Newmont Goldcorp Announces Second Quarter 2019 Results

DENVER–(BUSINESS WIRE)–Newmont Goldcorp Corporation (NYSE: NEM, TSX: NGT) (Newmont Goldcorp or the Company) today announced second quarter 2019 results, which includes the performance of Goldcorp operations from the date of transaction close on April 18, 2019.

  • Net income: Delivered GAAP net income from continuing operations attributable to Newmont Goldcorp stockholders of $1 million or $0.00 per diluted share; delivered adjusted net income1 of $92 million or $0.12 per diluted share, down $0.14 compared to the prior year quarter
  • EBITDA: Generated $679 million in adjusted EBITDA2, an increase of 25 percent from the prior year quarter
  • Cash flow: Reported consolidated cash flow from continuing operations of $301 million and free cash flow3 of $(79) million
  • Gold costs applicable to sales (CAS)4: Reported CAS of $759 per ounce, in line with the prior year quarter
  • Gold all-in sustaining costs (AISC)5: Reported AISC of $1,016 per ounce, in line with the prior year quarter
  • Attributable gold production: Produced 1.59 million ounces of gold, an increase of 37 percent over the prior year quarter
  • Portfolio improvements: Announced strategic investments in GT Gold, Prodigy Gold and Irving Resources to fund exploration and development activities in Canada, Australia, and Japan, respectively; divested Buffalo Valley and Trenton Canyon properties in Nevada; closed transaction establishing the Nevada Gold Mines joint venture, creating the largest global gold producing complex
  • Financial strength: Ended the quarter with $1.8 billion cash on hand and net debt of $4.9 billion, supporting an investment-grade credit profile; paid a one-time special dividend of $0.88 per share; declared a second quarter dividend of $0.14 per share
  • Outlook: 2019 attributable production at 6.5 million ounces, CAS at $735 per ounce and AISC at $975 per ounce

“Newmont Goldcorp delivered $679 million in adjusted EBITDA in the second quarter of 2019 as the Goldcorp integration process is well underway and on track to deliver an additional $365 million in annual cash flow,” said Gary J. Goldberg, Chief Executive Officer. “Our proven strategy is driving improvements across the newly combined portfolio. Closing the Goldcorp acquisition, coupled with the successful close of the Nevada Gold Mines joint venture, has positioned Newmont Goldcorp as the world’s leading gold business for decades to come.”

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1 Non-GAAP measure. See end of this release for reconciliation to Net income (loss) attributable to Newmont stockholders.

2 Non-GAAP measure. See end of this release for reconciliation to Net income (loss) attributable to Newmont stockholders.

3 Non-GAAP measure. See end of this release for reconciliation to Net cash provided by operating activities.

4 Non-GAAP measure. See end of this release for reconciliation to Costs applicable to sales.

5 Non-GAAP measure. See end of this release for reconciliation to Costs applicable to sales.

Second Quarter 2019 Summary Results

Net income from continuing operations attributable to Newmont stockholders for the quarter was $1 million or $0.00 per diluted share, a decrease of $273 million from the prior year quarter primarily due to integration costs associated with the Newmont Goldcorp and Nevada joint venture transactions, costs incurred while Peñasquito and Musselwhite mines were not operational, higher interest expense, and a prior-year gain from the sale of the Company’s royalty portfolio in June 2018, partially offset by higher averaged realized gold prices.

Adjusted net income was $92 million or $0.12 per diluted share, compared to $144 million or $0.26 per diluted share in the prior year quarter. The adjustments to net income of $0.12 related to integration and transaction costs associated with the Newmont Goldcorp transaction and Nevada joint venture, an increase in the fair value of investments, a gain on asset and investment sales, and reclamation and remediation charges related to the Company’s legacy sites.

Revenue rose 36 percent to $2,257 million for the quarter primarily due to higher sales volumes from the Newmont Goldcorp transaction.

Average realized price6 for gold was $1,317, an increase of $25 per ounce over the prior year quarter; average realized price for copper was $2.48, a decrease of $0.51 per pound over the prior year quarter; average realized price for silver and lead were $14.20 per ounce and $0.76 per pound, respectively.

Gold CAS increased 35 percent to $1,245 million for the quarter. Gold CAS per ounce was in line with the prior year quarter at $759 per ounce as higher ounces sold and lower stockpile and leach pad inventory adjustments were offset by lower production at Peñasquito as a result of the blockade, and increased costs at other sites.

Gold AISC increased four percent to $1,016 per ounce for the quarter on higher sustaining capital spend.

Attributable gold production7 rose 37 percent to 1.59 million ounces for the quarter primarily due to new production from the acquired Goldcorp assets and higher grades at Merian and Tanami, slightly offset by lower grades at KCGM and Boddington.

Attributable gold equivalent ounce (GEO) production from other metals rose 68 percent to 111 thousand ounces primarily due to new silver and lead production from Peñasquito, partially offset by lower copper grades at Boddington. CAS from other metals totaled $121 million for the quarter. CAS per GEO increased 66 percent to $1,308 per ounce primarily due to higher unit costs at Peñasquito as a result of the blockade and higher stockpile and concentrate inventory adjustments at Boddington and Phoenix. AISC per GEO increased 74 percent to $1,646 per ounce on increased CAS.

Capital expenditures8 rose by 47 percent to $380 million, primarily due to increased sustaining capital investments from the acquired Goldcorp assets and higher spending for growth projects, including Borden, Quecher Main, Yanacocha Sulfides, Tanami Expansion 2, and the Ahafo Mill Expansion.

Consolidated operating cash flow from continuing operations decreased 25 percent from the prior year quarter to $301 million due to integration costs and costs incurred while the Peñasquito and Musselwhite mines were not producing, partially offset by new sales from the acquired Goldcorp assets. Operating cash flow was also unfavorably impacted by timing of accounts receivable collections at Peñasquito and Boddington. Free Cash Flow also decreased to $(79) million for the quarter, primarily due to higher development capital expenditures and lower operating cash flow.

Balance sheet ended the quarter with $1.8 billion cash on hand after returning dividends of approximately $590 million to shareholders, and a leverage ratio of 1.5x net debt to pro forma adjusted EBITDA9 after repaying $1.25 billion of Goldcorp debt at transaction close.

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6 Non-GAAP measure. See end of this release for reconciliation to Sales.

7Attributable gold production includes 75,000 ounces from the Company’s equity method investment in Pueblo Viejo (40%)

8Capital expenditures refers to Additions to property plant and mine development from the Consolidated Statements of Cash Flows.

9Non-GAAP measure. See end of this release for reconciliation.

Corporate update

Newmont Goldcorp transaction: On January 14, 2019, Newmont Goldcorp Corporation (Newmont) entered into a definitive agreement to acquire all outstanding common shares of Goldcorp Inc. (Goldcorp). On April 18, 2019, Newmont closed its acquisition of Goldcorp following receipt of all regulatory approvals and approval by Newmont’s and Goldcorp’s shareholders of the resolutions at the shareholder meetings on April 11 and April 4, 2019, respectively, for total cash and non-cash consideration of $9,456 million in a primarily stock transaction. As of the closing date, the combined company is known as Newmont Goldcorp Corporation, continuing to be traded on the New York Stock Exchange under the ticker NEM and listed on the Toronto Stock Exchange under the ticker NGT.

Nevada joint venture: On July 1, 2019, Newmont Goldcorp and Barrick Gold Corporation concluded the transaction establishing Nevada Gold Mines LLC (Nevada Gold Mines or the Nevada joint venture). Nevada Gold Mines, owned 38.5 percent by Newmont Goldcorp and owned 61.5 percent and operated by Barrick, will rank as the largest global gold producing complex. The Nevada joint venture will be subject to the oversight and guidance of the Board of Managers, with Newmont Goldcorp retaining two board seats and Barrick three, and the board supported by technical, finance and exploration advisory committees on which both companies have equal representation. Newmont Goldcorp will proportionately consolidate its ownership interest in Nevada Gold Mines and will report the Company’s interest in the joint venture as a separate segment in its consolidated financial statements beginning in the third quarter of 2019.

Projects update

Newmont Goldcorp’s capital-efficient project pipeline supports stable production with improving margins and mine life. Near-term development capital projects are presented below. Funding for Borden, Musselwhite Materials Handling, Quecher Main, and Ahafo Mill Expansion projects has been approved and these projects are in execution. Additional projects represent incremental improvements to production and cost guidance. Internal rates of return (IRR) on these projects are calculated at a $1,200 gold price.

  • Quecher Main (South America) will add oxide production at Yanacocha, leverage existing infrastructure and enable potential future growth at Yanacocha. First production was achieved in late 2018 with commercial production expected in the fourth quarter of 2019. Quecher Main extends the life of the Yanacocha operation to 2027 with average annual gold production of approximately 200,000 ounces per year between 2020 and 2025 (100 percent basis). During the same period, incremental CAS is expected to be between $750 and $850 per ounce and AISC between $900 and $1,000 per ounce. Capital costs for the project are expected to be between $250 and $300 million with expenditure of $95 to $105 million in 2019. The project IRR is expected to be greater than 10 percent.
  • Ahafo Mill Expansion (Africa) is designed to maximize resource value by improving production margins and accelerating stockpile processing. The project also supports profitable development of Ahafo’s highly prospective underground resources. First production is expected in the third quarter 2019, followed by commercial production in the fourth quarter of 2019. The expansion is expected to increase average annual gold production by between 75,000 and 100,000 ounces per year for the first five years beginning in 2020. Capital costs for the project are estimated between $140 and $180 million with expenditure of approximately $35 to $45 million in 2019. The project has an IRR of more than 20 percent.

The Ahafo Mill Expansion, together with the Company’s Subika Underground mine, will improve Ahafo’s production to between 550,000 and 650,000 ounces per year for the first five full years of production (2020 to 2024). During this period Ahafo’s CAS is expected to be between $650 and $750 per ounce and AISC is expected to be between $800 and $900 per ounce. This represents average production improvement of between 200,000 and 300,000 ounces at CAS improvement of between $150 and $250 per ounce and AISC improvement of $250 to $350 per ounce, compared to 2016 actuals.

  • Borden, North America (North America) is a new underground mine expected to extend profitable production at the Porcupine complex. The Company expects to reach commercial production in the fourth quarter of 2019.
  • Musselwhite Materials Handling (North America) improves material movement from Musselwhite’s two main zones below Lake Opapimiskan. An underground shaft will hoist ore from the underground crushers, reducing haulage distances and ventilation costs. The Company expects the project to be fully operational in mid-2020 after development progress was impacted by the conveyor fire at Musselwhite.

Outlook

Newmont Goldcorp’s 2019 outlook reflects a full-year of Newmont operated assets and the Goldcorp assets from April 18, 2019. The Company does not include development projects that have not yet been funded or reached execution stage in the outlook below, which represents upside to guidance. The Nevada outlook assumes a full-year of production and costs for the Company’s owned and operated Nevada assets as of June 30, 2019, prior to the close of the Nevada Gold Mines joint venture on July 1.

Attributable gold production is expected to be 6.5 million ounces in 2019. Production is back-half weighted with the completion of the Ahafo Mill Expansion in Africa, the Borden project in Canada and reaching higher grades at Cerro Negro and Peñasquito.

  • North America production is expected to be 1.1 million ounces in 2019. The outlook includes the impacts from the blockade at Peñasquito, the conveyor fire at Musselwhite and the installation of additional safety controls at Red Lake.
  • South America production is expected to be 1.3 million ounces in 2019 as Cerro Negro reaches higher grades from the Eureka and Marina Norte zones in the second half, and productivity improvements at Merian offset the transition to harder ore.
  • Australia production is expected to be 1.5 million ounces in 2019 with higher grades, throughput and productivity gains at Tanami, offset by lower mining rates at KCGM from geotechnical constraints and the continuation of stripping at Boddington.
  • Africa production is expected to be 1.1 million ounces in 2019 with a full year of production from Subika Underground, higher grades from the Subika open pit and improved mill throughput in the second half of the year with completion of the Ahafo Mill Expansion project.
  • Nevada production is expected to be 1.5 million ounces in 2019. The outlook has been adjusted by approximately 70,000 ounces to reflect the impact of geotechnical constraints and remediation work at Gold Quarry.

Gold cost outlook CAS is expected to be $735 per ounce and AISC is expected to be $975 per ounce in 2019.

  • North America CAS is expected to be $860 per ounce and AISC is expected to be $1,115 per ounce in 2019. The outlook includes the impacts from the blockade at Peñasquito, the conveyor fire at Musselwhite and the installation of additional safety controls at Red Lake.
  • South America CAS is expected to be $630 per ounce and AISC is expected to be $785 per ounce in 2019.
  • Australia CAS is expected to be $775 per ounce in 2019 with increased stripping at Boddington and the drawdown of lower grade stockpiles at KCGM partially offset by higher production and lower power costs at Tanami from switching to natural gas. AISC is expected to be $940 per ounce in 2019.
  • Africa CAS is expected to be $585 per ounce in 2019 with higher grades from Subika Underground and Subika open pit and the Ahafo Mill Expansion coming online. AISC is expected to be $770 per ounce in 2019.
  • Nevada CAS is expected to be $795 per ounce in 2019. AISC is expected to be $990 per ounce and has been adjusted to reflect higher sustaining capital from remediation work at Gold Quarry.

Co-product GEOs – Attributable production is expected to be 870,000 GEOs in 2019, which includes copper production from Phoenix and Boddington, and silver, zinc, and lead production from Peñasquito. CAS is expected to be $710 per GEO and AISC is expected to be $995 per GEO in 2019.

Capital – Total consolidated capital is expected to be $1,560 million for 2019. Development capital of $575 million in 2019 includes investments in the Borden and Musselwhite Materials Handling projects in North America, Quecher Main in South America Ahafo Mill Expansion in Africa, and Tanami Power Project in Australia, and expenditures to advance studies for future projects. Sustaining capital is expected to be $985 million for 2019 and includes the Awonsu layback and investments to cover infrastructure, equipment and ongoing mine development.

Consolidated expense outlook The Company’s 2019 outlook for general & administrative costs is expected to be $325 million, which includes a partial year of synergies from the Goldcorp integration. Interest expense is expected to be $280 million and investment in exploration and advanced projects is expected be $450 million in 2019. Guidance for depreciation and amortization in 2019 is expected to be $2,050 million.

Assumptions and sensitivities – Newmont Goldcorp’s outlook assumes $1,200 per ounce gold price, $16 per ounce silver price, $2.50 per pound copper price, $1.05 per pound zinc price, $0.90 per pound lead price, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate, and $65 per barrel WTI oil price. For the six-month period July 2019 to December 2019, and assuming a 35% portfolio tax rate, a $100 per ounce increase in gold price would deliver an expected $225 million improvement in attributable free cash flow. Similarly, a $0.05 favorable change in the Australian or Canadian dollar would deliver an expected $25 million and $20 million improvement in attributable free cash flow, respectively. A $0.10 per pound change in zinc price would result in a $15 million impact to attributable free cash flow. A $10 per barrel reduction in the price of oil, a $1.00 per ounce increase in silver price, a $0.10 per pound increase in lead price and a $0.25 per pound increase in copper price would each deliver an expected $10 million improvement in attributable free cash flow. These estimates exclude current hedge programs; please refer to Newmont Goldcorp’s Form 10-Q, which was filed with the SEC on April 25, 2019 for further information on hedging positions.

2019 Outlooka

2019 Outlook+/- 5% Consolidated
Production
Attributable
Production
Consolidated
CAS
Consolidated
All-in Sustaining
Costsb
Consolidated
Sustaining
Capital
Expenditures
Consolidated
Development
Capital
Expenditures
(Koz, GEO Koz) (Koz, GEO Koz) ($/oz) ($/oz) ($M) ($M)
North America

1,115

1,115

860

1,115

320

155

South America

1,345

1,295

630

785

120

210

Australia

1,460

1,460

775

940

185

60c

Africa

1,105

1,105

585

770

125

90

Nevada

1,515

1,515

795

990

230

15

Total Goldd

6,600

6,500

735

975

985

575

 

 

 

 

 

 

Total Co-products

870

870

710

995

 

 

2019 Consolidated Expense Outlooke ($M) +/-5%
General & Administrative

325

Interest Expense

280

Depreciation and Amortization

2,050

Advanced Projects & Exploration

450

Adjusted Tax Ratef

34%-39%

a2019 Outlook in the tables shown are considered “forward-looking statements” and are based upon certain assumptions; figures include the impact of the Newmont Goldcorp transaction from April 18, 2019, but do not include the impact of the Nevada Gold Mines joint venture. Nevada outlook assumes a full-year of production and costs for Newmont Goldcorp’s owned and operated Nevada assets as of June 30, 2019, prior to the close of the Nevada Gold Mines joint venture. For example, 2019 Outlook assumes $1,200/oz Au, $16/oz Ag, $2.50/lb Cu, $1.05/lb Zn, $0.90/lb Pb, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate and $65/barrel WTI; AISC and CAS estimates do not include inflation, for the remainder of the year. Production, CAS, AISC and capital estimates exclude projects that have not yet been approved. The potential impact on inventory valuation as a result of lower prices, input costs, and project decisions are not included as part of this Outlook. Such assumptions may prove to be incorrect and actual results may differ from those anticipated, including variation beyond a +/- 5% range. Amounts may not recalculate to totals due to rounding. See cautionary note at the end of this news release.

bAll-in sustaining costs or AISC as used in the Company’s Outlook is a non-GAAP metric; see below for further information and reconciliation to consolidated 2019 CAS outlook.

cIncludes finance lease payments related to the Tanami Power Project paid over a 10 year term beginning in 2019.

dProduction outlook does not include equity production from stakes in TMAC (28.5%) or La Zanja (46.9%) as of June 30, 2019.

eConsolidated expense outlook is adjusted to exclude extraordinary items, such as certain tax valuation allowance adjustments.

fAssuming average prices of $1,300 per ounce for gold, $16 per ounce for silver, $2.75 per pound for copper, $0.90 per pound for lead, and $1.05 per pound for zinc and achievement of current production and sales volumes and cost estimates, we estimate our consolidated adjusted effective tax rate related to continuing operations for 2019 will be between 34-39%. This does not include potential changes to the tax rate due to the formation of the Nevada Gold Mines joint venture.

2019 Site Outlooka

Consolidated
Production
Attributable
Production
Consolidated
CAS
Consolidated
All-in Sustaining
Costsb
Consolidated
Sustaining
Capital
Expenditures
Consolidated
Development
Capital
Expenditures
(Koz, GEO Koz) (Koz, GEO Koz) ($/oz) ($/oz) ($M) ($M)
 
CC&V

345

345

910

1,035

25

 

Éléonore

265

265

790

935

35

40

Red Lake

120

120

1,050

1,340

25

5

Peñasquito

165

165

820

1,095

175

 

Porcupine

225

225

750

910

20

60

Musselwhite

0

0

 

 

25

50

Other North America

 

 

 

 

10

 

 

 

 

 

 

 

Cerro Negro

345

345

615

775

45

25

Yanacochac

480

265

690

855

20

190

Merianc

520

390

585

710

55

 

Pueblo Viejo

 

295

 

 

 

 

Other South America

 

 

 

 

 

 

 

 

 

 

 

 

Boddington

685

685

920

1,045

70

 

Tanami

500

500

510

705

75

60d

Kalgoorliee

275

275

890

1,035

35

 

Other Australia

 

 

 

 

5

 

 

 

 

 

 

 

Ahafo

680

680

590

780

100

70

Akyem

420

420

585

735

25

5

Ahafo North

 

 

 

 

 

15

Other Africa

 

 

 

 

 

 

 

 

 

 

 

 

Nevada

1,515

1,515

795

990

230

15

 

 

 

 

 

 

Corporate/Other

 

 

 

 

5

45

 

 

 

 

 

 

Peñasquito – Co-products (GEO)f

665

665

625

955

 

 

Boddington – Co-product (GEO)

125

125

1,060

1,230

 

 

Phoenix – Co-product (GEO)

80

80

900

1,070

 

 

 

 

 

 

 

 

Peñasquito – Zinc (Mlbs)

245

245

 

 

 

 

Peñasquito – Lead (Mlbs)

180

180

 

 

 

 

Peñasquito – Silver (Moz)

25

25

 

 

 

 

Boddington – Copper (Mlbs)

60

60

 

 

 

 

Phoenix – Copper (Mlbs)

40

40

 

 

 

 

a2019 Outlook in the tables shown are considered “forward-looking statements” and are based upon certain assumptions; figures include the impact of the Newmont Goldcorp transaction from April 18, 2019, but do not include the impact of the Nevada Gold Mines joint venture. Nevada outlook assumes a full-year of production and costs for Newmont Goldcorp’s owned and operated Nevada assets as of June 30, 2019, prior to the close of the Nevada Gold Mines joint venture. For example, 2019 Outlook assumes $1,200/oz Au, $16/oz Ag, $2.50/lb Cu, $1.05/lb Zn, $0.90/lb Pb, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate and $65/barrel WTI; AISC and CAS estimates do not include inflation, for the remainder of the year. Production, CAS, AISC and capital estimates exclude projects that have not yet been approved. The potential impact on inventory valuation as a result of lower prices, input costs, and project decisions are not included as part of this Outlook. Such assumptions may prove to be incorrect and actual results may differ from those anticipated, including variation beyond a +/- 5% range. Amounts may not recalculate to totals due to rounding. See cautionary note on at the end of this news release.

bAll-in sustaining costs or AISC as used in the Company’s Outlook is a non-GAAP metric; see below for further information and reconciliation to consolidated 2019 CAS outlook.

cConsolidated production for Yanacocha and Merian is presented on a total production basis for the mine site; attributable production represents a 51.35% interest for Yanacocha and a 75% interest for Merian.

dIncludes finance lease payments related to the Tanami Power Project paid over a 10 year term beginning in 2019.

Contacts

Investor Contact

Jessica Largent

303.837.5484

jessica.largent@newmont.com

Media Contact

Omar Jabara

303.837.5114

omar.jabara@newmont.com

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