CA - Newmont Corporation (NEM) Presents at 2023 Gold Forum Americas Brokers Conference (Transcript)

2023-09-21 02:36:06 ET

Newmont Corporation (NEM)

2023 Gold Forum Americas Conference

September 19, 2023 01:10 p.m. ET

Company Participants

Tom Palmer - President, Chief Executive Officer

Conference Call Participants

Jackie Przybylowski - BMO

Presentation

Jackie Przybylowski

…Specific region. Before joining Newmont in 2014, Tom brought over 20 years of experience with Rio Tinto working in a variety of roles across the business. Welcome Tom, and I look forward to your presentation.

Tom Palmer

Thanks Jackie. It looks like we are alright to go with our slide two. So thank you Jackie and thank you all for joining us this morning.

Before I begin, I’d invite you to review our cautionary statement on the next slide. 2023 is a very exciting and transformational year for Newmont, and for all our current and future stakeholders. Our proposed acquisition of Newcrest is underpinned by a very clear and focused strategy, designed to ensure that the Newmont of today not only retains its leadership position in the gold industry, but also strengthens its underlying foundations to deliver decades-long shareholder value.

To give you an insight into the corporate strategy process that we have fined-tuned over the last several years, let me walk you through the key inputs and outputs that together define our strategic vision, our key strategic drivers and the execution options to evaluate and consider.

We start by analyzing and understanding the key global megatrends that are impacting our world, our industry and Newmont specifically. These cover society, technology and geopolitics. These megatrends represent, both individually and collectively a very dynamic, complex, and unpredictable environment, one in which we currently operate in today and will be expected to succeed in over the long-term.

We then combine our view of these megatrends with a comprehensive understanding of our core strengths, our unique capabilities, and the potential gaps that we need to close, in order to differentiate Newmont today and into the future. Our strategic drivers focus on three fundamental elements. First, building, maintaining, and strengthening our responsible gold leadership position through our culture, our performance and our relationships.

Second, identifying industry consolidation opportunities that play to our strengths and competitive advantages, and are also executable and value accretive to our shareholders. Finally, finding opportunities to diversify our commodity mix, so that we continue to deliver to our shareholders, the benefits of responsibly produced gold today, together with an increasing future exposure to the world's key transition metal, copper.

Our decision to approach Newcrest earlier this year, with the idea of a potential combination, was grounded in these three key elements of our strategy. First, it presented an opportunity to assemble the best possible collection of Tier 1 gold and copper assets in the industry, under one umbrella, benefiting from Newmont's operating existing portfolio, operating model, sustainability practices, and disciplined capital allocation process. Second, the addition of the Newcrest assets to the Newmont portfolio allows us to consolidate in two world-class gold and copper mining districts, Australia and Canada.

Unlocking compelling strategic, operational and sustainability driven synergies, that are unique to this transaction. And finally, the combination complements Newmont's existing copper production and project pipeline with world-class growth optionality.

Connecting the external environment with a robust understanding of your internal capabilities is key to being able to devise and then implement a successful strategy, and our acquisition and integration of Newcrest is underpinned by a clear and consistent strategy that is being executed with robust planning and preparation.

At Newmont, we are supported by the world’s best collection of people and assets, and we are focused on delivering operational and financial performance that justifies our position as the benchmark gold equity.

In this industry, we continue to differentiate ourselves in four key areas: First and foremost, Newmont has a long history of committing to leading practices in our approach to safety and sustainability. Second, Newmont has created a global, diverse portfolio of Tier 1 assets, with both the scale and mine life to sustain our business and continue leading the industry for decades to come.

Third, these assets are managed through our operating model, which is supported by a deep bench of experienced leaders, teams, and subject matter experts with a proven track record of safely delivering value. And finally, our disciplined approach to capital allocation allows us to maintain financial strength and flexibility, while balancing steady reinvestment into our business with industry-leading returns to shareholders.

Our acquisition of Newcrest represents a powerful value proposition that will build on these four key differentiators: strengthening our robust, global platform to generate strong and resilient returns. Upon completion of the transaction in just a few weeks’ time, the combined business is expected to set the new Sustainability standard; strengthening Newmont’s position as the gold industry’s recognized leader. Create the industry’s strongest portfolio of world class gold and copper assets with ten Tier 1 operations and a Tier 1 district in the highly prospective golden triangle in British Columbia.

Deliver $500 million dollars of annual synergies from G&A, Supply Chain and Full Potential through our proven operating model, and target over $2 billion in cash from portfolio optimization. And we will remain committed to driving a disciplined, balanced approach to our capital allocation process.

Today, I’ll talk through each of these differentiators, how they deliver value, and how Newcrest fits into our long-term strategy. At Newmont, we take pride in our heritage as a values-driven organization with a clear purpose. Our core values are safety, sustainability, integrity, inclusion and responsibility. They have been developed over a long period and through multiple generations of leaders.

Together they are fundamental to how we run our business, where we choose to operate, and how we conduct ourselves on a daily basis. And we have learnt that achieving our purpose requires a strong governance structure and a commitment to accountability and transparency.

As only the tenth CEO in Newmont’s 102-year history, I am a product of our robust governance processes and I am expected to build on the legacy of my predecessors over the last 40 years, Gordon Parker, Ron Cambre, Wayne Murdy, Richard O’Brien and Gary Goldberg.

As we close the transaction in the coming weeks, we will be applying our proven safety and sustainability leadership and practices at Newcrest’s operations, by first bringing a clear focus on understanding and mitigating fatality risks through visible, felt leadership in the field. By building on Newmont’s sustainability leadership and commitment to meaningful social engagement based on inclusion, transparency and shared values in order to be the partner of choice for governments, host communities, suppliers and our workforce.

By remaining committed to Newmont’s leading environmental stewardship, social performance practices and climate goals; and by creating a diverse, inclusive and equitable workplace where everyone is welcome, attracting and retaining the breadth of skills and talents needed to continually improve performance.

By aligning our purpose and values across the combined organization, we will be very well-positioned to safely and sustainably deliver on our commitments through the industry’s best portfolio of top-Tier operations in low-risk mining jurisdictions.

A portfolio that has produced around 8 million ounces of gold annually, with 80% of this production coming from assets based in Australia and the Americas. And notably, more than 5 million ounces or two-thirds of this production has come from 10 large, long-life, low cost, Tier 1 assets, representing more than half of the world’s top-tier gold mines.

We are leaning into our experience operating the Tier 1 assets in our portfolio today, and our experience from integrating Goldcorp just over four years ago, and will be applying our Full Potential program, a key component of our proven operating model to the new assets that are coming into our portfolio in a few weeks’ time. And let me give you some examples of our experience, starting with the Boddington mine in Australia.

Newmont commissioned modern Boddington as a gold and copper producer back in 2011. It was also the place where we first implemented our Full Potential program in 2014, a program that I have led at Newmont over the last 10 years, and the most sustainable improvement program that I have worked with in over 30 years – 35 years in mining operations.

Full Potential has three distinct phases that we implement with rigor and discipline: The first is Diagnose, where we bring together Newmont’s subject matter experts across geology, mining, processing and asset management, to work with our site teams, to understand the value drivers for that operation and the constraints or bottlenecks that need to be worked in order to deliver value.

The second phase is Design, where those same teams work together to build action plans that will deliver the value identified. And the third phase is Deliver, where the General Manager of that operation and their teams are held accountable for delivering on those plans, with the support of our Technical teams and broader functional expertise. We then refresh the process every two years at every operation.

At Boddington, Full Potential has delivered more than $700 million dollars in value over the last ten years, largely driven through improvements to mill performance, where we have taken throughput beyond nameplate capacity of 35 million tonnes per annum to now over 40 million tonnes per year, while at the same time achieving a 6% improvement in gold recovery. And it was this sustained performance that underpinned an extension of mine life at Boddington, enabling us to profitably invest in the replacement of the haul truck fleet, successfully commissioning 41 autonomous CAT 793’s.

This is the first application of this technology in the gold industry and the first in a deep open pit mine anywhere, giving Newmont a clear competitive advantage in the technology that will be a critical part of the transition to net zero mining operations.

When we acquired Goldcorp just over four years ago, we committed to delivering annual synergies of $165 million through our Full Potential program. At Peñasquito in Mexico, we have blown that target out of the water, delivering more than $700 million in annual synergies, with over 80% of this value coming from mining and processing improvements.

In the large, complex polymetallic processing plant, we have worked the bottlenecks in crushing, grinding and floatation to deliver more than $300 million in synergies. And in the two massive open pits, we have increased the average payload on our fleet of 85 Komatsu 930Es by 10%, which translates to an additional 12 million tonnes of material moved per year at next to zero cost.

Combined with other load and haul improvements, we have increased the total material moved by more than 20% compared to 2020, with no additional equipment. And as we demonstrated back in 2019, when we sustainably resolved the blockade issues that had plagued Peñasquito for more than a decade, we will continue to make decisions for the long-term at that mine site, decisions that protect value for all of our stakeholders and create a safe, profitable and sustainable future for this large polymetallic mine.

Moving to a Tier 1 underground mine at Tanami in the Northern Territory of Australia. Tanami joined the Newmont portfolio, through our acquisition of Normandy in 2002 and over the last twenty years has produced more than 12 million ounces of gold.

Tanami is our turnaround story. We have transformed the operation from being on the divestment table in 2013 to a core member of Newmont’s portfolio and one of Australia’s great gold mines. It is a prime example of how we apply our Full Potential program to deliver value and earn the right to grow.

In 2015, after sustained performance, driven by Full Potential, that underpinned an extension in mine life, we committed to the first expansion at Tanami, involving the development of a dual decline and an expansion to the mill. Then in 2017, we committed to further invest in a gas pipeline and gas fired power plant to provide a reliable, long life energy supply.

Following the successful commissioning of both these projects, in 2020 we committed to another expansion at Tanami involving the construction of a 1.5 kilometer deep production shaft that will support gold production of around 600,000 ounces a year, reduce operating costs below $1,000 an ounce and extend mine life beyond 2040. And through the Oberon project, only 30 kilometers away from our current operation, we are actively working to open up the potential of the Tanami district and looking to grow annual production towards one million ounces a year.

Finally, heading to Ghana in West Africa and our Ahafo operation. We also acquired our Ghanaian assets through the acquisition of Normandy and assigned zero value to them back in 2002. The Ahafo mine was developed in 2006, and over the last 10 years has also benefited from our implementation of Full Potential, earning the right for the investment decisions we made in 2017, for growth through the Ahafo Mill Expansion and a move to underground mining beneath the Subika pit.

On the back of these successful projects, we are now opening up the potential of the Ahafo district through our investment in the new Ahafo North mine, which is only 30 kilometers from our existing operations. When this exciting new mine is combined with the underground potential of Subika, Apensu and Awonsu, we have an Ahafo district that will be capable of producing around 850,000 ounces of gold per year out to and beyond 2050, making it one of the world’s top gold mining districts by any measure.

Our experience with Full Potential over the last 10 years, our proven track record of synergy delivery from the Goldcorp acquisition and a team of over 120 subject matter experts undertaking due diligence all came together in May of this year to identify the $500 million in annual synergies that we have committed to deliver from our acquisition of Newcrest.

On top of the $100 million we expect to realize from the G&A synergies of this combination, we estimate approximately $200 million in value from supply chain optimization. This will come from applying best in class pricing and our existing strong relationships with key suppliers, smelters and equipment manufacturers to realize the benefits from our increased economies of scale.

We also expect to realize at least $200 million through the disciplined application of our Full Potential program and similar to what we experienced at Peñasquito over the last four years ago, the biggest value drivers are expected to come from Newcrest’s two Tier 1 operations, Cadia and Lihir.

At Cadia, we see the potential to increase average mill throughput from 33 million to 35 million tonnes per year, by optimizing maintenance schedules and working to debottleneck the processing circuit. And similar to the improvements we’ve made to the mill at Boddington over the last 10 years, Cadia has the potential to enhance the performance of the current equipment in the mill, to push through and possibly beyond nameplate capacity.

At Lihir, we see the opportunity to take what is currently a short-term mine design and bring forward a more comprehensive and long-term mine plan to improve productivity. Through this approach, Lihir would be able to improve mining rates and reduce the time spent rehandling material, ultimately leading to higher production and lower costs.

And we look forward to hosting a visit to these operations around this time next year to show you the progress that we have made and the processes we have put in place to continue improving.

Turning to our Capital Allocation Strategy. Our capital allocation priorities remain unchanged and will continue to be executed according to a clear and balanced strategy. First and foremost, to maintain the industry’s strongest balance sheet. Second, to reinvest in our business through exploration and organic growth, staying disciplined as we focus on sustainably improving margins and advancing the combined portfolio’s most profitable projects. And third, to return excess cash to shareholders through dividends.

Newmont understands the importance of shareholder returns, having returned $5.8 billion since the closing the Goldcorp transaction in April 2019 and having maintained a dividend yield above 3% for 11 consecutive quarters.

So in closing, we are very excited about this strategic transaction and the long-term value and optionality that it will bring to both sets of shareholders and stakeholders. Through this powerful combination of high-quality gold and copper assets and projects concentrated in low-risk jurisdictions, Newmont will be well-positioned to set the new standard for gold mining across the industry.

The combined business is expected to set the new sustainability standard, making us the right stewards of the world’s top-tier assets. To strengthen our industry-leading portfolio and create the best collection of Tier 1 gold and copper assets in favorable mining jurisdictions. Apply our extensive experience and proven operating model to deliver $500 million of annual synergies; target over $2 billion in cash from portfolio optimization; maintain a balanced and disciplined approach to capital allocation, leveraging our robust, global platform to generate resilient returns.

And finally, increase our investor reach, welcoming shareholders from Australia that will form an important part of our shareholder base as we look to establish and then grow our listing on the Australian Stock Exchange.

We are continuing our integration planning work with the talented and experienced team at Newcrest and we are excited to begin this next chapter of our journey to create value and improve lives through responsible, sustainable mining.

Thank you for your time today, and we’ll turn it back to Jackie.

Jackie Przybylowski

Thank you very much Tom. We have no time for questions, so thank you.

Question-and-Answer Session

Q -

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