189 (11.03.18)


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SIXTY SECONDS WITH:

Gary Goldberg

Newmont Mining is not presently in discussions with Barrick over buying the Super Pit in Australia but is planning several large output expansions, says CEO Gary Goldberg

Before joining Newmont you worked in copper inside Rio Tinto; at what point were you drawn to gold?

I actually started out as a gold miner; my family had a small gold stake in Colorado that we worked during summer vacations when I was growing up. Gold is unlike other commodities because deposits tend to be shorter-lived, so you have to get the basics right in a shorter time frame in order to deliver long-term value.

Newmont was the standout performer of all big gold miners in 2017: you're now the world's largest gold producer by market cap and recently lifted your dividend 87 per cent. If prices continue to rise, will the market's emphasis shift back towards M&A and growth, and will you shift with it?

We’re in the business of creating long-term value, so we invest in growth, which we define as growing our margins, reserves and resources across the cycle. Over the last five years, we’ve built three new mines, funded nine expansions and maintained a robust exploration program. As a result, we’ve added more than two million ounces of lower cost gold production and last year replaced reserve depletion for the first time since 2012. While we also consider buying assets, we measure internal and external opportunities on the same scale and generally find organic growth offers better returns.

Newmont's free cash flow is very attractive, but the industry's been through some belt-tightening, so do operations begin to wobble and creak a little and will capex levels tend to edge back up?

We’ve sustainably delivered nearly $2bn in productivity improvements since 2012. The key word here is sustainably: we continually invest in maintaining our operations at peak efficiency. Expenditures may increase over the next couple of years as we approve new projects, including

Ahafo North in Ghana, Yanacocha Sulfides in Peru, Long Canyon Phase 2 in the US and Tanami Expansion 2 in Australia, which we expect to come up for approval, subject to meeting our investment criteria.

You have two capital investment projects coming up in Africa, Subika and Ahafo. Does political risk there concern you?

Africa is a continent with more than 60 countries, each with vastly different economic, political and social attributes. Newmont has been operating successfully in Ghana since 2002, our two mines there have produced more than 7m ounces of gold to date, they will deliver profitable production for more than a decade and the district remains highly prospective. We have strong working relationships with the government and our local communities, and view Ghana as a favourable operating jurisdiction.

Is there any substance to rumours that Newmont is close to buying Barrick out of the Super Pit in Australia?

No. We have expressed our interest in acquiring the other half of the Super Pit at the right price, but are not currently in discussions. In the meantime, we continue our work to optimise the mine.

2017 was positive for Newmont, but the gold mining sector more broadly underperformed the gold price and also the royalty and streaming sector. Are the days of gold producers offering leveraged upside to the gold price behind us, and are big gold producers losing the battle versus ETFs?

ETFs give investors exposure to gold price, but they don’t pay dividends. Our shareholders count on our ability to optimize the value and risk profile of our portfolio in a manner that generates healthy profits and dividends across the cycle.

 

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