Newmont Mining Corporation (NEM)

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Newmont Mining Corp (NYSE:NEM)

Q2 2014 Earnings Conference Call

July 30, 2014 10:00 AM ET


Meredith Bandy - VP of IR

Gary Goldberg - President and CEO

Laurie Brlas - CFO


Andrew Quail - Goldman Sachs

John Bridges - JPMorgan

David Haughton - BMO

Patrick Chidley - HSBC

Greg Barnes - TD Securities

Jorge Beristain - Deutsche Bank

Brian Yu - Citi

Adam Graf - Cowen

Farooq Hamed - Barclays



Good morning and welcome to the Newmont Mining Second Quarter Earnings Conference Call. All lines will be on a listen-only mode until we open for questions and answers. Today's conference is being recorded. If anyone has any objections, please disconnect at this time. I'd now like to turn the call over to Meredith Bandy, Vice President of Investor Relations. You may begin.

Meredith Bandy

Thank you and good morning, everyone. Welcome to Newmont's second quarter 2014 earnings conference call. Joining us on the call today are Gary Goldberg, President and Chief Executive Officer; 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 two, I’d like to refer you to our cautionary statement. We will be discussing a number of 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

Now, I will turn it over to Gary.

Gary Goldberg

Thank you all for joining us this morning. I will start by introducing Meredith Bandy, our new Vice President of Investor Relations. Meredith joined us from BMO where she was an equity research analyst covering metals and mining. Many of you know Meredith from her past life. I am sure the rest of you will get to know and appreciate Meredith. I welcome this opportunity to highlight our strong second quarter results.

We continued to exceed our cost and efficiency improvement targets while maintaining planned gold production. We also made strides in optimizing our portfolio and have generated nearly $800 million in non-core asset divestitures.

Finally, we announced that we will develop the Merian mine in Suriname, the first in our optimized organic project pipeline to get the green light. Efficiency and safety go hand-in-hand and we also continued to improve our safety performance.

Turning to slide four. We’ve achieved seven straight quarters of keeping our total injury rates at or below 0.5 per 200,000 hours worked. And in the second quarter, we brought those rates down to an all-time low of 0.32. This represents industry leading performance, and more importantly, it represents 30,000 people taking accountability for working safely day-in and day-out.

While we are heading in the right direction, our performance was marred by the loss of George Ayama [ph] a contract security guard at Ahafo. We continue to keep George and his family in our thoughts as we renew our commitment to working safely and looking out for each other. This photo shows our team at the Yanecocha truck shop, who recently reached one year working without injury. One shift is coming up on four years working safely proving that zero harm is possible. Our focus on improving every aspect of our business continues to pay us.

Turning to slide five. Our work to improve cost and efficiency helped us achieve a 17% per ounce reduction in gold all in sustaining costs and costs applicable to sales compared to the prior year quarter. Well some of that was related to fewer inventory write downs this year than last. 10% of our all in sustaining cost improvement was a direct result of operating more efficiently.

At the same time, we were able to increase gold production by 5%, compared to the second quarter of 2013. Based on this positive trajectory, we’ve updated our 2014 outlook to reflect a 3% improvement in costs and a 2% improvement in production for the year. As we continue to optimize our project pipeline, we are pleased to announce that we’re developing Merian in Suriname, a profitable new mine that offers lower cost production and establishes a foothold in a perspective new gold district. I will cover more on Merian in a few minutes. Building on our record of delivering projects Akyem and Phoenix Copper Leach on time and on budget, we are also progressing Turf Vent Shaft project in Nevada on time and on budget this year.

We also completed the sale of Jundee for $94 million on July 1st which is up slightly from the previously announced 91 million due to working capital adjustments. This brings our total proceeds from the sale of non-core assets to nearly $800 million.

Finally, we made progress on improving our financial flexibility. During the second quarter we generated a $124 million in free cash flow and reduced capital expenditure by 58% over the prior year quarter.

Let’s turn to more specifics on slide six. In the second quarter, we generated $359 million in cash savings on our gold all-in sustaining costs, bringing our year-to-date savings to $442 million. This puts us well ahead of schedule to achieve savings of approximately $600 million to $700 million by 2016.

Quarter-on-quarter, we reduced all-in sustaining costs from $1,283 to $1,063 per ounce, an increase attributable gold product from 1.17 million ounces to 1.22 million ounces. We also increased attributable copper production by 4% quarter-on-quarter primarily through the added production at our Phoenix Copper Leach operation.

I will take you through our regional performance now starting with production on slide seven.

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