Newmont Mining (NEM) Earnings Report: Q Conference Call Transcript

Transcription

1 Newmont Mining (NEM) Earnings Report: Q Conference Transcript The following Newmont Mining conference call took place on February 18, 2016, 09:30 AM ET. This is a transcript of that earnings call: Company Participants Meredith Bandy; Newmont Mining oration; VP of IR Gary Goldberg; Newmont Mining oration; President & CEO Laurie Brlas; Newmont Mining oration; CFO Chris Robison; Newmont Mining oration; COO Randy Engel; Newmont Mining oration EVP; Strategic Development Other Participants Andrew Q uail; Goldman Sachs; Analyst John Bridges; JPMorgan; Analyst Stephen Walker; RBC Capital Markets; Analyst Jorge Beristain; Deutsche Bank; Analyst Andrew Kaip; BMO Capital Markets; Analyst David Haughton; CIBC World Markets; Analyst Tanya Jakusconek; Scotiabank; Analyst Garrett Nelson; BB&T Capital Markets; Analyst MANAGEMENT DISCUSSIO N SECTIO N Welcome to the Newmont Mining fourth-quarter and 2015 year-end earnings conference call. (O perator 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 (VP of IR): All right. Thank you, O perator. Good morning, everyone. Welcome to Newmont's fourth-quarter and fullyear 2015 earnings conference call. Joining us on the call today are Gary Goldberg, President and Chief Executive O fficer; and Laurie Brlas, Chief Financial O fficer. They and other members of our executive team will be available to answer questions at the end of the call. Turning to slide 2, please take a moment to review the cautionary statements shown here or refer to our SEC filings, which can be found on our website, Newmont.com. And now I will turn it over to Gary on slide TheStr eet, Inc. Al l R i ghts R eser ved Page 1 of 18

2 Thanks, Meredith, and thank you for joining us this morning. I am pleased to report that we ended 2015 with safer and more efficient operations, a stronger portfolio and a more resilient balance sheet. This performance is the outcome of our work to instill greater discipline in how we manage our business, and make value our watchword, and to drive accountability deeper into the organization. While economic growth and metal prices were generally subdued in 2015, we made measurable progress on our strategy to become the world's leading gold business by improving our underlying business, from safety to productivity to costs; strengthening our portfolio; and creating value by funding our highest-margin projects, reducing debt, and paying steady dividends. I will turn to slide 4 for the highlights. Starting at our operations, last year, we lowered injury rates by 18% to among the lowest in the mining sector. We reduced our gold all-in sustaining costs by 10%, marking six consecutive quarters of keeping them below $1,000 per ounce. And we increased gold production to 5 million ounces, and copper production to 166,000 tons on an attributable basis. Moving to our portfolio, we acquired Cripple Creek & Victor, a cash-flowing asset in a favorable jurisdiction, and progressed the new leach pad and mill. We divested non-core assets, including Waihi and our stake in Valcambi, bringing total asset proceeds to $1.7 billion since And we completed the Turf Vent Shaft on time and under budget, giving us access to higher grades and a platform to expand the Leeville Mine. We advanced Merian, where we lowered capital from our most recent guidance by another $50 million, and remain on track to begin commercial production later this year. We reached a decision to fund the first phase of Long Canyon in Nevada, and an expansion at Tanami in Australia. And we have added 5 million ounces of gold reserves by the drill bit. Turning to our balance sheet, we increased our adjusted EBITDA by 29%, to $2.7 billion, despite a 9% decrease in realized gold price. We more than doubled free cash flows to $756 million, reduced net debt by 19% while continuing to invest in growth, and paid $52 million in dividends and delivered first-quartile total shareholder returns versus our competitors. O ur sustainability performance also influences our ability to create value. Turning to slide 5. In 2015, Newmont's sustainability performance was rated Best in the Mining Industry by the Dow Jones Sustainability Index. We also ranked first in the areas of climate strategy and environmental management, labor practices and human rights, and corporate citizenship. While it's hard to put a dollar value on sustainability, it is clear that superior performance is a prerequisite for managing long-term costs and risk, and maintaining the social acceptance we need to operate. The most important way we measure sustainability is by how well we look after our people. Our goal is to send everyone home safely every day. We're making progress by continually lowering injury rates, and we achieved more than 400 days of zero harm at a team. But this performance is overshadowed by the loss of two colleagues in O ur work to improve safety and productivity will never end. Turning to operational performance on slide 6, in 2015, we lowered our gold all-in sustaining cost for the fourth year in a row, ending below $900 per ounce. This represents a reduction of 24% over the last three years. O ur full potential program has been a central force in improving our performance and our competitive position since it was launched in late To date, we have delivered more than $1 billion in improvements against the 2012 baseline, and consistently exceeded our targets. We've launched the second phase of this program at about half our operations, with the remainder scheduled in Better technical practices are also driving improved reliability. We can't control metal prices, but we have been able to narrow the gap between estimated and actual tonnages and grades, metallurgical recoveries, cost and productivity, through more predictable ore body modeling. Finally, we benefited from favorable oil prices and exchange rates in 2015, which accounted for about 60% of our overall cost improvements TheStr eet, Inc. Al l R i ghts R eser ved Page 2 of 18

3 Turning to portfolio improvements on slide 7, our goal is to build a portfolio of long-life, low-cost assets, with technical and social political risks we are well equipped to manage. We have optimized our portfolio over the last three years, and you can see the results of our efforts on this slide. Comparing what we divested to what we reinvested in, we were able to increase mine life by about two-thirds, lower costs by nearly 20%, and lower technical and social risks. I will take a minute now to walk you through what we're doing to manage risk and make the most of our opportunities in each of our regions. Turning to slide 8, in North America, the Turf Vent Shaft was completed in November and is now delivering better air circulation and design capacity. The ventilation is so good, in fact, that people are wearing coats in the Leeville underground mine. The team has fine-tuned ground control plans at Leeville and is currently evaluating alternative mining methods. Production and costs were negatively impacted by geotechnical challenges in the fourth quarter, and we expect that trend to reverse in the second half of We started mining at Long Canyon, and remain on track to begin production in the first half of Finally, we're making good headway with the Cripple Creek & Victor Expansion. Leach pad construction is slightly ahead of schedule, with first production expected in the second quarter. Mill availability has also improved following a scheduled shutdown in December, and further improvements are expected in the first half of Turning to South America, Suriname Merian is about two-thirds complete, and I will talk more about that later. In Peru, we are studying a phased approach to developing Yanacocha's remaining oxide and sulfide deposits, and we will have more to tell you in the second half of the year. I also want to touch on the reclassification of Conga Reserves to Resources. This was triggered by certain operating and construction permits expiring at the end of 2015, and uncertain prospects for future development and permitting. We do not anticipate development of Conga for the foreseeable future. In Africa, we have secured a new investment agreement and built permanent energy capacity in Ghana, both of which create the stability necessary for long-term investment. Moving on to Asia Pacific, the Tanami Expansion project is on track, with the second decline well underway and mill expansion construction beginning in mid Additional production is expected to come online in In Indonesia, we received our export permit about two months late, and the delay affected our sales revenue in the fourth quarter. I also want to address speculation about the potential sale of Batu Hijau. Newmont, with our partner Sumitomo, are in discussions with certain parties who have expressed serious interest. But to date, none has secured fully committed financing or final deal terms. In the meantime, we remain focused on operating Batu Hijau safely and efficiently. Before I hand over to Laurie, I want to take a moment to acknowledge and thank Chris Robison, our Chief O perating O fficer, for playing a leading role in creating safer and more efficient operations, and a stronger portfolio and project pipeline, over the past three years. As Chris retires on May 1, we have an exceptional leader in Tom Palmer taking his place. I have known Tom for more than 15 years. He has a long track record of improving operational performance, as he did over the past two years at our Asia Pacific business. And we share a strong commitment to safety and productivity, and to building the next generation of profitable new mines. With that, I will hand it over to Laurie to cover our financial results TheStr eet, Inc. Al l R i ghts R eser ved Page 3 of 18

4 Thanks, Gary, and thanks, everyone, for joining us today was a strong year for Newmont, both operationally and financially. Let's turn to slide 10 to review the financial highlights. For the full year, gold's cost applicable to sales and gold all-in sustaining costs were both down 10% compared to 2014, and finished below the midpoint of our guidance. Likewise, gold production was up 4%, and above the midpoint of our guidance. For the fourth quarter, gold production was strong and roughly in line with the prior-year quarter. As expected, costs were higher than the previous three quarters. Gold CAS and all-in sustaining costs per ounce were both 8% unfavorable to the prior-year quarter, due primarily to lower mill grades at Yanacocha and Ahafo. Consistent with our guidance, CAS is expected to improve by the second half of 2016 as we ramp up production at CC&V, and Merian reaches commercial production. Now turning to slide 11, we delivered over $750 million of consolidated free cash flow in And generated a 49% improvement in cash from continuing operations, despite the 9% drop in the gold price. O ur adjusted net income for the year was $507 million, or $0.98 per share. And I am pleased to report that adjusted EBITDA for 2015 was up 29% from the prior year, benefiting from strong copper and gold sales volumes, and lower costs applicable to sales. Turning to the fourth-quarter results, adjusted EBITDA of $466 million was strong, but lower than the prioryear quarter, due to lower metal pricing. We continued to fund dividends from free cash flow and existing cash balances. Last week, our Board approved a quarterly dividend of $0.025 per share, in line with our gold price-linked dividend guidelines. Turning to slide 12, let's walk through our net income adjustments. The primary adjustments to our quarterly GAAP net income include: a $0.25 tax adjustment -- the majority of this relates to tax restructuring, and acquisitions and divestitures; an $0.18 non-cash reclamation charge at one of Newmont's legacy sites -- this accrual adjustment is for liabilities that will be spent over many years into the future; a $0.03 one-time payment related to prior-period royalties from the revised Ghana Investment Agreement; and a $0.06 impairment of other long-lived assets and other marketable securities. After adjusting for these items, we reported net income of $20 million, or $0.04 per share. EBITDA was also impacted by the non-cash reclamation charge, the revised Ghana Investment Agreement, and asset impairment -- in other words, the same items except for taxes -- resulting in adjusted EBITDA of $466 million for the quarter. Now turning to our capital priorities on slide 13, we've delivered a step change in financial flexibility, and maintained our investment-grade balance sheet, despite lower metal pricing, through a disciplined approach to project development and capital allocation. In 2015, we generated about $2.2 billion in operating cash flow. After sustaining capital, cash from core operations totaled $1.4 billion. At the end of the year, we also had $2.8 billion of cash on our balance sheet, a 16% improvement from This includes 2015 net cash from divestitures of about $200 million. O ur strong cash flow and total liquidity position of over $6 billion supports our capital priorities of funding profitable projects, reducing debt, and returning cash to shareholders. As you can see, during the year, we spent $655 million on development capital, repaid $454 million of debt, and paid $52 million in dividends. Free cash flow was negative for the fourth quarter, primarily due to timing of development capital spend for Merian and Long Canyon. We had positive cash from core operations of $27 million in the quarter, which didn't cover our Q 4 development capital of just over $200 million. It's worth pointing out again, that we continue to expect positive free cash flow on an annual basis, but 2014 TheStr eet, Inc. Al l R i ghts R eser ved Page 4 of 18

5 we may not see it every quarter, due to timing of development capital expenditures for our growth projects. As I noted earlier, our cash flow from core operations more than covered development capital, debt paydown, and dividends for the year. We are very pleased with the progress we've made in strengthening our balance sheet during 2015, including $120 million of debt repayment in Q 4. In light of our strong 2015 financial and operating performance, and the current gold price environment, we will evaluate options to further reduce gross debt over the coming months. Slide 14 demonstrates that our discipline has transformed our balance sheet into one of the healthiest in the sector. O ur net debt-to-ebitda ratio of roughly 1.3 is among the lowest in the industry. And our strong cash flow and balance sheet continue to differentiate Newmont from the competition. We have reduced our net debt by 19% since 2014, and continue to target a net debt-to-ebitda ratio of 1 time at $1,200 gold. This metric may trend higher at lower pricing, but over time, these levels allow us to maintain investment-grade metrics across cycles to work with the rating agencies and talk to them frequently to ensure they understand our strategy and results. S&P removed the negative outlook on our BBB rating in June. They also revised their liquidity assessment from strong to exceptional. Moody's recently placed Newmont and many other metals and mining companies on review. They did this across the board, primarily because of their outlook for commodities pricing and their desire to do a review against that pricing deck. In general, the agencies have been very positive about the operating and financial improvements at Newmont. And with that, I will hand it back to Gary. Thank you, Laurie. Let's shift gears to the future, starting on slide 16. O ur goal is to continue improving our performance and prospects by delivering safe and profitable production; adding higher-margin ounces; and advancing our best projects, generating the strong returns that we need to invest in growth, reduce debt, and fund dividends, and maintaining leading sustainability and governance practices. Turning to our outlook on slide 17, our outlook has not changed, with the exception of the improvement in forecast capital spend at Merian, which I mentioned earlier. We expect to sustain the savings we've achieved to date through efficient operations, optimized projects, and value-accretive transactions. And to maintain gold all-in sustaining costs below $1,000 per ounce through O ver the next two years, costs are expected to benefit from higher-margin ounces at Merian, Cripple Creek & Victor, Tanami, and Long Canyon; higher-grade ore at Batu Hijau and Carlin underground mines; and ongoing productivity, cost and capital improvements. Potential upside includes full-potential savings, and lower-cost ounces from projects that have not yet been approved. Turning to production on slide 18, we expect steady gold production of between 4.8 million and 5.3 million ounces in Production is then forecast to rise in 2017 as new projects come online. After that, we expect profitable production of at least 4.5 million to 5 million ounces through In the near term, higher-margin ounces for Merian are expected to offset declining volumes at Yanacocha in South America. Similarly, in North America, lower-cost production from Cripple Creek & Victor, Long Canyon and Carlin underground mines is forecast to offset stripping phases at Carlin surface mines and Twin Creeks. Development of Northwest Exodus represents further upside. The team in Ghana is optimizing projects to address harder ore and lower grades in Ahafo surface mines, and to develop the highly prospective Subika Underground resource. Finally, Asia Pacific will leverage the Tanami Expansion to counter lower grades and the higher stripping at Boddington TheStr eet, Inc. Al l R i ghts R eser ved Page 5 of 18

6 Turning to capital on slide 19, our outlook calls for stable and disciplined sustaining capital expenditures over the near term to cover infrastructure, equipment, and ongoing mine development. Sustaining capital is expected to rise slightly in 2017 to cover equipment rebuilds, water treatment and tailing storage facilities. Longer term, we expect to hold sustaining capital to between $700 million and $800 million per year. Development capital in 2016 and 2017 will support our current projects, including Merian, Long Canyon, and expansions at Cripple Creek & Victor and Tanami. These figures may change as we consider our next profitable growth opportunities. Turning to our project pipeline on slide 20, projects in the execution phase are progressing on schedule and as per below budget. To recap, Long Canyon is more than 45% complete, and we began mining in January. The Cripple Creek & Victor Expansion is on track, and the team is evaluating promising options for concentrate processing. Merian was 66% complete at the end of January, and we expect to reach commercial production in the second half of this year. And the second decline at Tanami is nearing completion, and we will begin mill expansion construction in the coming months. Turning to projects that will be up for funding review in 2016, the Ahafo Mill Expansion is designed to leverage existing infrastructure to build capacity and improve costs. The expansion is expected to offset lower-grade ore and accelerate profitable production of stockpiles. Developing the Subika Underground mine would deliver higher-grade ore to Ahafo Mill and create a platform to explore the region's highly prospective underground resource. We expect to reach decisions on both the Ahafo Mill Expansion and Subika Underground mine in the second half of Finally, the next cutback at Batu Hijau, Phase 7, represents good returns, but requires significant investment. We will not move forward with Phase 7 until we have secured an amended contract of work and project financing. Turning to our reserves on slide 21, we added 5 million ounces to our gold reserves by the drill bit in 2015, and 4 million ounces by acquiring Cripple Creek & Victor. Additions included higher-grade ounces at key underground mines, including 1 million ounces at Carlin and 800,000 ounces at Tanami; more than doubling reserves at the Subika Underground mine, with the addition of 800,000 ounces; and extending the life of KCGM by adding 1.1 million equity ounces, and at Yanacocha by converting 700,000 ounces at Q uecher Main. These additions help offset depletion of 6.5 million ounces; divestment of 800,000 ounces, which included Waihi; price-related changes of 3 million ounces, largely due to moving an economically marginal layback at [Akayem], which is not included in the current mine plan, to resources; and net negative revisions of 700,000 ounces, primarily at Ahafo and Ahafo North. The strength of our gold reserves is reflected in slightly higher average year-end gold grades of 1.06 grams per ton and reduced sensitivity to lower gold prices. We lowered our reserve price to $1,200 per ounce at the end of O perational and portfolio improvements, combined with favorable exchange rates, have reduced the downside sensitivity of a further $100 decrease in gold price to less than half of what it was last year. Turning to slide 22, in the near term, we expect a relatively strong US dollar and subdued global economic growth to constrain prices. In the medium term, supply is expected to decrease, due to aging ore bodies, slower project development, and fewer new discoveries. These factors, combined with rising demand from emerging market consumers, support a positive outlook for gold prices in the years to come. In the meantime, we are preparing for all scenarios. Turning to slide 23, our planning process builds from a gold price of $900 per ounce, which informs our contingency plans. At today's metal prices, we can afford to advance our best projects and exploration prospects, reduce debt, and maintain our dividend. At lower prices, we would expect to finish existing projects, potentially delay new projects, stripping campaigns, and sustaining capital, and further reduce overhead and expiration costs. As gold prices 2014 TheStr eet, Inc. Al l R i ghts R eser ved Page 6 of 18

7 improve, we will continue to optimize costs and capital on projects and exploration prospects that offer strong returns, accelerate debt reduction, and increase dividends in line with our policy. Summing it all up on slide 24, we are proud of what we've accomplished in 2015, but our sights are set on raising our performance to the next level. This means moving from one of the safest companies in the mining sector to one of the safest among all industries; taking our asset portfolio from good to great; building a strong and diverse talent pipeline; and maintaining leading social, environmental and governance practices in generating the financial flexibility we need to fund our best projects, reduce debt, and return cash to shareholders. Thank you for your time. I would like to now turn the call back over to the operator to open the line for questions. Q UESTIO NS & ANSWERS (O perator instructions) Andrew Q uail of Goldman Sachs. Andre w Quail (Analyst - Goldman Sachs): Good morning, Gary, Laurie and team. Thanks for taking my questions. The first one is fairly easy. Can you just confirm what you actually spent at Merian in the quarter? What our actual capital spend was in the fourth quarter at Merian? Andre w Quail (Analyst - Goldman Sachs): Yes. I'm going to have to look that up here real quick because I do not have that at my fingertips. But we'll come back to that and look it up. Andre w Quail (Analyst - Goldman Sachs): O kay. Next one is just on the Yanacocha. Could you just, I suppose, comment on what you expect -- not on a tonnage perspective, but more so on a grade perspective going forward -- especially into 2016? Not on production, but just on grade. O kay. Just to answer your first question, on 100% basis, we were about $102 million at Merian. And I'm going to ask Chris Robison to a cover where we stand at Yanacocha grade-wise in 2016 versus prior years, whatever we expect grade-wise Yes, Andrew, as you know, the grade was expected to drop. And so our expectation -- as you can see, the ounces in 2016 were down in the 500,000-ounce range for 2016 and the foreseeable future. So it's 2014 TheStr eet, Inc. Al l R i ghts R eser ved Page 7 of 18

8 roughly half of where we had been two to three years ago, and then as we stepped down in Andre w Quail (Analyst - Goldman Sachs): So you think it's something between a fourth-quarter and a third-quarter grade? Do you think it's going to be consistent with fourth quarter, or is it going to be more between (multiple speakers)? No, Andrew, I think it's pretty consistent with fourth quarter as grade has ramped down. I think pretty consistent through the year. We will certainly be consistent through the year, and it's similar to fourth quarter. Chris, I would think that you'd say that our guidance that we (technical difficulty) cost basis for 2016 is based on the analysis of the grade. And we are still going to deliver that, which is lower than the fourthquarter costs. O h, absolutely. And they've done a great job in focusing on costs, with the declining grade, and reducing headcount and other significant costs. Andre w Quail (Analyst - Goldman Sachs): That's great. And I suppose my last question, back to Merian. O bviously it's 66% complete. It's great you get a downward revision to CapEx. Do you foresee any more down-growth to CapEx, given the projects that are almost there? I think what we'll be doing, Andrew, is, as we get it closer to commercial production, we will assess where that stands. I think for right now, we were comfortable making this next reduction. I think the team has done a great job of delivering. Chris was just down there a couple of weeks ago. I was down in December and just impressed with how the whole project is coming along. But I think we'd hold off until probably midyear or third quarter, as we get into commercial production, to reassess capital. Andre w Quail (Analyst - Goldman Sachs): All right. Thanks very much. Thanks. John Bridges of JPMorgan. John Bridges (Analyst - JPMorgan): Good morning, Gary, Laurie, everybody TheStr eet, Inc. Al l R i ghts R eser ved Page 8 of 18

9 O n the sustaining costs, all-in sustaining costs, you are using GAAP to do your numbers. If you were able to use IFRS, would your reported on a sustaining cost be lower? What are the issues between the two systems? I would say that over time, there wouldn't be any difference. O n a quarter-to-quarter basis, there could be some differences, as under one, you might capitalize; on another, you might expense. But it actually does a lot to equalize things across the two methodologies. John Bridges (Analyst - JPMorgan): Okay. Are you doing a lot of stripping at the moment? Are you stripping more than more normal or about average? In Carlin and Twin, we'll have some stripping campaigns over the next few years -- Carlin currently in one, and Twin will come back into one. So those would be the two areas that I would see any -- and I wouldn't call them abnormal; it's just the normal part of their mining cycle. O r Batu Hajiu, if we were to get into Phase 7, would be into one of those as well down the road a couple of years. John Bridges (Analyst - JPMorgan): Okay, fine. And then maybe as a follow-on on Yanacocha. You mentioned the sulphides project. I know you are still working on it, but I just wondered if you had a more detailed idea as to what the better options were there? Not at this stage, John. I think we're still sticking to our schedule of reviewing that with the team in June and have more to talk about in July. John Bridges (Analyst - JPMorgan): O kay. We'll look forward to that. Thanks, Gary, and best of luck. Thanks, John. Stephen Walker of RBC Capital Markets. Stephen Walker (Analyst - RBC Capital Markets): Thank you. Good morning, everybody. Just two questions on strategy. First of all, in 2017, obviously there is likely going to be more development capital allocated than is shown on slide 19. But when you look at capital allocation decisions, vis-a-vis organic projects and the feasibility or the pre-feasibility stage versus acquisitions, could you talk a little bit about -- and again, CC&V is a good example of an acquisition that strategically fit. Talk about the balance between acquisition strategies and organic growth, particularly as you go from 2017 into 2018, 2014 TheStr eet, Inc. Al l R i ghts R eser ved Page 9 of 18

10 where production on paper, without the new projects kicking in, stepping down significantly in 2018 from 2017? Sure, Stephen. I think -- first of all, step back. O ur core focus is on making sure our operations to business delivers value. So we are not out for a target of a certain number of ounces, per se. It's what's going to deliver the best return to shareholders. So that's why you've heard us, as we've announced certain projects, talk about return on capital. That's a big focus. And clearly, we understand our internal projects the best, generally. So that's a key focus that we look at. But we do take a look at what's available out there around the rest of the world in terms of opportunities. We weight all of our operations, our internal operations and external opportunities, on the same value and risk scale. Where we look at value, NPV, return on capital, mine life and position on the cost curve. We look at risk from a technical and a geopolitical and social risk aspect, and really make all the decisions based on that. In terms of how we then allocate capital, we are targeting roughly 20% to 25% of our free cash flow today to be paid back in dividends. We are working towards a position of getting our net debt to EBITDA -- targeting, as Laurie said, a 1 ratio at a $1,200 gold price. And investing in the business along way. And as you point out, we're making quite a bit of investment. You see that in our free cash flow in the fourth quarter of And we will see that in the first half. Primarily, it's front-end-loaded in But that kind of gives you a little overview of where our focus is really driven on what's the best value to shareholders, is the main driver. Stephen Walker (Analyst - RBC Capital Markets): Thank you for that, Gary. Just again, as a separate question on strategy, we've talked in the past about synergies or potential synergies between operations in Nevada. And certainly in 2014, there was discussion at that time of a combination with Barrick, which could considerably generate a lot of synergies, and particularly in Nevada. Do see opportunities in Nevada where you could partner with somebody and achieve synergies, whether it's at Turquoise Ridge or elsewhere at the metallurgical operations in Carlin? I think clearly we are focused on running our operations. We're joint venture partners with certain parties in Australia, where we're managing the KCGM operation now. We are partners at Turquoise Ridge, and we continue to work to look at what the next development opportunities are. All the ore at Turquoise Ridge is processed at our Twin Creeks operation today. And looking at ways to be able to expand that relationship and develop the best value for our shareholders in that process is one of our focuses. So I wouldn't look away from them, but right now, those would be the areas that we are focused on. Stephen Walker (Analyst - RBC Capital Markets): Great. Thank you very much, Gary TheStreet, Inc. All Rights Reserved Page 10 of 18

11 Thanks, Stephen. Jorge Beristain of Deutsche Bank. Jorge Beristain (Analyst - Deutsche Bank): Thank you. Good morning, Gary, and everybody. I guess my first question -- Gary, just again on strategy. Maybe you could just talk a little bit about the fact that your US copper operations are basically below breakeven on an all-in sustaining-cost basis relative to the current copper price. And if there will be any plans to brown down production there in response to low copper prices? That's my first question. I think there are two parts to -- and that's the Phoenix operation in the US that's producing copper. You've got the copper that comes with the gold in concentrate. And you also have the copper that comes from the SX/EW. And we do have probably more flexibility around SX/EW if we were to see a significant decline in copper prices, where it wasn't making money on a cash basis. But at this stage, we do not have any plans to make a change. But that would be the one we'd have probably the most flexibility, initially, to make a change on. Jorge Beristain (Analyst - Deutsche Bank): So when you define running them for cash, you define that as C1. You're not thinking AISC cash as being the breakeven? If you got down to it, we would be looking at C1. But we continue to assess that as we go forward. And as Gary said, part of that is in with the concentrate. So you really have to look at the combined copper/gold. Because there is an allocation of costs, which can be somewhat academic and isn't always guaranteed to be 100% accurate. You're really looking at the combined product and what margin you get out of that. Jorge Beristain (Analyst - Deutsche Bank): Understood. And then that leads into sort of my second strategic question. When you think about potentially selling assets in certain parts of the world and reinvesting, where does copper rank relative to gold? Are you metals agnostic, or are you leaning more towards increasing your gold projects going forward? We are very competent at operating gold operations around the world. We do have the three 2014 TheStreet, Inc. All Rights Reserved Page 11 of 18

12 copper/gold deposits that we operate today. But our focus would be on gold, primarily. If there was something of value that was gold with some copper with it, we would consider it. But our focus is really on gold, Jorge. Jorge Beristain (Analyst - Deutsche Bank): Thank you. And sorry -- if I could just get a last one in, for Laurie specifically. Laurie, if we could just get a better baseline and maybe just an explanation as to what continues to happen with the Other Expense category? I can understand a lot of that is non-cash. But just looking at your year-ahead guidance, it seems to imply about a 250 midpoint for SG&A, including -- I'm assuming that category includes others, given that your actual SG&A runs at about 180. So is it correct to think you're using about a $70 million assumption annually for others? Well, the other thing is -- we talked about this at Investor Day -- that we have moved our regional G&A into G&A, and out of O ther. So you are going to see some changes in that going forward. And we can give you a lot of detail if you'd like offline. The O ther is a fairly complex area; and a lot of it is non-cash, as you mentioned. But it should be coming down as we make some of these changes that will provide a little bit more transparency. Jorge Beristain (Analyst - Deutsche Bank): Yes, that would be great to get some more color there. Just because recurrently, it seems to be an area of negative surprise. And on cash basis, this does work out to be somewhere upwards of about $40 an ounce, give or take. Annually, it would seem like some fairly low-lying fruit, if you could get a better handle on controlling those recurrent others. So I just wanted to flag that. Thanks. Yes, and we definitely take a look at it. And we will get back to you with some more detail, Jorge. Andrew Kaip of BMO. Andre w Kaip (Analyst - BMO Capital Markets): Good morning, Gary and Laurie. Good morning. Andre w Kaip (Analyst - BMO Capital Markets): Good morning. The first question I have, Gary, is just for you. Thanks for providing some clarity on Batu Hijau and the fact that you have parties that are interested. I'm wondering if you are in a position to just comment on the 2014 TheStreet, Inc. All Rights Reserved Page 12 of 18

13 quality of those groups that are interested? Do you see them as viable groups that are just assembling the capital to be able to make an offer, or can you comment on that? All right. I'm going to ask Randy to give a comment. Andre w Kaip (Analyst - BMO Capital Markets): Hello. Randy Enge l (Strategic Development): The viability is certainly high enough that we felt it appropriate to mention them. They're serious parties. Like we mentioned at Investor Day, we've really only engaged in parties that we felt were viable. Financing in this market has been challenging, but I think that's the case across the sector. So we certainly view them as very real parties. Andre w Kaip (Analyst - BMO Capital Markets): Are you looking at more than one group that is interested, or is it just one particular group that is entertaining it? Randy Enge l (Strategic Development): I think we have looked and talked to a number of groups. We've got some serious interested parties right now that we are focused on our discussions with. Andre w Kaip (Analyst - BMO Capital Markets): All right, thanks very much. And then the second question -- Laurie, congratulations on further debt reduction. I'm just wondering -- and you made comments about potential further debt reduction, or gross debt reductions, early this year, into Can you comment on your strategy now? Still a very healthy cash position in Newmont. And I understand the need for it as you're constructing projects. But at some point in time, those cash requirements are going to abate. And I'm wondering what your strategy there is? Sure, thank you, Andrew. Yes, I think the whole team deserves a lot of credit for this debt paydown; we don't do it in finance. But we definitely have some project-level debt at PT and NT that we expect to be paying down throughout the year. And then we've also considered the concept of doing a tender on some of our outstanding corporate debt. We do have the cash, as I said in December. We are monitoring the gold price and want to make sure that we do not take undue risk. But as you point out, where we're at right now, both financially and where we are within our projects, that definitely could be something on the horizon. We just have to make sure that the timing fits with all the other things. And as you know, we get into the blackout windows and everything around our quarter. So our timing to be able to do those things can sometimes be limited. But we definitely, obviously, have the capability, and will be studying that quite a bit going forward TheStreet, Inc. All Rights Reserved Page 13 of 18

14 Andre w Kaip (Analyst - BMO Capital Markets): All right, thank you very much. Thanks, Andrew. David Haughton of Imperial Bank of Commerce. David Haughton (Analyst - CIBC World Markets): Good morning, Gary, Laurie, Chris and Randy. Got some questions on the CapEx. Firstly, looking at Merian, you've got guidance there for 2016 of $170 million to $210 million. Is that on a 100% basis, or is that your 75% share? That's 100%. David Haughton (Analyst - CIBC World Markets): Excellent. And during the presentation, Gary spoke to some $50 million worth of savings. What kind of savings were generated? Is it as a consequence of currency or energy or some other element you would want to talk about? Yes, David, obviously, it's exchange rate; and fuel price, plays a big role there. But also, from my recent visit there, G Mining has some very unique approaches in terms of logistics which, you can imagine, is pretty interesting, getting gear into the Amazon jungle, where we have saved costs. And even in assembling gear there, where a lot of equipment is obviously fabricated but then assembled in Europe, in the US or Canada, and then transported in and basically just bolted together. So as we do more of that, that's probably -- after FX and fuel price, the biggest savings is less labor cost and less high-tech labor at-site. David Haughton (Analyst - CIBC World Markets): O kay. And I know that Andrew Q uail was heading in a similar direction. You're sustaining CapEx is about $100 per ounce. Can you see any of those kind of experiences moving over to your ongoing CapEx? Or is it really quite specific about the build capital? I think it's more specific. I think a big sustaining project, something where there was a lot of gear, I think we've learned a lot from that. But we would certainly take these ideas to other big projects in the future -- some great experience there and knowledge we've gained. David Haughton (Analyst - CIBC World Markets): O kay. So it's transferable, say, to what might happen in Ghana, for instance, if you pressed the button for 2014 TheStreet, Inc. All Rights Reserved Page 14 of 18

15 the expansions? Absolutely, yes. And at Ahafo Mill. David Haughton (Analyst - CIBC World Markets): Yes. Just going over to Long Canyon, garnets of the CapEx remaining is around about $250 million to $300 million. Is that up from what your previous expectations were? No, it's pretty well in line with expectations. We are seeing a bit lower spend there, again, mainly due to fuel costs. But it should be pretty line-ball to what we had previously forecast. Yes, our $250 million to $300 million is full-project spend from the beginning, so that hasn't changed at this stage. Only about half of that in Yes. David Haughton (Analyst - CIBC World Markets): O kay, all right. Well, thank you very much. And, Chris, enjoy your retirement. Thank you. Tanya Jakusconek of Scotiabank. T anya Jakusco ne k (Analyst - Scotiabank): Good morning, everybody. I have two questions. O ne is technical and one is financial. Maybe just on the technical side, can we talk a little bit about the geotechnical issues that you are experiencing at Leeville? Exactly what's happening there? I understand there's more brown support that's going in. But what are you seeing underground that's different from what originally you were expecting? And how do we see this cost improving through the year? So maybe that's my first question TheStreet, Inc. All Rights Reserved Page 15 of 18

16 Thanks, Tanya. I'm going to have Chris handle that one. Yes, Tanya, I think a couple pieces to this. O ne, it's one particular area in Leeville. So it's not an impact across the whole Leeville turf complex. It's one area where, due to the faulting, while we had an expectation there of poor ground conditions, our current mining approach, the long hole stoping, leads to more geotech issues. So one of the things that we are looking at is a cut-and-fill approach in this particular area of the mine. That would lead to more selective mining, so higher grade, higher costs that may offset one another, as you would be mining less tons. Higher costs but higher grade. So we see the impact of this through -- because of this area, it's an isolated area in the mine, the impact this year, but certainly not longer term. T anya Jakusco ne k (Analyst - Scotiabank): So is it safe to say that we are just in this sort of faulted area for the first half? And then once you come out it, we are back to long hole stoping? Yes, and we would be long hole stoping elsewhere in the operation. Just this one area, we would go to this modified mining approach. T anya Jakusco ne k (Analyst - Scotiabank): Okay, perfect. And then, Laurie, I had a question for you. And I appreciate you mentioned your target for net debt to EBITDA at 1 time at $1,200 gold price. Is it safe to assume that, you know, we've got obviously the Merian CapEx that's coming through in the first half of the year. You have to make a decision on Ahafo and Subika in the second half of the year. Do we look at it that any excess cash flow above that spend -- and that assumes you've made the decision to go ahead on Ahafo and Subika -- still keeping a minimum cash balance of $2 billion on the balance sheet? Anything above and beyond that would go to paying down the debt? Well, I think we would certainly evaluate a variety of different things, other options that we may have -- what does the gold price look like at that point in time. Theoretically, you are probably not far off about what we would do. But there would definitely be timing and other things that would come into play before we move on that. But I definitely see the ability for us to pay down some incremental debt this year. T anya Jakusco ne k (Analyst - Scotiabank): O kay, thank you very much. Thank you. Garrett Nelson of BB&T Capital Markets TheStreet, Inc. All Rights Reserved Page 16 of 18

17 Garrett Nelson (Analyst - BB&T Capital Markets): Hello, thank you. I think you mentioned lower ore grades at Yanacocha and Ahafo as the primary drivers of the year-overyear increase in your total cost per ounce. But it looks like your North American costs, CAS, were up about 9%, and was driven by Carlin. Remind us why were your costs are so much higher at Carlin? And looking at 2016, are you expecting your costs per ounce in that region to come down as the year progresses and as production ramps at Turf Vent Shaft and so forth? I think overall, I mean, first of all, our costs came down year on year, just to remind folks -- especially all-in sustaining. And we have had the moves around Yanacocha. As we get closer towards the end of the existing mine life, we have expected those costs to come up as production comes down. Carlin was a factor of some of the items that Chris mentioned, that we're dealing with some of the geotechnical issues. Plus, came to the end of some stripping and some grade-related issues. O ur guidance though, that we provided in early December, in terms of where we expect our costs to be for 2016, hasn't changed from what we provided and still remains the same. Garrett Nelson (Analyst - BB&T Capital Markets): And the [paceville] project at Carlin would have affected the costs? It would have affected the sustaining capital in the fourth-quarter spend, yes. Garrett Nelson (Analyst - BB&T Capital Markets): O kay. And then your leverage ratios have obviously come down a lot over the last several quarters. Remind us whether you have a target leverage ratio. And if so, what is your target? Yes, what we've said, Garrett, is that we would like to be at 1 times debt to EBITDA when gold price is $1,200. O bviously the EBITDA moves around a bit as the gold price moves around a bit. But if we think about it that way, we are confident that we can maintain investment-grade metrics as the gold price moves and through the cycles. Garrett Nelson (Analyst - BB&T Capital Markets): All right, great, thanks very much. Thanks, Garrett. Thank you. I would now like to hand the call back to Gary Goldberg for any final remarks TheStreet, Inc. All Rights Reserved Page 17 of 18

18 Thanks, Operator. And thanks, everyone, for joining today. I'm pleased with the changes we've made over the past few years that have positioned Newmont to be the world's leading gold business. We will continue to focus on our strategy to deliver long-term value by improving our underlying business -- from safety to productivity to costs; strengthening our portfolio; and creating value by funding our highest-margin projects, reducing debt and paying steady dividends. Thanks again for joining us and have a safe day. Thank you, and that concludes today's conference. All rights reserved (c) 2014 TheStreet, Inc. Please feel free to quote up to 200 words per transcript. Any quote should be accompanied by "Provided by TheStreet" and a link to the complete transcript and Any other use or method of distribution is strictly prohibited. THE INFORMATION CONTAINED IN EACH WRITTEN OR AUDIO TRANSCRIPT (the "TRANSCRIPT") IS A REPRO DUCTIO N O F A PARTICULAR CO MPANY'S CO NFERENCE CALL, CO NFERENCE PRESENTATIO N O R O THER AUDIO PRESENTATIO N. THE TRANSCRIPTS ARE PRO VIDED "AS IS" AND "AS AVAILABLE" AND THESTREET IS NOT RESPONSIBLE IN ANY WAY NOR DOES IT MAKE ANY REPRESENTATION OR WARRANTY REGARDING THE ACCURACY O R CO MPLETENESS O F THE TRANSCRIPTS AS PRO DUCED, NO R THE SUBSTANCE O F A PARTICULAR CO MPANY'S INFO RMATIO N. THE TRANSCRIPTS ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY. THESTREET IS NOT PROVIDING ANY INVESTMENT ADVICE O R ENDO RSING ANY PARTICULAR CO MPANY TheStreet, Inc. All Rights Reserved Page 18 of 18