Newmont Corporation (NEM) Earnings Call Transcript & Summary

Continuing with the fireside chat format. We're moving on to the next presentation with Newmont. And to present to us today on Newmont, we have 2 very successful women providing leadership to one of the biggest gold company in the world. I have the immense pleasure of welcoming Karyn Ovelmen, Chief Financial Officer; and Natascha Viljoen, Chief Operating Officer. Karyn and Natascha. I want to first start by congratulating you on two things. First, your career accomplishments for sure. And I think young men and women have a lot to learn from that. And second, your impeccable sense of timing. But some of us in this room have spent a lifetime waiting for gold to be at $2,600. And you seem to have timed it perfectly your entry into the gold sector.

But before we talk about gold at $2,600, I want to ask a question that's often being -- sorry about that, the question that's often being asked in terms of the representation of women in the mining industry, or should I rather say, the underrepresentation of women in the mining industry. What would you say to that? And what's Newmont doing in terms of changing that. Karyn, if you want to start first.

Sure. I think Newmont puts all of the D&I, diversity and inclusion metrics, obviously at the forefront of who we are and take those metrics very seriously. We've been very successful with those metrics. But it's also about our values as well, right? And so when it comes to our internal systems, our symbols, our behaviors, I think the mere fact that Natascha and I are sitting here today, representing the company, leading the company from a strategic, operational, financial perspective, from a representation perspective, I think you can't get any clearer in terms of Newmont's commitment in this regard.

And I want to build a little bit on that. In terms of the privilege to have partnerships in Newmont between people like Karyn and I. So for me, it's a privilege to be here today. I also think it is a reflection on the work that our CEO, Tom Palmer, has done in building a really strong and diverse leadership team. If you look at our leadership team today, we have 50% gender representation. And it's something that we're working hard on in the professional levels in our organization to install and sustain through various practices of breaking down the barriers that we've historically seen in the mining industry. We know that the mining industry historically has been male dominated. That was supported by the cultural norms by recruitment practices, but also just the workplace itself. And at Newmont, I think we're very proud of the fact that culturally, we're making that shift to make it all inclusive in all of these aspects of our business. We do recognize that we still have some ways to go as Newmont and as an industry because whilst at Newmont we feel proud of what we've achieved in our senior levels, we know that we've got quite a bit of work to do across organization in continuously addressing gender bias, and really putting on the opportunity that diversity brings in transformational thinking and the benefit that, that comes from that diversity and inclusion.

Let's move to why Newmont? And when I asked this question, it's not just why you are with -- you joined Newmont, but also like me and other investors in the room after this chat is over, should go and buy Newmont shares, and see this also as an opportunity, if I may dare say, to have Mark and Amar, who presented before you, run for their money. So Natascha, I want to start with you. Building on your several decades of mining industry experience, your observations on Newmont so far from an operational excellence and growth point of view?

So why am I excited to be here today other than that $2,500 gold price, of course? I grew up in the mining industry and I grew up in the gold sector as a matter of fact. And my father is second generation mining. If we consider the portfolio of assets we have today, it is a real suite of Tier 1 assets, with a total embarrassment of riches when we think about our project portfolio. The reality for us and the opportunity lies in operational excellence, technical expertise and the discipline to deliver against good, developed plans, with an eye on the future. And if you consider where we are in the gold industry and what the trajectory is that we see the gold sector will go into, continuously planning and designing our mines with a long-term in mind. And with 11 Tier 1 assets, soon to be 12 when we start up our Ahafo North project, we have a true opportunity to look at the enterprise and run these operations really, really well. And the one lesson I've learned, and is actually something that my father told me when I started my career, and when you talk about people like Mark and Amar in the room, is that we need to go back and learn what really good basic practice in mining is. We need to know our assets really well and we need to drive that basic good practice in mining. And we need to go back to the miners who started this industry many, many years ago and get to the level of understanding and discipline that they had around operational practices. I think what we've added over many years, is the appreciation of the value that diversified workforce bring, plus the true groundedness that we need to have in doing so safely and sustainably.

Karyn, over to you. And I want to bring you a cross-sectoral experience into this...

Sure.

In terms of the capital allocation you've seen in the gold industry. How do you describe -- how would you describe Newmont's current capital allocation strategy? And what do you think Newmont can do better in terms of capital allocation?

Yes. Natascha points out, we have an incredible portfolio of assets. So we own more than half of the world's Tier 1 gold mines. So we lead when it comes to scale, ounces, reserves, but coming from outside the industry, I think in terms of where we need to do better, we need to push beyond these types of metrics. The industry has not done very well when it comes to return on invested capital and [Technical Difficulty] returns through a cycle. I think it's an opportunity for us. We need to run our business well. We need to put out -- we need to meet our guidance every quarter, every month, every year. But most importantly, we -- from a capital allocation perspective, we need to put an economic lens in terms of how we want to run our portfolios, with an eye towards that return on invested capital, truly creating economic value for our shareholders. Natascha has a renewed focus in terms of safety, operational excellence, project execution. We also need to provide that economic lens on our portfolio. So how do we structure the portfolio, run the portfolio, make capital allocation decisions, whereby we are truly creating economic value for our shareholders in the near term and over the longer term? I think because of the Tier 1 portfolio that we have, because of that focus on operations and that renewed energy around that as well as really putting a true lens in terms of how we want to look at this portfolio in terms of the types of returns that we can provide to our shareholders over the near term and the long-term, we have a real opportunity, I believe, to differentiate in this space and to change that trajectory in terms of providing returns to shareholders.

I want to move to your recent acquisition with Newcrest, and I want to come to the divestitures and the capital allocation regarding that. But first, Natascha, starting with you, having gone through the assets, what have you learned about the newly acquired assets, one? And second, what opportunities you see in terms of deploying the full potential program just by integrating those assets within Newmont?

So firstly, when I think about our new assets, I can't think about it without stepping back and looking at the full portfolio of assets because what it enabled for us is to really step back and turn these inside -- these assets inside out in a way that we haven't done before, because we have the opportunity now to look at this entire portfolio of assets. The flexibility that we can build in our operational performance and how we think about our sustaining capital profile and staging that to ensure that we have a stable ounce profile and a sustainable -- sustainable capital profile. When we consider the full potential program on the new assets, particularly, we've run all 4 assets that will remain in the portfolio now through our full potential program. And that is -- all of those are in execution at the moment. We have committed $200 million are as part of the synergies that will come from that process, and we're well on track. But I do want to emphasize that not only through the full potential program, but in stepping back and changing the constraints that we've put on our operations, the constraints that we've put on how we look at our portfolio of assets and how that enterprise have interdependency, it is an opportunity for us to make a real step change in productivity, bringing costs down to sustainable low cost base and working towards that economic margin expansion that Karyn has been talking about.

Okay. And then you recently announced the divestitures of Telfer and Havieron. How is the process for the remaining asset divestitures going? And then I want to come back to, what are you going to do with the capital?

Okay. So the process is going very well. So we announced in February the divestiture of 6 noncore assets and a project. We've also had progress in terms of divestitures or monetizations of some noncore equity positions as well. So approximately $0.5 billion in proceeds related to the Batu Hijau as well as the Lundin monetization. And then in connection with the bigger efforts around the divestiture program, the noncore assets, as you say, we already announced Telfer last week. Very, very happy with how that culminated that process. Next track that we have in progress is the [indiscernible] divestiture. And so that is moving into more advanced stages. And then finally is the North American assets. Tremendous amount of interest that we're receiving, we are in the second phase of that process, so due diligence. All of those activities are taking place now. Interest associated with single asset acquisition, a combination of some of the assets as well as the entire portfolio. We continue to expect to complete the entire divestiture program by the end of the first quarter of 2025. And we are still anticipating that, that will result in approximately -- or greater than $2 billion in proceeds for that total 6 noncore asset divestiture process, which will allow us to continue to focus and now really focus on the core portfolio as we go forward as well as reduce some of our debt and buy back shares.

So you -- I mean earlier this year, in terms of the shareholder capital allocation, I said financial flexibility, sustainable investment return on capital, which is all we're talking about here. But going back to the question I asked Amar and Mark; do you agree with the higher capital returns that the sector needs to provide in line with what you've seen in your previous industry?

Absolutely. So I think just in terms of balance in terms of how we balance just reinvestment back into the business, coupled with the return of capital, whether it'd be dividends or share buybacks, but the real focus for us as well is really on that return on invested capital. So we have this amazing opportunity with this portfolio. And rather than looking at things and trying to maximize on an asset-by-asset basis, on an NPV perspective, but really stepping back, how do we run the portfolio in the near term, over the longer term, with an eye towards the life of these assets to really provide that economic value? So that free cash flow expansion per share, that margin expansion per share, year-over-year ultimately culminating in a return on invested capital over a longer period of time.

Natascha, I want to come back to you and ask about how you look at growth within the Newmont portfolio. And you are the Chief Operating Officer, you are the Chief Financial Officer. She wants to preserve capital and return; you want to spend capital. So I want to get your views on how you're looking at both.

So I want to emphasize, just love being here in this partnership because I think Karyn and I see this absolutely eye to eye as we do in the LT. For me, growth is about value and not necessarily about volume. One of the things that I appreciate about the Newmont culture is humility that we have in the leadership team. And why that is important for me after spending nearly 34 years in the industry? I think that humility in the Boardroom allows us to have a really robust and transformational conversations on what's good for our business. And what's good for our business is to make an impact and create value. And that doesn't necessarily mean it needs to be bigger to make more value. It is about, how do we do what we do really, really well. Amar has spoken, and I have to repeat that. The way that he knows his business, he knows his contractors. That's how we need to know our business. Because if we know our business that way, that is a sure way of making sure that the base foundation of our business is strong. We create the most value out of our capital that we've already deployed, and that creates flexibility for us. When we generate cash in how can return value to our shareholders and make the right investment decisions based on value and not on volume.

So if you look at your growth portfolio right now, what did you say are the 1, 2, 3 priorities for Newmont?

So we know that we have 4 projects underway at the moment. We have 2 caves at Cadia that is developing well. We've got Tanami 2, where we're sinking a new shaft with a new underground facilities. We have Ahafo North that we've building a new mine in Ghana. And lastly, we have smaller capital expansions at Cerro Negro in Argentina. Our first priority is to deliver those. We need to -- we've made commitments, we need to deliver those. We do have a second tranche of projects that's near term, some of them coming out of the acquisition, stepping back and turning that inside out and making sure that we are comfortable with the development work that's been done, the technical detail that's gone into that and our ability to execute against them. That will go into the portfolio, as Karyn has said, and we will make the right economic decisions from a trade-off perspective. Lastly, we've got this embarrassment of riches in terms of the broader portfolio. And Karyn and I partnered on this to say, "Well, we want to really make a step change in how we develop and deliver on large-scale projects." Financial evaluation is a really big portion of that development, but really understanding the technical detail and risk or opportunity on the delivery and execution of that projects is the focus. So as we step through this embarrassment of riches, not looking -- only looking at the financial returns, but our ability to committed to deliver and deliver against it. And then we will put that through our capital allocation framework.

That's great, Natascha. One last question for you, Karyn. Is Newmont done with M&A? Or do you see potential future M&A?

Right now, we have our hands full. We are integrating as well as obviously shaping the portfolio with the divestitures, and we see tremendous value when it comes to M&A as we look at the Newmont shares. And so our focus right now will be, as free cash flow comes in, as the proceeds from the investors come in, is to focus on share buybacks.

Thank you very much, Karyn and Natascha. We do have time for a quick question from the audience. The gentleman at the back, please.

Thank you. You said something that really resonated with me, which was the importance of return on invested capital. So it's great to hear Newmont taking that metric seriously. So my question for you is, would Newmont be willing to start publishing their return on invested capital in their financial results, in their presentations and taking a lead to see if we can get some of the other companies in this industry to report that as well? So forget AISC, forget production, forget all the volume-related stuff, let's focus on one metric that really tells you about the financial performance of the business.

Yes. As we started today in our conversation, we do need to move back some of the -- move past some of those traditional metrics. We are in the process right now. With this new portfolio, we're not just looking at the newly acquired assets, we are looking at our legacy assets, combined with the newly acquired assets on a portfolio basis. As we start to formulate what that looks like, as we start to think about some of the projects in terms of how we would time those and how we would execute that, again, with an eye towards that return on invested capital, we'll start to have a better view on what that would look like. And absolutely, we will be extremely transparent. And that -- it is how we will start to articulate our strategy and how we feel about how we're going to sequence things and what those economics could look like to our shareholders.

Thank you very much. And with that, we are out of time. Really appreciate you 2 taking the time to talk to us today.

Thank you.

Thank you, and all the best.

Thank you.