Newmont Provides Updated 2019 and Longer-term Outlook

DENVER–(BUSINESS WIRE)–Newmont Mining Corporation (NYSE: NEM) (Newmont or the Company)
announced its 2019 outlook1 with attributable gold production
guidance of 5.2 million ounces at AISC2 of $935 per ounce.

Highlights

  • Gold costs applicable to sales (CAS): CAS guidance is $710 per
    ounce for 2019 and $750 per ounce for 2020; CAS is expected to be
    between $690 and $740 per ounce longer-term through 2023.
  • Gold all-in sustaining costs (AISC): AISC guidance is $935 per
    ounce for 2019 and $975 per ounce for 2020; AISC is expected to be
    between $875 and $975 longer-term through 2023.
  • Attributable gold production3: Production
    guidance is 5.2 million ounces for 2019 and 4.9 million ounces in
    2020; longer-term production is expected to remain stable at between
    4.4 and 4.9 million ounces per year through 2023.
  • Capital: Total consolidated capital guidance for 2019 is $1,070
    million and $730 million in 2020; capital is expected to be between
    $500 and $600 million longer-term through 2023. Development capital
    includes the Ahafo Mill Expansion in Africa, Tanami Power4
    in Australia and Quecher Main in South America as well as expenditures
    to advance studies for future projects. Sustaining capital guidance is
    $680 million for 2019 and $660 million for 2020; longer-term
    sustaining capital is expected to be between $450 and $550 million
    through 2023.

“Our proven strategy will deliver stable gold production at competitive
costs over at least the next five years as we continue to deliver
value-accretive projects across our four regions,” said Gary J.
Goldberg, Chief Executive Officer. “Our investment grade balance sheet
and ample liquidity means we are well positioned to invest in profitable
growth and simultaneously return cash to shareholders through our
industry leading dividend5. Newmont remains focused on
leading the gold sector in profitability and responsibility through the
next generation of mines, technology and leaders.”

__________________________

1

 

Outlook guidance used in this release are considered
“forward-looking statements” and users are cautioned that actual
results may vary; refer to the cautionary statement at the end of
this release.

2

AISC as used in the Company’s outlook is a non-GAAP metric
– see below for further information and reconciliation to CAS
outlook. 2019 AISC outlook presented has been revised to reflect a
differentiation of exploration and advanced project expenses as
sustaining versus non-sustaining.

3

Production outlook does not include equity production from
stakes in TMAC (28.68%) or La Zanja (46.94%).

4

Includes $225-$275M for capital leases related to the
Tanami Power Project paid over a 10 year term beginning in 2019.

5

2019 dividends have not yet been declared by the Board of
Directors and remain subject to approval: refer to cautionary
statement at the end of this release.

 

Outlook

Newmont’s outlook reflects steady gold production and ongoing investment
in its operating assets and most promising growth prospects. Newmont
does not include development projects that have not yet been funded or
reached execution stage in its outlook which represents upside to
guidance.

Attributable gold production is expected to be 5.2 million ounces
in 2019, primarily driven by a full year of higher grade production from
the recently completed Subika Underground project in Africa. Production
is expected to be 4.9 million ounces in 2020 and longer-term production
is expected to remain stable at between 4.4 and 4.9 million ounces per
year through 2023 excluding development projects which have yet to be
approved.

  • North America production is expected to be 1.9 million ounces in 2019
    as higher grade production from Northwest Exodus and Twin Underground
    are offset by the depletion of Silverstar ore at Carlin and lower gold
    production at Phoenix as mining shifts to higher copper grade ore from
    the Bonanza pit. Production remains at 1.9 million ounces in 2020 and
    2021 as higher grades at Long Canyon following the stripping campaign
    help offset lower grades at Cripple Creek & Victor (CC&V). North
    American production may be impacted by the Gold Quarry wall slip and
    mine plan optimization work is ongoing. The Company continues to
    pursue profitable growth opportunities at Carlin, Long Canyon, CC&V
    and Galore Creek.
  • South America production is expected to be 650,000 ounces in 2019 as
    productivity improvements at Merian offset the transition to harder
    ore. Production is expected to decrease to 560,000 ounces in 2020 and
    450,000 ounces in 2021 as the Tapado Oeste pit and Yanacocha laybacks
    are mined out and Merian transitions from saprolite to hard rock. The
    Company continues to advance near-mine growth opportunities at Merian
    and both oxide and sulfide potential at Yanacocha.
  • Australia production is expected to be 1.5 million ounces in 2019 with
    higher grades and throughput and productivity gains at Tanami, offset
    by lower mining rates at KCGM following the wall slips and the
    continuation of stripping at Boddington. Production is expected to be
    1.5 million ounces in 2020 and 1.6 million ounces in 2021 as
    Boddington accesses higher grade ore. KCGM’s near-term production has
    been lowered due to the wall slips, but optimization work continues to
    recover the impacted ounces as part of the broader Golden Mile Growth
    Study. The Company continues to advance studies for a second expansion
    at Tanami and expects to reach a full-funds decision in the second
    half of 2019.
  • Africa production is expected to be 1.1 million ounces in 2019 with a
    full year of production from Subika Underground, higher grades from
    the Subika open pit and improved mill throughput in the second half of
    the year with the mill expansion. Production is expected to be 930,000
    ounces in 2020 with lower grades at Akyem and Subika open pit which
    are partially offset by higher underground grades at Ahafo and a full
    year of production from the Ahafo Mill Expansion. In 2021, production
    is expected to be 1 million ounces as Akyem reaches higher grades near
    the bottom of the pit. The company continues to advance the Ahafo
    North project and other prospective surface and underground
    opportunities.

Gold cost outlook CAS is expected to be $710 per ounce
for 2019 following higher production at Ahafo, lower mining costs at
Yanacocha and lower operational costs at Tanami with the completion of
the Tanami Power Project. The Company continues to implement Full
Potential cost and efficiency improvements and advance technology
initiatives to offset inflation and input cost pressures. CAS is
expected to be $750 per ounce for 2020 and between $690 and $740 per
ounce longer-term through 2023. AISC is expected to be $935 per ounce in
2019 on improved CAS in Africa and South America partially offset by
higher sustaining capital. AISC is expected to be $975 per ounce in 2020
and between $875 and $975 longer-term through 2023. Future Full
Potential savings and profitable ounces from projects that are not yet
approved represent additional upside not currently captured in guidance.

  • North America CAS is expected to be $785 per ounce in 2019 as lower
    leach grades drive inventory cost increases at CC&V which are
    partially offset by cost improvements across the other North American
    operations. CAS is expected to be $760 per ounce in 2020 and $790 per
    ounce in 2021 with higher production at Twin Creeks as the Turquoise
    Ridge Joint Venture (TRJV) optimization project ramps up. AISC is
    expected to be $975 per ounce in 2019 on improved unit CAS. AISC is
    expected to be $925 per ounce in 2020 and 2021. North American CAS and
    AISC guidance may be impacted by the Gold Quarry wall slip and mine
    plan optimization work is ongoing.
  • South America CAS is expected to be $640 per ounce in 2019 driven by a
    lower stripping ratio at Yanacocha partially offset by higher labor
    and mill maintenance costs at Merian. CAS is expected to increase to
    $825 per ounce in 2020 with higher inventory costs and strip ratio at
    Yanacocha. CAS is expected to be $830 per ounce in 2021 as Merian
    fully transitions into harder rock which is partially offset by lower
    operating costs at Yanacocha as the oxide mill shuts down. AISC is
    expected to be $800 per ounce in 2019 due to lower CAS and sustaining
    capital. AISC is expected to be $995 per ounce in 2020 and $1,000 per
    ounce in 2021 on higher CAS and increases in sustaining capital.
  • Australia CAS is expected to be $775 per ounce in 2019 driven by
    increased stripping at Boddington and the drawdown of lower grade
    stockpiles at KCGM, partially offset by higher production and lower
    power costs at Tanami from switching to natural gas. CAS is expected
    to be $750 per ounce in 2020 and $645 per ounce in 2021 as Boddington
    reaches higher grades. AISC is expected to be $945 per ounce in 2019
    on increased CAS. AISC is expected to be $925 per ounce in 2020 and
    $800 per ounce in 2021.
  • Africa CAS is expected to be $570 per ounce in 2019 due to higher
    grades from Subika Underground and Subika open pit and the Ahafo Mill
    Expansion coming online. CAS is expected to be $660 per ounce in 2020
    and $625 per ounce in 2021 with mine sequencing at the Ahafo and Akyem
    pits driving production changes. AISC is expected to be $735 per ounce
    in 2019 on improved unit CAS, partly offset by higher sustaining
    capital for the Ahafo tailing storage facility expansion. AISC is
    expected to be $830 per ounce in 2020 and $780 per ounce in 2021.

Copper – Attributable production is expected to be 45,000
tonnes in 2019 and 2020 as Phoenix reaches higher copper in Bonanza ore
which is offset by lower production at Boddington. Copper production
increases to between 45,000 and 65,000 tonnes longer-term through 2023
driven primarily from higher grades at Boddington following completion
of the next stripping campaign. CAS is expected to rise to $2.05 per
pound in 2019 and $2.10 per pound in 2020 due to higher stripping at
Boddington. CAS is expected to improve to $1.55 to $1.75 per pound
longer-term through 2023 as production at Boddington increases
offsetting lower copper grades at Phoenix. AISC is expected to rise to
$2.45 per pound in 2019 on increased CAS. AISC is expected to be $2.55
per pound in 2020 and $1.80 to $2.10 per pound longer-term.

Capital – Total consolidated capital is expected to be $1,070
million for 2019 and $730 million for 2020. Development capital of $390
million in 2019 includes investments in the Tanami Power Project in
Australia, Ahafo Mill Expansion in Africa, Quecher Main in South
America, and the TRJV third shaft in North America and expenditures to
advance studies for future projects. Development capital is expected to
be $70 million in 2020 and approximately $50 million longer-term until
additional projects are approved. Sustaining capital is expected to be
$680 million for 2019, $660 million for 2020 and between $450 and $550
million per year longer-term to cover infrastructure, equipment and
ongoing mine development.

Consolidated expense outlook – Interest expense increases to $215
million for 2019 from leases related to the Tanami Power Project and
lower capitalized interest. Investment in exploration and advanced
projects is expected to be $430 million in 2019 with increased near-mine
and greenfield exploration spend across all regions and higher advanced
project spend in North America. 2019 outlook for general &
administrative costs is stable at $245 million and guidance for
depreciation and amortization is expected to be $1,370 million as Subika
Underground and the Tanami Power Project come into service.

Assumptions and sensitivities Newmont’s outlook assumes
$1,200 per ounce gold price, $2.50 per pound copper price, $0.75 USD/AUD
exchange rate and $65 per barrel WTI oil price. Assuming a 35% portfolio
tax rate, $100 per ounce increase in gold price would deliver an
expected $335 million improvement in attributable free cash flow.
Similarly, a $10 per barrel reduction in the price of oil and a $0.05
favorable change in the Australian dollar would deliver an expected $25
million and $45 million improvement in attributable free cash flow,
respectively. These estimates exclude current hedge programs; please
refer to Newmont’s Form 10-Q which was filed with the SEC on October 25,
2018 for further information on hedging positions.

Projects update

  • Ahafo Mill Expansion (Africa) is designed
    to maximize resource value by improving production margins and
    accelerating stockpile processing. The project also supports
    profitable development of Ahafo’s highly prospective underground
    resources. First production is expected in the second half of 2019
    with commercial production also expected in the second half of 2019.
    The expansion is expected to increase average annual gold production
    by between 75,000 and 100,000 ounces per year for the first five years
    beginning in 2020. Capital costs for the project are estimated between
    $140 and $180 million with expenditure of approximately $35 to $45
    million in 2019. The project has an IRR of more than 20 percent.

    The
    Ahafo Mill Expansion, together with the Company’s recently completed
    Subika Underground project, will improve Ahafo’s production to between
    550,000 and 650,000 ounces per year for the first five full years of
    production (2020 to 2024). During this period Ahafo’s CAS is expected
    to be between $650 and $750 per ounce and AISC is expected to be
    between $800 and $900 per ounce. This represents average production
    improvement of between 200,000 and 300,000 ounces at CAS improvement
    of between $150 and $250 per ounce and AISC improvement of $250 to
    $350 per ounce, compared to 2016 actuals.

  • Quecher Main (South America) will add
    oxide production at Yanacocha, leverage existing infrastructure and
    enable potential future growth at Yanacocha. First production is
    expected in late 2018 with commercial production expected in the
    second half of 2019. Quecher Main extends the life of the Yanacocha
    operation to 2027 with average annual gold production of approximately
    200,000 ounces per year between 2020 and 2025 (100 percent basis).
    During the same period, incremental CAS is expected to be between $750
    and $850 per ounce and AISC between $900 and $1,000 per ounce. Capital
    costs for the project are expected to be between $250 and $300 million
    with expenditure of $95 to $105 million in 2019. The project IRR is
    expected to be greater than 10 percent.
  • Tanami Power (Australia) will lower
    Tanami power costs by approximately 20 percent beginning in the first
    quarter of 2019, mitigate fuel supply risk and reduce carbon emissions
    by 20 percent. The project includes a 450 kilometer natural gas
    pipeline that is under construction to connect the Tanami site to the
    Amadeus Gas Pipeline, and construction and operation of two on-site
    power stations. The gas supply, gas transmission and power purchase
    agreements are for a 10 year term with options to extend. The project
    is expected to result in net cash savings of approximately $34 per
    ounce beginning in 2019. Capital costs are estimated between $225 and
    $275 million with annual cash lease payments over a 10 year term
    beginning in 2019. The project IRR is expected to be greater than 50
    percent at $0.75 AUD.

2019 Outlooka

2019 Outlook +/- 5%    

Consolidated
Production

   

Attributable
Production

   

Consolidated
CAS

   

Consolidated
All-in Sustaining
Costsb

   

Consolidated
Sustaining Capital
Expenditures

   

Consolidated
Development Capital
Expenditures

      (Koz, Kt)     (Koz, Kt)     ($/oz, $/lb)     ($/oz, $/lb)     ($M)     ($M)
North America 1,935 1,935 785 975 280 15
South America 1,030 650 640 800 75 175
Australia 1,470 1,470 775 945 205

70

f

Africa     1,140     1,140     570     735     115       130  
Total Goldh     5,600     5,200     710     935     680       390  
                                     
Total Copper     45     45     2.05     2.45            
 
2019 Consolidated Expense Outlooki ($M)
+/-5%
General & Administrative         245
Interest Expense 215
Depreciation and Amortization 1,370
Advanced Projects & Exploration 430
Adjusted Tax Expensej         210
 

2019 Site Outlooka as of December 6, 2018

   

Consolidated
Production

   

Attributable
Production

   

Consolidated
CAS

   

Consolidated
All-in Sustaining
Costsb

   

Consolidated
Sustaining Capital
Expenditures

   

Consolidated
Development Capital
Expenditures

      (Koz, Kt)     (Koz, Kt)     ($/oz, $/lb)     ($/oz, $/lb)     ($M)     ($M)
Carlin 895 895 850 1,050 150
Phoenixc 190 190 795 945 20
Twin Creeksd 325 325 670 850 40 15
CC&V 360 360 880 1,030 35
Long Canyon 165 165 430 505 10
Other North America                             25        
 
Yanacochae 510 265 720 900 25 175
Meriane 520 390 565 685 50
Other South America                                    
 
Boddington 680 680 960 1,090 75
Tanami 495 495 495 690 80

70

f

Kalgoorlieg 290 290 810 940 35
Other Australia                             15        
 
Ahafo 720 720 560 720 85 60
Akyem 420 420 580 730 25
Ahafo North 70
Other Africa                                    
 
Corporate/Other                             10        
 
Phoenix – Copper 20 20 1.80 2.15
Boddington – Copper     25     25     2.25     2.65            

a

 

2019 Outlook in the above table are considered “forward-looking
statements” and are based upon certain assumptions. For example,
2019 Outlook assumes $1,200/oz Au, $2.50/lb Cu, $0.75 USD/AUD
exchange rate and $65/barrel WTI; AISC and CAS estimates do not
include inflation, for the remainder of the year. Production, CAS,
AISC and capital estimates exclude projects that have not yet been
approved. The potential impact on inventory valuation as a result
of lower prices, input costs, and project decisions are not
included as part of this Outlook. Such assumptions may prove to be
incorrect and actual results may differ from those anticipated,
including variation beyond a +/- 5% range. Amounts may not
recalculate to totals due to rounding. See cautionary note at the
end of this release.

b

All-in sustaining costs or AISC as used in the Company’s
Outlook is a non-GAAP metric; see below for further information
and reconciliation to consolidated 2019 CAS outlook.

c

Includes Lone Tree operations.

d

Includes TRJV operations shown on a pro-rata basis with a 25%
ownership interest.

e

Consolidated production for Yanacocha and Merian is presented
on a total production basis for the mine site; attributable
production represents a 51.35% interest for Yanacocha and a 75%
interest for Merian.

f

Includes $225-$275M for capital leases related to the Tanami
Power Project paid over a 10 year term beginning in 2019.

g

Both consolidated and attributable production are shown on a
pro-rata basis with a 50% ownership for Kalgoorlie.

h

Production outlook does not include equity production from
stakes in TMAC (28.68%) or La Zanja (46.94%) as of September 30,
2018.

i

Consolidated expense outlook is adjusted to exclude
extraordinary items, such as certain tax valuation allowance
adjustments.

j

Consists of $75 of mining taxes and $135 of income taxes and is
based on a $1,200/oz. gold price and $2.50/lb. copper price.
Income taxes and mining taxes are particularly sensitive to
pricing and actual expense will vary if realized prices differ
significantly from these amounts.

 

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional
information only and do not have any standard meaning prescribed by U.S.
generally accepted accounting principles (GAAP). These measures should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. Unless otherwise noted, we
present the Non-GAAP financial measures of our continuing operations in
the tables below.

Costs applicable to sales per ounce/pound

Costs applicable to sales per ounce/pound are non-GAAP financial
measures. These measures are calculated by dividing the costs applicable
to sales of gold and copper by gold ounces or copper pounds sold,
respectively. These measures are calculated for the periods presented on
a consolidated basis. Costs applicable to sales per ounce/pound
statistics are intended to provide additional information only and do
not have any standardized meaning prescribed by GAAP and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. The measures are not necessarily
indicative of operating profit or cash flow from operations as
determined under GAAP. Other companies may calculate these measures
differently.

All-In Sustaining Costs

Newmont has developed a metric that expands on GAAP measures, such as
cost of goods sold, and non-GAAP measures, such as Costs applicable to
sales per ounce, to provide visibility into the economics of our mining
operations related to expenditures, operating performance and the
ability to generate cash flow from our continuing operations.

Current GAAP measures used in the mining industry, such as cost of goods
sold, do not capture all of the expenditures incurred to discover,
develop and sustain production. Therefore, we believe that all-in
sustaining costs is a non-GAAP measure that provides additional
information to management, investors and analysts that aid in the
understanding of the economics of our operations and performance
compared to other producers and provides investors visibility by better
defining the total costs associated with production.

All-in sustaining cost (AISC) amounts are intended to provide additional
information only and do not have any standardized meaning prescribed by
GAAP and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP. The measures
are not necessarily indicative of operating profit or cash flow from
operations as determined under GAAP. Other companies may calculate these
measures differently as a result of differences in the underlying
accounting principles, policies applied and in accounting frameworks
such as in International Financial Reporting Standards (IFRS), or by
reflecting the benefit from selling non-gold metals as a reduction to
AISC. Differences may also arise related to definitional differences of
sustaining versus development capital activities based upon each
company’s internal policies.

The Company recently revised its calculation of AISC to exclude
development expenditures related to developing new or major projects at
existing operations where these projects will materially benefit the
operation included in Advanced projects, research and
development 
and Exploration amounts presented in
the Consolidated Statements of Operations.

The following disclosure provides information regarding the adjustments
made in determining the all-in sustaining costs measure:

Costs applicable to sales. Includes all direct and indirect costs
related to current production incurred to execute the current mine
plan. We exclude certain exceptional or unusual amounts from Costs
applicable to sales 
(CAS), such as significant revisions to
recovery amounts. CAS includes by-product credits from certain metals
obtained during the process of extracting and processing the primary
ore-body. CAS is accounted for on an accrual basis and excludes Depreciation
and amortization
 and Reclamation and remediation,
which is consistent with our presentation of CAS on the Consolidated
Statements of Operations. In determining AISC, only the CAS associated
with producing and selling an ounce of gold is included in the measure.
Therefore, the amount of gold CAS included in AISC is derived from the
CAS presented in the Company’s Consolidated Statements of Operations
less the amount of CAS attributable to the production of copper at our
Phoenix and Boddington mines. The copper CAS at those mine sites is
disclosed in Note 3 to the Consolidated Financial Statements.

Contacts

Newmont Mining Corporation
Investor
Contact

Jessica Largent, 303-837-5484
jessica.largent@newmont.com

Media
Contact

Omar Jabara, 303-837-5114
omar.jabara@newmont.com

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