Newmont Mining Corporation (NEM)

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Newmont Mining (NEM)

Q4 2013 Results Earnings Conference Call

February 21, 2014, 8:00 a.m. ET

Executives

Kirsten Benefiel - Senior Director, Investor Relations

Gary Goldberg - President and CEO

Laurie Brlas - CFO

Chris Robison - Executive Vice President of Operations and Projects

Randy Engel - Executive Vice President of Strategic Development

Analysts

Patrick Chidley - HSBC

Brian Yu - Citigroup

John Bridges - JPMorgan

Adam Graf - Cowen & Company

Jorge Beristain - Deutsche Bank

Garrett Nelson - BB&T Capital Market

Presentation

Operator

Good morning, and welcome to the Newmont Mining fourth quarter and full year 2013 earnings conference call. [Operator instructions.] I would now like to turn the call over to Kirsten Benefiel, senior director of investor relations. Thank you, you may begin.

Kirsten Benefiel

Thank you, operator, and good morning, everyone. Welcome to Newmont's fourth quarter and full year 2013 earnings conference call. Joining us on the call today are Gary Goldberg, president and chief executive officer; Laurie Brlas, chief financial officer; Chris Robison, executive vice president of operations and projects; and Randy Engel, executive vice president of strategic development. They and other members of our executive team will be available to answer questions at the end of our call.

Turning to slide two, I’d like to refer you to our cautionary statement. We will be discussing forward-looking information, which is subject to a number of risks. More information is included in our SEC filings, which can be found on our website at newmont.com.

Now, please turn to page three, and I will turn the call over to Gary.

Gary Goldberg

Thanks, Kirsten, and thanks, everyone for joining us this morning. I welcome this opportunity to highlight the strong results our team delivered in 2013, for maximizing production and exceeding cost reduction targets, to bringing profitable new projects online and divesting noncore assets. I also want to help you understand Newmont’s potential in the years ahead.

My goal is to clearly explain our stable production profile and the substantial cost reductions we are committed to achieving, and give you more specifics on what we have done to scrutinize and optimize our project pipeline.

Finally, I will delineate the specific steps we have taken to improve our financial flexibility by modifying our dividend policy and securing commitments to restructure our debt. Let me make our capital allocation priorities crystal clear: they are to maintain financial flexibility, invest in our top development prospects, and return capital to shareholders, in that order.

The first record result for 2013 I will touch on is safety. Turning to slide four, safety is fundamental to running an efficient business, and in 2013, we achieved our lowest total injury rate on record. In human terms, this means that compared to 2012, 176 people did not get injured, 36 did not miss work due to an injury, and nine avoided a serious injury.

In business terms, a strong safety record means we are operating at peak efficiency. Safety and social responsibility are at the heart of our employee value proposition and help us to attract and retain the best and the brightest.

Now I want to review the value proposition we offer investors, turning to slide five. Newmont is the premiere U.S. based gold mining company, and the value we offer shareholders is grounded in our operational, financial, and strategic acumen.

Starting with our operations, we have a strong asset portfolio with 70% of our production derived from Australia, New Zealand, and the United States. We are managing our portfolio to deliver stable production of about 5 million ounces of gold per year over the next three years, with 90% of our revenues coming from gold.

We are also relentless in our work to improve costs and efficiency. I brought in two world-class mining experts and tasked them delivering a step change in operational performance: Chris Robison, our head of operations, and Scott Lawson, our head of technical services. They were responsible for leading our team to achieve cost reductions of nearly $1 billion in 2013 and we will apply that same expertise and discipline to achieve at least another $600 million to $700 million in savings from 2014 to 2016.

Turning to our balance sheet, we have taken decisive action to maintain financial flexibility in a challenging price environment. Our new CFO, Laurie Brlas, is also a mining veteran, and led our efforts to reschedule our debt payments and revise our dividend policy to improve financial flexibility. Laurie’s job is to keep us focused on delivering against our capital allocation commitments.

One further point of clarification, we do not believe that issuing equity to pay off debt is a sound business practice, and we have no intention to do so.

Finally, we have reevaluated and reinforced our approach to maximizing the value of our investments and our portfolio. You all know Randy Engel, our head of strategic development. Randy has established a more rigorous approach to screening assets and opportunities based on their contribution to value, as measured by NPV and return on capital employed and mine life, as well as their impact on our portfolio cost and risk profile.

We now view everything through this lens, which has helped us to prioritize our best organic development opportunities and move forward with divesting assets that are not a good fit with our strategy. We realized nearly $600 million by divesting noncore assets in 2013.

With that clarification on how we create value, I’ll turn to the specifics on what we delivered in 2013. Turning to slide six, last year we committed to improving costs and efficiencies by $500 million to $750 million by 2015 and delivering on our production goals. I am pleased to say that the team met and exceeded these commitments.

Read the rest of this transcript for free on seekingalpha.com