Newmont Corporation (NEM) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Solid Operational Performance

  Newmont delivered solid operational performance, keeping on track to achieve 2024 guidance and positioning for improving financial results.

• Progress on Capital Allocation Priorities

  The company progressed its capital allocation priorities, retiring $250 million in debt and returning approximately $540 million to shareholders through dividends and share repurchases.

• Strong Financial Results

  Newmont reported $4.4 billion of revenue, $1.4 billion of cash flow from operations, and $594 million in free cash flow in the second quarter.

• Portfolio Optimization

  Announced the monetization of Batu Hijau deferred payment obligations, expecting to receive $153 million by September 30, contributing to nearly $530 million in proceeds from divestitures by year-end.

• Synergies from Newcrest Acquisition

  Achieved $100 million in synergies in the second quarter, bringing the run rate to $205 million since the acquisition of Newcrest, with a target of $335 million by year-end.

Pessimistic Highlights

• Challenges in Safety Systems

  Following the tragic loss of four colleagues, Newmont initiated a comprehensive review of its safety and risk management systems to improve safety performance.

• Higher Costs

  Reported higher all-in sustaining costs of $1,562 an ounce, primarily due to lower production volumes, higher royalties, and increased sustaining capital.

• Working Capital Changes

  Faced $263 million of unfavorable working capital changes, largely due to a build in stockpiles and trade receivables, and significant reclamation spend.

Company Outlook

• Increased Production and Lower Costs Expected

  Anticipates higher gold production and lower unit costs in the second half of the year, driven by higher grades at key operations and the realization of synergies.

• Divestiture Program Confidence

  Expects to reach at least $2 billion from the sale of seven high-quality non-core assets, excluding proceeds from Lundin Gold and Batu Hijau transactions.

• Continued Focus on Safety and Sustainability

  Committed to enhancing safety systems and maintaining its position as the gold industry's sustainability leader.

Q & A Highlights

• Q: What is the latest thinking on timing and upward pressure on offer prices for asset sales? (Lawson Winder, from Bank of America Securities)

  A: The asset sales process for Akyem, Telfer, and North American assets is on track, with competitive processes and good value coming through. The $2 billion target from divestitures excludes proceeds from Lundin Gold and Batu Hijau transactions. (Thomas Palmer)

• Q: Can you discuss the decision to start the buyback and the run rate going forward? (Daniel Major, from UBS)

  A: The decision was influenced by the gold price environment, operational visibility, and certainty on divestment proceeds. The pace of share buybacks will be driven by free cash flow realization and proceeds from divestitures. (Karyn Ovelmen)

• Q: How should we think about Penasquito's production and the $130 million in synergies? (Tanya Jakusconek, from Scotiabank)

  A: Penasquito's production in Q3 will be similar to Q2, with a significant increase in gold production in Q4. The $130 million in synergies will come from supply chain work and full potential improvements, particularly in the fourth quarter. (Natascha Viljoen and Thomas Palmer)

• Q: Can you clarify the depreciation rates on Newcrest assets and the working capital evolution? (Anita Soni, from CIBC Wall Markets)

  A: Depreciation rates on Newcrest assets are generally settled, with slight variability expected. Working capital changes traditionally produce adverse impacts in the first half, with improvement expected in the second half. (Karyn Ovelmen)