Newmont Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 25, 2024

Key Takeaways

  • Newmont disclosed the tragic loss of four colleagues this year and has launched in‐depth investigations with immediate safety measures and a structured reinvigoration of its safety systems to prevent future incidents.
  • The company produced 1,700,000 ounces of gold in Q1 at an all‐in sustaining cost of $1,439/oz and reaffirmed its on‐track delivery of 2024 guidance with production weighted to 53% in H2.
  • Newmont advanced its portfolio optimization by selling the London Gold Financing Facilities for $330 million and launched divestment processes for six non-core assets targeting over $2 billion in proceeds within 12 months.
  • The integration synergies program delivered $56 million in Q1, bringing total synergies to $105 million and remaining on track for a $500 million annual run rate by January 1, 2026.
  • With $6.7 billion in liquidity, Newmont refinanced $2 billion of debt, declared a Q1 dividend of $0.25/share, and plans disciplined capital allocation including debt reduction and potential share buybacks.
AI Generated. May Contain Errors.
Earnings Conference Call
Newmont Q1 2024
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good morning, and welcome to Newmont's First Quarter 20 24 Earnings Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note the event is being recorded. I'd now like to turn the conference over to Tom Palmer, President and Chief Executive Officer.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining our call. Today, I'm joined by my executive leadership team, including Natasha Vollune and Karen Ovalman, and we'll all be available to answer your questions at the end of the call. Can I please ask you to note our cautionary statement and refer to our SEC filings, which can be found on our website? Before we begin today, I'd like to take a moment to remember the 3 colleagues who sadly lost their lives working for Newmont this year.

Speaker 1

Mike Kavita Morrison or Kobi as he was known to his friends and colleagues was a dedicated and hardworking member of our Harfo North project team and a natural leader. Kobi was a son, a husband, a father, a dear friend to many and he will be greatly missed. Rosanna Lestema was a daughter, a wife and a mother to a young daughter. Civil engineer, Rosanna was part of the original team that developed Cerro Negro 11 years ago and had aspirations to soon become a part time farmer in Argentina. And Daniel Ochoa, a son, a father to 2 young boys, a partner and a brother.

Speaker 1

He has been described by his colleagues as a strong team member with ambitions to further develop his career in mining. The investigations into these tragic incidents have been led by 2 of our managing directors from different business units. With the support of teams of subject matter experts to ensure that we truly understand the cause of the incidents. Our response will include implementing both immediate measures from early observations from the investigations as well as taking a structured approach to reinvigorate our safety systems, tools and infield leadership activities that will all have a heavy focus on the quality of application. Sadly, these recent incidents are a stark reminder of the need to maintain discipline and a relentless focus on safety fundamentals.

Speaker 1

The loss of Adam Kennedy, Kobi, Rosanna and Daniel over the past 6 months has had a profound impact on the entire Newmont family and it is with great humility and resolve that we will continue to challenge ourselves to ensure that everyone working in our business goes home safely to their loved ones. Turning to our quarterly results. We are firmly on track to deliver our 2024 guidance. We are pleased with our operational performance in the Q1 and remain focused on delivering consistent results as guided over the remainder of this year and beyond. I also want to reiterate the 4 key commitments that we have made to our shareholders.

Speaker 1

We continue to make progress on these commitments, and I'd like to provide a brief update on our Q1 achievements, starting with strengthening Gimon's position as the gold industry's recognized sustainability leader. Last week, Newmont published our 20th annual sustainability report along with our 3rd annual taxes and royalties contribution report, both providing a detailed and transparent look at our values driven approach to sustainability and the economic contributions we made in the jurisdictions and communities that we operate in. With this sustainable foundation in place, we have created the industry's strongest portfolio of world class gold and copper assets in the most favorable mining jurisdictions. And from this portfolio, we produced 1,700,000 ounces of gold at an all in sustaining cost of $1439 an ounce in the Q1. We continue to expect these unit costs to improve throughout the year, driven by both higher production in the second half and the delivery of synergies.

Speaker 1

I'd also note that in the Q1, our go forward Tier 1 portfolio produced 1,400,000,000 ounces of gold at $13.78 an ounce. Our Tier 1 portfolio also produced over 480,000 gold equivalent ounces from copper, silver, lead and zinc and included in this number is the 35,000 tons of copper that we produced and sold. We generated $776,000,000 of cash flow from operating activities in Q1, including a $666,000,000 reduction from working capital, which Karen will cover in a few minutes. And when we exclude the $291,000,000 one time stamp duty payment we made in February in connection with our acquisition of Deepcrest, free cash flow for the quarter would have been $217,000,000 Our 2nd quarter production and costs are expected to remain relatively consistent with the Q1. And we continue to expect that our gold production will be weighted to around 53% in the second half of the year, remaining firmly on track to achieve our full year guidance on both production and cost basis.

Speaker 1

In the Q1, we also continued to progress the divestment of our 6 high quality non core assets this year. And this morning, we announced the sale of our London Gold Financing Facilities, generating $330,000,000 in cash proceeds and furthering our commitment to maximizing shareholder value by monetizing our non core assets. We continue to maintain our exposure to Fruta del Norte through our equity interest in London Gold. Underpinned by the industry's strongest portfolio of gold and copper assets, we remain committed to maintaining a disciplined and balanced approach to capital allocation. As part of this, we declared a Q1 dividend of $0.25 per share, demonstrating our ongoing commitment to returning capital to shareholders.

Speaker 1

We refinanced approximately $2,000,000,000 in debt related to the Newcrest acquisition. And we continue to advance our 4 key projects we have in execution. A second expansion at Tanami, our new mine, Harpo North and our 2 new block caves at Cadia. And finally, turning to synergies. We remain firmly on track to deliver on our commitments.

Speaker 1

In the Q1, we achieved $56,000,000 in synergies, bringing the total delivered to $105,000,000 since we closed our acquisition of Duke Crest in November last year and building solid momentum towards our commitment of delivering a $500,000,000 synergy run rate by the 1st January, 2026. We have identified a series of initiatives, each with action plans and dedicated resources in place that have us on track to achieve a $335,000,000 run rate by the end of this year, representing 2 thirds of our $500,000,000 synergy commitment and well ahead of the run rate we estimated when we announced this commitment in May of last year. Beginning with the core of this value delivery, we are seeing great opportunities emerging from our full potential work and we are just getting started. At Lihir, we recently completed the first phase of full potential from which we have identified initiatives that will deliver more than $150,000,000 of value, close to double the synergy target we allocated to this new Tier 1 operation in our portfolio. I've just returned from Lihir and the key to extracting this value will be simplification, Following a very similar approach to the one we used at Penasquito 5 years ago, we had key members of our Newmont technical team on the ground in PNG, supporting the site team to work on simplifying operations by focusing on the areas that will genuinely move the needle and stopping the non value activities that have historically played this operation.

Speaker 1

One example of this work is the work we are doing to debottleneck the materials handling and crushing circuits, which have been limited by the different ore properties resulting in downtime from spillage, block shoots and block crushers. From this initiative alone, we expect to improve mill throughput and generate over $50,000,000 in annual cash flow improvements. And the future waves of opportunities already identified at Lihir, we remain very excited about the untapped potential at this Tier 1 operation. We are also well into the first phase of our full potential work at Cadia, Red Chris and Bres Jack and have already identified several high value opportunities that we will progress in parallel with the initiatives now underway at Lihir. For our supply chain synergies, we have already realized close to $30,000,000 from negotiating more favorable terms and pricing for materials and equipment, as well as first consolidating and then renegotiating service contracts.

Speaker 1

As we look ahead, we will continue to work closely with our key suppliers, leveraging our unmatched scale and global partnerships to seek improvements through negotiations and tenders over the course of the year. Then turning to G and A. We have already achieved over 80% of the synergies that we're committed to, and we expect to exceed our $100,000,000 G and A commitment by the end of this year. Most of our G and A synergies are coming from employee and contractor rationalization as we expected and to a lesser extent from reductions in insurance premiums and other administrative fees. We look forward to realizing the significant production and cost benefits from our synergy work and we will continue to provide you with updates on our progress each quarter.

Speaker 1

And with that, I'll now pass it to Natasha and then Karen for an update on our operational and financial performance for the quarter. Over to you, Natasha.

Speaker 2

Thank you, Tom, and good morning, everyone. After the loss of our colleagues at Ahafo North and Cerro Negro, Tom and I spent time at these two sites and with the project operational and investigations teams to get a firsthand understanding of the incidents to inform our global response to address our safety performance. In addition to Ojafo North in Cerro Negro, I had the privilege of visiting 5 of our 6 managed Tier 1 operations and spend time with our colleagues at Bonnington, Inosquito, Achim, Ahafo and Lihir as well as Yanacocha and Merian. Our operations delivered a strong first quarter performance in line with our business plan and outlook for the year. With full potential underway at many of our sites, we remain confident in our ability to deliver safe and efficient production, keeping us on track to deliver on the commitments Tom just described.

Speaker 2

I will cover the Q1 performance and outlook for our Tier 1 operations, starting with Tanami. Tanami achieved planned production for the quarter despite the heavy wet season in the Northern Territory that resulted in a 6 week closure of the Tanami track. In the Q1, Tanami delivered higher tons mined from deeper underground and successfully completed its planned milled shutdown, positioning the site to deliver at least a 20% increase in gold production in the Q2 compared to the 1st. At Boddington, the stripping of the current buybacks in both the North and South Beds continued to ramp up in the Q1, an investment that will bring forward stronger gold and copper grades starting in 2026. Total material moved increased over the Q4 due to improved tonnes mined and higher shovel productivity through the introduction of double sided loading for our autonomous truck fleet, representing a major milestone for this ore fleet as the performance of this technology continues to go from strength to strength.

Speaker 2

Penasquito delivered strong silver and lead production from the Chile, Colorado pit in the first quarter as waste stripping continues to progress in the Penasco pit as previously indicated. As a result and as planned, we continue to expect gold production to be around 60% weighted towards the second half of the year at this world class polymetallic mine. As we return to mining ore from the Penasco bit towards the end of the year, we will have access to these higher gold rates in the Q4 and into next year. At Ojafa, we continue to optimize the processing circuits in the Q1, achieving a 37% increase in mill throughput compared to the prior quarter. The newly fabricated girth gear for 1 of the 2 SAG mills has arrived on-site, and we remain on track to replace this year in May of this year.

Speaker 2

Once the new growth gear is commissioned, we anticipate a 10 to 20 day ramp up period to reach full processing rates, resulting in even stronger production levels at our half hour into the second half of the year. Gilead continued to deliver strong gold and copper grades from the current block cave in the Q1. However, as factored into our guidance, these grades are expected to gradually decline over the remainder of the year as we transition from mining this cave to Panel Cave 23. And the work we are doing on both tailings rectification and expansion at Cadia, as mentioned last quarter, is progressing well. Dom and I visited Lihir in early April, and we're impressed with the team's dedication and understanding and then implementing full potential work.

Speaker 2

As Tom said, this work will focus on simplifying the operation and being clear on the highest value options that will drive stability through the mining value chain. In addition, I want to flag that the largest of our 4 auto players at Lihue will come down in Q3 for planned maintenance. This shutdown is included in our guidance. During the Q1, we continued to progress the 4 key projects we currently have in execution. At Arfon North, we are advancing the construction of the processing plant and mine service facilities along with waste stripping activities to allow the mining of ore to commence towards the end of this year.

Speaker 2

We are diligently focused on progressing the projects safely and efficiently and looking forward to delivering new low cost ounces in the second half of twenty twenty five. At the second expansion of Tanami, our focus is on safely lining the lower section of the shaft. And as you can see in the photo, we also continued to progress the construction of the underground infrastructure, including pouring the concrete foundation for the crusher chamber during the Q1. The 2 blockades at Cadia are both progressing well. We are advancing cave development to bring production online at Panel 2, 3 and we are progressing underground development work for Panel Cave 12.

Speaker 2

With that, I'll turn it over to Karen to cover our financial performance and capital allocation priorities for the remainder of the year.

Speaker 3

Thank you, Nezwesha. Let's get started with a review of the financial highlights for the quarter. Newmont delivered solid first quarter earnings, driven by strong production volumes and favorable metal prices. And as a reminder, results included only 2 months of our equity investment in Lending Gold, which is accounted for 1 quarter in arrears. In the Q1, Newmont delivered $4,000,000,000 in revenue at an average realized gold price of $2,090 per ounce and copper price of $3.72 per pound.

Speaker 3

Adjusted EBITDA of $1,700,000,000 and adjusted net income of $0.55 per diluted share. The most notable adjustment to net income for the quarter was a $0.43 add back related to non cash impairments of non core assets that were classified as held for sale as of March 31. Under U of S. GAAP, assets that are classified as held for sale require a specific evaluation and need to be recorded at the lower of the carrying value or fair value less cost to sell. As a result of this evaluation, Newmont realized a non cash loss on assets held for sale, including the associated tax impact of $485,000,000 primarily related to the Coffey project as opposed to assets that are currently operational.

Speaker 3

As I indicated on our previous call, we anticipated minimal free cash flow in the Q1, primarily due to the timing of production and payments. We generated over $1,400,000,000 of cash flow from operations in the Q1 before a working capital reduction of $666,000,000 These changes in working capital included a one time payment of $291,000,000 related to stamp duty tax stemming from the acquisition of Newcrest, which was accrued for last year a building stockpiles primarily at our newly acquired sites of $193,000,000 a building accounts receivable of $84,000,000 largely due to the ramp up of operations at Penasquito in the Q1 and the timing of concentrate sales and $59,000,000 of reclamation spend primarily related to the construction of the Yanacocha water treatment facilities. Yanacocha's ongoing closure advanced to the feasibility state at the end of last year and continues to address several complex closure issues, including water management, social impacts and tailings. This long term water management solution will replace 5 existing water treatment facilities with 2. We commenced our construction of the Anacocha water treatment plants as planned this quarter and expect spending to ramp up throughout the year and continue to adversely impact working capital.

Speaker 3

Historically, Newmont's standalone reclamation spend averaged around $200,000,000 to $300,000,000 per annum, but we expect to spend around $600,000,000 in 2024 and peak around $700,000,000 in 2025 before beginning to decline in 2026. As previously mentioned, the first half of the year traditionally tends produce adverse working capital changes and this normal trend is expected to continue into the 2nd quarter, but with a slightly lower impact due to the regular timing, cash tax and interest payments. And with production also weighted towards the second half of the year, we anticipate that the majority of our cash flow after working capital will be realized in the 3rd Q4 positioning Newmont for a stronger second half of the year from both an earnings and cash flow perspective as we continue to focus on operational delivery. As Tom mentioned, we remain firmly on track to achieve our full year guidance for production, costs and capital spend. Production is expected to increase in the second half of the year with the year's strongest performance anticipated in the Q4, primarily driven by strong grades at Penasquito, Mahafo and Panamine.

Speaker 3

And unit costs will be closely correlated to production with the added benefit of full potential improvements and additional synergies realized in the second half of the year. Capital discipline is a key focus area for us with our transformed portfolio. As mentioned on our last call, we continue to expect to invest an average of $1,300,000,000 per year of development capital in projects that will generate the highest returns, which we plan to provide more information about during our Capital Markets Day in the Q4 of 2024. During the Q1, we continued to execute our balanced capital allocation strategy, which focuses on maintaining a strong balance sheet, steadily funding cash generative capital projects and returning capital to shareholders. We maintained an investment grade balance sheet and ended the quarter with $6,700,000,000 in total liquidity when including the cash reclassified to current assets held for sale.

Speaker 3

We reinvested $317,000,000 of development capital as we continue to advance our highest return projects from our deep organic pipeline. And finally, we declared a fixed common first quarter dividend of $0.25 per share in line with the dividend declared during the 4th quarter. Looking ahead, our capital allocation priorities have not changed and the cash flows generated from our operations and the proceeds from divestments will be allocated first to have an approximate cash balance of $3,000,000,000 and then to reduce debt up to $8,000,000,000 over the next few years. Additionally, once we have line of sight on meeting our balance sheet targets, we intend to repurchase shares as we see value in buying back our shares. Maintaining a disciplined and structured approach to capital allocation throughout the year will better position Newmont to deliver value to our shareholders.

Speaker 3

With that, I'll hand it to Tom for closing remarks.

Speaker 2

Back to you, Tom.

Speaker 1

Thanks, Kara. In closing, and as we look ahead to our priorities for the year, I'd like to reiterate our focus areas and key commitments. 1st, we will reinvigorate our established safety program and continue to strengthen NEEMO's position as the gold industries recognized sustainability leaders. 2nd, we will continue operating the industry's strongest portfolio of world class gold and copper assets in the most favorable mining jurisdictions. 3rd, over the next 2 years, we will deliver $500,000,000 of annual synergies, an additional $500,000,000 in cost and productivity improvements and over $2,000,000,000 in cash from portfolio optimization.

Speaker 1

And finally, we will drive a disciplined balanced approach to capital allocation, creating a resilient and returns focused future for our organization and our shareholders. From our go forward portfolio focused on Tier 1 gold and copper operations, we are well positioned to deliver on these commitments and more, creating an attractive value proposition to new and existing investors during this unique time in the gold industry. And with that, I'll thank you for your time today and turn it over to the operator to open the line for questions.

Operator

We'll now begin the question and answer session. Our first question comes from Lawson Winder of Bank of America.

Speaker 4

Thank you, operator. Good morning, Tom and team. Very nice quarterly results and thanks for the update today. Can I start off by asking about asset sales? First of all, congratulations on realizing value from the sale of the Lundin stream and offtake.

Speaker 4

But with respect to that, first of all, when you receive that when would you receive that cash, first of all? And then second of all, will it be applied entirely to debt repayment? And then just looking at the asset sales more broadly, we've seen public indications of interest, fairly substantial interest in achieving Telfer. How would you describe the interest in the other assets? And what is your timeline currently on thinking to be able to announce some transactions on these assets?

Speaker 4

Thank you.

Speaker 1

Good morning, Paul. I'll pick up the second part of your question and get Karen to pick up the first in terms of the use of the proceeds from the London transaction. So 6 high quality non core assets that are now held for divestment. So we've moved into that accounting classification as Karen talked to. We have started a formal process on every one of those assets.

Speaker 1

So we're in Phase 1 in each of those for each and every one of those assets. So we're in the price discovery phase. And there is a high level of interest across all of those processes. When we classify as assets held for sale, we are laying out a program as we're committed to that we will work to divest those assets for fair value over the next 12 months. Our preference is on cash and that's what we'll be looking to optimize value and cash, But the process has started on all 6 of them and there's a high degree of interest.

Speaker 1

Clearly getting an asset out of a Newmont portfolio is attracting a lot of interest in the market. After Karen in terms of your question around the use of the proceeds, they're coming to tranches Karen and then maybe price to use.

Speaker 3

Yes. In terms of the use of proceeds, so the 1st payment, 2nd quarter, the 2nd payment in the 3rd quarter. Our capital allocation priorities are consistent with as I discussed in my prepared remarks. And as we've indicated through 2024, the beginning part of the year, we will be drawing out cash as we go through the year. And so the first probably first proceeds would be used to kind of replenish those cash balances as we go forward.

Speaker 4

Great. Thank you very much.

Speaker 1

Thanks, Wilson.

Operator

Our next question comes from Tanya Jakusconek of Scotiabank.

Speaker 5

Great. Good morning. Thank you for taking my questions. Natasha, I wanted to ask you just on the year on the GEO side, you gave us the $47,000,000 on the gold front. Can you give us some guidance on the other metals, maybe just on the GEOs, how they progress at the year and particularly at Penasquito, please?

Speaker 2

Tanya, thank you for that question. I think starting off just broadly, we will see we see higher contribution from Penasquito on GEOs this year because we are mining predominantly in the Chile, Colorado pit that we know is higher in GEOs. We if we look at our GEO production across the last four quarters, we will see that the GEO production for silver would be around 9,000,000 ounces a quarter in the order of about 28,000,000 ounces for lead sorry, 29,000 tons 58,000 tons of zinc across the four quarters.

Speaker 1

Just chipping in there, Tanya, that the sort of coming out of Chile, Colorado for the 4th quarter and hit back into Banasco, pretty flat on silver and leaf. So probably the cash

Speaker 4

is a

Speaker 1

little bit more zinc maybe in the 4th quarter.

Speaker 5

Okay. That's helpful. Thank you.

Speaker 1

Copper is pretty steady through the year. Copper is pretty steady, Tanya, sorry.

Speaker 5

Okay. And could I ask just still on the operational side, Natasha, you mentioned, Lihir maintenance in Q3. Are there any other big maintenance that we should be aware of in your portfolio, particularly Nevada Gold Mines, Pueblo Viejo Acadia?

Speaker 2

The only other area would be Ohafo South where we will be replacing the Gerskia as I mentioned in the prepared comments. So and that will happen now in the Q2. And then after that, we should see a ramp up back to normal production levels for Harfo. You might remember, Tania, we did say that we've reduced production out of Harfo to make sure that we keep the 2 mill streams running, but that will then return to normal production rights after that shot.

Speaker 5

Okay. That's very helpful. And then just finally on operations and I'll leave it for someone else to ask. I'm just interested as you the costs were quite good in Q1, even with the lower production levels that, you are going to expect better production going through the year. Anything on the inflationary front that you could flag for us?

Speaker 5

Any easing that you're seeing? Anything that you're seeing some benefits on?

Speaker 2

We've certainly seen some easing in 3 areas. We've seen it in contractor costs, diesel and explosives. But then we've also seen some increase in our steel wool costs related to steel price and then also cyanide costs. The other aspect to it would probably be energy in certain areas. We see a reduction in energy.

Speaker 2

That is, I think, quite surprising for us from 20 23.

Speaker 1

And just remind, Andrea, that half of that direct cost is labor and that's been pretty flat. Yes.

Speaker 5

So just as I understood because it faded in and out and I apologize for that. Just on where you're seeing reductions or easing as in contractor cost, diesel and some consumables and energy. Is that a correct statement?

Speaker 2

Yes. Explosives specifically. And then overall labor cost yes, overall labor cost staying flat for owned labor, but that's about 50% of our cost, Micah.

Speaker 5

Okay. Thank you so much for taking my questions and I'll pass it to someone else. Thank you.

Speaker 1

Thanks, Tanya.

Operator

Our next question comes from Josh Wolfson of RBC Capital Markets.

Speaker 6

Hey, thanks very much. The team has painted a fairly rosy picture here on what the prospects are for asset dispositions and then also what the free cash flow outlook will look like absent some of these working capital headwinds. In that context, I'm wondering how flexible is the company's buyback policy? And I'm noticing the stock being a lot higher today than it was when the plans were announced for this at the 4th quarter results. Thank you.

Speaker 3

Thanks, Josh. Yes, as we go through the divestitures and as I've indicated, as our free cash flow picks up in the second half of the year, first priority is to ensure that we've got that our cash replenished on our balance sheet. And then there will be flexibility in terms of as long as we have line of sight in terms of that debt reduction over the next 24 months, we would at that point in time, if we were in a position, start to think about executing on share buybacks.

Speaker 1

And a reminder, Josh, we've got an approved $1,000,000,000 buyback program ready to go if and when that scenario, Karen, maps out takes place.

Speaker 6

Okay. And then just sort of to clarify, when I look at even what a flat quarter would look like at much higher gold prices today, and again without some of the larger working capital challenges, even maybe 1 or 2 of these asset dispositions would put you in line of sight of that. So is it fair to say that the prospects for this buyback could happen sooner than maybe what the initial criteria were outlined for the balance sheet requirements?

Speaker 3

Yes. The expectations for the divestitures is that those will be executed within the next 12 months, hence the classification on the balance sheet is assets held for sale. So expectation is through Q1 of 2025 that we will have executed or made decisions around the divestitures. And so the timing is contingent upon that.

Speaker 6

Okay. And then sorry, just one question if I can sneak in. I noticed the book value for the assets that are held for sale is $5,700,000,000 which is quite a large number as compared to the $2,000,000,000 targeted. Any sort of comments there on how we should think about pricing or what the targets are effectively?

Speaker 3

No, not necessarily. I think from an accounting convention perspective and how they're reported from a GAAP perspective will be obviously considered, I would assume, by potential buyers, but the announced in essence, the process of going through the commercial view of the assets and the value to the potential buyers that will produce something most likely different, whether it's up or down in associates versus what is recorded on our book from a GAAP perspective.

Speaker 6

Great. Thank you very much.

Speaker 1

Thanks, Josh.

Operator

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

Speaker 7

Yes. Thanks very much for taking my questions. Maybe I'll ask the first question on the Full Potential program. So I had the privilege of visiting Penasquito in March and definitely the team did a great job of outlining how the full potential program has benefited there. And I know you're working very hard on rolling that out in some of the newer acquired assets like Lihir.

Speaker 7

Can you talk a little bit about how that's going so far and what you're seeing in terms of achievements or maybe potential for future achievements?

Speaker 1

Yes. Thanks, Jackie. Good morning. I'll kick off. And Akash, you might want to build on that.

Speaker 1

We'll dig in the room as well, and I want to chip in as well. We're further the most advanced at Lihir and Lihir was the site we saw as the most opportunity, which is why we jumped into there literally on day 1. 3 main productivity and cost opportunities, as I hear, the one I mentioned in the prepared remarks is really around consistent all feed so that you can manage and address materials handling. So it's surely got the right balance of different ores so that you've got managing conveyor belts and block shoots and block crushers just allowing a big plant to get a good consistent feed coming into it is a key value driver. Asset management and improving plant availability and other plant losses, a real opportunity at Lihir, just the basics of good quality work management, reliability engineering with the strength of the team that we have to support Lihir.

Speaker 1

And then the third one is down into the pit, improving mine efficiency and mine productivity, just getting back to the basics of drill and blast, low haul through the mine. So very similar as we discussed at Penasquito in late February. Move across to maybe just I'll touch on Cadia and Red Chris in particular. There's an enabler at Cadia, really important enabler in terms of resolving the tailings constraints. So understanding the work to rectify the tailings at Cadia and then expand those tailings to ensure you've got the tailings capacity to support productivity improvements from both the mine and the processing plant.

Speaker 1

Underground, it's unlocking panel development. We're clearly opening up PC23, so progressing the opening up of the draw points over the next couple of years in PC23, ensuring that you're bringing on the development work for PC12. And then there's a fine balance between the mine and the processing plant. So ensuring that as we're doing that work, we're also unlocking our processing capability. We're still in that first phase of full potential, but we do identify some early quick wins.

Speaker 1

And I would argue that we are specialists in high pressure grinding roles at Mornington. Over the last dozen years, we have worked with those HPGRs and we have a very efficient way of operating and maintaining those that important crushing circuit such that we have regular visits to Boddington to understand how we both operate and maintain those HPGRs. So the opportunity for us to quickly get across to the HPGRs at Cadia, understand the power draw, understand the process control logic and optimize those HPGRs is a really early quick win that we're getting after even before we finish the diagnostic phase. And then I'll maybe touch on Red Chris. Red Chris, that processing plant is going to be there through the end of the mine and as we ultimately move into the block cave.

Speaker 1

So really focusing on the opportunities to stabilize mill operations, again the basics around reliability and having uptime of that facility with consistent feed. And after you have stabilized, then optimizing copper and gold recoveries and improving process controls so that you have a mill that's performing very well, the remaining life of the pit as you then bring on the ore from the block cave in future years. Tasha, anything you'd add?

Speaker 2

No, I think that was a really comprehensive answer. Thanks, Tom.

Speaker 1

Hopefully, Jackie, that gives you some sense of the excitement we have certainly behind full potential and the confidence we have in that run rate through to the end of this year, the run rate to the end of next year and why we've gone after the upside on top of that 500,000,000

Speaker 7

dollars And those are super helpful answers. Thanks, Tom. And maybe if I can ask as a second question. Just going back to your divestment strategy, I know you have a number of assets that you're looking to sell in Canada specifically, but also I guess globally as well. Can you comment at all like do you have a preference of selling that that's in sort of groups or bundles or are they all expected to be sold individually to different buyers?

Speaker 7

I don't know if you can make any comments on sort of how you're thinking about that?

Speaker 1

Thanks, Jackie. As I mentioned in the earlier question, the process has started on all 6 assets. So we have engaged banks and have started a process on all 6 assets and we're in the process of cross discovery through Phase 1, so an active interest. So we are getting a good feel for the level of interest in these assets and the competitive environment that that we're hoping to enjoy. And we're running 3 separate processes in terms of because they're in different locations.

Speaker 1

So there's a process for telephone in the Australian context with a dedicated team looking after that. There's a process for a chin in the African or Ghanaian context with a separate team looking after that. And there's a process for our North American assets for operations plus the Colby project and a team getting after that, for being led by Peter Top and Scott Langley, but up and running and very active. As I say, we're in Phase 1, but and quite excited about the level of interest and the competitive environment, which we're presenting those assets to prospective buyers.

Operator

Our next question comes from Mike Parkin of National Bank.

Speaker 8

Hi, guys. Thanks for taking my question. Just looking for a bit of additional color with Yanacocha and the water treatment plants. This might be a bit old, but just looking for what's the main driver there doing the 2 new plants versus the 5 existing one? Is it capacity or just the old ones don't have the technology kind of need to have implemented there?

Speaker 1

Good morning, Mike. It is both capacity and technology. So just to paint a picture for you, we've been operating and mining the oxide ore at Yanacocha for the better part of the last 30 years and disturbed at the top of the Andes an area that is equivalent of 3 quarters of Manhattan. So to give you a sense of the scale of the disturbed land at the top of the Andes, a significant rainfall every year and a watershed right into both the Atlantic and the Pacific Oceans. So there is a very significant amount of disturbed land, very significant amount of water at the top of the Andes.

Speaker 1

And that water is acidic. So every drop of water that touched that disturbed land, we need to capture, process, treat and then discharge to different qualities. In some instances, the discharge needs to be to drinking water quality and some instances to agricultural standards as defined by the permits we have from the regulatory authorities in Peru. So as has been accrued for within our closure liability, we have been moving into the stage of closure for Yanacocha that involves the construction of 2 large water treatment plants over the next few years that then will treat water in perpetuity forever. These plants are designed to be there processing water and discharging water forever.

Speaker 1

So we're in the building of the plant phase now for a set of facilities that will operate for the 3 decades out in front of us. Just to put into perspective, size of those water treatment plants, we are treating we are designing and building those plants to treat 8,000 meters cubed per hour. That is a plant equivalent to treating the water required by city the size of Seattle. So that's the size of the water treatment plants we're building up in Yanacocha.

Speaker 8

And the cost of those, I guess, that's all kind of flowing through this year and next year. Is that in your capital budget or is that running through the income statement? You normally have

Speaker 1

Sorry, Mike. I'll Chip. Param might want to build on this. You don't develop in capital or sustaining capital?

Speaker 3

That's correct. It's accrued on our balance sheet as a liability. You'll see that the $600,000,000 that we expect to spend in 2024 is considered a current liability, but that you will not see that as Tom indicated flowing through sustaining or development capital.

Speaker 8

Okay. So is it more working capital changes as the current liability

Speaker 3

comes down? Yes, consistent with Q1, you'll see that flow through working capital.

Speaker 8

Okay. Thanks very much. That's it for me.

Speaker 1

Right. Thanks, Budd.

Operator

Our next question comes from Anita Soni of CIBC.

Speaker 9

Just a little bit of a follow on to what Mike just asked. So with Anacocha, originally you guys took a you did a provision of $2,000,000,000 and it was basically the cost of treating this water in perpetuity. So at least that's what I that's what we understood or what you had previous that you previously talked about. So is this do we still have those costs as well? Or is this like once you've built this plant, you wouldn't have ongoing expenses in terms of the water treatment plant?

Speaker 9

Like I'm not quite sure if this is now additive to the original $2,000,000,000

Speaker 1

So in terms of the provisions that we've had closure liabilities, that's all been there. There's no new information there that's fully accounted for in terms of our closure liabilities for Huenacocha. And as part of that, there's always been the spend to build the water treatment plants, which takes place over 24, 25, 26. And then the cost to operate those water treatment plants. So you're then looking at around $40,000,000 $50,000,000 a year to operate those water treatment plants in perpetuity.

Speaker 1

The cost to both operate those plants and to construct those plants are included in our closure liability.

Speaker 9

So what's that total closure liability now then?

Speaker 1

Well, Yanacocha is sitting at just looking at my number, it is sitting at about $4,800,000,000 in the sorry, the liability pass across to Karen to cover the liability rather than me trying to settle with balance sheets.

Speaker 3

Yes. Thomas is referring to the total reclamation and remediation liabilities is around 6.6 percent, but for Yanacocha, it is the 1.7 percent that's in that has been accrued for on our balance sheet. Sorry, dollars 1,700,000,000,000 Yes,

Speaker 1

for the water treatment plant, Anita. So this Yanacocha has a bunch of other closure activities. You've got to reshape leach pads and waste dumps and tailings facilities. So, for the treatment plant is a component of that. The total closure liability for Yanacocha is $4,800,000,000

Speaker 9

Okay. Got it. And then you mentioned it's taking place over 2024, 2025 and then 2016. Can you tell us what the number that we would see in working capital outflow in 2026 would be?

Speaker 3

Yes. So as I indicated in my prepared remarks, so $600,000,000 in terms of $24,000,000 peaking at $700,000,000 in 2025, and then starting to come down from there in 2026.

Operator

Our final question comes from Daniel Major of UBS.

Speaker 1

Hi there. Yes, thanks. Go for Daniel.

Speaker 10

Okay. Sorry, I'll keep it quick. I'm joining out of time. Thanks. Yes, two questions.

Speaker 10

1, just on following up on the working capital and looking at your Slide 10 in the presentation. You've talked at length on the reclamation payments. But can you give us a sense of any other key moving parts we should expect in the coming quarters? And where you would expect the net balance change year on year to be from a cash working capital perspective, including the stamp duty or excluding it, whichever?

Speaker 3

Sure. So the only additional stamp duty we'll have is in the Q3 for approximately $30,000,000 You'll see some additional seasonal changes as we head into 2nd quarter as it relates to cash, taxes as well as interest from a cash perspective. Those will flow through in the Q2 as well. And you'll see higher the reclamation liabilities to cash outflow associated with that as we go through 2024. And then in addition to that, you'll see the traditional timing as it relates to sales and inventory changes as we go through the year.

Speaker 10

So if you stand out, what would you expect the net change to be over the full year, Bill, in terms of total net build and working capital?

Speaker 3

Yes, that really depends on the timing in terms of that, as well as, of course, pricing as we go through 2024. Okay.

Speaker 10

Thanks. And then, the second one, you've talked detailed a lot of the progress you've made since the integration in Newcrest. In these kind of deals, I guess, there's always positives and negatives. What's the toughest part? What's been the most challenging or almost difficult part of the integration so far?

Speaker 1

I'll pick that one up. The big by far and away Daniel is the tragic loss of Adam Kennedy's life Brucejack on the 20th December last year. And as you reflect upon the integration, you reflect upon what things could we have done differently, what decisions could we have made differently that ordered an effect to Adam being killed that day at Brucejack. I think as you said in some of our remarks as well, I think stepping back from the loss of Adam and safety, I think the 2 areas that we're working through diligently are colleagues facilities and we've talked about Telfer and we've talked about Acadia and a little bit around Red Chris. So just bringing those tailing facilities into the Newmont standard and ensuring that we have the appropriate rigor and discipline around those, managing them here and now and ensuring those we ship at those going forward that they have the appropriate standard.

Speaker 1

And then the third one would be bringing the ore body knowledge levels up to a Newmont standard so that we've got really robust ore body knowledge underpinning our mine plans. So that will be the 3 areas where there's been, I guess, the hard work. I think if I step back from that with the perspective of having lived through a similar integration and transaction 5 years ago. I think when I step back from those three areas, I think the integration has gone very well. And I think we had the benefit of being able to apply the lessons we learned from integrating the 5 Goldcorp assets back in 2019 to this exercise and that's put us in good stead.

Speaker 10

Great. Thanks so much. Good luck.

Speaker 1

Thanks, Matt.

Operator

We've had a follow-up question from Anita Soni of CIBC.

Speaker 9

Yes. Sorry, I got cut off there before the end of the question. But I was hoping I'm assuming that the 2026 spend for Yanacocha water treatment would be $400,000,000 I think you said it was $1,700,000,000 just for the buildup of those plants. So you're doing $600,000,000 then $700,000,000 so the remainder would be $400,000,000 Is that correct?

Speaker 3

Yes. And the expectation is that this will be commissioned in 20 27. And there'll be obviously some continued, as Tom said, continued approximately around $50,000,000 a year associated with that going forward.

Speaker 1

So Nader, we certainly see the step up through those 3 years. And then back to as best you can predict that far in the future, back to the sort of normal long run levels for closure and reclamation activities.

Speaker 9

Okay. I'm going to so the second question that I wanted to ask was about Cerro Negro. So definitely unfortunate that 2 people lost their lives. I did want to ask a little bit about, does it have anything to do with long term structural support there? These I mean, these guys were or a gentleman and a lady were mined within the Mine Technical Services Group.

Speaker 9

So not a little bit unexpected for that group to for that to happen. So I was just trying to find out if you had any color on that.

Speaker 1

Thanks, Aneta. I might ask Natasha to comment.

Speaker 2

I mean, they're absolutely not structural. So from a geotechnical point of view and from a quality of asset point of view, very high quality and no material geotechnical challenges for us. This was procedural by nature. So definitely not linked to any long term predictions.

Speaker 9

Okay. All right. Thank you. That's it for my questions.

Speaker 1

Thanks, Anita. And as we close out our investigation, we will share those lessons widely with the industry. So as we're up to, we will. Thanks, Anir.

Operator

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

Speaker 1

Thank you, operator. Thank you all for your time and please enjoy the rest of your day. Thanks everyone.

Operator

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

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