Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Newmont Corp (NEM, Financial) delivered solid operational performance, keeping on track to achieve 2024 guidance.
- The company generated $1.4 billion of cash flow from operations and $594 million in free cash flow in Q2.
- Newmont Corp (NEM) achieved $100 million in synergies in Q2, bringing the run rate to $205 million since acquiring Newcrest.
- The company retired $250 million in debt and returned approximately $540 million to shareholders through dividends and share repurchases.
- Newmont Corp (NEM) remains confident in achieving a $335 million synergy run rate by the end of the year, ahead of initial estimates.
Negative Points
- The company faced higher all-in sustaining costs of $1,562 per ounce, primarily due to lower production volumes and increased sustaining capital.
- Production at Cadia is expected to decline through the rest of the year due to transitioning mining to the next panel cave.
- Lihir's production decreased in Q2 due to heavy rainfall and soft ground conditions, impacting mine sequencing.
- The company anticipates significant reclamation spend in the second half of the year, which will be a working capital headwind.
- Newmont Corp (NEM) faces challenges in maintaining stable production levels at Telfer due to ongoing tailings dam issues.
Q & A Highlights
Q: What is your latest thinking on the timing of asset sales at Akyem, Telfer, and the North American assets? Are you seeing upward pressure on offer prices with the stronger gold price?
A: (Thomas Palmer, CEO) The asset sales process is progressing well. At Akyem, we are at the end of Phase 2 with seven parties preparing their bids. The North American process is concluding Phase 1 with 24 bids submitted. Telfer is also progressing well. We are seeing competitive processes and good value coming through.
Q: Are there any concerns around the tailings dam issues at Telfer impacting the ability to monetize that asset for value?
A: (Thomas Palmer, CEO) We have been radically transparent about the tailings issues at Telfer. The issues and remediation work are well understood, and we have been transparent with potential buyers. We continue to operate the mine and build stockpiles in front of the mill.
Q: Can you provide clarity on the decision to start the buyback and the run rate of cash returns relative to debt reduction going forward?
A: (Karyn Ovelmen, CFO) The decision was driven by our free cash flow realization, proceeds from divestitures, and the current gold price environment. The pace of share buybacks will be driven by these factors. We have time on the debt and will be opportunistic in the market.
Q: How should we think about Peñasquito's gold production in Q3 and Q4?
A: (Natascha Viljoen, COO) We expect similar gold production in Q3 as in Q2, with a significant increase in Q4 due to higher grades from the Peñasco pit. Non-gold metals production was higher in Q2 due to good mill performance and higher grades from the Chile Colorado pit.
Q: Can you provide a breakdown of the $130 million in synergies expected in the second half of the year?
A: (Thomas Palmer, CEO) Most of the G&A synergies have already been realized. The remaining synergies will come from supply chain improvements and full potential programs at Lihir and Cadia. The majority of these synergies will be realized in Q4.
Q: What is the expected impact of the autoclave shutdown at Lihir on production?
A: (Thomas Palmer, CEO) Autoclave 4, which represents 40% of throughput, will be down for 120 days starting August 1. The other three autoclaves will continue to run. The impact is reflected in our guidance, with higher production expected in Q4 once the autoclave is back online.
Q: How should we think about working capital changes in the second half of the year?
A: (Karyn Ovelmen, CFO) We expect reclamation spend to be around $400-$450 million in the second half, weighted towards Q4. We also expect some working capital headwinds from stockpile builds and reclamation spend.
Q: Will the reclamation liabilities be passed on to the buyers of the divested assets?
A: (Thomas Palmer, CEO) Yes, the reclamation liabilities will be passed on to the buyers. We have a track record of doing this in previous divestments.
Q: What is the expected impact of the higher gold price on tax payments?
A: (Karyn Ovelmen, CFO) Tax payments will start accruing in arrears as we go forward, reflecting the higher gold price environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
