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Newmont loses $243-million (U.S.) in Q3

2021-10-28 07:30 ET - News Release

Mr. Tom Palmer reports

NEWMONT ANNOUNCES THIRD QUARTER 2021 RESULTS

Newmont Corp. has provided its third quarter 2021 results.

Third quarter 2021 highlights

  • Produced 1.45 million attributable ounces of gold and 315,000 attributable gold equivalent ounces from co-products;
  • Reported gold CAS (costs applicable to sales) of $830 per ounce and AISC (all-in sustaining costs) of $1,120 per ounce;
  • Updated full-year guidance of 6.0 million ounces of attributable gold production, $790 per ounce of CAS and $1,050 per ounce of AISC, reaffirming original guidance of 1.3 million gold equivalent ounces from copper, silver, lead and zinc;
  • Generated $1.1-billion of cash from continuing operations and $735-million of free cash flow (97 per cent attributable to Newmont);
  • Declared third quarter dividend of 55 cents per share, consistent with the previous quarter;
  • Completed $99-million of share repurchases from $1-billion buyback program;
  • Ended the quarter with $4.6-billion of consolidated cash and $7.6-billion of liquidity with a net debt to adjusted EBITDA ratio of 0.2 times;
  • Delivered the gold industry's first autonomous haulage system (AHS) fleet, improving safety and long-term productivity at Boddington;
  • Advancing near-term projects, including Tanami expansion 2, Ahafo North and the mining method change at Subika underground;
  • Progressing Yanacocha sulphides, investing at least $500-million through 2022 with a full funds decision expected in the second half of 2022.

"Newmont delivered on a challenging third quarter performance with $1.3-billion in adjusted EBITDA and $735-million in free cash flow, building momentum for a strong fourth quarter," said Tom Palmer, Newmont president and chief executive officer. "Supported by our clear strategic focus and proven operating model, we continue to apply our disciplined approach to capital allocation. A year ago, we announced our industry-leading dividend framework, establishing a clear pathway for stable and predictable returns. Over the last four quarters, Newmont has steadily reinvested in our operations while returning more than $2-billion to shareholders through dividends and share buybacks, demonstrating our confidence in the long-term value of our business and our ability to maintain financial flexibility," said Tom Palmer, Newmont president and chief executive officer.

                         THIRD QUARTER 2021 FINANCIAL AND PRODUCTION SUMMARY
 
                                                          Q3 2021     Q2 2021     Q1 2021     Q3 2020

Attributable gold production (million ounces)                1.45        1.45        1.46        1.54
Gold costs applicable to sales (CAS) ($ per ounce)           $830        $755        $752        $756
Gold all-in sustaining costs (AISC) ($ per ounce)          $1,120      $1,035      $1,039      $1,020
GAAP net income (loss) (U.S. $ millions)                      $(8)       $640        $538        $611
Adjusted net income (U.S. $ millions)                        $483        $670        $594        $697
Adjusted EBITDA (U.S. $ millions)                          $1,316      $1,591      $1,457      $1,663
Cash flow from continuing operations (U.S. $ millions)     $1,133        $993        $841      $1,597
Capital expenditures (U.S. $ millions)                       $398        $415        $399        $296
Free cash flow (U.S. $ millions)                             $735        $578        $442      $1,301


Attributable gold production decreased 6 per cent to 1,449,000 ounces from the prior-year quarter primarily due to lower throughput at Nevada Gold Mines as a result of a mechanical failure in May, 2021, which resulted in a partial shutdown of the Goldstrike mill at Carlin until it was fully repaired in September, 2021, lower leach production, mill recovery and ore grade milled at CC&V, lower throughput at Tanami as the mine was placed under care and maintenance in July, 2021, and lower throughput, grade milled and recovery at Boddington. These decreases were partially offset by higher throughput at Cerro Negro due to reduced operations in the prior-year quarter in response to COVID-19.

Gold CAS increased 4 per cent to $1,175-million from the prior-year quarter. Gold CAS per ounce increased 10 per cent to $830 per ounce from the prior-year quarter primarily due to lower gold ounces sold, higher diesel costs, an unfavourable Australian dollar foreign currency exchange rate, and higher royalty payments at Akyem and Nevada Gold Mines. These increases were partially offset by a build of inventory.

Gold AISC increased 10 per cent to $1,120 per ounce from the prior-year quarter primarily due to higher CAS per ounce and higher sustaining capital spend. These increases were partially offset by lower treatment and refining costs.

Attributable gold equivalent ounce (GEO) production from other metals increased 15 per cent to 315,000 ounces primarily due to higher throughput and recoveries at Penasquito.

CAS from other metals totalled $192-million for the quarter. CAS per GEO increased 15 per cent to $638 per ounce from the prior-year quarter primarily due to higher allocation of costs to other metals and higher concentrate selling expenses at Penasquito and Boddington. These increases were partially offset by higher gold equivalent ounces sold. AISC per GEO increased 15 per cent to $887 per ounce primarily due to higher CAS per GEO and higher sustaining capital spend.

Net loss from continuing operations attributable to Newmont stockholders was $8-million or one cent per diluted share, a decrease of $619-million from the prior-year quarter primarily due to the loss recognized on the pending sale of the Conga mill assets of $571-million, lower average realized gold prices, lower gold sales volumes, unrealized losses on marketable and other equity securities, higher CAS, and higher reclamation and remediation charges. These decreases were partially offset by lower income tax expense and lower impairment of long-lived assets.

Adjusted net income was $483-million or 60 cents per diluted share, compared with $697-million or 86 cents per diluted share in the prior-year quarter. Primary adjustments to third quarter net income include the loss recognized on the pending sale of the Conga mill assets, changes in the fair value of investments, reclamation and remediation charges, and valuation allowance and other tax adjustments.

Adjusted EBITDA decreased 21 per cent to $1,316-million for the quarter, compared with $1,663-million for the prior-year quarter.

Revenue decreased 9 per cent from the prior-year quarter to $2,895-million primarily due to lower average realized gold prices and lower gold sales volumes.

Average realized price for gold was $1,778, a decrease of $135 per ounce over the prior-year quarter. Average realized gold price includes $1,784 per ounce of gross price received, the favourable impact of $4 per ounce mark to market on provisionally priced sales, and reductions of $10 per ounce for treatment and refining charges.

Capital expenditures increased 34 per cent from the prior-year quarter to $398-million primarily due to higher sustaining capital spend from sites that were placed into care and maintenance in response to COVID-19 during 2020 and higher development capital spend. Development capital expenditures in 2021 primarily include advancing Tanami expansion 2, Yanacocha sulphides, Ahafo North, the Subika mining method change, Cerro Negro expansion projects, Quecher Main, Pamour, the power generation civil upgrade, Goldrush complex and Turquoise Ridge third shaft.

Consolidated operating cash flow from continuing operations decreased 29 per cent from the prior-year quarter to $1,133-million primarily due to lower average realized gold prices and lower gold sales volumes, an increase in tax payments and an increase in prepaid assets. Free cash flow also decreased to $735-million primarily due to lower operating cash flow and higher capital expenditures as described above.

Balance sheet and liquidity ended the quarter with $4.6-billion of consolidated cash and approximately $7.6-billion of liquidity; reported net debt to adjusted EBITDA of 0.2 times.

Nevada Gold Mines (NGM) attributable gold production was 308,000 ounces with CAS of $768 per ounce and AISC of $945 per ounce for the third quarter. EBITDA for NGM was $293-million.

Pueblo Viejo (PV) attributable gold production was 85,000 ounces for the quarter. Pueblo Viejo EBITDA was $108-million and cash distributions received for the company's equity method investment totalled $69-million in the third quarter.

COVID-19 update

Newmont continues to maintain wide-ranging protective measures for its work force and neighbouring communities, including screening, physical distancing, deep cleaning and avoiding exposure for at-risk individuals. The company incurred incremental COVID-19 specific costs of $24-million during the quarter for activities such as additional health and safety procedures, increased transportation and community fund contributions. During the second quarter of 2020, the Newmont Global Community Support Fund was established to help host communities, governments and employees combat the COVID-19 pandemic. Amounts distributed from this fund were $1-million during the quarter and have been adjusted from certain non-GAAP (generally accepted accounting principles) metrics. The remaining $23-million is not adjusted from the company's non-GAAP metrics.

The company has mobilized a COVID-19 vaccine working group with representatives from across the globe. Newmont views vaccination as critical in the fight against COVID-19 and actively encourages its work force to get vaccinated as they become eligible. It is working to support authorities, through its Global Community Support Fund, to improve the availability and deployment of vaccines to its work force and host communities.

Projects update

Newmont's capital-efficient project pipeline supports improving production, lowering costs and extending mine life. Financing for the current development capital projects Tanami expansion 2 and Ahafo North has been approved and these projects are in the execution stage. The company has included the Yanacocha sulphides project in its long-term outlook as the project is currently scheduled to be approved for full financing in the second half of 2022. Additional development projects, not listed below, represent incremental improvements to the company's outlook.

  • Tanami expansion 2 (Australia) secures Tanami's future as a long-life, low-cost producer with potential to extend mine life beyond 2040 through the addition of a 1,460-metre hoisting shaft and supporting infrastructure to achieve 3.5 million tonnes per year of production and provide a platform for future growth. The expansion is expected to increase average annual gold production by approximately 150,000 to 200,000 ounces per year for the first five years and is expected to reduce operating costs by approximately 10 per cent. Capital costs for the project are estimated to be between $850-million and $950-million with a commercial production date in the first half of 2024.
  • Ahafo North (Africa) expands the company's existing footprint in Ghana with four open-pit mines and a stand-alone mill located approximately 30 kilometres from the company's Ahafo South operations. The project is expected to add between 275,000 and 325,000 ounces per year with all-in sustaining costs between $600 to $700 per ounce for the first five full years of production (2024 to 2028). Capital costs for the project are estimated to be between $750-million and $850-million with a construction completion date in the second half of 2023 and commercial production in early 2024. Ahafo North is the best unmined gold deposit in West Africa with approximately 3.5 million ounces of reserves and more than one million ounces of measured and indicated and inferred resource and significant upside potential to extend beyond Ahafo North's current 13-year mine life.
  • Yanacocha sulphides (South America) will develop the first phase of sulphide deposits and an integrated processing circuit, including an autoclave to process gold, copper and silver feedstock. The project is expected to add 500,000 gold equivalent ounces per year with all-in sustaining costs between $700 to $800 per ounce for the first five full years of production. An investment decision is expected in the second half of 2022 with a three-year development period. The first phase focuses on developing the Yanacocha Verde and Chaquicocha deposits to extend Yanacocha's operations beyond 2040 with second and third phases having the potential to extend life for multiple decades.

Updated outlook

Newmont is providing an updated 2021 outlook due to the continued impact from COVID-19 and other challenges experienced in the year. Further updates about Newmont's long-term guidance will be provided in December, 2021. For further discussion, investors are encouraged to attend Newmont's third quarter 2021 earnings conference call.

Newmont's updated 2021 outlook includes approximately 6.0 million ounces of attributable gold production and approximately 1.3 million gold equivalent ounces from copper, silver, lead and zinc. The revised outlook for attributable gold production includes adjustments for operational challenges at Boddington and Nevada gold mines, as well as the continued impact from the global pandemic, primarily in Canada and Australia.

Boddington experienced challenges from severe weather, shovel reliability, operational delays associated with managing bench hygiene and the continued ramp-up of AHS to full productivity. As a result, Boddington delivered lower ex-pit tons than expected, with full-year 2021 gold production anticipated to be approximately 140,000 ounces below original guidance estimates. Nevada Gold Mines is also experiencing challenges. Carlin and Cortez are expected to be at the low end of their annual guidance ranges, and Turquoise Ridge is expected to be below its annual guidance range. Additionally, the global pandemic has continued to impact many of the company's operations. Tanami was placed under care and maintenance in late June and July as a result of COVID-19 restrictions, reducing the site's full-year production by approximately 40,000 ounces. In addition, Newmont continues to experience lower productivity as a result of COVID-19-related absenteeism and a tightening of the labour market in Canada. The company expects these sites to be at the low end or below their annual production guidance ranges.

Updated 2021 costs applicable to sales (CAS) outlook is expected to be $790 per ounce and all-in sustaining costs (AISC) are expected to be $1,050 per ounce. The revised outlook includes the impact from lower production volumes and higher royalties and production taxes at higher gold prices.

Updated 2021 attributable development capital expenditures are expected to be approximately $700-million. The revised outlook includes a decrease of $150-million largely due to deferred spending associated with advancing Tanami expansion 2.


 
 
                                   NEWMONT 2021 OUTLOOK (1)

                                                                                      Previous
                                                             Updated (as of     (+/-5%) (as of
                                                              Oct. 28, 2021)      Dec. 8, 2020)


Gold price assumption ($/oz)                                         $1,800             $1,200
Consolidated gold production (Moz)                                      5.9                6.4
Attributable gold production (Moz) (2)                                  6.0                6.5
Consolidated gold CAS ($/oz)                                            790                750
Consolidated gold all-in sustaining costs ($/oz) (3)                  1,050                970
Consolidated co-product GEO production (Moz) (4)                        1.3                1.3
Attributable co-product GEO production (Moz) (4)                        1.3                1.3
Consolidated GEO CAS ($/oz) (4)                                         600                600
Consolidated GEO all-in sustaining costs ($/oz) (3) (4)                 880                880
Consolidated sustaining capital expenditures ($M)                     1,000              1,000
Consolidated development capital expenditures ($M)                      750                900
Attributable sustaining capital expenditures ($M)                       950                950
Attributable development capital expenditures ($M)                      700                850
General and administrative ($M)                                         260                260
Interest expense ($M)                                                   275                275
Depreciation and amortization ($M)                                    2,350              2,500
Exploration and advanced projects ($M)                                  390                390
Adjusted tax rate (5)                                               34%-38%            34%-38%
Federal tax rate                                                    27%-30%            27%-30%
Mining tax rate                                                       6%-9%              6%-9%

(1) Two thousand twenty-one outlook projections used in this presentation are considered 
    forward-looking statements and represent management's good faith estimates or expectations 
    of future production results as of Oct. 28, 2021. Outlook is based upon certain assumptions, 
    including, but not limited to, metal prices, oil prices, certain exchange rates and other 
    assumptions. For example, the 2021 outlook includes actual results through Sept. 30, 2021, 
    and assumes $1,800 per ounce gold, $25/oz silver, $4/pound copper, $1.20/lb Zn, 95 cents/lb 
    Pb, 75-cent U.S.-/Australian-dollar exchange rate, 78-cent U.S.-/Canadian-dollar exchange 
    rate and $65/barrel WTI (West Texas Intermediate) for the fourth quarter of 2021. Production, 
    CAS, AISC and capital estimates exclude projects that have not yet been approved, except for 
    Yanacocha sulphides which is included in the outlook as the development project is expected 
    to reach execution stage in the second half of 2022. The potential impact on inventory 
    valuation as a result of lower prices, input costs and project decisions are not included as 
    part of this outlook. Assumptions used for purposes of the outlook may prove to be incorrect 
    and actual results may differ from those anticipated. The outlook cannot be guaranteed. As 
    such, investors are cautioned not to place undue reliance upon the outlook and forward-looking 
    statements as there can be no assurance that the plans, assumptions or expectations upon which 
    they are placed will occur. Amounts may not recalculate to totals due to rounding. 

(2) Attributable gold production outlook includes the company's equity investment (40 per cent) in 
    Pueblo Viejo with about 325,000 oz in 2021; does not include the company's other equity 
    investments. Attributable gold production outlook represents the company's 51.35-per-cent 
    interest for Yanacocha and a 75-per-cent interest for Merian.

(3) All-in sustaining costs (AISC) as used in the company's outlook is a non-GAAP metric.

(4) Gold equivalent ounces (GEO) is calculated as pounds or ounces produced multiplied by the ratio 
    of the other metals' price to the gold price, using gold ($1,200/oz), copper ($2.75/lb), silver 
    ($22/oz), lead (90 cents/lb) and zinc ($1.05/lb) pricing.

(5) The adjusted tax rate excludes certain items such as tax valuation allowance adjustments.


                                            OPERATING RESULTS
 
                                                           Three months ended           Nine months ended
                                                                     Sept. 30,                   Sept. 30,
                                                           2021          2020          2021          2020
Attributable sales (koz)
Attributable gold ounces sold (1)                         1,357         1,429         4,101         3,996
Attributable gold equivalent ounces sold                    301           248           930           780
Average realized price ($/oz, $/lb)
Average realized gold price                            $  1,778       $ 1,913      $  1,783       $ 1,745
Average realized copper price                          $   3.99       $  2.99      $   4.19       $  2.49
Average realized silver price                          $  18.34       $ 21.69      $  20.32       $ 16.66
Average realized lead price                            $   0.99       $  0.73      $   0.96       $  0.69
Average realized zinc price                            $   1.24       $  1.01      $   1.21       $  0.77
Attributable production (koz)
North America                                               384           414         1,194         1,022
South America                                               188           165           551           536
Australia                                                   274           309           842           861
Africa                                                      210           229           617           608
Nevada                                                      308           337           895           992
Total gold (excluding equity method investments)          1,364         1,454         4,099         4,019
Pueblo Viejo (40%) (2)                                       85            87           254           256
Total gold                                                1,449         1,541         4,353         4,275
North America                                               275           238           820           656
Australia                                                    40            35           115            94
Total gold equivalent ounces                                315           273           935           750
CAS consolidated ($/oz, $/GEO)
North America                                          $    800       $   762      $    767       $   792
South America                                          $    958       $   885      $    822       $   824
Australia                                              $    788       $   690      $    767       $   712
Africa                                                 $    886       $   693      $    804       $   707
Nevada                                                 $    768       $   761      $    755       $   764
Total gold                                             $    830       $   756      $    779       $   762
Total gold (byproduct)                                 $    698       $   641      $    629       $   686
North America                                          $    595       $   513      $    564       $   539
Australia                                              $    914       $   840      $    913       $   842
Total gold equivalent ounces                           $    638       $   556      $    606       $   575
AISC consolidated ($/oz, $/GEO)
North America                                          $  1,026       $ 1,003      $    988       $ 1,066
South America                                          $  1,276       $ 1,162      $  1,119       $ 1,111
Australia                                              $  1,025       $   889      $  1,040       $   914
Africa                                                 $  1,114       $   865      $  1,023       $   889
Nevada                                                 $    945       $   904      $    931       $   936
Total gold                                             $  1,120       $ 1,020      $  1,064       $ 1,046
Total gold (byproduct)                                 $  1,041       $   940      $    970       $ 1,024
North America                                          $    822       $   735      $    781       $   840
Australia                                              $  1,025       $   998      $  1,155       $ 1,032
Total gold equivalent ounces                           $    887       $   770      $    863       $   862

(1) Attributable gold ounces from the Pueblo Viejo mine, an equity method investment, are not included in 
    attributable gold ounces sold.

(2) Represents attributable gold from Pueblo Viejo and does not include the company's other equity method 
    investments. Attributable gold ounces produced at Pueblo Viejo are not included in attributable gold 
    ounces sold, as noted above. Income and expenses of equity method investments are included in equity 
    income (loss) of affiliates.

                            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               (in millions of dollars except per share)
                                                                                     
                                                                Three months ended     Nine months ended
                                                                          Sept. 30,             Sept. 30,
                                                                   2021       2020       2021       2020

Sales                                                            $2,895     $3,170     $8,832     $8,116
Costs and expenses
Costs applicable to sales                                         1,367      1,269      3,895      3,659
Depreciation and amortization                                       570        592      1,684      1,685
Reclamation and remediation                                         117         38        220        116
Exploration                                                          60         48        147        118
Advanced projects, research and development                          40         39        108         92
General and administrative                                           61         68        190        205
Care and maintenance                                                  6         26          8        171
Loss on assets held for sale                                        571          -        571          -
Other expense, net                                                   37         92        126        184
                                                                  2,829      2,172      6,949      6,230
Other income (expense)
Gain on asset and investment sales, net                               3          1         46        593
Other income (loss), net                                            (74)       (44)      (106)       (35)
Interest expense, net of capitalized interest                       (66)       (75)      (208)      (235)
                                                                   (137)      (118)      (268)       323
Income (loss) before income and mining tax and other items          (71)       880      1,615      2,209
Income and mining tax benefit (expense)                            (222)      (305)      (798)      (446)
Equity income (loss) of affiliates                                   39         53        138        119
Net income (loss) from continuing operations                       (254)       628        955      1,882
Net income (loss) from discontinued operations                       11        228         42        145
Net income (loss)                                                  (243)       856        997      2,027
Net loss (income) attributable to non-controlling interests         246        (17)       215        (22)
Net income (loss) attributable to Newmont stockholders               $3       $839     $1,212     $2,005
Net income (loss) attributable to Newmont stockholders
Continuing operations                                               $(8)      $611     $1,170     $1,860
Discontinued operations                                              11        228         42        145
                                                                     $3       $839     $1,212     $2,005
Net income (loss) attributable to Newmont stockholders per  
common share
Basic
Continuing operations                                            $(0.01)     $0.76      $1.47      $2.31
Discontinued operations                                            0.01       0.28       0.05       0.18
                                                                     $-      $1.04      $1.52      $2.49
Diluted
Continuing operations                                            $(0.01)     $0.76      $1.46      $2.31
Discontinued operations                                            0.01       0.28       0.05       0.18
                                                                     $-      $1.04      $1.51      $2.49
   

Conference call information

A conference call will be held on Thursday, Oct. 28, 2021, at 10 a.m. Eastern Time (8 a.m. Mountain Time); it will also be carried on the company's website.

Conference call details

Dial-in number:  855-209-8210

International dial-in number:  412-317-5213

Conference name:  Newmont

Replay number:  877-344-7529

International replay number:  412-317-0088

Replay access code:  10160453

Webcast details

Title:  Newmont third quarter 2021 earnings conference call

URL:  see On24 website

The third quarter 2021 results will be available before the market opens on Thursday, Oct. 28, 2021, on the investor relations section of the company's website. Additionally, the conference call will be archived for a limited time on the company's website.

About Newmont Corp.

Newmont is the world's leading gold company and a producer of copper, silver, zinc and lead. The company's world-class portfolio of assets, prospects and talent is anchored in favourable mining jurisdictions in North America, South America, Australia and Africa. Newmont is the only gold producer listed in the S&P 500 Index and is widely recognized for its principled environmental, social and governance practices. The company is an industry leader in value creation, supported by robust safety standards, superior execution and technical expertise. Newmont was founded in 1921 and has been publicly traded since 1925.

We seek Safe Harbor.

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