Good morning, and thank you for joining Newmont's 2nd quarter 2021 earnings call. Today, we have Tom Palmer, Rob Atkinson and Nancy Beasley. They will be available to answer questions at the end of the call along with other members of our executive team. Please note our cautionary statement on Slide 2 and refer to our SEC filings, which can be found on our website. I'll now turn it over to Tom on Slide 3.
Thanks, Eric. Good morning and thank you all for joining our call. In May, Newmont celebrated its 1 100th birthday, marking a major milestone in our company's long history of creating value and improving lives through sustainable and responsible mining. And while our organization has certainly evolved, our strategy remains clear. We are focused on delivering value to all of our stakeholders from our world class portfolio of long life, responsibly managed assets located in the best gold mining jurisdictions.
Turning to Slide 4 for a summary of our quarterly performance. During the Q2, Newmont produced 1,450,000 ounces of gold and over 300,000 gold equivalent ounces from copper, Silver, Lead and Zig, as we build momentum for a strong second half of the year. We generated operating cash flow of nearly $1,000,000,000 and free cash flow of $578,000,000 of which 97% is attributable to Newmont. In May, we completed the acquisition of GT Gold, consolidating our position in the highly respected Golden Triangle District of British Columbia. And last week, we announced the approval of our Hathaway North project, expanding our existing footprint in Ghana and adding more than 3,000,000 ounces of gold production over a 13 year mine life.
This project is expected to deliver an internal rate of return of over 30% at current gold prices and offers exciting exploration opportunities throughout the land package. Supported by our leading portfolio of operations and projects, we continue to apply a disciplined approach to our Capital Allocation Priorities. Even after the redemption of our 2021 senior notes in April and the completion of the GT Gold acquisition, we have $7,600,000,000 in total liquidity. We have sustained a net debt to EBITDA ratio of 0.2x, maintaining our financial flexibility whilst we continue to reinvest in our business and return cash to our shareholders. Yesterday, we declared a 2nd quarter dividend of 0.55 maintaining an industry leading dividend yield of over 3.5%.
Set within our established framework, Our 2nd quarter dividend demonstrates our confidence in the strength of both our portfolio and our operating model to generate sustainable long term value. In June, we published 2 important BSG focused reports that touched every part of our business and operations. The first was our 17th annual sustainability report, which continues to provide a transparent and detailed look at our ESG performance, focusing on the issues and metrics that matter most to our stakeholders. The second was our 1st climate strategy report, which focuses on our approach to achieving our science based climate targets and aligns with the reporting guidelines from the Task Force on Climate Related Financial Disclosures. These reports outline the key sustainability strategies that are embedded in our business and our culture at Newmont.
Turning to Slide 5. Newmont is broadly recognized for our robust and disciplined practices when it comes to sustainability reporting, both within our sector and among all corporate reporters. And our long history of taking a leading approach to environmental, social and governance practices has positioned us as the gold sector's recognized sustainability leader. Newmont's strong ESG performance creates long term value for our stakeholders and drives superior business results through delivering safer, more efficient and reliable operations, greater productivity from well managed resources, the ability to operate effectively in a broad range of jurisdictions, a proactive approach to managing risks and emerging issues, and most importantly, a reputation built on trust based relationships and a track record of delivering on our commitments. Earlier this month, we posted a webcast to provide an overview of our ESG journey, what we have done well, where we have learned lessons and our plans to continue improvement.
If you weren't able to join us, I'll invite you to listen to the replay, which is posted on our website. Turning now to Slide 6. Newmont is the world's leading gold producer with an unmatched portfolio of world class long life operations. Among our 12 operating mines and 2 joint ventures, we have 9 world class assets, each of which delivers more than 500,000 gold equivalent ounces per year at all in sustaining costs of less than $900 per ounce and with a mine life exceeding 10 years. And we believe that where we choose to operate matters.
It is important to note that all of our world class assets are located in top tier jurisdictions that we define as countries classified in the A and B ratings ranges by each of Moody's, S and P and Fitch. Newmont has the best portfolio of assets located in the most favorable gold mining jurisdictions that when coupled with the quality of our people and our integrated operating model positions us to generate sustainable returns for decades to come. Turning to Slide 7. Our portfolio will produce steady gold production of more than 6,000,000 ounces per year through until at least 2,030, balanced across each of our 4 regions. This profile is further enhanced by the production of more than 1,000,000 gold equivalent ounces from Silver, Lead and Zinc at Penasquito and Copper at Boddington and Yanacocha.
Combined, We will deliver nearly 8,000,000 gold equivalent ounces per year for the next decade, the most of any company in our industry. Moving to Slide 8. Our project pipeline is unmatched in the gold industry and he's one of the best in the mining industry. There is significant value to unlock as we optimize and advance our longer term projects and laid the pathway to steady production and cash flow well into the 2040s. We continue to advance our midterm projects, including Yanacocha Sulfides, where we are preparing for a full funds approval in December of this year, with a multi decade by life that provides exposure to gold, copper and silver.
The sulfides project generates profitable production and offers additional to extend mine life at this cornerstone asset. We are also executing the 2nd expansion project at Tanami. Through the development of a 1.6 kilometer deep production shaft and supporting infrastructure. This project supports the site's future as a long life and low cost producer, and it also provides a platform for us to further explore a prolific mineral endowment the Panama District. And as mentioned previously, we are pleased to announce that funding for the development of the Haifa North has been approved and this project has now advanced into the execution phase.
Turning to the next slide for some more detail. Earlier this month, our Board of Directors approved full funding for the Ahafo North project, expanding our existing footprint in Ghana and adding more than 3,000,000 ounces of gold production over an initial 13 year mine life. Located approximately 30 kilometers both of our existing Ahafo South operations. The Ahafo North project will include 4 open pit mines and the construction of a standalone mill to produce approximately 300,000 ounces per year at very attractive all in sustaining costs. The project is expected to deliver an internal rate of return of over 30% of current gold prices.
Ahafo North is a significant gold mine by in EMEA. We have conducted extensive regulatory and community engagements, including meetings with traditional leaders and local government agencies and public forums to ensure that we earn and maintain social acceptance throughout the Hahafo North life cycle. We will work to create lasting value for host communities through enhanced local sourcing and hiring. One key aspect of Ahafo North is our workforce planning, which includes a target to achieve gender parity in the workforce when operations begin. We are very excited about progressing Ahafo North and look forward to bringing you updates as we develop this new mine over the next 2 years.
Turning to Slide 10. The global pandemic has and will continue to challenge all of us for some time to come. And our commitment to protect the health and safety of their workforce and host communities remains our top priority. We believe that the COVID-nineteen vaccine is critical in combating the spread of the virus. We are encouraging our workforce to get vaccinated as soon as they become eligible.
And we are working with our local communities and host governments to improve availability and deployment at all of our managed operations. These efforts are supported by our global community support fund, which is seeking to help with vaccine rollouts, vaccine education and awareness campaigns. We are seeing some of the highest vaccination rates in the United States and Canada, largely due to the widespread and early availability in these countries. But until the vaccine is available to everyone around the world, our people and operations will continue to be affected by this virus. And recent outbreaks have shown just how difficult this pandemic continues to be, testing our protocols and the resilience of our people and systems.
The impacts of the pandemic are also driving cost inflation around the globe. We are now expecting cost escalation of around 3% to 5% for materials, energy and labor. And we expect these pressures to continue through until at least the end of next year. We are currently working on our 2022 business plan, ensuring that the high cost of inflation and the application of our wide ranging controls and We remain in line with our guidance ranges. As a reminder, our guidance ranges are plus or minus 5% from the midpoint we published in December 2020.
We are on track to achieve the midpoint to low end for production and the midpoint to high end for costs. Production remains back half weighted for the year, with approximately 53% expected in the second half of the year. As a reminder, our cost guidance assumes a $1200 gold price. At today's gold prices, you can expect an additional $20 to $30 per ounce for production, taxes and royalties. As we look ahead towards the second half of this year, we will remain diligent in supporting the vaccination efforts that are so urgently needed around the world.
And we encourage everyone to get their vaccine as soon as they are eligible, ensuring that we are all doing our part to end this global pandemic. And with that, I'll turn it over to Rob Atkinson for a more detailed look at our global projects and operations. Over to you, Rob. Thanks, Tom. Turning to Slide 12, I'll give an update on our regional performance, starting with Africa.
A team delivered another strong performance during the Q2 as higher ore grades from changes in sequencing largely offset more tonnes mined due to challenges with shovel availability. The site is well positioned to deliver solid production throughout the year, expecting to reach its highest production during the Q4. Ahafoil continues to be a solid contributor, delivering higher grade material from our underground operations to offset unplanned mill maintenance and power outages. At Subika, we continue to progress the development of our new underground mining method, sublevel shrinkage, and we expect to see steady increases in grade and underground ore tons mined in the second half of the year. In addition, we expect to reach higher oil grades from the open pit operations in quarter 3 and 4, positioning Ahafo to deliver a strong finish to 2021.
And after finalizing the permitting process with the Ghanaian EPA, our Board of Directors approved full funding of the Ahafo North project earlier this month. Spending will ramp up in the second half of the year and all critical path equipment orders have been placed in support of initial construction activities to ensure timely execution of the project. The development of this prolific orebody will leverage our proven operating model with the project and resulting mine receiving functional and technical support from our existing world class Ajo South operation as we create the next generation of mining in Ghana. Turning to Slide 13. Panamined delivered solid results in the 2nd quarter as higher ore grades more than offset unplanned mill maintenance and longer haul distances from the bottom of the mine.
In late June, We detected our first positive COVID case at Tanami. Working closely with government representatives and other key stakeholders, We rapidly made the decision to place the site in care and maintenance beginning on June 26 to reduce the spread of the virus and protect the health of our workforce and communities right across Australia. I'd like to thank our team in Australia for their rapid response and Courageous Decisions during such an extraordinary and dynamic set of circumstances. And I'm proud of the resilience and strength of our workforce as we continue to learn from and manage the impacts and consequences of this virus. Although our Q2 was largely unaffected, We are forecasting a 40,000 to 50,000 ounce impact for the remainder of the year as a result of the care and maintenance period.
We began ramping up out of care and maintenance in July 13th, and today, Tanamine is now operating at 90%. And despite the impacts from COVID, we continue to advance Tanamine expansion too. During the Q2, we progressed the hoist structure and our work on the mine shaft, remaining on track to deliver significant ounce, cost and efficiency improvements in the first half of 2024. Audington achieved near record quarterly mill performance, reaching nearly 11,000,000 tonnes processed during the Q2. And we continue to expand the use of the gold industry's 1st autonomous haul fleet.
And today we are operating 20 trucks in the South Pit and we remain on track to deploy the entire fleet of 36 trucks by the end of quarter 3. The efficiencies from autonomous haulage coupled with improved performance from the mill will continue to drive performance at Boddington. The improved mill performance helped to offset lower tonnes mined from ongoing shovel reliability and geotechnical challenges in the South pit, which has the potential to impact our ability to reach as much of the higher grades as we have planned in the second half of the year. Turning to Slide 14. Penasquito delivered another consistent quarter as we continue to execute on our planned full potential enhancements and the most recent improvements in metal recovery rates will continue to support planned delivery into the future.
The work we've done to optimize Penasquito since we acquired the site in 2019 demonstrates our ability to successfully operate and enhance value at large complex open pit mines. The site is well positioned to remain a strong performer throughout 2021 as we continue to realize higher than planned tons mined and improved recoveries from the Pyrex Leach plant. CCV delivered lower tonnes mined due to unplanned fleet maintenance and the site continued to experience geochemistry challenges during the Q2, resulting in lower grades and recovery. Mill performance was offset by higher leach pad recoveries and grade improvements are expected during the second half of the year, helping to partially overcome some of the challenges experienced in the 1st and second quarter. At Porcupine Mill and Ongoing Equipment Maintenance has resulted in lower tons mined and processed during the quarter.
As we look towards the second half of the year, we expect underground development and grades will improve. And last month, our full potential program identified 20 initiatives at Porcupine, which will deliver efficiency improvements in the coming months. As mentioned previously, we continue to closely monitor the impacts from COVID at Musselwhite. In April, we made the decision to temporarily suspend operations for 5 days to reduce spread of the virus, resulting in mill stoppages, reduced underground development and more personnel at site in late April early May. We expect that these challenges will persist in the second half of the year and we are continuing our full potential work at Musselwhite, focused on increasing development rates and driving productivity.
Eleonore delivered another strong quarter as development rates and mill throughput continued to improve over the prior quarter and prior year, off assessing the impact of lower personnel in site due to COVID. In addition, the site continues to increase the use of tele remote mucking equipment, which have helped to increase Tun's mind and drive important improvements to safety and efficiency. LA and R will continue to be a solid contributor during 2021 as we expect to sustain consistent production from stable tons mined and Process throughout the year. Turning to Slide 15. Despite heavy rainfall in the 2nd quarter, Merrion remains a strong performer in the South American region.
The site continues to utilize an ore blending strategy to optimize mill performance. And during the Q2, Marion delivered lower throughput as the site focused on processing harder, higher grade ore. In the second half of the year, Marion will continue to transition from softer saprolite to harder ore, resulting in higher production from improved grades and steady throughput. Cerro Negro continues to improve productivity and performance as the site continues to manage through the evolving pandemic. During the Q2, Cerro Negro delivered higher oil grades and despite reduced personnel from COVID, the site continues to increase ore tons mined and processed each quarter.
Due to the pandemic, Cerro Negro has delivered low development rates over the past year, limiting access to higher grade ore in the late 2021 and into 2022. However, the site is progressing future growth projects such as the development of San Marcos and exploration in the Eastern District. Yanacocha has also experienced significant challenges due to the pandemic, impacting productivity through the year. Yet, despite the challenges from the virus, Yanacocha delivered higher grades and recovery from the leach pad in addition to an increase in grade and more tons mined from the Carichuk open pit. As we look towards the second half of the year, Yanacocha will focus on optimal ore placement on leach plants as the scientists transition to leach only operations ahead of the development of Yanacocha Sulfides.
The Yanacocha Sulfides project has the potential to extend Yanacocha's world class operations well beyond 2,040, adding profitable production from 1 of the largest and most prolific gold districts in South America for decades to come. And despite potential impacts from the elections in Peru and the impacts of COVID, the project is progressing well. The team is focused on critical path activities such as advanced engineering and procurement as we prepare for full funds approval in December of this year. And with that, I'll hand it over to Nancy on Slide 16.
Thanks, Rob. Turning to Slide 17 for the financial highlights. Newmont delivered strong performance in the 2nd quarter with over $3,000,000,000 in revenue, an increase of $700,000,000 from the prior year quarter, driven by higher sales volumes and metal prices. Adjusted net income of $670,000,000 or $0.83 per diluted share. Adjusted EBITDA of nearly $1,600,000,000 an increase of over 60% from the prior year quarter And strong free cash flow of $578,000,000 also an increase of about 50% from Q2 of 2020.
Yesterday, we declared a regular quarterly dividend of $0.55 per share, an increase $0.30 or 120 percent over the prior year quarter. With a yield of over 3.5% at our current share price. Newmont is among the top 10% of the S and P's large cap dividend payers. Turning to Slide 18 for a review of our adjusted earnings per share in more detail. 2nd quarter GAAP net income from continuing operations was 640,000,000 or $0.80 per share.
Adjustments included $0.03 related to the unrealized mark to market gains on equity investments, $0.02 related to reclamation and remediation adjustments at historical mining sites, dollars 0.02 related to tax adjustments and valuation allowance and $0.02 of other charges. Taking these adjustments into account, we reported 2nd quarter adjusted net income of $0.83 per diluted an increase of almost 160% or $0.51 over the prior year quarter. As a reminder, due to our status as a U. S. GAAP filer, our adjustments to net income do not include $19,000,000 of incremental costs incurred this quarter as a result of the COVID pandemic.
Adjusting for these costs would have resulted in approximately $0.02 of additional net income per share in the Q2, and we expect these costs to continue throughout the year as we prioritize the health and safety of our work Forest and local communities. Turning now to Slide 19. Under our conservative $1200 gold price assumption, Newmont expects to generate $3,500,000,000 of attributable free cash flow over a 5 year period. In addition, for every $100 increase in gold prices above our base assumption, Newmont delivers with the ability to generate these levels of distributable free cash flow, allowing us to balance steady reinvestment in the business, Continue to strengthen our balance sheet and also provide superior shareholder returns through our industry leading dividend framework and opportunistic share buybacks. Turning to Slide 20 for more about our dividend.
Our dividend framework provides shareholders with a stable, safe annualized dividend of $1 per share at a $1200 gold price, along with the potential to receive 40% to 60% of the incremental attributable free cash flow generated at gold prices above our plan. We will continue to review our dividend each quarter with management and our Board, evaluating our operational and financial performance and outlook semiannually to give us maximum flexibility in determining our dividend within the framework. The dividend declared yesterday was consistent with our Q1 dividend, calibrated at an $1800 gold price and a 40% distribution of incremental free cash flow. Our 2nd quarter dividend demonstrates our confidence in our future outlook and our ability to maintain capital discipline. Turning to Slide 21.
We continue to drive the business with our clear capital allocation priorities, which include reinvesting in our business through disciplined investments in exploration and organic growth projects maintaining our financial strength and flexibility and returning cash to shareholders. During the Q2, we delivered on each of these priorities by progressing our profitable reinvestment in the business, particularly with the execution of the Tanami expansion, the approval of Ahafo North and the advancement of Yanacocha Sulfides. Investing in exploration with 55 drill rigs working around the globe, completing the GT Gold transaction in May of this year, maintaining our industry leading dividend established within our framework to provide stable and predictable returns, repurchasing 2,400,000 shares, translating to approximately $150,000,000 of our $1,000,000,000 share buyback program and maintaining a strong balance sheet with a net debt to EBITDA ratio of 0.2x, giving us the flexibility to reduce our debt outstanding by $550,000,000 with available cash and still maintain cash balances of $4,600,000,000 at the end of the quarter. We are confident in our ability to continue delivering strong results and free cash flow to maintain our disciplined approach to capital allocation. The progress we made in the first and second quarter enabled Newmont to return over $1,000,000,000 to shareholders in the first half of this year, while we continue to reinvest in our business and support our operations with a strong and flexible balance sheet.
With that, I'll hand it back to Tom on Slide 22.
Thanks, Nancy. And I'll wrap it up on Slide 23. I'm privileged to lead an organization with a proven track record and a long history of value creation. Capitalizing on the strength of our people, assets and integrated operating model. Newmont is well positioned to lead the industry with our commitment to create value and improve lives through sustainable and responsible mining.
As our company moves into its next 100 years, we remain focused on delivering value to all of our stakeholders from our world class portfolio of long life responsibly managed assets located in top tier jurisdictions. With that, I'll turn it over to the operator to open the line for questions.
We will now begin the question and answer session. And our first question comes from Tyler Langton of JPMorgan. Please go ahead.
Yes, thanks and good morning, sort of Tom, Robin, Nancy. Just I guess I had a question on COVID. I mean, I know it's probably Tough to
calculate, but do you have a
sense sort of the impact from COVID restrictions on production in Q2? And then just as you look out To the second half, I mean, Robbie mentioned the impact at Tanami. But are there any other sort of operations just as sort of the delta variant spreads that you're kind of Particularly sort of watching for risk to production.
Thanks, Tyler. I'll pass across to Rob, but we are certainly continuing to manage the virus across just every one of our locations. But Rob, maybe even a bit of color as you slip around the globe. Thanks, Tyler. And if I kind of start off in Australia, that obviously the Tanami that We had that first positive case and you get 2 weeks completely shut down and it takes a little while to ramp up and Tanami is now back up at about 90%.
So it's 2 weeks plus a few days. But the biggest worry we've got in Australia is that each one of the states and territories have got different rules and regulations and they're not necessarily allowing free travel between the states and the quarantining and we've obviously got people that work at the different states. So that's a risk moving forward that we're carefully watching and carefully managing in Australia. But really in terms of the biggest area which we're still worried about is South America is that by far and away that's where we've had the biggest impacts, certainly in Cerro Negro, we've had several key outbreaks and we've had to shut down several times in the second but vaccines are starting to get through there and building up in similar Yanacocha, the vaccines are coming through, but It's the absenteeism, Tyler, which is the biggest unpredictable thing that you can sometimes have shovel operators away, you can have mill operators away and that causes the biggest challenge, but certainly with the vaccines in that part of the world, that's certainly very positive for us. In terms of Canada, I mentioned about Musselwhite that we had that week in April May where we had to go into care and maintenance.
So that that had a significant impact. But again, at each one of the Canadian sites, the level of absenteeism has sometimes been 3 or 4 times higher than what we've typically had and that really impacts the development, etcetera. And the key thing that I want to get across is that sites are actually managing the situation very, very well, but it is the unpredictability of the virus and that's the challenge we've got. But with the vaccines coming on, we're certainly very hopeful that that will reduce. It's a very difficult question to actually put your finger on.
Tyler, if I build upon that, we will continue to make decisions that put the health and safety of our workforce and local communities front and center. In that Panama example, it was midnight on a Friday night that that positive case came through. Within 2 hours, that team had made the decision to put the operation into care and maintenance, have 750 people back in their rooms quarantined and everything safely buttoned up at the mine site and have notified 900 people who had flown home in the previous 48 hours to ensure that they were going into home quarantine and doing the appropriate testing. And we will continue to make those decisions and courageous decisions to ensure health and safety above all else. As we look around how we're managing these impacts with a portfolio of our size with the strength we have of a balanced portfolio around the globe.
We believe that we can continue to accommodate these pandemic impacts within the guidance that we've provided.
All right. That's very helpful. And then just switching to Hafill North, and I know there was Just a slight increase in the CapEx with the full funds decision versus the previous guidance. And I was just trying to get a sense, The current CapEx guide, sort of what level of input cost is that assumed? Is it sort of more recent prices for things like Yes, for materials and energy.
And I guess same question also for the cost or are you assuming More sort of average prices over the past several years, just trying to get a sense sort of the impact that sort of current inflationary trends could We have the CapEx and operating costs there.
Yes. Thanks, Tyler. We certainly and the that slight bumping the capital costs from what we've been guiding previously was looking at current pricing and looking at COVID impacts. And We've already placed orders on a number of critical path items, which is really locking up pricing and schedule. And we're doing some of that for Yanacocha Sulfides as well to ensure that we can manage both schedule and cost.
So there's COVID impacts, but also have already done similar to locking contracts and pricing. So it takes into account on a capital cost of the considerations around current inflation pressures and COVID. And from an operating sense still a couple of years out before that operation comes online, we do that these inflationary pressures to be cyclical and might well be thrown out the other side of that cycle by the time half annuity is up and running and producing.
Great. Makes sense. That's it for me. Thanks so much.
Thanks, Tom.
The next question comes from Fahad Tariq of Credit Suisse. Please go ahead.
Hi, good morning. Just building on the last question about the Maybe just remind us where some of the production offsets are coming in the second half of the year? By that, I mean, which operations are expected to kind of make up for some of the COVID issues predominantly in South America and Australia? Thanks.
Thanks, Fahad, and good morning. It's our needle moving sites really drive our portfolio movements on a half year to half year basis. So Penasquito is pretty flat. It's having very solid year, but it's pretty consistent half on half, quarter on quarter. Boddington, we are and I was down at Boddington about 3 weeks ago, watching autonomous haulage in action and spending some time in the South pit and the SO5 layback, just looking at our work to move down into the high grade ore.
So we are moving into the high grade ore in the latter part of this year. And Rob talked a bit about the importance of managing some of the geotechnical challenges and some of the equipment reliability challenges. So really important We have that discipline and focus to get to that high grade ore. So, Boynton is a key contributor. Tanami has got some high grade in the latter part of the year.
And so very pleased that we're able to navigate through that positive case back up and running very smoothly and we'll enter into some higher grade stopes at Tanami in the latter part of the year. And the other one is Harpo. We've got a stronger second half in Harpo as we get certainly as the underground, Subika Underground sublevel shrinkage comes on, but also as we get into some high grade ore out of the open pit. So flat to Penasquito, stronger second half of Bonny Cannamay and a half out and near the operations that moved the needle.
Okay. That's really clear. Thanks. And my only other question, just on the Anacocha sulfides as you work towards the full funds decision. If there was a a situation where your joint venture partner was unable to contribute as much to the funding because of balance sheet issues, etcetera.
Would there be appetite for Neamont to maybe consider buying out larger stake of the project? Thanks.
We're very excited about Yanacocha Sulfides. We're very excited about the long life potential of sulfides. So Topline's project is built off and the economics are built off the first wave, what we call the first wave, which is another layback of the Anacocha 3rd day pit in Chukicocha Underground. But there's a second wave and a third wave and a 4th wave of sulfides ore that come after you've installed that processing infrastructure. It's a story that will play out like Carlin did for Newmont from the early to mid-90s and over the last 25, 30 years.
So we're very excited about the potential of Yanacocha. We see Yanacocha as a cornerstone asset in a key district that we want to be in for a very long time and it's gold and copper, which we're very excited about. So it's the opportunity when we think about M and A activity, We look at where we can consolidate in districts like we did with GT Gold in the Golden Triangle over the earlier part of this year. And certainly if we could consolidate our position at an operating asset in a prolific district in our Yanacocha, if that opportunity presented and we could pick up more of that asset for fair value, we would be interested.
That's very clear. Thank you.
Thanks, Bahad.
The next question comes from Josh Wolfson of RBC. Please go ahead.
Operator, it looks like we might have a connection issue with George.
Yes. We will move on to Greg Barnes of TD Securities. Please go ahead.
Yes, thank you. Tom, I'm just trying
to understand the Boddington commentary because it seems to imply that You won't get to get as much high grade in the second half of the year as perhaps expected, but you still expect production to be up stronger in the second half of the year. But trying to reconcile us to comments.
Thanks, Greg. So we're moving down into the higher grades in the South Pit. So as you move into those higher grades, you progressively start to build into higher grades that are coming out of the South Pitman and obviously feeding into the mill. So you are going to see we will see a trend of high production in the second half as you do that. It's really going to be that mine sequence of how much of that high grade you get by December 31 and how much tips over into January as we move through.
So It's going to be a stronger second half because we're entering the high grade area. It's about how many weeks in the 6 months we get at that high grade material and how much is coming off a medium grade stockpile into a mill that is absolutely humming. So it will progressively increase, and it's just how much that high grade we can creep into 2021 versus tipping into 2022. And that's what we're very focused on in terms of making sure we step down those benches, manage the bench hygiene to ensure that we're looking after geotechnical issues. And then we've had some reliability issues with a very large hydraulic shuttle, both engine issues and very large hydraulic oil pump issues that you wouldn't typically see in these machines.
So working with the working very closely with the supplier of that machine to ensure we get that reliability and maximize the amount of high grade oil we get into second half.
Okay. So there's going to be a little less production from Boddington in the second half of the year perhaps that you were previously Expecting as well. I think I'm hearing.
Potentially, there's a risk that some pits into the early part of 'twenty one, but We're still with 6 months in front of us, Greg, so we're still very much focused on vinyl. I'm making sure we manage that bench turnover very, very carefully. I said I was down there for a period of time about 3 weeks ago spending spent a fair bit of time climbing over that shovel and in that pit with the mining team just understanding how they're working their way through that.
Okay. And Tom, your comments about inflationary pressures in the second half of the year into 2022. I think that's a bit of a change from perhaps what you're saying at the beginning of the year, I don't think you're seeing much impact from those cost pressures, but now it does appear to be coming through. Where is it coming through from?
Thanks, Greg. It is as we sit as we've been sitting down, we're right in the middle of our business planning process now. So as we as our global supply chain team then starts to look at some of Those trends we are seeing across I mean, 50% of our CAS is labor. And we are seeing both in Canada and Australia quite hot labor markets for mining. And So we are seeing that has been an uptick certainly in both those countries over the course of this year, and we expect to see that flow through at least all of next year.
And then materials and energy make up the next 40% to 45%. So across labor materials and energy, you've got our cost base. And we are seeing in terms of steel and fuel and oils as we pull together Our plans work with those various suppliers for that uptick. And bundle it all together, aggregated all together, we're seeing the order of about that 5%. We're seeing it not structural, we are seeing it as cyclical, so that we are seeing that buying through and considering that, that will play out for at least all of 2022 and starting to factor that into our planning process.
We've got our continuous improvement program full potential, which is very mature, but we are leaning in too hard to look for where we can offset some of those headwinds, but we certainly are seeing that inflation trend. And of course, it does set us up nicely for some pretty positive gold profit outlook as we're seeing that. But it's as we're pulling together the detailed analysis for our business plan that we are seeing those trends flow through.
Okay. So likely upward pressure on 2022 cost guidance.
That's right, Greg. And as we sit here midstream in our planning process, looking at about that around about that 5% aggregated number.
Okay, great. Thanks, Tom.
Thanks, Mig.
The next question comes from Jackie Przybylowski of BMO Capital Markets. Please go ahead.
Hi, thanks very much. I guess I'll just sort of follow on Greg's question on Inflation, so you're kind of warning that you're expecting to see inflation on the operating cost side and it sounds like maybe on the capital cost side too with things like steel. But your guidance is more or less unchanged, I guess. It looks like there's a few areas at least in 2021 on both development and In CapEx guidance, where we've actually seen it go down by a little bit and it looks like also maybe in 2023 with development CapEx. So how should we be thinking about Guidance.
Is this something that I mean, did you have sort of a wiggle room built into it that the inflation is just sort of filling in? Or Is there any risk that we might see either your CapEx or your OpEx guidance go up by subsequent quarters by year end? Thanks.
Thanks, Jackie. So for 2021, we're certainly seeing on the cost side, somewhere between midpoint and the high end. So that high end is plus 5%. So we're going to track somewhere within there. So we as we sit here today and looking at some of those inflationary pressures so that we can and will accommodate our costs this year within that.
Certainly, as we look to 2022 and and update our long term guidance in December, we're certainly seeing that cost pressure I was just talking with Greg about. And on the development capital side, we have built into at Tanami and we've built into the Ahafo North, our understanding of where cost is and that's accommodated within the outlook we've given for both those projects. We are continuing to de risk Yanacocha sulfides where we're on a critical path. We are getting ensuring we get factory slots and prices for some different critical path items, for instance, oxygen plants and the like. That we're making sure we're managing that process ahead of a full funds decision, so that when we come out with a hopefully a full funds decision in December what we guide to is accommodating some of those capital cost inflationary pressures.
And then on the development capital side as we guide, I'd say less the inflationary pressures, more the sequence of those projects as you've got a different COVID impact. So how is the spend profile looking for a half a North and a Anacostia Sulfide than a Tanami is more going to be the influence of our development capital number in versus 'twenty three and versus 'twenty four.
All right. That makes a lot of sense. Thank you for clarifying that. Maybe I'll just follow-up The point on the Anacocha sulfides. And Tom, I know you've been asked this a 100 times probably already, but with the changes Peru with the recent election and it looks like there's a formal signing it of Castillo.
Is there anything that would that you Could see between now December that would make you pause on sanctioning Anacocha sulfides are independent of the Project itself, I'm talking more about the political or regulatory environment. Is there anything that would worry you? Or are you fairly confident that you'd be able to manage that in whatever environment you're in?
Yes. Thanks, Jackie. It's Certainly, I think a very important step is the declaration of President Castillo. Next step for us will be to see how he assembles his cabinet. And then we know who we can engage with and understand that we're about to embark upon a couple of $1,000,000,000 investment in their country.
I think it's clear that they acknowledge the importance of mining to Peru's economy and a country that's probably the worst hit from the pandemic around the world. And so the opportunity to to have an investment into the mining industry that's going to help the Peruvian economy. I'm optimistic that That discussion will be well received as we can start engaging with the new cabinet. We've been in Peru for 30 years. Yanacocha Sulfides positioned us to be in Peru for at least another 30 or 40 years.
So we are taking a very long term view on this decision. But pleased to see that we've got a decision in the election, which will allow us then to start engaging over the next 6 months with some of those key leaders in government.
Thank you very much. That's all my questions. Thanks, Tom.
Thanks, Jackie.
The next Question comes from Tanya Jakusconek of Scotiabank. Please go ahead.
Great. Good morning, everyone. Just maybe coming to Rob or Tom, I just wanted to Follow back on to this inflation question. Appreciate the 3% to 5% and you mentioned labor in Canada and Australia. I just want to dig deeper if there's any aspects of labor, that you're seeing a much higher inflationary Is it underground miners?
I'm just trying to understand if there's pockets of that that's occurring that you're seeing?
Yes. Good morning, Tanya. Thank you for the question. We are certainly seeing in Canada high demand for key technical south number of projects around the country and then so you're starting to see that mobility of folks moving on to different opportunities. And we're seeing that impact in terms of operators and maintainers for the mines.
Again, in particular, we have got the flying flight operations that ease being able to switch from one plane to another. So we are seeing those pressures in a heating up market in Canada and very similar in Western Australia, where you've got a very significant boom happening on the back of record iron ore prices, so very high demand, both in the construction of the expansions to who will lift the extension of those iron mines to maintain throughput, high demand for operators, maintainers and technical people, so professionals, in an environment that Rob was talking about earlier where the state governments, the provincial governments in Australia are constantly the opening closing borders. And so there's a real push on to the employing out of the state, so so that you've got that reliability of your staff being within state. And we're likely to have in Australia those interstate pressures for still some time to come given their slow take up of the vaccination, which is certainly they're paying the price for now with the delta strain of the virus. One of the things that we are doing, which is going to significantly offset the pressure on operators in particular is the implementation of autonomous haulage at Boddington.
If you think about fleet of 36 trucks across 4 shifts and then the additional numbers of people you have to cover shift breaks and annual leave and those sorts of things. You're talking of the order of 180 people that are no longer needed to drive trucks because they're running autonomously and that takes some pressure out of the system in terms of that labor pressure for operators and maintainers. But it's lots of projects in both those countries and limited Apply on that professionals and operators in Montana. Robert, do you have anything to add? I think the only thing we have to add, Tom, is Tanya, It also applies to contractors where maintenance shuts that there is such demand, competing priorities.
And as Tom said, if you're trying to do a major shift in Western Australia and you're limited to contractors there. Sometimes you can't do all the work you need to and as such you've got to kind of do the Fair Work, etcetera. And similar to what Tom said in Canada, we've also seen exploration contractors to also lift their prices as well. So those are definitely the 2 toughest and Otis markets.
Okay. And then maybe if I can get a bit of clarity on material energy, I understand. But just on material, are you just seeing it in steel? Is it cement? Is it cyanide?
Maybe just a little bit more clarity exactly in the material side.
Yes, it's predominantly steel that we're seeing come through on the material side. And what we'd also tuck in underneath materials when we think about that element of our costs, Tanya, is freight. So as particularly as we've got concentrate, we're moving out of Pinacito and Boltington, they are seeing freight cost increase. So that is the 2 materials areas that we're seeing that pressure.
And then just on 2 other assets But Tom, we didn't touch on or maybe well, Bobington we did a little bit. Can you just remind me of what exactly the geotechnical issue is in the pit?
Rob, do you want to pick that one up as we bring our benches down? Yes. Tanya, it's quite a seasonal issue there as well is that Australia, that part of the world tends to get quite heavy rain and when you've got heavy rain, there's always the risk to the walls where we stand off a little bit further. And that's something which we've who's been managing very, very carefully. So it's things as practical as that.
And just for a piece of information that this month of July has some of the record rainfalls in Australia. So we just have to stand off the walls a little bit further and that causes a slight slowdown in the trucks. And there's making sure you're keeping your catch benches clear as you're stepping down. So if you're starting to see because of some of That weather, I mean, if you remember in the Bollington pit tenure when you were there a few years ago, it's quite a fractious material. So it's making sure you got those places clean, you're keeping your catch benches clean and making sure you got that hygiene as you're stepping down, so you're not creating problems for yourself into the future because you're not looking after your bench budget.
Okay. And then just on the Goldstrike Roaster, I don't know if Rob can share with us the impact of that Roaster portion of the Roaster being down for Q3, what that Would be as an impact to you like you gave us for prytenomide?
Sure. And Rob's in regular Rob Rob and Greg would talk every week or every couple of weeks. So it's the mill feeding the roaster and it's the slippering on the mill that's type of fire and is being replaced and let him not give a bit of color on understanding of the impact from an NGN perspective. Yes, certainly, Tanya. Obviously, it has been a major failure, went down end of May.
We're expecting it to come up sometime in September. What the team at NGM has been able to do is run a different type of feed there, whether it's the high carbon materials to make sure that there's still material that we're going through that particular mill. But in terms of the impact, When we look at the roster and also some of the challenges that are occurring at Turquoise Ridge, we're looking at for Newmont about 40,000 tons in sorry, Tanya.
That's in Q3 for your share.
For the second half for the rest of the year?
For the
rest of the year.
Rest of the year, Okay. And
Rob and I are also heading up to across to ELCO on Sundays for our quarterly Board meeting, so we'll get a chance to have a bit of a look see as well.
And if I could just squeeze one more in just on the status of the illegal miners that are going on in Ghana, maybe what's happening there.
Rob or Steve, well, it's Steve Glotsdell here as well. So Rob or Steve, you want to pick up that one? I'll kick off Steve. And Tanya, one of the key things I'd say is that year to date there's actually been quite a remarkable turnaround there in terms of actually on-site, the presence of the illegal miners on the site, he's been managed particularly well, that the Ghanaian authorities are working closely with us to make sure that We're not only targeting the illegal miners, but also where their gold is getting processed is also getting sold. And the response from the Ghanaian authorities has been 1st class.
At the same time, we've increased our intelligence, our monitoring, our owns etcetera. So in many ways, the way in which we are managing what we can manage on-site he's actually going quite well with a clear partnership with the Ghanaian authorities. There has obviously been some issues off-site and perhaps Steve, if you want to just talk about that.
Sure. So I guess I would just add that, As Rob was saying, we obviously rely on the government authority to provide security as well as having our own security. As you know, We're committed to the voluntary principles on security and human rights. Those trainings are always ongoing. In this particular case, There were several dozen individuals, who clearly were intent on conducting legal mining activities and the government needed to engage in effective action.
We have a robust ASM program. We focus on maximizing local hiring, local procurement and alternative livelihood work. We'll continue to do that, partner as closely as we can with the governments and also the local stakeholders and traditional authorities who after all are the owners of the land. And we believe that the steps He can take and will calm the situation now, but we're watching it very carefully.
Thank
The next question comes from Anita Soni of CIBC World Markets. Please go ahead.
Good morning, everyone. So the question, I guess, is just a little bit more on the input cost Or the inflationary pressures that you're seeing. So as I look at the guidance, you said you would be midpoint to top end of The guidance range on the plus or minus 5%. So prior year to date, you've hit the middle of that range. So is that to say the second half of the year could be on the plus 5% or higher for the second half cost this year.
Yes, one of the things to monitor with our cost guidance is we guided a $1200 gold price. And so when you see our year to date actual costs, they include production taxes and royalties of some $20 to $30 an ounce, because we've been up at around $1800 So it's factoring in that $20 to $30 assuming gold price stays at its current levels will continue to flow through on our actual costs going forward.
Okay. I'm not sure if that made it better or worse, but let me think about that. The second question, I guess, would be around moving to the second half of the year sorry, moving into 2022, thinking about the guidance that you've given on costs. So if I'm going to summarize all the commentary, I think you're basically saying development costs are encapsulated already in the two guides you've given for the 2 projects as they stand for Ahaflo North and Tanami. And then secondly, sustaining costs and operating costs, you're seeing a 3% 5% increase and that includes, I guess all kind of input and labor escalation.
Does it include COVID impacts as well?
Yes. Yes. So we are and we're building our plans now, Anita, but we are incorporating we do expect those COVID protocols and costs to continue into next year. So we are building assumptions around those into our cost as we build our plan and that when I talk that 3% to 5%, that's including any provisions we make for that.
Okay. And then as you mentioned, it's done at $1200 gold. So is there any thoughts to increasing That number for next year, so that when we look at this chart next year, would those royalties be Better captured with a higher gold price.
We're certainly maintaining our discipline internally with our business plan to build at that $1200 assumption to ensure we've got the robustness and that discipline in our culture. And we're debating at the moment how we think about providing our cost guidance for next year, whether we maintain an assumption on a $1200 revenue Gulf Ross or whether we were to attach it to some other numbers. So we're considering that as we pull together our numbers. Nancy, did you want to make your comment?
Yes, Anita, I would also add is we will continue to provide you with sensitivities around all the important drivers. So even at a $1200 gold price, you'll be able to articulate and make good assumptions about different gold prices and output. So For example, the comment that Tom made on the taxes and royalties about prices higher than $1200,000 We will continue To guide clarity around those, so you can get a better picture even at the $1200 level. Okay.
All right. Thank you very much.
Thanks, Vinita.
The next question comes from Mike Parkin of National Bank. Please go ahead.
Hi, guys. Thanks for taking my questions.
In Peru, there certainly seems
to be A fair bit of issue, not specific to Yanacocha, but to just the mining industry in general about Lack of investment and flow of monies earned back into local communities. Can you give us some color in terms of what your stakeholder engagement has been like with your local communities that are impacted by Anacocha and what, If anything you're kind of planning to do differently if you do go ahead with the full funds decision on the sulfide project.
Thanks, Mike. Great question and I'll pass it across to Steve, go to Phil to give you some color in terms of some of the aspects of the work we're doing there.
Thanks, Tom, and thank you, Mike, for the question. I think, as you know, mining is a pillar and a core really a cornerstone for the Peruvian economy and we've been there for well over 3 decades now. And our relationship with Cajamarca Has really improved over the years. Obviously, Biancocho has a huge presence in Calamarca and our community has grown substantially over time. There have been challenges for sure with regard to delivery of value coming from the central government in form of taxes as to where that money gets distributed.
And over time, they've With different administrations, you've seen more or less funds come back into the region. Obviously, we value through Employment, local hiring, local content. And I would say honestly that as hard hit as Peru and Cajamarca have been in this COVID pandemic environment. Our relationship has really strengthened during this period of time. In fact, we just had a vaccination clinic opening up in our offices in Cajamaraca, and I believe it's the only mining company that's been able to do that in Peru to date.
So our intention certainly is and has been to focus on the value provided to our stakeholders in Cajamarco relationship, not only with the many communities around our operation, but also with the regional government continues to strengthen. Our intention would be throughout this process to continue to work with them to find ways, especially as we look at moving forward with sulfides in maximizing that value. Certainly, we want to partner with the central government on determining how to best provide return of those dollars back into the community. And I'd also encourage you to take a look at our sustainability report on the programs that we have more broadly in Cajamarka and the efforts we've made and the economic contribution that's occurred.
All right. Thanks for that. And one other one, just back to mentioning how freight is weighing in on the inflation. Can you are you seeing any major challenges with access to securing container availability? Reading a few reports out there saying that's becoming quite a challenge.
Is that something that's impacting either the movement of concentrate or supplies into sites or whatever color you can kind of provide would be appreciated.
Thanks, Mark. We're not seeing any impact on that perspective around freight.
Okay. That's it for me guys. Thanks very much.
Thanks, Mark.
This concludes our question and answer session. I would like to turn the conference back over to Tom Palmer for closing remarks.
Thank you, operator, and thank you all for joining us today. And please, as this virus continues to Claiopt Stice and Healthy Immacraftia families. Thanks, everyone.