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Newmont Corp.

Newmont Announces Record Third Quarter 2020 Results

Oct 29, 2020

DENVER--(BUSINESS WIRE)-- Newmont Corporation (NYSE: NEM, TSX: NGT) (Newmont or the Company) today announced third quarter 2020 results.

THIRD QUARTER 2020 HIGHLIGHTS

Produced 1.5 million attributable ounces of gold* and reported CAS* of $756 per ounce and AISC* of $1,020 per ounce and produced 273 thousand attributable gold equivalent ounces from co-products
Generated $1.6 billion of cash from continuing operations and $1.3 billion of Free Cash Flow*
Reported $4.8 billion of consolidated cash with $7.8 billion of liquidity and a net debt to adjusted EBITDA* ratio of 0.4x
All sites operational with wide-ranging controls and safety protocols continuing to manage the Covid pandemic while placing the health, safety and wellbeing of our people and communities above all else
On track to finish 2020 strong and meet full-year guidance
Declared third quarter dividend of $0.40 per share, an increase of 60 percent over the prior quarter
Formed exploration joint ventures with Agnico Eagle Mines Limited in Colombia and Kirkland Lake Gold Inc. in Canada
Announced sale of royalty portfolio to Maverix Metals for total consideration of approximately $90 million
Achieved gender parity amongst independent non-executive Board Directors

“Capitalizing on the strength of our portfolio and higher gold prices, we delivered record third quarter adjusted EBITDA of $1.7 billion and free cash flow of $1.3 billion. This was the best quarterly financial performance in Newmont’s history. We also remain focused above all else on protecting the health, safety and wellbeing of our workforce and neighboring communities as the pandemic continues," said Tom Palmer, President and Chief Executive Officer. "As demonstrated by our second dividend increase this year, with a 79 percent increase in January and a further 60 percent increase in October, I am confident that our world-class portfolio is best positioned to generate industry-leading value and returns for our shareholders."

- Tom Palmer, President and Chief Executive Officer

QUARTERLY DIVIDEND INCREASED 60 PERCENT

Annualized dividend of $1.60 per share is highest in the gold sector**
Announced dividend framework that maintains leading $1.00 per share sustainable base dividend and provides additional returns from Newmont’s significant free cash flow generation at higher gold prices
Strong financial position and world-class portfolio supports a higher dividend as we continue to progress our most profitable projects
Industry-leading dividend yield of 2.7% exceeds median of S&P 500 Index
During 2019 and 2020, we will have returned more than $2.5B to shareholders through dividends and share buybacks

*See footnotes provided below, as well as the cautionary statement at end of release regarding forward-looking statements, including with respect to financial and operating outlook and expected returns to shareholders.

**An annualized dividend has not been declared by the Board. The above represents management’s expectations based upon the increased level declared for the third quarter. The declaration of future quarterly dividends remains at the discretion of the Board. Investors are cautioned that the Company’s dividend framework and the expected annualized dividend level are non-binding. See the cautionary statement at the end of this release.

Attributable gold production¹ decreased 6 percent to 1,541 thousand ounces from the prior year quarter primarily due to ongoing Covid-related impacts at Yanacocha, Cerro Negro and Éléonore as the operations continued to ramp up in the third quarter from care and maintenance, in addition to the sale of Red Lake and Kalgoorlie, partially offset by higher production at Peñasquito and Musselwhite.

Gold CAS² decreased 8 percent to $1,130 million from the prior year quarter primarily due to lower gold ounces sold. Gold CAS per ounce increased 3 percent to $756 per ounce primarily due to higher stripping ratios at Yanacocha, Merian, Akyem, lower surface grades at Ahafo and higher gold price-related royalties.

Gold AISC³ increased 3 percent to $1,020 per ounce from the prior year quarter primarily due to higher CAS per ounce and Covid-related care and maintenance costs, partially offset by lower sustaining capital spend.

Attributable gold equivalent ounce (GEO) production from other metals increased 16 percent to 273 thousand ounces primarily due to operations at Peñasquito receiving sustained community support compared to the prior year blockade and higher recoveries at Boddington. CAS from other metals totaled $139 million for the quarter. CAS per GEO2 improved 26 percent to $556 per ounce from the prior year quarter primarily due to higher sales at Peñasquito, partially offset by foreign exchange impacts in Australia and lower sales at Boddington. AISC per GEO3 improved 33 percent to $770 per ounce primarily due to lower CAS from other metals and lower sustaining capital spend.

Net income from continuing operations attributable to Newmont stockholders was $611 million or $0.76 per diluted share, a decrease of $1,615 million from the prior year quarter primarily due to the recognized gain on the formation of Nevada Gold Mines (NGM) in the prior year, lower sales volumes due to the sale of Kalgoorlie and Red Lake, higher costs in response to the COVID-19 pandemic and pension settlement charges, partially offset by higher average realized gold prices and lower tax expense, exploration costs, Goldcorp transaction costs and general and administrative costs.

Adjusted net income⁴was $697 million or $0.86 per diluted share,compared to $292 million or $0.36 per diluted share in the prior year quarter. The adjustments to net income of $0.10 primarily related to pension settlements, changes in the fair value of investments, COVID-19 specific costs, asset impairments, restructuring and severance costs, settlement costs including the costs from the Cedros community agreement at Peñasquito, valuation allowance and other tax adjustments. Adjusted EBITDA⁵ improved 54 percent to $1,663 million for the quarter, compared to $1,079 million for the prior year quarter.

Revenue increased17 percent from the prior year quarter to $3,170 million primarily due to higher average realized gold prices, partially offset by lower gold sales volumes.

Average realized price⁶ for gold was $1,913, an increase of $437 per ounce over the prior year quarter; average realized price for copper was $2.99, an increase of $0.62 per pound over the prior year quarter; average realized price for silver was $21.69 per ounce, an increase of $4.51 per ounce over the prior year quarter; average realized price for lead was $0.73 per pound, a decrease of $0.11 per pound; average realized price for zinc was $1.01 per pound, an increase of $0.20 per pound over the prior year quarter.

Capital expenditures7 decreased 31 percent from the prior year quarter to $296 million, primarily due to the sale of Red Lake and Kalgoorlie and reduced spending from the completion of Borden Underground, Ahafo Mill Expansion, and other sustaining projects in 2019. Development capital expenditures in 2020 primarily include advancing Tanami Expansion 2, Yanacocha Sulfides, Ahafo North, the Subika mining method change, Musselwhite Materials Handling System, Éléonore Lower Mine Material Handling System, Quecher Main, and projects associated with the Company’s ownership interest in Nevada Gold Mines.

Consolidated operating cash flow from continuing operations increased 101 percent from the prior year quarter to $1,597 million due to higher realized gold prices, partially offset by lower sales volumes. Free Cash Flow⁸also increased to $1,301 million primarily due to higher operating cash flow and lower capital expenditures.

Balance sheet ended the quarter with $4.8 billion of consolidated cash and approximately $7.8 billion of liquidity; reported net debt to adjusted EBITDA of 0.4x⁹.

Nevada Gold Mines (NGM) attributable gold production was 337 thousand ounces with CAS of $761 per ounce and AISC of $904 per ounce for the third quarter of 2020. EBITDA for NGM was $374 million.

Pueblo Viejo (PV) attributable gold production was 87 thousand ounces. Pueblo Viejo EBITDA¹⁰ was $115 million and cash distributions received for the Company's equity method investment totaled $75 million in the third quarter.

COVID-19 UPDATE

Continued our wide-ranging controls at the Company's operations and offices to put the health, safety, and overall wellbeing of Newmont's people and communities above all else
Maintained effective testing, quarantine and contact tracing procedures for positive cases
Incurred $35 million of care and maintenance costs during the third quarter, which included wages, direct operating costs for critical activities and non-cash depreciation for sites ramping up from care and maintenance or continuing to operate at reduced levels
Incurred $32 million of incremental Covid specific costs for activities such as additional health and safety procedures, increased transportation and community fund contributions
Distributed $9 million to date from Newmont's $20 million Global Community Support Fund focused on employee and community health, food security and local economic resilience through partnerships with local governments, medical institutions, charities and non-governmental organizations

PROJECTS UPDATE

Newmont’s capital-efficient project pipeline supports stable production with improving margins and mine life. Funding for the current development capital projects Tanami Expansion 2 and Musselwhite Materials Handling has been approved and the projects are in execution. Additional projects not listed below represent incremental improvements to the Company's outlook.

Tanami Expansion 2 (Australia) secures Tanami’s future as a long-life, low cost producer with potential to extend mine life to 2040 through the addition of a 1,460 meter hoisting shaft and supporting infrastructure to achieve 3.5 million tonnes per year of production and provide a platform for future growth. The expansion is expected to increase average annual gold production by approximately 150,000 to 200,000 ounces per year for the first five years beginning in 2023, and is expected to reduce operating costs by approximately 10 percent. Capital costs for the project are estimated to be between $700 million and $800 million.
Musselwhite Materials Handling (North America) improves material movement from Musselwhite’s two main zones below Lake Opapimiskan. An underground shaft will hoist ore from the underground crushers, reducing haulage distances and ventilation costs. The project is 95 percent complete; however, full commissioning has been delayed amidst the Covid pandemic as Musselwhite operations were previously on care and maintenance. The Company expects to commission the project upon completion of the Musselwhite conveyor system by the end of 2020.

OUTLOOK

Newmont's 2020 attributable gold production is unchanged at approximately 6.0 million ounces and the Company expects to produce approximately 1.0 million gold equivalent ounces from co-products. Gold CAS is expected to be $760 per ounce, and gold AISC is expected to be $1,015 per ounce.

Newmont's capital expenditure for 2020 is expected to be approximately $1.4 billion as the Company continues to progress the majority of its development and sustaining capital projects, including Tanami Expansion 2, developing the sub-level shrinkage mining method at Subika Underground and advancing laybacks at Boddington and Ahafo.

For exploration and advanced projects, approximately 80 percent of the Company’s exploration budget is allocated to near-mine activities. Newmont's 2020 exploration and advanced project spend is expected to be approximately $350 million as the majority of infill drilling programs and Greenfield exploration actives have resumed with the lifting of Covid restrictions globally. Advanced project study work for Yanacocha Sulfides and Ahafo North continues remotely.

Newmont continues to maintain wide-ranging protective measures for its workforce and neighboring communities, including screening, physical distancing, deep cleaning, and avoiding exposure for at-risk individuals. If at any point the Company determines that continuing operations poses an increased risk to our workforce or host communities, it will reduce operational activities up to and including care and maintenance and management of critical environmental systems. Newmont’s 2020 outlook assumes operations continue throughout the remainder of the year without major Covid-related interruptions.

1 Attributable gold production for the third quarter 2020 includes 87 thousand ounces from the Company’s equity method investment in Pueblo Viejo (40%).

2 Non-GAAP measure. See end of this release for reconciliation to Costs applicable to sales.

3 Non-GAAP measure. See end of this release for reconciliation to Costs applicable to sales.

4 Non-GAAP measure. See end of this release for reconciliation to Net income (loss) attributable to Newmont stockholders.

5 Non-GAAP measure. See end of this release for reconciliation to Net income (loss) attributable to Newmont stockholders.

6 Non-GAAP measure. See end of this release for reconciliation to Sales.

7 Capital expenditures refers to Additions to property plant and mine development from the Consolidated Statements of Cash Flows.

8 Non-GAAP measure. See end of this release for reconciliation to Net cash provided by operating activities.

9 Non-GAAP measure. See end of this release for reconciliation.

10 Non-GAAP measure. See end of this release for reconciliation.

*Attributable gold production for 2020 includes 375,000 ounces from the Company’s equity method investment in Pueblo Viejo (40%).

Full Potential at Boddington improves mining rates and grade increases throughout remainder of 2020 with the three year stripping campaign nearing completion in the South Pit and Tanami continues to deliver solid performance.

Africa benefits from a full year of production from the Ahafo Mill Expansion which is offset by mine sequencing in both the Subika and Awonsu open pits, a change in mining method at Subika Underground and lower grades at Akyem.

2020 outlook includes the impacts from Peñasquito, Éléonore and Musselwhite being temporarily placed into care and maintenance in the second quarter.
The Musselwhite Materials Handling project is 95 percent complete and the conveyor system is on track to be fully commissioned by year end.
Éléonore production and cost outlook reflects the ongoing work to integrate the geotechnical model and updated Reserves.

2020 outlook includes the impacts from Cerro Negro and Yanacocha being temporarily placed into care and maintenance in the second quarter. The 2020 outlook includes Covid-related impacts through July 30, 2020 and does not include ongoing Covid-related constraints in Argentina that restricts Cerro Negro operations which are at approximately 65 percent of normal capacity. The South America region remains on track to achieve full year 2020 guidance.

Production, CAS & AISC for the Company’s 38.5 percent ownership interest in NGM is unchanged, as provided by Barrick Gold Corporation.

a 2020 outlook projections used in this presentation are considered forward-looking statements and represent management’s good faith estimates or expectations of future production results as of October 29, 2020. Outlook is based upon certain assumptions, including, but not limited to, metal prices, oil prices, certain exchange rates and other assumptions. For example, 2020 Outlook assumes $1,200/oz gold, $16/oz silver, $2.75/lb copper, $1.20/lb zinc, $0.95/lb lead, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate and $60/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. Assumptions used for purposes of Outlook may prove to be incorrect and actual results may differ from those anticipated, including variation beyond a +/-5% range. Outlook cannot be guaranteed. As such, investors are cautioned not to place undue reliance upon Outlook and forward-looking statements as there can be no assurance that the plans, assumptions or expectations upon which they are placed will occur. Amounts may not recalculate to totals due to rounding. See cautionary 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 2020 CAS outlook.

c Represents the ownership interest in the Nevada Gold Mines (NGM) joint venture. NGM is owned 38.5% by Newmont and owned 61.5% and operated by Barrick. The Company accounts for its interest in NGM using the proportionate consolidation method, thereby recognizing its pro-rata share of the assets, liabilities and operations of NGM.

d Attributable gold production outlook includes the Company’s equity investment (40%) in Pueblo Viejo with ~375Koz in 2020; does not include the Company’s other equity investments. Attributable gold production outlook represents the Company's 51.35% interest for Yanacocha and a 75% interest for Merian.

e Gold equivalent ounces (GEO) is calculated as pounds or ounces produced multiplied by the ratio of the other metal’s price to the gold price, using Gold ($1,200/oz.), Copper ($2.75/lb.), Silver ($16/oz.), Lead ($0.95/lb.), and Zinc ($1.20/lb.) pricing.

f The adjusted tax rate excludes certain items such as tax valuation allowance adjustments.

g Assuming average prices of $1,400 per ounce for gold, $16 per ounce for silver, $2.75 per pound for copper, $0.95 per pound for lead, and $1.20 per pound for zinc and achievement of current production and sales volumes and cost estimates, we estimate our consolidated adjusted effective tax rate related to continuing operations for 2020 will be between 38%-42%.

About Newmont

Newmont is the world’s leading gold company and a producer of copper, silver, zinc and lead. The Company’s world-class portfolio of assets, prospects and talent is anchored in favorable mining jurisdictions in North America, South America, Australia and Africa. Newmont is the only gold producer listed in the S&P 500 Index and is widely recognized for its principled environmental, social and governance practices. The Company is an industry leader in value creation, supported by robust safety standards, superior execution and technical expertise. Newmont was founded in 1921 and has been publicly traded since 1925.

Media Contact

Courtney Boone

303.837.5159

courtney.boone@newmont.com

Investor Contact

Eric Colby

303.837.5724

eric.colby@newmont.com

Source: https://www.newmont.com/investors/news-release/news-details/2020/Newmont-Announces-Record-Third-Quarter-2020-Results/default.aspx

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Newmont Announces Record Third Quarter 2020 Results