Good morning, and welcome to Newmont's First Quarter 2021 Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Eric Colby, Vice President of Investor Relations.
Please go ahead.
Good morning, and thank you for joining Newmont's Q1 2021 earnings call. Today on the call, we have Tom Palmer, President and Chief Executive Officer Rob Atkinson, Chief Operating Officer and Nancy Beede, Chief Financial Officer. They will be available to answer questions at the end of the call along with other members of the Turning to Slide 2, please take a moment to review the cautionary statement shown here and refer to our SEC filings, which can be found on our website. I'll turn it over to Tom on Slide 3.
Thanks, Eric. Good morning, and thank you all for joining our call. Before we begin, I'd like to take a moment to acknowledge the 12 colleagues that we've lost to the COVID pandemic over this last year. For each step, we have mobilized the fatality investigation team And utilize the same methodology we do for other employee or contractor fatalities. The intent of each investigation was to understand if any of our COVID critical controls required change and ensuring We learn and share our findings globally.
These losses have had a profound impact On the entire Newmont family. And it is with great humility that we are reminded that the safety and well-being of our workforce and host communities must come above all else. Turning to Slide 4 for a summary of our quarterly performance. Our safety and Sustainability framework is at the core of how we manage our business, and I'm proud that Nearmont continues to lead the industry with our ESG practices. In March, we delivered a first for the gold industry with production coming from an autonomous haul fleet.
Our investment in autonomous haul trucks not only improves safety and productivity at Boddington, But also serves as a base case for replication and other operations and projects across the Newmont portfolio. We also entered into a $3,000,000,000 sustainability linked revolving credit facility, are 1 of the first in the mining industry. By aligning our financial strategies and ESG performance, We are holding ourselves accountable and demonstrating Newmont's unwavering commitment to leading ESG practices. During the Q1, our world class portfolio produced 1,500,000 ounces of gold And 317,000 gold equivalent ounces from copper, silver, lead and zinc, in line with our full year outlook Positioning Newmont to deliver a stronger performance as expected in the second half of the year. We generated significant operating cash flow of $841,000,000 and free cash flow of $442,000,000 Of which $438,000,000 is attributable to Newmont.
And in We announced the acquisition of GT Gold, expanding our industry leading project pipeline to include the Tatoga project, are located in the highly sought after Golden Triangle District of British Columbia. We continue to apply a disciplined approach to our capital allocation priorities and deliver on our commitments. Yesterday, we declared a 1st quarter dividend of $0.55 per share, set within our established dividend framework And consistent with our 4th quarter dividend. Our 1st quarter dividend demonstrates our confidence in the strength of our business And continued commitment to predictable, stable and sustainable shareholder returns. We maintained a net debt to EBITDA ratio of 0.2x and completed the redemption of our 2021 senior notes in April, Reducing our debt outstanding by $550,000,000 with available cash.
We also continue to invest in and develop our most profitable near term projects, including Tanami Expansion 2, Ahafo North, the mining method change at Sobeeka Underground and Yanacocha Sulfides. Shifting now to safety and our continued focus on fatality prevention on Slide 5. More than a year ago, Newmont made a symbolic change. Stepping away from our industry's traditional use of a lagging personal injury rate in our bonus programs to measures that are focused on managing the critical controls That must be in place at all times to prevent fatalities. During the Q1, We completed 65,000 conversations by leaders in the field that were focused on these critical controls, will actively identifying and managing potential risks that could lead to a fatality.
This is an increase of nearly 60% since last quarter And demonstrate our commitment to the preventative measures we are implementing at Newmont. As another example, fatigue has been identified as a critical risk and is frequently a factor in our investigations Potentially fatal events. Fatigue has not been a traditional focus in our industry. Typically, it has been managed through administrative controls such as training and checklists, or companies have looked to technology As a syllable bullet to address the issue. At an organizational level, we knew we needed to do more.
We needed to make fundamental changes to our rosters, start times and accommodation to reduce this significant risk Exposure. We have recently completed the construction of new Can facilities as part of our Tanami II expansion. These facilities were designed to provide the opportunity for quality sleep and have greatly reduced commute times for our team members. We have also completed upgrades to CAM facilities at Yanacocha, Penasquito, Cerro Negro and Merian, ensuring that our team members have the appropriate privacy and accommodation to get proper sleep. As a result of these investments in our camp facilities, along with our well-being programs around our global portfolio, We have seen an 80% reduction in fatigue related incidents at Newmont since 2019.
We will continue to make these changes to ensure that our team members can return home safely to their families at the end of their shift at work. Turning now to our portfolio on Slide 6. 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. Importantly, all are located in top tier jurisdictions We define as countries classified in the A and B ratings ranges by each of Moody's, S&P and Fitch.
Underpinning our asset base are the industry's largest gold reserves, including 94,000,000 ounces of gold And 65,000,000 gold equivalent ounces from other metals. Our portfolio is are also enhanced by the gold industry best exploration pipeline of both greenfield and brownfield opportunities, for this integration is that we do not reinvent the wheel and duplicate ever. For example, With the majority of our exploration activities occurring near existing operations, we have familiarity not only with the geology but also the permitting, regulatory and community relationships surrounding each of our operations. We firmly believe that we have the best portfolio to generate sustainable returns from our world class Responsibly managed assets located in the best gold mining jurisdictions. Turning to Slide 7.
Our portfolio will produce steady gold production are more than 6,000,000 ounces per year through at least 2,030, balanced across each of our 4 regions. This profile is then 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 for a look at our project pipeline. Our project pipeline is unmatched in the gold industry and is one of the best in the mining industry.
There is significant value to unlock as we optimize and advance our longer term projects have laid a pathway to steady production and cash flow well into the 2040s. As you can see, in addition to our highly prospective gold projects, we have significant organic exposure The gold copper porphyries, including Norte Ovieto, Nuevo Union and Galore Creek. In fact, If you assume that just one of these 3 megaprojects comes into our production profile at the back end of this decade, Gimont's total production would be around 15% to 20% copper, providing us a natural exposure to a metal of growing importance for reducing carbon emissions and facilitating the ongoing transition to a new energy economy. It's also important to note that this pipeline does not include the various laybacks that will also extend mine life At our current open pit operations, including Achin, CC and V and Porcupine. You will also see that we have added Totoga to our project pipeline, another exciting gold copper asset that I'll cover in more detail On Slide 9.
In March, we announced the acquisition of GT Gold. The consolidation of this asset is a demonstration of Gear Mot's clear focus on our long term strategy To build a portfolio of world class assets located in the world's best mining jurisdictions. Our initial equity investment in GT Gold in 2019 was a stepping stone That enabled us to perform due diligence in the area and gain considerable insight into the potential of the Saddle North deposit And to Tonga Property. We are committed to continue building a constructive and relationship with the Tahltan nation, including the community of Iskut. We understand and acknowledge that Tahltan consent is necessary for advancing the Totooga project, and we will partner with the Tow Town Nation at all levels And with the government of British Columbia to ensure a shared path forward.
The deposit will be developed as an underground mine with a block cave mining method. And in addition, Access from the valley floor that you can see in this picture will also enable us to reach the ore body relatively quickly. A very important feature of this project is that the combination of an underground mine And an ability to leverage the hydropower infrastructure that's in place today will result in a low carbon intensity operation, Supporting our industry leading greenhouse gas reduction targets. The Tatoga project, including the primary Saddle North deposit, has the potential to contribute significant Gold and copper annual production at attractive all in sustaining costs over a long mine life. In addition to the known deposits at Saddle North, there are further exploration opportunities throughout the land package.
The acquisition of Totoga adds to Newmont's existing interest in this area And builds on our 50 percent ownership in the Galore Creek project. The transaction is expected to close in the Q2, and we look forward to providing updates on this highly prospective project in the future. With that, I'll hand it over to Rob to discuss our operational performance on Slide 10. Thanks, Tom. Before I start, I'd like to recognize the very significant efforts that continue to be applied at all of our operations in order to manage COVID and to keep our teams safe and healthy.
It is important to realize that this Pandemic has some way to run and these efforts will need to continue for many months to come. Turning to Slide 11, I'll give an update on Africa's performance. Our assets in Africa delivered another strong performance in the Q1. Achie maintained its momentum from quarter 4, delivering a strong Q1 from higher grade and improvements to the mill. We increased mill efficiency and overall plant performance during the Q1, improving throughput by 3%, Whilst also reducing the energy consumption by 4%.
These improvements are driven by full potential projects And are an example of how we continue to find innovative solutions even at our mature operations. The site is well positioned to deliver solid production throughout the year, expecting to reach its highest production And lowest costs during the Q4. Ahafo delivered higher surface tons mined due to mine sequencing improvements That resulted in an extra bench being mined at Awansu, helping to offset lower grade during the Q1. We continue to progress the development of our new mining method at Sabita, sublevel shrinkage, which will increase tonnage, improved productivities and reduced mining costs. The team has commenced stoping ahead of schedule, And we completed our first two ore blasts this month, a major milestone for the project.
As the sublevel shrinkage project In addition, we expect to reach higher ore grades from the open pit operations in the second half of Positioning AFFO to deliver a very strong finish 2021. Finally, at Hapo North, we continue to advance the permitting process with the Ghanaian EPA. I'm pleased to announce that we have completed the environmental impact study and paid the invoice for the main permit this month, putting us on track for a full funds decision in July of this year after the receipt of All other aspects of this project are proceeding well. Turning to South America on Slide 12. South America has been the region most impacted by the virus, and we continue to see the most significant impacts in Argentina and Peru.
Will remain focused on the safety protocols to protect the health and well-being of our workforce and communities as we continue to mitigate the impacts of travel restrictions caused by the virus. We do expect impacts due to COVID to continue for some time until vaccinations are available And being administered in large quantities. Berrien was the best performing asset in South America. Despite heavy rainfall during the Q1, which impacted productivity in the mine, the team continued to utilize an ore blending strategy to optimize mill performance, resulting in increased tons processed, whilst maintaining stable base. As the year progresses, Marine will transition from softer saprolite to harder ore, which will result in higher production through improved grades, But will be partially offset by lower mill throughput.
At Cerro Negro, we have continued to work closely with government and other key stakeholders as we manage our operations through the evolving pandemic. As we reviewed the number of COVID cases in the country and the increase in case numbers at our own site remain the decision to temporarily suspend operations for 5 days in January And 7 days in March to reduce the spread of the virus. While these decisions impact first quarter production, The health and safety of our workforce remains our first priority. And despite stoppages during the quarter, we've been able to resume developments at San focus on safely ramping up site activities, increasing camp capacity and appointing a new dedicated team optimize the important and complex shift changes. Ganacochak has also experienced significant challenges due to COVID.
And due to the pandemic, productivity will likely be impacted throughout the year. Despite the challenges from the virus, Yanacocha delivered higher grade material mined from the Catcher Main and Karateugo pits. These tons were placed on the leach plants during quarter 1, which position to leach only operations is planned ahead of the development of Yanacocha Sulfides, which will extend Yanacocha's operations well beyond 2,040. We continue to advance the sulfides project and are currently working through our internal peer review process in preparation for full funds approval later in the second half of twenty twenty one. Yanacocha is a world class asset in Newmont's portfolio With significant further prospectivity, and we look forward to bringing you this next chapter in Yanacocha's long history of profitable production.
Turning to North America, Slide 13. Beresquito delivered another strong performance and achieved record Co product sales of nearly 300,000 gold equivalent ounces in the Q1 due to higher grades and recoveries. The site also set a new monthly record for concentrate transport and shipping, loading and selling over 125,000 tons in March. Potential continues to deliver improvements to our mining and mill performance at Penasquito. And as an example, We've increased the average payload for our haul trucks by 17 tons per load.
This translates to an additional 12,000,000 tons moved per year remain a strong performer throughout 2021 and is also currently exploring our extensive land package for future development opportunities. CC and V delivered lower grade and experienced geochemistry challenges during the Q1. And as a result, ore that was planned to be milled was redirected to the leach pads. Green improvements are expected during the second half of the year, are helping to offset the challenges experienced this quarter. At Musselwhite, we continue to closely monitor The impacts from COVID in Ontario and have made the decision to temporarily suspend operations for 5 days in April to reduce the spread of the virus.
Despite the impacts from COVID, which drove changes to the planned mining sequence, grades and over tons mined continued to improve over the prior quarter. We are also continuing our full potential work at Musselwhite with the largest focus on increasing development rates and are driving productivity as the year progresses. At Porcupine, ongoing ground controlled rehabilitation in The Hoyle Pond Underground Mine coupled with mill and equipment maintenance has resulted in more tons mined and processed during the quarter. We have begun the implementation of our full potential program at Orthofine, which will deliver efficiency improvements in the second half of the year. Eleonore continues to make strong improvements to performance and productivity, increasing underground development rates to an average of over 40 meters per day By the end of the Q1, this is an improvement of 25% from 2020.
In addition, the site has employed, shelley removed mucking equipment for the first time, increasing tons mining, efficiencies and the safety of our workforce. Eleonore will continue to be a stable contributor during 2021 as we expect it to deliver Steady production increases from higher tons mined and processed throughout the year. It's also important to note that the site is making good progress in the fight against COVID, and I'm pleased to report that 70% of Elianna's workforce has been are pleased so far. Turning to Australia on Slide 14. Dynamine delivered a consistent performance Despite heavy rainfall, increasing ore tons mined during the quarter.
For the rest of 2021, we will continue to monitor impacts of COVID On the Northern Territory due to the potential closure of state and territory borders, but we expect that production will steadily increase as grade will be streamed throughout the year. In addition, the team continues to advance Tanami Expansion 2, supporting the site's Futures a long life, low cost and very efficient producer. We recently completed construction of the can facilities and the excavation of the are section of the production shaft, putting us on track to deliver significant ounce, cost and efficiency improvements in the first half For 2024. At Bonnington, we delivered a solid quarter, in line with our expectations and full year guidance. Plant maintenance was completed during the Q1, ensuring the plant continues to perform at high levels.
As we head into the second half of the year, As highlighted in our previous guidance, we expect to achieve higher grades, improved throughput and increased ore tons mined due to efficiencies from Autonomous haulage and improved mill processing. As you can see in the picture, we are well on our way to operating the world's first Open pit gold mine with an autonomous truck fleet, and I will provide more details of the project on Slide 15. I'm pleased to announce that the first Boddington AHS haul trucks went live in March of this year, And we have successfully started the first phase of our transition to a fully autonomous haulage fleet, which will improve safety and extend mine life At one of our core assets. Today, we are operating 4 trucks, hauling ore from stockpiles to the crusher have 4 additional trucks completing the final testing. We expect to expand the use of autonomous units in the pit during the second quarter, deploying the entire fleet of 36 trucks by the end of September.
As a reminder, the AHS project was approved in February of 2020, meaning the project was planned, constructed and able to achieve first production In just over a year. Being on track to deliver this project on time and on budget will be a huge accomplishment, Especially during a global pandemic. And I'd like to thank our team at Orrington and our partners at Caterpillar, including their dealership Westrac, for their ongoing dedication and drive during such an unprecedented time. We have received very strong support from Caterpillar throughout the project, and we look forward to working together on future endeavors. In addition to the exceptional delivery of this project, we have already seen strong performance over the last month from these machines and the operating team.
The fleet has been running nonstop since going live in Bin Barge, eliminating stoppages from ship changes, 1st major milestone, moving over 1,000,000 tons in less than 6 weeks. It's also worth noting the significant productivity improvements that we we will achieve with this fleet will also translate to lower fuel costs and consumption, reducing our carbon emissions at Boynton and supporting Newmont's Climate initiatives. But most importantly, the use of these autonomous trucks reduces the exposure that our workforce has potential vehicle interactions, helping us to further reduce fatality risk and to ensure that our team members return home safely at the end of their shift at work. The implementation of the industry's 1st autonomous haulage fleet will be a major milestone for Newmont and the gold industry as a whole. We will look to replicate this technology, training and experience at other sites around the globe, leveraging our team of experts and the lessons have been answered at Orrington.
And we will also look to integrate further autonomous solutions both in future open pit and underground As we plan and develop the assets in our project pipeline, ensuring that these important improvements safety and productivity are applied across the global business. And with that, I'll hand it over to Nancy on Slide 16.
Thanks, Rob. Turning to Slide 17 for the financial highlights. During the Q1, Newmont delivered solid results With $2,900,000,000 in revenue, an increase of nearly $300,000,000 from the prior year quarter, driven by higher metal prices. Adjusted net income of $594,000,000 or $0.74 per diluted share Adjusted EBITDA of nearly $1,500,000,000 an increase of 30% from the prior year quarter and Strong free cash flow of $442,000,000 which includes unfavorable working capital changes of over $325,000,000 in the first quarter, are primarily driven by nearly $400,000,000 of tax payments attributable to 2020. We declared a 1st quarter dividend of $0.55 per share are in the range of $2.20 per share on an annualized basis, demonstrating our continued commitment to sustainable returns and consistent with our 4th quarter dividend.
Our dividend puts Newmont in the top quartile of the S and P large cap dividend payers and provides a yield of are approximately 3.5% on our current share price. Turning to Slide 18 for a review of our adjusted earnings per share in more detail. 1st quarter GAAP net income from continuing operations was $538,000,000 or $0.67 per share. Adjustments included $0.14 related to the unrealized mark to market losses on equity investments measured as of March 31st $0.05 primarily related to our sale of our interest in TMAC, which closed in January of this And $0.03 related to tax adjustments and valuation allowance. Taking these adjustments into account, we reported 1st quarter Adjusted net income of $0.74 per diluted share, an increase of $0.34 over the prior year quarter.
One difference from 2020 that we would like to point out is that adjustments to net income do not include $21,000,000 of incremental COVID costs. Adjusting for these costs would have resulted in $0.02 of additional net income in the Q1, and we expect these costs to continue throughout the year as we protect against the impacts of the pandemic at our operational sites. Turning now to Slide 19. Using our conservative $1200 gold price assumption, Newmont expects to generate $3,500,000,000 of free cash flow over a 5 year period. In addition, for every $100 increase in gold prices above our base assumption, Newmont delivers 400 receive levels of attributable free cash flow, enabling us to maintain flexibility in our balance sheet for debt repayments and opportunistic M and A, in addition to providing industry leading shareholder return.
Turning to Slide 20 for more details about our dividend. Our dividend framework provides shareholders with a stable base annualized dividend of $1 per 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. This range provides Newmont with the flexibility to maintain a have a stable and consistent dividend payout, even when there are fluctuations in gold price. We will continue to review our dividend each quarter with management and are evaluating gold prices and Newmont's projected performance semiannually to give us maximum flexibility in are in determining our dividend within the framework. The 1st quarter dividend declared yesterday was consistent with our 4th quarter dividend, Calibrated at an $1800 gold price assumption and a conservative 40% distribution of incremental free cash flow.
Our dividend framework continues to be our primary vehicle for returning cash to our investors, and Newmont continues to lead the industry in shareholder returns, are delivering $4.50 per share through dividends and share buybacks since 2019. Turning to Slide 21. We continue to drive the business with our clear capital allocation priorities, which include reinvesting in our business are through disciplined investments in exploration and organic growth projects, returning cash to shareholders in maintaining our financial strength and flexibility. During the Q1, we delivered on each of these priorities With our investments in the 1st autonomous haulage fleet in the gold mining industry, improving safety and productivity at Boddington, progressing our profitable reinvestments in the business at the Tanami Expansion and advancing Ahafo North and Yanacocha Sulfides are announcing the acquisition of GT Gold, maintaining our industry leading dividend of $2.20 per share on an annualized basis and announcing a new $1,000,000,000 share buyback program. We chose not to repurchase shares during the Q1 continue to monitor for opportunities, maintaining a net debt to EBITDA ratio of 0.2x and completing the redemption of our 2021 senior notes in And maintaining financial flexibility with the completion of a $3,000,000,000 sustainability linked revolving credit facility, one of the first in our industry And a demonstration of our commitment to leading ESG practices.
Under the new facility, the company will incur pricing adjustments on drawn balances are based on sustainability performance criteria, measured through ratings published by MSCI and S&P Global, aligning our financial strategies and our ESG performance. As we look ahead to the Q2, we are confident in our ability to continue delivering strong results and free cash flow to maintain our disciplined approach to capital allocation. With that, I'll hand it back to Tom on Slide 22.
Thanks, Nancy. And turning to Slide 23. Newmont continues to be the world's leading gold company, And I am confident that our world class portfolio and robust project pipeline have positioned Newmont to deliver on our commitment are creating value and improving lives through sustainable and responsible mining. With that, I'll turn it over to the operator and open the line for questions.
We we will now begin the question and answer session. And the first question will come from Fahad Tariq of Credit Suisse. Please go ahead.
Good morning. Thanks for taking my two questions. First, it sounds like across the portfolio a consistent theme is second half weighted Production, but I'm trying to figure out how much of that is sequencing and grade driven and how much of it is from the South American COVID issues that you mentioned And also the Musselwhite COVID issue that you mentioned. So any color there would be helpful, the grades versus kind of COVID impact in the first half.
Thanks Fahad. Good morning. The needle movers in our portfolio are half by Boltington and Penasquito. Penasquito on gold production is pretty flat Through the 12 months, roughly fifty-fifty first half to second half. What's going to really move the dial in the second It's mine sequencing and grade at both Boynton and a half hub.
So at Boynton, we've been Laying back the 5th layback of the South Pit of Wellington now for 3.5 years in
the second half, we get access to
the high grade gold and copper And the benefit of autonomous haul, which has been fully implemented by the second half. So you'll see that flow through in the second half as we get to that high grade. At the half of a combination of the new underground mining method sublevel shrinkage will bring through more volume and improved grade and then you've got improved grade From the Sobeeka open pit as well. So it's largely mine sequenced at grade Cribbon. And it's those three operations that really will Deliver on the second half performance.
Okay, great. That's clear. And just My second question, there was a media article this morning talking about the GT Gold at Totoga project and the local indigenous groups perhaps Not really being open to the project. Maybe talk about the approach there and more specifics And like historically what levers has, Newmont used to kind of get that buy in? Thanks.
Yes. Thanks, Fahad. So our relationship With the Tahoequen, I guess we started several years ago with our acquisition of 50% of the Galore Creek project In that mine of British Columbia. So we have established relationships that we look to grow and build on With all representatives of the Tahitian Nation. And when you look back at our long history of Social responsibility, it is very much founded on building those relationships, understanding Issues and concerns and how we can work together.
So we fully understand, we fully acknowledge We will need Taotian consent to advance that project and we will be endeavoring to work with them respectfully And engage with the leadership of those various communities to find a shared pathway forward. And that is very much the approach that Newmont takes, whether we're
The next question comes from Tyler Langton of JPMorgan. Please go ahead.
Yes, good morning. Thanks for taking my question. I guess to start With, Peruvian culture, I guess there seems potentially some sort of increasing political risk there. I guess, I mean, you obviously have some time before a full Funds decision, but I guess do those developments kind of give you any pause? And if you also just remind us, do you have any sort of stability agreements when it comes Sort of taxes and royalties or sort of or other rights.
Yes. Thanks, Tom. Good morning. We've been Operating in Peru for 30 years. We've been we basically were in Peru before democracy was in place.
So we've lived and worked through what has been a colorful democracy in Peru's modern This is just another chapter in that journey. So we will monitor the presidential elections carefully And how the Congress and ultimately the new President work together. We have had a very successful 30 years in Peru. When we think about making investments like Yanacocha Sulfides, we think about making investments, which for a project by sulfides It's literally for decades with the quality of the sulfide deposit around the Yanacocha property. So we'll look and understand These events coming up in the next month or 2, that will factor into our process of internal discussions with our Board and our joint venture partners.
And then ultimately, I look forward to being able to make a full plus decision and Progress sulfides and to have that delivering great returns for Newmont shareholders in the community and around carbon market for a long, long time to come.
Okay. That's helpful. And then just switching to Penasquito, I guess, sort of production kind of did quite well in the quarter in both sort of cash costs and all in sustaining costs are sort of decent amount below sort of the annual guide. Can you just kind of remind us your expectations for that mine for the year and kind of what to kind of expect In the following quarters.
Yes, Mark, it's Rob to provide some color on that. It's pretty Steady performance. And we certainly look at it's a polymetallic mine, so we certainly look at developing that mine and managing on the basis of the 4 metals that it's are producing, but it's pretty steady performance through the year. Rob, if you want to provide a bit more color for Tom? Thanks, Tyler.
And I'd really Back up what Tom said is that the best way to describe Penasquito is steady performance that Where we get good gold 1 quarter, we go into other elements another quarter. But the key thing about Penasquito is that the mill is performing well, The mine is performing well. The team is performing well and managing COVID as well as possible in a country which has suffered But it really is going to be a very steady, but a successful year at Kennesquito.
Okay, perfect. Thanks so much.
Thanks, Sal.
Our next question comes from Josh Wolfson of RBC, please go ahead.
Thanks. So for the 2021 outlook, the comment I guess There's the assumption of no major COVID interruptions. The commentary on the call earlier was such that there There's obviously a higher degree of interruptions in South America and then a brief stoppage, I guess, at Musselwhite. How would Sort of those interruptions compared to some of the caveats within guidance.
Thanks, Josh, good morning. I think we've certainly seen a number of impacts at Yanacocha and Cerro Negro. It's a real and Argentina across our portfolio of like countries where we're seeing the gross impact from COVID. We get better and better and better at managing our protocols. I've also mentioned at Cerro Negro, now that a dedicated team Managing ship challenges, which is a very, very complex process in Argentina.
Then how you're doing all your discerning and monitoring and ensuring that you're bringing up Workforce in for their shift that are clear of the virus and quarantine if we do have Okay. So it's really monitoring those two operations. Mexico as a country Still struggling with the virus, but we've got very, very good protocols in place throughout that country. The United States fortunately is starting to really turn the tide. We've seen the recent events in Ontario.
I'm confident that the Canadian Government will address those. Through Australia and Ghana, we're seeing that the pandemic managed very, very well. So I think we're still going to need to be have a chronic unease and be continuing to maintain the discipline around our protocols. As vaccines become available, encouraging our workforce to take the vaccines, supporting the government's where we can roll that out so that we can have An improving trend over time. So I believe we've got the protocols and the discipline in place to be able to manage COVID and my kind of guidance for the course of this year.
Great. Thank you. And then just maybe a Question on some of the trends we're seeing. We've seen commentary at least from maybe not as much the gold sector, but other resource companies about labor tightness Certain regions and then obviously with higher commodity prices globally, is there any commentary you could provide on what trends you're seeing across the portfolio On labor and costs.
Yes. Thanks, Josh. Monitoring that closely, labor costs bank About 50% of our cost base. If that includes contracted services, we include an assumption for labor escalation in our budgets and then We flow that through to our guidance. So we've got some provision for that.
The key indicator, leading indicator I look For in seeing whether we may be seeing some wage pressure is voluntary attrition. It's pretty healthy across our business. In some ways, our response to the pandemic and the fact that we chose and we continue to choose to manage The health and safety of our workforce and local communities, above everything else, has served us well in terms of the support that we have from our workforce. The areas that I've been monitoring more closely on labor, risk of labor escalation to Australia, pretty high in all market, As you see, oil prices hit an all time high. The West Australian government that is locking borders and encouraging the Workforce to come from within that state, which puts pressure on the supply of labor.
We're very fortunate. We've got very robust Workplaces at both Bonnington and Tanami, good leadership, healthy levels of attrition And projects like autonomous spoilage just mitigate that pretty significantly where your track fleet and our labor force for track fleet is one The right sources of the virus are monetary and Caitlin, but the voluntary attrition numbers are leading indicators still pretty healthy across our business.
Great.
Thank you very much.
Thanks, Joe.
The next question comes from Greg Barnes of TD Securities. Please go ahead.
Yes. Thank you. Tom, I guess this is a higher level question, but when I look at your portfolio of mega projects, as you called them earlier on, It's pretty striking how much copper is there. And you said you could see a soft getting to 20% copper exposure over time. Is that a conscious decision Over the longer term to diversify the production base somewhat?
Or is it a function of the projects that are available to you that look attractive to you You are adding to the portfolio like to tell that.
Yes. Thanks, Greg. It's still very much a clear focus On gold as the core of our business. But organically, we are seeing that as you look for the best gold projects, they come with Particularly when you look at our world class definition and look for those long life projects and you look For those projects in the jurisdictions we're prepared to work in, they come with copper. So it's more of an organic benefit from that.
We focus on the right size projects in the right jurisdiction. So The Takeda project has some nice copper with it. The Anacocha has some nice copper with it. And several of those mega projects, particularly Yes, they're getting on a good oil creek, bring with them some nice copper. So it's more of an added benefit.
But as As we say, it's going to come on at a nice time as we will go through their energy transition.
And just on to Togo, when I look at the acquisition price and if I Assuming you used $1200 long term gold, that would have implied a pretty healthy long term copper price. How did you approach The acquisition price for GT.
I've got Eric sitting opposite me here who's Shepherded that one through. So why don't I get Eric just to give you a bit of color on that, Greg? Yes, Greg.
We obviously will look at multiple price Scenarios, so $1200 would have been one of them, our base copper price, at the time, I think was $2.75 Obviously, the copper Pricing, the outlook is quite strong. So we didn't have a single case that we looked at. As you pointed out, there's a fair bit of copper, there's a fair bit of gold. So it's really the interplay of the 2 metals across different scenarios. As we've, I think, highlighted, we Potential for Totova to be a world class asset for us and that means a long life, pretty significant production at good Cost, Tom pointed out on the call, the geometry is pretty attractive to an efficient block cave.
And so all of that was attractive to us when making
position. Okay, great. Thank you.
Thanks, Greg.
The next question comes from Anja Jafus Konik of Scotiabank. Please go ahead.
Good morning, everyone. Congratulations on those trucks at I love the color. Hope to see them one day. Just wanted to have a few questions if I wanted to follow-up on Josh's question on inflation. You talked about the work For some Tom in terms of watching movement there.
Can you talk a little bit about if you're seeing any inflation in your capital or cost from steel and or other materials, please? Thank you.
Thanks, Daniel. Good morning. So materials and energy, if labor makes up 50%, materials and energy is the next 30% to 40%. And again, we leverage our global portfolio entering the long term contracts and strategic relationships with suppliers. So that goes a long way To mitigating the impacts of near term inflation where we've got rise and fall built into those contracts and stability.
So it's a very important part Of the Newmont story and the strength of our portfolio on how we look to run our business. We are seeing some pressure on steel generally around grinding media that we're watching carefully and some pressure on freight, Particularly with as you see the amount of concentrate that we move out of Penasquito. So we're watching those carefully. In terms of capital projects, we've already accounted for a lot of that in terms of the Tanami expansion and the move to Australian Steel, so that's been taken up in previous updates to guidance. As we move into Ahafo North, a lot of the work for the once we get the full funds approval for the next 12 to 18 months is Earthworks.
And then the civil works before you start to bring in your steel. So we're confident that with the estimates that we've got and what we'll bring For full funds, it's going to account for any escalation around steel. And similarly, As we start to button up, the Anacocha sulfide go through our internal peer reviews and I'll bring that forward for full funds. We are including in our estimates The contingencies estimates for where steel may move. So we do anticipate there will Some pressure on steel for our capital projects and making sure we account for those in the budgets we've put for full funds approval.
Okay. And nothing in cyanide at all, you're not seeing any inflation pressures there?
None, I can do.
Okay. Okay, great. Thanks for that. And I guess just a continuation on the themes that I keep asking. Maybe just an update on any changes of royalties, taxation in any jurisdictions that you operate in that you're hearing of, including the U.
S?
No, no. It's all I mean, again, it's a key feature of our strategies where we choose When we choose to have our operations that brings with it a lot of stability around our investment agreements whether in place or royalty regime. So We're not seeing any pressure on that front across our jurisdictions.
Okay. And then just my last question before I hand it over to someone else is, Just wanted to make sure that the guidance that you provided with your Q4 release, which was that production was going to be 47%, 48 expected in the first half and $52,000,000 $53,000,000 in the second half still is intact?
It is. I'd say, I would look more to 47 in the first half and 53 in the second half. And it's going to be dominated by a half O and Bonnington reaching the greater volumes at higher grade. So as you move through the Q3 into the 4th and that second half. So I'm sort of factoring 47%, 53%.
Okay. And if I could squeeze just one more in, just that I was intrigued about the vaccination seventy Presented, Eleonore. Just maybe if you could share any other minds that you have, where you have your vaccination For COVID, it's actually very well. I didn't hear anything about Africa. So just wondered if you could share just a bit more color on that.
Yes. Sure, Tanya. So We're certainly encouraged in the rollout in Ontario and everyone assume you're living that experience right now. So we're doing what we can do to support the rollout for our Musselwhite porta pine operations. Cripple Creek and Victor, Certainly seen the rollout in Colorado.
We've been setting up clinics for our workforce and their families and continue to do that and provide access to vaccines And lots of education and encouragement around the efficacy of these vaccines. Through Peru, Argentina and Mexico Suriname, a much longer road to home. So we must maintain those protocols. Vaccines will come We will support that we work on the expectation that's still many, many months off. Australia to get their act together and get the vaccines rolled out and look forward to that increasing over time.
So that one, we can drop those into state borders That are impacting on mining operations and then open up international borders to allow that country to go up again. And in Ghana, I think that we're starting to see Some rollout of vaccine, some clinics already at our top sites in Ghana. So again, looking to work with the Canadian government for the rollout. It's going to be a long process, Tanya, I think, before the world is fully vaccinated. So I think we're going to be living with 5 gene regimen, so This is a significant milestone for a long time to cover in our operations.
Okay. Thank you so much.
Thank you.
Next question comes from Mike Jalonen with Bank of America. Please go ahead.
Hi, Tom. Clearly, I need to go work at Illinois to get vaccinated here in Canada. But Just following along Greg's question with your 3 big copper gold projects. I've seen a number of Juniors with both big gold copper projects copper gold projects and got markdowns of $1,000,000,000 plus. Just wondering how does Newmont service value in these projects?
I don't know much of Nova Union, North Wild Delta or Gore Creek are Your share price, correct me if I'm wrong. Just wondering what steps you could take. Thanks.
Thanks, Mike, and good morning. We're working on it in the same way that we did an exploration webcast earlier this year and we'll certainly look to do an ESG webcast on the back Our new sustainability report in the coming months. We're working on providing some more details and maybe doing so through Another webcast, we can have a little bit more time and provide some details and cover on those projects as well as some of the other projects that sit in our organic project pipeline, So that we can lift the level of understanding and the appreciation that we have of those projects and how we can sequence them in and why we are so confident About our business over the next several decades. On Sunday, we turned 100. And we've got through our organic project pipeline an ability to see well into our NEXETRIX.
So we're excited about it. And I think there's an opportunity for us To provide the individual community with some more details on that.
Okay. Thanks and happy birthday.
Thanks, Glenn. I'll blow out a candle for you.
The next question comes from Anita Soni of CIBC. See, please go ahead.
Hi, good morning, everyone. So firstly, I want to commend you guys on your initiatives to reduce risk Around the T's. I know that that is actually a real risk. What made me leave engineering about 18 years ago and sadly after I left, Someone died at that to Huiju because you work back to back shifts. So, commend you on that.
But related to that question, could you give us An idea of if there's any kind of cost that we should expect associated with those kinds of initiatives.
Yes. Thanks, Aneta, and good morning. I mean, you aren't seeing it incorporated into our guidance around sustaining capital. And in some instances expansion 2, it's in the development capital, but it's part of those plans To build additional camp facilities. The Anacocha sulfides will have included in the scope.
In fact, there are probably Some early lead time items, additional camp facilities to allow people to have their own room and their own bed. So it's accommodated within our $3,000,000,000 a year of sustaining capital and the $600,000,000 to $800,000,000 on average of development capital. So that's it's not big money in the overall scheme of things. It's about having the intent and the will to do something in this space. In terms of Productivity improvements around start and finish times and ensuring that fatigue breaks, the length of shifts, number of consecutive shifts, the length of time that some can work.
In my experience, you will have that payback in dividends many times over by getting the right level of rest Amongst your workforce so that they are working productively with network. So the things we're doing around roster start times and the like We'll improve our productivity over time, it's my expectation, rather than be a cost of the business.
Second question, a little bit more in the detail. On Cerro Negro, the grades went down a little bit. I'm just wondering How we can expect that to play out over the course of the year? And what was the reason? I mean, are you using stockpiles right now and then you'll return once you can get, I guess the mining rate is up from direct access is my guess.
I just don't know I
don't have the color on that.
Thanks, Sid. I'll get Rob to take that question up with. Hi, Anita. Fairly straightforward. It's because of COVID, because of the absences, the production from our higher grade at Marianas Norte and Eureka were lower and limited because of the lack of development.
So it's purely a sequencing due to lack of employees, but those are the areas that we're most focused on. And the workforce is back working. We're nearly at full rate. So hopefully, in the coming months, we'll see that turnaround. But it was just a timing issue due to lack of employees.
Okay. And then lastly, more of a big question big picture question perhaps for Nancy. Just looking at your dividend payout ratio and that we're just currently sitting slightly below, but you do have a good On gold price, but you do have a good cash balance. Can you give us an idea, if we're thinking about downside risk on gold price, How do you play like sort of play with the cash balance that you have? I noticed that it's prior to these gold prices, it was sort of sitting around $3,000,000,000 as The cash balance you wanted, would you think about sort of reducing that cash balance as needed if gold price dips For the same period.
To maintain that dividend. Yes.
Thanks for the question, Anita. Yes, we said in prior times that at a $1200 gold price, We would like to keep around a $2,500,000,000 to $3,000,000,000 cash balance. We are certainly carrying are more than that today, but I do think that's a testament to a couple of things. One is our ability to be very nimble with the dividend. And there's a we provided a very clear framework and a lot of transparency about the optionality between that 40% 60%.
So there's Some great points about that. And then the other piece is we are still in a time of very much uncertainty around COVID, And we also have a lot of development capital. So I think carrying considerably higher balances than that at today's gold prices is a great strategy for us, but certainly a lot of optionality and flexibility around those balances, which is what we've consistently stated. And flexibility around those balances, which is what we've consistently stated.
And Anita, maybe to build on that. We look With our ball back over
a long period of time at gold prices and the
cash we've actually generated and that factored into our decision to step up And calibrated the $1800 mark and owner returned 40% of that cash. So the stability And sustainability of our dividend is very robust. So we didn't make that decision to go to the $1800 mark likely. And our expectation would be when we look forward to that portfolio and our performance that we can sustain those levels for some time.
And just lastly, I know it does say in your disclosure that it does already include your free cash flow projections include are Gulf Coast and Yanacocha Sulfides and just wanted to confirm that, that any lumpiness in those Spend would also be included within that $1800,000,000 to $60,000,000 in those 2 projects.
Absolutely. All right. Thank you. All right. Thank you.
Discussion there included.
Okay. Thank you very much.
Thanks, Anita. And I think that's the end of the questions that we could I'm conscious we've gone past the top of the hour. So thank you all for your time. Please, a number of you I'll be in Toronto and Ontario at the moment and likely still in lockdown. So please everyone stay safe and well and we look forward to seeing you and speaking to you soon.
Thanks everyone.
The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.