Good morning, and welcome to Newmont's Third Quarter 2020 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 Jessica Largent, Vice President of Investor Relations.
Please go ahead.
Thank you, and good morning, everyone. Welcome to Newmont's Q3 2020 earnings conference call. Joining us on the call today are Tom Palmer, President and Chief Executive Officer Rob Atkinson, Chief Operating Officer and Yancey Bizzi, Chief Financial Officer. They will be available to answer questions at the end of the call along with other members of our executive team. Turning to Slide 2.
Please take a moment to review the cautionary statements shown here and refer to our SEC filings, which can be found on our website at newmont.com. And now, I'll turn it over to Tom on Slide 3.
Thanks, Jess, and thank you all for joining us this morning. Before I start, I want to take this opportunity to thank Jeff Largent, who will be leading Newmont at the end of the year after more than 5 years with us, which included 3 years as Head of our Investor Relations Group. For those of you who have not yet had the chance to meet him, I'd also like to introduce Eric Colby, our Vice President of Strategic Communications. Eric was appointed to lead the strategic communications function earlier this year, and it combines both Investor Relations and Communications. Eric received with Newmont since 2007, including 3 years working again in Coacher in Peru.
And since 2013, Eric has led multiple transactions as part of our corporate development team, playing a key role in the divestiture of Baja Bijao, the acquisition of Goldcorp and the formation of the Nevada Gold Mines joint venture. I want to thank Jess for her many contributions to Newmont, the support that she has provided me and my team, and wish her the very best of luck as she embark on her next adventure. Turning back to results. I'm very excited to share with you our record 3rd quarter performance as we continue to deliver on our purpose to create value and improve lives through responsible and sustainable mining. Turning to our quarterly highlights on Slide 4.
Newmont has the industry's most diverse balanced portfolio of world class assets that provide stable production with significant leverage to rising gold prices. We have continued to manage through the COVID pandemic from a position of strength. With a proven leadership team, operating model and highly capable workforce, we are building on our track record of superior value creation. I'm incredibly proud of how our teams across the world have responded to this pandemic and the sacrifices people have made and continue to make to support Newmont and the communities in which we live and work. They have set a standard for leadership in our industry.
All of our clients are now operational, and we delivered record financial results. We produced 1,500,000 ounces of gold and 273,000 gold equivalent ounces from cobalt, silver, lead and zinc, putting us well on track to achieve our full year guidance this year. We generated significant operating cash flow of $1,600,000,000 and free cash flow of $1,300,000,000 the most in any quarter in Newmont's 100 year history. We have continued to safely advance project work at Tanami, Savica Underground and Musselwhite. We also announced the sale of a royalty portfolio to Mavris Settles, which closed yesterday, and exploration joint ventures with Agnica Eagle in Colombia and Kirkland Lake in Canada.
Our solid operating performance further improved our financial strength and flexibility. We ended the quarter with $4,800,000,000 of consolidated cash and reduced our net debt to adjusted EBITDA ratio to 0.4x. And yesterday, we further demonstrated our confidence in the strength of our business and continued commitment to leading shareholder returns with a 60% increase to our quarterly dividend, which is now $0.40 per share or $1.60 per share annualized. This is the 2nd increase to our dividend this year and reflects the strength of Newmont's portfolio to pay a higher dividend while we continue to advance profitable projects and maintain financial strength and flexibility. Newmont will remain disciplined in everything we do, including being prudent in our approach to capital allocation given the uncertainty in the world today.
However, we will have an opportunity to evaluate even further returns to shareholders as we continue to build excess cash. And last, but certainly not least, we are the first and only mining company to achieve gender parity amongst our non executive directors. Setting an example at the very top of our organization that is fundamental for sustained cultural change. Turning to Slide 5 for more detail on our commitment to improving lives. At Newmont, we have a fundamental belief that a commitment to leading environmental, social and governance practices are essential to delivering sustainable long term value for all of our stakeholders.
This starts with our commitment to our people and the work we are doing to sustainably improve health and safety and create a more inclusive culture across our global business. We continue to perform well against our public sustainability targets to source from local supplies, hire within the communities near our operations, respond to community complaints in a timely manner, reduce our water consumption and complete planned reclamation activity. We are on track to meet a 7 year target to reduce our carbon emissions by 16.5% by the end of this year and are also working to develop longer term science based targets for emissions, which we plan to release next month. We are committed to fully implementing the global industry standard from tailwinds management that will help us improve how we manage these type of facilities. We are the 2nd most transparent company in the S and P 500 and placed 12th out of more than 200 companies on the corporate human rights benchmark.
These achievements are the result of relentless hard work from generations of leaders, lessons learned and improvements made that form the very DNA of Newmont. Turning to Slide 6. As a mining industry, we must continue to improve our health and safety performance. At Newmont, we have a relentless focus on ensuring that everyone who works in our business can return safely home for their families. As leaders, it is up to us to create a culture in which fatality risks are clearly understood and sustainably managed at all times.
Through visible self leadership and the systems we put in place to manage risk consistently across our global business, we are working to significantly improve our safety performance. In response to eliminating fatalities and supporting an injury free workplace, Newmont made a symbolic change this year, stepping away from our industry's traditional use of allowing 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. This year, we have completed over 40,000 critical control focused conversations in the field, conversations that have proactively identified and eliminated potential risks that could lead to a fatality. And we've recently begun using digital tools, introducing an app across the organization to facilitate these conversations and capture more robust data that can quickly be analyzed and shared across our business globally. On the back of this work, we have reduced our significant potential events by 2 thirds compared to 2019 and achieved a 6 fold improvement from when I joined Newmont in 2014 and started us on this journey.
And despite the significant leadership distraction due to managing COVID this year, we are on track to achieve the lowest personal injury rate in our company's history, with a total recordable injury frequency rate of 0.28 per 200000 hours worked. It is no coincidence that visible self leadership focused on fatality prevention is driving a significant improvement in all of our safety metrics. Turning now to the industry's portfolio on Slide 7. Among our 12 operating mines and 2 joint ventures, we have 8 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 that exceeds 10 years. Importantly, all 8 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.
We firmly believe that we have the right sized portfolio to generate sustainable returns from our world class responsibly managed assets located in the best gold mine jurisdictions. Underpinning our asset base are the largest gold reserves in the world with nearly 96,000,000 ounces. We also offer substantial future upside through our gold resource base with nearly 75,000,000 ounces of measured and indicated resources. In addition to this, we have 63,000,000 gold equivalent ounces in our reserves, which includes £15,000,000,000 of copper. Importantly, 90% of our reserves are in the Americas and Australia.
Exploration always has been and will continue to be our core competency at Newmont. Our disciplined exploration program lays the groundwork for growing our reserve and resource base to sustain stable, speed production and cash flows for decades to come. Turning to Slide 8. Our portfolio will generate more than 16 ounces of gold per year through 2029. This stable production profile is underpinned by our 8 world class assets, our industry leading exploration program and our next three development projects, Tanami Expansion 2, which is in execution and then a half agor and Yanacocha sulfides, both of which are in the late stages of definitive feasibility.
As you can see here, our portfolio provides steady production over the next decade, balanced across each of our 4 regions. This profile is further enhanced by more than 1,000,000 gold equivalent ounces from silver, lead and zinc at Penafito and copper at Follington and Yanacocha. Combined, we will deliver more than 7,000,000 gold equivalent ounces per year for the next decade, the most of any company in our industry. Turning to our unrivaled project pipeline on Slide 9. 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 and lay the pathway to steady production and cash flow well into the 20 40s. Our near term projects include Ahafo North, which is the best unmined gold deposit in West Africa and for which we expect to reach a full funds decision early in the New Year And Yanacocha Sulfides, which is also progressing towards a full funds decision next year and has the potential to extend Yanacocha's life well into the 2030s. Looking at the earlier stage projects in our pipeline, you will see 2 new projects improve visibility with Palmor at Porcupine, which was formerly the Century project and Oberon at Catamoy. The Palmol project is a low back to the existing Palmol open pit and is smaller in scope than the prior Century project, which requires a relocation of the existing processing facilities in order to access the dome ore body. Developing Pam ore is expected to extend mine life by another decade, providing us more time to explore the Borden, Portal Pond and Dome ore bodies to find the next profitable extension of the porcupine mine.
Palmor is a great example of Newmont's disciplined investment system, which focuses on value creation and phase investment decisions to maintain our current production profile instead of progressing highly complex capital intensive projects. And overall, we are very excited that our new mine exploration efforts continue to identify highly prospective deposits with the potential to further extend life and improve costs at the world class Tanami asset. Rob will cover some more details on overall shortly. At Coffey, we completed our exploration mapping exercise and are closing the camp ahead of the winter season. We remain excited about the potential of Coffey to fully optimize the ore body and improve value.
In addition to our highly prospective gold projects, we had significant organic exposure to gold copper porphyries, including North Abieto, Medellugnon and Galore Creek. In fact, if you assume that one of these 3 mega projects comes into our production profile at the back end of this decade, Newmont'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 worth noting that since 2016, I have led the delivery of 10 projects on time and budget, achieving an average internal rate of return of over 30%. Going forward, we will build on this track record by continuing to apply our disciplined and rigorous approach to projects and ensuring Newmont is well positioned to generate superior value throughout the price cycle. Turning to our free cash flow generation potential on Slide 10.
Our balanced portfolio, combined with our discipline and operating model, provides significant leverage to higher gold prices from the largest production and reserve base in the world. For every $100 increase in gold prices above our base assumption, Newmont delivers approximately $400,000,000 of incremental attributable free cash flow per year. Using our conservative $1200 gold price assumption, our base free cash flow will still total more than $5,000,000,000 over the next 5 years. At the current gold prices, our portfolio will generate more than $19,000,000,000 of free cash flow over that same time frame. To be clear, this is free cash flow that is entirely attributable to Newmont's account, enabling us to provide industry leading returns.
With that, I'll hand it over to Rob to discuss our operational performance on Slide 11.
Thanks, Tom. Before jumping into the regions, I'll start with a general COVID update. Across our portfolio, we have continued our wide ranging controls and safety protocols to place the health, safety and well-being
of our teams and our
communities above all else. While we've had employees and contractors test positive for the virus, our effective testing, contact tracing and quarantine procedures have proven to be effective in mitigating the spread to other employees and local communities. In the Q2, we had 5 sites in care maintenance and all 5 sites were operational in the Q3. Penasquito ramped up quickly and was achieving pre COVID record levels in the plant by mid June. Eleonore and Musselwhite ramped up early in the 3rd quarter and Yanacocha has returned to nearly full capacity.
Cerro Negro is currently operating at about 60% of normal capacity as the site continues to be impacted by ongoing travel restrictions in Argentina due to the virus. We are working closely with the local authorities and unions and are mitigating the efficiency impacts of reduced staffing levels by consolidating our mining and processing efforts in the near term. I'm incredibly proud of the commitment of all of our teams during these difficult times and the efforts that they have demonstrated day in, day out to work and produce safely. Turning to Slide 12 for an update on Australia's performance. At Boddington, we delivered solid 3rd quarter production on the back of higher grades, which partially offset the wet weather that impacted mining productivity.
As the stripping campaign winds down, we expect to benefit from higher grades through 2022. Audington is expected to finish the year strongly with higher production and lower operational costs in the Q4. The autonomous haulage system is progressing well and remains on track to be fully operational in the first half of twenty twenty one, which will further enhance Boddington's safety and productivity, while also extending mine life. The team continues to work very closely with Cat as they prepare to become the world's 1st open pit gold mine with an autonomous haul truck fleet. The Cat Mine Star system has been installed and we are expediting the delivery of the AHS trucks with 14 of the 29 arriving before year end ahead of schedule.
Tanamine delivered another strong quarter with higher grades, which helped offset COVID related travel restriction in quarantine protocols that impact And despite And despite the challenges over the course of 2020, Tanamine remains on track to produce 500,000 ounces this year. Tana Mine Expansion 2 is progressing well with around 40% of engineering work complete and close to 20% of the overall project complete. Earlier this month, we achieved a significant milestone completing the pilot hole, which provides us the ability and guidance we need to be able to develop the new 5 point 4 meter wide shaft from both the top and the bottom. Construction for the camp is well underway with around 75% of the new surface buildings in place. We continue to review the schedule and capital for this project to understand the full impact of potential delays due to the ongoing impact of COVID.
Looking further ahead, we have significant near mine exploration upside with extensions to existing deposits and at Oberon, which has the potential to grow beyond 2,000,000 ounces. Oberon is an open pit deposit located only 28 kilometers to the north of the Tanami Mine underground mine and has a potential to grow production for the operation beyond the current 500,000 ounces per year. As Tom mentioned, OBERON is in pre feasibility and we've been remotely progressing our study work by evaluating mine planning scenarios and resource model updates. Recently, we resumed field work after working in close collaboration with traditional owners to access the area and safely remobilize our hydro geological drilling efforts. Exploration drilling is planned to resume after the upcoming wet season.
Turning to Africa on Slide 13. At ACHIM, we delivered solid third quarter performance with higher throughputs and recoveries, and we expect to reach higher grades in the Q4, which will continue through 2021. At AHFL, our investment in this world class asset continues to deliver value. Our transition to a more productive underground mining method at Sabika Underground is progressing very well with development rates ahead of schedule. During the quarter, we ramped up to mining 4 to 5 stopes concurrently in various locations of the mine, reducing congestion and increasing tonnages.
Higher grades from the underground will help offset the stripping campaigns in the Awanzu and Subika open pits through next year. And at Ajo North, we continue to advance the permitting process with the Ghana EPA and the team is focused on engineering and design work as well as construction, procurement and community planning. As Tom mentioned, we remain firmly on track for a full funds decision in 2021. When approved, our plans include building a standalone mill to produce approximately 250,000 ounces per year over a 13 year mine life for an investment of approximately $700,000,000 to $800,000,000 And Ahafo North functional and technical resources will be supported from our current Ahafo operation, leveraging our proven operating model to reduce duplication in the region. Turning to our South America operations on Slide 14.
Marion delivered solid third quarter performance as we process stockpiles to help offset lower tons mined and we expect higher grades in the Q4 as we advance into the harder ore. Yanacocha ramped up from 80% capacity in July to near full capacity in September. In the Q3, we processed higher leach tons and returned to more normal levels of throughput in the mill. And as expected, the inability to place lead chances in the Q2 will impact Yanacocha through 2020, but the team is working very hard to improve lead cycle times. At Cerro Negro, we're focused on operating as efficiently as possible to help mitigate the ongoing impacts of the travel restrictions caused by the virus.
As a result, we are currently running the Millen campaign and the team continues to demonstrate resiliency despite facing inclement weather in the Q3 and complexities of managing varying workforce availabilities and shift changes. Mining is focused on development in the Marianas complex, but we are forecasting a slow ramp up delaying access to higher grade stopes into 2021, while we work with the authorities on a longer term plan to return to normal operations
by the end of the year. It is worth
noting that Cerro Negro is only approximately 4% of Newmont's full year production. So as Tom previously mentioned, we are well on track to deliver our 2020 guidance. Looking ahead, we remain very excited about Cerro Negro, which has the potential to become the largest gold producer in South America. We have more than doubled our land position and the mine and its surrounding areas are highly prospective and underexplored. Our exploration team has identified significant district scale potential with more than 100 known prospects and ranks Cerro Negro as one of the most prospective land packages in our entire global portfolio.
We're also very excited about Yanacocha sulfide progressing to a full funds decision in 2021, and we will continue to share additional details as our definitive feasibility study progresses. So wrapping up with North America on Slide 15. Penasquito delivered a solid third quarter performance as we safely and efficiently ramped up from care and maintenance. While the site continues to manage through COVID related workforce challenges, we've been able to maintain our record levels through the plant and we also successfully completed a 2 week mill maintenance shutdown in September, setting the operation up for a strong Q4. Our full potential program continues to drive value from this world class asset, and we are currently focused on improving fragmentation through our blasting process and we continue to make enhancements to the front end of the mill to further improve throughput.
In addition, we fully ratified the sustainable agreement with the Cedros community in August, which also helps us to explore our large land package that is currently only 20% explored. At Musselwhite, we successfully ramped up from care and maintenance in the Q3 and restarted stockpile processing. And I'm delighted to say that we achieved mechanical completion of the conveyor system yesterday and have started the important process of wet commissioning. Over the coming weeks, the conveyors will be tested to ensure all components of the conveyor belts are safe and fully operational as expected. And I very much look forward to completing the full commissioning and reaching nameplate capacity of the belts in December.
Also just last week, this project completed over 100,000 hours without a lost time injury. Again, I'm very proud of the great work of our sites and project teams, along with our contractor segmentation to ensure that we keep the health and the safety of every teammate in the forefront of every shift. Development rates at Musselwhite are exceeding plan and commissioning of the materials handling project has begun and is expected to be fully completed in November. We have also officially kicked off our full potential program at Musselwhite, building on the virtual efforts over the last several months. Overall, Musselwhite is very well positioned to be fully up and running as we enter 2021 and will be back stronger than ever before.
At Eleonore, our 3rd quarter performance improved as the site ramps up from care and maintenance. Ongoing COVID related restrictions continue to impact staffing levels, but development rates ramped up in September and we are back to operating at normal capacity. Our site leadership team remains focused on improving efficiency and productivity and is driving fundamental changes to how we operate at approximately 250,000 ounces of annual gold production with a sustainably lower cost base. We have made significant progress restructuring and reducing the overall number of site personnel, yet morale has improved and production levels are on the rise, which speaks to the cultural change taking place at Eleonore. Through our full potential program, we've delivered $24,000,000 of value year to date and expect to continue to deliver meaningful cost improvements in 2021 beyond.
Earlier this year, we commissioned the lower mine materials handling project safely and under budget, which will significantly streamline the transportation of ore to surface as we transition to higher production rates from the lower levels of the mine in the years ahead. Our exploration drills at Elian North are returning very encouraging results, both laterally and at depth, and we are improving our understanding and interpretation of the geological model. We have also advanced our understanding of the district's geological framework, which will inform our 2021 drill program and targets less than 20% of the property drill tested to date. Porcupine delivered solid 3rd quarter results and the site is improving underground development rates with several new initiatives underway that will increase tons mined and processed in 2021. And CC and V also delivered strong results from an increase in tons mined and reaching higher grades at the bottom of the Crescent pit.
And with that, I'll turn it over to Nancy to discuss our financial results on Slide 16.
Thanks, Rob. Turning to Slide 17 for the financial highlights. We delivered our strongest ever quarterly performance several financial metrics, including record free cash flow of $1,300,000,000 of which 97% is attributable to Newmont. Year to date, we have generated $2,300,000,000 in free cash flow, of which 96% is attributable to Newmont. Other notable third quarter results include revenue of nearly $3,200,000,000 adjusted net income of $697,000,000 or $0.86 per diluted share adjusted EBITDA of more than $1,600,000,000 an increase of 54% from the prior year quarter and cash from continuing operations of $1,600,000,000 ending the quarter with a strong cash position of $4,800,000,000 We ended the quarter with liquidity of nearly $8,000,000,000 and our net debt to EBITDA ratio improved to 0.4x.
Earlier this month, S and P moved Newmont's outlook from stable to positive on strong free cash flow prospects and reconfirmed our BBB credit rating. As a reminder, our financial results proportionally consolidate the company's ownership and trust in Nevada Gold Mines that do not include the contributions from the company's investment in Pueblo Viejo, which appears in equity income versus in our operating results. For the Q3, our 40% of PV reported 87,000 ounces of production and would have added an additional $115,000,000 of EBITDA. Turning to Slide 19 for a review of our earnings per share in more detail. 3rd quarter GAAP net income from continuing operations was $611,000,000 or $0.76 per share.
Adjustments included $0.07 related to the change in fair value of our equity investments, dollars 0.03 related to incremental COVID specific costs such as additional screening protocols, transportation costs and community fund disbursement. Dollars 0.10 related to pension settlement changes related to the Nevada Gold Mines transaction. Dollars 0.03 related to tax adjustments and valuation allowance and $0.07 of other charges. Taking these adjustments into account, we reported 3rd quarter adjusted net income of $0.86 per diluted share. While we adjusted EBITDA for approximately $32,000,000 of non recurring incremental COVID specific costs from our Q3 net income, we did not adjust out approximately $35,000,000 of care and maintenance costs due to Yavacocha, Sara Nigro and Musselwhite ramping up in the Q3.
With that, I'll hand it over to Tom on Slide 19.
Thanks, Anthony. Turning now to Slide 20. Our capital allocation philosophy remains unchanged and continues to balance the following three priorities: reinvesting in our business through disciplined investments in exploration and organic growth projects, maintaining financial strength and flexibility to sustain the business across price cycles and returning cash to shareholders. Newmont continues to set new standards as the clear industry leader in shareholder returns, which we further differentiated with the 50% increase in our quarterly dividend that we announced yesterday, bringing our quarterly dividend to $0.40 per share and our annualized dividend rate to $1.50 per share. This was our 2nd substantial dividend increase this year, demonstrating the strength and stability of our business.
Turning to Slide 21 for more details. During 2019 2020, we will have returned more than $2,500,000,000 to shareholders through dividends and share buybacks, an amount that is more than the total of our next 8 competitors combined. Our $0.40 per share 3rd quarter dividend represents a 186% increase from the 3rd quarter dividend in 2019 and highlights the strength of our financial position and our ability to continue paying an industry leading dividend whilst we simultaneously invest in and develop our most profitable projects. Our most recent dividend increase was set within our newly established dividend framework. This framework provides our shareholders with the stability of our base annualized dividend of $1 per share, calibrated at a $1200 gold price assumption.
And the potential to receive 40% to 60% of the incremental free cash flows generated at gold prices above $1200 per ounce. Our 3rd quarter dividend was calibrated at a conservative and stable $1500 gold price assumption. As we have disclosed previously, Newmont generates incremental free cash flow of approximately $400,000,000 for every $100 change in the gold price above 1200 dollars So at an assumed $1500 gold price, we would generate approximately $1,200,000,000 of incremental free cash flow annually. Our 3rd quarter dividend increase was calibrated to share 40% of that incremental $1,200,000,000 free cash flow that Newmont will generate at an assumed $1500 gold price. That 40% is approximately $480,000,000 This equates to $0.60 per share annualized, an increase of $0.60 per share annualized over our base $1 per share dividend.
As a result, we are pleased to offer our shareholders an annualized dividend of $1.60 per share. We chose a conservative $1500 assumed gold price for the calibration of our 3rd quarter dividend to maintain financial discipline and prudence as well as to instill stability and predictability into our dividend increase framework. We will typically reassess the gold price semiannually and recommend incremental dividend increases when we believe gold prices have rebates at levels of at least $300 per ounce higher than we applied to establish our prior dividend increase. While the dividend will be assessed quarterly by our Board, the framework aims to ensure stability and predictability, and we will evaluate the additional dividend in gold price increments of approximately $300 per ounce. In addition to this framework, we have a number of tools available to deploy excess cash based upon the circumstances at the time.
These include further strengthening the balance sheet through debt repayments, opportunistic share buybacks and additional dividends. Our commitment to industry leading shareholder return is evidenced by our track record, and we are confident our operational delivery and discipline will enable us to continue to enhance that record of performance. With that, I'll wrap it up on Slide 22. Over the last 18 months, Newmont has assembled the gold industry's leading portfolio of world class operations and projects in top tier jurisdictions. And we'll deliver more than 7,000,000 gold equivalent ounces per year for the next decade and beyond.
Our ability to generate substantial free cash flow across the price cycle is unmatched, and our significantly reached high gold prices was demonstrated by our record 3rd quarter free cash flow of $1,300,000,000 As we continue in our 100th year, Newmont is leading the gold mining industry with a foundation that is stronger than ever and a proven strategy to deliver long term value while improving lives. I'm very excited about what the future holds at Newmont, and I look forward to keeping you updated on our performance. With that, I'll turn it over to the operator to open the line for questions.
Our first question today comes from Fahad Tariq with Credit Suisse.
Hi, good morning. Just one question for me. I didn't see in the presentation anything on synergy targets and what maybe if that's changed or not. But in any case, can you provide some color on is the cash flow synergy target still $500,000,000 for next year? How is that progressing?
And anything else you could
tell us on that front would be great.
Yes. Thanks, Fahad, and good morning. I'll kick off and pass it over to Matt to give you some stories of where we're delivering that value. But yes, we're on track to deliver the synergy target as we've committed. The $500,000,000 next year is still very much our commitment.
That's incorporated in our long term guidance. We'll update our long term guidance in December at our guidance webcast. Just this week, we've been meeting with our Board to review our plan, which forms the basis of that guidance. But I remain very confident that we will deliver at least that $500,000,000 of free cash flow next year. And as I say, it is built already into our long term guidance.
Rob, do you want to give
a few stories? Thanks, Tom. Thanks for question Fahad. By far and away, the engine of our predominant synergy is at Penasquito. And that team continues to do particularly well and have over exceeded this year.
And as a reminder, the key areas that we're focused on are primarily the front end of the process plant to allow more water flow through the mill. And we've successfully done that in spades. In terms of the mining initiatives, it is about improving the fragmentation to enable more dump to go through the plant, but also just bringing greater and greater discipline into how we blast, how we demarcate, how the shovels dig, etcetera. But beyond that, we've also moved into the total cost of ownership in the supply chain side of things. So the procurement of non OEM HME parts, just to name but a few, but we've got 45 initiatives on the go down there, all delivering good value.
So very, very pleased with how things are going.
Thanks so much. Thank you.
Our next question comes from Tyler Langton with JPMorgan.
Good morning. Hope everyone is doing well. Just first question, I guess, with sort of COVID cases rising, I guess, is there do you see any increased risk of the shutdowns at the mines, especially, I guess, the mines that were previously impacted? And then just with Cerro Negro, I guess, it's operating at 65%. Is it really to get back to 100%, is it really just based on having travel the Cerro Negro operation.
The constraints are all around the with the Cerro Negro operation. The constraints are all around the cover restrictions that everyone in Argentina will be managing to keep people safe and healthy. We continue to apply our COVID protocols with discipline across every one of our 12 managed operations no matter where they are in the world. So in Australia, where there is no spread, there is no community virus in either Western Australia or the Northern Territory with Boddington and Kanamay are, respectively. We still maintain all of our protocols at those operations to ensure that we manage the risk of this nasty virus spreading.
We still have some 10,000 people who are not in an operating site or an office environment working virtually, again, to protect their health and safety and the safety of the communities in which we live and work. What I want to do is give you a story of around Penasquito of the work that's being done, which would be mirrored across every one of our operations to ensure that we keep people health and safety. There is a it's a good story that really demonstrates the extra effort that people
are going to, the resilience
in our business and why I'm so incredibly proud of our Newmont workforce. Rob?
Thanks, Tom. And really just to build on that is it also highlights how Newmont is living and managing the current situation with the virus. But Penasquito to give everybody on the line a sense that when we talk about COVID testing, it's easy to think, oh yes, that's fairly simple. But in Mexico, we've got 18 testing centers. We've got 7 at various airports throughout Mexico.
We've got 7 at various major bus stations throughout Mexico and we've got 4 testing stations on-site. Now that also is required to staff those up with nurses and we've got 56 nurses and personnel operating in those 18 centers. And as you can imagine, since COVID started, we have performed tens and tens of thousands of tests to make sure that our people are safe to go to the site. And also we're testing before people leave the site, so they can go back to the communities safely and with the full knowledge that they're clear of the virus. But I think that story from Penasquito really highlights just as Tom said, the effort and the commitment that our teams have to make sure that we operate throughout this virus very, very safely.
Thanks. That's helpful. And then just with the 2 projects for next year for Yanacocha and Ahafo North, do you get a sense when next year you might make a decision? And is there any risk just from COVID sort of pushing those decisions out?
Thanks, Tyler. I'll pick up Rob. I'm going to chip in. Half of North will come first. It will be early in the New Year.
It's locked in loaded. We're just working through with the EBITDA on the final permits. It's absolutely down the middle of our wheelhouse. The blueprints are the same as the original Hawthorne, Achim and Merian, a very straightforward mine to build, open pit mine and mill. It's only 30 kilometers from our existing half of operation.
And a lot of the work, particularly in the 1st 12 months, is the relocation of the road and the clearing of topsoil and starting the initial earthworks, all of which is done with local Ghanaian workforce. And we build off a project team that's still in place at Ahafo, having just recently finished the Ahafoambit expansion and Savica underground. So very well positioned with Ahafo North and as I say, locked and loaded, waiting for those final wires to be dotted and finished to be crossed. The other coach of SIFI is in the second half of next year. Still doing the final engineering work around that definitive feasibility study.
And again, pretty straightforward in terms of bringing that project on once it's approved. Sulfide is a layback of the existing Anacocha Verde pit, so we're mining today at the Anacocha, so it's deploying equipment to that layback. Hence, the Chacocha Underground Mine, which we've already developed quite extensively. So both sources of ore are well advanced. The key work is around the construction of a concentrator and the autoclave on the existing footprint.
And again, as you approve that project and do your early works, a lot of that is civil works to prepare the foundations for quite a substantial processing plan. So not see any COVID related restrictions to being able to bring that project on us as we reach full funds.
Our next question comes from Greg Barnes with TD Securities.
Thank you. Tom, just rehashing your commentary on the dividend framework. Did I understand that you will reassess the dividend every 6 months now going forward, at least on the gold price?
Our Board will look at it every quarter, Greg. But they'll look back at a semi annual gold price period. So if you look at the discussion we went through with
the Board this week to
improve that dividend, we look back the semi annual period we look back on, that's the first half of this year. Gold was averaging around $16.50 for the first half of the year, which was a conservative view, so lower that to $1500 and apply the 40% on the lower end of our range to that $1500 So we'll look at every quarter as a board, but then look back over that semiannual period.
Okay. So in Q1, if you look back over the second half of twenty twenty, let's say we average 1900, which it looks like we will, you'd use something like 1800 as the basis of dividend?
I think as you use our framework and make do those calculations, and I think I saw that in your report this morning, that is absolutely the discussion that our Board will
be going through. So you could
do that calculation, say, the 40% to 60% could be somewhere between $2.20 $2.40 And that would be subject to the Board looking at not just that gold price, but all of a number of other factors, but that's the sort of discussion that we'll be having. That framework allows us to have that discussion and allows you and the investment community to make those determinations. And just I was interested
in your comments on copper and the projects in your portfolio. Is that an expression of increasing interest in copper or just a factoid out there that those projects have copper exposure and it's an interesting angle.
It's just purely a factoid that we don't need to do anything other than develop our organic project pipeline and we'll get a natural exposure to copper at a time where it will be an important metal in the global community. Okay. Good. Thank you. Thanks, Craig.
Our next question comes from Chris Terry with Deutsche Bank.
Hi, Tom, Nancy and Rob. A couple of questions for me. First one on the cash balance now at $4,800,000,000 Just thinking about the mechanics of that, looking back, I guess, the last couple of years, you have had it down to about $2,000,000,000 or so, I think. But generally, it's a reasonably high cash balance. But as you think about going forward, as that cash builds, you pay some of it into dividends and then you should on our numbers become net cash relatively quickly.
How do you think about the actual cash balance though? What you'll do with that? Is that going to be used to pay debt? Or what physical will you do with the actual cash? Thanks.
Yes, absolutely. I'll take that one. You've got it just right. We have indicated publicly that we would like to keep cash balances somewhere in the $2,000,000,000 to $3,000,000,000 range. And I think in this time of COVID uncertainty that remains prudent.
We've also indicated that we will continue to use that cash for things like paying down our 'twenty one through 'twenty three debt, things like the share buyback that we've initiated last year and certainly contributions to the dividend as well as reinvesting in our business. So all of those things combined will give us that financial flexibility and optionality. But yes, in today's world, I think holding a bit more cash on the balance sheet is certainly something we will continue do.
Okay. Thanks, Nancy. And then just in terms of the project pipeline on Slide 9, you talked about Ahafo North and Yanacocha Sulfides. Dollars 750,000,000 I think you said for the Ahafo North CapEx and Yanacocha Sulfide's second half next year decision. Can you just remind us the time period and the rough capital that, that would be spent over?
I think it's a pretty long dated project, but just wanted to get an update. Thanks.
Thanks, Chris. It's round numbers $2,000,000,000 We're at 51.35 percent Equestriano Coaches, so it's roughly $1,000,000,000 to Newmont's account. And it's 3 year development. So if you look at the big the 3 big capital projects and if you look at our sort of model our development capital going up on the back of those, 750 for Tanami, 750 for 500,000,000 dollars for Yanacocha Sulfides over the next 4, maybe a little bit into 5 years. That's about roughly our spend on development capital, pretty steady.
And that's another important factor behind our dividend framework is we've got a steady $1,000,000,000 in sustaining capital, steady $400,000,000 combined between advanced projects and exploration and roughly a steady $800,000,000,000 in development capital that we want to maintain, a framework that allows us to share excess cash to shareholders.
Okay. That makes sense. So next year, those 2 main updates. And then looking at Slide 9, any of the other sort of pre feas feasibility type projects that will move to the next gate?
Yes. I think the ones to keep in mind that, Greg, we'll I mean, our project pipeline is what we don't show in May is we're sinking a shaft at Turquoise Ridge, we own 38.5% of that. The Pedro Viejo expansion, which we own 40% of that, getting close to full funds. So there are a couple of other very important catalysts within the Newmont portfolio. And then we will be continuing to optimize the 3 big mega projects for Lower Creek, North Africa, and the Bay Area, and we have to do one of those at one time, very end of this decade or in the next.
So Pammaw and Oberon, the second underground of the Harpo Pinsu, moving underground after a finish for laybacks to the chain, all those will push through to execution. And then Coffey, we're just bottoming up a drilling program as we go into winter. And Coffey would be another potential a half a north type project that we could be bringing through to follow on. So you get Tanami 2 the halfway north, it's Coffey's got a potential follow on from that. So plenty of activity happening in that pre feasibility study phase.
Okay. That's clear. And the last one from me. With the automation at Boddington due, I think you said early next year, what's the latest thoughts on how long you'd assess that for before you'd maybe look at other sites and rolling that out on other operations?
We don't need to do much assessing of autonomous orders. It's proven I mean,
I implemented the first autonomous mine in the Pilbara almost 10 years ago. So it's proven technology. There's no piloting or assessing. It's changing a fleet over, and it's got a business case. So what you work through with the existing operations and it's you've got to have enough life in front of you and a value proposition to change out a fleet.
Boynton presented that business case, so there has to be business case. And then there's some very important part of our purpose statement is improving lives. And we're going to think about those communities in which we live and work and whether autonomous haulage is part of that equation when you think about some of the locations that we're in. So we'll continue to assess whether there's opportunities for autonomous surface haulage. There's plenty of opportunities for underground autonomous operation, and we're doing quite a bit of that already.
So I expect you'll see more underground autonomous before another open pit. The real opportunity for us is to improve the value proposition around those mega projects instead of prefeasibility. When you've got a when you have within your portfolio an autonomous operation,
you can train a new workforce
up in that operation and underpin a base case for those projects. Too big a risk to be doing your first radio with our autonomous solids with a brand new project. So that's one of the strategic elements of Boydton.
Our next question comes from Anita Soni with CIBC World Markets. I would want to delve a little bit further into Slide 9 and Slide 10, the Natuzzi capital and the projects. So I think you just mentioned that coffee, you were talking about them in the context of Tanami and the Haase North. So do I understand, Tien Tsin, that the capital would be in the range of about $700,000,000 to $800,000,000 Is that what you're trying to drive out
there? Not quite, Amita. I think it would be a lower number, but I categorize the 2 broad categories I have for projects are major and bigger. So major projects, you need anything it's in the 100 of $1,000,000,000 could be anything from $300,000,000 up to $1,000,000,000 And then that mega project is anything greater than $1,000,000,000 And it's actually a different way from my experience with projects, it's a different way to implement those 2 types of projects. So coffee is a similar size to our Harpo North or a townwide in terms of the complexity of the work.
So it's So
it's more along the range of like 250,000 ounces, 300,000 ounces rather than 5.
Yes, yes.
Okay. All right. Second question, just I'm trying to understand this free cash flow profile that you have
a little bit
further. Not included in there is the Hafo North and Yanacocha Sulfides and obviously all the other projects that we've talked about. But what is included is Tanami, which is an execution, right?
That's correct, Anita. So that's once those projects move into full funds, then those projects will take some of the free cash flow that we're showing there. However, that's only showing free cash flow from gold. It's not showing free cash flow from the other metals. So that chart needs to be read from both of those perspectives.
All right.
But it does include the gold, all that kicks in for those, but I think those only kick in around 2024, 2025 anyway, right?
Those projects are in the back end of our 5 years. But they are very important projects. I'm excited to be able to bring them forward and show you what those projects do to both our production profile and our cost.
Okay. And then with respect to exploration, that's something that I was just interested in. Looking at the exploration budget going forward next year, do you guys have an idea of whether or not they'll stay the same increase or what are you looking at this stage?
It's the same year on year. So it's about $250,000,000 in exploration, Anita. And 80% of that spend is near mine. It's in around convergence and extending life.
Okay. I think that's all I have. Thank you.
Right. Thanks, Meta.
Our next question comes from Mike Jalanen with Bank of America.
Hi, Tom and everyone. Just you intrigued me on the Amor open pit, that venturi project had gone pretty quiet since the merger. So it's coming back to life. What's changed from what the prior owner sort of saying about Century versus a smaller pit? You're not moving any buildings.
Just curious what kind of fluctuate could it be? Thanks.
Thanks, Mike. I'm really pleased we're getting the question from you. I'll pass across to Rob to give you some color on PAMO.
Yes, Mike. It really is the simplicity of it and the lack of complexity, to be honest. But obviously, it's an existing mine that just needs to be dewatered. We've got a good geological model there. We can use the current plant infrastructure.
And it also provides us with that kind of 10, 11, 12 years of mine life that allows us to further explore the barden, the oil pond and the dome ore bodies. So it really was just a fairly simple value equation and we just thought that was the simplest route, but also the most value accretive route.
So where do you go from here with this project? I should say I'm trying to get some numbers or some timeline.
Well, we are just doing the studies at the moment. And as that slide indicated is that we are still at the early stages. So I would expect we'll be able to give you more of a timeline in next year once we've progressed it a bit more. But just a kind of rule of thumb that we're expecting, it's going to be a 3 to 4 year kind of planning preparation stage. And then we're expecting around about the 12 year, 13 year kind of life at between 150,000 to 200,000 ounce kind of thing.
So that's broad brush. But certainly, Mike, it's early days. The team is working hard on it at the moment to come up with suitable mine designs and dewatering schedules. And certainly in the New Year, we'll be able to provide more color.
Okay. And I guess just turning to Oberon, I was at I can't remember if that was discussed when we were at Tanami there in November a couple of years ago. Maybe just remind me where that is and just seems pretty exciting.
Yes, Mike. It's again, I wasn't on that tour, which is just I think,
Mark, we might have touched on it in terms of the geological attitude of the Chris Robinson did, but we've done a power drilling since you're up there.
No, no problems. But it literally is just a stone's throw away. It's less than 30 kilometers from the underground. Boston has a strong ramp. And certainly, there's a huge amount of synergies that we can get there.
It is an open pit, but it's also got underground potential as well. So in terms of proximity, it's very, very close, which allows us to potentially use the existing infrastructure. And that's certainly one that the team is focused very hard on. As I mentioned that the drilling program, we struggled this year because of COVID not being allowed to drill on aboriginal land, but we've got those approvals and post the wet season, we get straight back to it again.
Okay. Well, thanks for that.
I look forward to the next trip to Tanami, maybe November, and we'll see. Thanks.
That would be fantastic.
There's a lot to show off. Thanks, Mike.
Our next question comes from Michael Dudas with Vertical Research Partners.
Yes. Hi. Good afternoon, everybody. Good morning, I guess, where you
guys are,
everyone. Just maybe just Paul, you mentioned briefly about ESG in your prepared remarks, etcetera. Thinking about from the energy standpoint, when you're looking at your development projects, obviously you're probably relooking probably always look at them from the best environmental and social efforts from a development standpoint. But any opportunities or thoughts on decarbonizing them from that standpoint? Or are you looking into investments that we haven't talked about in some of the development work that may lead towards some that will require some investments to improve that metric from a carbon free standpoint?
Thanks, Michael. We're working right at the moment through our 2,030 targets. So we're resetting our emission targets, both tons and intensity, such as their science base. And we're also debating an aspirational target for 2,050. And because we've got a long life portfolio, we can actually see after that far and start to talk about how we support the global community in terms of how we develop our projects and our operations.
We have our portfolio has a natural move to underground mining. So as we move to more underground than open pit, we reduced both our emissions on an intensity and tons basis. We look at where our power sources are coming from, both what we can do to convert power and where we're pulling power off the grid, what the suppliers are doing, how we can encourage suppliers to improve their conditions intensity. For instance, in Ghana, we've supported our installation of solar power cells that go into the grid as part of that process. And then if we're serious, then we need to be thinking about what we're doing with our investments to ensure that we're reducing our emission intensity.
So that is the move to more electric equipment. The move to autonomous haulage at points and a lot of steel fired trucks, you are more efficient because the automation doesn't have the human element in terms of how those engines are operated. We need to look at different fuel sources. We already deploy a carbon price to some of our key investments, dollars 20 a ton and $40 a ton to assess what we do. Our full potential program, our continuous improvement program, a key element of that is improving energy efficiency, which brings improved cost, improved productivity and reduced emissions.
And we need to think about and our industry needs to be part of the discussion around where are we putting our money, where our mouth is with these targets and with our aspirations and starting to develop technologies that can ultimately lead to a carbon neutral work. And these are the debates we're having right now. I think if you want to be a leader in this industry, then you have to be demonstrating through your actions PSG leadership. So we're having those debates and stay tuned. We're going to talk about our new targets next month and then continue to talk about how we deliver those in the weeks months beyond that.
And so if I could just add that just
to build on that, Michael, that Dean Gehring, who leads our technical service, is also employing some key specialists in this domain and we've got power and electricity specialists, which will really help us in terms of not only managing the current power that we're pulling from that, whether it's the stranded power or whether it's from the grid, but also working with the suppliers, as Tom said, about the future, whether it's gas plants, solar plants, other type of electricity plants. So again, it isn't just about the targets. We're actually building the teams that we need to do that work.
This concludes our question and answer session. And I would like to turn the call back over to Tom Palmer for any closing remarks.
Thank you, operator, and thank you, everyone, for joining us today. And please, you and your family stay safe and well. Thank you.