systematic review of our safety and risk management systems, in order to better understand the key challenges and opportunities we have to improve our safety performance going forward. Our enhanced approach includes a heightened level of diligence across our entire fatality risk management assurance model, bolstering our leadership work in the field to ensure we have a balanced approach between both the quantity and quality of our critical control verifications, and an increased focus on leaders, coaching leaders and their teams aimed at building and strengthening capability through all levels of our organization. With this reinvigorated approach, we are actively driving improvements in safety performance and strengthening operational effectiveness across all of our managed operations. Turning now to our second quarter highlights. We delivered solid operational performance as planned, keeping us firmly on track to achieve our 2024 guidance and positioning us to deliver improving financial results. These solid results have also enabled us to progress our capital allocation priorities, which I'll touch on in a moment. With a continued focus on safely delivering, we've also made meaningful progress on the four key commitments we made to our shareholders at the start of the year. First, we continue to strengthen Newmont's position as the gold industry's recognized sustainability leader. During the second quarter, we launched a safety refresh across our managed operations globally and are leveraging this important work to reinvigorate our safety systems, tools, standards and in-field leadership work. Supported by this approach, we've restarted operations at Cerro Negro in late May, returning our focus to safe and efficient mining in this highly prospective district in Argentina. In May, we also published our annual Climate Report, summarizing our performance for the sites managed by Newmont throughout 2023. Moving to our second commitment. Newmont has created a world-class portfolio focused on Tier 1 and emerging Tier 1 operations and districts. From this portfolio in the second quarter, we produced 1.6 million ounces of gold and 477,000 gold equivalent ounces from copper, silver, lead and zinc. Notably, this included 38,000 tons of copper for the quarter. We generated $1.4 billion of cash flow from operations and $594 million in free cash flow in the second quarter. And yesterday, we announced the monetization of Batu Hijau deferred payment obligations, and we expect to receive $153 million upon closing by September 30. It is also worth noting that Newmont received $44 million associated with contingent payments from production of Batu Hijau, bringing total proceeds that we will receive this year from our former operation to $197 million. In addition, we received the first $180 million payment from the sale that we announced last quarter, that Lundin Gold financing facilities. From these two transactions, we will receive nearly $530 million by the end of this year. With this progress, and with the confidence we have in our divestiture program, we now expect to reach at least $2 billion from the sale of our seven high-quality non-core assets alone. Taking all of this into account, we continue to build momentum, enabling us to advance our capital allocation priorities. Since our last call, we continue to safely progress the projects we have in execution from an industry-leading organic project pipeline, including the second expansion at Tanami, our new miner Ahafo North, and the two new Block Caves at Cadia. We have retired $250 million in debt, and we have returned approximately $540 million to shareholders in the form of regular dividends and share repurchases, which Karyn will discuss in more detail in a few minutes. Turning now to synergies. We remain firmly on track to deliver above and beyond our initial commitment of $500 million. In the second quarter, we achieved $100 million in synergies, bringing our run rate to $205 million since we closed our acquisition of Newcrest only eight months ago. With this solid momentum, we have now disbanded our back-office integration team and remain firmly on track to achieve a $335 million run rate by the end of this year, well ahead of our initial estimates. Looking at the three components of our synergy delivery, and starting with full potential. We are now advancing into the delivery stage of the initiatives we have identified at Lihir, Cadia and Red Chris, with the largest value drivers coming from our two new Tier 1 assets in Lihir and Cadia. On our call last quarter, we provided an update on the opportunities we have identified at Lihir. In this quarter, I'll briefly describe some of the opportunities we see in front of us at Cadia. We recently completed our full potential diagnosis phase at Cadia, from which we have identified a series of initiatives that are expected to deliver more than $100 million of value by the end of next year. During this first phase, we had a team of experts from Newmont's Global Technical Services group working to support the site to identify opportunities to enhance production and improve cash flows. As one example of this, and through collaboration with Boddington, Cadia is working to optimize the output from its high-pressure grinding roll circuit in the mill. With these HPGR improvements, Cadia will be able to lift its mill feed by approximately 80 tons an hour or more than 600,000 tons a year. Implementing the initiatives we have identified and leveraging the experience we have gained over the last 10 years with our Full Potential program, we are working with the team at Cadia to increase average mill throughput to 34 million tons per annum, representing a meaningful step up in productivity from this world-class gold and copper asset. With Lihir, Cadia, and Red Chris, all now entering the delivery phase of Full Potential. We are on track to meet our initial $200 million commitment. Moving to supply chain synergies. We continue to leverage our combined scale to drive improved commercial outcomes for both pricing and terms. In the second quarter, we realized $60 million in synergies from around 40 initiatives in contracted services, mining equipment, energy, information technology, among other categories. And we have a clear line of sight to reach a $140 million run rate by the end of this year, as we progress our commercial work across several spend categories, including chemicals, explosives, grinding media, tires, fuel, as well as spare parts and rotables. And finally, turning to G&A synergies. We have now achieved 95% of our initial $100 million commitment with an additional $15 million realized during the second quarter. The latest G&A synergies have primarily been coming from continued labor rationalization and ongoing reductions in our contractor spend. Taking these synergies into account, combined with the higher production volumes anticipated in the second half of this year, we expect to deliver lower unit costs in the third and fourth quarters. And with that, I'll now turn it over to Natascha, and then on to Karyn for an update on our operational and financial performance for the quarter. Over to you, Natascha.

Thank you, Tom, and good morning, everyone. Our managed operations delivered solid second quarter results in line with our expectations and outlook for the year. With a focus on safe and efficient production at each of our managed operations, we are heading into the second half of the year with confidence in our ability to deliver on our business plan and the commitments Tom reiterated earlier. And similar to the first half of the year, our operational results in the third and fourth quarters will be largely driven by production from our six managed Tier 1 operations. Reflecting on these and beginning with Tanami, we delivered higher production in the second quarter as planned, while effectively progressing the second underground expansion. Tanami continues to be a reliable performer and remains well positioned to access higher grade stopes in the second half of the year from the Liberator ore body. Moving to Boddington, we reported consistent results as stripping in the North and South pits continued ahead of plan in the second quarter. With plant and crusher maintenance behind us, Boddington is expected to deliver strong mill throughput and slightly higher gold and copper production in the third quarter. At Penasquito, we delivered higher gold and zinc production due to higher grades from the Chile Colorado pit and strong mill performance in the second quarter. Production levels are expected to remain steady in the third quarter with a significant increase in gold production in the fourth quarter as we return to mining ore from Penasquito toward the end of the year. Turning now to Ahafo, the girth gear replacement was completed slightly ahead of schedule, and I'm really proud of the Ahafo team for completing this significant body of work so efficiently. The change-out spanned over 12 months and involved the fabrication of a new 6.5-meter diameter girth gear, along with the transport of more than 50 tons of steel all the way from Australia to Ghana. During this entire time, the team continued to optimize the processing circuit, ensuring our most productive milling circuit was able to run as efficiently as possible. Beginning in the third quarter, we expect a meaningful step-up in production from Ahafo, as we will improve mill throughput, deliver consistently strong mining rates from Subika underground, and access higher grades from the Subika open pit. At Cadia, we delivered solid gold and copper production as planned due to steady grades and strong bond performance in the second quarter. As flagged in our guidance, production at Cadia is expected to gradually decline through the rest of the year as we transition mining to the next panel cave, and we expect these lower grades to continue until the next panel cave is fully wrapped up. Finally, at Lihir, second quarter production decreased from the first quarter, primarily due to heavy rainfall, which contributed to soft ground conditions that in turn impacted mine sequencing. Production levels are expected to remain consistent in the third quarter as the site commences a planned 120-day shutdown of the primary autoclave. To put this autoclave shutdown into perspective, the process includes not only shutting down the autoclave itself but also removing the brick layer at the membrane, inspecting the 5.5-meter diameter steel shell, applying a high-temperature tolerant membrane and rebricking the 48-meter long structure, which is nearly the length of a new Olympic swimming pool. Once complete, we anticipate coal production will return to normal levels in the fourth quarter, positioning Lihir for a strong finish to the year. Taking everything into account, we anticipate an increase in gold production in the fourth quarter, setting us up to deliver Lihir's higher production in that period. Our performance in the second half of the year will be driven by higher grades at Penasquito, Ahafo, and Tanami, improved throughput from Lihir and Boddington, along with an expected improvement from our non-managed operations. During the second quarter, we continued to progress the four key projects we currently have in execution. At Ahafo North, construction of the crusher and mill are advancing well. We have poured the concrete foundations for the SAG and ball mills and have erected all six carbon in leach tanks. Earthworks continue for the tailing storage facilities, along with the pre-mine development activities for this very exciting new mine in West Africa. At the second expansion at Tanami, our team remains focused on the concrete liner of the lower section of the shaft, and we continue to advance construction activities both underground and on surface. Underground, we are progressing the pressure and conveyor systems and have just safely and successfully completed boring nearly 200 cubic meters of concrete for the underground pressure chamber. On surface, we are working to complete the winder building, which will house the wasting operations for many decades to come. Turning to Cadia, the two Block Caves are each progressing well. We are continuing to commission two new draw points at panel caves 2-3, and we are anticipating that initial caving is expected to remain by the end of the year. For panel caves 1-2, we are advancing underground development and the engineering work needed to design the crushing and material handling systems at this Tier 1 gold and copper operation. With that, I'll turn over to Karyn to cover our financial performance and the progress we are making on our capital allocation priorities.

Thank you, Natascha. Turning to the next slide. Let's begin with a review of the financial highlights for the quarter. Building upon Tom and Natascha's remarks, Newmont delivered strong operational and financial results in the second quarter. We reported $4.4 billion of revenue at an average realized gold price of $2,347 per ounce, and costs applicable to sales of $1,152 per gold ounce, an all-in sustaining cost of $1,562 an ounce, which were higher over the first quarter, primarily due to lower production volumes, higher royalties from a stronger gold price environment and increased sustaining capital this quarter due to spending on tailings work at Cadia and the planned purchase of additional trucks at Merian. Taking everything into account, we reported adjusted EBITDA of approximately $2 billion, driven by solid production volumes and higher gold prices. Adjusted net income was $0.72 per diluted share and was more than 30% higher than the first quarter. The most notable adjustment to net income for the quarter was an approximately $0.20 add-back related to a non-cash impairment to reflect our progress at the conclusion of Phase 1 in the divestment process for North America. As a reminder, assets that are classified as held for sale require a specific evaluation under US GAAP and need to be recorded at the lower of carrying value or fair value of cost to sell. We will continue to assess the current carrying value of all assets held for sale each quarter, which may result in future adjustments until the assets are divested. It is important to note that this impairment does not reflect the future potential of these operations in their entirety or what the ultimate purchase price might be. We also generated $1.4 billion of cash flow from operations and $594 million of free cash flow, which does not include the first $180 million payment received from the sale of the Lundin Gold financing facilities announced last quarter. It does include $263 million of unfavorable working capital changes, largely due to a build in stockpiles of $185 million, primarily attributed to Lihir and Telfer, a build in trade and other receivables of $140 million, due to higher grade concentrate produced at Penasquito and the timing of sales at Cadia, and $107 million of reclamation spending, primarily related to the construction of the Yanacocha water treatment facilities. With $166 million in reclamation spent to date, we expect that payments will continue ramping up in the second half of the year, which will be a working capital headwind in the third and fourth quarters. And while we are pleased with the improvement in free cash flow, we are still not satisfied and are working to further improve margins. Looking ahead, we anticipate higher free cash flows in the second half of the year, driven by increased production volumes and lower unit costs, as Tom and Natascha just mentioned. Heading into the second half of the year, we remain firmly on track to achieve our full-year guidance of reduction in cost and capital spend. As Natascha mentioned, production is expected to increase in the third quarter, with the year's strongest performance anticipated in the fourth quarter. Unit costs will be closely correlated to production, with the added benefit of full potential improvements and additional synergies realized in the latter part of the year. Today, we announced two divestments, including the monetization of our Batu Hijau deferred payment obligations and the sale of our Lundin Gold financing facilities. In total, these divestitures are expected to generate nearly $530 million in gross proceeds by the end of the year. With this momentum, the benefit of higher commodity prices contributing to enhanced free cash flows, and the confidence in our asset divestiture program, we were able to prioritize shareholder returns sooner than anticipated while concurrently executing on debt reductions. Since our last earnings call, we repurchased 5.7 million shares at an average price of $43 per share for a total cost of $250 million, including $104 million repurchased during the second quarter and $146 million in July. Additionally, we purchased $250 million in nominal debt for $227 million, or $0.90 on the dollar. We maintained an investment-grade balance sheet and ended the quarter with $6.8 billion in total liquidity. We declared a fixed common second quarter dividend of $0.25 per share, in line with dividends declared for the past two quarters. Looking ahead to the remainder of the year, we will continue to execute our balanced capital allocation strategy focused on maintaining a strong balance sheet, steadily funding cash-generative capital projects, and returning capital to shareholders. With that, I'll pass it back to Tom for closing remarks.

Thanks, Karyn. At the start of this year, I outlined the four key commitments that we have made to our shareholders, and I'd like to end today's call with a recap of the progress we have made against them in the second quarter. First and most importantly, we commenced a systematic review of our safety and risk management systems. We safely delivered solid production as planned, keeping us firmly on track to meet our full-year guidance for both ounces and costs. We announced meaningful progress on our portfolio optimization commitments with the monetization of our Batu Hijau deferred payment obligations. We realized $100 million in synergies, bringing the total delivered to $205 million since we closed our acquisition of Newcrest in November last year. We've demonstrated our commitment to shareholder returns, delivering $540 million through both regular dividends and share repurchases. And we strengthened our balance sheet with $250 million of debt reduction. As we enter the second half of this year, I am confident in our ability to deliver high production, more potential improvements, and additional synergies, all of which will contribute to lower unit costs in the third and fourth quarters, and execute on our portfolio optimization strategy through the divestment of our non-core assets, and to progress our capital allocation priorities, all positioning Newmont for a strong finish to this year. And with that, I'll thank you for your time today and turn it back over to the operator to open the line for questions.

Great. Thank you, operator, and good morning, Tom and team, nice quarterly results, and thanks for the update. I'd also like to acknowledge the congratulations for realizing value on the deferred payments from Batu Hijau, which I think most of us have forgotten about. But I wanted to ask about the larger asset sales process Akyem, Telfer, and the North American assets. What is your latest thinking on the timing of each? And with the stronger gold price, are you seeing upward pressure on offer prices? Thanks very much.

Good morning, Lawson. Thanks for your question. It’s a chapter that we closed in our relationship with Batu Hijau, an asset I've been associated with for my ten years at Newmont and was an active part of the original divestment process. So in some ways, it's a sad moment to close that chapter on what is still a great copper mine, and one that Newmont built a generation ago. In terms of our broader portfolio optimization rationalization process, it's firmly on track, and we continue to follow a very rigorous process to ensure we get full and fair value for these assets. These assets are sold to operators that can continue to operate and maintain them, with the principles that we have at Newmont. Maybe just covering the program, we've had four parallel streams running. The first one is cleaning up the opportunities around our non-core equity portfolio. And the two major items there were the London Gold transaction and Batu Hijau, but we'll continue to look for any opportunities that might be in that non-core equity portfolio. At Akyem, we're well advanced in the process with Akyem. We completed Phase 1 some time ago. We had 20 parties through that process who made bids, and we've taken seven parties into Phase 2. We're at the end of the Phase 2 process, where we've had all those parties visit site and participate in management presentations, and they are now preparing their Phase 2 bids for us to consider. So we're at that stage where really, by the time you get into Phase 3, you're down to one or two parties finalizing that transaction. So that is progressing very well and is on track. We're certainly seeing a competitive process and good value coming through. The North American process, we're just concluding Phase 1. We had some 67 parties actively participate in Phase 1, with around 24 bids submitted. Everything from bids for a single asset — if you remember, North America includes Cripple, Greek, Victor, Eleanor, Porcupine, Musselwhite, and our coffee project up in the Yukon. We've had a range of bids from a single asset to a bundle of assets to the full portfolio. We're working through assessing those bids and determining which parties will take into Phase 2. That's progressing well, and there's nice competition in the process. I'm pleased with how both Akyem and North America are progressing. Finally, Telfer continues to progress well. We continue to actively work that process and feel confident about it as well. Everything is on track and we're pretty pleased with what we're seeing in terms of bids coming through and the type of organizations looking to make offers for these non-core assets.

Yes, and just as a reminder, the accounting treatment under U.S. GAAP requires that there's an advanced process, it's auditable, there's viable buyers and the probability that the divestitures will be completed in 12 months, which for us would then be March of 2025.

Thanks for clearing up that timing. One follow-up on Telfer. Thank you for clarifying a lot of folks' thoughts around Telfer in terms of both timing and value. But one bit of feedback we've been getting is just some concerns around the tailings dam issues, and whether or not that might have impacted the ability to monetize that asset for value. Do you have any thoughts on that? Or is there any feedback you may have received from potential interested parties that might help calm some of those concerns?

Thanks, Lawson. The approach we took with Telfer — and I've certainly talked about this a number of times over the last few months — is being radically transparent around those tailings issues. Since we noticed the first of the sinkholes developed on Christmas Eve, we have been transparent with the regulators, our workforce, and any potential buyers regarding the existing issues and the remediation work required. The issues are well understood, and we have a clear pathway to remediate. I might just get Natascha to give a bit more detail on what that looks like and the timing around that, as that serves to understand better what potential buyers are looking at. Regarding the ability to acquire Telfer and the operation running, I would add that we are still operating the mine. We're building stockpiles ahead of the mill. As soon as the tailings facilities are through with the remediation work, the plant can start up, and we can continue to process ore and produce gold again.

Thanks, Tom. Good morning, Daniel. Firstly, I want to reiterate that we have been transparent with all parties involved throughout the process. Secondly, I want to reiterate that both the TSS 7 and 8 dams are stable. We're progressing the TSS 7 rehabilitation as planned, and it is all around how do we fill in the sinkhole, place membranes, and prevent further erosion in those areas. While we're working on stabilizing and remediating the sinkholes in TSS 7, TSS 8 has completed the rehabilitation, and we have authorization to continue with a lift on TSS 8 before we can do any more depositioning on that dam. It is on schedule, and we are planning to start up Telfer in the fourth quarter when the rehabilitation and the lift have been completed.

Quite alright. Thank you very much for those responses.

Thanks, Lawson.

Hi, thanks so much. Can you hear me okay?

Yes, we can. Thanks, Daniel.

Yes. My question is focused on the decision to start the buyback. It comes in two parts. Firstly, from a perspective of run rate of cash returns relative to debt reduction going forward, how should we look at that? You've indicated around half of the free cash flow will be allocated to debt reduction and buybacks? Is that what we should be considering for the second half? That's the first part of the question.

Karyn, can you pick that one up?

Sure. Yes, we have time on the debt. We purposely put out the $1 billion tranche for 2026, and so our commitment was made over a 24-month period when we established that. So we do have time on the debt. The Batu as well as the Lundin transactions just allowed us to be able to opportunistically participate in the market and make some open market purchases.

Hello? Sorry, and the buy...

Hi, Daniel. Did we miss the second part?

Yes, sorry. The other part was the run rate of the buyback going forward, what we should be thinking? And then just to add to that, what gave you the confidence to initiate the cash returns earlier? Is it the gold price environment, the operational visibility for the second half, or the certainty on narrowing in on the proceeds for divestments?

All three of those, Daniel, provided that opportunity for us. In terms of the pace of the share buybacks as we go forward, that will be driven by our free cash flow realization and proceeds from the divestitures. So we've just mentioned, we're proceeding very well and have confidence in the ultimate execution on those investments. We'll pace our share buybacks as we realize those proceeds and the free cash flow.

Just to build on the debt side, Daniel, we were opportunistic in the second quarter with those proceeds coming through. We've got that tranche sitting out there for two years, and we'll look to be opportunistic in terms of where there might be good buying while managing that period out until the tranche is due.

Great. Thanks so much.

Thanks, Dan.

Good morning. I think that's me. Thank you, everyone. I want to have just a question on the technical side, maybe Natascha, to you. Just on Penasquito. You did mention in 10-Q that Q3 should be similar to Q2 on the gold side, strong Q4 driven by grades as we get into the new pit. But the production from the non-gold metals did very well in Q2. Our previous guidance had been that they would be evenly distributed throughout the year. How should I think about Penasquito on the gold side as we go through Q3 and Q4?

Thank you, Tanya. I think as we've spoken about before, we are mining predominantly from Chile Colorado in these first three quarters of the year. We are progressing a pushback in Penasquito pit. Chile Colorado, as you would remember, is higher in zinc and lead and the other metals. Therefore, our production in those other metals in the first three quarters is higher. We've been progressing this payback in Penasquito a bit faster than expected. So we do expect to be back in the fourth quarter in Penasquito pit, giving us that advantage of higher gold grades in that period. We expect about a 25% increase in gold grade in that fourth quarter.

Natascha, just building on that, I think for the second quarter, with ore coming from Chile Colorado, good performance through the mill engine. We’re getting good throughputs and recoveries. So as we transition into the third quarter that's also got feed primarily coming from Chile Colorado. If the mill performs, and the grades present, we can potentially see better lead and zinc because ore is coming from Chile Colorado. The higher production was due to good mill performance by Dave Meador and the team there.

Okay. As I think about the second half, and I think you mentioned there will be a step-up in production, to volume and then stronger volumes in Q4. When I think about this cost structure, because in order for us to get these costs down, we do need the volume, number one. And obviously, the $130 million in synergies you mentioned. I'm just trying to picture for myself, should I be thinking that the step-up into Q3 is almost like 26% of production coming out of the year and then 28% in Q4, with $130 million, the majority of those savings coming in Q4? I'm just trying to understand how I will get to your guidance on the costing side, with the volume and the synergies. Where is the $130 million in synergies coming from, if I can have a breakdown of those?

Think about it this way. You're certainly going to see the highest quarter for gold ounces in the fourth quarter. That's driven from some of our key assets that Natascha covered in her comments. You will see the synergies, particularly those coming from full potential, primarily manifesting in the fourth quarter, as those programs get their momentum up. Our direct costs are pretty stable across the year. What we're seeing in the first half will flow through to the second half. So your picture of the timing between the third and fourth quarters is reasonable in terms of volume adjustments. You will see a step up in the third quarter, and then a further rise into the fourth to meet our guidance.

And what about the breakdown of the $130 million in synergies? Can you give me an idea of what that is for G&A, how much is supply chain, and the operations?

Certainly. When you think about G&A, we've largely seen that come through, so not much left there. Supply chain continues to push hard. You'll begin to see a good amount come from supply chain work. Then, you'll start to see Lihir and Cadia show some regression in the fourth quarter, but not much from G&A percentage-wise. Overall, you're not too far off the mark with your expectations.

Okay. Great. Thank you so much. I appreciate you taking my question.

Thanks, Tanya.

Hi. Just a follow-up on the share repurchases. Margins are good and they're getting better. You're still facing asset disposals ahead, and you're out early and strong on the buyback. How should we think about what happens when you hit the $1 billion mark? I think that's the total allowed right now through 2026. Should we anticipate the Board will reevaluate that potentially earlier than that? Or should we think that once you hit the $1 billion, you start picking up CapEx again?

Good morning, Matt. The $1 billion was our initial commitment, and it's a bend. We're committed to $2 billion of proceeds from divestments of the seven non-core assets: $1 billion going to share repurchases and $1 billion going to debt reduction. That’s how that comes together. We’re beginning to see these divestment processes move forward, and we’re talking about the offers and what proceeds look like. As we approach the end of the $1 billion program, we'll discuss potential for another tranche with our Board. We would expect any extension of that program to be through buybacks. You should expect us to look to extend that program if all flows as anticipated.

Absolutely. As I already indicated, the free cash flow realization and the divestitures will drive the share buyback. Administrative, we'll work with the Board if we need to reevaluate the authorization to meet those proceeds and free cash flow for executing on share buybacks as we move forward.

Okay. Great. That's very clear. And then maybe just as a follow-on on the CapEx question. Do you view an increase in CapEx down the line? Is that kind of like a timeline-related thing where you integrate Newcrest for a number of years, focus on capital returns, and then eventually get back into potentially higher development CapEx?

No, Matt. We've been clear in our strategy. We have built a portfolio of Tier 1 long-life assets, lever managed operations, and non-managed joint ventures. For the first time, we have a long-life, very long-life gold mining business with Tier 1 assets. Key to running a long-life portfolio is our discipline around capital allocation. Our pipeline of projects includes the six big projects we have in the pipeline. The $1.3 billion in development capital allocation doesn't change. We will demonstrate that over time, but the expectation is that we will consistently allocate that $1.3 billion to reinvest back into the business each and every year.

Okay. Great. That's clear. Thanks, Tom.

Thanks, Matt.

Hello, Tom and team. So a lot of the questions have been asked and answered. I'm going to ask about the working capital as it evolves over the back half of the year. I think you said you had about $166 million of the $600 million reclamation spend to date. This leaves around $434 million. Is it an even split for that spending in Q3 and Q4? Also, will you continue to mine Telfer at that rate? How much was that spend again? I thought I heard $185 million, but I could be wrong about that?

Good morning, Anita. I'll get Karyn to pick up the working capital question and then Natascha on Telfer.

Thanks, Anita. The first half of the year traditionally tends to produce adverse working capital changes. Therefore, we expect free cash flow generation to improve in the second half of the year. As mentioned in my prepared remarks, we do have some unfavorable impacts - just about $30 million expected to be paid out in stamp duty in the third quarter. You're right that it's about $400 to $450 million to be spent in the second half of the year, with more of that weighted towards the fourth quarter than the third.

In general, regarding cost production, we will continue to mine as we know there's a solution for the tailings dam, and we’re working through those solutions. We have capacity in the plant to catch up and get production through. As we achieve production and declare the ounces, we will also declare our unit costs.

Okay. If I can ask just one more question. You reiterated your target of $2 billion from asset sales. Would you include this $500 million or so realized from these non-core within that $2 billion? Or is that excluding the - is that excluding those two assets, Lundin and Batu Hijau?

It's estimated that $2 billion that we're committed to excludes proceeds from Lundin and Batu Hijau. So we're committing to at least $2 billion from the divestment of the seven non-core assets.

Okay. Thank you very much. That's it for my questions.

Thanks, Anita.

Yes. Good morning. Thanks for taking my question. A bit in the weeds around Lihir. I'm trying to understand the cadence of the shutdown and the guidance. There are roughly five months left in the year. The shutdown is four months, but should we think about volumes as being sort of evenly split first half and second half? Are all four autoclaves being shut down? Or will it be in series or parallel? How do I think about that cadence?

Autoclave four is the largest of the four autoclaves, representing 40% of the throughput. The other three autoclaves will remain operational, contributing some recoveries. The guidance for Lihir this year reflects the impact of that large autoclave being down for the 120-day shutdown. Natascha remarked that, as this year progresses, the third quarter is expected to be similar to the second quarter, but then you'll see the fourth quarter higher, as that autoclave comes back online. It won't be slow with a 50-50 weight for the year due to those aspects.

Okay, that's very clear. Thanks for the color.

Thanks, Bob.

Good morning, and thank you for taking my question. It concerns reclamation. There’s significant money going into Yanacocha. As we think longer term about your $1.3 billion sustainable capital, are there other assets, three to five years out, that could have significant capital requirements, i.e., cash out the door as opposed to book accounting that I need to consider in my long-term cash flow analysis?

Good morning, Brian. When we talk about capital allocation, we’ve built this portfolio with reliable, predictable spending on sustaining capital to manage our business moving forward, including tailings dams and the like. In terms of reclamation, I’ll have Karyn answer about the specifics of Yanacocha.

Yes. Just to clarify, that comes out of working capital. These are actual payments for accruals that have already been recorded on the books. The Yanacocha water treatment system is the big one. We don't expect any significant changes to what we've outlined throughout. We've indicated the spend will be approximately around $600 million in total for 2024, with a higher allocation in '25, returning to historical outflows of around $200 million to $300 million annually from '28 onwards. There shouldn’t be any other significant increases in that line item.

Regarding our portfolio, Yanacocha is an order of magnitude larger in reclamation liability than our other operations. The other significant mines such as Penasquito, Boddington, and the Nevada Gold Mines complex have liabilities that are orders of magnitude lower in comparison.

Great. That's what I thought, but I just figured I'd check. The second part of my question is about the reclamation liabilities. I assume you're going to sell the reclamation liabilities to the buyers of these assets? For example, Porcupine has potential studies going on regarding reclamation. I'm just trying to factor that into my overall analysis, since it seems important.

Yes. It’s the expectation that as we divest these assets, and particularly when we see competition, that reclamation liability will pass to the new owner. Our track record supports this, as we've done during previous asset sales like KCGM or Red Lake.

Great. Thanks very much.

Thanks, Brian.

Hi, guys. Thanks for taking my questions. Just a couple of follow-ups. Natascha, can you just give me an idea of when we should expect that fourth autoclave to go down for service for the reline?

Mike, on the first of August, it will be down for 120 days.

Okay, perfect. And a couple of questions for Karyn. What are depreciation rates on the Newcrest assets? I’m assuming they’re not yet stable, or have you finalized your purchase price accounting? Is it fair to use Q2 rates going forward, or should we still expect those to bounce around a bit?

There will be slight variability as we adjust from a purchase price accounting perspective, but they should generally be set. We’ve seen some ups and downs in depreciation, with higher ounces mined at Penasquito, higher ounces mined and acid additions at Ahafo, offset by decreased depreciation on assets held for sale. These will result in big variances going forward. Generally, Newcrest from a purchase price accounting perspective should be pretty settled.

Okay. And a question on taxes. Are you making payments in installments based on your budgeted gold price? Given that we're sitting closer to $2,400, are you adjusting your payments? Should we expect catch-up payments in Q1, Q2 of next year, assuming this metal price environment sustains?

Yes, it will start accruing in arrears as we move forward.

Okay. Thank you. That's it from me.

Thanks, Mike.

Thank you, operator, and conscious we’re just at the top of the hour. Thank you all for your time today. Have a good day, and we look forward to catching up with you soon. Thanks, everyone.