Newmont Announces Solid Second Quarter 2020 Results

Company’s second quarter results highlight resilient operating model and significant leverage to rising gold prices from diversified portfolio of world-class assets

DENVER–(BUSINESS WIRE)–Newmont Corporation (NYSE: NEM, TSX: NGT) (Newmont or the Company) today announced second quarter 2020 results.

SECOND QUARTER 2020 HIGHLIGHTS

  • Produced 1.3 million attributable ounces of gold* and reported CAS* of $748 per ounce and AISC* of $1,097 per ounce and produced 138 thousand attributable gold equivalent ounces from co-products
  • Generated $668 million of cash from continuing operations and $388 million of Free Cash Flow* while safely managing the ramp up of operations in care and maintenance
  • Reported $3.8 billion of consolidated cash with $6.7 billion of liquidity and a net debt to adjusted EBITDA* ratio of 0.6x
  • Declared second quarter dividend of $0.25 per share
  • Returned >$2.0 billion to shareholders through dividends and share buybacks since January 2019

“In the second quarter we delivered solid financial performance with $984 million in adjusted EBITDA and $388 million in free cash flow, both substantial increases over the prior year quarter. Our focus remains on ensuring the health, safety and wellbeing of our workforce and neighboring communities as we manage through the Covid pandemic. I am very proud of our workforce for the agility and resolve that they have demonstrated during these challenging times,” said Tom Palmer, President and Chief Executive Officer. “We safely and efficiently executed restart plans at our mines previously in care and maintenance and Newmont’s world-class portfolio is well positioned to deliver an even stronger second half of 2020. The ongoing favorable gold price environment amplifies our free cash flow generation yet our discipline around capital allocation will not change as we continue to invest in profitable projects and provide shareholders industry-leading returns while maintaining a strong balance sheet.”

– Tom Palmer, President and Chief Executive Officer

COVID-19 UPDATE

  • Continued our wide-ranging controls at the Company’s operations and offices to put the health, safety, and overall wellbeing of Newmont’s people and communities above all else
  • Implemented effective quarantine and contact tracing procedures for positive cases
  • Executed safe and efficient restart plans at all five sites previously in care and maintenance, including Cerro Negro, Yanacocha, Éléonore and Peñasquito and Musselwhite
  • Delivered strong second quarter production despite a reduction of ~300Kozs gold and ~100Koz of co-product GEOs from operational downtime at sites in care and maintenance
  • Incurred $195 million of care and maintenance costs during the second quarter, which included wages, direct operating costs for critical activities and non-cash depreciation
  • Incurred $33 million of incremental Covid specific costs for activities such as additional health and safety procedures, increased transportation and community fund contributions
  • Distributed $5.7 million to date from Newmont’s $20 million Global Community Support Fund focused on employee and community health, food security and local economic resilience through partnerships with local governments, medical institutions, charities and non-governmental organizations

*See footnotes provided below, as well as the cautionary statement at end of release regarding forward-looking statements, including with respect to financial and operating outlook and expected returns to shareholders.

SECOND QUARTER 2020 FINANCIAL AND PRODUCTION SUMMARY

 

Q2’20

Q1’20

Q2’19

Attributable gold production (million ounces)

1.26

 

1.48

 

1.59

 

Gold costs applicable to sales (CAS) ($ per ounce)

$

748

 

$

781

 

$

759

 

Gold all-in sustaining costs (AISC) ($ per ounce)

$

1,097

 

$

1,030

 

$

1,016

 

GAAP Net income (US $ millions)

$

412

 

$

837

 

$

1

 

Adjusted net income (US $ millions)

$

261

 

$

326

 

$

92

 

Adjusted EBITDA (US $ millions)

$

984

 

$

1,118

 

$

679

 

Cash flow from continuing operations (US $ millions)

$

668

 

$

939

 

$

301

 

Capital Expenditures (US $ millions)

$

280

 

$

328

 

$

380

 

Free cash flow (US $ millions)

$

388

 

$

611

 

$

(79)

 

Attributable gold production1 decreased 21 percent to 1,255 thousand ounces from the prior year quarter primarily due to the sites in care and maintenance and the sale of Red Lake and Kalgoorlie, partially offset by higher grades at Porcupine and higher grades and increased throughput at Tanami.

Gold CAS2 decreased 24 percent to $940 million from the prior year quarter due to the sites in care and maintenance and Gold CAS per ounce improved one percent to $748 per ounce primarily due to lower stockpile and leach pad inventory adjustments, partially offset by lower ounces sold.

Gold AISC3 increased eight percent to $1,097 per ounce from the prior year quarter primarily due to care and maintenance costs, partially offset by lower sustaining capital spend.

Attributable gold equivalent ounce (GEO) production from other metals increased to 138 thousand ounces primarily due to the impact of the blockade at Peñasquito in North America last year, partially offset by the classification of copper as a by-product at Phoenix following the formation of Nevada Gold Mines, and lower grade and throughput at Boddington. CAS from other metals totaled $118 million for the quarter. CAS per GEO2 improved by 58 percent to $555 per ounce from the prior year quarter primarily due to higher sales at Peñasquito, partially offset by higher mill maintenance costs at Boddington and the classification of copper as a by-product at Phoenix. AISC per GEO3 improved 41 percent to $974 per ounce primarily due to lower CAS from other metals.

Net income (loss) from continuing operations attributable to Newmont stockholders for the quarter was $412 million or $0.51 per diluted share, an increase of $411 million from the prior year quarter primarily due to higher average realized gold prices, the increase in fair value of investments, lower operating costs and lower transaction and integration costs; partially offset by lower sales volumes from certain sites in care and maintenance and the sale of Kalgoorlie.

Adjusted net income4was $261 million or $0.32 per diluted share, compared to $92 million or $0.12 per diluted share in the prior year quarter. The adjustments to net income of $0.19 primarily related to changes in the fair value of investments, COVID-19 specific costs, valuation allowance and other tax adjustments, and transaction and integration costs. Adjusted EBITDA5 improved 45 percent to $984 million for the quarter, compared to $679 million for the prior year quarter.

Revenue increased five percent from the prior year quarter to $2,365 million primarily due to higher average realized gold prices, partially offset by lower gold sales volumes.

Average realized price6 for gold was $1,724, an increase of $407 per ounce over the prior year quarter; average realized price for copper was $2.91, an increase of $0.43 per pound over the prior year quarter; average realized price for silver was $14.70 per ounce, an increase of $0.50 per ounce over the prior year quarter; average realized price for lead was $0.75 per pound, a decrease of $0.01 per pound; average realized price for zinc was $0.70 per pound, and there were no zinc sales in the prior year quarter.

Capital expenditures7 decreased by 26 percent from the prior year quarter to $280 million, primarily due to lower spend from five operations being placed into care and maintenance, lower sustaining capital spend from the sale of Red Lake and Kalgoorlie, and reduced spending from the completion of Borden Underground, Ahafo Mill Expansion, and other projects in 2019. Development capital expenditures in 2020 primarily include advancing Tanami Expansion 2, Yanacocha Sulfides, Ahafo North and Subika mining method change, Musselwhite Materials Handling and conveyor installation, Éléonore Lower Mine Material Handling System, Quecher Main, and projects associated with the Company’s ownership interest in Nevada Gold Mines.

Consolidated operating cash flow from continuing operations increased 122 percent from the prior year quarter to $668 million due to higher realized gold prices, partially offset by lower sales volumes. Free Cash Flow8also increased to $388 million primarily due to higher operating cash flow and lower capital expenditures.

Balance sheet ended the quarter with $3.8 billion of consolidated cash and approximately $6.7 billion of liquidity; reported net debt to adjusted EBITDA of 0.6x9.

Nevada Gold Mines (NGM) attributable gold production was 326 thousand ounces with CAS of $797 per ounce and AISC of $979 per ounce for the second quarter 2020. EBITDA for NGM was $277 million.

PROJECTS UPDATE

Newmont’s capital-efficient project pipeline supports stable production with improving margins and mine life. Funding for the current development capital projects Tanami Expansion 2 and Musselwhite Materials Handling has been approved and the projects are in execution. Additional projects not listed below represent incremental improvements to the Company’s outlook.

  • Tanami Expansion 2 (Australia) secures Tanami’s future as a long-life, low cost producer with potential to extend mine life to 2040 through the addition of a 1,460 meter hoisting shaft and supporting infrastructure to achieve 3.5 million tonnes per year of production and provide a platform for future growth. The expansion is expected to increase average annual gold production by approximately 150,000 to 200,000 ounces per year for the first five years beginning in 2023, and is expected to reduce operating costs by approximately 10 percent. Capital costs for the project are estimated to be between $700 million and $800 million.
  • Musselwhite Materials Handling (North America) improves material movement from Musselwhite’s two main zones below Lake Opapimiskan. An underground shaft will hoist ore from the underground crushers, reducing haulage distances and ventilation costs. The project is 95 percent complete; however, full commissioning has been delayed amidst the Covid pandemic as Musselwhite operations were previously on care and maintenance. The Company expects to commission the project upon completion of the Musselwhite conveyor system by the end of 2020.

OUTLOOK

On May 19, Newmont provided revised 2020 outlook as the Company’s mines that were previously in care and maintenance began ramping up. Today, the Company is reaffirming its latest 2020 production outlook and is providing additional details on its regional and site-level guidance.

Newmont’s 2020 attributable gold production remains at approximately 6.0 million ounces and the Company expects to produce approximately 1.0 million gold equivalent ounces from co-products. Gold CAS has been lowered to $760 per ounce, while gold AISC is unchanged at $1,015 per ounce on increased sustaining capital spend.

Newmont continues to progress the majority of its development and sustaining capital projects, including Tanami Expansion 2, developing the sub-level shrinkage mining method at Subika Underground and advancing laybacks at Boddington and Ahafo. However, total 2020 capital expenditure is expected to be approximately $1.4 billion due to reductions in non-essential activities and changes to the development capital schedule for Tanami Expansion 2, which defers some expenditure to 2021.

For exploration and advanced projects, approximately 80 percent of the Company’s exploration budget is allocated to near-mine activities and the majority of those programs continued through the second quarter at sites that were operating. Newmont’s 2020 exploration and advanced project spend has been lowered to approximately $350 million as all Greenfield programs were suspended and infill drilling programs were on hold at operations in care and maintenance. The Company is currently ramping up drilling programs and preparing to restart Greenfields activities as soon as local restrictions are lifted in areas of Africa, Australia and South America. Advanced project study work for Yanacocha Sulfides and Ahafo North continues remotely.

Newmont will continue to maintain wide-ranging protective measures for its workforce and neighboring communities, including screening, physical distancing, deep cleaning, and avoiding exposure for at-risk individuals. If at any point the Company determines that continuing operations poses an increased risk to our workforce or host communities, it will reduce operational activities up to and including care and maintenance and management of critical environmental systems. Newmont’s 2020 outlook assumes operations continue throughout the remainder of the year without major interruptions.

1

Attributable gold production for the second quarter 2020 includes 74 thousand ounces from the Company’s equity method investment in Pueblo Viejo (40%)

2

Non-GAAP measure. See end of this release for reconciliation to Costs applicable to sales.

3

Non-GAAP measure. See end of this release for reconciliation to Costs applicable to sales.

4

Non-GAAP measure. See end of this release for reconciliation to Net income (loss) attributable to Newmont stockholders.

5

Non-GAAP measure. See end of this release for reconciliation to Net income (loss).

6

Non-GAAP measure. See end of this release for reconciliation to Sales.

7

Capital expenditures refers to Additions to property plant and mine development from the Consolidated Statements of Cash Flows.

8

Non-GAAP measure. See end of this release for reconciliation to Net cash provided by operating activities.

9

Non-GAAP measure. See end of this release for reconciliation.

Newmont Outlook (+/-5%)

2020

Consolidated Production (koz)

5,900

Attributable Production* (koz)

6,000

Consolidated Gold CAS ($/oz)

760

Consolidated Gold All-in Sustaining Costs ($/oz)

1,015

Consolidated Co-products (GEOs koz)

1,010

Attributable Co-products (GEOs koz)

1,010

Consolidated GEO CAS ($/oz)

605

Consolidated GEO All-in Sustaining Costs ($/oz)

945

Consolidated Sustaining Capital Expenditures ($M)

900

Consolidated Development Capital Expenditures ($M)

475

Attributable Sustaining Capital Expenditures ($M)

875

Attributable Development Capital Expenditures ($M)

425

*Attributable gold production for 2020 includes 375,000 ounces from the Company’s equity method investment in Pueblo Viejo (40%).

2020 Regional Production And Cost Overview:

 

 

Australia

 

Attributable Production (koz)

1,180

Attributable Co-products (GEOs koz)

130

Consolidated Gold CAS ($/oz)

700

Consolidated Gold All-in Sustaining Costs ($/oz)

900

Consolidated Sustaining Capital Expenditures ($M)

205

Consolidated Development Capital Expenditures ($M)

145

  • 2020 production and cost outlook unchanged from previous guidance.
  • Full Potential at Boddington improves mining rates and grade increases throughout the year with the three year stripping campaign nearing completion in the South Pit and Tanami continues to deliver solid performance.
  • Development capital decreased by $125 million due to reductions in non-essential activities being postponed and changes to the development capital schedule for Tanami Expansion 2 which defers some expenditure to 2021.

Africa

 

Attributable Production (koz)

850

Consolidated Gold CAS ($/oz)

710

Consolidated Gold All-in Sustaining Costs ($/oz)

870

Consolidated Sustaining Capital Expenditures ($M)

90

Consolidated Development Capital Expenditures ($M)

70

  • 2020 production and cost outlook unchanged from previous guidance.
  • Africa benefits from a full year of production from the Ahafo Mill Expansion which is offset by mine sequencing in both the Subika and Awonsu open pits, a change in mining method at Subika Underground and lower grades at Akyem.

North America

 

Attributable Production (koz)

1,410

Attributable Co-products (GEOs koz)

880

Consolidated Gold CAS ($/oz)

775

Consolidated Gold All-in Sustaining Costs ($/oz)

1,040

Consolidated Sustaining Capital Expenditures ($M)

275

Consolidated Development Capital Expenditures ($M)

70

  • Revised 2020 outlook includes the impacts from Peñasquito, Éléonore and Musselwhite being temporarily placed into care and maintenance.
  • The Musselwhite Materials Handling project is 95 percent complete and the conveyor system is on track to be fully commissioned by year end.
  • Éléonore production and cost outlook reflects the ongoing work to integrate the geotechnical model and updated Reserves to fully optimize a life of mine plan and unlock additional value.
  • Porcupine and CC&V outlook unchanged from previous guidance.

South America

 

Attributable Production (koz)

1,135

Consolidated Gold CAS ($/oz)

815

Consolidated Gold All-in Sustaining Costs ($/oz)

1,105

Consolidated Sustaining Capital Expenditures ($M)

110

Consolidated Development Capital Expenditures ($M)

120

  • Revised 2020 outlook includes the impacts from Cerro Negro and Yanacocha being temporarily placed into care and maintenance.
  • Cerro Negro production and cost outlook reflects the Covid-related constraints on advancing mine development to access to higher-grade ore originally planned for the fourth quarter of 2020.

Nevada Gold Mines (NGM)

 

Attributable Production (koz)

1,375

Consolidated Gold CAS ($/oz)

690

Consolidated Gold All-in Sustaining Costs ($/oz)

880

Consolidated Sustaining Capital Expenditures ($M)

185

Consolidated Development Capital Expenditures ($M)

45

  • Production, CAS & AISC for the Company’s 38.5 percent ownership interest in NGM unchanged, as provided by Barrick Gold Corporation.

2020 Outlooka

2020 Outlook (+/-5%)

Consolidated Production (Koz, GEOS Koz)

Attributable Production (Koz, GEOs Koz)

Consolidated CAS ($/oz)

Consolidated All-In Sustaining Costs b ($/oz)

Consolidated Sustaining Capital Expenditures ($M)

Consolidated Development Capital Expenditures ($M)

Attributable Sustaining Capital Expenditures ($M)

Attributable Development Capital Expenditures ($M)

North America

1,410

 

1,410

 

775

 

1,040

 

275

 

70

 

275

 

70

 

South America

1,030

 

1,135

 

815

 

1,105

 

110

 

120

 

90

 

80

 

Australia

1,180

 

1,180

 

700

 

900

 

205

 

145

 

205

 

145

 

Africa

850

 

850

 

710

 

870

 

90

 

70

 

90

 

70

 

Nevada Gold Minesc

1,375

 

1,375

 

690

 

880

 

185

 

45

 

185

 

45

 

Total Goldd

5,900

 

6,000

 

760

 

1,015

 

900

 

475

 

875

 

425

 

 

 

 

 

 

 

 

 

 

Total Co-productse

1,010

 

1,010

 

605

 

945

 

 

 

 

 

2020 Consolidated Expense Outlook ($M) (+/-5%)

General & Administrative

265

Interest Expense

300

Depreciation and Amortization

2,250

Advanced Projects & Exploration

350

Adjusted Tax Rate f,g

38% – 42%

Federal Tax Rate g

29% – 33%

Mining Tax Rate g

8% – 10%

a 2020 outlook projections used in this presentation are considered forward-looking statements and represent management’s good faith estimates or expectations of future production results as of July 30, 2020. Outlook is based upon certain assumptions, including, but not limited to, metal prices, oil prices, certain exchange rates and other assumptions. For example, 2020 Outlook assumes $1,200/oz gold, $16/oz silver, $2.75/lb copper, $1.20/lb zinc, $0.95/lb lead, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate and $60/barrel WTI; AISC and CAS estimates do not include inflation, for the remainder of the year. Production, CAS, AISC and capital estimates exclude projects that have not yet been approved. The potential impact on inventory valuation as a result of lower prices, input costs, and project decisions are not included as part of this Outlook. Assumptions used for purposes of Outlook may prove to be incorrect and actual results may differ from those anticipated, including variation beyond a +/-5% range. Outlook cannot be guaranteed. As such, investors are cautioned not to place undue reliance upon Outlook and forward-looking statements as there can be no assurance that the plans, assumptions or expectations upon which they are placed will occur. Amounts may not recalculate to totals due to rounding. See cautionary at the end of this release.

b All-in sustaining costs or AISC as used in the Company’s Outlook is a non-GAAP metric; see below for further information and reconciliation to consolidated 2020 CAS outlook.

c Represents the ownership interest in the Nevada Gold Mines (NGM) joint venture. NGM is owned 38.5% by Newmont and owned 61.5% and operated by Barrick. The Company accounts for its interest in NGM using the proportionate consolidation method, thereby recognizing its pro-rata share of the assets, liabilities and operations of NGM.

d Attributable gold production outlook includes the Company’s equity investment (40%) in Pueblo Viejo with ~375Koz in 2020; does not include the Company’s other equity investments. Attributable gold production outlook represents the Company’s 51.35% interest for Yanacocha and a 75% interest for Merian.

e Gold equivalent ounces (GEO) is calculated as pounds or ounces produced multiplied by the ratio of the other metal’s price to the gold price, using Gold ($1,200/oz.), Copper ($2.75/lb.), Silver ($16/oz.), Lead ($0.95/lb.), and Zinc ($1.20/lb.) pricing.

f The adjusted tax rate excludes certain items such as tax valuation allowance adjustments.

g Assuming average prices of $1,400 per ounce for gold, $16 per ounce for silver, $2.75 per pound for copper, $0.95 per pound for lead, and $1.20 per pound for zinc and achievement of current production and sales volumes and cost estimates, we estimate our consolidated adjusted effective tax rate related to continuing operations for 2020 will be between 38%-42%.

2020 Site Outlooka as of July 30, 2020

 

Consolidated Production (Koz)

Attributable Production (Koz)

Consolidated CAS
($/oz)

Consolidated

All-In Sustaining Costs b

($/oz)

Consolidated Sustaining Capital Expenditures ($M)

Consolidated Development Capital Expenditures ($M)

 

 

 

 

 

 

 

CC&V

285

 

285

 

1,000

 

1,175

 

35

 

 

Éléonore

190

 

190

 

920

 

1,350

 

40

 

10

 

Peñasquito

510

 

510

 

565

 

770

 

130

 

 

Porcupine

325

 

325

 

795

 

975

 

40

 

10

 

Musselwhite

95

 

95

 

1,230

 

2,020

 

30

 

50

 

 

 

 

 

 

 

 

Cerro Negro

250

 

250

 

785

 

1,100

 

40

 

30

 

Yanacocha c

335

 

175

 

975

 

1,430

 

20

 

90

 

Merian c

445

 

335

 

715

 

840

 

50

 

 

Pueblo Viejo

 

375

 

 

 

 

 

 

 

 

 

 

 

 

Boddington

700

 

700

 

855

 

1,015

 

115

 

15

 

Tanami

480

 

480

 

455

 

685

 

85

 

130

 

Other Australia

 

 

 

 

5

 

 

 

 

 

 

 

 

 

Ahafo

480

 

480

 

810

 

960

 

60

 

40

 

Akyem

365

 

365

 

575

 

695

 

30

 

5

 

Ahafo North

 

 

 

 

 

25

 

 

 

 

 

 

 

 

Nevada Gold Mines d

1,375

 

1,375

 

690

 

880

 

185

 

45

 

 

 

 

 

 

 

 

Corporate/Other

 

 

 

 

30

 

 

 

 

 

 

 

 

 

Peñasquito – Co-products (GEO) e

880

 

880

 

560

 

890

 

 

 

Boddington – Co-product (GEO) e

130

 

130

 

910

 

1,105

 

 

 

 

 

 

 

 

 

 

Peñasquito – Zinc (Mlbs)

360

 

360

 

 

 

 

 

Peñasquito – Lead (Mlbs)

190

 

190

 

 

 

 

 

Peñasquito – Silver (Moz)

28

 

28

 

 

 

 

 

Boddington – Copper (Mlbs)

55

 

55

 

 

 

 

 

a 2020 outlook projections shown above are considered forward-looking statements and represent management’s good faith estimates or expectations of future production results as of July 30, 2020. Outlook is based upon certain assumptions, including, but not limited to, metal prices, oil prices, certain exchange rates and other assumptions. For example, 2020 Outlook assumes $1,200/oz gold, $16/oz silver, $2.75/lb copper, $1.20/lb zinc, $0.95/lb lead, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate and $60/barrel WTI; AISC and CAS estimates do not include inflation, for the remainder of the year. Production, CAS, AISC and capital estimates exclude projects that have not yet been approved. The potential impact on inventory valuation as a result of lower prices, input costs, and project decisions are not included as part of this Outlook.

Contacts

Media Contact

Eric Colby

303.837.5724

eric.colby@newmont.com

Investor Contact

Jessica Largent

303.837.5484

jessica.largent@newmont.com

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Author: dmnnewswire