GREENWOOD VILLAGE Oct 30, 2015 (Thomson StreetEvents) -- Edited Transcript of Newmont Mining Corp earnings conference call or presentation Thursday, October 29, 2015 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Meredith Bandy Newmont Mining Corporation - VP of IR * Gary Goldberg Newmont Mining Corporation - President & CEO * Laurie Brlas Newmont Mining Corporation - CFO * Chris Robison Newmont Mining Corporation - EVP & COO ================================================================================ Conference Call Participants ================================================================================ * Andrew Quail Goldman Sachs - Analyst * John Bridges JPMorgan - Analyst * Brian Yu Citigroup - Analyst * John Tumazos John Tumazos Very Independent Research, LLC - Analyst * Tanya Jakusconek Scotiabank - Analyst * Botir Sharipov HSBC - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, and welcome to the Newmont Mining third-quarter 2015 earnings conference call. (Operator Instructions) Today's conference is being recorded. If anyone has any objections, please disconnect at this time. I would now like to turn the call over to Meredith Bandy, Vice President Investor Relations. You may begin. -------------------------------------------------------------------------------- Meredith Bandy, Newmont Mining Corporation - VP of IR [2] -------------------------------------------------------------------------------- Thank you, operator. Good morning, everyone, and welcome to Newmont's third-quarter earnings call. Joining us on the today are Gary Goldberg, President and Chief Executive Officer, and Laurie Brlas, Chief Financial Officer. They and other members of our executive team will be available to answer questions at the end of the call. Turning to slide 2, before I go any further, please take a moment to review the cautionary statement shown here, or refer to our SEC filings, which can be found on our website at newmont.com. With that, I'll turn it over to Gary. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [3] -------------------------------------------------------------------------------- Thanks, Meredith, and good morning, everyone. I'm pleased to report that Newmont delivered another strong quarter, and I appreciate the opportunity to walk you through the details now. Our operations continued to drive cost down, work more safely, and increase gold and copper production compared to the prior-year quarter. This performance helped us double our operating cash flow, significantly improve adjusted EBITDA, and deliver a nine-fold increase in free cash flow compared to last year, despite lower metal prices. Our portfolio is also stronger than it was a year ago. We executed value-accretive transactions, and remain on track with our four development projects in the Americas. We also announced the decision to proceed with our Tanami expansion project in Australia. Finally, we strengthened our balance sheet, met our commitment to pay dividends, and repaid $50 million of debt. I'll turn to slide 4 for more on these achievements. We continue to execute the three elements of our strategy. First, we improved our underlying business by lowering injury rates 15%, decreasing all-in sustaining costs 16%, and increasing gold production 16% quarter on quarter. We also tripled copper production. Second, we strengthened our portfolio by acquiring Cripple Creek & Victor, and selling assets that represent lower value or higher risk to Newmont. We remain on schedule, and on or under budget, at Turf Vent Shaft, Merian, and Long Canyon Phase 1. We are also moving forward with our Tanami expansion project, an investment that will increase profitable production and extend mine life at very competitive returns. Finally, we created shareholder value by generating $758 million in adjusted EBITDA and $478 million in free cash flow during the third quarter. This allowed us to continue to self-fund our best projects, pay dividends, and pay down debt. Delivering our strategy starts at the mine face. Turning to slide 5, I visited a team earlier this month, and was impressed with our newest operations performance. The team recently reached one year working with zero harm, and is delivering exceptional business results. This is the bar we're setting for all our operations. Overall, our total injury rates were 15% lower than the prior-year quarter, and remain among the lowest in the mining industry. This performance is overshadowed, however, by the loss of a contractor working on a tree-cutting team in Indonesia. [Pak Mastar Tedi] was struck in the upper body by a falling tree, and recently succumbed to his injuries. Our thoughts are with his family and his colleagues. Our work to make our operations safer and more efficient never ends. Turning to our cost performance on slide 6, our gold all-in sustaining costs were $835 per ounce for the quarter, bringing our year-to-date cost to $864 per ounce. This represents a 27% reduction since 2012. About half the improvements we achieved in the third quarter are the result of sustainable cost and efficiency improvements across the portfolio, and higher productivity in sales at low-cost operations. We also benefited from favorable oil price and exchange rates, and some delayed timing in our capital expenditures. Turning to production on slide 7, we produced more than 1.3 million attributable ounces of gold during the third quarter. This constitutes 16% more than the prior-year quarter, and our highest output in the last seven quarters. New production from CC&V offset about two-thirds of the reductions associated with divestments. We also produced 48,000 tons of copper, mostly as a result of higher grades at Batu Hijau. I'll highlight four operations that drove this performance. At Batu Hijau, third-quarter production reflected higher phase 6 ore grades, which we'll mine through 2017. At Boddington, mine-plan and full-potential improvements unlocked higher grades, and increased mill utilization and recoveries. Tanami delivered strong production, and on the back of higher grades and improved productivity, and also mill utilization, which were achieved through full potential. And finally, Twin Creeks benefited from improved mill grades and the completion of a plan stripping campaign. Putting it all together, our operations are doing good work to maximize opportunities and mitigate challenges. Turning to slide 8, in North America, the Turf Vent Shaft remains on schedule to reach commercial production in the fourth quarter, and will be completed below budget. Engineering and mine development also remain on track at Long Canyon, where we continue to expect first production in 2017. You can see the leach pad and other surface facilities in this photo. The CC&V integration is also progressing, and the operation celebrated 5 million ounces of gold produced last month. Ramp up to full mill capacity is slightly behind schedule, and we have adjusted our outlook accordingly. We are working out the bugs, and the delay is not expected to impact longer-term production. Turning to South America, Merian remains on budget and on schedule to begin producing in 2016. Construction is just over 40% complete, and we've stockpiled more than 930,000 tons of ore at higher-than-planned grades. We are also advancing project integral, a phased approach to developing Yanacocha's remaining oxide and sulfide deposits, and we'll have initial findings by mid-2016. In Africa, we are now operating at full capacity on grid power, and Ahafo's new generators will be commissioned by year end. We are also advancing a broader power strategy to secure reliable and affordable supply over the long term. In Indonesia, we expect our export permit to be renewed in the near future, and continue to work with the government to finalize amendments to our contract of work. In the meantime, we are operating at full capacity, and storing concentrate or shipping it to Gresik for processing. In Australia, we've announced that we are moving forward with the Tanami expansion project. Turning to slide 9, since 2012 Tanami has more than doubled its gold production while cutting costs by about two-thirds and significantly improving resource confidence. The Tanami expansion project builds on this trajectory. It involves constructing a second decline in the underground mine and incremental capacity in the plant to increase profitable production and extend the mine life. The project is the outcome of a detailed review of options to maximize near-term cash flow and long-term asset value. In the first five years of full production, the expansion will increase Tanami's average annual gold production by 80,000 ounces, lower all-in sustaining costs by between 5% and 10%, and extend mine life by three years. First production is expected in the second half of 2017. Adding a second decline will also serve as a platform for exploration drilling to support future expansions. As I mentioned last quarter, we see the potential to double current reserves and resources at comparable grades by expanding the Callie and Auron deposits, and developing new discoveries at Federation and Liberator. We are excited about this project and what the team has done to optimize it. For an investment of between $100 million and $120 million, the project provides a return of more than 35% at $1,100 gold, and more than 25% at gold prices as low as $900 per ounce. With that, I'll hand it over to Laurie for an update on our financial results. -------------------------------------------------------------------------------- Laurie Brlas, Newmont Mining Corporation - CFO [4] -------------------------------------------------------------------------------- Thanks, Gary, and good morning, everyone. I'm pleased to report that Newmont delivered a great quarter, with solid financial results. Turning to slide 11, as Gary mentioned, we continued to see cost improvement across the portfolio. Our third-quarter gold cost applicable to sales per ounce and gold all-in sustaining cost per ounce were 14% and 16% favorable, respectively, to the prior-year quarter. With these most recent results we have maintained our portfolio all-in sustaining costs below $1,000 per ounce for the last five quarters running. Gold production was also strong in the quarter, and was up 16% from the prior year. Despite a 13% decline in the average realized gold price from a year ago, we continue to generate strong earnings and robust cash flows. Turning to slide 12, during the third quarter, revenue was up 16%, and we generated $813 million in cash from continuing operations, an increase of more than 148% from the year-ago quarter. Adjusted EBITDA was up 67% from the prior year, due to higher production at Batu Hijau, Boddington, Tanami and Twin Creeks, improved oil prices and exchange rates, and ongoing cost and efficiency improvements. Consolidated free cash flow was $478 million during the third quarter, as higher sales volumes and improved costs offset increased development capital spending at Merian and Long Canyon Phase 1. With these most recent results, our year-to-date free cash flow has grown to $941 million, an amount roughly 8 times more than what was generated a year ago. We reported adjusted net income of $126 million in the third quarter, or $0.23 per share, compared to $249 million, or $0.50 per share, last year. Turning to slide 13, we walk through the adjusted net income adjustments, which include a $0.04 per share gain related to discontinued operations, a $0.10 per share gain related to the TMAC deconsolidation. In the past, we fully consolidated TMAC; but upon completion of their IPO, that is no longer required for accounting purposes. So their results will not be included in our line-by-line numbers going forward and, instead, will be captured in our equity income line. This gain was on the actual event of deconsolidation, and we carved it out for purposes of adjusted net income. It also gave rise to a $0.05 per share gain resulting from an adjustment to our tax valuation allowances. In the quarter, we also recognized a $0.07 per share gain on asset sales, primarily our stake in the Valcambi refinery. For adjusted net income purposes, we also carved out a $0.04 per share loss related to impairments and loss provision, and a $0.03 per share loss related to restructuring, acquisition costs, and other minor items. After reconciling for these items, we reported adjusted net income of $126 million, or $0.23 per share. We are particularly pleased to note that this number includes $0.02 of accretion from the addition of CC&V to our portfolio for just a short two months. A similar outcome is seen in adjusted EBITDA of $758 million, up 67% from the prior year. It is adjusted for essentially the same unusual items. Now turning to slide 14, a strong balance sheet provides a competitive advantage in a volatile gold price environment. And we continue to execute on capital priorities designed to safeguard our investment grade rating. At the end of the third quarter, our balance sheet had roughly $3 billion in cash and cash equivalents. In addition, we had about $400 million in marketable securities, and a $3 billion revolver that is essentially undrawn. In total, that's $6.4 billion of liquidity. This, and our strong cash flow in 2015, gives us the comfort that we can start and finish our projects without having to take on additional debt to fund them. During the third quarter, we repaid $50 million of debt toward the PTNNT revolver. This brings our year-to-date total debt payments to $330 million. We expect to pay down further debt later this year, and are on track to repay a total of $750 million by year end. As always, further payments will be made in context of the current business and market environment, but our significant cash balance certainly supports our ability to pay off additional debt. Given our existing cash balances and revolver, we have ample flexibility to execute on our capital priorities, and are actively monitoring the gold price and the fixed income market to evaluate our options. We also maintained our dividend in light of our strong cash flow and operating performance. As a reminder, we have no significant debt maturities due until 2019. And our current net debt to book capital of 19% is well below the maximum 62.5% covenant on our revolver, which is our only covenant. And now turning to slide 15, we are proud that our net-debt-to-EBITDA ratio of roughly 1.1 is among the lowest in the industry, and has continued to improve. We have transformed Newmont's balance sheet into one of the strongest in the sector, and our liquidity and cash flow generation separate us from the competition. We have reduced our net debt by 32% from the prior-year quarter. And more importantly, we have reduced net debt while also growing our EBITDA, which significantly improves our financial flexibility. We remain comfortable with our relative level of debt and maturity profile, and we will continue to examine ways to reduce the absolute debt level and increase the long-term strength of our Business. And now I'll turn the call back over to Gary. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [5] -------------------------------------------------------------------------------- Thanks, Laurie. I'll shift gears now to look at the future. Turning to slide 17, we expect to end 2015 with attributable gold production at the higher end of our guidance range, which is between 4.7 million and 5.1 million ounces, and copper production of between 140,000 and 180,000 tons. The changes we are making to our 2015 guidance are two-fold. First, we're lowering our outlook for gold all-in sustaining costs 4% to between $880 and $940 per ounce. This reflects strong performance, particularly in Asia Pacific and Africa, as well as lower exchange rates, and favorable power and diesel prices. We expect these costs to rise slightly in the fourth quarter due to higher exploration and advanced project spending, sustaining capital timing, and lower grades at Yanacocha and Ahafo. Second, we lowered our full-year outlook for capital expenditure by about 9% to between $1.4 billion and $1.6 billion. This reduction reflects lower sustaining capital expenditures of between $740 million and $780 million, or 13% below previous guidance, gained through cost and efficiency improvements at Yanacocha, Boddington, Batu Hijau, Ahafo and Akyem, as well as some timing impacts. Our improved outlook also reflects lower development capital, including $50 million in savings at Merian realized through supply chain improvements, favorable exchange rates, and lower commodity prices. This reduction is partially offset by new development capital for the Tanami expansion project. Our project pipeline continues to be one of the strongest in the gold sector. Turning to slide 18, our projects focus on profitably extending the life of our existing operations, or opening prospective new mining districts. Before we reach funding decisions, we scrutinize our approach to each project with a goal to lower initial capital costs, accelerate payback, and leverage existing infrastructure. Projects that are in the execution phase include the Turf Vent Shaft, which will give us access to between 100,000 and 150,000 ounces of higher grade ore per year, and support further expansion at Leeville; Merian, which will deliver 400,000 to 500,000 ounces of gold at all-in sustaining costs of between $650 and $750 per ounce for the first five years, beginning in 2016; the Cripple Creek & Victor expansion, which includes the new mill, leach pad, and recovery plant that will be commissioned in the second half of 2016 -- CC&V will contribute between 350,000 and 400,000 ounces of gold in 2016 and 2017, and is expected to lower Newmont's overall cost profile; the first phase of Long Canyon, which will add between 100,000 and 150,000 ounces of gold production per year at all-in sustaining costs of between $500 and $600 per ounce beginning in 2017; and finally, the Tanami expansion project, which I touched on earlier. Further up the pipeline, we are advancing the Ahafo mill expansion and Subika underground mine in Ghana. These projects are designed to help offset the impact of lower grades and harder ore. We've deferred the decision to proceed with the Ahafo mill expansion until the second half of next year to coincide with our timing on the Subika underground decision. We are also progressing the phase 7 cut-back at Batu Hijau where we are working to secure the stability we need for ongoing investment; Quecher Main, which is part of the oxide expansion effort at Yanacocha; and Northwest Exodus in Nevada, which would extend the current underground operation and add profitable production. Turning to exploration on slide 19, exploration is one of our core competencies. About 70% of the gold we are mining in 2015 was discovered by Newmont geologists. Our program focuses on maintaining our existing resource base, while preserving options to pursue significant new discoveries. We employ rigorous standards to make sure the highest-quality ounces are added to our reserve base, and we have developed a proprietary geologic risk assessment process to improve our ore body confidence. This map shows prospects in Nevada, Peru, Ghana and Australia that we expect to be in production before 2020, and longer-term prospects in the US, Ethiopia and the Guiana shield. Turning to slide 20 for a closer look at our underground prospects at Exodus in Nevada, Exodus is a high-grade underground ore body that was identified in 2008 with a 300,000-ounce discovery. Through new discoveries at Northwest Exodus in 2011 and Exodus Footwall in 2013, we have grown the resource base to 1.2 million ounces to date, of which 300,000 ounces have been mined. We see the potential to double this figure over the next few years by converting mineral inventory into reserves and resource, and by drilling the remaining half of Exodus's targeted mineralization. Turning to slide 21, Northwest Exodus is located several hundred meters from Exodus. We declared a maiden resource of 700,000 ounces in 2014, and expect to declare first reserves in early 2016. Compared to our initial Exodus discovery, Northwest Exodus is larger, with 50% higher grades. Mineralization remains open on the hanging wall. Turning to slide 22, the Exodus Footwall is our latest high-grade discovery, and is located in different stratigraphy than Exodus and Northwest Exodus. We recently identified mineralization of up to 51 meters at grades of 12.5 grams per ton, and the Footwall remains open along strike and at depth. We anticipate declaring first resource at Exodus Footwall in early 2016. While we intend to pursue these opportunities, we are also prepared for ongoing market volatility. Turning to slide 23, at today's metal prices, we can afford to advance our best projects and exploration prospects, fund our dividends, and repay debt. This chart gives you an idea of what we might do differently in a prolonged period of lower or higher gold prices. Under significant constraints, we would delay stripping campaigns and sustaining capital, we'd complete our current projects, and further reduce overhead and exploration costs. As gold price improves, we'll continue to optimize costs and capital, fund our most profitable projects, accelerate debt repayment, and increase dividends in line with our policy. Getting our house in order now, allows us to deliver superior margins when gold price recovers. Turning to slide 24, we're continuing to make good progress toward our goal to become the world's most profitable and reliable gold producer. We'll reach that goal by continuing to deliver our strategy: to improve our underlying Business by continuously raising our safety, cost and technical performance; to strengthen our portfolio by building a longer-life, lower-cost asset base; and to create shareholder value by generating cash, paying dividends, and strengthening our investment grade balance sheet. Thank you for your time. I would like to open the floor to questions now, operator. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Andrew Quail with Goldman Sachs. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [2] -------------------------------------------------------------------------------- Good morning, Gary, Laurie and team. Congratulations on, again, another very strong quarter. Just a couple of questions. I suppose you've seen obviously the benefits of the tailwinds from the Aussie dollar and oil price falling. Can you just sort of give us some comments on how you would think about going forward with hedging? And would you increase your hedging exposure on the cost side? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [3] -------------------------------------------------------------------------------- Sure, Andrew. Historically we have had foreign exchange hedges in place in Australia and a little bit in New Zealand. Of course, New Zealand with the sale of Waihi has gone away. In Australia we liquidated about two-thirds of that position back -- about two years ago it's been now -- November of 2013. And we are continuing to draw that down. It runs out -- basically, it's pretty small now and over the next two to three years is gone. But it is a very small portion. We don't see ourselves changing that hedge position or increasing it, quite frankly. We've seen a good correlation between gold price and the Aussie dollar, not that that clearly drives anything. But we don't see any need to make a change in our position on the foreign exchange rate hedging. When it comes to the diesel fuel, we basically do that in Nevada because of the ability for us to take hedge accounting. And we are not taking a position on where the price will go, it is just we do it in order to try to smooth out what the price swings might be. So we've got, basically, an evergreen-type hedge book arrangement there that we continue out over a two- to two-and-a-half-year period to cover that. But we are not taking any strong positions on price there either. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [4] -------------------------------------------------------------------------------- (inaudible - multiple speakers) (laughter) No, that's great. I suppose the other one is on Indonesia and on Batu Hijau. I mean, I think in the short-term, it's fine with the export license. I suppose looking into sort of 2016 and I know it would be nice to know if we had a crystal ball, but do you think with phase 7 -- is there a time that you need to make a decision on this? Obviously with the government and are they more understanding about what's happening with metal prices than you have seen over the last couple of years? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [5] -------------------------------------------------------------------------------- Yes I think the way we are looking at it, we need to clearly get the export permit. And we expect that here in the next week or two, in terms of getting that. So we continue to mine through phase 6. And that's just been part of the process every six months of renewing that. In terms of the contract to work, we do need to get those changes nailed down. We agreed those changes a little over a year ago with an MOU with the government and just really need to get that finalized and get the certainty of that as well as get the financing in place. Like we did with phase 6, get the financing in place to support phase 7. So I would expect in the way we're looking at it, we've got over the next year to get that in place. And that's the time frame that we're looking at. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [6] -------------------------------------------------------------------------------- And I suppose, last question is on Carlin. Obviously bounced back 3 tons now. Obviously the [TBS] is going to help that. Do we sort of see like getting back to rates that we saw probably this time last year? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [7] -------------------------------------------------------------------------------- I missed the location that you were saying. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [8] -------------------------------------------------------------------------------- At Carlin. Carlin, sorry. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [9] -------------------------------------------------------------------------------- Carlin. Sorry. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [10] -------------------------------------------------------------------------------- Sorry. East Australia accent. Sorry, Gary. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [11] -------------------------------------------------------------------------------- (laughter) I usually catch those. I'm going to ask Chris Robison to cover that. -------------------------------------------------------------------------------- Chris Robison, Newmont Mining Corporation - EVP & COO [12] -------------------------------------------------------------------------------- Yes, Andrew, I think the key there to Carlin is, as Gary mentioned earlier, is the Turf Vent Shaft. As that comes online, we see the higher -- the much higher grade coming out of Leeville, which will obviously bump Carlin back up I think closer to where we have been previously. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [13] -------------------------------------------------------------------------------- To higher grade and higher tons? -------------------------------------------------------------------------------- Chris Robison, Newmont Mining Corporation - EVP & COO [14] -------------------------------------------------------------------------------- Yes. More grade -- more fixed tons but just higher grade than what we are putting through right now. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [15] -------------------------------------------------------------------------------- Yes. Got it. Thanks, guys. Thanks very much. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [16] -------------------------------------------------------------------------------- Thanks, Andrew. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- John Bridges with JPMorgan. -------------------------------------------------------------------------------- John Bridges, JPMorgan - Analyst [18] -------------------------------------------------------------------------------- Just wondered, following on from your exploration commentary, how are your geologists thinking about reserves at year end? What sort of oil price do you think you'll be using? And how do you think the reserves will look at presumably lower gold prices? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [19] -------------------------------------------------------------------------------- Yes, we'll give -- thanks for the question, John. We'll give the detailed update on that in February when we do the update on reserves and resources at year end. But we've given previous sensitivities out there on what it looks like at, say, $100 lower reserve price -- we're using currently $1,300 for reserves and at $1,200. Right now I would expect we'll probably move to $1,200, but I don't expect us to see as big a swing on the reserves as what we had shown in that sensitivity. Really two things helping that. One has been how we've gotten our costs down throughout the organization. And that helps make things economic at lower prices. The other piece has been the swing in the Aussie dollar where we would have seen potentially an impact at Boddington. I wouldn't expect that we'd see that. But we'll give the details and have the details on that when we come out with reserves and resource numbers at the beginning of this next year. -------------------------------------------------------------------------------- John Bridges, JPMorgan - Analyst [20] -------------------------------------------------------------------------------- Okay, thanks. That's helpful. And then as a follow-up, Merian -- you are coming in below budget with that project. Just wondered if you are learning with that process? And maybe the lower cost of doing things in this current environment is making you think differently about some of the other projects? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [21] -------------------------------------------------------------------------------- Definitely. I think there's been some very interesting approaches and good approaches taken to how equipment is being assembled offsite, prepared and put together offsite, so that it eases the way we can construct it on site. I use the leach cell or tanks that we use for the cyanide leach portion that are being assembled in sections and then bolted together, rather than having to bring a bunch of welders on and fabricate those on site, is one simple example of that. But the more we can make modules and import things that way, in this particular location, it's worked out well. And that could apply in other areas. When I think of, for instance, Ahafo North. And it's down the road another couple of years, but I could see that applying there as well. -------------------------------------------------------------------------------- John Bridges, JPMorgan - Analyst [22] -------------------------------------------------------------------------------- Okay. Excellent. I'll get out of the way. Thanks for that. Good luck. Well done. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [23] -------------------------------------------------------------------------------- Thanks, John. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Brian Yu with Citi. -------------------------------------------------------------------------------- Brian Yu, Citigroup - Analyst [25] -------------------------------------------------------------------------------- I wanted to circle back on the prior questions about Indonesian and Batu. Gary, you mentioned you expect to get the permit in the next week or two. In an alternate scenario where it doesn't happen, how long can you keep Batu running and have sufficient on site storage capacity? And given that, like Freeport, they do have their export license. Are there alternatives such as perhaps Freeport exporting more concentrate and you guys get maybe a greater share of the smelter just to bridge any kind of timing gap? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [26] -------------------------------------------------------------------------------- Yes, Brian, we're not really connected with Freeport on export permit. Theirs has different conditions than ours. We kind of trail theirs. Where they had some issues once they got their permit on currency, we've had that addressed along the way. So that's not an issue. Our biggest piece is just working through some final requirements the government has, which is what we went through the last time through this process. We expect -- very confident we'll get that. Failing that, we do have about three weeks of capacity left in the concentrate storage barn. And if we weren't to have that, then we'd have to look at curtailing production. But I really don't expect that to happen given all the things we're hearing on the ground and in the progress that's being made. -------------------------------------------------------------------------------- Brian Yu, Citigroup - Analyst [27] -------------------------------------------------------------------------------- Okay. And the second question is just on CC&V. You mentioned a little bit of a delay in the mill ramp. Could you provide a little bit more detail? And then, second, along those lines, you are keeping your guidance for next year. So maybe -- order of magnitude, what are you talking about in terms of weeks or month in terms of slippage and when it gets to full run rate? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [28] -------------------------------------------------------------------------------- Sure thing. I'm going to hand over and ask Chris Robison to explain what's going there. -------------------------------------------------------------------------------- Chris Robison, Newmont Mining Corporation - EVP & COO [29] -------------------------------------------------------------------------------- Yes, I think, Brian, there is a couple of things that -- first off, we are working through some design issues that we are confident that we can solve by taking more time. So the ramp up of the actual equipment has taken a bit longer than we would have expected. I think the other aspect of it is around ore blending, making some changes around how we mine and feed the plant that we're addressing to get more throughput and maximize the grade through the plant as it was designed for. And I think the third piece that maybe addresses your question longer term is we're looking at how to reconfigure that plant with the opportunity to take the concentrate from there. Rather than leaching there and the complexities that brings within the plant, taking that concentrate to Nevada and putting it in either our autoclaves at Twin or our roaster at Carlin, which is an advantage for both CC&V and absolutely the two Nevada operations. -------------------------------------------------------------------------------- Brian Yu, Citigroup - Analyst [30] -------------------------------------------------------------------------------- Okay. And then with the design issues -- so you are going handle the concentrate maybe a little bit differently. It's not -- that is not a CapEx fix? -------------------------------------------------------------------------------- Chris Robison, Newmont Mining Corporation - EVP & COO [31] -------------------------------------------------------------------------------- Not -- if we do the reconfiguration that we are looking at, it's not a significant CapEx issue. It's in the -- the issues we are dealing with right now are primarily around the back end of the plant, the filtration of both the tails and the con. And that is where the lower mechanical availability is that's driving the whole plant. But we're confident we can fix that. But also with this reconfiguration, takes pressure off that part of the plant. -------------------------------------------------------------------------------- Brian Yu, Citigroup - Analyst [32] -------------------------------------------------------------------------------- All right. Thank you. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [33] -------------------------------------------------------------------------------- Thanks, Brian. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- (Operator instructions) John Tumazos. -------------------------------------------------------------------------------- John Tumazos, John Tumazos Very Independent Research, LLC - Analyst [35] -------------------------------------------------------------------------------- Thank you. At what point in the completion of the construction at Long Canyon and Merian do you think you'll transition from construction and commissioning to renewed near mine and regional exploration? Both of those, I guess, are pretty fertile districts. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [36] -------------------------------------------------------------------------------- It's a good question, John. And we, quite frankly, haven't stopped our drilling there. We continue to do the drilling at both of those sites to both infill around, but also looking in the region. So at Long Canyon we are looking not only around the existing Long Canyon but looking in that region in both Utah and Nevada. Merian, we continue to look for additional [sapper] light ore in the area around Merian as well. So it is not something we've discontinued and it fits within where we've continued to look in our Brownfield and, what we'd call, wing span areas. -------------------------------------------------------------------------------- John Tumazos, John Tumazos Very Independent Research, LLC - Analyst [37] -------------------------------------------------------------------------------- So it is possible the reserve or resources at both of those locations could rise this year? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [38] -------------------------------------------------------------------------------- This year and into next year. And probably more towards the end of 2016 that we'd be looking to declare something for those. -------------------------------------------------------------------------------- John Tumazos, John Tumazos Very Independent Research, LLC - Analyst [39] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Tanya Jakusconek with Deutsche Bank. -------------------------------------------------------------------------------- Tanya Jakusconek, Scotiabank - Analyst [41] -------------------------------------------------------------------------------- Good morning, everyone. I think it's Scotiabank. But I have a few questions. One is on CC&V. Maybe we can have an explanation on the allocation of the purchase -- the acquisition purchase price to the inventory. That really impacted the cash costs. And then sort of what are we looking for, for 2016? Because I think the guidance given was significantly higher. I apologize if you addressed this. I just got on the call. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [42] -------------------------------------------------------------------------------- Not a worry, Tanya. I'm going to have Laurie talk about those details for both this year and how we are looking at next year. -------------------------------------------------------------------------------- Laurie Brlas, Newmont Mining Corporation - CFO [43] -------------------------------------------------------------------------------- Thanks, Tanya. No, we have not addressed that yet. So thank you very much for the question. We are still in the process of finalizing the purchase price allocation work. And as you know, that can have some changes on how things end up with. I would say that as we did the fair value reviews of everything, we've allocated a bit less to the stockpiles than you would have seen AGA do as we did fair values on every asset. And sometimes it does result in a different allocation. And that drove the lower prices. We will give our full 2016, 2017 update to guidance at the Investor Day in December. But I think you can assume that we will come in a bit lower than what we had originally done. But we want to complete that work before we finish -- before we give that information. -------------------------------------------------------------------------------- Tanya Jakusconek, Scotiabank - Analyst [44] -------------------------------------------------------------------------------- Yes. And when you say lower, would that be similar to this 2015 cash cost guidance range in that [560 to 600]? -------------------------------------------------------------------------------- Laurie Brlas, Newmont Mining Corporation - CFO [45] -------------------------------------------------------------------------------- I think what you saw in third quarter is exceptionally low. I would not expect it to be that low. Lower than what we had originally said but not as low as what we saw in this quarter. With it just being the first [vibe], it's not a full quarter period and low volume. You just have some anomalies that sometimes come through. So I would look for it to be somewhere in between what you saw in this quarter and what we had originally thought it would be. -------------------------------------------------------------------------------- Tanya Jakusconek, Scotiabank - Analyst [46] -------------------------------------------------------------------------------- Okay. And then if I have a chance to ask another question, again, I apologize if this has already been asked. Just wanted some more clarification on some of the changes in legislatures that are going on in Peru with respect to water and what impact that would have on Yanacocha, i.e., how do we need to get the mine prepared for these new legislature and sort of costing on this and implications? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [47] -------------------------------------------------------------------------------- Thanks, Tanya. We haven't covered that yet. But good question. It's one that we actually have been working for a number of years with the government as they've brought forward new regulations and then been working with them on modifying them. They actually rolled out some regulations that exceed by almost 1,000 times what requirements are in most other countries around the world. So trying to get the regulations back to something that's actually physically achievable on the ground. We have been making an investment in a water treatment plant there since earlier this year that is scheduled to be completed early next year that will put us on track to meet what we would expect to be the final regulations, though we are still working through that process with the government. -------------------------------------------------------------------------------- Tanya Jakusconek, Scotiabank - Analyst [48] -------------------------------------------------------------------------------- Okay. And has it been very cordial in terms of just exceeding 1,000 times the required regulations in other jurisdictions? Are they pretty amenable to acknowledging that this might be not achievable? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [49] -------------------------------------------------------------------------------- I think, as with any of these things, you have the discussions, you lay out the facts and try to work through what's the most reasonable approach going forward. -------------------------------------------------------------------------------- Tanya Jakusconek, Scotiabank - Analyst [50] -------------------------------------------------------------------------------- So you think you are pretty much there if they come to reasonableness? We are pretty much there with your water treatment plant coming in early next year? There's nothing else? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [51] -------------------------------------------------------------------------------- Yes. If we can come to alignment on that we do believe what we've put forward and what we are constructing there is going to achieve what's needed going forward. -------------------------------------------------------------------------------- Tanya Jakusconek, Scotiabank - Analyst [52] -------------------------------------------------------------------------------- Okay. Thank you. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [53] -------------------------------------------------------------------------------- Thanks, Tanya. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- (Operator instructions) -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [55] -------------------------------------------------------------------------------- Operator, it doesn't sound like we have any more? -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- We have one more question in queue. Mr. Botir Sharipov with HSBC. -------------------------------------------------------------------------------- Botir Sharipov, HSBC - Analyst [57] -------------------------------------------------------------------------------- Congrats on the strong quarter. Just a couple of questions from me. On, I guess, CC&V, I know it is early stages and you guys are still working out the kinks. But just wanted to get your idea of thinking about the costs -- mining costs and your recoveries there. You mentioned that you could reduce those by 10% and 2%, respectively. And I guess with two months under your belt, what's your current thinking? Has it changed since the time you guys acquired the mine? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [58] -------------------------------------------------------------------------------- I think we are still very confident on what we've laid out. And positively impressed with some of the things we've found. But I'll ask Chris Robison to talk about that in a little more detail. -------------------------------------------------------------------------------- Chris Robison, Newmont Mining Corporation - EVP & COO [59] -------------------------------------------------------------------------------- Gary, I would probably just echo what you said, that we are still confident that we can achieve those sort of improvements in the mine as we work through it. And I think, as you said, it's early days. Our mine planning folks and technical folks continue to look at it but we are optimistic that we can do that. I think the other piece of it is, while we talk about the mill, the New Valley leach is going very well. Our team is very confident that we can bring that in on time or a bit ahead of schedule and comfortable with cost there. So while we focus a bit on the mill, the heart of the operation is the Valley leach and that's going very well early stage with our folks coming on and taking that over. -------------------------------------------------------------------------------- Botir Sharipov, HSBC - Analyst [60] -------------------------------------------------------------------------------- Thank you. And I guess switching to Batu Hijau on phase 7, I understand you guys are reviewing it, but maybe you could give us an early indication of what sort of financing that you need for that? And maybe strip ratios, if possible? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [61] -------------------------------------------------------------------------------- Yes, we can lay out more details as we run through our guidance for next year. But in general, what we did for phase 6, we got nonrecourse bank financing that was put in place. In rough terms, we are looking at a total cost for the stripping campaign of around $2 billion. And the financing that we currently would see required would be in the $700 million to $800 million range. But that is just sort of a rough ballpark. -------------------------------------------------------------------------------- Botir Sharipov, HSBC - Analyst [62] -------------------------------------------------------------------------------- And I guess in terms of time, how long that stripping campaign will take before you guys get into the higher grade ore again? -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [63] -------------------------------------------------------------------------------- It would be back out to about 2022. So we are into the ore body here for 2016 and 2017. And then that stripping campaign -- we don't get into the phase 7 ore until 2022. -------------------------------------------------------------------------------- Botir Sharipov, HSBC - Analyst [64] -------------------------------------------------------------------------------- Okay. Thank you very much. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [65] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [66] -------------------------------------------------------------------------------- There are no further questions at this point. I would now like to hand the call back to our speakers. -------------------------------------------------------------------------------- Gary Goldberg, Newmont Mining Corporation - President & CEO [67] -------------------------------------------------------------------------------- Thanks again for joining our third quarter earnings call this morning. Our team continues to drive stronger performance across the portfolio and the sector and we are not resting on our laurels. Our goal is to continue improving safety and efficiency at our operations and to continue building longer life, lower cost portfolio. Ultimately, we are working to create the value we need to fund profitable growth, pay down debt, and most importantly, generate cash for our shareholders. Thanks again and have a safe day. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.
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