Newmont Mining (NEM)

Q2 2012 Earnings Call

July 27, 2012 10:00 am ET

Executives

John Seaberg - Vice President of Investor Relations

Richard T. O'Brien - Chief Executive Officer and Executive Director

Russell D. Ball - Chief Financial Officer and Executive Vice President

Gary J. Goldberg - President and Chief Operating Officer

Randy Engel - Executive Vice President of Strategic Development

Analysts

John D. Bridges - JP Morgan Chase & Co, Research Division

Jorge M. Beristain - Deutsche Bank AG, Research Division

David Haughton - BMO Capital Markets Canada

Patrick T. Chidley - HSBC, Research Division

Brian MacArthur - UBS Investment Bank, Research Division

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Presentation

Operator

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Good morning, and welcome to Newmont Mining's Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If anyone has any objections, please disconnect at this time.

I'd now like to turn the call over to John Seaberg, Vice President of Investor Relations for Newmont Mining Corporation. Thank you. Sir, you may begin.

John Seaberg

Thank you, operator, and good morning, everyone. Welcome to Newmont's Second Quarter 2012 Earnings Conference Call. Joining us today are Richard O'Brien, Chief Executive Officer; Gary Goldberg, President and Chief Operating officer; Russell Ball, Executive Vice President and Chief Financial Officer; and other members of our executive leadership team.

Turning to Slide 2. Before we discuss the quarterly results, I'd like to refer you to our cautionary statement as we will be discussing forward-looking information which is subject to a number of risks, as further described on our -- in our SEC filings, which can be found on our website at newmont.com.

And now, I'll turn the call over to Richard O'Brien.

Richard T. O'Brien

Thanks, John.

Before we jump into the quarter, I'd like to take a few minutes to comment on the recent announcement regarding Gary Goldberg's promotion to President and Chief Operating Officer. I worked with the board to recruit Gary to Newmont last year, and I recommended this promotion in recognition of the scope of his responsibilities and the substantial contributions he's already made in Newmont. As you know, Gary joined Newmont in December of last year with a 30-year track record of success at Rio Tinto. Throughout his career, Gary has been widely recognized for his achievements in safety, environmental stewardship and social responsibility. He's quickly come up to speed on our business opportunities and challenges and has proven himself to be an outstanding addition to Newmont's senior leadership team. As a reminder, today Gary is responsible for worldwide operations; projects of safety and loss prevention, security solutions and innovation; and business excellence.

Gary and I have developed an excellent working relationship and I look forward to continuing our work together as we build on our existing foundation of capital discipline, balance sheet strength, profitable operations, extensive exploration and project opportunities in our industry-leading dividend policy. Many of you have already met Gary, some at our recent Investor Day, and going forward, you will have many opportunities to get to know him better.

This week, we also announced the election of Kofi Bucknor to our Board of Directors. Kofi brings significant financial expertise as well as extensive knowledge of Ghana in Africa.

I'd also like to take the opportunity to acknowledge the passing of the Ghanaian President John Atta Mills. We appreciated the support from President Mills over the past years and know that he will be remembered for his statesmanship and years of dedicated service to his country.

Now turning to Slide 3. As we talked about in May at our Investor Day in New York, we reaffirmed our commitment to offer shareholders a combination of profitable growth, disciplined returns, strong exploration potential, balance sheet strength and our industry-leading gold price-linked dividend.

Our second quarter and year-to-date operating results performed in line with our budget. Exploration is on track to cover reserve depletion and exceed 100 million ounces of reserves in 2012. As expected, our second quarter gold production was impacted by annual planned mill maintenance in Nevada, lower tons mined at Tanami in Australia and lower gold and copper production from Batu Hijau in Indonesia as we continue with the planned stripping to Phase 6. While we had a few items in the quarter that impacted our earnings, which Russell with speak to later in the call, we remain generally on track to deliver on our financial and operational goals established at the beginning of this year.

As noted in our earnings release yesterday, we're narrowing our 2012 outlook for attributable gold production to 5 to 5.1 million ounces while maintaining our outlook for CAS of $625 to $675 per ounce. We've also lowered our 2012 attributable capital expenditure outlook by approximately $300 million primarily as a result of our slower development timetable at Conga in Peru.

We expect our advanced projects expenditures to be approximately $50 million to $60 million lower in 2012 primarily as a result of our deferred development plans in Peru as well as our refined scopes of work at several of our early-stage projects in Nevada and in our Asia Pacific region. Similarly, we expect our exploration and G&A spending to be lower by approximately $40 million to $50 million this year and 10 to 12 -- $10 million to $20 million in G&A: so $40 million to $50 million for exploration, $10 million in G&A.

We're also mindful to balance our desire for increased efficiency with our continued commitment to build a healthy, more efficient and growing business, which is entirely consistent with what we discussed with you at Investor Day. So as a result, our adjusted outlook for advanced projects exploration and G&A spending has been reduced by approximately $100 million for 2012. As we continue to optimize our portfolio of projects and businesses, as we refine our plans and focus on total cost reductions, we do expect to identify further efficiencies and cost savings for 2013. And we will share that with you when we communicate our 2013 expectations.

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