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Edited Transcript of NEM earnings conference call or presentation 5-Nov-19 4:00pm GMT

Q3 2019 Newmont Goldcorp Corp Earnings Call

GREENWOOD VILLAGE Nov 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Newmont Goldcorp Corp earnings conference call or presentation Tuesday, November 5, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jessica Largent

Newmont Goldcorp Corporation - VP of IR

* Nancy K. Buese

Newmont Goldcorp Corporation - Executive VP & CFO

* Robert D. Atkinson

Newmont Goldcorp Corporation - Executive VP & COO

* Thomas Ronald Palmer

Newmont Goldcorp Corporation - President, CEO & Director

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Conference Call Participants

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* Andrew Kaip

BMO Capital Markets Equity Research - MD of Mining ,Equity Research & Precious Metals Mining Analyst

* Anita Soni

CIBC Capital Markets, Research Division - Analyst

* Carey MacRury

Canaccord Genuity Corp., Research Division - Analyst of Metals and Mining

* Christopher Michael Terry

Deutsche Bank AG, Research Division - Research Analyst

* Greg Barnes

TD Securities Equity Research - MD and Head of Mining Research

* John Charles Tumazos

John Tumazos Very Independent Research, LLC - President and CEO

* Matthew Murphy

Barclays Bank PLC, Research Division - Analyst

* Michael Parkin

National Bank Financial, Inc., Research Division - Mining Analyst

* Tanya M. Jakusconek

Scotiabank Global Banking and Markets, Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to the Newmont Goldcorp's Third Quarter 2019 Earnings Call. (Operator Instructions) 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.

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Jessica Largent, Newmont Goldcorp Corporation - VP of IR [2]

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Thank you, and good morning, everyone. Welcome to Newmont Goldcorp's Third Quarter 2019 Earnings Conference Call. Joining us on the call today are Tom Palmer, President and Chief Executive Officer; Rob Atkinson, Chief Operating Officer; and Nancy Buese, 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 newmontgoldcorp.com. And now I'll turn it over to Tom on Slide 3.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [3]

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Thanks, Jess, and thank you all for joining our call. It has been just over a month since I moved into the CEO role, and I'm very honored to be only the tenth CEO in Newmont Goldcorp's almost 100-year history. And I am very excited about the strength of our portfolio, the capability of our people and the opportunities we have in front of us to safely deliver superior value for all our stakeholders.

Turning to the third quarter. We delivered solid performance and have made excellent progress in delivering on the value we promised to establish Newmont Goldcorp as the world's leading gold business. Recent highlights include completing 3 profitable projects on schedule and within budget; exceeding our commitments of value delivery from the Goldcorp acquisition through an acceleration of synergies and full potential improvements; closing the Nevada Gold Mines joint venture and contributing our Newmont Nevada assets in good order, and continuing to improve our safety performance in advancing our reputation for sustainability.

Turning to the details on Slide 4. In the third quarter, we produced 1.6 million ounces of gold and all-in sustaining cost of $987 per ounce, generating $1.1 billion in adjusted EBITDA and $365 million in free cash flow.

We completed site visits to support the sales process for our Red Lake operation. We commissioned 3 projects in Borden, the 0.5 million expansion in Quecher Main, and we approved the Tanami Expansion 2 project.

I'm pleased to report that we are exceeding our synergy targets from the Goldcorp acquisition with run rate improvements expected to reach $240 million by the end of this year including $60 million in quick wins from Peñasquito and Cerro Negro alone. We also continue to lead the gold sector in stewardship. We declared a quarterly dividend of $0.14 per share, putting us on course to return approximately $900 million to shareholders this year.

We maintain a strong balance sheet with over $5 billion of liquidity, and we were recognized as the top gold miner by the Dow Jones Sustainability Index for our leading ESG performance. Leading mining companies have at their core an unwavering commitment to safety and sustainability.

Turning to Slide 5. As Chief Executive Officer, you can expect from me a relentless focus on ensuring that everyone who works in our business can do so safely through our leadership and through the systems and processes we put in place to manage risk. There is nothing more important.

My expectation is that everyone who works in our business understand the fatality risks associated with their work and are ensuring that the critical controls that are required to manage them are in place at all times. A robust safety culture is one that constantly reinforces key systems, safe behavior and actively shares lessons learned from serious incidents. This is fundamental to the well-being of our people and underpins our operating performance.

Turning to a look at our global portfolio on Slide 6. We have the strongest and most sustainable portfolio in the industry. Our assets are located in the most balanced and favorable jurisdictions in the world with 14 operated mines and 2 nonoperated joint ventures. With more than 90% of our reserves in the Americas and Australia, our global position provides an unmatched platform for near-mine brownfields and greenfield exploration.

As announced in September, we have initiated a sales process for Red Lake, and interested parties have now completed their site visits. We have also divested our position in the Nimba iron ore project in Guinea and are strategically reviewing our equity investment portfolio.

Turning to our industry-leading project pipeline on Slide 7. We had the deepest pipeline of world-class projects in the gold industry, giving us significant project sequencing flexibility. We will continue to apply a disciplined and rigorous approach to optimize these projects and advance them through our investment system. Consistent project delivery and disciplined operational execution remain the cornerstones of our business and are central to creating long-term shareholder value.

This year, we have successfully delivered 4 projects on 4 continents. And in the past month alone, declared commercial production for 3 of these projects: Quecher Main, the Ahafo Mill Expansion and Borden.

Quecher Main was safely delivered on schedule and under budget and is on track to generate an internal rate of return of 15%, an improvement from 10% when we approved the project just 2 years ago. Our Ahafo Mill Expansion was also brought online within budget for approximately $175 million, increasing mill capacity to nearly 10 million tonnes per annum whilst adding 75,000 to 100,000 ounces per year of annual gold production from 2020 to 2024.

And at Borden, we are extending the life of the Porcupine complex and leading the advancement of safe and sustainable underground mining globally through state-of-the-art health and safety controls, digital mining technologies and processes, and low-carbon emission vehicles.

We have also continued to advance profitable growth. Last month, our Board unanimously approved moving the Tanami Expansion 2 project into the execution phase. We are very excited about this project's ability to extend life beyond 2040 at our world-class Tanami Mine in our core Newmont region. This project also provides a platform for us to further explore our prolific mineral endowment at Tanami. We will provide further details on this project in the context of our long-term guidance at our webcast in December.

For our 2 midterm projects, Yanacocha Sulfides and Ahafo North, we continue to advance and optimize them through our definitive feasibility study work.

Finally, looking in -- at the earlier stage projects in our pipeline, we are taking a patient and deliberate approach to optimizing and sequencing our larger projects including Nueva Unión, Galore Creek and Norte Abierto. These projects will compete for future capital investment that we are proactively engaging with our joint venture partners to ensure that the projects only advance after specific hurdles are achieved.

Our robust project pipeline is a key differentiator in the gold industry and provides us with a solid pathway to steady production and cash flow generation for decades to come.

Turning to Slide 8 for a look at progress on the Goldcorp integration. I'm very pleased with the pace at which we are delivering value from this acquisition. On the G&A front, we have both accelerated and increased the total synergies to $120 million per annum. This is $35 million and more than 40% higher than our initial $85 million commitment.

For supply chain, our team is actively targeting value across several fronts including quick wins through the extension of best pricing and rebates and leveraging our increased scale and volume to reduce our input costs. Our world-class exploration team has identified over $25 million of annual program efficiencies, a figure that wasn't considered in our initial commitment.

Our full potential program is well and truly underway at the former Goldcorp operations. We are seeing the same opportunities at these new operations to those that we have delivered from Newmont's assets over the last 7 years, and we are able to accelerate value delivery by leveraging this experience.

We launched Full Potential at Peñasquito at the start of June and have had Newmont's strongest team on the ground supporting the site during a diagnose-and-design work. We have made excellent progress, and the site is tracking to achieve $50 million in quick win improvements this year alone. Full Potential has now moved into the deliver phase at Peñasquito.

At Cerro Negro, Full Potential was kicked off in July and the site is tracking to achieve $10 million in improvements that we also expect to achieve this year. In just 6 months since we acquired Goldcorp, we are exceeding our commitments and are tracking towards delivering $240 million in annual run rate improvements by the end of this year. This is 2/3 of the commitment we made for the end of 2021 after only 6 months.

With that, I'll turn it over to our Chief Operating Officer, Rob Atkinson, on Slide 9 to review our operational performance.

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [4]

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Thanks, Tom. Since June, I've had the opportunity to visit all of our sites, and the observations and discussions I had as a result have informed my immediate priorities. My highest priority is a renewed and relentless focus on safety, followed by ensuring that we are demonstrating a high level of visible and felt leadership in the field.

Secondly, it will be about focusing on the basics to ensure we not only hit our plan, but we better it. Thirdly, we need to collaborate more across our regions to learn from each other as the whole is worth more than the sum of the parts. And finally, a strong focus on improving productivity day in and day out.

As COO, I'm very much looking forward to investing in our people and local communities and raising our performance to drive greater value from what I believe to be an exceptional asset base.

Before reviewing our third quarter operational performance I'd like to congratulate Dan Janney, our new Regional Senior Vice President of the North America region. Dan is an accomplished miner with 27 years of global mining operations experience and most recently was a key Newmont leader in Nevada. He has successfully led teams to deliver step-change improvements in safety, efficiency and productivity, and his appointment reflects our intention to safely improve costs and accelerate operational and efficiency improvements at our 6 mines in North America.

I'll now provide an overview of the North America sites on Slide 10. In North America, our teams are focusing on safety and operational execution. As we work to overcome headwinds and deliver a strong end to 2019 and importantly, to set ourselves up for long-term success.

At Peñasquito, an illegal blockade began on September 14, resulting in a third quarter production shortfall of 11,000 gold ounces and 51,000 gold equivalent ounces from silver, lead and zinc. The blockade was lifted on October 8, and we started shipping concentrate immediately after the blockade was lifted.

I'm pleased to say progress has been made with both the federal and state governments to help ensure the rule of law is upheld to enable a sustainable operating environment.

On October 22, we began restarting operations. And yesterday, we also restarted government-sponsored discussions with members of the Cedros community exclusively, and I look forward to reaching a sustainable and long-term win-win solution to this local issue.

The site is now safely back to full operation. The stripping campaign in the main Peñasco pit is nearing completion, and we expect to maintain higher grades in the fourth quarter and into 2020. As Tom mentioned, our Full Potential work at Peñasquito has firmly moved into the deliver phase with the $50 million of quick win improvements. I'm very excited about the team's work to progress the incremental $200 million of cost and productivity initiatives. Similar to Boddington 6 years ago, the majority of the improvements are expected to come from the mill with a focus on increasing throughput and reducing maintenance downtime.

At Porcupine, we achieved commercial production at the Borden underground mine on October 1. Ore from Borden is processed at the existing Porcupine mill and will extend profitable production at the mining complex in Timmins, Ontario. We also see exploration upside at Borden as the deposit remains open at depth.

At Musselwhite, rehabilitation work is nearing completion, and we recently executed contracts for engineering, construction and the installation of the new conveyor system. Whilst the replacement of the conveyor is underway, we are getting ahead on development and building inventory to sustainable levels.

As we head into next year, we plan to have 3 or 4 stopes available at any one time. And going forward, very importantly, our plan is to be 18 months ahead on development work. Musselwhite is currently operating in a mining area halfway down the mine, as we also continue to push the main decline and exploration drift at the bottom of the mine in order to improve and ensure mining and [ore] flexibility in the future.

We expect to begin recognizing production and sales in the second quarter of 2020 once the mill is processing the stockpile material we are currently trucking to surface, and we will be back to normal operations in early October when we bring the conveyor back online.

The Musselwhite Materials Handling project is tracking to be fully operational by mid-2020 with the shaft installation nearing completion and dry commissioning of the new crushing and conveyor systems well underway.

At Éléonore, mining continues in Horizon 5, and we expect to reach higher grades in the fourth quarter. However, third quarter production was slightly lower than expected due to mine sequence. The operation is developing an integrated geotechnical and mine planning system to determine the optimal approach for safely and sustainably progressing through the lower zones to minimize mining-induced stresses.

Full Potential has now commenced at Éléonore, and we are progressing the key diagnose phase of this program, and we are leveraging our experience from all of our other underground mines to identify the highest-value improvement opportunities.

At Red Lake, operations fully resumed in October after we completed work to install additional safety controls at lower levels of the mine, and we recently recommenced mining of Cochenour. As the sales process progresses, we continue to focus on the safe and efficient operation of this mine.

Finally, at CC&V, we expect to finish the year strongly as we recovered the [faired] ounces from the VLF1 leach pad.

Now to discuss our South America operations on Slide 11. At Merian, we delivered steady third quarter performance with sustained improvements in mine productivity and mill performance. We're now transitioning into harder rock, which will present higher grade and improved mine productivity.

Yanacocha delivered solid production with the drawdown of ounces from our existing La Quinuan leach pad. With Quecher Main, reaching commercial production in October, we expect to see recovery of ounces from the new Carachugo leach pad in 2020. I'd like to congratulate our South America team for safely delivering this important project that will sustain Yanacocha's mine life and serve as a bridge to the future growth opportunities in the years ahead.

At Cerro Negro, we kicked off our Full Potential process, which has been in full swing since July, and our team has identified $10 million of quick wins mainly from improving mine development rates while setting a course to design and implement opportunities such as shift optimization, maintenance scheduling and basic operational improvements. And I'm looking forward to providing an update on our progress during our guidance webcast.

We are tracking to a strong fourth quarter as we mine an average grade of 3 -- 13.8 grams per tonne.

Turning now to our Australia operations on Slide 12. At Tanami, we delivered another solid quarter and expect the fourth quarter to reflect the operation's lowest costs and highest production for the year as we access higher-grade stopes.

At Boddington, our planned stripping campaign in the South Pit is progressing very well and during the third quarter, we safely completed mill-maintenance activities. Unit costs have improved with higher ore tonnes mined and a favorable foreign exchange rate.

And at KCGM, we continued to strongly focus on increasing mine productivity whilst managing within the constraints of current geotechnical challenges and the associated remediation work in the Fimiston Pit. We are optimizing mill recoveries as the Morrison Starter Pit starts to present higher-grade ore.

As a result of the exclusion zones we put in place to safely manage the East and the West walls of the pit, 2019 production will be impacted by 40,000 ounces, and we have adjusted our regional outlook accordingly.

But above all else, we will always ensure that our workforce is safe whilst we proactively manage through these geotechnical challenges with pragmatic mine plans and a high level of monitoring of all of our high walls. We also continue to determine the most appropriate design for a layback to further manage risk and access the gold ounces, which remain in the pit.

Underground operations are progressing well. On the project front, we are excited that Tanami expansion 2 is unanimously approved by our Board for execution. The team is progressing development work and shaft sinking has advanced beyond 210 meters, and we expect to commence raise boring in quarter 1 2020. This is a terrific project, which will deliver significant value, increased mine life and provide a platform for further exploration.

Now to our Africa operations on Slide 13. Ahafo delivered another quarter of solid performance as we continued mining higher grades from Subika open pit and realized initial benefits from the successful ramp-up of the Ahafo Mill Expansion project. The expansion accelerates efficient processing of ore from stockpiles and the Subika Underground Mine as well as harder, lower-grade ore from Ahafo's existing pits. Successful project execution has positioned the operation to generate a strong fourth quarter and a record 2019.

At Akyem, we also delivered yet another solid quarter and are pleased to have recently connected both our Africa operations to our operations support hub in Perth. The process control staff are now remotely analyzing real-time data from Akyem and collaborating with the site to deliver Sag mill improvements. We've identified approximately $20 million to $25 million of annual opportunities at Akyem and Ahafo from throughput and recovery improvements that will be implemented over 3 years. This is a great example of the value that can be generated from operating as one fully connected global mining business.

Looking forward, we have now established a solid platform to further evaluate growth from this prospective district. As we continue progressing our underground exploration, I'm excited by the potential at Subika and adjacent ore bodies and are actively evaluating and prioritizing these growth opportunities on a value-versus-risk basis.

Wrapping up with our 2019 operational outlook on Slide 14. Our full year outlook now incorporates Nevada Gold Mines from July 1, which lowered our production by 45,000 ounces, improved our overall unit cost and lowered our exploration and advanced project spend by approximately $35 million. We also updated the North America and Australia regions to include the impacts of the last Peñasquito blockade and current mining constraints at KCGM. These have been partially offset by improved unit costs at Boddington.

Our development capital outlook has been lowered to $550 million as increases for Nevada Gold Mines and Ahafo are offset by lower spend in North and South America.

In summary, we expect to deliver approximately 6.3 million attributable ounces of gold and deliver all-in sustaining costs of approximately $965 per ounce in 2019. We remain fully focused on safely improving productivity and lowering costs to generate sustainable long-term value, and we'll provide an update on our progress at our guidance webcast on December 2.

With that, I'll hand it over to Nancy on Slide 15.

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Nancy K. Buese, Newmont Goldcorp Corporation - Executive VP & CFO [5]

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Thanks, Rob. Turning to Slide 16 for the financial highlights. In the third quarter, we delivered revenue of more than $2.7 billion, which increased 57% over the prior year quarter with the additional sales from the Goldcorp assets and higher gold prices; adjusted net income of $292 million or $0.36 per diluted share; and adjusted EBITDA of nearly $1.1 billion, a 70% increase over the prior year quarter. Cash from continuing operations was $793 million, an increase of 85%, driven by higher adjusted EBITDA. Free cash flow of $365 million increased more than $200 million over the prior year quarter; free cash flow per share of $0.44, of which we paid $0.14 per share in dividends.

As a reminder, our third quarter results proportionately consolidated the company's ownership interest in Nevada Gold Mines. For the third quarter, our 38.5% of the Nevada Gold Mines joint venture contributed 334,000 ounces and generated $234 million of EBITDA.

Turning to Slide 17 for a review of earnings per share in more detail. Third quarter GAAP net income from continuing operations was $2.2 billion or $2.71 per share. The primary adjustment was a $2.88 gain related to the creation of Nevada Gold Mines. The gain represents the difference between the fair value of Newmont's 38.5% ownership interest in Nevada Gold Mines and the carrying value of the Newmont Nevada assets contributed to the joint venture.

Other adjustments included $0.49 related to valuation allowances and other tax impacts, $0.03 related to transaction and integration costs and $0.01 of other charges.

Taking these adjustments into account, we reported adjusted net income of $0.36 per diluted share.

Turning to Slide 18. We remain well positioned to execute our capital priorities, including maintaining an investment-grade balance sheet, investing in the next-generation of mines to improve margins and build a stronger reserve base, and returning cash to shareholders through our sustainable quarterly dividend of $0.14 per share. We have one of the strongest balance sheets in the gold sector.

In September, we issued $700 million of debt at a rate of 2.8%, which was the lowest 10 years metal and mining coupon ever and is a testament to our leading financial position. Before using the proceeds to pay off $626 million of debt due on October 1, we ended the quarter with a cash balance of $2.7 billion.

Looking forward, we are well positioned to continue a trajectory of industry-leading financial performance by executing our capital priorities and staying focused on long-term value creation.

And now I'll hand it back to Tom to wrap up on Slide 19.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [6]

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Thanks, Nancy. Turning to Slide 20. We are building momentum to deliver a strong fourth quarter and ensuring we are taking the necessary steps to position our business for long-term success. We remain focused on the 5 foundational principles of our strategy: Keeping our people safe with a relentless commitment to our safety culture and systems; growing margins through the application of our operating, technical and exploration discipline; leveraging our exploration program and unmatched portfolio to grow reserves and resources; optimizing our world-class project pipeline and maintaining discipline around capital allocation.

Thank you for your time. With that, I'll turn it over to the operator to open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Mike Parkin of National Bank.

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Michael Parkin, National Bank Financial, Inc., Research Division - Mining Analyst [2]

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Looking back at Slide 8, where you're showing where your initial, kind of, target on synergies was and where you've transitioned to today, it looks like the G&A savings are -- if that right-hand bars chart is proportional, has grown substantially. Just trying to get an idea of what has benefited from your initial kind of look to where you are today?

And then also, if you could provide any kind of sense of what the breakdown in that G&A savings would be, just ballpark on a percentage basis on a corporate-versus-a-site base.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [3]

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Thanks, Mark. It's Tom here. So the G&A number is $120 million that you see on the right-hand side, which is an increase from the initial commitment we made of $85 million. That value comes from collapsing 2 companies into one. So it's the value that comes from no longer having a corporate headquarters in Vancouver and starting to run Newmont Goldcorp like we ran Newmont before we acquired Goldcorp.

So that -- the vast majority of that value is coming from corporate costs. And it's about the focus we have had on driving down our overhead costs so that we're running this business as efficiently as we can.

And from my position, we're not finished yet. I think there's still more work for us to do to set this business up to run efficiently. And as we move into 2020, you can expect to hear more from me on that.

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Operator [4]

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Our next question comes from Matthew Murphy of Barclays.

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Matthew Murphy, Barclays Bank PLC, Research Division - Analyst [5]

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Just had a question on the ramp-up at Musselwhite. So when you're talking about rebuilding inventories, those are underground inventory? Or it's stope availability? Or it's actual? Or at surface?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [6]

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Thanks, Matthew. I'll pass microphone across to Rob Atkinson to answer your question.

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [7]

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Thanks, Matthew. Very simply, it's material that we are currently trucking up from underground to the surface. And when those stopes get to the sufficient level, we'll restart the plant next year. But it is ore that's currently being mined halfway down the mine.

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Matthew Murphy, Barclays Bank PLC, Research Division - Analyst [8]

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Okay. And then the reason for not starting the mill until later is just it's going to be insufficient quantities until then. Is that right?

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [9]

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That's correct. The best way to run a mill is flat out or not at all. And we want to make sure that we're in a position of not starting and stopping.

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Matthew Murphy, Barclays Bank PLC, Research Division - Analyst [10]

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Sure. Okay. And so is this progress in line with what you had previously guided on Musselwhite?

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [11]

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It very much is. And certainly, I was up there a couple of weeks ago. I saw the operation firsthand, the team is making great progress. And I mentioned in the discussion that we've awarded the contracts. So [segmentation] are on board. And we really are pushing that project to bring it on by early October next year. So very good progress.

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Matthew Murphy, Barclays Bank PLC, Research Division - Analyst [12]

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Okay. And then just the last one related to Musselwhite, is -- those insurance proceeds looks like $45 million since the fire. Do you expect to get more proceeds there? Or is there a cap on what you can get?

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Nancy K. Buese, Newmont Goldcorp Corporation - Executive VP & CFO [13]

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We do. There is a cap, and we have not previously disclosed that. But suffice it to say, we're working with the carriers and the underwriters now to settle that claim and our hope is to try to wrap that up by the end of the fourth quarter.

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Operator [14]

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Our next question comes from Chris Terry of Deutsche Bank.

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Christopher Michael Terry, Deutsche Bank AG, Research Division - Research Analyst [15]

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A few questions from me. Maybe we could just started Peñasquito, so a lot of moving parts there. Just wondering if you could comment on the last technical report you had out versus how we should expect the run rate from here. I think you mentioned higher throughputs, $50 million Full Potential savings. So I just wanted to sort of think about how that asset is shaping up in forward periods.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [16]

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Chris, I'll pick up that one and maybe pass across to Rob to add any color. The $50 million quick wins comes from some very straightforward things, parking up 14 pieces of mining equipment that are excess to requirements, parking up an overland waste conveyor that's not required and taking our team from Boddington and tuning those Sag mills so it runs efficiently, and a bit of work around how we design a polygon on the mine and then how we dig to the polygon. So as Rob talks about some really basic things that we're doing at Peñasquito.

The thing that gets me really excited about Peñasquito and the value that it can deliver are the parallels between Peñasquito and Boddington.

And I'd led the turnaround of Boddington over the last 6 or 7 years, and I can see the same story at Peñasquito and the opportunity for us to improve throughput particularly at the front end of that mill by taking all of that experience from Boddington and rapidly applying it to Peñasquito is what gets me very excited about the value and the upside that we can deliver from Peñasquito.

In terms of long-term view, in less than 4 weeks, we're providing our guidance out for 5 years, and that's probably the best way to give you a summary of how Peñasquito is going to shape up over the next 5 years or so.

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Christopher Michael Terry, Deutsche Bank AG, Research Division - Research Analyst [17]

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Okay, okay. And then maybe just to ask a question on the slide going through the synergies another way, of the $40 million that you've added, the $240 million, just wondered if you could comment on what we should see of that actually flowing through to the cash line. So actually, on the operating line?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [18]

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Yes. The -- you'll start to see that flowing through. I'm going to pass across to Nancy to -- she's probably better placed to answer that question.

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Nancy K. Buese, Newmont Goldcorp Corporation - Executive VP & CFO [19]

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Yes. So you'll see, as we recognize some of the Full Potential benefits, you'll see those in a variety of ways. You'll see them in an improved cost structure. You may see them in terms of improved production and productivity and a few other places. So I would say it's a balance between cost and production probably swayed significantly more towards costs, and we will continue to refine those numbers as we present them to you over the quarters and recognizing folks want to understand how this is actually flowing through AISC and how will it will flow through production.

And again, as Tom mentioned, you'll see most of that represented in our December guidance, and that will be the best benchmark for how to understand those savings.

But we get the ask, and we'll continue to provide transparency on that as we move forward.

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Christopher Michael Terry, Deutsche Bank AG, Research Division - Research Analyst [20]

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Okay. And then in terms of -- just following up on the cost as well. Just at Tanami, I just wondered if you could comment, thinking about the expansion, the second phase and where that asset is at. I just wondered if you could comment a little bit on what you've seen on the cost reduction from the pipeline versus your original expectations and whether the benefits are coming through there.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [21]

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Yes. Thanks, Chris. Again, we'll provide some more detail to build upon the information we have provided previously in a few weeks' time with our long-term guidance. But that project continues to meet our internal rates of return. So it continues to present as a very profitable mine, and I'd expect that we'll be able to show you the -- some good cost improvements and a story that continues from the one that we've shared with you over the last 12 months for that expansion of that operation.

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Christopher Michael Terry, Deutsche Bank AG, Research Division - Research Analyst [22]

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The last one for me. Just in terms of the guidance going forward, and maybe you'll have more color in the next month or so, but are you going to be guiding on an asset-by-asset basis or going to more of a regional approach like you have in this release?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [23]

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Chris, you'll see the same asset-by-asset approach for Newmont Goldcorp going forward that you had from Newmont in the past. So for the next 12 months, you'll see asset-by-asset. You'll see 3 years by region. You'll see 5 years for the portfolio. Same as we have done for a number of years now.

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Operator [24]

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Our next question comes from Greg Barnes of TD Securities.

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Greg Barnes, TD Securities Equity Research - MD and Head of Mining Research [25]

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Rob, in your comments at Peñasquito, the discussions you have in there, you specifically said you're talking to the Cedros community only. I'm wondering where the trucking company and their issues lie now.

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [26]

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It's a good question. And going back to what I said, the key relationship we have is with the communities, and that's where it's got to start and finish. The CAVA trucking live some in that community, others elsewhere. But very simply, that our discussions are with that community, and that's what we've got to solve.

With the government, both state and federal, that we're having other discussions to make sure that the Cedros community is first and foremost, and that's where our discussions lie and that's where we are absolutely targeting to deliver long-term, sustainable future.

So certainly, our priority is with Cedros community. At CAVA, we have to manage on an ongoing basis, but focus, again, is with Cedros.

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Greg Barnes, TD Securities Equity Research - MD and Head of Mining Research [27]

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Is it mostly the water issues that you are dealing with there?

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [28]

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Very much. The water is the key part. The other thing is that we want to have an ongoing relationship. Relationship shouldn't be transactional, and we want to make sure that the Cedros community is benefiting the presence of our operation there. But a large part of that is to have reliable, predictable and a high-quality source of water. So that forms a large part of the discussions, but it's certainly not the only part.

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Greg Barnes, TD Securities Equity Research - MD and Head of Mining Research [29]

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And Tom, the Q4 is shaping up to be a very good quarter, north of 1.8 million ounces, I guess, from what your guidance suggests. I guess the only issue there is that Goldcorp had a history of loading everything up into the fourth quarter and then there was a bit of a pullback after that. Is Q4 more of a run rate? Or is it a one-hit wonder and then things pull back? How do you see things moving forward?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [30]

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Well, there are a number of factors driving our strong fourth quarter, and they're not all from former Goldcorp assets. You've got Ahafo Mill Expansion that's going to have a full quarter of run rate. You're moving at a high-grade ore at KCGM, you're moving into higher-grade ore at Tanami. So there are a number of former Newmont assets that are contributing to that fourth quarter. So it's a factor of mine sequence.

And when our mines are reaching some of the higher-grade ore, that's driving a higher fourth quarter this year. And when we guide in December, we'll give you some indication through our guidance as to how 2020 is shaping up in terms of a year -- half-year-on-half-year or quarter-on-quarter performance.

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [31]

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And I think, Tom, if I could also just add that one of the key things that we are doing next year is to make sure that we're well set up for the long-term future. And as an example of that at Éléonore, and we're working very closely to make sure that our stoping sequence is, right, that we've got that flexibility. And also the work that we're doing at Musselwhite to make sure that we're no longer in that one-stope position that we were just 12 months ago, that we've actually got several stopes.

So all the work that we are doing is very much focused on the long term, and we're setting the mines up as such.

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Greg Barnes, TD Securities Equity Research - MD and Head of Mining Research [32]

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Does the gold have more of a consistent production profile through the year?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [33]

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Greg, it's about following the mine sequence and how the grade presents through a portfolio of 13 or 14 operations. So we don't try and optimize to get smooth, quarter-on-quarter. We look to optimize on what's the best value and then let those mine plans, those mine sequence follow in good order.

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Operator [34]

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Our next question comes from Carey MacRury of Canaccord Genuity.

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Carey MacRury, Canaccord Genuity Corp., Research Division - Analyst of Metals and Mining [35]

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I just had a question on Éléonore and Porcupine. I guess when the Goldcorp deal was first done, those were deemed as potentially noncore. Now that you've had them for almost 2 quarters, I'm just wondering what you're thinking on those 2 assets are.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [36]

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Yes. Just to clarify, Carey, we never said Éléonore was a potential optimization asset. It's a core asset in our business and the exploration potential around Éléonore is first class. And it's a region that we are very happy to have our foot on. So I don't know where that story has come from, but that's never been the case.

Porcupine, some really good opportunities around Porcupine to optimize that operation particularly as we look to bring in Borden and the contribution from Borden and the upside from Borden, so our focus with Porcupine is on optimizing the value from that asset.

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Carey MacRury, Canaccord Genuity Corp., Research Division - Analyst of Metals and Mining [37]

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Okay. And then maybe on the 2020 guidance, I think your preliminary numbers are about 7.4 million ounces. Given the blockade at Peñasquito and what's happening with Musselwhite and potentially KCGM, are those the 3 items that you would have had that we should potentially be taking our 2020 numbers down a bit by? Or are there other items that should offset those when we think about 2020? I know you're in the middle of your guidance process.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [38]

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Yes. It's a bit of apples-to-oranges when you start to compare from that March guidance to what we'll present in 2020. You've got -- since March, we've formed a joint venture in Nevada. So you'll see the impact of production and costs from that joint venture that we'll talk to in the -- in that first week of December. You've got a potential divestment of Red Lake that comes into that equation. You've got a different mining sequence from Peñasquito as you flagged in terms of when ore might present. So there are a number of factors that come into play.

At Ahafo, we move into a different mining method next year as we mine the Subika underground mine with a sub-level shrinkage measured -- method that wasn't there back in March 4. So there are a number of factors that will be different from March 4 to what we presented in the first week of December, but we'll provide clear explanation of that when we provide our long-term guidance.

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Operator [39]

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Our next question comes from Tanya Jakusconek of Scotiabank.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [40]

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Maybe for Tom. Congratulations on the Full Potential that you're seeing. You're ahead of budget there. Wanted to ask about 2020. I know that we talked previously that 80% of your expected synergies are going to be captured in 2020 and you would be exiting the year at 100%. But since you've been doing better than anticipated, is that something that we think you're going to be doing better than that 80%? [Have] you changed that target at all?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [41]

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Thanks, Tanya. It's Tom here. It's -- well, 40% run rate by the end of this year, 80% by the end of 2020 and 100% by the end of 2021 was the initial commitment that we made, but we're now sitting at essentially 66% of that run rate at the end of 2020.

As part of our long-term guidance again in 4 weeks' time, we'll give you an update in terms of how we're tracking based upon that guidance against that initial commitment that we made.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [42]

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Okay. All right. I look forward to hearing more about that. And maybe just on your divestiture. You mentioned Red Lake potentially not being in the 2020 guidance. Does it look like something could close before year-end?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [43]

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We're on track with the process we're running. We've just completed the site visits. So we remain on track.

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Operator [44]

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Our next question comes from Anita Soni of CIBC.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [45]

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So my question is with regards to Éléonore. Could you just talk about the grade, the lower grades that you had this quarter and how you see that playing out over the next little while?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [46]

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Thanks, Anita. I'll pass the microphone across to Rob Atkinson to take you through that.

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [47]

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No Problem. Anita, it's really very simple that we've been working hard to get the stopes back into a good sequence so that we're minimizing all the mining stresses that we are looking at certainly higher grade coming into the quarter 4.

So very, very simply, it's those 2 issues that I think we're getting back into a better sequence. And the stopes which are presenting are of a higher grade. So that's all there is to it.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [48]

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All right. And then similarly, on Cerro Negro lower grades, I think you're citing Eureka and Mariana Norte has higher grades in the fourth quarter. But as I recall, Eureka grades weren't all that high. So I'm just -- I think you had 10-gram per tonne overall this quarter. And I think what I know of Eureka, what was left was about 10-gram per tonne material. So was there some pod that you had not mined yet that was higher grade?

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [49]

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I'm not 100% sure, to be honest, but certainly, we've -- at Cerro Negro, we've just been progressing the plan. We're certain it's a very high-grade moving forward this next quarter, but perhaps, Tom?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [50]

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Year. I think, Anita, why don't we get Jess to pick up with you after the call, and she can take you through the detail of that question.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [51]

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Sure. And then just in terms of the debt issuance and then repaying the debt on October 1. I'm just curious why you didn't use cash balances to just pay off that debt and move on. I know that your net debt-to-EBITDA is around 1 at the $1,500 gold that we just experienced, but closer to about 1.5 if you use the prior quarter's run rate on EBITDA.

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Nancy K. Buese, Newmont Goldcorp Corporation - Executive VP & CFO [52]

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Yes, Anita, a great question. And what we really wanted to do is, as we take on both the acquisition of the Goldcorp assets and the JV, we wanted to ensure we had maximum financial flexibility. So we had an opportunity at an unbelievable coupon to just refinance that for now, but that's one thing we've really continued to think about. At today's higher gold prices, debt repayment will be a significant priority. We just wanted to give ourselves some flexibility as we're taking on what Newmont looks like today.

But you can certainly anticipate, as we are experiencing these prices, a significant amount of those dollars will be pointed towards debt reduction of those '21 through '23 debt towers.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [53]

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And then last one, just a little bit more on the -- trying to get you to reveal something as everyone else has on the guidance coming up. The -- in terms of Musselwhite, when you put out the 7.4 million ounces, I think that was in June of -- it was with Q2 results when you put out 7.4 million. Did that incorporate the impact of the Musselwhite fire, which I think happened in the first -- at the end of the first quarter?

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [54]

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Yes, the numbers you're quoting there, Anita, go back to our guidance from early March. But don't incorporate the impact of the Musselwhite fire that happened in late March.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [55]

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All right. So this would probably have been more like the annualized run rate prefire would have been in that 7.4 million ounces?

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [56]

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Yes. That's a good judgment to make.

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Operator [57]

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Our next question comes from Andrew Kaip of BMO Capital Markets.

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Andrew Kaip, BMO Capital Markets Equity Research - MD of Mining ,Equity Research & Precious Metals Mining Analyst [58]

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Look, just a little bit more on Musselwhite. Early October is when you're guiding towards commercial production. Wondering if you can walk us through the steps and what the critical path there is that's determining early October. Is it the completion of the conveyance system? Or is it material handling system isn't going to be commercial by that time? So just a bit more clarity would be...

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [59]

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Thanks, Andrew. It's not linked to the materials handling system. It's the replacement conveyor, and I'll get Rob to take you through some detail on that.

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [60]

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No problem. Thanks, Andrew. And again, this is a sequence of events. So really, the -- what we've been working hard on at the moment is the rehabilitation and the dewatering. That had to be done to be completed. We've got one more area, which is the transfer point to demolish and the -- and salvage some of the old gear, and that will be done over the coming months.

The contract in place to get a suitably qualified, experienced contractor was also a part, and that's been awarded. And we expect full site mobilization to be completed by early January.

Now as Tom mentioned, the materials handling, it's a very important part. If you remember, that we've got a shaft and we've got conveyor and a crusher. That's being commissioned, and we're expecting that to be fully commissioned around about the end of the first quarter. The mechanical completion of the belt, we are expecting to be somewhere towards the end of the second, early third quarter. And then that's where we can do the practical completion, the technical support and the ramp-up to allow us to get to October.

So certainly, whilst it's not the material handling system, the material handling system only comes into its own with the belt running, and that's when we can get the true efficiencies. So we're going to get a double whammy that when the belt comes back, it's going to be a lot more efficient [domain] in general with the materials handling system as well. But that's the sequence of event that we're looking at over the next 9 months -- 9 or 10 months.

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Andrew Kaip, BMO Capital Markets Equity Research - MD of Mining ,Equity Research & Precious Metals Mining Analyst [61]

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All right. And then when we think about Musselwhite on a go-forward basis full production, how many stopes are you thinking that you have available -- or to be able to meet the production expectations in guidance and give you that flexibility that you can look out efficiently?

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [62]

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I think a good rule of thumb is for -- if we aim for that and certainly, I think we'll be comfortable for the couple of reasons is it gives us the flexibility if there's any challenges with stopes. It also gives us the flexibility with grade. And the key to all that is making sure that our development is well ahead, that whether it's at Musselwhite or any of our other mines, keeping that 18 months in advance is so key. But a good rule of thumb we are aiming at is to have at least 4. And just another comment I'd make, Andrew, on putting -- keeping Musselwhite as an important mine in our portfolio of 14. Given the context of our portfolio, we can manage through this issue. But it's at that scale compared to our portfolio.

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Andrew Kaip, BMO Capital Markets Equity Research - MD of Mining ,Equity Research & Precious Metals Mining Analyst [63]

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Okay. And then just one final question just on Peñasquito, you had indicated that grades would be stepping up in the fourth quarter from where they are currently. I'm just wondering what kind of step up can we expect. There's a fairly significant rate difference between what was previously forecasted for 2019 and then what 2020 was and that's moved. So I'm just wondering how much of a step-up should we be expecting.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [64]

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Again, Andrew, I'll get Rob to take you through some of that detail.

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Robert D. Atkinson, Newmont Goldcorp Corporation - Executive VP & COO [65]

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Yes. The grades, we are about to hit some good material in the mine after the pre-stripping that's been done. So we are going to have a sustained period where the grade is going to be higher. I think a good rule of thumb is about 0.5 gram per tonne is where we're typically sitting for the final quarter.

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Operator [66]

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Our next question comes from John Tumazos of John Tumazos Very Independent Research.

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John Charles Tumazos, John Tumazos Very Independent Research, LLC - President and CEO [67]

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Could you elaborate a little bit? There was a sentence or 2 towards the end of the presentation that mentioned Galore Creek, Norte Abierto and Nueva Unión. Are those projects that you're optimistic about because they're very large or because the pending data that might be developed over the next couple of years, as Newmont does their work, may improve the project or because of the existing data on the project or because you expect higher copper and gold prices to improve the returns?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [68]

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Thanks, John. It's Tom here. What we like about those 3 projects that we have sitting at prefeasibility stage is the very long life that they present, and they can underpin an investment thesis for Newmont Goldcorp that presents very long life that can go out through the next 2 or 3 decades or beyond.

And where those projects hit all 3 of them in prefeasibility study phase is it gives us, in conjunction with our joint venture partners, the opportunity to really work on and optimize those projects to get good competition for capital going so that the -- that they present in the second half of next decade as the first project that may come on to extend the life of our business.

We look at those projects as doing them in series, not parallel. So when you look at those 3 projects, the opportunity to optimize them and then sequence them, you can have 3 projects come on through the latter part of the 2020s into the 2030s and into the 2040s and really underpinning long life for our business.

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Operator [69]

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Our next question is a follow-up from Anita Soni of CIBC.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [70]

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So I was just wondering, when you do the December 2 guidance and outlook, will you address reserves at the acquired assets at that point? Or will that be a February Q4 phenomenon?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [71]

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Anita, it's Tom here. It will be February, and we'll make sure that we bring that information out. Typically, we drop a press release. But I think for next year, we'll make sure we signal that and take you through that information as that's ready. But it's a -- into the new year exercise for us to complete all that work.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [72]

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And will it incorporate, I mean, your assumptions on where the cost could go? Or will it just sort of benchmark to where you are now?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [73]

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You're talking -- you're asking the question in terms of reserve pricing.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [74]

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Yes, reserve. Yes, reserve pricing. I mean on one side of the equation where the reserve is the costs associated with it, so.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [75]

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Yes. I wouldn't expect our reserve pricing to change from $1,200.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [76]

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But I mean, the unit cost assumptions that are used on the other side of the equation to say, "Okay, well, we're mining at $90 a ton at Éléonore versus, say, $110, " which is -- I'm just pulling numbers out of the air. But I'm just wondering, will it include sort of the benchmarking of what's actually happening at the asset right now or some future projection of what you think you can deliver?

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [77]

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Yes. For the operating assets, it will be underpinned by the mine plans that underpin our business. So it will be the assumptions we have used.

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Operator [78]

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And our next question is a follow-up from Carey MacRury of Canaccord Genuity.

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Carey MacRury, Canaccord Genuity Corp., Research Division - Analyst of Metals and Mining [79]

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Just one more question on -- just wondering if you could touch on the Coffee project. I know you've pushed it back in the development pipeline. Just wondering what the work plan there looks like going forward.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [80]

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Thanks, Carey. It's -- we have pushed that back prefeasibility because we think there's exploration upside potential there that we want to better understand. Marcelo Godoy, our Head of Exploration, particularly excited about the opportunity around Coffee. But what we're looking at is the doing the drilling program to better define that resource and keep that project in prefeasibility stage until we can better understand that, optimize that project and then bring it forward in competition with the other project. It sits alongside in prefeas.

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Operator [81]

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This concludes the question-and-answer session. I would like to turn the conference back over to Tom Palmer for closing remarks.

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Thomas Ronald Palmer, Newmont Goldcorp Corporation - President, CEO & Director [82]

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Thank you, operator, and thank you, everyone, for joining us, and thank you for your continued interest in Newmont Goldcorp. Thank you.

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Operator [83]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.