Good morning, welcome to the Newmont Goldcorp transaction update. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 Gary Goldberg, Chief Executive Officer. Please go ahead.
Good morning, thank you for joining us. As you saw this morning, our board of directors has unanimously determined that Barrick's unsolicited, hostile, all-stock proposal to acquire Newmont is not in the best interests of Newmont shareholders. Before I start, I'll ask you to review the cautionary statement shown here on slide two and refer you to our SEC filings, which can be found on our website at newmont.com. On slide three, you'll find additional information on the proposed transaction. Turning to slide four. We have summarized some of the factors that informed our board's unanimous determination that Barrick's proposal is not in the best interest of Newmont shareholders and that it is inferior to the Goldcorp transaction. The thorough review process our board undertook with outside advisors has only reaffirmed our conclusion that our combination with Goldcorp represents the best opportunity to create value for Newmont shareholders.
Our analysis demonstrated that the transaction is a superior value creation opportunity for all Newmont shareholders on all relevant metrics, that's before taking into account the significant risks associated with Barrick's proposal. The Goldcorp transaction delivers nearly twice the accretion to Newmont's net asset value per share compared to Barrick's proposal, even when factoring in Barrick's unsubstantiated synergy assumptions. 100% of the potential value creation from Barrick's proposal relies on delivering synergies from a new management team that lacks global operating experience and is only two months into its own transformational integration efforts. We believe Barrick's proposed share consideration and a portfolio filled with assets in unfavorable jurisdictions carries significant risks. As you may have seen in our press release this morning, we have proposed a clear joint venture framework for our Nevada-related operations with Barrick.
To be clear, the Goldcorp transaction and Nevada JV with Barrick are mutually exclusive. Newmont shareholders can benefit from both. Later in the presentation, Tom will discuss the joint venture in greater detail, first, I'd like to describe the reasons behind the board's determination that Barrick's proposal is inferior. Turning to slide five. Barrick's egocentric proposal is designed to transfer value from Newmont shareholders to Barrick. Barrick is approaching a clear production decline and needs Newmont's mines and processing facilities. They have yet to provide guidance beyond 2019, the best the market has is analyst estimates projecting their production declining by 12% from 2018-2023. Barrick has described their proposal as an unprecedented value creation opportunity, yet it is inferior to the Newmont Goldcorp transaction. Barrick also has a poor M&A track record.
We do not believe their operating model is capable of successfully realizing the value of global M&A, particularly when Barrick is still in the very early days of integrating their own transformational transaction. Barrick's motivation is to be the biggest and deprive Newmont shareholders of the benefits of the Goldcorp transaction. While Barrick is going through a time of great change, one of the major factors that hindered Barrick's ability to create value in the past remains the same. Turning to slide six. John Thornton is still firmly in control of Barrick. There have been numerous missteps, and the exchange ratio chart on the slide speaks for itself to the value destruction overseen by Mr. Thornton. Although Barrick's transaction with Randgold resulted in new management, we have no reason to think that investors should have any more confidence in Barrick's ability to effectively operate a global portfolio.
Turning to slide seven. There is no doubt that Mark has been successful as an explorer and a geologist. He entered into a number of great joint ventures that created value for Randgold shareholders. However, the numbers do not lie. As an operator, he has not created shareholder value, and he has yet to prove that he can successfully manage or integrate a global portfolio. Turning to slide eight. We believe that Barrick is attempting to bite off substantially more than they can chew. Barrick's new management has no experience integrating acquisitions. Additionally, prior to assuming his new role at Barrick just two months ago, Mark managed only five assets on one continent.
He has never managed a global portfolio like Barrick's, with 24 assets in 15 countries across five continents, let alone the scale or complexity contemplated by Barrick's proposal, the total of 37 assets on five continents. Barrick's poor ESG performance is also another risk to value creation. Turning to slide nine. In our industry, ESG performance is an increasingly important element of creating value for our shareholders, attracting investment, and maintaining social license with communities. Barrick's ESG performance underperforms with a 60 rating on Sustainalytics. At Newmont, ESG performance is important to us, and we're proud of our track record in this regard. We've been named the fourth most transparent company in all of the S&P 500, and we have a 95 Sustainalytics score. Newmont has also been the recognized ESG leader in the metals and mining sector by the Dow Jones Sustainability World Index for an unprecedented four consecutive years.
We integrate sustainability into all aspects of our business because it's the right thing to do for our shareholders and other stakeholders. Like Barrick's proposal, their ESG performance carries significant risks for Newmont shareholders. Turning to slide 10. In addition to the risks I've previously mentioned, Barrick's portfolio includes numerous unfavorable jurisdictions with several ongoing and significant operational and sustainability problems. Barrick's proposal would expose Newmont shareholders to some of the most high-risk jurisdictions in the gold mining industry, including the DRC, Tanzania, Mali, and Papua New Guinea, among others. As we have detailed, Barrick's management team lacks experience integrating and managing a global portfolio. To put it simply, the Goldcorp transaction is superior for Newmont shareholders on all relevant metrics. Turning to slide 11.
Newmont Goldcorp offers shareholders superior accretion, share of achievable synergies, a stable and experienced team, share price performance, a track record of delivering results, ESG performance, a long-term plan, and a superior portfolio and risk profile. The Goldcorp transaction still allows Newmont and Barrick shareholders to capture the synergies in Nevada through the joint venture we have proposed, while avoiding the significant risks of a hostile takeover attempt. Turning to slide 12. Over the last six years, Newmont has executed on our strategy to position our business for long-term success with a world-class portfolio of assets. The Goldcorp transaction advances that strategy. Goldcorp has a strong portfolio of world-class assets in world-class jurisdictions, and it appears that Mark agrees. Turning to slide 13.
In this email from Mark Bristow to Ian Telfer in May 2017, Mark writes, "In Goldcorp, you have assembled a strong portfolio of assets located in world-class districts." He goes on to say, "This is a testament to the company's assets and potential." I'll now turn it over on slide 14 to Tom Palmer to walk through additional details regarding the superior Newmont Goldcorp combination.
Thanks, Gary. As you know, we take a very disciplined approach to the financial targets we put out. When we announced the Goldcorp transaction, we outlined the initial process that we had undertaken to identify $100 million per annum in synergies. This estimate was to be largely achieved through G&A and did not factor in savings and efficiencies from implementation of our Full Potential program or all of the benefits of integrating the supply chain of Newmont and Goldcorp. Since announcing the transaction, we have completed a lot of integration planning. This has allowed us to provide even greater clarity around the value we expect to deliver. On top of the initial $100 million, we have identified a further $100 million per annum in supply chain improvements, made up of $90 million in procurement efficiencies and $10 million of inventory and system optimization.
As we've shared previously, there is an additional $165 million per annum in value by applying our proven Full Potential program to the Goldcorp assets. To put it all together, Newmont Goldcorp has to date identified a total of $365 million per annum in savings and efficiencies, representing value creation potential of over $4.4 billion, using the same time frames and discount rates applied by Barrick in their estimates. Importantly, the Goldcorp transaction is more accretive to Newmont shareholders. Turning to slide 15. The Goldcorp transaction generates nearly twice the accretion to Newmont's net asset value per share and 2020 cash flow per share, even if you give Barrick full credit for their unilateral synergy estimates.
The Goldcorp transaction is much more accretive to Newmont shareholders and does not depend on achieving synergies from a management team that lacks global operating and transaction integration experience. In order to provide shareholders with additional information about the value we see in this combination, we are announcing our long-term outlook for Newmont Goldcorp. Turning to Slide 16. Here's a look at our combined Newmont Goldcorp production profile for the next seven years through to 2025. We expect to have stable long-term gold production of around 7 million-8 million attributable ounces per year before asset divestments and a detailed look at project optimization and resequencing. The orange dotted line shown here is the estimated gold equivalent ounce production from copper, silver, zinc, and lead, which will deliver an additional $1.5 billion in revenue per year.
This profile includes production from our combined existing operations as well as the current and midterm projects. The current projects include Borden, Quecher Main, and the Ahafo Mill expansion, and the green layer shows production from midterm projects, which include Tanami Expansion 2, Yanacocha Sulfides, Ahafo North, and Coffee. Our average annual attributable development capital to support the current and midterm projects will be approximately $600 million per year. Overall, Newmont Goldcorp's stable asset base and robust project pipeline represents a distinct competitive advantage. Turning to slide 17. We are well-positioned for the long term. As you can see, over the next seven years, we anticipate producing 7 million-8 million attributable ounces of gold annually. All-in Sustaining Costs also steadily improve from $945 an ounce in 2019 to $830 an ounce in 2025.
Noting again that these figures do not include the impact of potential divestitures and additional project optimization and resequencing. We think a fair question for investors to ask Barrick is where is their long-term guidance? Turning to slide 18. Both Barrick and Randgold were experiencing declining production leading up to their transaction, and their 2019 guidance disappointed the market. Turning to slide 19. Barrick is trying to tell you that bigger is better. We simply don't agree and believe that competition is good for both the industry and for investors. Our company's risk profiles are distinctly different, as are our operating models, as well as our jurisdictional and political risks and our approaches to governance and ESG. However, we can still realize the vast majority of the synergies of Barrick's proposal through a JV of Newmont and Barrick's Nevada-related operations working together to deliver that value potential.
We simply do not agree that a whole company transaction is in the best interest of Newmont shareholders. However, we recognize that substantial benefits can and should be realized for both Newmont and Barrick shareholders through the Nevada JV. There is no reason we shouldn't be able to find a solution that unlocks the value of our respective Nevada operations for both sets of shareholders. Mark Bristow built Randgold on partnerships. 100% of Randgold assets were JVs. Today, 2/3 of Barrick Gold assets are joint ventures. In fact, we have two of them with Barrick. Contrary to recent comments from Barrick's representatives, we have long been open to working constructively with Barrick to achieve potential synergies in Nevada. In fact, we're actually doing work together on the ground today in western Nevada.
We were hopeful that with new management at Barrick, we would have a willing partner to sit down with and come to terms on an agreement. In that regard, we have submitted a term sheet to Barrick today for a JV of our Nevada-based operations and made that term sheet available publicly. Turning to slide 20. The proposed JV is modeled on similar terms to other successful joint ventures, including ones that Barrick has with Newmont and Goldcorp. The full terms are available on our website, but to summarize, each party will contribute all Nevada-related assets and liabilities to the joint venture. Newmont would hold an economic interest of 45% and Barrick 55%. This economic split is based on consensus NPVs and an equal split of Barrick's estimated synergies.
Governance would include a management committee and technical committee with equal representation, enabling Newmont to provide input and leverage our technical expertise, which is critical to maximizing the benefits of the JV. Operational management roles would be jointly agreed upon, and they would be responsible for day-to-day operations and decision-making. We currently have two joint ventures with Barrick, one at KCGM and a second at Turquoise Ridge.
Having had accountability for KCGM for the past five years and our Nevada operations for the past three years as part of my global portfolio, I know both of these JVs and how well our teams work together on the ground. With this experience, I am very confident that if we allow our operating teams in Nevada to come together with an appropriate level of oversight from the parent companies, that they will work constructively to unlock the synergy value on behalf of our shareholders. This can be done without being exposed to the significant risks of Barrick's proposal. Turning to slide 21. Contrary to what others will tell you, Carlin is a highly complex ore body, where geochemistry is more important than gold grade. Consequently, it will take technical expertise and know-how to fully realize the potential synergies.
When you look at the combination of open pits, underground mines, and processing plants, achieving these synergies is not as simple as tearing down a fence. To confirm, we're ready to sit down with Barrick and quickly finalize an agreement to start realizing the benefits for our shareholders. The Goldcorp transaction and Nevada JV with Barrick are mutually exclusive. Newmont shareholders can benefit from both. With that, I'll turn it back to Gary on slide 22.
Thanks, Tom. I'll wrap up by identifying the real missing billions, $12 billion of value. That is the value that Newmont's proven operating model has outperformed Barrick by following the termination of merger discussions. Since January 2014, Newmont has delivered shareholder returns of 65%, compared with Barrick's negative 22% over that same period and Randgold's 8%. At Newmont, we have effectively managed our global operations, and through operating discipline, we have delivered for our shareholders. Barrick simply has not. The chart demonstrates this with just a few lines. In contrast to the significant risks we have detailed of the Barrick approach, the Goldcorp transaction represents a world-class opportunity for Newmont shareholders. Finally, turning to slide 23.
The transaction with Goldcorp creates the strongest portfolio of operating gold mines, projects, and reserves in favorable jurisdictions, will target sustainable long-term production of 6 million-7 million ounces of gold annually and will deliver stable free cash flow from this steady production, as well as improving costs over a decades-long time horizon. The Goldcorp transaction, which is expected to close in the second quarter, is immediately and significantly accretive. We have identified $4.4 billion of synergies and Full Potential improvements. Newmont's proven and scalable operating model provides a clear path to delivering these benefits and achieving a successful integration and will have an industry-leading dividend and an investment-grade balance sheet. We are confident that the Goldcorp transaction represents the best opportunity to create value for Newmont shareholders, and we look forward to realizing the significant benefits of the combination.
With that, we'll open the line for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause to assemble our roster. Our first question comes from Matthew Murphy of Barclays. Please go ahead.
Morning. I am wondering if you can provide any color on your thoughts on some of the concerns Barrick has raised about a JV structure, I mean, duplicate administration, et cetera, on how you think you can avoid that under your proposal.
Thanks, Matthew. I think the key for us is we've patterned this proposal across what we've seen and experienced and been involved in terms of successful joint ventures, where you put the best of both teams working together to create the best value for both companies at the end of the day.
Matt, Tom Palmer here. We also look at our experience working with Barrick in both Turquoise Ridge and KCGM and just see the value of the best operating people coming together and delivering value for both sets of shareholders. The other value that we bring is, as I talked about in one of my slides, it is incredibly complex in Nevada. You need really, really capable mining, processing, and asset management folks. Attracting and retaining those folks and keeping them in places like Elko can be difficult. The access to our technical team and the advice and experience that they can bring to ensure the value comes out of Nevada is a critical element of this JV proposal.
To be crystal clear, we can do both of these things. We can deliver the value from the Goldcorp transaction, and we can work with Barrick to deliver the value from the synergy potential in Nevada.
Okay. Just on the valuations, I'm interested in your thoughts on using consensus NPVs and, let's imagine in a scenario where Barrick says, "We're not interested in the JV, but we would talk about an acquisition of Nevada." How you look at these consensus NPVs?
Matthew, frankly, since we've never been able to sit down and have a decent discussion around valuations and understand each other's assets, the best thing we had available was consensus NAV to go off of, and that's what we've used.
Okay, thank you.
Thanks.
Our next question comes from John Bridges of JPMorgan. Please go ahead.
Hi. Morning, Gary, Tom. Sorry about sound quality, I'm out of the office. Like the JV idea. I just wondered if you could talk a little bit about the sort of apples-to-apples comparison on the synergies. There were different methodologies there which led to different numbers, which I just wondered if you'd had time over the weekend to sort of come to some sort of conclusion as to what an apples-to-apples comparison was. Thank you.
Yeah. John, at the end of the day, we looked at things from our standpoint as we know them. We've not been able to sit down to be able to analyze what they've put together because they've not been willing to sit down with us. I think that's really the logical next step to be able to work out an apples-to-apples comparison.
Okay. Thanks, Gary.
Our next question comes from Fahad Tariq of Credit Suisse. Please go ahead.
Fahad? Fahad, are you there?
Yep. Can you hear me?
Now we do. Go ahead.
Yeah, sorry about that. Thanks for taking my question. On slide 21, you highlight maybe some challenges in optimizing Nevada. What is the confidence level on the $4.7 billion synergy estimate that Barrick has put out? Is that a number that you're comfortable with? I know it's feeding into the valuation. Secondly, the timeframe for the cadence of the synergies they've outlined, quite clearly in the presentation. Any color on the confidence around some of those numbers would be helpful. Thanks.
Fahad, Tom here. I'd provide the same answer as Gary gave to John, which is, we really need to sit down across the table and talk through those synergy numbers. What I would say is that a significant amount of the synergy is going to come from recovery and grade. To extract, the gold from the ore in Nevada is complex, and you need to have your best technical people involved. There's significant execution risk if you don't understand that issue and ensure you've got the best technical people involved. We have, within Newmont, people who have 30-plus years of experience operating those mines and processing plants, and they will be key to unlocking the potential value from a combined set of mines and processing plants.
That's helpful. Just a quick housekeeping. On slide 25, you provide the outlook for Newmont and Goldcorp combined, which I believe for the CapEx is slightly different than the proxy or different than the proxy. I just want to confirm, from a modeling perspective, it should be that we look at this, not the proxy. Is that right?
That's exactly right, Fahad.
Okay, thanks.
Use this guidance for modeling.
Thank you.
Our next question comes from Josh Wolfson of Desjardins. Please go ahead.
Thank you. A couple of questions. First off, for the assets that would be within the proposed joint venture, and I guess incorporated within that 55/45 split, does that include your assets, Phoenix, Long Canyon and Cripple Creek?
Tom here. Yes, it does. Cripple Creek and Victor and its concentrate and the heat value of its sulfur is an essential element of extracting the full value out of Nevada.
Okay.
As well as Long Canyon, Josh. You didn't mention Long Canyon.
Second, it might be a bit early, but have the two groups or yourselves looked into what the anti-competition or regulatory risks would be with this proposal, I guess especially with the labor risks there or the unionization risks as well?
Those are all things we'd need to sit down and address, though, in situations that I've been involved in putting together operations in joint ventures, whether it's in coal fields in Australia or the U.S., those have not been issues.
Lastly, I think there was a discussion of capital spending or project capital spending of roughly $600 million over the forecast period of 2019 to 2025. That seems a bit lower, I think, than what was previously stated. Is it safe to assume that the capital spending would be higher earlier, over the period that's been provided?
No, this is attributable capital, to be clear. As we continue to work through, we've provided some project smoothing in here and resequencing that's allowed us to take that number down a bit from what we've been talking about.
The number you're seeing there also, Josh, is just the development capital.
Okay. That's all my questions. Thank you very much.
Thank you.
Again, if you have a question, please press star, then one. Our next question will come from Brian MacArthur of Raymond James. Please go ahead.
Good morning. I'm just curious, I thought the royalty was interesting thing to throw into the mix. Is there anything magical about 1.5%? I assume it's all negotiable. The second part, you talk about reserves and resources. Is that only inferred resources, or you mean things are done at different prices or whatever? How you conceptually think of that?
Yeah. The simple answer to that, Brian, is we both have our published mineral reserves and resources in Nevada and the Nevada related properties. Anything beyond that, the idea is to use the royalty to address in case there's additional reserves or resources found in other areas that ultimately get processed, so that each of us gets proper credit for what we contribute to the joint venture.
Great. Thank you.
Our next question comes from Carey MacRury of Canaccord Genuity. Please go ahead.
Hi. Good morning. Just a question on the costs on slide 25, the pro forma longer-term outlook. Goldcorp does their cost on a byproduct basis. Are we to assume that those are done the same way that each company does it today, or is this under U.S. GAAP and sort of restated?
Yeah. What we've done is put it in the form that we would report, so it's co-product basis, for those that are large contributors. For smaller amounts like silver, like we already do with our existing cost estimates at Newmont, it would be byproduct basis.
There's no byproduct credit for the zinc or lead out of Peñasquito?
Correct. This is co-product accounted for here. Yes.
This is in the Newmont reporting format.
Okay. Secondly, with the Nevada split, 55/ 45, you're effectively giving up operational control in Nevada, and yet, given your history of running some of these facilities, do you see there any risks around that?
What we've proposed in the JV is equal representation on the management committee and the technical committee. Then we appoint an operating group that run the business. We bring our management expertise and our technical expertise and our environmental expertise and our safety expertise to the table. It's a equal representation on those key committees.
Ultimately, isn't the voting power 55/ 45?
Yes.
Yeah, that's right.
Yeah. Okay. All right, great. Thank you.
If you have a question, please press star then one. Our next question will come from Chris Terry of Deutsche Bank. Please go ahead.
Hi, Gary. Hi, Tom. Just the slide 16, just looking at the production profile that you have overall, talking about the 7 million-8 million sort of range and then squaring that with the 6 million-7 million . Just to be clear, the only difference there is that you still would plan divestments under the Goldcorp Newmont transaction, is that correct?
Correct. We've not gone through and optimized either the projects or gone through and made any adjustments for any potential divestments.
Chris, we talk about getting into that 6 million-7 million zone over the long run. As we look to do that project optimization resequencing over the long run, so a longer time period than this seven-year outlook, you can expect us to be in that 6 million-7 million ounce range.
Okay, thanks. That's helpful. Just on coming back to the Nevada JV, the 45/55 split, and the way that you've structured it, are you flexible, presumably if Barrick come back and want to negotiate that, are you flexible on the terms and how that all comes through? Or is that your sort of first and final offer on how we think about it? The other part to the question is, do you look at Nevada as an all or nothing deal? Does it have to include every piece, or could you do a partial deal, depending on how Barrick come back?
No, I think, Chris, it's all open. We need to really sit down, as I've been saying, sit down with them to discuss the details. In terms of all or nothing, we have a great joint venture in Western Nevada already at Turquoise Ridge that's working well. This is really in regards to taking a bigger look at the rest of Nevada and what might be possible.
Okay. Thanks, guys.
Thanks, Chris.
This concludes our question and- answer session. I would like to turn the conference back over to Gary Goldberg for closing remarks.
Thank you for your time today and your interest in the Newmont Goldcorp strategic combination.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.