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    Newmont Corporation (NEM)

    Business Description

    Newmont Corporation (NEM) is a leading mining company primarily engaged in the production of gold, with additional operations in copper, silver, lead, and zinc mining . The company operates 17 mining sites, including significant interests in Red Chris and Nevada Gold Mines (NGM) . Gold is the primary product, and the company reports its production in gold equivalent ounces, reflecting contributions from other metals . Newmont's financial performance is closely tied to the fluctuating prices of these metals, influenced by global economic factors . The company is strategically focused on advancing projects, research and development, and exploration to enhance its operations and resource base .

    1. Gold Production - Engages in the extraction and processing of gold, which is the primary product and main revenue contributor.
    2. Copper Production - Involves mining and processing copper, providing a significant additional revenue stream.
    3. Silver Production - Extracts and processes silver, contributing to the company's diverse metal portfolio.
    4. Lead Production - Engages in the mining of lead, adding to the company's range of metal products.
    5. Zinc Production - Involves the extraction and processing of zinc, further diversifying the company's metal offerings.

    Q3 2024 Summary

    Initial Price$42.10July 1, 2024
    Final Price$54.14October 1, 2024
    Price Change$12.04
    % Change+28.60%

    What went well

    • Successful ramp-up of PC2-3 at Cadia, replacing declining production from PC1 and PC2
    • Disciplined capital allocation with focus on high-return projects
    • Maintaining stable production and cost discipline into 2025 despite challenges

    What went wrong

    • Higher-than-expected cost inflation, especially in labor and contracted services, is impacting Newmont's costs, with escalations beyond initial assumptions and expected to continue into 2025, potentially reducing margins and profitability.
    • Production challenges at key operations like Lihir and Cadia are leading to lower-than-anticipated gold output in 2025, with Lihir expected to produce approximately 250,000 ounces less than initially guided due to lower throughput and mining adjustments. ,
    • Elevated sustaining capital expenditures, particularly for critical tailings work at Cadia, are expected over the next few years, resulting in higher costs and potential pressure on free cash flow, which may affect shareholder returns. , ,

    Q&A Summary

    1. Cost Outlook and Inflation
      Q: Will unit costs moderate over time given higher AISC?
      A: Management acknowledges that all-in sustaining costs are $100 higher this year than expected and that previous forecasts did not include any escalation for inflation. They expect current cost levels to trend into 2025 due to higher direct costs, especially from increased contracted labor costs, which make up 50% of their cost structure.

    2. 2025 Production Guidance
      Q: Is 2025 gold production base now 5.6 million ounces?
      A: Due to lower expected production at Lihir and Brucejack, management indicates that 2025 gold production from the core portfolio is projected to be around 5.6 million ounces, down from the previously anticipated 6 million ounces.

    3. Impact of Inflation and Integration Challenges
      Q: Is higher cost due to inflation or integration issues?
      A: Management explains that higher costs stem from both industry-wide inflation, particularly in contracted labor, and integration challenges at operations like Lihir, Cadia, and Cerro Negro. They also mention increased sustaining capital expenditures and efforts to reduce costs.

    4. Future Production and Cost Expectations
      Q: Should we expect 5.5 million ounces at $1,500 AISC?
      A: Management suggests that while costs may remain elevated due to inflation and sustaining capital needs, they anticipate new lower-cost ounces from projects coming online in the next few years. Over the long term, they expect to maintain an average production rate around 6 million ounces of gold.

    5. Multi-Year Guidance Timing
      Q: When will detailed multi-year guidance be provided?
      A: Management plans to provide greater granularity on 2025 numbers in February next year, after completing the divestment program and focusing on their core operations and projects in execution.

    6. Cadia Production Outlook
      Q: Will Cadia reach 35 Mtpa production target?
      A: Management confirms ongoing work on tailings dam expansions and balancing permitting requirements to achieve optimal capital efficiency at Cadia. They are focused on repairing the southern wall of the northern dam and proceeding with further expansions.

    7. Cerro Negro Production Target
      Q: When will Cerro Negro reach original production target?
      A: Management is focusing on productivity improvements to bring Cerro Negro back to expected baseline operations. All mining areas and equipment are available; the emphasis is on enhancing productivity to meet targets.

    Key Metrics

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    Executive Team

    NamePositionStart DateShort Bio
    Thomas R. PalmerPresident and Chief Executive OfficerOctober 1, 2019Thomas R. Palmer joined Newmont's Board of Directors on October 1, 2019. He previously served as President and Chief Operating Officer and has a 20-year career with Rio Tinto .
    Robert D. AtkinsonExecutive Vice President and Chief Operating Officer (until May 2, 2024)June 2019Robert D. Atkinson joined Newmont in June 2019. He has over 30 years of mining industry experience and previously worked at Rio Tinto .
    Natascha ViljoenExecutive Vice President and Chief Operating OfficerMarch 1, 2024Natascha Viljoen joined Newmont on October 2, 2023, and will assume full accountability for all business units on March 1, 2024. She was previously CEO of Anglo American's platinum business .
    Karyn F. OvelmenExecutive Vice President and Chief Financial OfficerMay 30, 2023Karyn F. Ovelmen joined Newmont on May 30, 2023. She has over 30 years of experience in financial roles and has served as CFO at several companies .
    Jennifer CmilExecutive Vice President and Chief People OfficerOctober 2019Jennifer Cmil has been with Newmont since October 2019. She joined Newmont in 2010 and has held various HR leadership positions .
    Peter TothExecutive Vice President, Chief Strategy and Sustainability OfficerJuly 2022Peter Toth joined Newmont in July 2022. His role expanded in September 2022 to include Sustainability. He has over 25 years of leadership experience in the resources industry .
    Dean GehringExecutive Vice President, Chief Integration Officer, and Interim CTOMay 2023Dean Gehring joined Newmont in 2017 and was appointed Executive Vice President and Chief Technology Officer in June 2019. He became Chief Integration Officer in May 2023 and Interim CTO in September 2023 .
    Mark D. EbelInterim Chief Legal Officer (until March 2024)June 2023Mark D. Ebel was promoted to Interim Chief Legal Officer in June 2023. He joined Newmont in 2011 and has been responsible for M&A and compliance matters .
    Suzanne RetallackExecutive Vice President, Chief Safety and Sustainability OfficerJune 2023Suzanne Retallack was promoted to Executive Vice President and Chief Safety and Sustainability Officer in June 2023. She joined Newmont in 2019 and has led improvements in health and safety systems .
    Joshua L. CageChief Accounting Officer and ControllerOctober 2022Joshua L. Cage has served as Chief Accounting Officer and Controller since October 2022. He has over 20 years of service with Newmont and previously worked at Ernst & Young and KPMG .

    Questions to Ask Management

    1. Given the anticipated lower production from Lihir and Brucejack in 2025, resulting in an estimated gold production of 5.6 million ounces from the core portfolio , how does the company plan to address this decline and what measures are being taken to improve production levels at these operations?

    2. With the expected annual sustaining capital spend of around $1.8 billion over the next few years due to critical tailings work at Cadia , how will this significant expenditure impact the company's free cash flow and capital allocation priorities?

    3. Considering the escalation in labor costs, particularly contracted labor, contributing to higher than expected direct costs and G&A spend , what strategies are being implemented to manage these cost pressures and improve margins?

    4. Given the focus on optimizing the go-forward portfolio of 11 managed operations and three projects in execution , how does the company prioritize potential new projects like Wafi-Golpu, especially when the current projects are already consuming significant resources ?

    5. Having achieved the initial synergy run rate target of $500 million , are there additional synergies or cost-saving opportunities that the company is pursuing to enhance shareholder value, particularly in light of the higher than expected costs and production challenges?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateFebruary 2024 October 2024
    End Date/DurationFebruary 2026 October 2026
    Total additional amount$1 billion $2 billion
    Remaining authorization$552 million Not specified
    DetailsOffsets dilution from stock awards and provides shareholder returns Executed at company's discretion

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2025
    • Guidance:
      1. Gold Production:
        • Q4 2024: 1.8 million ounces (8% increase over Q3 2024) .
        • FY 2025: 5.6 million ounces .
      2. All-in Sustaining Costs:
        • Q4 2024: $1,475 per ounce (8% reduction compared to Q3 2024) .
      3. Development Capital:
        • Q4 2024: $320 million .
      4. Sustaining Capital:
        • Annual: $1.8 billion .
      5. Free Cash Flow:
        • Strong expected in Q4 2024 .
      6. Divestments:
        • Up to $1.5 billion in gross proceeds .
      7. Share Repurchase Program:
        • Additional $2 billion approved, total $3 billion .
      8. Production from Specific Mines:
        • Lihir: 2025 production 250,000 ounces lower than initial guidance .
        • Brucejack: 2025 production 100,000 ounces lower .
        • Cadia: Decline expected .
      9. Cost Inflation:
        • Continued labor inflation into 2025 .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Production Guidance: On track for full-year guidance, with increased production in Q3 and strongest in Q4 .
      2. Cost Guidance: On track for full-year guidance, with decreasing unit costs in Q3 and Q4 .
      3. Capital Spend Guidance: On track for full-year guidance .
      4. Synergies: Above initial commitment of $500 million, with a $335 million run rate by year-end .
      5. Divestiture Program: At least $2 billion from asset sales .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Gold Production: 53% expected in the second half of the year .
      2. Costs: On track for full-year guidance, with improvements expected .
      3. Capital Spend: On track for full-year guidance .
      4. Reclamation Spend: $600 million in 2024, peaking at $700 million in 2025 .
      5. Synergies: $500 million run rate by January 1, 2026, with $335 million by end of 2024 .
      6. Yanacocha Water Treatment Plants: Construction impacting working capital .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Gold Production: 5.6 million ounces .
      2. All-in Sustaining Costs (AISC): $1,300 per ounce .
      3. Development Capital: $1.3 billion per year over five years .
      4. Cost and Productivity Improvements: $500 million by end of 2025 .
      5. Shareholder Returns: $1 per share annualized base dividend and $1 billion share repurchase program .
      6. Copper Production: Significant production from diversified portfolio .
      7. Debt and Liquidity: Gross debt up to $8 billion and liquidity of $7 billion .