Ladies and gentlemen, thank you for standing by. This is the conference operator. Welcome to the Barrick and Newmont Forge Nevada Joint Venture Agreement conference call. During the presentation, all participants are in listen only mode. Following the presentation, we will conduct a question and answer session. At that time, if you have a question, please press star followed by one on your telephone keypad. At any time during the conference, should you need operator assistance, please press star, then zero. I would now like to turn the conference over to Mark Bristow, President and Chief Executive Officer of Barrick Gold Corporation, who is joined by Gary Goldberg, Chief Executive Officer of Newmont Mining Corporation. Please go ahead.
Thank you very much. Good morning, ladies and gentlemen. As the announcer said, I'm here with Gary in Elko, Nevada, the center of the gold mining world, and we have an exciting and historic story to share with you today. We're pleased to announce that Gary and I have agreed to form a sensible joint venture of our outstanding assets and talent in Nevada and realize the synergies that have eluded both of our companies for decades. We view this as a benefit not only to our collective shareholders, but to our employees, local stakeholders, and Nevada as a whole. This is a Rubicon moment and the best illustration of how some of us in this industry are determined to turn our industry around.
Our joint venture will allow us to tear down the fences and operate our assets as one mining complex, making the best use of our combined infrastructure and running the most profitable and sustainable long-term gold mining business in Nevada. It also puts us in a position to invest more capital in our collective mines and projects, complete more focused exploration with an unconstrained district-wide approach, and ultimately ensure that the full potential of Nevada's unequaled mineral endowment can be realized for all stakeholders. I will now turn the microphone to my new partner, Gary Goldberg from Newmont.
Thank you, Mark. Newmont has been operating in Nevada since 1965 and Barrick since 1986. During that time, our teams have been good neighbors, helped each other out during emergencies, and more recently, worked together to make our joint venture at Turquoise Ridge a success. Today, after more than 2 decades of looking at opportunities for further cooperation, we've reached an historic agreement to harness the power of both companies' assets here in Nevada to create an even more efficient business in one of the richest gold districts in the world. This agreement also paves the way for both Newmont and Barrick to unlock more value than either of us could create alone. Our experience at the Turquoise Ridge joint venture has been an excellent demonstration of how our employees can work together to capture synergies and create long-term value.
Our board recognizes this value creation opportunity and voted unanimously to approve the joint venture implementation agreement. This joint venture is a win for Newmont, a win for Barrick, and equally important, a win for Nevada. We will create the world's largest gold mining complex and the third largest gold company here, with world-class ore bodies and processing facilities in one of the most favorable mining jurisdictions. We also bring more than 80 years of combined operating experience in Nevada, which I'm confident will serve us well in maximizing value for all of our stakeholders, from employees and shareholders to governments and communities. Newmont and Barrick have always operated with the highest commitment to safety, as well as the highest standards for responsible and meaningful engagement with the people who work at and live near our operations. This will continue to be a major focus of our joint venture company.
I'll now turn the microphone back over to Mark.
Thank you, Gary. As you all have noticed, I'm really working on the pronunciation of Nevada. I've been having lessons for the last couple of days. I'll now move on to speak to the slide deck that's on both Newmont and Barrick's websites. I do apologize that you're going to have to log on to our websites if you want to follow the slide deck. The reason for that is we're sitting in Elko, and it was impossible to arrange a webcast as we normally do out in the countryside. Let me describe the transaction details. Barrick will contribute to the joint venture, Goldstrike, Cortez, Turquoise Ridge, Goldrush, and associated processing facilities and infrastructure.
Newmont has agreed to contribute Carlin, Twin Creeks, Phoenix, Long Canyon, and associated processing facilities and infrastructure as well. Development assets such as Fourmile, which is Barrick's, Mike and Fiberline, which are Newmont's, are excluded for the time being, but may be included at a later date, subject to meeting economic hurdles. Ownership percentages will be 61.5% Barrick and 38.5% Newmont, which are based on analyst consensus values. The board of directors will also be split along ownership lines. Barrick will be the operator of the joint venture and will be advised by a technical committee and an exploration committee with equal representation of what Gary referred to, and I have no doubt he's right, experienced Newmont and Barrick personnel. We have signed a binding implementation agreement to form a joint venture on the terms proposed and expect we can close formally in the next few months.
The map in the presentation highlights the tremendous opportunity of our Nevada joint venture, as Newmont and Barrick have perhaps the most complementary asset base in our industry, from which significant synergies and benefits can be realized. On the following two slides, we highlight the industry-leading statistics the joint venture will have. It will have 3 Tier 1 assets in the form of Goldstrike-Carlin combination, Cortez Complex, and the Turquoise Ridge-Twin Creeks combination, with Goldrush, another potential Tier 1 asset on the way. These assets produced approximately 4 million ounces in 2018, at a pro forma all-in sustaining cost of $775 per ounce. The joint venture will have a 48 million ounce high-grade reserve and resources of an additional 28 million ounces to start with outstanding exploration potential that I have no doubt we will continue to unlock.
As a complex, our joint venture will be the largest single gold mining operation in the world. By the way, it will be the third largest gold company after Newmont and Barrick. Newmont and Barrick shareholders will share in approximately $5 billion in real synergies, which will be immediately accretive to both of our per share net asset values. All this without the issuance of a single common share. In addition to the benefits to our collective shareholders, we believe that the joint venture will ensure more than 20 years of profitable and responsible production in Nevada, leading to a longer-term benefit for all of our stakeholders and Nevada as a whole.
In particular, this joint venture will allow us to view our Nevada assets as one ore body, provide greater ability for capital investment, and ensure that the enormous geological potential of the state is realized for all of our stakeholders. Ladies and gentlemen, I thank you for your attention. Gary and I would now be very happy to take on any questions you might have.
Thank you very much. We will now begin the question- and- answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question comes from Carey MacRury of Canaccord Genuity. Please go ahead.
Hi, good morning. Congratulations on the JV.
Thank you.
Maybe a question first for Newmont. I think the previous work you had done, you had estimated the synergies as being less than what Barrick had proposed. Are you more comfortable now with having sat down with Barrick in terms of what the ultimate synergies can be?
No, Carey, the numbers that we put out here a week or so ago were tied back to discussions that were held back in 2014. Since that time, you've seen the numbers that Barrick's put out, the $4.7 billion. Whether it's 4.7 bilion or something above or below that, it's something that we both believe are achievable by working together through this joint venture.
Carey, I can comment on that. I think what we try to do in that number is We've modeled it. We included the cost of transacting a joint venture of this type. As Gary says, there's other details than just chatting yesterday, some of the opportunities, just as far as mining schedules, immediate access to some of the ore bodies. I guess when we get the two geology groups together and start looking at the opportunity, for instance, between Turquoise Ridge and Twin Creeks, there's been a longstanding debate on property swaps, and now that's really something we can just lock up in this agreement. There are many other examples I know too between some of the boundaries and ore bodies between Goldstrike and Carlin. I believe there's some easy wins to really redefine targets and let them be properly evaluated.
I've got no doubt that in the fullness of time, this is a very significant opportunity. At the end of the day, it's up to us to deliver on this as we're the operators in the joint venture, we're very comfortable that we'll be able to do that. I'm sure that Newmont will be looking over our shoulder and making sure that we do.
Maybe secondly, just on slide three, you show some of the ore flows changing, Cortez shipping to Carlin. When the deal closes in the middle of the year, how quickly do you expect that to change, and what are some of the quicker things you can do on that front? Obviously, Goldrush is still out in the future a bit.
We will start working together to look at synergies that don't compromise any final approval to close out on the formal joint venture. Again, a lot of these are things that we should have done in the past, it makes good sense to start debating them and planning to realize them, just as Randgold and Barrick worked together even before we finalized or closed out on the transaction. We will do that, again, there's many opportunities immediately. For instance, the ability, one of the things that I believe will be attractive to all stakeholders is as we plan the trucking back to either Carlin, which was our preference from our Cortez operations, to be able to shift some of the transport onto private roads and take them off the national highways as an immediate benefit.
those arrows that you see in the presentation are simple first-step synergies that I think we would want to do now that we've put our heads together anyway.
Maybe just one last one. I know, Barrick, you've looked at adding capacity in Nevada. With the new combined footprint, is that still a requirement down the road, or you think you can exist with the current footprint here in terms of processing capacity?
No, I don't think I know that both Gary's team and the new team coming into Newmont and our team, which is a new team, effectively have brought a fresh look at these opportunities. What this does is it really puts the best infrastructure in Nevada at the disposal of a single entity. The big barrier to entry in Nevada is once you get to the bottom of the pits, the oxide sort of transition zone, you move into refractory and double refractory ore, and it needs access to significant processing infrastructure, which at a significant cost, and also requiring a long permitting time. I think there's, again, knock-on opportunities for us as a joint venture to look at accessing and exploiting other opportunities that are not currently included in our agreement but are within the area of interest.
Okay. That's it for me. Thanks, guys.
The next question comes from Josh Wolfson of Desjardins . Please go ahead.
Thank you. First, on the actual creation of the structure, I'm assuming the assets will be put into a different holding. Is that going to be a taxable event for either company?
No, we're working through the details of that, Josh, in terms of how that actually gets affected. They're forming a limited liability company out of Delaware that the assets will be held in, and that's some of the details that we'll be going through here. That's what we're working to maneuver through as we bring it to a close.
Okay. Similarly for, I guess, go forward tax analysis, what is the sort of reasonable range of taxes that the new joint venture is expected to pay for Nevada, roughly?
Nevada is one of, I think I can speak both for Newmont and Barrick, is a very efficient and attractive tax destination. All I can say, Josh, is that we are driven to get If we deliver on the synergies, which as I pointed out, we believe we will, we'll drop the cut-off grades across the organization, increase the margin, get access to better free cash flow, and also be able to deliver additional taxes to the state and the federal government.
I think it's fair to say we're really focused on the operational efficiencies that will result from the joint venture in the first instance, and tax efficiencies will follow with that.
On the Cripple Creek asset, which I understand is important to the overall complex in Nevada, just to be clear, that one is not included in the joint venture, correct?
That's correct, Josh. That was not an asset that Barrick wanted to include, and what we've agreed is we'd work out basically a processing agreement to be able to process those concentrates because, as you rightly point out, it's the heat content, it's the sulfur, and that helps with the processing at Carlin. That is an important part of the overall process. We'll be working through the details on that in the coming months.
Okay. Last question, I apologize if this makes things awkward, but is there a standstill agreement included as part of the joint venture between the two companies?
Yes, there is.
There is? Okay. Thank you very much.
The next question comes from Michael Sapieco who's with Macquarie. Please go ahead, Michael.
Yeah. Thanks very much. Maybe a couple of quick questions for Mark. First, what really changed your mind on a JV versus a potential merger in terms of the difficulties in managing a JV and all the associated issues that you talked about? Second, how should we be thinking about the $330 million in corporate synergies that were being discussed as part of a larger deal? Is that something you think you can chip away at as part of this, or any color on that would be appreciated. Thanks.
Michael, this was never sort of a sideshow or a second plan B. It was always focused on delivering value for our stakeholders. As we pointed out, this first step, which is the focus in Nevada, has always been the focus over, as we both, Gary and I, pointed out, more than 20 years. It made good sense. I think I've never been a person that goes back. We need to move forward. We've got to this point, I think it's a very productive point. It's a leading sort of event in our industry. Certainly since I've been in the industry, last 30 years, you have never seen something as engaging and inclusive as this transaction and the ability to get it done in the time that we did, our respective teams worked through to deliver.
The synergies you're referring to are a Newmont-Barrick synergy, and that's now off the table. Our focus is on delivering on this joint venture.
Very much so from our end at Newmont is working with the team here at Barrick to make sure that those synergies are delivered, as has been stated, and hopefully beyond that point. We continue to work, and we'll continue with our process with Goldcorp and bring that hopefully to a successful conclusion here, pending approval by shareholders and regulators towards the end of next month. That has the synergy value there. The combination between the two has significant value, really, for all shareholders, as Mark's been pointing out.
Maybe if I can ask a follow-up to both of you. To the extent that you can answer, is there any consideration to the JV in Nevada being a steppingstone to a larger deal?
I'm not prepared to comment on that, Michael.
Fair enough.
I'm with Mark on that at this stage as well.
You guys are never satisfied.
We've got a lot to deliver in both of our camps right now.
Very good. Thank you.
The next question comes from Carey Smith, who's with Haywood Securities. Please go ahead.
Thanks, operator. Mark, is there some sort of area of exclusion that the joint venture would have to respect? You're going to have an exploration team in the joint venture. Would the exploration that they could conduct only be able to be conducted on lands that were currently within the JV, and they wouldn't be able to look outside of that at new assets, say, in other parts of Nevada or in other parts of the Great Basin in Utah, let's say?
We've got an area of interest defined in the joint venture. All I can say is it's a very large area. It's going to keep us very busy, and it's definitely the most prospective part of the Nevada geology. We have, as you know, kept out our growth projects, both of us, and we'll be working on that. I would want to believe that we really build this joint venture, and we are able to do more together across the state. That would be my objective as the responsible person for the joint venture.
Okay. The area of interest would be larger than the state of Nevada, if I read your commentary correctly?
Than the State of Nevada.
Yeah, it's an area that involves a boundary around and includes all the projects that we've defined in the announcement.
It's not larger than the state of Nevada.
Definitely not. No.
Okay. For the assets that are specifically excluded, the development stage assets, the one that Barrick has and the two that Newmont have, how would it work to bring an asset like that into the mix? Would it be the JV actually acquiring the asset from the company that held it? Is that likely how it would be done?
Yes. The guidance is that it would be a right to include it if the projects were proven to be projects that deliver more than a 15% internal real rate of return based on a backward-looking two years average gold price. That doesn't necessarily exclude it if it doesn't meet it, because it would be a decision for the joint venture partners to decide to bring it in.
Okay. The employees that will be working for the JV, will they be actual employees of the JV, or would they be seconded from Barrick and Newmont into that partnership?
We would see, most of the employees in Nevada are employed by the respective mining companies that operate. There will be corporate people skills that are dedicated for Nevada, and we'll work together to make sure that we put the best team together, to be able to lead this business. It's a significant business, as I pointed out, bigger than any of our other respective assets for either company.
The employees that continue would be employees of the joint venture.
Yes, that's correct. We would employ them in the joint venture.
Okay.
It's an LLC structure. It's a legal entity.
Right. I got you. Okay, well, it's a long overdue sensible deal. Congratulations to everybody. Thank you.
Thank you.
The next question comes from Fahad Tariq, who's with Credit Suisse. Please go ahead.
Hi. Congratulations on the joint venture. Just two questions on my end. On the 61.5%, 38.5% split, how was that determined? I know when Newmont had proposed last week, it was based on consensus NAVs or NPVs. Can you give me a little color on that, please?
Sure, Mark. I think what we did, it was based on consensus NAV. Last week, when we proposed the 55/45, that had CC&V in it. CC&V is not in it. When you take that value out and look at consensus median, basically you come down to that 61.5%, 38.5% split.
Okay. Just to follow up on that, once to the both parties do additional diligence, would that split be renegotiated?
It is what it is.
Okay. My third question now is, will the joint venture, do you guys foresee that moving forward regardless of the outcome of the Goldcorp-Newmont merger?
Absolutely.
They're independent. They both travel. As far as Newmont shareholders, they're good potential for both sets of shareholders.
They're mutually exclusive. Yes.
All right. Thank you very much.
The next question comes from John Tumazos of John Tumazos Very Independent Research. Please go ahead, sir.
Thank you very much. Does the 61.5/38.5 split change after Fourmile is defined, or Mike, or Fiberline, or as new deposits come into the reserve and resource base?
John, as Mark explained on the adding an asset in before, there'll be a process that goes through, provided it meets the certain hurdle rates that Mark described in terms of using a gold price and a 15% real rate of return. Then, depending on which partner, you could either take a dilution mechanism or take basically a cash up to maintain the percentage split. That's the simple summary of it.
Thank you.
Thanks, John.
The next question comes from Tanya Jakusconek of Scotiabank. Please go ahead, Tanya.
Yes. Good morning, everybody. Congratulations on getting a joint venture done. Just a couple of questions on my side, maybe just to start with the technical finance and exploration advisory committees. Maybe, Mark or Gary, you can let us know, how will the management teams be appointed? Will they be done by Barrick or both companies jointly?
Tanya, there's only one responsible person, and that's Barrick, to deliver on the plan. The plan will be developed and approved by the board, which will vote its able to vote its economic interest. Although in all the joint ventures I've ever worked with, I've never had to do that. The technical committees are both, and there'll be a number of them, finance, exploration, technical. As we run the committees in Turquoise Ridge, Kibali, we've got lots of experience with AngloGold Ashanti in Africa on two very big joint ventures. They're there to make sure that we challenge the operating teams and the people that are actually running the business. That will be my responsibility to ensure that we deploy the best people we've got from the combination of both the companies.
In regards to the contest, we haven't named the people on these committees yet, but it'll be equal representation from both Newmont and Barrick, three people each on those committees, and it's really taking the best from both of our businesses to get the best results out of this Nevada joint venture. In terms of the board representation, our initial board representation will be myself and Tom Palmer as the two representatives.
Mine is myself, Catherine, and Gregor. Is that right, Catherine? Yeah.
Okay. Then do you expect to realize the full status-
Oh, sorry. Tanya, correction. It's George Bee.
Rock.
Rock.
Rock.
Sorry, it's Rob Krcmarov. Gregor is on the technical exploration committee. It's myself, Catherine, and Rob Krcmarov.
Okay, thank you. Just on the full stated synergies, do you expect to get those, even as a joint venture, Mark? I think you said yes, I just wanted to check.
Yeah. What part of the synergies don't you understand, Tanya?
Oh, no, I understand. It is just, you had mentioned before that you wouldn't be able to capture all of them as a joint venture.
No. I said we wouldn't be able to capture them all if we didn't have one person responsible to deliver on it. Otherwise, we end up with keeping two sets of corporate structures, trying to work and protect our bases. Just go back to the old story. We've agreed this is a single business unit, put together under a legal entity with a responsible operator accountable to the stakeholders, effectively.
It is something that we've got. As Mark described his experiences, we've had similar experiences, both within Newmont and with the senior teams in Newmont that have worked very successfully in having the one party, but then working together is a very good way to get the best value for everyone.
Mm-hmm. Then maybe, Gary, just on the exploration side, on anything that's found on the joint venture land, I know your initial proposal had been to have that person's land get an NSR, was your original proposal. What have you done in terms of the exploration found on this joint venture? How is that gonna be dealt with?
That's exactly where it's landed, Tanya. 1.5% NSR would apply for either one of the parties, depending on what's found beyond the reserve and resource that's already identified.
For the avoidance of doubt, the declared reserves and resources are as they are with the respective companies, and any additional reserves or resources that we add will attract a 1.5% net smelter return.
As they're produced, yeah.
Yep.
Okay. Just my last question, I just wanted to ask on the infrastructure and the processing, and I appreciate you mentioned as you go deeper, you get sulfidic ore. Are all of these synergies also capturing the fact that you may change your bio-sulfide autoclaves back to normal autoclaves?
Yes, I think there's lots of discussions now that we have the opportunity. There's also the opportunity to look, one of the things in Phoenix is to look at how we process the ore, going forward as it gets deeper. Whether there's logic in changing an autoclave to be able to do that sort of process. There are many different options that we will be looking at. The bio-sulfide project as it stands in Goldstrike at the moment, our new sort of focus on that process is still committed to look and see because of being able to deliver the bench scale results. We've definitely got results on a pilot plant scale, and we've been struggling to deliver those results, particularly with the alkaline ore. We're working on it because we've been able to deliver it in a sort of smaller scale. We'll continue with that.
I'm sure, again, when we add new additional expertise, maybe we'll be able to unlock some of those opportunities.
Okay. Well, good luck with the joint venture. It's great to see.
Thanks, Tanya.
Thank you, Tanya.
We have a follow-up question from Carey MacRury who's with Canaccord Genuity. Please go ahead.
Hi. Just one follow-up question, maybe for Gary. In the JV term sheet that you proposed, there were certain activities that were subject to majority approval, and certain activities were subject to unanimous approval. I'm just wondering, in the new structure, is there anything that would still fall under that would require unanimous approval?
Yeah, there are still some that are unanimous, but it's very large sort of things. Large capital, I think it's above $500 million is an example of that. If there were to be asset sales out of the business, as we talked about bringing assets in, those would be the sorts of things that land in there.
Pretty bulk standard stuff.
Yep.
Okay, great. Thank you.
The next question comes from Dan Rollins, who's with RBC Capital Markets. Please go ahead.
Yeah, thanks very much. Congrats to both teams. Hopefully this is the template the industry can use going forward. Just one question with respect to both of the CEOs. Given the amount of synergies that you've discussed and acknowledging potentially capital needs for the new joint venture, is there any plans to direct a portion of the $ in synergies to investors as increased dividends?
Dan, yeah, of course. Let's get there first. That's from Barrick's side. Our focus is, as we've said, if we get this thing together and we deliver on what we believe is possible. We will free up extra cash flow for our respective shareholders. From Barrick's side, that's our focus. Less debt, more dividend.
I like that. Dan, from Newmont's standpoint, you know we've got the $0.56 dividend that we currently have. We've committed to continue with that post the Goldcorp transaction, which puts us in a leading dividend position in the industry, and it's one we'll continue to assess, as Mark says, as we deliver the synergies from both the joint venture here and the acquisition of the Goldcorp assets that look to deliver $4.4 billion in synergy values over time. We'll continue to always assess, making sure we get that right split of cash return to shareholders, investment back in the business, and looking to the future. Thank you.
Thanks. That's great. I think having investors benefit directly from those synergies would be great. Thank you.
This concludes time allocated for questions on today's call. I would now like to turn the conference back over to Mark Bristow for any closing remarks.
ladies and gentlemen, thank you very much. I'm sure that if anybody's got any additional questions, our team's available as normal to pick up on questions, and I'll pass over to Gary. Thank you for making the time. We look forward to working with you going forward.
thanks Mark, and thanks everyone for joining the call. I think it's appropriate that this call is coming from Elko, Nevada today as we forge a new relationship and a great future relationship for all the employees of the Nevada joint venture or for all the stakeholders. Really looking forward to working with the Barrick team as we put this together going forward. Thanks very much.
This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.