紐蒙特黃金公司 (NEM) 2020 Q2 法說會逐字稿

Good morning, and welcome to Newmont's Second Quarter 2020 Earnings Call. (Operator Instructions) Please note, this event is being recorded.

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

Thank you, and good morning, everyone. Welcome to Newmont's Second Quarter 2020 Earnings Conference Call. Joining us on the call today are 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 our 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 at newmont.com.

And now I'll turn it over to Tom on Slide 3.

Thanks, Jess. Good morning, and thank you all for joining our call. Newmont continues to manage through the COVID pandemic from a position of strength and our diverse, balanced portfolio of world-class assets provides stable production with significant leverage to rising gold prices.

Turning to Slide 4 for a look at our second quarter highlights. Our resilient operating model supported the delivery of solid quarterly results despite the ongoing impacts of the COVID pandemic on our business. We safely resumed operations at Cerro Negro, Yanacocha, Éléonore, Peñasquito and Musselwhite. The 5 sites placed into care and maintenance earlier this year. In the second quarter, we produced 1.3 million ounces of gold at all-in sustaining costs of $1,097 per ounce. We generated operating cash flow of $668 million and free cash flow of $388 million. And we continued to safely advance project work at Tanami Expansion 2, Subika Underground and Musselwhite.

Our investment-grade balance sheet, combined with liquidity of $6.7 billion provides us with significant financial strength and flexibility. We ended the quarter with $3.8 billion of cash and have lowered our net debt to adjusted EBITDA ratio to 0.6x. We declared a second quarter dividend of $0.25 per share, which remains the highest yielding dividend among senior gold producers. It is also worth noting that over the last 18 months, Newmont has returned more than $2 billion to shareholders, demonstrating our track record of industry-leading returns. At Newmont, we have a fundamental belief that strong environmental, social and governance performance is not only the right thing to do, it is also an indicator of a well-managed business that delivers sustainable long-term value for shareholders and other stakeholders.

In June, we published our 16th annual sustainability report, which details Newmont's strategy, approach, targets and performance related to material ESG issues, ranging from climate, water, tailings, value sharing and human rights, true to corporate governance, tax strategy, ethics and compliance. The report transparently covers what we have done well, where we have learned lessons and how we plan to improve. And I encourage you to take some time to read more about our efforts in this space by visiting the sustainability section of our website at newmont.com.

Turning to Slide 5. Combined with our proven and resilient operating model, Newmont's deep bench of experienced leaders and mature systems remain a competitive advantage in these unprecedented times. We will continue to maintain our wide-ranging COVID protocols at all sites, ensuring that we keep the health, safety and well-being of our people and communities above all else. Whilst we have had employees and contractors test positive for the virus, our quarantine and contact-tracing procedures have proven effective in mitigating the spread to other employees and local communities.

Two weeks ago, I visited our Boddington operation in Western Australia. And even though Western Australia currently has no community spread of this virus, our robust controls remain in place at Boddington. It was great to experience firsthand the work all of our operations are doing to ensure that we do not lose focus on protecting our workforce and communities during this time. The confidence and pride at Boddington was very high, and our team there is absolutely focused on safely delivering to their plans. I am incredibly proud of all of our employees for how they are overcoming the challenges we've faced this year with focus and resolve.

Across the globe, we are finding new ways to move the business forward by better leveraging technology, fostering greater collaboration and building a deep sense of community despite having to work apart. We're also strengthening our relationships with external stakeholders by embracing our core values of safety, sustainability, integrity, inclusion and responsibility in every engagement with them. Earlier this year, we established a $20 million global community support fund to assist host communities, governments and employees. With input from local stakeholders, we identified 3 focus areas: employee and community health; food security; and local economic resilience.

To ensure that our financial support will have the most positive impact and reach those who need it most. Our efforts have included the provision of personal protective equipment for frontline workers, the construction of an oxygen plant for a regional hospital, partnering with local food banks for families in need, and micro-lending and revolving loans for businesses in host communities. Sadly, one area we have seen significant need as a result of COVID is domestic violence. So we have also partnered with agencies who serve women and children in need of safer environments.

To date, we have distributed nearly $6 million, with another $4 million in process, pending completion of the governance process designed to ensure that the funds go where they are intended and are utilized effectively. We're committed to managing our fund with collaboration and transparency. And you can find a regularly updated list of all recipient organizations on our website. These efforts will continue in the weeks and months to come, so that our host communities can thrive long after this pandemic is behind us.

Turning to a look at our global diverse portfolio on Slide 6. Among our 12 operating mines and 2 joint ventures, we have 8 world-class assets, each of which delivered more than 500,000 ounces of consolidated production per year at all-in sustaining costs of less than $900 per gold equivalent ounce and a mine life that exceeds 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. In addition to our 8 existing world-class assets, Newmont has 2 emerging world-class assets with the Yanacocha in Peru and Merian in Suriname. These emerging assets within our portfolio offer upside through further optimization and development over the coming years. We also have an unmatched project pipeline with Tanami Expansion 2 being executed and both Ahafo North and Yanacocha Sulfides advancing towards full-funds decisions next year. It is from this foundation that we can create additional value as we optimize our longer-term projects and deliver decades of profitable production.

Turning to Slide 7. Our stable production profile will generate more than 6 million ounces of gold per year through to 2029. This decade-long production profile is underpinned by our 8 world-class assets, our industry-leading exploration program and our 3 key development projects; Tanami 2, which is in execution, along with Ahafo North and Yanacocha Sulfides. This profile is further enhanced with over $1.5 billion per year of additional revenue from producing between 1.2 million to 1.4 million gold equivalent ounces from silver, lead and zinc at Peñasquito and copper at Boddington. Combined, we will deliver well over 7 million gold equivalent ounces per year for the next decade, the most of any company in our industry.

Turning to our free cash flow generation potential on Slide 8. We expect to generate substantial free cash flow throughout the gold price cycle. For every $100 increase in gold price above our base assumption, Newmont delivers approximately $400 million of incremental attributable free cash flow per year. Using our conservative $1,200 gold price assumption, our base free cash flow would still total more than $5 billion over the next 5 years. And at current gold prices, our portfolio will generate more than $17 billion of free cash flow over that same time frame. In addition, we have the potential for further upside with tailwinds from favorable oil prices and foreign currency exchange rates.

Looking forward, we are well positioned to continue executing our capital priorities and staying focused on long-term value creation.

With that, I'll hand it over to Rob to discuss our operational performance on Slide 9.

Thanks, Tom. Turning to Slide 10. The strength of our diversified global portfolio, along with our operating model and capable workforce continues to be a key differentiator for Newmont during this unprecedented time. During the second quarter, we executed safe and efficient restart plans at Cerro Negro, Yanacocha, Éléonore, Peñasquito and Musselwhite, which I will discuss in more detail shortly. As Tom mentioned, we continue to maintain the extensive protocols across all of our sites to ensure the health and safety of our workforce and nearby communities. And we have been operating with a significantly reduced site-based workforce who remain committed to the safe delivery of our plans.

As you will recall, we made the important and proactive decision to continue paying our employees through June despite the status of their operation, which has impacted our second quarter unit costs. It was absolutely the right decision, and it has been an essential factor to allow the safe and efficient ramp-up of our operations with the full support of our workforce and local communities.

For the second quarter, we incurred approximately $195 million of care and maintenance costs and approximately $33 million of COVID-19-specific costs related to additional health and safety procedures, transportation costs and community support fund disbursements across our entire portfolio. Over the last few months, we've seen near-term headwinds as our increased health and safety protocols impact operating efficiencies, particularly in the mine with staggered pre-start meeting, the elimination of hot seating and transport changes impacting productivity.

However, we've been able to partially offset these impacts by reducing the number of people working at site, implementing new rosters and taking advantage of downtime to plan for longer-term efficiency improvements, and I will touch on these further in the regional overviews. I'm very proud of our team and what they've safely accomplished during this unprecedented time. But as we continue navigating through this global pandemic, I can assure you, our focus to drive efficiency and productivity gains is more important and acute than ever. And we are well positioned to deliver a stronger second half of the year.

Turning now to Slide 11 for an update on Australia's performance. At Boddington, we began to reach higher grade in the South pit. And earlier this month, the team achieved 21 million tonnes through the plant year-to-date, which puts them on track to exceed 40 million tonnes by year-end. As our 3-year stripping campaign nears completion, we will continue to mine higher grades into 2021. We continue to invest in the autonomous haulage system which we expect to be fully operational next year.

Tanami delivered yet another solid quarter, and the team is continually looking for ways to improve the way we work. Just recently, the mine implemented even-time rosters to improve productivity and shift change days. With the interstate border closures in place in Australia, I am incredibly appreciative of many of the team and their families for their willingness to temporarily relocate to Darwin from other parts of Australia, allowing us to continue safely operating through this period. The Tanami Expansion 2 project is also progressing, and all critical activities have continued. Working with our EPCM Worley, we are now approximately 30% through the engineering design, and the overall project is about 10% complete.

Travel restrictions did impact second quarter development rates. However, we recently added a fourth crew to help mitigate the efficiency losses. In early July, the box cut for the production shaft foundation was completed, and we placed a second raise bore on surface. So overall, things are tracking well. And 2 weeks ago, the first buildings for the new camp near the underground mine arrived on-site after traveling over 2,000 miles. The camp will initially be used for the construction crews. And when the project is completed, it will be repurposed to accommodate our mining crews to improve fatigue management and save 80 minutes a day in travel time between the current camp and the mine. We are also progressing our study work of Oberon remotely, including a review of surface layouts, mine and process plant infrastructure options, and updating the resource model.

Our hydrogeological drilling has been delayed, but we are working with the traditional owners to access the area and safely remobilize the team. The overall deposit continues to grow as an open pit opportunity. And the potential to get beyond 2 million ounces as we define the high-grade structures and understand the upside of this prospective deposit and how this further improves our production outlook.

Australian's 2020 production and cost outlook is unchanged with approximately 1.2 million ounces at $900 per ounce AISC.

Turning to Africa on Slide 12. Ghana has seen an uptick in COVID cases over the last 2 months, but our teams at Akyem and Ahafo continue to adhere to strict protocols and our quarantine and contact-tracing procedures have been effective in minimizing the impact to our operations.

Akyem delivered solid second quarter performance with higher throughput despite a planned maintenance shutdown, and expects to reach higher grade in the fourth quarter. At Ahafo, we continue to progress stripping at the Awonsu and Subika open pits while advancing underground development for the updated mining method at Subika Underground. Development rates at Subika Underground are ahead of schedule. And we recently received the raise bore machine, which will further support development progress. The 2020 outlook for Africa is unchanged with 850,000 ounces at $870 per ounce AISC. As we expect a strong second half of the year with Ahafo reaching higher grade in the open pits and Subika ramping up tonnes from the underground.

Turning to Slide 13 for an update on the Ahafo North project. The Ahafo District provides significant upside potential from the underground opportunities at Awonsu, Apensu and Subika as well as from Ahafo North. The cave is just 30 kilometers north of our existing Ahafo operations, it is the best unmined gold deposit in West Africa, with approximately 3.5 million ounces of open pit reserves and more than 1 million ounces of indicated and inferred resource. Similar to Tanami in Australia, our ability to expand in this prolific region is underpinned by our successful recent investments in the Ahafo mill expansion and Subika Underground, which has created a very strong platform for our future. Our plans include building a stand-alone mill, and the project is expected to produce approximately 250,000 ounces per year, over a 13-year mine life for an investment of approximately $700 million to $800 million.

Our project work continues remotely with the team focused on engineering and design work as well as construction, procurement and community planning. We have also been able to advance the permitting process with the Ghana EPA through both virtual and limited face-to-face sessions. And earlier this month, we submitted our initial environmental impact statement for review. We also received engineering and design approval from the Ghana Highway Authority for the highway diversion and improvement project, which was a key milestone for the project. We remain on track for a full-funds decision in 2021.

Moving to our North America operations on Slide 14. During the second quarter, the North America region resumed operations at the 3 sites that were previously in care and maintenance. At Peñasquito, we began a phase ramp-up in mid-May, consistent with the Mexican government's regulations. Government representatives visited the site, including the federal undersecretary of mines to review our protocols, and said, Peñasquito is the leading example for how all Mexican mines should operate during these times.

We began ramping up the mill and mining activities at the beginning of June, and were quickly back to pre-COVID record levels in the plant by mid-June. We remain very focused on delivering value from this world-class asset by applying our full potential program to eliminate constraints, reduce costs and increase productivity and ultimately allow us to extend mine life through resource conversion.

As previously highlighted, we also recently completed a definitive agreement to resolve all outstanding disputes with the Cedros community, which was a significant milestone, and which now establishes a clear path forward for both parties to develop long-term partnerships to create value and importantly, improve lives. This agreement was signed with the community-elected representatives and will be ratified in the General Assembly that will take place when COVID-19 gathering restrictions are lifted by the government. Both Porcupine and CC&V continued without major interruptions during the second quarter. And in Porcupine, we saw improved recoveries with a greater proportion of ore coming from the bore than underground.

At Musselwhite, we resumed work on the conveying system in early June after working closely with First Nations leaders and the provincial health authorities on a safe restart plan. By early July, our contract of cementation had its full project team on site, and we are on track to complete the conveyor installation by the end of 2020. The Musselwhite materials handling project will begin mobilizing for completion activities in September to align with the conveyor time line. We restarted the mill for stockpile processing on June 19 and resumed the underground mine development work at the same time. Our full potential work at Musselwhite is progressing well, and our team successfully completed the diagnose phase entirely virtually in April and May.

From that work, the underground work stream identified approximately 25 opportunities to improve development productivity, trucking performance and ore body modeling. I'm excited about the future of Musselwhite and the ability to drive valuable operational improvements in the year ahead.

Turning to Éléonore. We restarted the mill in late May after approximately 60 days in care and maintenance. Earlier this year, the mine undertook a review of ground support conditions, and we completed some necessary rehabilitation work before ramping up production activities. We expect to reach more normal levels of production in August as we manage through ongoing travel and logistical constrains. Construction on the lower mine materials handling system project resumed in early June with the conveyor belt installation and commissioning of the first rock breaker. We expect the project to be operational in mid-August, streamlining the transportation of rock to surface.

From the beginning, we flagged that Éléonore was the operation requiring further optimization as Newmont's technical experience critically assessed the asset and the opportunities to improve the geotechnical model. We remain positive on the value we can unlock from Éléonore. However, we are taking the proper time to fully integrate the updated geological and geotechnical models to deliver and optimize life of my plan.

As a result, we expect a lower production baseline for Éléonore of approximately 250,000 ounces per year, and work is underway with support from our full potential program to ensure the cost base matches this production level. To support this important work, we've made a number of changes to the site leadership team since the beginning of the year with a new general manager; mining manager; exploration manager; health, safety and security manager, who are all now on board. This leadership team is driving fundamental changes to how we operate with a sharp focus on sustainable improvement housing back to basics principles in order to build a strong foundation in the years ahead.

The North America 2020 outlook has been updated to approximately 1.4 million ounces and $1,040 per ounce AISC with an additional 880,000 gold equivalent ounces from silver, lead and zinc. This outlook includes the impact of sites previously in care and maintenance and the changes at Éléonore.

Turning to South America on Slide 15. Merian delivered solid performance in the second quarter as higher recoveries partially offset lower tonnes mined as the site managed through wet season impacts tanks. The team also safely completed planned mill maintenance in June and began to reach higher grade as we transitioned to harbor ore.

Yanacocha began ramping up in mid-May after being in care and maintenance for approximately 60 days. Mine and mill activities were suspended during the care and maintenance period, but we continued all critical activities such as water treatment, which enabled ongoing production from the leach pads. The mill restarted in mid-May and mining activity resumed in late May, and we expect to reach full operations in September. We are placing Quecher Main ore on the new Carachugo leach pad again and expect to recover these ounces later this year. However, Yanacocha's outlook has been updated to reflect late cycle disruptions in 2020 from the timing of ore placement.

At Cerro Negro, we took advantage of the approximately 60-day care and maintenance period to perform a significant amount of mill maintenance and modifications to improve throughput. The team is managing through several constraints, including government and provincial travel restrictions in addition to inclement winter weather. So the mine is currently operating at about 50% capacity. Given the site is mine constrained, we are running the mill and campaigns in order to ensure cost efficiency until we are back to normal mining rates. Full potential implementation is underway. And the priorities remain focused on back to basics mining practices, which includes improving development rates, ground control and backfill practices.

The 2020 outlook for Cerro Negro has been updated to include COVID-related constraints and our ability to achieve improved development rates and access higher-grade ore in the fourth quarter.

Looking forward, we remain excited about the potential to extend Cerro Negro's mine life through our exploration program. And we recently secured a large land package of approximately 550 square kilometers near Cerro Negro. The South America 2020 outlook has been updated to just over 1.1 million ounces at approximately $1,100 per ounce AISC, which includes the impact of sites previously in care and maintenance and the COVID-related constraints at Cerro Negro.

We are also excited about Yanacocha Sulfides progressing towards a full-funds decision in 2021. So turning to Slide 16. Yanacocha has been a cornerstone asset to the Newmont portfolio for decades, and we continue to see promising drilling results. As you can see here, the first phase of the sulfides project is focused on developing the most profitable deposits and is expected to produce approximately 500,000 gold equivalent ounces per annum through 2030, and extend Yanacocha's operations into the 2040. As we advance towards a full-funds decision next year, we look forward to providing more information on this exciting project in due course.

So wrapping up with our 2020 outlook on Slide 17. Despite the decision to place 5 operations in care and maintenance, we expect to produce approximately 6 million ounces of gold at all-in sustaining costs of $1,015 per ounce in 2020 with an additional 1 million gold equivalent ounces from core products. Compared to the outlook provided in mid-May, production is unchanged, while our costs applicable to sales has been lowered to $760 per ounce and all-in sustaining costs is unchanged at $1,015 per ounce.

Our sustaining capital has increased to $900 million as we've been able to ramp up faster than first anticipated of our operations previously in care and maintenance. Our total 2020 capital expenditure is expected to be approximately $1.4 billion as increases to sustaining capital are partly offset by further changes to the development capital schedule for Tanami Expansion 2, which defers some spend to 2021.

For exploration and advanced projects, we've lowered our 2020 investment to approximately $350 million. We are fortunate to have the largest gold reserves in our industry at 95.7 million ounces, and we completed the majority of our reserve drilling in the first quarter. However, as we continue to focus on keeping our people safe, we currently expect to replace approximately 60% to 70% of our targeted reserves delivery by the drill bit from our managed operations in 2020. We also experienced some processing delays at the start of the pandemic, but are now seeing normal turnover times. We also restarted exploration mapping activities at Coffee using 100% Yukon-based crew, and we are prepared to restart greenfields activities as soon as local restrictions are lifted in areas of Africa, Australia and South America. Our longer-term target of organically replacing at least 2/3 of reserves depletion over the next 10 years remains firmly intact.

The changes to the way we operate from COVID have been substantial. And as the pandemic continues to evolve with the potential for a second wave becoming more likely, we may have to take further measures to protect our workforce and our communities.

And with that, I'll turn it over to Nancy to discuss our financial results on Slide 18.

Thanks, Rob. Turning to Slide 19 for the financial highlights. Despite having 5 operations in care and maintenance, our financial performance improved significantly compared to the prior year quarter, demonstrating that tailwinds from favorable gold and oil prices and foreign exchange more than offset the COVID-related impacts to our business.

During the second quarter, Newmont delivered solid results with higher revenue of nearly $2.4 billion despite fewer ounces sold, adjusted net income of $261 million or $0.32 per diluted share and adjusted EBITDA of approximately $1 billion. Cash from continuing operations was $668 million and free cash flow was $388 million, a nearly sixfold increase quarter-on-quarter.

Turning to Slide 20 for a review of our earnings per share in more detail. Second quarter GAAP net income from continuing operations was $412 million or $0.51 per share. Adjustments included $0.28 related to the change in fair value of our equity investments; $0.04 related to incremental COVID-specific costs, such as additional screening protocols, transportation costs and community fund disbursements; $0.02 related to tax adjustments and valuation allowance; and $0.03 of other charges.

Taking these adjustments into account, we reported second quarter adjusted net income of $0.32 per diluted share. While we adjusted approximately $33 million of nonrecurring incremental COVID-specific costs from our second quarter net income, we did not adjust out approximately $195 million related to the 5 operations temporarily placed into care and maintenance.

Costs here included wages, direct operating expenses and noncash depreciation. It's worth noting that our ANI per share would have been $0.15 per share higher if we had adjusted for these costs.

Turning to Slide 21. As Tom mentioned, Newmont continues to manage through the COVID pandemic from a position of strength. There has been no change to our industry-leading capital allocation priorities, which include maintaining and strengthening our investment-grade balance sheet, growing our margins through the delivery of our full potential continuous improvement program and growing our reserves and resources through disciplined investments in organic growth. And finally, returning cash to our shareholders through a sector-leading dividend.

We ended the quarter with liquidity of $6.7 billion, and our net debt-to-EBITDA ratio improved to 0.6x. Newmont's focus on leading shareholder returns remains stronger than ever, and we declared a second quarter dividend of $0.25 per share.

Over the last 6 quarters, we have returned more than $2 billion to shareholders through dividends and share buybacks, a track record that demonstrates our commitment to providing the highest returns.

Lastly, while the recent rise in gold price is notable, we will continue to use our conservative assumptions around $1,200 mine plans and continue our discipline around capital allocation. We will also invest in profitable projects, return cash to shareholders and maintain a strong balance sheet. Excess cash flows generated from periods of higher gold prices could be used to further improve our balance sheet and provide additional returns to shareholders.

With that, I'll hand it over to Tom to wrap up on Slide 22.

Thanks, Nancy. And concluding on Slide 23. Newmont's superior operating model, combined with our incredibly talented and dedicated workforce, are key to maintaining our position as the world's leading gold company. Whilst businesses across the globe have faced unprecedented challenges this year, I am very proud of how we have responded and that Newmont is able to provide our stakeholders with a solid foundation in the midst of uncertainty. We have the industry's best portfolio with world-class assets in top-tier jurisdictions, the largest gold reserve base of 96 million ounces, significant exposure to other metals, all of which positions Newmont to reliably produce more than 6 million ounces of gold every year for at least the next decade. And we will continue to apply Newmont's discipline with resolve to deliver cost and productivity improvements to expand margins. I'm very excited about what the future holds at Newmont, beginning with a strong second half to 2020.

Thank you for your continued support and please keep safe and well as we continue to navigate through this pandemic.

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

(Operator Instructions) And our first question comes from Tyler Langton of JPMorgan.

I guess just to start, could you talk a little bit about the risk to production in the second half, like if COVID cases just increase from current levels around your operations? And I guess specifically, are there actions you can take to sort of reduce the risks of having to shut downing of the 5 operations that you previously put on care and maintenance? And is there sort of less risk at the operations that were never shut down?

Thanks, Tyler. I'll pick that one up and then maybe get Rob to provide a bit more color as well. We remain all of the protocols that we've had in place and had in place since March, store at many place, even in those places, like Australia with Boddington and Tanami. In both of those parts of Australia, there is no community spread. But this virus is nasty. It's terribly contagious, and we are keeping those protocols in place. That's not just the things we're doing on the operating sites around social distancing and hygiene, it's also about keeping people off the operating side. If they're not part of the workforce required to operate and maintain a mine and the processing plants.

So this virus is still a way to run as we're seeing around the globe. So we are maintaining that discipline across every one of our operations in terms of those protocols. That's the best thing we can do. That's the things that we can control. We are concerned and monitoring carefully different parts of the world, but particularly through South America, Mexico, Peru, Argentina. Those countries are still struggling terribly with this virus, and we're doing everything we can to support our folks in those parts of the world. And part of that is keeping those protocols firmly in place and ensuring that we're screening folks. We're keeping up those social distancing, the hygiene, and we're managing the quarantine and contact tracing, if we do pick up a case. Rob, do you want to add any further color to that?

Thanks, Tom. And I'll just add a couple of things, Tom, to your question, Tyler. I think the other thing that we've been doing throughout has just had very regular communication with respect to the authorities and the government. And that's included quite a number of site visits. So they've seen the standards at which we're adhering to. And in many cases, when people are on our site, it's actually better than being in the community. So just having that confidence in what we're doing at site and continuing to do that, that's really important. And I think the other couple of things just to build on the very practical things that Tom outlined is that we did change rosters before to have our sites with longer rosters, and that makes sure there's less turnover during these times. And that obviously helps. And also just minimizing any kind of visits and minimizing the number of people that we've got on our sites. So after the last 3, 4 months, I think we've come up with a number of very successful tactics. But as Tom said, the chronic unease is very much there, and we're not dropping our earnings at all.

Great. That's helpful. And then just the 2, I guess, quick financial questions. With the Goldcorp synergies, I think the target was $340 million this year and then a total of $500 million next year. Is there sort of any change to those numbers? And then just with capital allocation, I know sort of the longer-term plan is to kind of invest roughly half the free cash flow into the business. And then the other half towards sort of dividends, repurchases. Just with the dividends and repurchases, is there any sort of updated thoughts there? Or is it something where you're still sort of waiting to see just how the impacts of COVID play out?

Thanks, Tyler. I'll pick up your synergy question and ask Nancy Buese to pick up the capital allocation question. On the synergies, those numbers are -- the $340 million of cash flow this year and the $500 million of cash flow next year, which exceeds our initial commitment of $365 million from that transaction, those commitments are built into our guidance, and we are delivering on those. And a lot of this -- a lot of the value for this year has come from 3 areas: the G&A savings, so they bundle up exploration and G&A. There's upwards of $150 million there; there's supply chain improvements; and then there's -- the big value driver is Peñasquito. And Peñasquito is performing very well, either side of the -- what was the shortest shutdown period for care and maintenance and it ramped up very quickly. So Peñasquito performing synergies are delivered. Nancy, do you want to pick up the capital allocation?

Sure. So really, on the capital allocation, we just recently raised our dividend very significantly. And so our view is while there's still so much uncertainty around COVID and just understanding the full ramification of that on our operations, we feel like that dividend is very solid for now, and we will continue to consider what we should do with the dividend level going forward. And our capital allocation, you have it just right, as we've indicated before, is approximately over the cycle, 50% of that back to the business and 50% of that back to shareholders. We think we're at the top of the cycle, but it's really hard to say right now. But our view would be we'll continue to evaluate that and continue to look at dividend levels as we put the backdrop of our business plan for next year in place and really understand the balance sheet ramifications.

Our next question comes from Greg Barnes of TD Securities.

Tom or perhaps, Nancy, do you have any idea what the ongoing COVID-related costs will be, either in millions of dollars or per ounce?

I'll pick that one up, Greg, and Nancy might want to build upon it. But it's that -- it's roughly $4 million to $5 million a month which is around the $7 to $9 per ounce, which is around the things we put in place around hygiene, around different transport that you need to maintain social distancing and the like. So that's the cost you're seeing and the costs that you could expect to have ongoing as we continue to have those protocols in place. It doesn't include -- it's a bit harder then to measure the productivity impacts of needing to clean out a vehicle between -- as you do a hot seat change, as you have different ways for running pre-start meetings and all of those productivity impacts that you have that are over and above that. Now you get some tailwinds, and we'll get smarter at doing that. But a rough rule of thumb is that $4 million to $5 million a month, that's the additional cost for those measures. Nancy B., would you add anything to that?

Yes. I think that's right. And so that translates to about $3 an ounce. And the other piece of that is other community funds that we may spend. But those -- just as a reminder, those are adjusted out of AISC and adjusted EBITDA and ANI, but will certainly continue to impact free cash flow. So again, it's not huge dollars in the overall scheme of things, but we would anticipate incurring those on a regular basis for the foreseeable future.

Okay. And just the second question, Tom, given the environment we're in and the amount of free cash flow you're generating, are you doing any early work or contemplating about how you could actually increase your production profile?

Greg, no. We're looking at those 2 projects that are in late-stage definitive feasibility studies. So it's Ahafo North and Yanacocha Sulfides. So they're both late-stage definitive feasibility full-funds next year. They're 2 sizable projects. And they will have a contribution to that production profile with the ebbs and flows over that 10 years. That's where our focus is. And they will be significant drawers on free cash flow into next year. And then the other thing you've got to balance up with that is that that will have 3 significant projects in Tanami 2, Ahafo North and Yanacocha Sulfides, all happening in parallel.

And it's about then balancing that with your project execution risk. We will continue to invest in those studies that are further up the pipeline. But we won't unnaturally move them forward. They need to go through the proper -- they're big projects, and they need to go through the proper rigor and process, and we'll continue to spend on our exploration efforts as well. So nothing significant, but we'll continue to navigate our project pipeline through its natural course. Another way of looking at it is at current prices, that as we continue to work our margins, applying full potential is it means more margin.

Our next question comes from Jackie Przybylowski of BMO Capital Markets.

I guess, first, I'll ask Nancy, maybe circling back on the capital allocation and dividend question. Given where we are with gold prices today, have you thought about maybe the difference between increasing the regular dividend versus maybe just topping up with a one-timer special dividend in light of maybe the peak gold prices were at? Is that something that you guys would think about doing?

Yes, we look at all those different options. And I think as we've talked before, there's a host of tools in our toolbox ready for use. So we do prefer to consider how our regular dividend travels against the cycle. But I would say at this point in time, we're just in the middle of putting together our '21 business plan. And so our view would be is, let's continue that work, see how the next 5 years stack up, and then we'll be in a really good position to test various tools against that backdrop and see where we are as we continue the journey of capital allocation. As a reminder, we just increased our dividend. So we feel like that's a very good level throughout the cycle and certainly understanding that we are generating more cash at this time, we will, as always, continue to evaluate the right way to turn that cash to shareholders.

Fair enough. If I can also ask on the full potential program. I know the last couple of months have been very difficult. But are you able to give us a bit of an update in terms of how it's going at Peñasquito? And are you -- I know you mentioned that you've realized quite a bit of synergies there. But are you realizing the benefits from the full potential program that you were expecting?

Thanks, Jackie. I might ask Rob to give you some color on full potential, which is going very well, but if he can fill in some details for you.

Thanks, Jackie. And the simple answer is very much so that Tom mentioned in his preamble about the rates that we were able to achieve after we came back from the care and maintenance. And really within just a handful of days, we were back up to the record levels that we were reaching before. So going through the mill, we were well above the 110,000 tonnes a day. And that just shows the amount of effort, the stability and the focus that the team has got there.

We're also making big improvements in the mine in terms of the way in which we're digging the ore to make sure there's no dilution. And just the accuracy of what's going through the plant there as well. And really across the board, Peñasquito, Jackie, as you know, there's opportunity everywhere in terms of the way in which we're utilizing our equipment, the effectiveness of our drill and blast, the quality of the blasting in our supply chain, working on the availability of our equipment, the effectiveness of our maintainers, et cetera. On all those accounts, we're seeing improvements. And I think the longer that we continue to run, the more records that we're going to break there. So in answer, Jackie, it's been very positive.

Our next question comes from Fahad Tariq of Crédit Suisse.

Can you provide just a bit more color on some of the geotechnical issues at Éléonore? I know you touched on it during the prepared remarks. But maybe just talking about some of the options that you're looking at to lower the cost there?

Thanks, Fahad. I might pick that one up with a little bit of color, and then I'll get Rob to provide some more details. But Éléonore is a similar story to the one we had at Leeville in Nevada back in '15 and '16, where to really get an understanding of a complex geotechnical ore body you need to take your models to -- in order of magnitude in more detail. And once you've got that level of understanding in that model, you're bringing the geological model and you can better map out your mine plans and then your appropriate mining methods for that ore body. That's the work that we've been doing over the last several months and actually using some of the same people in day 14.

Kate Williams who did that work very successfully and led that work very successfully at Leeville in Carlin back in '15 and '16. And now Leeville is a very important part of the Carlin underground complex at Nevada Gold Mines. And largely because of the excellent work that they did. So that's the work that we're now applying to Éléonore and all that knowledge and skill that we're applying to Éléonore. And I might get Rob to give you some more specifics about the Éléonore mine and that issue.

Thanks, Tom, and thanks for the question, Fahad. And just to reinforce what Tom said is that as a minor, the 2 key things that you look for an underground mine is a geological model that you've get confidence in and a geotechnical model, you've get confidence in. And we've arrived at that position. And I think when you kind of look back to what we reported earlier in the year about the reserves and the resources that, we have got work to do in terms of the stope design in terms of our dilution and recovery.

And those are the key things that we continue to work on at Éléonore. And it really is -- the basics of mining is how do you make sure that you're putting in place stops in the right sequence and the right size, that you're not bringing on new forces of geotech, which caused disruption moving forward. So when you send back in terms of the cost, as I spoke about before, we are resetting Éléonore to an operation around that 250,000 ounces moving forward. And we have to reset the costs around that. And obviously outside the people numbers. And as an example of that, pre-COVID at Éléonore, we have about 1,200 employees and contractors. That's certainly got to get down to more like the 900-people level.

We've also recognized in our full potential area that the highest cost activity is in our development. And we know that we've got to increase and improve the development rates that we're achieving there. And certainly, the team is very focused on that. Similarly with all of our heavy equipment, we had too much geared at Éléonore, and we've basically stripped the heavy equipment out to really be focusing on the amount of equipment that you need to run a mine of that size. And whether that's the truck, that's the loaders, that's the bolters. So we are now approaching the right amount of equipment. Now obviously, that needs less operators, it needs less maintainers as well, and it flows into the cost. But the key thing, which I'd emphasize, it really is around that -- managing that dilution and the recovery. And that's where the team is very much focused on.

The other key point that we do have coming very much into our favor is the commissioning of the lower mine handling system that is essentially, in essence, removes the need to truck up and 500 meters. So it's going to provide quite a big productivity click there. But I hope that provides you with some detail in terms of what we're doing at Éléonore.

And last, but by no means, least, we've got the team in place, and we've got the focus there, which will really drive that harder than ever before. So with that, hope that helps, Fahad.

Our next question comes from Chris Terry of Deutsche Bank.

I just had a few shorter questions, hopefully. Firstly, just on Musselwhite. Just wanted a little bit more clarity on the exact timing there. I think there's just been a little bit of confusion over the exact quarter when we should expect production.

Thanks, Chris. I'll get Rob to pick that one up.

Thanks, Chris. Musselwhite is going very well that we're expecting the conveyor system to be up and running come the end of the year. So it is the fourth quarter. And December is the current time frame that we're looking at. And just to give you a sense that in terms of the progress there that we've got 2 key conveyors there that we're doing. We've got the conveyor frames on one of the 2-kilometer stretches. We've got all the hanging supports in the other. So really, the critical path is we're on fire suppression and then actually pulling and splicing the belts. But at the end of the year is what we are very much focused on and is progressing well, Chris.

Thanks, Rob. And then just in terms of the use of capital, I guess, the CapEx minor changes in 2020 versus 2021? And then also just thinking about the greenfields exploration, which you'd pulled back previously. So is the increase, it's all just COVID related? There's no kind of fundamental changes in thinking of allocation or anything on that side? You would expect that you'll ramp up greenfield activities as you get better access to sites in simple terms?

That's right, Chris. So you'd expect to see our exploration go back to the similar spend as we guided to this year once we got access to those locations. And then I think with the -- if I understood your question correctly, with development capital, you'll see just we're focused on the critical path at Tanami 2, you'll see some of that spend that would have been initially flowing into next year. So you'll see a bit higher development capital in 2021 as a consequence of that sustaining capital will stay pretty stable. We don't see any bell wave in the sustaining capital.

Okay. And 2 other quick ones. So the autonomous work you've done. Can you just give an update on where -- in terms of Boddington, and just if you've done any more work on other sites? Or if there's any update for the autonomous positioning within the broader business?

So autonomous is really focused on Boddington at this point in time. And that's all progressing very nicely. Those trucks will start to arrive in the not-too-distant future, coming out of the factory in Peoria. And a nice caterpillar AHS test facility being commissioned in the next few weeks, just up the road from Boddington.

So we're very well positioned to have a good caterpillar deal support. For other operations, where we look to start -- if you want to take, as I did many years ago with IHS in the Pilbara, you build your pilot site within the business you prove up what it can do and then you look at how it can be modeled across the rest of the business. So that's step 1 strategically. And we're probably eying off those big projects and see the definitive feasibility study, Norte Abierto, Nueva Unión, Galore Creek as to how autonomous haulage could help those projects improve the economics of those projects as we optimize them at the PFS stage and then look to see what is there in the application in our existing other operations. But that's the strategic approach with IHS beyond Boddington at this point in time.

I guess the last one for me. You talked a lot about COVID impacts, but maybe to ask it in different ways. There's 1 site or maybe 2 sites that you're still most concerned about as being the most vulnerable. I assume it's South America, but are you able to give color on a particular side, is it Peñasquito, Yanacocha? What keeps you up at night as the key risk from a COVID site?

Yes. It would -- it's the countries that and how those countries are managing the pandemic are the ones that concern me. I'm very confident about our ability to manage the risk of spread of the infection at any one of our operations. The protocols are the same everywhere. Our worry is more around the community spread and then the governments needing to take action, and Mexico and Peru would be those 2 countries that we watch carefully. But nothing in terms of what's happening on our side. It's more about how those countries are managing the health crisis.

Our next question comes from Tanya Jakusconek of Scotiabank.

Rob, I just wanted to circle back on Éléonore, again, so that I understand it correctly. I think originally, when we -- you took over the Goldcorp portfolio, I think Éléonore was viewed as a mine that would be looking somewhere in the sort of the 325,000 ounce range or thereabouts. The change to 250,000 now as you've reset it, is it a combination that -- and again, I maybe missed this, is your views on the reserve? Or is it -- there's more dilution to this overall plan or less hoping that you have to do on an annual basis? Not less hope -- yes, less hope because of the pressures that you have to open it up for? I'm just trying to understand what change have you seen now. And the second part is, do you expect to get the synergies that you had originally anticipated from this asset?

Tanya, thank you. And just to touch base on your question. I hope I kind of go down the right road for you. But essentially, over the last year that we've had the asset, just doing more geotechnical investigation for our experience and more geological modeling, including structural geology, our understanding is so much greater. So when we've been able to see what we've got in practice with also modeling, that's been the biggest change, and we've been able to adapt and refine. So it's really been around the mining practices, which are being put in place to the way in which the ore presents. And the condition which the ore is under. That's essentially what we're dealing with.

And so it's certainly not because the material is not there. It's how we're actually mining it. And I think that's the key thing we should certainly say, Tanya. And that's why I still remain very, very focused on the opportunity at Éléonore. We are still doing exploring both downward to see if the ore body continues plus out on both sides as well as the full potential projects. And again, none of the full potential projects are rocket science. It truly is the basics. And I think that as we get Éléonore fit for purpose and it's fighting base around 250,000, we're going to see those synergies continue.

And I think it's important to say that the likes of the support for Éléonore is now already coming from Denver. The supply chain is now coming from Denver. The G&A is being supported from Vancouver as well as Denver. So we're already seeing the softer synergies there. But in the mine itself, it really is focusing on the basics and making sure that we're mining that ore body the way it should be mined.

And maybe just one. The other overall synergies, Tanya, I think Éléonore was $25 million.

Yes. Okay. Maybe we'll take this off-line to get more into the technical details. Maybe one for Nancy, if I could. Nancy, what -- as you look at your balance sheet and you look at that free cash flow that is being generated, and you did say half of it back into the business and now half back to shareholders. Can you just remind me what's the minimum cash balance that you like to keep on the balance sheet to run your business?

Yes. We've talked about this in the past, Tanya. We certainly don't have a hard and fast around that. I would say, generally, we keep in mind the fact that in certain countries, we do need to keep certain balances or we have tax leakage coming back to the U.S. So it's a very complex network of where we're going to spend capital and where we're generating free cash flow. I would say, generally speaking, that number for us is around $2 billion. But it certainly does matter to us where that cash is available for different purposes. So yes, I would sort of say in that $2 billion range, sometimes higher if we're getting ready to enter a period of capital -- development capital work. But that's probably the minimum at the lower end of the cycle.

Next question comes from Adam Graf of B. Riley FBR.

Just looking at the slides, I was struck by the big impact on GAAP earnings from the change in value from your equity portfolio. And I was curious if maybe you could discuss the process and the speed that you guys are going through those interests and how you're sorting through them and deciding what to get rid of and when.

Thanks, Adam. I might pick that one up and get Nancy to pick up some of that question as well. We're continuing to look at cleaning up that equity portfolio. We talked about the group of equities that we didn't see fitted with our portfolio going forward and looking at ways that we could potentially package them up and sell them. So that work is continuing. And obviously, in the current price cycle, we want to make sure we get full fair value for those as well.

So we're not pacing to do anything there. We're still testing the market with those that don't have a strategic fit. We've also seen some of the swings and roundabouts, which Nancy might touch upon, but you saw that, that value come off and that -- in the first quarter and then that value came back up again as markets recovered. So you may be seeing some of that play through with those equities as gold price moves around with the pandemic. Nancy, is there anything you'd add to Adam's question?

Yes. I would just say that our unrealized holding gain and losses on that portfolio was about $227 million or $0.28 and then the other piece of that is there was a tax benefit recognized resulting from those changes. So that's really the impact of that portfolio, and it's really just relative to, I'm sure, valuation around, current gold prices.

Sure, sure. Maybe just to change the subject. Can you guys -- do you have a schedule or an idea of when you guys might be able to give us some more details regarding CapEx and grades and sort of a summarized mine plan for the Yanacocha Sulfide project?

Adam, it's probably going to be the next year as we work through our definitive feasibility study work and get closer to that full-funds approval or potentially as we issue our -- we could give some more color as we issue our guidance again later this year. So we'd look for a milestone like that or closer to full funds to provide an update. I mean that information we're sharing now from memory came with last year's guidance issued in December. So that's typically when we -- as we revisit our plan and update numbers and update our guidance that would be a bit logical place to maybe give some more color on that project.

Our next question comes from Michael Dudas of Vertical Research Partners.

Tom, maybe one, just if you could share your thoughts on -- it's been the 1-year anniversary for the joint venture in Nevada. Your perspective from when it -- when you engaged to where you are today and how you see it from Newmont's standpoint?

Yes, from my perspective, Mike, it was a joint venture that should have been done a long time ago. And I'm pleased that we're able to get it done in the first quarter of last year and bring those 2 assets together. You had in Newmont and you had in Barrick, mature assets that were both starting to enter into the twilight stages of their life and declining production profiles. And I think the ability to bring those ore bodies and those processing plants together brings life into those assets for both organizations and for those communities through Northern Nevada. So I think it was a very good transaction that is creating value for both Newmont and Barrick shareholders, and the whole is definitely worth more than some of the individual parts. So I think it was -- continues for me to be a very good transaction. And quite frankly, I think it's a transaction that should have been done some time ago, and I think too many egos got in the way on both the Newmont side and the Barrick side. And I'm pleased it's done.

I think everybody agrees with that [thought]. How about relative to production cost to expectations that Barrick have put through relative to what you envisioned? Is that -- you feel that's on the right track? And maybe this could continue to be upside because of some of the power of those synergies that you cited?

Yes. Certainly, we -- I mean, as the junior partner in the JV, we're looking to see the synergies realized, and we continue to provide support and influence to see the value from those synergies coming through. There is some very straightforward synergies, and then there's some that are harder to get as you start to optimize mine plans around that double refractory ore. So we're keen to see those flow through, and we continue to influence and support and seeing those flow through. The team also have had to manage through the COVID pandemic as we all have, and I think Greg Walker and the team have done a yeoman's job in terms of navigating through the pandemic and managing all the impacts that come from that, that impact on both the production and cost performance. So continue to work with Barrick as the operator and keen to see those synergies flow through.

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

Thank you all for joining us today. And please, as we continue to manage the impacts of this nasty virus, please, you and your families stay and keep safe and well, and we look forward to talking to you in the not-too-distant future. Thank you, everybody.

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