Newmont Mining Corporation (NEM)

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Newmont Mining Corporation (NEM)

Investor Day Call

August 1, 2013 11:00 AM ET


John Seaberg – VP, Investor Relations

Steve Richards – Safety Coordinator, NYSE

Gary Goldberg – President and CEO

Tom Mahoney – Interim CFO

Randy Engel – EVP, Strategic Development

Scott P. Lawson – SVP, Technical Services

Elaine Dorward-King – Sustainability & External Relations


John Bridges – JPMorgan

Stephen Walker – RBC Capital Markets

Jorge Beristain – Deutsche Bank

Christopher Mancini – Gabelli Gold Fund

Alexander Hacking – Citi

Julie Tanner – Christian Brothers Investment Services

Paretosh Misra – Morgan Stanley

Steve Roukis – Matrix Advisors

Patrick Chidley – HSBC

Samuel Block – MSCI ESG Research

Daniel McConvey – Rossport Investments LLC

Garrett S. Nelson – BB&T Capital Markets

Julie Tanner – Christian Brothers Investment Services


John Seaberg

[Starts Abruptly]….busy morning after listening to some of our competitors’ conference calls. We know it’s been a busy morning and we really appreciate you being here.

For those of you who don’t know me, my name is John Seaberg, I am vice president investor relations. Before getting started today, I am going to introduce the safety coordinator for the New York Stock Exchange Steve Richards to give an overview of the evacuation procedures in case of emergency. Steve?

Steve Richards

Good morning. Here with the New York Stock Exchange we have several safety procedures that we use in the event of any type of evacuation. The first thing that you will be aware of is that you'll hear some sort of an audible device siren followed by an announcement. At that point we will instruct you on whether to stay in your location where you are at right now or there may be a need to evacuate. If we’re going to evacuate the floor, the two main places that you will assemble at is the front where you came in the elevators which is our A staircase, that will bring you down to Wall Street. So if you just follow that staircase straight down to the ground floor you will be exiting out on Wall Street.

The second staircases in the back, that’s our C staircase and that staircase will take you down to Broad Street. So again if there was a need to evacuate this floor, those are the two primary staircases that your will use. And our personnel here at NYSE are trained in this procedure. So there will be other people on the floor here to help you get where you need to go. Thank you.

John Seaberg

Thank you, Steve. Now refer you to our cautionary statement as we will be discussing forward-looking information that is further described in our SEC filings that can be found on our website.

Turning to slide four, a brief overview of the agenda. Today’s presentation is scheduled to last about two and half hours including two Q&A sessions. We ask you to please hold your questions until you reach those designated periods. In addition, as this has been webcast, if you a question please raise your hand and one of my colleagues will come around with a microphone, so those listening in can clearly hear your question. In addition, we’d ask you if you could please introduce yourself and your firm prior to posing your question. We should be wrapping up around 1:30 today at which we’d invite you to join us for an informal lunch where the executive team will be available for further discussions.

And with that, I would like to turn it over to Gary

Gary Goldberg

Good morning and thanks John for the introduction and thank you all for being here this morning. Looking forward to presenting our team and presenting our business to you over the next two and half hours and answering your questions. For those I have not met, I am Gary Goldberg, I am celebrating my fifth month in the role of CEO at Newmont and it’s been 32 years in the mining industry for me.

I am excited to be here today and introduce as I said my leadership team and tell you about the next chapter of Newmont history. Newmont has been a respected global mining house for more than 90 years and has adapted to many industry changes. Today we will be looking at what we are doing, not just to weather the challenging times but to make the most of those times. And I want to give you an overview of the strategy we’ve developed to build the strong business for every environment. The essence of this strategy is to deliver on our commitments to shareholders and to other stakeholders.

We have a commitment to more than 40,000 employees and contractors at Newmont to create a safe working environment. As you know safety is our most important value and we begin every conversation with a discussion and conversation on safety. You don’t often see a safe operation that isn’t also an efficient operation. Common denominators are information and accountability. Gratifying to see our safety performance has improved as we focus on embedding the underlying behaviors that create a safe workplace.

That said, we lost a colleague in June, [Corey Vascos] at an incident at our Exodus mine and that’s not acceptable to any of us. Our ultimate goal is to send out people home in the same shape as they arrive at home every day and that goal is shared by my entire team.

I’d like to introduce that team now and some of the new members I will start with first, Scott Lawson who joined in December 2012. Scott has 27 years leading technical service functions for Rio Tinto and Peabody. Scott is a civil engineer from the University of Utah. Chris Robison who joined in May 2013. Chris has 32 years running copper, molybdenum, gold and industrial minerals operations worldwide. Chris is a metallurgical engineer from the Mackay School of Mines. Dr. Elaine Dorward-King, joined in March 2013. Elaine has 25 years in mining. She is involved in piloting sustainable development programs and ran the health, safety and environmental departments for Rio Tinto and most recently Richards Bay Minerals. Elaine has a doctorate in analytical chemistry from Colorado State University. And Susan Keefe who joined in October 2012, has 19 years in mining experience, has experienced most recently before joining with Rio Tinto in communications and external relations, Susan has a degree in biology from Stanford.

Lending continuity to this group are some of the Newmont veterans and I will have Dr. Grigore Simon stand out first. Grigore is a nine year veteran and was named senior vice president of exploration in January of 2012. He has a PhD in geology from the University of Michigan and an MBA from the University of Rochester. Tom Mahoney, Tom is also – he is a 20-year veteran and was appointed interim CFO in May. Tom is a mining engineer from the University of Arizona and has an MBA from Notre Dame. Randy Engel, a 20 year veteran and was appointed to lead our strategic development group in 2008. Randy has a master’s degree in finance from the University of Denver.

Steve Gottesfeld, 16 year veteran, appointed as general counsel in January of 2010. Steve has a law degree and a masters in international affairs from the University of Denver. And the only one not with us today is Bill MacGowan, Bill has been with the group for three years now, he’s got 25 years leading human resources departments in an array of different multinational companies. Bill has a y political science degree from Claremont. Also joining us today is our Chairman Vince Calarco who many of you may know. Thank you.

Our team’s first priority has been to take stock of a portfolio in the emerging environment and develop a strategy to adapt to maintain a strong business through all the cycles. So you’ve heard our competitors talk about improving cost and capital disciplined, I believe the difference lies in how we deliver on our commitments. Our strategy has 3 key elements. The first is to secure the gold franchise or maximize the value we realize from our current business. We will do this by maintaining the financial flexibility that allows us to take advantage of opportunities, delivering on our plans and projects more cost effectively and efficiently, optimizing our portfolio and recalibrating our exploration spend to improve return on investments.

The second aspect of our strategy is to strengthen the portfolio, targeting investments and acquisitions in gold and copper that improve value, improve mine life and reduce costs. The third is to enable our strategy and we’re going to do this by strengthening the capabilities, systems and culture that we need to succeed. Taken together these commitments fundamental changed Newmont’s focus from volume to value.

Newmont exists to translate mineral resources into sustainable value for our shareholders, and that's woven into every one of the aspects of our business. In health and safety, we are driving accountability for safety and other aspects of our performance deeper into the ranks to deliver more value. We also create value through operational excellence and we are changing the way we go about our core business, whether it be from exploration right on through to reclamation, to improve our cost and improve our competitive position.

In growth, we are only investing if the returns pass our hurdle rate and you saw examples last year and earlier this year where we stopped work on Sandman and stopped work (inaudible) underground because they weren’t reaching our hurdle rates. We will invest in new gold and copper assets only when they improve value, mine life and lour cost position. Conversely we are divesting non-core assets like the Canadian oil sands interest that we sold a last month.

With regard to people, we are making the hard decisions necessary to reduce our overhead and the extra costs, work and complexity that comes with us. To sharpen our focus on the work that really helps create value. And finally in sustainability and external relations we’re revising our approach, our model and capabilities to directly align our environmental government and community relations practices with this business value. The strategy has been launched and we are beginning to see the results. The most tangible result is savings that we will deliver 10 to 15% reduction in our all-in sustaining costs and more than offset inflation over the next two years. Since Scott will talk to you more about the step change in costs, capital and productivity improvements that we are delivering at our operations.

We’re also taking actions to streamline our overhead costs and are in the process of reducing our Denver workforce by more than one third as we sharpen our focus on fundamentals of finding, mining and processing gold and copper. We are taking a more rigorous approach to screening M&A targets as well as our own project opportunities. These four criteria give you a broad sense of how we assess all of our opportunities. First of all, starting with value, net present value and return on capital employed are key and as we look at this, we look at those net of acquisition costs. We look at costs, we want to take a look at what we do to take ourselves down the industry cost curve.

Mine life, we spent a lot of time finding, getting permitted all these different operations, we want to make sure we’ve got a mine life that justifies that investment we make upfront. And finally the risk associated with the opportunity including the socio-political and technical risks and how well we are prepared to mitigate those. Consistent with prior years we are making realistic assumptions as we build our plans for the future. We anticipate continuing volatility in the short-term and for planning purposes we are using as you see here gold and copper prices of $1200 per ounce and $3 per pound respectively. For reserves and resources, $1400 per ounce and $3 per pound respectively.

At the same time we believe that underlying macroeconomic trends support a stronger price outlook for both gold and copper. We see growth in developing economies and stabilization in developed economies both pointing to stronger demand in the medium horizon.

Summing up our plans, we are committed to building value today and tomorrow through six key components that my team will walk you through. Tom will talk about our work to preserve financial flexibility. Chris will walk us through how we are delivering our plans and projects. Grigore will present an update on our refreshed exploration strategy. We’ll then break for some Q&A for about 30 minutes before coming back to the program where Scott will talk about our full potential programs as well as our work to improve our technical foundations. Finally Elaine will give an overview of our efforts to drive a more proactive approach to managing social and environmental risks.

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