Newmont Corporation (NEM) Earnings Call Transcript & Summary

Good morning, and welcome to Newmont's 2022 guidance webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tom Palmer, President and Chief Executive Officer. Please go ahead.

Good morning, and thank you for joining Newmont's 2022 guidance webcast. 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. 2021 has been important for Newmont as we near the end of our 100th year. It has given us the opportunity to reflect on our company, our industry and the lessons we have learned. Underpinned by an unmatched portfolio of world-class long-life operations and an organic project pipeline that is the best in the industry, Newmont has continued to build on a solid foundation as the world's leading gold company. Our 2022 and longer-term outlook remains strong as we enter a period of significant investment into our project pipeline, an investment that will grow production, improve margins and extend the mine life. As we look ahead towards Newmont's next 100 years, our strategy is crystal clear. We remain focused on delivering long-term value to all of our stakeholders through our unwavering commitment to sustainable and responsible mining. Before we dive into guidance, I wanted to spend a few minutes discussing some of the things that we're doing to lead the industry and position Newmont for sustainable success over the long term. At Newmont, we firmly believe that the COVID-19 vaccines are critical in combating the spread of the virus. And we will continue to make decisions that prioritize the health and safety of our workforce and local communities above all else. To protect our people and limit the impact that the global pandemic has on our operations, we are deliberately moving towards a position where all of our global workforce will be required to be fully vaccinated. In Australia, Canada and Peru, we are adhering to national vaccination mandates already in place, and we are very encouraged by the quick update as a result. In the United States, we have set a requirement that all employees and third-party workers at Cripple Creek and Victor and our corporate offices are to be fully vaccinated by the end of January next year. In Central and South America, vaccination rates at our operations largely outpaced national rates due in part to our global community support fund, which seeks to improve the availability and deployment of vaccines and deliver education and awareness campaigns. And in Ghana, where vaccination availability remains low, we are currently working with Ghana Health Services and the American Chamber of Commerce to secure and deploy nearly 100,000 doses to our workforce their families and our local communities over the coming months. In November last year, Newmont led the industry in announcing greenhouse gas emission reduction targets, which importantly were validated and approved by SBTI, providing independent and transparent third-party assurance. We followed up on that announcement with a commitment to invest $500 million over 5 years to support the pathways necessary to meet these targets. We made these commitments because we firmly believe that we must make bold lasting changes to create a bright and healthy future. And last month, we took another important step by announcing a new strategic alliance with Caterpillar, working together to lead a fundamental change in the mining industry through the rapid development and deployment of all electric autonomous mining systems to achieve 0 emissions mining. To support this goal, Newmont has committed an initial $100 million, focused on automation and electrification at our Cripple Creek and Victor open pit mine in Colorado and our Tanami underground mine in Australia. Our ambitious goals for this work involves the introduction of an autonomous haul truck fleet at CCNB by the end of 2023. And then transitioning to a fleet of autonomous battery electric haul trucks beginning in 2026. And at Tanami, the deployment of our fleet, our battery-electric underground haul trucks by 2024, in conjunction with the commissioning of the expansion projects production shaft, we will then work with CAT to develop the autonomous technology for this fleet by 2025, targeting the full deployment of our battery-electric autonomous underground haulage fleet by the end of 2026. Leveraging Newmont's scale, mine life and operating capabilities, this groundbreaking strategic alliance sets the stage for the rapid development and deployment of these technologies, ultimately improving safety, productivity and energy efficiency across the mining industry. 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 comes from top-tier jurisdictions. Underpinning our portfolio is a robust foundation of reserves and resources, combined with the gold industry's best organic project pipeline. Importantly, all are managed through our integrated operating model, which has a proven track record of delivering value to all of our stakeholders. Newmont has developed an unmatched and industry-leading organic project pipeline, laying the pathway to steady production and cash flow well into the 2040s. In addition to our 2 projects currently under construction, Ahafo North and the Tanami expansion, we have 3 key development projects slated for full funds approval in 2022. Yanacocha sulfides, Pamour at Porcupine and the first phase of expansion at Cerro Negro. And Rob will provide some more detail on these projects shortly. These development projects, along with all of the projects shaded on this slide are included in our guidance and represent the key components to maintaining Newmont's steady production profile for at least the next decade. The other longer-term projects in our pipeline represent growth opportunities for later this decade and beyond 2030 and adds significant optionality to our portfolio. Our 3 mega projects, North Abierto, Nueva Union and Galore Creek also provide a natural exposure to copper, a material of growing importance for reducing carbon emissions and facilitating the ongoing transition to a new energy economy. And when we bring the first of these mega projects forward into our production profile, Newmont's metal production will include around 15% to 20% copper from that point forward. Beyond our current project pipeline, Newmont has the most extensive exploration program in the gold industry, focused on extending mine life, developing districts and discovering new opportunities in top-tier mining jurisdictions. Exploration has always been and continues to be a core competency at Newmont and is a critical component of our capital allocation strategy. In 2022, we expect to invest around $300 million in exploration, with 80% of that spend dedicated to our many near-mine brownfield opportunities and the remaining 20% directed towards greenfield exploration. We will be progressing our 3 most promising greenfield exploration projects: Esperance in French Guiana; coffee in the Yukon; and Saddle North in British Columbia. And over the next 5 years, we expect to spend more than $250 million on exploration for these 3 projects. A significant undertaking as Newmont has never progressed 3 greenfield projects of this scale simultaneously. On average, our target is to replace reserves over a 5-year period. And this year, we are on track to replace approximately 2/3 of our [ deploy ship ], and we look forward to providing a full report of our progress when we released our year-end reserves and resources early next year. Newmont's world-class exploration program, together with our unmatched project pipeline, will sustain steady production for at least the next decade. Consistent with last year, our portfolio will produce more than 6 million ounces of attributable gold each year through until at least 2031, balanced across each of our 4 regions. This profile is then further enhanced by the production of more than 1 million gold equivalent ounces from silver, lead and zinc at Penasquito and copper at Boddington and Yanacocha. Combined, we will deliver nearly 8 million attributable gold equivalent ounces per year for the next decade, the most of any company in our industry. As we near the end of the year and reflect on our performance and accomplishments, we are proud of what we have delivered in our centenary year. 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 continued to be recognized for our leading ESG performance, building new pathways to decarbonization and publishing our first climate strategy report. We are finishing the year strongly and remain on track to deliver 6 million ounces of gold at all-in sustaining cost of $1,050 per ounce, and 1.3 million gold equivalent ounces from copper, silver, lead and zinc. We generated over $1.7 billion in free cash flow through the third quarter of which more than 97% was attributable to Newmont. We remain on track to return more than $2 billion to shareholders through our industry-leading dividends and share buybacks in 2021. In addition to this, we completed the acquisition of GT Gold, commissioned the gold industry's first fully autonomous haul fleet at Boddington and continued to advance our most profitable near-term projects. Turning now to our long-term guidance. At Newmont, we continue to develop our plans based on conservative assumptions. We utilize a $1,200 gold price to calculate our reserves and develop our mine plans. And the productivity assumptions built into our plans are based on previous best demonstrated performance. Due to sustained higher gold prices over the last 2 years, we are now assuming an $1,800 per ounce gold price for cost applicable to sales and all-in sustaining costs. At this gold price, we expect to add around $30 per ounce from higher royalties and production taxes, in addition to around $50 per ounce from higher inflation, which includes the impacts from a tightening labor market, increased pressure on input commodity prices and higher freight costs. We are also building in ongoing COVID-related health and safety protocols into our assumptions going forward, adding around $10 per ounce to our all-in sustaining costs. Our 5-year outlook shows steady increases to production and declining costs over time due to our investment into new lower-cost production, combined with our ongoing discipline in delivering full potential improvements every year. Over the next 5 years, we will steadily improve our attributable gold production to 6.2 million to 6.8 million ounces. This is further enhanced by the production of around 1.5 million gold equivalent ounces from copper, silver, lead and zinc, which represents nearly 20% of Newmont's total production profile of around 8 million gold equivalent ounces. This improvement is largely driven by a ramp-up in production from pandemic-related delays in 2021, higher grade and improvements in productivity from Boddington's autonomous haul fleet and half of underground mining method change, higher silver lead and zinc production from Peñasquito beginning in 2023, and new ounces from both Ahafo North and the Tanami expansion, both adding production beginning in 2024. And these additional ounces will also help to reduce costs over the next 5 years. Our all-in sustaining costs next year are expected to be largely in line with 2021 at $1,050 per ounce at an $1,800 gold price. Costs will steadily improve, bringing our gold all-in sustaining costs to between $920 and $1,020 per ounce by 2024, also at an $1,800 gold price assumption. This overall cost improvement is supported by higher production from Boddington, Ahafo, Penasquito and Cerro Negro, combined with our investment in new lower-cost production from Ahafo North and the Tanami expansion. It is also worth noting that all of the capital spend associated with the Yanacocha sulfides project is included in our 5G guidance, but that it will only begin delivering low-cost gold and copper production from that investment in 2026. Our near-term cost reductions are also supported by the delivery of full potential improvements across our 12 managed operations. Our sites and projects are managed through our proven integrated operating model, supported by a deep bench of experienced leaders and technical experts. And our strength comes from leveraging our collective experience, sharing knowledge and talent across our operations and applying the best practices and lessons learned across our global business. And our full potential program is a prime example of this. Since 2014, it has delivered more than $4 billion in value from cost reductions and productivity improvements across our business. Next year, we expect to deliver $290 million of value from more than 250 full potential projects, value that is built into our business plans and guidance. Turning now to a different view of the strength of our portfolio as we move into 2022. Our all-in sustaining costs for our full production profile next year are expected to be $1,030 per gold equivalent ounce. And this is driven by our managed world-class assets and nicely balanced across our 4 global regions. As you look at this chart, I'd point out 2 things. First, nearly 3/4 of our attributable GEO production in 2022 comes from world-class assets in top-tier jurisdictions. And secondly, that over 35% of our production is coming at low cost from Boddington and Penasquito alone. And it's also worth noting that the significant investments that we are making at Tanami, Ahafo, Yanacocha, Porcupine and Cerro Negro will improve our costs and increase production at all of these assets over time. And with that, I'll turn it over to Rob to take us through our site level guidance and give us an update on our near-term projects.

Thank you, Tom, and good morning. We have the strongest and most sustainable portfolio in the industry, and I'm proud of our people who continue to safely execute our strategy day in, day out. We remain focused on growing margins and our global diverse portfolio of assets, together with our projects has positioned Newmont to safely deliver production and cost improvements in 2022 and beyond. Turning to the next slide, I'll step through the site level details, starting with our operations in Australia. Boddington is expected to deliver a strong performance next year as the site reaches higher gold and copper grades while sustaining mill throughput of more than 40 million tonnes per annum. Production at Bordington also benefits from the significant efficiency improvements due to the implementation of the gold industry's first autonomous haulage system, which continues to improve safety and productivity and increased tonnes mined. I'm pleased with the progress being made at Boddington with the AHS fleet, and I'm confident that the mine is really starting to peak. We've already achieved total movement of 280,000 tonnes in a single shift, which is well above what is required to achieve the 2022 business plan. It's important to note that implementing the industry's first AHS fleet is a major accomplishment, and the lessons we have learned will benefit not only Newmont, but the gold industry as a whole. And we will look to leverage this technology and our experience at Boddington as we expand the use of autonomous solutions across our global business. In addition to AHS, Bordington will continue stripping in the south pit, and we will begin a new layback in the north pit in 2023, both are significant expansions to extend mine life in this cornerstone asset. At Tanami, we will maintain steady production through 2023 despite reaching deeper sections of the mine. And production is expected to increase from the ramp-up of Tanami Expansion 2, delivering significant ounce, cost and efficiency improvements starting in 2024, which I'll cover in more detail on the next slide. Our Tanami operation has produced over 10 million ounces over the last 35 years, and it's a prime example of how our operating and technical discipline have expanded margins and unlock value. In 2017, we successfully delivered the first expansion project. And in early 2019, we completed the power project, both of which established a very solid foundation for us to continue growing this world-class asset. Our current investment in the second expansion has the potential to extend the mine life beyond 2040, supporting Tanami's future as a long-life and low-cost producer. This expansion will deliver significant value through the development of a nearly 1-mile deep production shaft and supporting infrastructure lowering operating costs by approximately 10% through reduced underground hauling. In addition, Tanami Expansion 2 will provide a platform for us to further explore a prolific mineral endowment in the district, which has the potential to grow annual production to more than 700,000 ounces per year. The team has made terrific progress, and the overall project is more than 35% complete. We continue to advance the construction of the head frame. And today, the shaft reaming is over 70% finished. In addition, we have completed nearly 80% of the procurement and nearly 70% of the engineering, keeping us on track to deliver the project in 2024. Moving to North America. Penasquito is Mexico's largest gold mine, second largest silver mine and one of the country's largest producers of zinc and lead. The site is expected to deliver lower gold production and steady coal product production next year due to the natural sequencing of a large polymetallic mine along with lower grade and harder ore mined from the Chile Colorado pit. In conjunction with the Phase 7 stripping program underway in the Penasco pit, the site will begin stripping the next phase of the Chile Colorado pit, which will deliver higher silver, lead and zinc production starting in 2023. And also in 2023, Penasquito will begin stripping Phase 8 of the Penasco pit, which will deliver higher grade ore in 2024. Moving to CC&V. Production will decrease slightly due to lower ore grade as we extend mine life through the addition of a resource layback in 2023, adding production that isn't currently in our reserves from our mine here in Colorado. And at Musselwhite and Éléonore, both sites are expected to deliver steady improvements beginning next year largely due to higher productivity achieved from the execution of our full potential initiatives and through the greater use of jumbos and full adoption of Kelly remote loaders. Musselwhite is expected to reach higher grades as mining progresses to the north in the PQ deeps area. And at Éléonore, we continue to increase development rates as the site continues to transition to lower levels in the mine. Across the Porcupine, the site benefits from higher grades at Hoyle, Borden and Hollinger next year. And to extend mine life at Porcupine and continue the processing of high-grade ore from Borden and Hoyle pond, the team is advancing exploration and work associated with the Pamour project, which I'll discuss further on the next slide. Located 10 kilometers from the Porcupine plant, the Pamour layback adds 1.6 million ounces of profitable gold production and extends mine life at Porcupine through 2035. By leveraging the existing infrastructure and processing facilities already in place, the Pamour project will optimize mill capacity in the coming years, adding low-cost volume and supporting further mining at Borden and Hoyle Pond. In addition, the development of this project provides us time to explore the Borden, Hoyle Pond and Dome ore bodies in this proven line industry to find the next profitable extension of the Porcupine mine. And we expect to bring some more full funds approval next year and are planning to commence dewashing efforts in late 2022. Moving to South America. Our South American region includes 3 managed operations and our 40% equity investment in the Pueblo Viejo joint venture. Merian will deliver higher production and lower costs next year due to mining higher grade ore from the Maraba pit. Production is expected to slightly decline starting in 2023 as we enter the next phase of stripping in the Merian pit and continue mining harder higher grade ore. The site continues to utilize an ore blending strategy to optimize mill performance, balancing harder rock with softer saprolite material to maintain steady throughput. Over to Cerro Negro, productivity and performance continues to improve, steadily increasing development rates and ore tonnes process. We expect production next year to remain in line with 2021, largely due to pandemic-related delays in development rates, which will limit access to higher grade ore in 2022. And as we look ahead, Cerro Negro's production will steadily increase. And unit costs will decline as we realize the benefits from full potential productivity improvement and the investment in organic district expansions, which I'll cover in more detail shortly. Moving to Yanacocha. The site will continue to deliver leach-only production while developing the first phase of the sulfides project. Our team is focused on higher grades, optimal lower placement and treatment on leach pads, and we remain very excited about the opportunity to develop sulfide potential at Yanacocha. Yanacocha is one of the largest and most productive gold mines in South America, generating nearly 40 million ounces of gold since 1993. The first phase of the sulfides project is focused on developing the Yanacocha Verde and Chaquicocha deposits, which will extend operations into the 2040s. With this multi-decade mine life from just the first phase, the sulfides project generates profitable production of approximately 525,000 gold equivalent ounces per year at attractive all-in sustaining cost below $800 per ounce. As previously announced, given the current status of the pandemic in Peru and the potential for more contagious variant, we have extended our full funds decision for the sulfides project to the second half of 2022, and we'll progress the project as the pandemic allows. As a result, we now expect our consolidated capital investment to be approximately $2.5 billion, which includes the construction of a concentrator and an autoclave to produce 45% gold, 45% copper and 10% silver. The increase in the updated capital includes refined estimates based on advanced engineering, higher market rates, which are being experienced broadly by the industry, and updates to our operating plans, including impact on COVID-19, which has caused a 1-year delay to the project time line. Once approved, the project will have a 3-year development schedule with first gold anticipated in 2025 and commercial production in 2026. Newmont remains committed to the sulfides project, and we'll be investing at least $0.5 billion through 2022 to advance critical path activities, including detailed engineering, long lead procurement such as autoclaves, flotation sales and transformers, earthworks and the installation of accommodation facilities for the construction and full-time workforce. Looking ahead, we're evaluating the second and the third phases of the Sulfides project, which has the potential to further extend the mine life for decades with significant levels of gold and copper production. When we initially acquired Cerro Negro in 2019, we reduced reserves and resources until we could be confident that Newmont's disciplined drilling program and conversion requirements were properly in place. As Tom mentioned previously, exploration is a core competency at Newmont, and we remain very excited about the district potential in Cerro Negro. Our first expansion is well underway, and it includes the development of the Marianas and Eastern Districts, which will extend existing operations beyond 2030 and increase annual production to above 350,000 ounces beginning in 2024. And compared to 2020, that will be a production improvement of well over 50%. This investment also provides a platform for further exploration and organic growth through future waves of expansion. And since acquiring Cerro Negro in 2019, Newmont has doubled the size of our land package to over 1,000 square kilometers, demonstrating our confidence in this highly perspective 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. Now moving to Africa. The team is positioned to deliver steady production next year as the site benefits from full potential improvements to mill productivity. Next year, we will begin stripping a new way back, which will extend open pit mine life by an additional 4 years, providing future optionality as we continue to evaluate underground and open pit growth opportunities. And next year, we will begin construction of an underground exploration decline, spending $35 million to allow for further drilling as we make progress towards the next exciting chapter and achieve. And Ahafo production is expected to remain strong, steadily increasing through 2024 due to higher grade from the Subika open pit and the change in our mining method at Subika underground. This change has allowed the site to safely increase on the ground tonnes mined, while improving mining costs. And similar to Tanami, in Australia, the Ahafo District has significant upside potential with underground opportunities out of [ Penza ] and further growth at Subika, along with the Ahafo North project, the next generation of mining in Ghana. In July this year, our Board of Directors approved full funding for Ahafo North, expanding our existing footprint in Ghana, and adding more than 3 million ounces of gold production over an initial 13-year mine line. Located approximately 30 kilometers north of our existing Ahafo South operations, the Ahafo North project will include 4 open pit mines and the construction of a stand-alone mill to produce approximately 300,000 ounces per year at very attractive all-in sustaining cost below $700 per ounce. Combined with Ahafo South, we expect to deliver an average of 850,000 gold ounces per year through 2030, making Ahafo one of the world's great mining complexes. We have conducted extensive regulatory and community engagements to ensure that we are to maintain social acceptance throughout Ahafo North's life cycle. And we will work to create lasting value for host communities through enhanced local sourcing and hiring. The one key aspect of Ahafo North is our workforce planning, which includes a target to achieve gender parity in the workforce when operations begin, an important and a deliberate step to improve female representation at our operating sites. We are very excited about progressing Ahafo North, and we look forward to bringing you updates as we develop this new mine over the next 2 years. And finally, shifting over to Nevada. Our ownership interest of 38.5% in Nevada Gold Mines will contribute approximately 1.25 million ounces of production for Newmont next year at all-in sustaining cost of $1,050 per ounce. As our partners mentioned recently, Nevada Gold Mines is also experiencing cost pressures from inflation in line with what we are seeing in many of our managed operating sites. Nevada Gold Mines is a significant and important contributor to Newmont, and we very much look forward to our managing and operating partner, delivering the 2022 plan safely, efficiently and at the margins expected. And now I'll hand it over to Nancy for more on our financial outlook.

Thanks, Rob. Let's begin with a review of our consolidated capital and expense outlook. We continue to invest in our future. And for 2022, we expect sustaining capital to remain steady at $1 billion. Development capital will increase to $1.4 billion as we enter a period of significant reinvestment back into our business. This increase is largely due to advancing the second expansion at Tanami, Ahafo North, Yanacocha Sulfides, the North and the first district expansion at Cerro Negro. Exploration and advanced project spend will also increase to $450 million as we focus on developing mining districts, extending mine life of our operating assets, progressing our most promising greenfield opportunities and advancing studies associated with our robust pipeline of projects. Interest expense is expected to decrease due to offsets from capitalized interest on development capital spend. And finally, our consolidated adjusted tax rate is expected to be between 30% and 34%, assuming a gold price of $1,800 per ounce. 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 on our balance sheet and to provide industry-leading returns to shareholders. As we look at next year and our longer-term outlook, Newmont is well positioned to create value and deliver on all of our disciplined capital allocation priorities. Next year, we will reinvest over $2.8 billion back into our business with the development of profitable projects from our unmatched pipeline and an ongoing commitment to our robust exploration strategy. We currently have $7.6 billion in liquidity and a net debt-to-EBITDA ratio of 0.2x, well below our target of a net debt-to-EBITDA ratio of under 1.0x, preserving Newmont's financial strength and optionality to sustain and grow the business. And we remain on track to return more than $2 billion to shareholders through dividends and opportunistic share buybacks in 2021. Our balanced global portfolio, combined with our disciplined 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. Newmont is the only company in the gold mining industry with the ability to generate these levels of attributable free cash flow, allowing us to confidently execute our capital allocation priorities and maintain our position as the world's leading gold company. In October last year, 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 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 a $1,200 gold price. As a reminder, the third quarter dividend of $0.55 per share was calibrated at an $1,800 gold price assumption and a 40% distribution of incremental free cash flow, resulting in a dividend yield of over 4%. Since introducing our dividend framework in October last year, Newmont has returned more than $1.6 billion to shareholders. Assuming similar gold prices in 2022, Newmont would expect to return at least $1.8 billion through our industry-leading dividend framework, demonstrating our confidence in the long-term value of our business, in our ability to maintain financial flexibility whilst steadily reinvesting in our operations. And with that, I'll hand it back to Tom to wrap up.

Thanks, Nancy. As we head into 2022, our outlook remains strong as we steadily increase production and improve costs over time through our global portfolio of world-class long-life operations, robust organic project pipeline and proven integrated operating model. Newmont is well positioned to lead the gold industry today and well into the future, as we continue to deliver long-term value to all of our stakeholders through sustainable and responsible mining. And with that, I'll turn it over to the operator to open the line for questions.

[Operator Instructions] And our first question will come from Jackie Przybylowski of BMO Capital Markets.

I just wanted to talk about the projects that you're working with, with Caterpillar on autonomous and EV. Is that -- I think you said in 2024, 2026 kind of time frame, is that to get to a full switch over of the fleet? Or can you talk a little bit about like what the process is for how that fleet gets renewed?

Thanks, Jackie, and good morning. Yes. What we're looking to do with Caterpillar is accelerate the product development cycle by working together where we share the risk of developing both underground and open pit, autonomous and electric vehicles. If we wait and follow our traditional equipment development cycles, we as a mining company or as a mining industry wait for the equipment manufacturers to develop the equipment on their normal cycle, 2030 will come and go. So if we're serious about hitting our 2030 targets, then we need to behave differently. And so we have worked with Caterpillar closely over the last 12 months to talk about how we can disrupt the industry, how we can disrupt the risk that we take as a mining company to introduce in a balanced way new technology and how they disrupt their product development cycle so that we can develop this equipment is going to be essential for achieving our 2030 goals and then being well on the pathway to our net 0 ambition that the mining industry has signed up for by 2050. The analogy I'd give is the work that I was part of a decade ago in the Pilbara with the introduction of autonomous haulage. That was not going very far, very fast. We've been playing with 4 trucks in a sand pit of a section off the area of one of the prime ore mines for 4 years. And it wasn't until -- at that time, we said we need to be serious about autonomous haulage. And at that time, it was signing up with Komatsu and committing to 150 autonomous haul trucks within 3 years, even though that pathway was not clear. Others then followed. Caterpillar followed. I was with Rio Tinto at the time, BHP followed, SMG followed. And now you've got autonomous haul truck fleets and billions of tonnes being moved through the Pilbara. And now as we're doing, we're adopting it in the gold industry, and it will be applied across the industry over this next decade. So the engagement with Caterpillar is about making those commitments together to accelerate the development cycle so that we can achieve the ambitions that the industry has set and can play a leading role in doing that. So those time frames are about doing the work necessary to develop those vehicles in a production environment such that they can be proven up and then replicated across Newmont and then ultimately across the mining industry.

So if I'm just understanding you correctly, those time frames are to develop the technology. It doesn't sound like you're planning to have a full fleet refurbishment or anything like that in the next 5 or 6 years. Is that the right way to think about it?

So at Tanami, and I'll get -- Rob, you might want to chip in as well. So at Tanami, we're going to work with Caterpillar to develop the underground haul truck, such that we have a fleet of 10 trucks running underground in battery electric mode with all the supporting infrastructure by 2024. And then we move to automate those trucks. At Cripple Creek and Victor, the technology is proven on autonomous haulage. We'll have that in place by the end of 2023. And then we'd be looking to bring the first of the open pit battery electric haul trucks to Cripple Creek and Victor by 2026, and then it's a transition with the open pit haul truck to battery electric. Just check, Rob, is there anything you'd want to clarify on that for Jackie?

No. You covered it well, Tom. And Jackie, it's very much a case of in the next 5 years, making sure that we do have those electric fleets and automation. And I think the other thing we should add is obviously, electric fleets are not just plug-and-play. It's the whole electrical infrastructure you've got to set up, whether it's the battery charging, whether it's a fast charging, whether it's the -- all the other electrics that you need. And that's also a huge part of this project. But this is really a move for us to get to electrification in that 5-year period, both CCMV and Tanami.

That's really helpful. If I can ask just a second question. You mentioned you're replacing roughly 2/3 of your reserves or 2/3 of your depletion this year. Can you talk a little bit, like, is there certain lines or certain regions which are challenging more than others? Or can you talk about like how that sort of shakes out across your portfolio?

Yes. I'll kick off, Jackie, and then Robert we'll get you to chip in with a little bit more detail. Certainly, exploration programs, Jackie, have been impacted by COVID. That has been an ongoing influence this year. But we also work through a multiyear program. So conversions will take place not necessarily in the calendar year, but we have a goal to -- for a 5-year period, on average, to replace depletion, and we'll get ebbs and flows with that. So it's probably a combination of 2 things: the natural ebb and flow of fuel exploration program. And COVID still has a pretty significant impact on our industry through the course of this year. But Rob, did you want to provide a bit of color on where we're seeing some -- maybe some upside and maybe some challenges.

Yes. Certainly, Tom. And Jackie, I'll start off with the challenges this year that certainly Yanacocha shouldn't come as any surprise there that because of the COVID outbreak, we had challenges there getting drills on the ground, but also at Cerro Negro, the difficulty of getting drillers into that region of Argentina, again, because of COVID. And then because of the closure of the borders in Australia, the likes of Oberon in Northern Territory, and those were the challenges. However, at the same time, the exploration team has done terrific work. We've prioritized well. And when we look at next year, certainly, 40% of where we're going to be drilling is Tatogga and coffee at Penasquito, Musselwhite and Éléonore. And certainly, those are all areas that we are excited about. And similar, we get back into South America, its strength at Cerro Negro and at Merian. And also the ounces that we weren't able to drill in Australia, we'll be back at Tanami again. But COVID has been the big major factor. And I think it's just those countries that we've spoken about for some time that have been the major challenges this year.

The next question comes from Tanya Jakusconek of Scotiabank.

Great. I'm sorry, I wasn't able to get on the call right away, so you may have addressed this. And if you have, I apologize. But I just wanted to come back to just your guidance for 2023 and beyond, so longer term. Can I just make sure that I understand that in the 2023 and beyond, what have you included? Like do you have any inflation? Do you have any additional COVID costs? I just want to make sure I understand what's in the 2023 and beyond.

Okay. If you're looking at that 2023 and beyond guidance and maybe comparing it back to our previous guidance, then I'd call out the following things. There is a lower production and mine sequence change that's having an impact of between $50 to $60 an ounce. There is $30 an ounce associated with higher royalties and production taxes that come with the higher gold price that we're assuming. And then there's another $40 an ounce that's made up of 2 things. We assume around 3% guidance. So more back to our normal guidance assumption that we've made. And we are maintaining an assumption that we'll have COVID protocols. So the combination of the order of about 3% escalation and COVID protocols makes up about $40 an ounce.

Okay. And that's for 2023 and beyond.

Correct.

And then if I could come back to just 2 other things. Again, I know Rob quickly touched on the higher CapEx at Yanacocha sulfide moving up that to $2.5 billion. And Rob, can you go through the categories and break down that $500 million of additional capital where it came from? I know some of it was delayed, 1-year delay, but there was some inflation. So if you can kind of just give us some buckets of where the increase came.

Jackie, do you want me to take that, Tom?

Yes, please, Rob.

Yes. The detailed engineering is the biggest one, Jackie, and that accounted for about $300 million across the board. Now that also includes the different costs that it takes to do the work. And the other $200 million is associated with the delay in the project and also the COVID-related protocols that we've had to put in place, extra camp rooms, et cetera, and then, of course, the market-related inflation.

And Rob, how much of the detailed engineering will we anticipate having had done by pool funds, which is a significant derisking factor?

By the fourth quarter of this year, Tom, or early fourth quarter, we'll be at about 80% to 90% of the engineering, which really takes away any risk of escalation from further work. So that's a really important point, 80% to 90%.

Okay. That's good. And then my last question is you've given us some -- lots of guidance for 2022 and beyond. Just kind of wondered, are you within your guidance for 2021 in terms of making your numbers there?

Thanks, Jackie. Yes, we're on track. Rob and I are spending a lot of time monitoring our operations, particularly our large operations, the Australia, the Tanami, the Peñasquito, the Ahafo's that are the middle-moving sites. We're working very closely with the teams there to ensure that we safely close out the year. And Rob's in regular contact with Greg Walker, as Nevada Gold Mines needs to bring on a strong fourth quarter and closely monitoring their performance as well. So on track to meet our guidance and monitoring it very closely.

The next question comes from Fahad Tariq of Credit Suisse.

Just one for me. In 2024, it looks like the growth CapEx almost tripled. It did triple from about $300 million to $900 million. So I'm just trying to get a sense of which projects are contributing to that specifically in 2024.

Fahad, so there are a few things at play there. You've got our decision to delay Yanacocha sulfides or push significant Yanacocha sulfide spend into '24. And you're also seeing the tail of Tier 2 rolling to '24 whereas the previous guidance, it would have been -- could have been pinching up earlier. And you've got more of Ahafo North coming to 2024. So timing of Ahafo North and Tanami 2 and Yanacocha sulfide's guidance on guidance you've seen move into '24, and we're incorporating the Pamour layback at Porcupine, which got a significant chunk in 2024 as well.

The next question from Greg Barnes of TD Securities.

Firstly, on the CapEx again, as you roll additional projects into the end of the guidance, is $1.7 billion to $2 billion more of the realistic CapEx guidance over the medium to longer term?

No. It's -- Greg, it's going to be $600 million to $800 million on average. We've got, I guess, a couple of sets of stars lining up. It is the next 2 years, 2.5 years are the most significant reinvestment period that Newmont's had at least a generation. And it's a bit of a combination of the pandemic having those projects stack up on each other a bit more than would have been our intent as we're sequencing them through a couple of years ago. So you're sort of seeing those combined impacts. As we move into the latter part of the guidance period and as we look through to the sort of the middle to the latter part of the decade, I think you'll see us come down to more of that $600 million to $800 million range. If you look at our project pipeline and see what's coming through there, it's within that window that you would start to see a coffee come through. We might see at the very end of this decade at Ahafo North. And those projects are smaller scale than the sulfides project over the top. One of the bigger projects potentially towards the end of this decade, early the next, you might have a step up again. But if we do those in sequence, $600 million to $800 million is still a very good rule of thumb on average for our portfolio.

Okay. And then just back to COVID, what happens at Cripple Creek, for example, if you don't get everybody vaccinated? Are people going to be laid off? Or is there going to be an impact on production? Or what do you do? And how do you encourage higher vaccination rates at Nevada gold mines where, from what we're hearing, the vaccination rates are very low?

So I'll kick off, Greg, and I'll get Rob to provide some more color as he's managing this one very closely. The -- you start with providing -- or engaging with your teams and explaining why. And we're doing that right around the world in terms of why it is so important that we get vaccinated to protect our health and safety and health and safety of our communities. So lots of discussion around why we're making this change and why we're setting this requirement. And reminding people that we have lost 26 colleagues to this virus over the last 18 months. This is very real and this has had a lasting impact on family and friends within our Newmont family over the last 18 months. Then we provide access to vaccines through clinics and the like, and we give people time to work through that process and then do work to put in as we get to understand where people are going to land in terms of their decision making. We can then put in plans in terms of contingencies to manage for folks who choose not to get vaccinated and, therefore, will not have a job at Newmont. I'll give you a couple of examples that I know Rob will probably get some more color on. We've just, yesterday in Australia, hit the required date for vaccinations in Western Australia. And Boddington had about 50 people of a workforce of about 1,000 who chose not to be vaccinated. Didn't miss a beat with those 50 people choosing to no longer work at Boddington. In Canada, we've got sites now at 100% vaccination rates. And we've been through that through similar processes to what we're running at Cripple Creek and Victor. But Rob, did you want to give a bit more color in terms of the sorts of things we're doing and our contingency plans as we work towards that end of January data?

Yes. Thanks, Tom. And it's a really important question, Greg. And as Tom rightly said, it's -- this is something that we've been talking about for a long time. We're giving everybody plenty of advanced warning of when these deadlines are approaching. So that communication, that change, that persuasion is certainly a critical element of it. And certainly, all of my line leaders has been spending an extraordinary amount of time having those discussions with our crews. We've also provided mobile clinics to the mines, not only for our people but also their families. So we are, first and foremost, doing everything we possibly can to do that. However, at these drop dead dates, as Tom just highlighted, in the likes of Australia, people have made decisions to leave. And we certainly got contingency plans in place where we will bring in contractors. We will change our -- some aspects of our mining. We will do different coverage. We may run the plants differently, et cetera. But certainly, we continue to work very hard to maximizing that amount. We will definitely lose people. But at the same time, I think we've got good contingency plans in place to deal with it as and when and if it eventually arises.

Have you had any discussions with Barrick about moving towards a similar mandate in Nevada?

The conversations we have -- and it's been the case, I'd say, through the industry, Greg. Every circumstance is different, and it's really been as it has been through the whole pandemic, just sharing lessons, sharing the experiences we've had talking about how we -- what success we've had, where we do things differently. It's certainly been a case of sharing lessons, experiences rather than requiring or pushing for any certain outcome. Rob, would you may want to cover -- talk about this regularly with Greg in terms of our different experiences with some of these locations, particularly in the United States.

Yes. And I think, Greg, that Nevada Gold Mine is also applying an awful lot of pragmatism to it. Certainly, that if they were to bring in a rule like that, it would be a massive impact at the moment. So I think we are taking a pragmatic approach to make sure that business continuity continues. We're obviously still doing a lot of education, again, providing the availability of vaccines and working closely with the state government, et cetera. But I think they have had to most definitely go down a road of pragmatism. But this -- we're all keen to look after our people, but they're doing everything they can without mandating to really encourage motivate people to take the vaccine.

The next question comes from Josh Wolfson of RBC Capital Markets.

A lot of detail provided on costs. So thank you very much for the disclosure. Maybe if I can just ask one tangential question on the cost side of things. You mentioned the impact from COVID and inflation across the asset base. Is there any kind of additional disclosure you can provide on regionally where perhaps those impacts are above average and where some of those impacts are below average?

Yes, Josh. If I think about regional impacts and if you look at our inflation of around -- it's 5% over and above what we've normally assume in a year. Half of that is labor costs. And when we say labor costs, it's both direct and indirect, so it's our employees, but it's also our contracted services. And where we're seeing that higher is in both Canada and Australia. So that would be more specific in those 2 mining centers where you've got some hot labor markets and so that makes up a significant amount of that higher cost in the labor. This 30% is materials and consumables, so not including energy. That's pretty consistent around the globe between that 5% to 7%. If we look at cyanides up 7% to 9%. Grinding media, you get a range of 7% to 25%. Explosives are up 12% to 18%. But that's pretty consistent around the globe. And then we're -- and then the other big bucket is energy costs. This makes up about another 15%. And that's -- that is pretty much we're seeing diesel prices up between 10% and 20%. Natural gas prices up anywhere to 60%. And again, that's pretty consistent around the globe. So energy, materials, consumables are pretty consistent around the globe. Labor, which is a big chunk of it, both direct and indirect, Australia and Canada, are significant contributors.

Great. And maybe one more question. Just on the updated Yanacocha capital estimate. Just wanted to confirm, does that include the spending prior to an investment decision, the $500 million that was outlined for 2022?

It would be the -- Rob, you might have to help me out with this one.

No. It is...

Just trying to remember where we grew the line on that number.

It does include the spend this year.

The next question comes from Michael Jalonen of Bank of America.

Tom, Robin and Nancy, I guess looks like on Slide 21 with Porcupine, interesting chart there showing indicative production profile and with the base and then the extended Porcupine. Just wondering, does that mean Borden and Hoyle Pond are depleted by '25 or am I reading this chart wrong?

Thanks, Mike. Rob, did you want to pick that one up with Mike? Just check. I'm still on the line. Are you still there, Rob?

I am, indeed. Sorry, I was on mute, Tom. Thanks for the question, Mike. Borden certainly does not run out by that time. And certainly, the timing of Pamour is when Hollinger, in particular, is at the end of the life. And we are starting to get into the main at Hoyle Pond where the exploration that we cover in the next couple of years is going to be imported. So around about that time frame, Mike, it really is going to be the Borden, Pamour and some high grade from Hoyle Pond is where we're looking at. And of course, bringing on Pamour then allows us to really gear up and give us that time for quality exploration elsewhere in that highly prospective area.

The next question comes from Tyler Langton of JPMorgan.

Just on your costs for 2022. Obviously, you mentioned it includes the 5% inflation. Is -- the question is do you have, I guess, a decent amount of certainty on those costs in the sense that you've locked them in? Or should we just kind of expect the cost to sort of generally move with inflationary pressures.

Tyler, we can certainly point to where those costs are coming from. As I said, half of it is labor, another 30% to consumables, another 15% energy. And we can see those cost trends coming and say we're building those cost trends into our guidance going forward. So there's a link between the trends we're seeing and the guidance we're providing. But what I would say is that, that then we sit back on our heels, we have our full potential program, and we are working bloody hard to control those costs and to manage those costs to be well below the increases that we're guiding to by leveraging all the things we've done for a long period of time. So they're built in. We can see the trends, but we're not just saying, that's it. We're going to accept that every one of our operations is expected to be driving to improve productivity, manage their cost to mitigate them.

Tom, if I could just add to what you said is that also, Tyler, in our projects, the likes of T2, we've now procured 80% of all our materials. And the strategy that we adopted at Yanacocha, getting the fabrication of the critical items such as auto clays, the grinding mills and the flotation, that obviously limits our exposure to inflation in those big projects.

Okay. But I guess a spot -- I guess, as spot prices, say, for sort of diesel and natural gas start to move lower, would that theoretically benefit you? Or have you sort of locked in purchases of energy or certain materials?

I'm with you, Tyler. No, we're price takers. So we would benefit from that.

Okay. Yes, that's perfect. And then just a final question on your -- the sort of the longer-term production guidance of the 6.2% to 6.8%. Are there any certain sort of assets or projects that would kind of get you to the higher end versus the lower end? Just trying to what -- or is it just sort of the operations as a whole? Just trying to get a sense if there's any specific items that kind of drive you to various ends of the range.

Yes. There's -- bringing on Tanami 2 and Ahafo North and a good run at commissioning both of those gives you upside as they come on through 2024. Peñasquito is a dial mover for our portfolio. And as we move into higher grade ore, we're stripping at the Peñasco. So we're going to move more to Chile, Colorado pit over the next couple of years. You get more of the other middle, especially the gold, then we swing back into the Peñasco pit as we come into '24. And we've got upsell opportunity if that goes well and the stripping campaign goes well. We've got higher-grade ore coming from Subika. Again, it's our stripping campaign in one Subika pit as well. You've got some upside potential there. So there's -- there are stripping campaigns and projects that are delivering that higher production. Depending on how the stars line up, depending on how well projects, commission ramp-up and depending how well our stripping campaigns go, they are the sorts of things that will give us upside on those numbers.

Next question comes from Anita Soni of CIBC World Markets.

I just wanted to ask the guidance on attributable capital. Just to be clear, does that -- that does not include Pueblo Viejo, correct?

Nancy, do you want to talk to how we manage Pueblo Viejo in our guidance?

Yes. That's correct, Anita. That does not sit inside with our guidance because it's an equity investment, and it's not part of -- so we put production in, but the capital costs are not included.

Okay. And then secondly, I was just wondering with the Cerro Negro district expansion Phase 1, I mean I'm not sure if you addressed that in your comments, Rob, but could you just explain what exactly that is and how it will, I guess, increase production in 2024 and how much of the capital associated with that is?

No problem. Tom, do you want me to take that?

Go for it, Rob.

Yes. Anita, essentially, what the expansion is really doing is to really provide that pathway to Cerro Negro, producing rounded out the 350,000 ounces a year. And that incorporates the Marianas district expansion and the Eastern District. So the Marianas, as you're probably aware, has got 2 components to it. It's got the [ Norte Este ] and the [ Norte Este SBA ] and then also the San Marcos ore body. So we continued that portal in March 2021. And then the Eastern District, we're really looking at bringing on 3 deposits, the Bajo Negro, the Silica Cap and the Gato Salvaje. So that's where we're focused on in 2024, as you mentioned, to bring it on. We are looking at winning just under 3 million ounces of gold by opening that up. And by doing these 2 areas together, it allows us to have those synergies between shared fixed cost, our equipment, our contractors, et cetera. So that, in a nutshell, is the expansion that we're currently focused on. And I should have also added is that at the current time, we're also expanding the tailings dam. So that's ready for when that brings on it at the appropriate time.

Okay. And so what was the total capital for the 2? I guess, 2 areas -- Marianas -- I guess I was trying to understand, Marianas versus Gato Negro, Bajo Negro and Silica Cap.

Yes. We're still doing all that. We're still in the study phase there at the moment, Anita. So -- and I may have to be reminded about this, but certainly, we're still locking down the total cost for this.

The next question comes from David Haughton of Global Mining Research.

Tom, Rob and Nancy, just following on the Cerro Negro expansion. I presume here that when we're looking at the production profile, that that's more a function of better grades coming from the areas that you're opening up rather than an expansion of the plant. Is that the correct way to think about it?

Yes, David. That is correct. And if Anita is still on the line, I'm just able to pull the number, we've got about $300 million over time included in our guidance for those Cerro Negro expansions, if you're still there, Anita. But no plant expansion, David. This is all bringing -- this is bringing ore from new mining areas into the existing plant.

And on a similar theme with Pamour, simply doing a pit layback to extend and fully utilize the infrastructure you already got in place.

That's correct. It's dewatering a pit that's full of water at the moment and then a layback and then getting that all through the existing processing facility.

I seem to recall from Goldcorp days that the pit layback was somewhat confined in its footprint because there was infrastructure that could be taken out on a larger scenario. Is that correct?

Yes. I'll get Rob, and I get you to talk to David. This is a little bit different from what they call the Dome project. It's a smaller scope that doesn't have those constraints or that impact. But do you want to talk to that, Rob?

Yes. That's correct, Tom. And it really was -- we obviously studied the Dome project, and we certainly saw the most significant value and the simplest way was to develop the Pamour. And as you mentioned, just a simple layback, which can really focus on the productivity and really deliver quicker. So that was the method that we've approached looking at simplicity, the highest value. And this is where it was determined.

Okay. And on the third of your project, Yanacocha sulfides, just to help us think about the scale of this thing. Can you remind us of what your anticipated tonnage throughput would be, likely grades of the 3 elements that you're going to get recoveries, unit costs? If you got anything like that, that you can help us think about modeling.

We haven't provided that yet, David, but let us take that on notice and think about how we start to build up that story to help you start to model that. We certainly would typically give those sorts of details at full funds. But let us take that on notice how to think about that given the -- given some of the decisions we've made around that project and the level of detail that we're going to have and the money we're investing. So let us take that and see what we can do. But typically, that would come with a decision.

Any data would be appreciated to help us sort of get a proper idea about what you're seeing. And my final question, a very simple one. It's in relation to your $300 million exploration budget. How should we think about that as a split between expense and capital?

I might throw that question to either Nancy or Daniel, just so I ensure that we answer that in the way you define those things, Nancy or Daniel, are you able help David or somebody can take that offline with David?

We may want to take that one offline. I think it's about 80% split, but we can follow up with you on that one.

Okay. So 80-20 capital versus expense. I presume that's what you mean.

Yes. And the trick there, David, is some of our mine development costs, which wouldn't be part of exploration to open up the drifts to do the drilling would be paid for elsewhere. So it's a little bit tricky.

The next question comes from Adam Josephson of KeyBanc.

Tom, with respect to your longer-term goal production guidance, you do 6 million ounces this year. In '23, you're guiding to 6% to $6.6 million. Can you help me with how much of the implied growth is coming from the presumed non-recurrence of the COVID-related disruptions that you've experienced this year versus the expansion projects you have underway? I'm just asking because you mentioned your outlook assumes operations continue without major COVID-related interruptions.

We'll certainly have an impact through '22 from COVID because we -- mines like -- big mines like Panama or at Cerro Negro, we just have been able to do the development work. So you'll see a delay of that. Then come '23, you'll start to see us start to ramp up as a consequence of that. But if I -- if you look at our ramp up, it's really coming from the laybacks -- the big mines move the dial. So the laybacks, we're just completing it at Boddington. So we're sitting on top of high grade now, so you got to get Boddington with autonomous haulage and straps delivering high grades of copper and gold. You'll see that flow through '22, '23. You're going to see other metals coming out of Penasquito in '23. And then back into gold in '24. '24 you're going to see the benefit of the expansion at Tanami and half North flowing through. One of the big movements of ounces out of '21 or '22, '23 into '24, '25 is the impact of COVID on the Tanami expansion. And so you're seeing those ounces in the back end of that guidance range. And then they'll flow into '26 and beyond. Was that the color you're looking for?

Yes, sure. And just one on costs. So you talked about the full potential initiatives. Can you help me with -- so your gold CAS is going from $790 this year to $820 next year and then down to $740 to $840 in '23. Can you help me with absent those full potential, the company specific programs you have, what would be happening to that projected gold cash? I'm just trying to get a sense of what the underlying inflation is and how much it's being tempered by your initiatives.

It's -- we are in -- I mean, the last year or 2 have been unusual. So if I look back to what at a more normal time is, and we'll return to a more normal time as the world settles down from this pandemic. But typically, we have an expectation that, as a minimum, our full potential projects are offsetting escalation of the order of around 2%. So as every mine builds its business plan, they must have full potential projects that are resourced, that are detailed out, that are offsetting an escalation of around 2%. So that's, in a normal circumstance, it's helping to mitigate escalation that you see each year as you move forward.

This concludes the question-and-answer session. I would like to turn the conference back over to Tom Palmer for any closing remarks.

Thank you, operator, and thank you, everyone, for making your time for the call today. I appreciate you staying on for quite a bit longer than we'd initially set, but I wanted to take as many questions as we could. Thank you for your time. Thank you for your ongoing interest in Newmont. And if I'm not speaking to you between now and the end of the year, I wish you and your families a safe and happy conclusion to the year and hope there's some time off from work to spend with families before we start again and work together again in 2022. Thank you, everybody.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.