紐蒙特黃金公司 (NEM) 2021 Q1 法說會逐字稿

Good morning and welcome to Newmont's First Quarter 2021 Earnings Call. (Operator Instructions)

Please note this event is being recorded.

I would now like to turn the conference over to Eric Colby, Vice President of Investor Relations. Please go ahead.

Good morning and thank you for joining Newmont's First Quarter 2021 Earnings Call. Today on the call, we have Tom Palmer, President and Chief Executive Officer; Rob Atkinson, Chief Operating Officer; and Nancy Buese, Chief Financial Officer. They will be available to answer questions at the end of the call along with other members of the executive team.

Turning to Slide 2. Please take a moment to review the cautionary statement shown here, and refer to our SEC filings, which can be found on our website. I'll turn it over to Tom on Slide 3.

Thanks, Eric. Good morning and thank you all for joining our call.

Before we begin, I'd like to take a moment to acknowledge the 12 colleagues that we have lost to the COVID pandemic over this last year. For each death, we have mobilized the fatality investigation team and utilized the same methodology we do for other employee or contractor fatalities. The intent of each investigation was to understand if any of our COVID critical controls require change and ensuring that we learn and share our findings globally.

These losses have had a profound impact on the entire Newmont family. And it is with great humility that we are reminded that the safety and well-being of our workforce and host communities must come above all else.

Turning to Slide 4 for a summary of our quarterly performance. Our safety and sustainability framework is at the core of how we manage our business. And I'm proud that Newmont continues to lead the industry with our ESG practices.

In March, we delivered a first for the gold industry, with production coming from an autonomous haul fleet. Our investment in autonomous haul trucks not only improves safety and productivity at Boddington but also serves as a base case for replication at other operations and projects across the Newmont portfolio.

We also entered into a $3 billion sustainability-linked revolving credit facility, one of the first in the mining industry.

By aligning our financial strategy and ESG performance, we are holding ourselves accountable in demonstrating Newmont's unwavering commitment to leading ESG practices.

During the first quarter, our world-class portfolio produced 1.5 million ounces of gold and 317,000 gold equivalent ounces from copper, silver, lead and zinc, in line with our full year outlook and positioning Newmont to deliver a stronger performance, as expected, in the second half of the year.

We generated significant operating cash flow of $841 million, and free cash flow of $442 million, of which $438 million is attributable to Newmont. And in March, we announced the acquisition of GT Gold, expanding our industry-leading project pipeline to include the Tatogga project located in the highly sought-after Golden Triangle district of British Columbia.

We continue to apply a disciplined approach to our capital allocation priorities and deliver on our commitments. Yesterday, we declared a first quarter dividend of $0.55 per share, set within our established dividend framework and consistent with our fourth quarter dividend. Our first quarter dividend demonstrates our confidence in the strength of our business and continued commitment to predictable, stable and sustainable shareholder returns.

We maintained a net debt-to-EBITDA ratio of 0.2x and completed the redemption of our 2021 senior notes in April, reducing our debt outstanding by $550 million with available cash.

We also continue to invest in and develop our most profitable near-term projects, including Tanami Expansion 2, Ahafo North, the mining method change at Subika Underground and Yanacocha Sulfides.

Shifting now to safety and our continued focus on fatality prevention on Slide 5.

More than a year ago, Newmont made a symbolic change, stepping away from our industry's traditional use of a lagging personal injury rate in our bonus programs to measures that are focused on managing the critical controls that must be in place at all times to prevent fatalities.

During the first quarter, we completed 65,000 conversations by leaders in the field that were focused on these critical controls, proactively identifying and managing potential risks that could lead to a fatality. This is an increase of nearly 60% since last quarter and demonstrates our commitment to the preventative measures we are implementing at Newmont.

As another example, fatigue has been identified as a critical risk and is frequently a factor in our investigations into potentially fatal events. Fatigue has not been a traditional focus in our industry. Typically, it has been managed through administrative controls such as training and checklists. Well, companies have looked to technology as a silver bullet to address the issue.

At an organizational level, we knew we needed to do more. We needed to make fundamental changes to our rosters, start times and accommodation to reduce this significant risk exposure. We have recently completed the construction of new care facilities as part of our Tanami 2 expansion. These facilities were designed to provide the opportunity for quality sleep and have greatly reduced commute times for our team members. We have also completed upgrades to care facilities at Yanacocha, Peñasquito, Cerro Negro and Merian, ensuring our team members have the appropriate privacy and accommodation to get proper sleep.

As a result of these investments in our care facilities, along with our well-being programs around our global portfolio, we have seen an 80% reduction in fatigue-related incidents at Newmont since 2019. We will continue to make these changes to ensure that our team members can return home safely to their families at the end of their shift at work.

Turning now to our portfolio on Slide 6. Among our 12 operating mines and 2 joint ventures, we have 9 world-class assets, each of which delivers more than 500,000 gold equivalent ounces per year at all-in sustaining costs of less than $900 per ounce and with a mine life exceeding 10 years. Importantly, all are located in top-tier jurisdictions that we define as countries classified in the A and B ratings ranges by each of Moody's, S&P and Fitch. Underpinning our asset base are the industry's largest gold reserves, including 94 million ounces of gold and 65 million gold equivalent ounces from other metals.

Our portfolio is also enhanced by the gold industry's best exploration pipeline of both greenfield and brownfield opportunities managed through our proven integrated operating model. One of the benefits of this integration is that we do not reinvent the wheel and duplicate effort. For example, with the majority of our exploration activities occurring near existing operations, we have familiarity not only with the geology and terrain but also the permitting, regulatory and community relationships surrounding each of our operations. We firmly believe that we have the best portfolio to generate sustainable returns from our world-class, responsibly managed assets located in the best gold mining jurisdictions.

Turning to Slide 7. Our portfolio will produce steady gold production of more than 6 million ounces per year through at least 2030, 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 Peñasquito and copper at Boddington and Yanacocha. Combined, we will deliver nearly 8 million gold equivalent ounces per year for the next decade, the most of any company in our industry.

Moving to Slide 8 for a look at our project pipeline. Our project pipeline is unmatched in the gold industry and is one of the best in the mining industry. There is significant value to unlock as we optimize and advance our longer-term projects and lay the pathway to steady production and cash flow well into the 2040s.

As you can see, in addition to our highly prospective gold projects, we have significant organic exposure to gold-copper porphyries, including Norte Abierto, Nueva Unión and Galore Creek. In fact, if you assume that just one of these 3 mega projects come into our production profile at the back end of this decade, Newmont's total production would be around 15% to 20% copper, providing us a natural exposure to a metal of growing importance for reducing carbon emissions and facilitating the ongoing transition to a new energy economy.

It's also important to note that this pipeline does not include the various laybacks that will also extend mine life at our current open pit operations, including Akyem, CC&V and Porcupine.

You'll also see that we have added Tatogga to our project pipeline, another exciting gold/copper asset that I'll cover in more detail on Slide 9.

In March, we announced the acquisition of GT Gold. The consolidation of this asset is a demonstration of Newmont's clear focus on our long-term strategy to build a portfolio of world-class assets located in the world's best mining jurisdictions. Our initial equity investment in GT Gold in 2019 was a stepping stone that enabled us to perform due diligence in the area and gain considerable insight into the potential of the Saddle North deposit in Tatogga property.

We are committed to continue building a constructive and respectful relationship with the Tahltan Nation, including the community of Iskut. We understand and acknowledge that Tahltan consent is necessary for advancing the Tatogga project, and we will partner with the Tahltan Nation at all levels and with the government of British Columbia to ensure a shared path forward.

The deposit will be developed as an underground mine with a block cave mining method. And in addition, access from the valley floor that you can see in this picture will also enable us to reach the ore body relatively quickly.

A very important feature of this project is that the combination of an underground mine and an ability to leverage the hydropower infrastructure that's in place today will result in a low-carbon-intensity operation, supporting our industry-leading greenhouse gas reduction targets.

The Tatogga project, including the primary Saddle North deposit, has the potential to contribute significant gold and copper annual production at attractive all-in sustaining costs over a long mine life. In addition to the known deposits of Saddle North, there are further exploration opportunities throughout the land package.

The acquisition of Tatogga adds to Newmont's existing interest in this area and builds on our 50% ownership in the Galore Creek project. The transaction is expected to close in the second quarter, and we look forward to providing updates on this highly prospective project in the future.

With that, I'll hand it over to Rob to discuss our operational performance on Slide 10.

Thanks, Tom. Before I start, I'd like to recognize that there is significant efforts that continue to be applied at all of our operations in order to manage COVID and to keep our teams safe and healthy. It is important to realize that this pandemic has some ways to run, and these efforts will need to continue for many months to come.

Turning to Slide 11, I'll give an update on Africa's performance.

Our assets in Africa delivered another strong performance in the first quarter. Akyem maintained its momentum from quarter 4, delivering a strong first quarter from higher grades and improvements to the mill. We increased mill efficiency and overall plant performance during the first quarter, improving throughput by 3% whilst also reducing energy consumption by 4%. These improvements are driven by full-potential projects and are an example of how we continue to find innovative solutions even at our mature operations. The site is well positioned to deliver solid production throughout the year, expecting to reach its highest production and lowest costs during the fourth quarter.

Ahafo delivered higher surface tonnes mined due to mine sequencing improvements that resulted in an extra bench being mined at Awonsu, helping to offset lower grades during the first quarter.

We continue to progress the development of our new mining method at Subika, sublevel shrinkage, which will increase tonnage, improve productivity and reduce mining costs. The team has commenced stoping ahead of schedule, and we completed our first 2 ore blasts this month, a major milestone for the project.

As the sublevel shrinkage project progresses during 2021, we expect to see improvements in grades throughout the year and a 50% increase in ore tonnes mined by the fourth quarter. In addition, we expect to reach higher ore grades from the open pit operations in the second half of the year, positioning Ahafo to deliver a very strong finish in 2021.

Finally, at Ahafo North, we continue to advance the permitting process with the Guinean EPA. I'm pleased to announce that we have completed the environmental impact study and paid the invoice for the main permit this month, putting us on track for a full funding decision in July of this year after the receipt of the tailings permit. All other aspects of this project are proceeding well.

Turning to South America on Slide 12. South America has been the region most impacted by the virus, and we continue to see the most significant impacts in Argentina and Peru. We remain focused on our safety protocols to protect the health and well-being of our workforce and communities as we continue to mitigate the impacts of travel restrictions caused by the virus. We do expect the impacts due to COVID to continue for some time until vaccinations are available and be administered in large quantities.

Merian was the best-performing asset in South America despite heavy rainfall during the first quarter, which impacted production within the mine. The team continued to utilize an ore blending strategy to optimize mill performance, resulting in increased tonnes processed whilst maintaining stable grades. As the year progresses, Merian will transition from softer saprolite to harder ore, which will result in higher production through improved grades but will be partially offset by lower mill throughput.

In Cerro Negro, we have continued to work closely with government representatives and other key stakeholders as we manage our operations through the evolving pandemic. As we reviewed the number of COVID cases in the country and the increasing case numbers at our own site, we made the decision to temporarily suspend operations for 5 days in January and 7 days in March to reduce the spread of the virus. While these decisions impact first quarter production, the health and safety of our workforce remains our first priority. And despite stoppages during the quarter, we've been able to resume developments at San Marcos and made good progress on the tailing storage facilities expansion.

Cerro Negro continues to focus on safely ramping up site activities, increasing camp capacity and appointing a new dedicated team to optimize the important and complex shift changes.

Yanacocha has also experienced significant challenges due to COVID. And due to the pandemic, productivity will likely be impacted throughout the year. Despite the challenges from the virus, Yanacocha delivered higher-grade material mined from the Quecher Main and Carachugo pits. These tonnes were placed on the leach pads during quarter 1, which we expect to result in higher production in future quarters.

In February, we decommissioned the oxide mill and completed our transition to leach-only operations as planned, ahead of the development of Yanacocha Sulfides, which will extend Yanacocha's operations well beyond 2040. We continue to advance the Sulfides project and are currently working through our internal peer review process in preparation for full funds approval later in the second half of 2021.

Yanacocha is a world-class asset in Newmont's portfolio with significant further prospectivity, and we look forward to bringing you this next chapter in Yanacocha's long history of profitable production.

Turning to North America, Slide 13. Peñasquito delivered another strong performance and achieved record co-product sales of nearly 300,000 gold equivalent ounces in the first quarter due to higher grades and recoveries. The site also set a new monthly record for concentrate transport and shipping, loading and selling over 125,000 tonnes in March.

Full Potential continues to deliver improvements to our mining and mill performance at Peñasquito. And as an example, we've increased the average payload for our haul trucks by 17 tonnes per load. This translates to an additional 12 million tonnes moved per year for next to 0 cost, an increase of over 6%. The site is well positioned to remain a strong performer throughout 2021 and is also currently exploring our extensive land package for future development opportunities.

CC&V delivered lower grades and experienced geochemistry challenges during the first quarter. And as a result, ore that was planned to be milled was redirected to the leach pads. Grade improvements are expected during the second half of the year, helping to offset the challenges experienced this quarter.

At Musselwhite, we continue to closely monitor the impacts from COVID in Ontario and have made the decision to temporarily suspend operations for 5 days in April to reduce the spread of the virus. Despite the impacts from COVID, which drove changes to the planned mining sequence, grade and ore tonnes mined continued to improve over the prior quarter. We are also continuing our Full Potential work in Musselwhite, with the largest focus on increasing development rates and driving productivity as the year progresses.

At Porcupine, ongoing ground control rehabilitation to the Hoyle Pond underground mine, coupled with mill and equipment maintenance, has resulted in more tonnes mined and processed during the quarter. We have begun the implementation of our Full Potential program in Porcupine, which will deliver efficiency improvements in the second half of the year.

Éléonore continues to make strong improvements to performance and productivity, increasing underground development rates to an average of over 40 meters per day by the end of the first quarter. This is an improvement of 25% from 2020. In addition, the site has deployed teleremote marking equipment for the first time, increasing tonnes mined, efficiencies and the safety of our workforce. Éléonore will continue to be a stable contributor during 2021 as we expect it to deliver steady production increases from higher tonnes mined and processed throughout the year.

It's also important to note that the site is making good progress in the fight against COVID, and I'm pleased to report that 70% of Éléonore workforce has been vaccinated so far.

Turning to Australia on Slide 14. Tanami delivered a consistent performance despite heavy rainfall, increasing ore tonnes mined during the quarter. For the rest of 2021, we will continue to monitor impacts of COVID on the Northern Territory due to the potential closure of state and territory borders. But we expect their production will steadily increase as grade improves throughout the year. In addition, the team continues to advance Tanami Expansion 2, supporting the site's future as a long-life, low-cost and very efficient producer.

We recently completed construction of the camp facilities and the excavation of the upper section of the production shaft, putting us on track to deliver significant ounce, cost and efficiency improvements in the first half of 2024.

At Boddington, we delivered a solid quarter, in line with our expectations and full year guidance. Planned maintenance was completed during the first quarter, ensuring that the plan continues to perform at high levels.

As we head into the second half of the year, as highlighted in our previous guidance, we expect to achieve higher grades, improved throughput and increased ore tonnes mined due to efficiencies from Autonomous Haulage and improved mill processing. As you can see in the picture, we are well on our way to operating the world's first open pit gold mine with an autonomous truck fleet, and I will provide more details on the project on Slide 15.

I'm pleased to announce that the first Boddington AHS haul trucks went live in March of this year, and we have successfully started the first phase of our transition to a fully autonomous haulage fleet, which will improve safety and extend mine life at one of our core assets. Today, we are operating 4 trucks hauling ore from stockpiles to the crusher, and then 4 additional trucks completed the final testing. We expect to expand the use of autonomous units in the picture in the second quarter, deploying the entire fleet of 36 trucks by the end of September.

As a reminder, the AHS project was approved in February of 2020, meaning the project was planned, constructed and able to achieve first production in just over a year. Being on track to deliver this project on time and on budget will be a huge accomplishment, especially during a global pandemic. And I'd like to thank our team at Boddington and our partners at Caterpillar, including their dealership, WesTrac, for their ongoing dedication and drive during such an unprecedented time. We have received very strong support from Caterpillar throughout the project, and we look forward to working together on future endeavors.

In addition to the exceptional delivery of this project, we have already seen strong performance over the last month from these machines and the operating team. The fleet has been running nonstop since going live in March, eliminating stoppages from shift changes, mill and toil breaks, fatigue breaks, which increased its productivity. And already, the new vehicles have reached the first major milestone, moving over 1 million tonnes in less than 6 weeks.

It's also worth noting the significant productivity improvements that we will achieve with this fleet will also translate to lower fuel costs and consumption, reducing our carbon emissions at Boddington and supporting Newmont's climate initiatives.

But most importantly, the use of these autonomous trucks reduces the exposure that our workforce has to potential vehicle interactions, helping us to further reduce fatality risks and to ensure that our team members return home safely at the end of their shift at work.

The implementation of the industry's first Autonomous Haulage fleet will be a major milestone for Newmont and the gold industry as a whole. We will look to replicate this technology, training and experience at other sites around the globe, leveraging our team of experts and the lessons that were learned at Boddington. And we will also look to integrate further autonomous solutions both at future open pits and on the [newer mines] as we plan and develop the assets in our project pipeline, ensuring that these important improvements to safety and productivity are applied across the global business.

And with that, I'll hand it over to Nancy on Slide 16.

Thanks, Rob. Turning to Slide 17 for the financial highlights.

During the first quarter, Newmont delivered solid results with $2.9 billion in revenue, an increase of nearly $300 million from the prior year quarter, driven by higher metal prices; adjusted net income of $594 million or $0.74 per diluted share; adjusted EBITDA of nearly $1.5 billion, an increase of 30% from the prior year quarter; and strong free cash flow of $442 million, which includes unfavorable working capital changes of over $325 million in the first quarter primarily driven by nearly $400 million of tax payments attributable to 2020.

We declared a first quarter dividend of $0.55 per share or $2.20 per share on an annualized basis, demonstrating our continued commitment to sustainable returns and consistent with our fourth quarter dividend. Our dividend puts Newmont in the top quartile of the S&P large-cap dividend payers and provides a yield of approximately 3.5% on our current share price.

Turning to Slide 18 for a review of our adjusted earnings per share in more detail. First quarter GAAP net income from continuing operations was $538 million or $0.67 per share. Adjustments included $0.14 related to the unrealized mark-to-market losses on equity investments measured as of March 31; $0.05 primarily related to our sale of our interest in TMAC, which closed in January of this year; $0.01 related to reclamation and remediation adjustments at historical mining sites; and $0.03 related to tax adjustments and valuation allowance.

Taking these adjustments into account, we reported first quarter adjusted net income of $0.74 per diluted share an increase of $0.34 over the prior year quarter.

One difference from 2020 that we would like to point out is that adjustments to net income do not include $21 million of incremental COVID costs. Adjusting for these costs would have resulted in $0.02 of additional net income in the first quarter, and we expect these costs to continue throughout the year as we protect against the impacts of the pandemic at our operational sites.

Turning now to Slide 19. Using our conservative $1,200 gold price assumption, Newmont expects to generate $3.5 billion of free cash flow over a 5-year period. In addition, 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, enabling us to maintain flexibility in our balance sheet for debt repayments and opportunistic M&A, in addition to providing industry-leading shareholder returns.

Turning to Slide 20 for more details about our dividend. Our dividend framework provides shareholders with a stable base annualized dividend of $1 per share at a $1,200 gold price, along with the potential to receive 40% to 60% of the incremental attributable free cash flow generated at gold prices above our plan. This range provides Newmont with the flexibility to maintain a stable and consistent dividend payout even when there are fluctuations in gold price.

We will continue to review our dividend each quarter with management and our Board, evaluating gold prices and Newmont's projected performance semiannually to give us maximum flexibility in determining our dividend within the framework.

The first quarter dividend declared yesterday was consistent with our fourth quarter dividend calibrated at an $1,800 gold price assumption and a conservative 40% distribution of incremental free cash flow. Our dividend framework continues to be our primary vehicle for returning cash to our investors, and Newmont continues to lead the industry in shareholder returns, delivering $4.50 per share through dividends and share buybacks since 2019.

Turning to Slide 21. We continue to drive the business with our clear capital allocation priorities, which include reinvesting in our business through disciplined investments in exploration and organic growth projects, returning cash to shareholders and maintaining our financial strength and flexibility.

During the first quarter, we delivered on each of these priorities with our investments in the first Autonomous Haulage fleet in the gold mining industry, improving safety and productivity at Boddington; progressing our profitable reinvestment in the business at the Tanami expansion and advancing Ahafo North and Yanacocha Sulfides; announcing the acquisition of GT Gold; maintaining our industry-leading dividend of $2.20 per share on an annualized basis and announcing a new $1 billion share buyback program -- we chose not to repurchase shares during the first quarter and continue to monitor for opportunities; maintaining a net debt-to-EBITDA ratio of 0.2x and completing the redemption of our 2021 senior notes in April; reducing our debt outstanding by $550 million with available cash; and maintaining financial flexibility with the completion of a $3 billion sustainability-linked revolving credit facility, one of the first in our industry and a demonstration of our commitment to leading ESG practices.

Under the new facility, the company will incur pricing adjustments on drawn balances based on sustainability performance criteria measured through ratings published by MSCI and S&P Global, aligning our financial strategies and our ESG performance.

As we look ahead to the second quarter, we are confident in our ability to continue delivering strong results and free cash flow to maintain our disciplined approach to capital allocation.

With that, I'll hand it back to Tom on Slide 22.

Thanks, Nancy. And turning to Slide 23.

Newmont continues to be the world's leading gold company, and I am confident that our world-class portfolio and robust project pipeline have positioned Newmont to deliver on our commitment of creating value and improving lives through sustainable and responsible mining.

With that, I'll turn it over to the operator and open the line for questions.

(Operator Instructions) And the first question will come from Fahad Tariq of Crédit Suisse.

Two questions. First, it sounds like across the portfolio, a consistent theme is second half-weighted production. But I'm trying to figure out how much of that is sequencing and grade driven and how much of it is from the South American COVID issue that you mentioned and also the Musselwhite COVID issue that you mentioned. So any color there would be helpful, grades versus kind of COVID impact in the first half.

Thanks, Fahad. The needle movers in our portfolio are Ahafo, Boddington and Peñasquito. Peñasquito gold production was pretty flat through the 12 months, roughly 50-50 first half to second half. What's going to really move the dial in the second half is mine sequencing and grade at both Boddington and Ahafo. So Boddington, we've been laying back for the fifth layback of the South Pit of Boddington now for 3.5 years in the second half. We get access to the high-grade gold and copper and the benefit of Autonomous Haulage, which will be fully implemented by the second half. So you'll see that flow through in the second half as we get to that higher grade.

And at Ahafo, combination of the new underground mining method sublevel shrinkage will bring through more volume and improved grade, and then you've got improved grade from the Subika open pit as well. So it's largely mine sequence and grade driven. And it's those 3 operations that we are able to deliver on that second half performance.

Okay, great. That's clear. And just my second question, there was a media article this morning talking about the GT Gold Tatogga project and the local indigenous groups perhaps not really being open to the project. Maybe talk about the approach there, more specifics. And like historically, what levers has Newmont used to kind of get that buy-in?

Yes. Thanks, Fahad. So our relationship with the Tahltan actually started several years ago with our acquisition of 50% of the Galore Creek project in that part of British Columbia. So we have established relationships that we look to grow and build on with all representatives of the Tahltan Nation.

And when you look back at our long history of social responsibility, it is very much grounded on building those relationships, understanding issues and concerns on how we can work together. So we fully understand, we fully acknowledge that we will need Tahltan consent to advance that project, and we will be endeavoring to work with them respectfully and engage with the leadership of those various communities to find a shared pathway forward. And that is very much the approach that Newmont takes wherever we're working, so.

Your next question comes from Tyler Langton of JPMorgan.

I guess start with just sort of Peru and Yanacocha, I guess there seems potentially some sort of increasing political risk there. I guess, I mean, you obviously have some time before a full funds decision. But I guess do those developments kind of give you any pause? An could you also just remind us, do you have any sort of stability agreements when it comes to sort of taxes and royalties or sort of -- or other rights?

Yes. Thanks, Tyler. The -- I mean, we've been operating in Peru for 30 years. We basically were in Peru before democracy was in place. And so we've worked through what has been a colorful democracy in Peru's modern history. This is just another chapter in that journey. So we will monitor the presidential elections carefully and how the Congress and ultimately the new President work together. We have a very successful 30 years in Peru.

When we think about making investments like Yanacocha Sulfides, we think about making investments which were, for a project by sulphides, literally for decades with the quality of the sulphide deposit in and around the Yanacocha property.

So we'll look and understand these events coming up in the next month or 2 that will factor into our process of internal discussions with our Board and our joint venture partners. And then ultimately, I look forward to being able to make full funds decision and to progress sulfides and to have that delivering great returns for Newmont shareholders and the community in and around Yanacocha for a long, long time to come.

Okay. That's helpful. And then just switching to Peñasquito. I guess sort of production kind of did quite well in the quarter, and both sort of cash costs and all-in sustaining costs were sort of a decent amount below sort of the annual guide. Can you just kind of remind us your expectations for that mine for the year and kind of what to kind of expect in the following quarters?

Yes. I'll get Rob to provide some color on that. It's a pretty steady performance. And we certainly look at -- it's a polymetallic mine, so we certainly look at developing that mine and managing on the basis of the [porphyries] that it's producing. But it's pretty steady performance through the year. Rob, if you want to provide a bit more color to Tyler.

Thanks, Tyler. And I'd really just back up what Tom said is that the best way to describe Peñasquito is steady performance that -- where we get good gold 1 quarter, we go into other elements another quarter. But the key thing about Peñasquito is that the mill is performing well, the mine is performing well. The team is performing well and managing COVID as well as possible in a country which has suffered huge impacts due to the pandemic. But it really is going to be a very steady, rather successful year at Peñasquito.

Our next question comes from Josh Wolfson of RBC.

So for the 2021 outlook, the comment, I guess, is that there's the assumption of no major COVID interruptions. The commentary on the call earlier was such that there's obviously a higher degree of interruptions in South America and then a brief stoppage, I guess, at Musselwhite. How would sort of those interruptions compare to some of the caveats within guidance?

Thanks, Josh. I think we've certainly seen like a number of impacts at both Yanacocha and Cerro Negro, and it's Peru and Argentina across our portfolio of like countries where we're seeing the greatest impact from COVID. We get better and better and better at managing our protocols. And Rob mentioned in Cerro Negro now they're dedicated to managing shift changes, which is a very, very complex process in Argentina, and how you're doing all your screening and monitoring and ensuring that they're bringing up the workforce in for their shift, but that they're clear of the virus and quarantine if we do have a case. So it's really monitoring those 2 operations. Mexico as a country is still struggling with the virus, but we've got very, very good protocols in place throughout that country.

The United States, fortunately, is starting to really turn the tide. We've seen the recent events in Ontario. I'm confident that the Canadian government will address those. Through Australia and Ghana, we're seeing the pandemic managed very, very well.

So I think we're still going to need to be -- have a chronic unease and be continuing to maintain the discipline around our protocols. As vaccines become available, encouraging our workforce to take the vaccines, supporting the governments where we can with COVID out so that we can have an improving trend over time. So I believe we've got the protocols and the discipline in place to be able to manage COVID and maintain our guidance through the course of this year.

And then just maybe a question on some of the trends we're seeing. We've seen commentary at least from -- maybe not as much the gold sector but other resource companies about labor tightness in certain regions and then, obviously, with higher commodity prices globally. Is there any commentary you could provide on what trends you're seeing across the portfolio on labor and costs?

Yes. Thanks, Josh. monitoring that closely. Labor costs make up about 50% of our cost base. That includes contracted services. We include an assumption for labor escalation in our budgets, and then we flow that through to our guidance. So we've got some provision for that.

The key indicator -- leading indicator I look for in seeing whether we may be seeing some wage pressure is voluntary attrition. It's pretty healthy across our business. Some way, our response to the pandemic and the fact that we chose and we continue to choose to manage the health and safety of our workforce and local communities above everything else has served us well in terms of the support that we have from our workforce.

But the areas that I'd be monitoring more closely on labor -- risk of labor escalation is Australia. Pretty hot iron ore market as you see iron ore prices hit an all-time high, a West Australian government that is locking borders and encouraging the workforce to come from within that state, which puts pressures on the supply of labor.

We're very fortunate we've got very robust workplaces at both Boddington and Tanami, good leadership. Healthy levels of attrition and projects like Autonomous Haulage just mitigate that very significantly where your truck fleet and a labor force of truck fleet is one of the greatest source of the labor.

So I'm monitoring intently, but the voluntary attrition numbers and leading indicators are still pretty healthy across our business.

Our next question comes from Greg Barnes of TD Securities.

Yes. Tom, I guess this is a higher-level question, but when I look at your portfolio of mega projects, as you called them earlier on, it's pretty striking how much copper is there, and you said you could see yourself getting to 20% copper exposure over time. Is that a conscious decision over the longer term to diversify the production base somewhat? is it a function of the projects that are available to you that look attractive to you that you are adding to the portfolio like Tatogga?

Yes. Thanks, Greg. It's still very much a clear focus on gold as the core of our business. But organically, we are seeing that as you look for the best gold projects, they come with -- particularly when you look at our world-class definition, we'd look for those long-life projects and you look for those projects in the jurisdictions we're prepared to work in. They come with copper. So it's more of an organic benefit from that. We focus on the right-sized projects in the right jurisdictions. So the Tatogga project had some nice copper with it. The Yanacocha has some nice copper with it. And several of those mega projects, particularly the Yanacocha/Galore Creek bring with them some nice copper. So it's more of an added benefit. But as we say, it's got to come on at a nice time as the world go through their energy transition.

And just on Tatogga, when I look at the acquisition price and if I assume you used a $1,200 long-term goal, that would have implied a pretty healthy long-term copper price. How did you approach the acquisition price for GT?

Well, I've got Eric sitting opposite me. He has shepherded that one through. So why don't I get Eric just to give you a bit of color on that, Greg?

We've -- obviously, we'll look at multiple price scenarios. So $1,200 would have been one of them. Our base copper price at the time, I think, was $2.75. Obviously, the copper price and the outlook is quite strong. So we didn't have a single case that we looked at. As you pointed out, there's a fair bit of copper. There's a fair bit of gold. So it's really the interplay of the 2 metals across different scenarios.

As we've, I think, highlighted, we see potential for Tatogga to be a world-class asset for us. And that means a long life, pretty significant production at good cost.

Tom pointed out on the call that the geometry is pretty attractive to an efficient block cave. And so all of that was attractive to us when making the acquisition.

Our next question comes from Tanya Jakusconek of Scotiabank.

Congratulations on those trucks at Boddington. I love the color. Hope to see them one day. Just wanted to have a few questions, if I could. I wanted to follow up on Josh's question on inflation.

You talked about the workforce, Tom, in terms of watching movement there. Can you talk a little bit about if you're seeing any inflation in your capital or costs from steel and/or other materials, please?

Thanks, Tanya. So materials and energy, if labor makes up 50%, materials and energy is the next 30% to 40%. And again, we leverage our global portfolio entering into long-term contracts and strategic relationships with supply. So that goes a long way to mitigating the impacts of near-term inflation where we've got rise and fall built into those contracts and stability. So it's a very important part of the Newmont story and the strength of our portfolio and how we look to run our business.

We are seeing some pressure on steel generally around [writing media] (52:20) that we're watching carefully, and some pressure on freight, particularly with -- as you see the amount of concentrate that we move out of Peñasquito. So we're watching those carefully.

But in terms of capital projects, the -- we've already accounted for a lot of that in terms of the Tanami expansion and the move to Australian steel. So that's been taken up in previous updates to guidance.

As we move into Ahafo North, a lot of the work for the -- once we get to full funds approval for the next 12 to 18 months in earthworks and then the civil works before we start to bring in steel. So we're confident that with the estimates that we've got, what we'll bring forward for full funds is going to account for any escalation around steel. And similarly, as we start to button up the Yanacocha Sulfides go through our internal peer reviews, then I'll bring that forward to full funds We are including in our estimates and in the contingency some estimates for where they still may move.

So we do anticipate there will be some pressure on steel for our capital projects and making sure we account for that in the budgets that we put forward for full funds approval.

Okay. And nothing in cyanide at all? You're not seeing any inflation pressures there?

No, Tanya.

Okay, great. And I guess just a continuation on the themes that I keep asking. Maybe just an update on any changes in royalties, taxation in any jurisdictions that you operate in that you're hearing on, including the U.S.

No. No, it's all -- I mean, it's -- again, it's a key feature of our strategies where we choose to have our operations. That brings with it lot of stability around our investment agreements, whether in price or royalty regimes. So we're not seeing any pressure on that front across our jurisdictions.

Yes. Okay. And then just my last question before I hand it over to someone else is just wanted to make sure that the guidance that you provided with your Q4 release, which was that production was going to be 47%, 48% expected in the first half and 52%, 53% in the second half still is intact.

It is. I'd say I would look more to 47% in the first half and 53% in the second half. And it's going to be dominated by Ahafo and Boddington reaching the greater volumes and higher grade, so -- as you move through the third quarter into the fourth and the second half. So I'd sort of factor in 47%, 53%.

Okay. And if I could squeeze just one more in. Just I was intrigued about the vaccination, 70% at Éléonore. Just maybe if you could share any other mines that you have where you have your vaccination for COVID is -- actually, well, very well. I didn't hear anything about Africa, so I just wondered if you could share just a bit more color on that.

Yes. Sure, Tanya. So we're certainly encouraging the rollout in Ontario, and it was -- I'm sure to you're living -- you can experience right now. So we're doing what we can do to support the rollout for our Musselwhite and Porcupine operations. Cripple Creek & Victor, certainly seeing the rollout in Colorado. We've been setting up clinics for our workforce and their families and continue to do that and provide access to vaccines and do lots of education and encouragement around the efficacy of these vaccines.

Through Peru, Argentina and Mexico, Suriname, a much longer road home. So we must maintain those protocols. Vaccines will come, and we will support, but we will on the expectation there's still many, many months of straining to get their act together and get the vaccines rolled out. I'm looking forward to that increasing over time so that, one, we can drop those into state borders that are impacting on mining operations and then open up international borders to allow that kind of [comfort] again -- up again.

And in Ghana, I think they're starting to see some rollout of vaccine, some clinics already at our sites in Ghana. So again, looking to work with the Ghanaian government for the rollout.

It's going to be a long process, Tanya, I think, before the world is fully vaccinated. So I think we're going to be living with (inaudible), and social distancing and masks for a long time to come in our operations.

Our next question comes from Mike Jalonen with Bank of America.

Clearly, you need to go work at Éléonore to get vaccinated and here in Canada. But just following along Greg's question with your 3 big copper/gold projects, I've seen a number of juniors with gold -- big gold/copper projects -- copper/gold projects, and it's got [Mark Johnson] $1 billion-plus. Just wondering, how does Newmont serve as value in these projects? I don't know much of the union or (inaudible), Batu or Galore Creek are watching your share price. Correct me if I'm wrong. Just wondering what steps you can take.

Yes. Thanks, Michael. We're working on it in the same way that we did an exploration webcast earlier this year, and we'll certainly look to do an ESG webcast on the back of our new sustainability report in the coming months. We're working on providing some more details and maybe doing so through another webcast. We can have a little bit more time to provide some details and color on those projects as well as some of the other projects that sit in our organic project pipeline so that we can lift the level of understanding and the appreciation that we have of those projects and how we can sequence them in and then -- and why we are so confident about our business over the next several decades.

On Sunday, we turned 100. And we've got, through our organic project pipeline, an ability to see (inaudible), and et cetera. So we're excited about it, and I think there's an opportunity for us to provide the investment community with some more details on that.

Okay and happy birthday.

Thanks (inaudible). I'll blow out a candle for you.

Our next question comes from Anita Soni of CIBC.

So first, I want to commend you guys on your initiatives to reduce risk around the teams. I know that, that is actually a real risk. So what made me leave engineering about 18 years ago. And sadly, after I left, someone died at Batu Hijau because he worked back-to-back shifts. So I commend you on that. But related to that question, could you give us an idea of if there's any kind of cost that we should expect associated with those kinds of initiatives?

Yes. Thanks, Anita. The -- I mean, we -- you are seeing it incorporated into our guidance around sustaining capital, in some instances with Tanami Expansion 2 that's in the development capital. But it's part of those plans to build additional camp facilities. Yanacocha Sulfides, we'll have included in the scope. In fact, there'll probably some early-lead-time items, additional camp facilities, to allow people to have their own room and their own bed. So it's accommodated within our $1 billion a year of sustaining capital and the $600 million to $800 million on average on development capital. So that's -- it's not big money in the overall scheme of things. it's about having the intent and the will to do something in this space.

In terms of productivity improvements around staff finish times and ensuring that fatigue breaks, the length of shifts, number of consecutive shifts, the length of time that somebody can work, in my experience, you have that payback in dividends many times over by getting the right level of rest amongst your workforce so that they are working productively when they, in fact, work. So the things we're doing around roster staff times and the like will improve their productivity over time is my expectation rather than be a cost to the business.

Second question, a little bit more in the detail on Cerro Negro. The grades went down a little bit. I'm just wondering how we can expect that to play out over the course of the year. And what was the reason? I mean are you using stockpiles right now and then you'll return them once you can get, I guess, the mining rates up from direct access is my guess. I just don't know -- I don't have a color on that.

Thanks, Anita. I'll get Rob to take that question on for you.

Yes. Fairly straightforward. It's -- because of COVID, because of the absences, the production from our higher-grade stopes at Marianas Norte and Eureka were more -- and limited because of the lack of development. So it's purely a sequencing due to lack of employees. But those are the areas that we're most focused on. And the workforce is back working. We're nearly at full rate. So hopefully, in the coming months, we'll see that turn around. But it was just a timing issue due to lack of employees.

Okay. And then lastly, more of a big-picture question perhaps for Nancy. Just looking at your dividend payout ratio and that we're just currently sitting slightly below, but you do have a good -- on gold price -- but you do have a good cash balance. Can you give us an idea, if we're thinking about downside risk on gold price, how do you play -- like sort of play with the cash balance that you have? I noticed that it's -- prior to these gold prices, that you're sort of sitting around $3 billion as the cash balance you wanted. Would you think about sort of reducing that cash balance as needed if gold price dips for a sustained period (inaudible)?

Yes, thanks...

Yes. Yes.

Thanks for the question, Anita. Yes, we've said in prior times that at a $1,200 gold price, we would like to keep around a $2.5 billion to $3 billion cash balance. We are certainly carrying significantly more than that today, but I do think that's a testament to a couple of things. One is our ability to be very nimble with the dividend. And there's like -- we've provided a very, very clear framework and a lot of transparency about the optionality between that 40% and 60%. So there are some great points about that.

And then the other piece, as we are still at a time of very much uncertainty around COVID and we also have a lot of development capital, so I think carrying considerably higher balances than that at today's gold price is a great strategy for us. But certainly a lot of optionality and flexibility around those balances, which is what we've consistently stated.

And Anita, maybe to build on that, we look with our Board back over a long period of time at gold prices and the cash we had actually generated, and that factored into our decision to step up and calibrate at the $1,800 mark and return 40% of that cash. So the stability and sustainability of our dividend is very robust.

So we didn't make that decision to go to the $1,800 mark lightly, and our expectation would be, when we look forward at our portfolio and our performance, that we can sustain those levels for some time.

And just lastly, I know it does say in your disclosure that it does already include -- your free cash flow projections include Ahafo North and Yanacocha Sulfides. And just wanted to confirm that any lumpiness in those spends will also being included within that $1,800, 40% to 60% in those 2 projects.

Absolutely. All (inaudible) are included. Thanks, Anita. And I think that's the end of the questions that we can see in the queue, and I'm conscious we've gone past the top of the hour. So thank you all for your time. Please -- and a number of you are up in Toronto or Ontario at the moment and likely some in lockdown. So please, everyone stay safe and well, and we look forward to seeing you and speaking to you soon. Thanks, everyone.

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