Newmont Corporation (NEM) Q2 2022 Earnings Report, Transcript and Summary

Good morning, and welcome to Newmont’s Second Quarter 2022 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Tom Palmer, President and Chief Executive Officer. Tom, please go ahead.

Thank you, Operator. Good morning, and thank you all for joining Newmont’s second quarter 2022 earnings call. Today, I'm joined by Rob Atkinson and Nancy Buese, along with other members of our executive team. And we will be available to answer questions at the end of the call. Before I begin, please note our cautionary statement and refer to our SEC filings, which can be found on our website. Newmont delivered a solid second quarter as we continue to differentiate ourselves through our leading portfolio of assets and projects, our proven integrated operating model, and our balanced and disciplined approach to capital allocation. And most importantly, our values driven commitment to our purpose of creating value and improving lives through sustainable and responsible mining. Underpinned by these key differentiators and guided by our clear and consistent strategy, Newmont remain well positioned to safely manage through the evolving and unprecedented challenges that our industry and the world at large face. During the second quarter, Newmont produced 1.5 million ounces of gold, an increase of over 150,000 ounces from the first quarter and as expected. In addition, we produced more than 330,000 gold equivalent ounces from copper, silver, lead and zinc, bringing us to well over 1.8 million gold equivalent ounces for the quarter from our balanced global portfolio. We generated significant operating cash flow of $1 billion and free cash flow of $514 million, an improvement of more than $260 million from the first quarter. With $7.3 billion in total liquidity, we have maintained an investment grade balance sheet with a net debt to EBITDA ratio of three times. Preserving our financial flexibility, whilst we continue to invest in our most profitable organic project and return cash to shareholders. In June, we completed the acquisition of Sumitomo’s interest in Yanacocha, bringing Newmont's ownership in this operation and the exciting sulfides project to 100%. And last week, we declared a second quarter dividend of $0.55, maintaining an attractive dividend yield of between 3% and 4% for the last seven consecutive quarters. Set within our established industry leading framework and calibrated at $1,800 gold price, our second quarter dividend demonstrates our confidence in the strength of both our portfolio and our operating model to deliver sustainable long term value. In May, we published our second annual climate report, part of the suite of reports and our company's non-financial performance. To address climate change and make a real impact, we will need to leverage Newmont’s leading ESG practices, our integrating operating model and the scale and mine life of our global portfolio. These are all important components not only for creating long-term value, but also for addressing the critical issues that our industry must solve, none more important than the elimination of fatalities. Safety is a core company value, and it is at the very heart of operating any sustainable business. I expect it to be the first consideration before anyone begins work at any Newmont location, ensuring that our workforce returns home safely after each and every shift. We have continued our discipline and dedicated approach to safety, maintaining a clear focus on managing the critical controls that must be in place at all times to prevent fatalities. During the second quarter, we completed 155,000 conversations by leaders in the field that were focused on these critical controls. Two years ago, we commissioned mobile technology to gather consistent data globally around these important discussions, which we call critical control verifications. And I'm pleased to say that since then, our leaders have now completed more than 800,000 of these conversations. Over the last three years, Newmont has continued to evolve our approach to safety across our global business, improving our fatality risk management program to ensure it is as effective and as insightful as possible. By combining our learnings from significant potential events and critical control verification data, we are now able to gain a deep understanding of the fatality risks of each operation and importantly, what is needed to be done to reduce these risks. At Newmont, we have created a robust and diverse portfolio of operations, along with a pipeline of more than 20 organic projects with the scale and mine life to deliver strong long-term results. Newmont will produce more than 6 million ounces of gold each year and almost 2 million gold equivalent ounces from copper, silver lead and zinc. Combined, that is nearly 8 million gold equivalent ounces every year for at least the next decade, the most of any company in our industry. Among our 12 operating mines and two joint ventures, nearly 9% of our attributable gold production comes from top tier jurisdictions. Because we firmly believe that where we choose to invest and operate matters. And underpinning our portfolio is a robust foundation of reserves and resources, which combined with the gold industry's best organic project pipeline, provides the pathway to steady production and cash flow well into the 2040s. We are in a period of meaningful reinvestment as we continue to advance our near term projects, including the second expansion at Tanami in Australia's Northern Territory, the development of a Ahafo North in Ghana and the Yanacocha Sulfides project, the next exciting chapter in Newmont’s long and profitable journey in Peru. And in addition to our three near term projects, Newmont has a deep pipeline of longer term projects that represent growth opportunities for later in this decade and beyond. These projects and operations are managed through a proven, integrated operating model with a strong track record of delivering long-term value to all of our stakeholders. Newmont's operating model is built upon the fundamental principle that the whole is worth more than the sum of the individual parts. And it is strongly supported by our full potential continuous improvement program, a program that has been in place for over eight years and is more important today than it has ever been. Our team is taking the lessons learned during the pandemic to address the challenges that our industry faces today, including tight labor markets, inflation and supply chain disruptions. As the world is reacting to these pressures we are actively deploying strategies to reduce our exposure. Our global supply chain team is leveraging our scale and the strong partnerships we have developed over many years with our key suppliers and equipment manufacturers. As the industry leader, we have best in class pricing as well as sophisticated rise and fall formulas built into our long term contracts to reduce both volatility and mitigate logistical constraints in order to prevent disruption in our operations. And whilst we can't talk about specific contracts, several of our major equipment and parts suppliers have recently issued comprehensive price increases for the industry that range from 15% to 30%. However, through the efforts of our global supply chain team, we have negotiated lower price increases, in some cases of only 3% to 5% for the coming year. In addition to this, we are challenging the gold industry by implementing new technology to improve productivity and reduce labor risk, such as our transition last year to a fully autonomous whole truck fleet at Boddington. We are leveraging our full potential program, which has been instrumental in delivering value during these unprecedented times, helping to offset the impacts from current market conditions. And we are utilizing real time data and our global team has subject matter experts to share knowledge and talent across our global portfolio, providing critical insights and driving improved performance that our operating teams simply cannot achieve on their own. It's one of the most tangible examples of this. We have designed and implemented three operational support networks covering our core areas of mining, processing and asset management. These global networks bring together our technical experts from around the world providing 24 hour monitoring, coaching and support through a consistent platform. In the mining industry, we traditionally expect our frontline leaders to obtain their own data and insights as they manage everything involved in safely leading a team of people at the start, during and end of a shift. Through our support networks, we help our leaders by monitoring operational performance and providing insights into the areas that need their attention: saving time; improving focus; and removing the need for so many people at our mind sites. And by offering a more flexible work environment, Newman is able to attract the best talent from within and beyond our industry, creating a more diverse, motivated, and highly skilled team to coach and support not one, but all of our operations. In addition to our dedicated and disciplined approach to cost management, you can also expect that we will remain transparent about what we are experiencing today and what we are anticipating in the future from this unprecedented environment. Over the last eight months, we have observed cost pressures, including the impact from Russia's invasion of Ukraine and increasingly competitive labor market, and the highest global inflation rates our world has seen in nearly 40 years. As a consequence, we are anticipating an additional 7% of cost escalation this year. That is on top of the 5% we had already included in our full-year outlook we established last December. Around 1/3 of this increase is related to labor costs. We are seeing contracted services rates that are more than 10% higher than December last year, driven primarily by strong competition for specialized labor, higher levels of post pandemic accretion resulting in higher demand and the pass-through of higher commodity prices and transportation costs. The next 1/3 of the impact comes from an increase in prices for global commodities and raw materials. We're observing escalation in the range of 20% to 30% for certain items such as cyanide and explosives, which is being driven by the increase in the price of natural gas and the availability of ammonia. As well as an increase in the price of steel that is being used in our grinding media and spare parts. And the final third of the impact is coming from higher fuel and energy costs. As an example, diesel prices have increased by more than $50 per barrel, adding approximately $20 per ounce to our all-in sustaining costs compared to our original guidance. I'll now turn it over to Rob and then Nancy for a more detailed look at our operational and financial performance, and they will discuss how our second quarter results have been impacted by the current environment. I will then wrap up with an overview of our outlook for the remainder of this year, as we remain focused on implementing productivity improvements, and offsetting the impacts of these challenging market conditions. Over to you, Rob.

Thank you, Tom, and good morning, everyone. Turning to the next slide. Let's dive into our operations and projects starting with Africa. Our team delivered a solid performance in the second quarter due to higher ore grade and tonnes mined in addition to strong mill performance, and the team is working to complete an open pit layback, and we expect stripping to decrease in the third quarter as we begin to reach the ore, and create future optionality for both underground and open pit growth. Ahafo South delivered a strong second quarter performance increasing gold production by more than 25% compared to the first quarter due to improved ore grades, higher underground and open pit ore tonnes mined and steady mill performance. And despite the challenges experienced during the first quarter from supply chain disruptions and global border closures, as a result of COVID, the team continues to successfully ramp up mining rates in the Subika underground, which Tom will discuss later on. We anticipate production at Ahafo to be weighted around 60% to the second half of this year as we continue to increase underground tons through increased development and reach higher grades, positioning Ahafo for a strong finish to the year. And finally, the team continues to progress engineering and procurement for the Ahafo North project. All of the permitting has been completed, and we are encouraged by our recent discussions as we continue the important stakeholder engagement work with local communities, traditional leaders, and regulators to ensure full land access, that it is properly cleared of all structures and quarters. As I have mentioned in previous updates, this will be an important milestone, which will give us the opportunity to update the remaining costs and schedule to develop this prolific ore body, ensuring that we can properly incorporate the impacts from this land access delay. As a consequence of working through this important activity, preliminary capital costs are expected to be approximately 15% higher than our original estimate. And we are anticipating a shift in commercial production from 2024 to mid 2025. We look forward to providing additional detail later this year, as we worked to add profitable production from the best unmined goal deposit in West Africa. And now turning to South America, Cerro Negro delivered another strong performance in the second quarter as a result of steady grade and ongoing improvements to mining rates and mill performance. The team continues to advance the first wave of expansions at Cerro Negro, including the expansion of the Marianas district and the development of the Eastern district to extend existing operations beyond 2030. The development of the San Marcos decline is progressing and we have successfully completed the first blast in the Eastern district in May of this year, an exciting accomplishment as we continue to explore and develop the district potential in Argentina. At Marion, the team delivered a steady performance despite very heavy rainfall in the second quarter, impacting mined sequencing and resulting in lower ore tonnes mined and milled in addition to lower grades. We anticipate higher production in the third and fourth quarter, as the rainy season comes to an end, improving mill performance and reaching higher ore grades in the second half of the year. And finally, Yanacocha continued to deliver solid production during the second quarter accelerating ounces from the re-leaching program and improving recoveries from the use of a richer leaching solution. We anticipate production at Yanacocha to be weighted around 55% to the first half of this year, as a site decreases Orton's mined and placed on the leach pads while we work to develop the first phase of the Sulfide project. Engineering is nearly 60% complete and procurement is around 45% complete with approximately one third of the local contracts already awarded. And as you can see in the picture here, the team is progressing the camp construction and early earth works as planned, ensuring we have in place proper accommodations for our construction workforce and for future mine operations. The project team is preparing for an investment decision in late 2022, and we currently expect capital spend to be around $2.5 billion from the full funds approval date with commercial production in mid-2026. We look forward to providing an update towards the end of the year, and we remain very excited about the opportunity to develop the Sulfide potential at Yanacocha. And now over to North America. Penasquito delivered another solid quarter as higher gold and silver grades helped to offset the impact from planned mill maintenance and higher costs associated with the workforce negotiation announced earlier this month. As part of the newly established profit-sharing agreement, Newmont Penasquito has agreed to pay an uncapped profit sharing bonus up to 10% of profits from the operation, with an expense of $70 million related to 2021 results, adding more than $65 per ounce to North America's second quarter all-in sustaining costs for gold and over $180 per ounce for coal product gold equivalent ounces. For 2022, we expect the profit sharing bonus to add additional costs of around $15 million at an $1,800 gold price, adding approximately $4 per ounce to North America's all-in sustaining costs for gold and $10 per ounce for coal product gold equivalent ounces. We reached this agreement with the workforce of Penasquito without interruption to the site, and we continue to build an aligned and valued relationship with union leadership to support the safe and viable operation of the mine well into the future. Looking ahead, costs are expected to stabilize as gold production from this large polymetallic mine increases in the third quarter due to higher grades delivered from the Penasco pit, whilst coal product grades from silver, lead and zinc begin to decline in the second half of the year as planned due to mine sequencing. Moving to Canada. Productivity and costs continued to be impacted by ongoing challenges stemming from a very competitive labor market. In addition to these challenges, Eleonore experienced COVID-related absenteeism during the second quarter as flight capacity restrictions and strict protocols remained in place to protect the health of our First Nation communities and workforce. Musselwhite and Porcupine both delivered an improved performance compared to the first quarter, increasing ore tonnes mined and processed with Musselwhite delivering its best monthly performance in over 3 years. Productivity and ore grades at both sites are expected to continue improving in the second half of the year as mining in Musselwhite progresses to the north in the PQ deeps area, and Porcupine reaches higher grades from Hoyle and Borden beginning in the third quarter. And finally, at CC&V, the site delivered improved production compared to the first quarter due to higher ore tonnes mined and processed at our leach facilities. And as Tom will discuss later on, the mine is now operating as a leach facility with steady production from optimized work placement and declining per unit costs for the remainder of the year. And now turning to Australia. As mentioned during the first quarter earnings call, the Western Australian border was reopened in early March, resulting in significantly higher case counts, ongoing testing requirements and strict close contact protocols throughout the state. Approximately 1/3 of the Boddington workforce and half of the Tanami workforce tested positive for COVID in the second quarter and high levels of absenteeism from positive cases close contact isolation protocols continues to challenge productivity at both sites. In addition, Australia is experiencing a tightening of the labor market as the competition for skilled workers and contracted services has intensified in recent months. Yet despite these challenges, Boddington delivered a strong second quarter performance. The team reported an increase in gold and copper production of more than 25% compared to the first quarter as higher mill throughput and grade more than offset lower tonnes mined due to inclement weather. Performance from Boddington's fleet of fully autonomous haul trucks continues to improve each quarter. And for the remainder of the year, Boddington will focus on achieving record mill throughput rates and increasing tonnes mined from this cornerstone asset. At Tanami, the site also delivered improved production with an increase of more than 25% compared to the first quarter due to higher ore grades, an increase in tonnes mined and improved mill performance, helping to offset the impacts from higher contracted services costs in a very competitive labor market. With the ongoing challenges of securing specialized labor and contracted services, the team continues to successfully progress the second expansion at Tanami, a project that will extend mine life beyond 2040. Nearly 90% of the project engineering and procurement has been completed protecting the project from a number of inflationary pressures. During the third quarter, the team will complete the reaming of the 1.5 kilometer deep, 5.5-meter wide shaft and the installation of the head frame and hoisting infrastructure, which, as you can see here, is nearly 95% complete. And as I have mentioned in previous updates on this project, this will be an important milestone as we evaluate the remaining schedule and cost to complete the project with the key work remaining involving the concrete lining of this production shaft. This process will also ensure that we properly incorporate the significant impacts from COVID-related restrictions and protocols and the current market conditions for labor and materials. We continue to operate in a very competitive labor market in the Northern Territory with significant demand from mining competitors and infrastructure initiatives throughout Australia. Based on our preliminary view, we expect capital costs to be approximately 25% higher than our prior estimate and a shift in commercial production from 2024 into early 2025. We look forward to providing additional detail later this year, and we remain excited to deliver significant pounds, cost and efficiency improvements at this world-class asset. And with that, I'll turn it over to Nancy on the next slide.

Thanks, Rob. Let's start with a look at the financial highlights. Newmont delivered a solid performance in the second quarter with $3.1 billion in revenue at a realized gold price of $1,836 per ounce, adjusted EBITDA of $1.1 billion and solid free cash flow of $514 million. Our strong cash flow generation allows Newmont to provide superior shareholder returns, largely to our industry-leading dividend framework. Last week, we declared a regular quarterly dividend of $0.55 per share, calibrated at $1,800 per ounce, demonstrating our confidence in our future outlook and our commitment to leading returns. And as Tom mentioned earlier, we're in a period of meaningful reinvestment, an essential component in growing production, improving margins and extending mine life. In the second quarter, we invested more than $600 million through capital, exploration and advanced project spend as we continue to progress our near-term projects and invest in our future. In July, we paid $34 million in advanced project spend, part of our initial $100 million commitment to Caterpillar, as we work to develop autonomous battery electric haul trucks for our open pit CC&V and our underground mine at Tanami. Compared to the first quarter, adjusted net income declined more than $0.20 on due to the macroeconomic factors that Tom mentioned earlier, in addition to lower realized metal prices for gold, copper, silver, lead and zinc. We sold 46% of our metal in the month of June at an average gold price of $1,834 per ounce, substantially decreasing our average realized gold price for the quarter compared to the LBMA gold price of $1,871 per ounce. Average realized metal prices were also impacted by $105 million of unfavorable mark-to-market adjustments on provisionally priced sales due to a sharp decline in metal prices on June 30. These impacts alone resulted in a reduction to net income of approximately $0.19 per share compared to the first quarter, largely offsetting a 12% increase in gold sales volumes due to higher production from our operations in Australia and Africa. In addition, we experienced an increase of approximately $80 million from higher labor and materials costs and nearly $50 million from higher diesel and energy prices compared to the first quarter. And as Rob mentioned, we incurred a $70 million expense in the second quarter related to the Penasquito profit-sharing agreement. These impacts, along with smaller, less meaningful items, resulted in second quarter adjusted net income of $362 million or $0.46 per diluted share. Despite the current market environment, our capital allocation priorities remain unchanged with a clear strategy: to reinvest in our business through exploration and organic growth projects; to maintain financial strength and flexibility in our balance sheet and to continue to provide industry-leading returns to shareholders. In the first half of this year, we delivered on each of these priorities by progressing our profitable reinvestment into the business with the advancement of our near-term projects and an ongoing commitment to our robust exploration strategy, enhancing our ownership of world-class assets and proven mining jurisdictions through the acquisition of the remaining interest in Yanacocha and the Sulfides project. Maintaining our industry-leading dividend of $2.20 per share on an annualized basis and sustaining a strong balance sheet with $7.3 billion in liquidity and a net debt-to-EBITDA ratio of 0.3x, preserving Newmont's financial flexibility with no debt due until 2029. As we look towards the second half of the year, we remain confident in our ability to continue delivering strong results and free cash flow to maintain our disciplined approach to capital allocation and creating long-term value for the business and all of our stakeholders. With that, I'll hand it back to Tom to talk about what to expect for the remainder of 2022.

Thanks, Nancy. And turning to the next slide. During our first quarter earnings call in late April, we provided an update on the impacts to our managed operations as a consequence of safely managing through the Omicron surge over the first 4 months of this year. We also discussed the emerging impacts from Russia's invasion of Ukraine, combined with the ongoing impacts from the global pandemic on labor markets and global supply chains, and as a consequence, input costs. We advised that we are closely monitoring these matters during the second quarter and would provide an update with our Q2 earnings in July. As a consequence of this work, we have decided to update our full year guidance to incorporate the following items. First, as we discussed in our earnings call in April, ramp-up mining rates at our new Subika underground mine at Ahafo South have been impacted by supply chain disruptions that have delayed the delivery of the required production drills and global border closures that have impacted labor availability of the key talent necessary to develop this new mine and train our operators. As also discussed in April, I can now confirm that we are advancing the development of a third production level at Subika, which will add optionality for this mine and minimize future disruptions. We expect first ore from this new third level around the middle of next year. Second, as we discussed in April, with the pending conclusion of our contracts to supply concentrate from Cripple Creek & Victor to Nevada Gold Mines, we stepped back to assess our operating strategy at Cripple Creek & Victor to determine if there was the potential for a simpler, higher-value, longer life, leach-only operation that does not carry the complexity and cost of running a mill to process a relatively small amount of the ore mine. This work has now been completed, and we have made the decision to put the mill into care and maintenance and move to a heap leach-only operation reducing production levels into the second half of this year and beyond as a consequence. Third, as Rob discussed, we continue to be impacted by the ongoing challenges associated with safely managing through the global pandemic. These challenges are particularly pronounced in Canada and Australia where we continue to adhere to strict close contact isolation protocols and test requirements impacting productivity and increasing costs. And finally, as I discussed earlier, the impact on our input costs from escalation in the 3 key areas of labor, material and consumables and fuel and energy. These impacts to our managed; operations have been built into our second half forecast as we work to address the critical global issues we face today and deliver on our updated guidance. So for 2022, we now expect to produce 6 million ounces of gold, which is within our original guidance range, but now incorporates the following changes from the impacts I just described. 80,000 ounces at our Ahafo South operation, 50,000 ounces across our Canadian operations, 40,000 ounces at Cripple Creek & Victor and 30,000 ounces across our Australian operations. The impact from these lower production volumes, coupled with higher input prices from inflationary pressures, has also increased our gold all-in sustaining cost for this year for $1,150 per ounce. We remain within guidance for sustaining capital. However, we anticipate our spend to be weighted around 55% to the second half of this year due to global supply chain delays in the first half and higher input costs. The unprecedented and evolving market environment has also impacted our expectations for development capital since we established our guidance in December last year. As a consequence, we have reduced our estimate for development capital for this year to $1.1 billion, incorporating delays in spending primarily associated with Ahafo and Yanacocha sulfides. In addition, over the next few months, we will pass through the land access milestone for Ahafo North and the completion of Shaft Remy milestone for the Tanami expansion and be in a position to clearly evaluate the remaining cost in schedule to complete both these important projects. Building on the trends that Rob just described, we'll be in a position to provide additional detail on both these projects later this year. As we look ahead, we expect that inflationary pressures and the impacts from a competitive labor market will persist into 2023, resulting in production levels and unit costs that will be similar to this year. We are actively working on our 2023 business plan and look forward to providing you additional detail on our long-term outlook when we deliver our annual guidance in early December. We will continue to be transparent regarding the challenges we are managing as a mining industry, and we remain firmly committed to advancing the initiatives that are most important to our business, including climate change. In May, we published our second annual climate report, providing stakeholders with a more comprehensive understanding of how we manage the impacts of climate change at our operations and projects. We believe that climate change is one of the greatest existential threats to our way of life. And this report outlines Newmont's climate-related risks and opportunities, our strategic planning around various climate change scenarios and the specific actions we are taking to reduce our carbon footprint. In addition to our climate report and our annual sustainability report published in April, we will launch Newmont's inaugural tax transparency report during the third quarter, which will provide an overview of the taxes we paid as part of the value we create in the countries where we operate. In closing, we have a tremendous opportunity to address the challenges of our dynamic and changing world from inflationary pressures and global supply chain disruptions to climate change and reducing fatalities in the mining industry. Guided by our clear and consistent strategy, we believe that Newmont has the size, scale, leadership and experience to navigate these challenges as we continue into our next 100 years of sustainable and responsible mining. And we are both ready and excited for what is ahead. And with that, I'll turn it over to the operator to open the line for questions. Thank you, operator.

Thank you. [Operator Instructions] Our first question comes from Mr. Lawson Winder from Bank of America.

I wanted to start on the dividend. In light of everything that's happening in terms of cost inflation and as well as your comments and plans to spend quite a bit on capital projects in 2022, '3, '4 and perhaps even beyond during this period of meaningful investment when free cash flow could be sort of pressured by these 2 factors, I mean is the current dividend sustainable? And then secondly, you've commented, Nancy, in the past that the dividend payout levels are assessed each quarter. And I'm curious, when you think about that assessment and you go through that process, is it the yield that you're focusing on or is it the payout ratio?

Thanks, Lawson. I'll pick up and Nancy, if you want to chip in, I'll pass across to you. Lawson, the key aspect of our dividend framework is gold price, and we look back at gold price over an extended period of time, not necessarily any volatility you may see in a particular quarter and look at the gold price over an extended period of time and we sit down and have that discussion with our Board to ultimately decide the dividend that we pay and determine the cash that we've generated and our capacity to pay a dividend. If you look back over a 6-month, 9-month, 12-month period, gold price is averaging around between $1,850 an ounce over that period of time. So it's the gold price, which drives our dividend framework. And then we look at our capacity to pay in terms of a percentage of the free cash flow we're generating based upon that gold price. Nancy, you might want to comment on yields more gold price in Newmont.

Yes. It's certainly around gold price and margins much more. We're not solving for a particular deal. I would also indicate, too, we've been on the more conservative side with the 40% payout at 1,800 as we were entering this period of reinvestment. And the other piece I would note was when we put the framework in place several years ago, we started and have continued to enjoy quite high cash balances. And we indicated at that time that, that gives us quite a glide path if prices were to change. So we have a great deal of conservatism built into the framework and the ability to continue to consider and evaluate based on those cash balances and our ongoing outlook.

Thanks, Nancy. To build on that, we also recognize that as a long-term business that we'll reinvest from time to time, you'll have periods of greater reinvestment and lower reinvestment over year-on-year or over a period of time. So we take that long-term view into consideration as we look at the spend profile of development capital.

Maybe I would ask it, just one follow-up along the lines of the dividend, which is when you speak of your capital allocation framework, which is reinvest in the business and maintain the balance sheet and then 3 was industry-leading returns. Should we think of it as being 1, 2, 3? So reinvesting first, strong balance sheet second and then sort of if there's capital left over, that then goes into the dividend? Or is there a bit of give and take there, for example, could you sort of delay some of these projects in order to maintain a sort of more competitive dividend?

Yes. So the gold that we have is a long-term stability of the business, and that absolutely requires reinvestment in these significant capital projects. So that will continue to be a very high priority for us. And certainly, our investment-grade ratings and our balance sheet stability are also important. So we will endeavor to maintain our margins, so we can deliver on all 3 of those priorities. But certainly, the long-term value of the business is very important to us. So we'll continue to calibrate and balance across all 3 of those imperatives, but I would say reinvestment is certainly quite critical.

And then just maybe sort of a conceptual maybe a bit of a longer-term question. But I mean, when you look at the cost pressures that you're facing and particularly the labor difficulties, I mean, does this create an imperative to accelerate your automation program and do what you did at Boddington with a greater number of mines? And to what extent can you accelerate that?

Yes. Thanks, Lawson. Good question. I think technology is clearly part of the lever you have as a mining company to improve productivity and optimally reduce costs. And Rob, you might want to comment. I think we have significantly benefited from having autonomous haulage in place at Boddington, probably less so from the cost pressure at this point in time, a [loss] (ph) and more directly as opposed to the productivity, given what West Australia has seen in terms of the introduction of the virus to that state over the course of the second quarter. But Rob, I think if we had -- still had conventional people operating trucks at Boddington, they would have been quite a significant impact through the second quarter. I think some mining companies who have conventional fleets in Western Australia will have experienced through the second quarter of this year.

Without a doubt, Tom, and the unpredictability of the virus not knowing who's going to turn up each day would have really impacted to have 36 trucks guaranteed running day in, day out has really delivered [Indiscernible] certainty but continued productivity. So it's been a good news to us.

And Lawson -- thanks, Robert. Lawson, we actually moved -- we have that's a control room that oversees these fleet of autonomous trucks in the latter part of last year, knowing that borders would eventually open up in Western Australia. We actually built a fall back control room. So on the village on the Boddington mine side, we had several rooms set up from within which you could control the mine of Boddington so that if we did end up with a case of some of the key operators testing positive, they could continue to isolate and manage the mine from the comfort of their room in the village. And so we're well positioned to use technology in this particular instance. But I think it will be a key driver in the mining industry when we think about how we can manage some of the cost and inflationary pressures that we're experiencing in certain jurisdictions.

I'm going to ask 1 more. I apologize to my colleagues if I've asked too many questions here, but I just wanted to get your thoughts on buy versus build. Just given the CapEx inflationary pressures here, is there an incentive here to perhaps look at additional M&A opportunities and particularly larger, more meaningful M&A opportunities? And I'll leave it there.

Thanks, Lawson. And for those waiting in line, we'll stay on the call until with the amount of information we've shared this quarter. We'll stay on the call and work through everyone's question. Lawson, our strategy doesn't change. We are very much focused on running our business and investing back in our business. The best investments you can make here back within the projects that you know very, very well. So that is our main focus, delivering value from that well-managed operations and bringing on and developing our organic project pipeline. But that doesn't mean that our radar isn't turned on. And if an opportunity presented where we could pick up an asset or a portfolio that met Newmont's criteria around size, scale, cost profile and jurisdiction, then we would run the ruler over that. If we felt that we could add more value with that asset or portfolio sitting within our operation. But to be frank, 99% of the people who work at Newmont are focused on delivering value from the portfolio that we are managing today.

Our second question comes from Fahad Tariq from Credit Suisse.

First, on the labor shortage that you're seeing, particularly in Australia and Canada. Can you just touch on the steps you are taking to address that shortage going forward?

Thanks. I'll kick off, and Rob, you might want to build on both of those countries. So if you think about labor, it's the -- our workforce, the people who are Newmont employees is relatively stable. We're seeing turnover or voluntary attrition that is at higher levels than we've maybe seen in the past towards the high level but still within manageable levels of what we've seen in the past. So the inflationary pressure is really coming from the contracted services or the particular technical expertise that we see. So the labor you need to bring in to do large shutdowns or to repair specialized equipment or to do particular contracted services work. And there's the additional costs that we're starting to see as people bid for work, for the work that we send that way, that is an area that we're watching very carefully. But the area that equally is important to me, if not more important to me, is actually having the people you need to do the work. So we have a scope of work we need to do for our shutdown of a mill that you might take down, say, a couple of times a year. And if we can't get all of the people that you need and how are we thinking about the scope of work to ensure that when we button that mill up and recommission it that we can run reliably until its next shutdown. So there's the cost pressure. But probably more important for me is that ensuring that we get the right people working on the equipment to ensure that it's maintained at the right level. Rob, do you want to build on that in Australia and Canada?

Yes. I'll just give 1 example, Fahad, at the last Bollington shut, we were 260 contracts to shore and literally, we had some companies defaulting on entire packages of work. So that really means that we -- we're spending a lot more time with our contractors and our business partners to make sure that we're aligned with those ones, not only for the short term, but also for the long term and continuing to deepen those relationships. And I think just going back to what Tom said about our own employees is that the value proposition that Newmont offers with the safety aspect or environmental credentials as well as the leadership and the working conditions, that is very, very attractive to many people, both inside our company and outside. So it really is around our contracting partners where we're spending most time and most work to deepen those relationships.

Just to build a little more on that, Fahad, in my remarks, I talked about 1 of the measures we've got in place to mitigate some of these inflationary pressures are our operational support networks, one of those is in asset management, which is obviously around how we do our maintenance work. And through that asset management program, we are now looking at our maintenance shutdowns across our 12 managed operations around the globe. And looking at how we can smooth out the timing of those shutdowns and when we do the different scopes of work. So as there are particular specialist skills that are rare around the world, we're ensuring that we're able to balance their use across our various operations to ensure that we mitigate that risk of not having that critical resource available to do important maintenance work.

And just my second question, switching gears to Yanacocha Sulfide. I noticed the CapEx estimate didn't change in this press release. Just curious if that is going to -- if a CapEx review is done quarterly or monthly or if we should expect something as part of the investment decision? And if the CapEx review was done and the estimate wasn't changed, what's different about the dynamic improved versus other parts of the world where you're seeing labor and materials inflation?

Yes. Thanks, Fahad. So where we're at with the Sulfides project is, we’re past through the 50% engineering mark, and which means that’s pretty -- a project of this size – any mining project that’s a significant amount of engineering completed at this stage of a project. We are dropping out the quantities right as we speak through this quarter as we build towards investment decisions and using those quantities to determine both the definitive schedule and the definitive estimate. The key amount of work that -- or material that's still to come with sulfides, if you recall, we've actually ordered a number of long lead time items. So the autoclave shells themselves, specialized steel involved with that, oxygen plants, key electric mill miners and the like. So we have derisked that project because both about cost and schedule by ordering some of those critical components and managing their lead times. So looking forward, there are 2 key components. It's all the -- what we call the bulks or stick still to build a plant and all the steel involved in fabricating the tanks and pipes that you have around this processing facility. So there's the cost of steel by specialists steel and standard steel for that work and labor. Now in the Peruvian context, we'll direct higher labor is something that we've got a lot of control to be able to manage, and it will be a very much a local workforce. So the risk is in the escalations that the world is seeing around the cost of steel. So in giving an indication in this update of $2.5 billion from the point of full funds approval, we are incorporating an early look into some of the escalation we're seeing in steel for that go-forward number from full fund. So there is some consideration for that Fahad as we're right in the middle of doing our definitive estimate and schedule as we speak.

Our next question comes from Jackie Przybylowski from BMO Capital Markets.

Jackie, are you there?

Jackie, unfortunately, we are not receiving any audio from you. Can you please make sure that you are unmuted locally.

Operator, we'll take the next question. We have Jackie to see where to get that line connected. So let's go to the next caller, and we'll pick Jackie up again.

Of course. Our next question comes from Josh Wolfson from RBC Capital Markets.

Back to the topic of capital allocation, Tom and Nancy. On the theme of the dividend, the existing policy in place, I think, had talked about $300 gold price increments being the key factor determining what the payout was going to be. And Nancy, I believe you mentioned that there had been some conservatism incorporated in there. We're seeing in the current environment, gold prices come off and still cost inflation be meaningful. So does the current policy still maintain its relevance? Or is there some sort of additional thoughts that we should sort of be thinking about rather than strictly that $300 increment determining payout?

Yes. Thanks, Josh. I might pick up that to the start and Nancy you build on it. I think -- we don't -- our dividend policy is deliberately set up to be stable and robust over the longer term. So although we're seeing some volatility in gold price during the last few weeks, we need to see how that plays out going forward. And I mean there's lots of condoscent authorities that us views on what gold price may do or not do. So we will continue to follow that framework, look back at the gold price over an extended period of time, the cash we've generated and are generating and make judgments within our framework. I think the area that as we look forward in terms of the dividend framework is the debate we're having around what the floor is in the gold price. And then ultimately, what gold price we used for doing our mine planning and for determining our reserves and resources and picking up the conversation we had on last earning calls and conversations we have had since then. So if we were -- we're still midstream in that debate, looking at all of those things. But if we were to lift out the gold price that we use for mine planning and for reserve setting then we would step back and look at our dividend framework and the construct around that floor and the gold price, which will have moved. So I think, Nancy, that's probably the most material thing, Josh, in terms of your question, but you want to build on that?

Yes, that's exactly right, Tom. So if you remember back to our framework, we had indicated a dollar-based dividend at $1,200 gold price and through the inflationary pressures and what we are seeing, as Tom indicated, around reserve pricing and everything else, the question becomes what is that floor today. And so what you may end up seeing, and we've still got quite a lot of work to do with a slight shift in the framework, but certainly, we have the ability and we'll retain the ability to pay a dividend into the future.

And then also on the share buyback, I noticed there hasn't been much activity year-to-date and obviously look at the move today. But even before that, prices were pretty much below where the stock was trading throughout 2021 when there was meaningful activity. What's the current thought process on how cash is allocated towards the buyback?

Yes. Thanks for the question, and it's one where we continue to evaluate. As we've indicated previously, it's a very opportunistic tool, and so we will use that at certain times. As we've been doing the work over the past quarter to evaluate the impact on inflationary pressures with our capital projects, in particular, we have made the decision to think about where we want to spend our dollars and that's really what's resulted in us holding for the moment. We will continue to evaluate our share price and the use of our cash. But yes, I would consider that to be an opportunistic tool that we will certainly use from time to time. And we do have just a bit under $0.5 billion remaining on the existing program.

Our next question comes from Tanya Jakusconek from Scotiabank.

Can you hear me?

Loud and clear. Thank you, Tanya.

I have a couple. I'm going to start the first one maybe to Rob. I don't want to figure out what's happening at Tanami Phase 2 because I was quite surprised at the increase in capital to that extent of 25%. That's mainly new projects that are coming in. And so 25% was quite a big number for me and also the slippage of over a year was quite a slippage for me. So I'm trying to understand what exactly is happening there to have that amount of capital increase and slippage when we were quite advanced in that project?

Thanks, Tanya, I'll pick that up and then pass for Rob for more color. The key milestone with the seeking a production shaft of that deep, so 1.5 kilometers a mile deep and 5.5 miles wide as you get to this point where we now have a hole essentially within weeks away from being open at that width and depth to be able to move down and survey the conditions of the wall all the way down to understand, therefore, the work you have to do in lighting that shaft to do whatever bolting and shop creating have to do and then to come down and do the establishment of the formwork and the installation on the concrete lighting. So we -- it was -- we're always building to this point in time where we will be able to survey the shaft and understand the time and materials required to complete the job. To put it in perspective for everybody on the call, if you've ever seen a skyscraper being built and the lift well going up with normally the branding of where it was building the building, you'll see the lift well going up in sort of a few meters once a week or every few days as they're putting the form work together and lifting that structure up to establish that well for the heart of that building. And you'll notice that, that takes many months to do that. We are about to start that process upside down for this shaft and it's a depth that's equivalent to 3 Empire State buildings that we're heading underground to put the formwork in place but each and every day, we're establishing formwork, pouring concrete, heading it set, moving forward, unpacking moving forward and other steps are into that serious task, and we have stepped back. Now that we have the shaft almost finished, we've done an initial survey. We've got to do the final survey, and then we can sit down with our contracting partners with absolute clarity on the condition of that shaft and the time of materials required over the next 18 to 24 months to line that shaft with concrete and the other supporting infrastructure all the way down. We haven't provided an update on Tanami 2 in terms of cost or schedule since the beginning of last year. So what you're seeing us update or give you a trend, whilst we do that remaining work is an indication now of the time and materials to complete that work with a clearer understanding of what the shaft looks like and a clear understanding of what the inflationary conditions are in the Australian market. So it is today's pricing and therefore, cost and schedule based upon a hole we now have largely open the ground that goes 1.5 kilometers down. So that sorts of increases aren't dissimilar to the escalations that we have seen as an industry, particularly in Australia over that 18-month period. But Rob, did you want to provide any color on top of that?

Yes. Thanks, Tanya. And I'll just build off a couple of things that Tom said. In general terms, aside from being at the moment in time where we can really get the specific quantities of what's going to take to line that shaft, the way in which I'd look at the increase is at -- about 60% of that is also due to COVID is -- some of the key factors in that is that half of our project team was based in WA, so actually getting them there. We had that 2 weeks where we had a COVID case at Tanami, where we had to shut down the whole operation, which ended up delaying the project by at least 6 weeks. And then with the absenteeism, labor shortages and logistics as well, that has also caused a significant delay as well as the cost. And I think the final point just to really echo what Tom said is that at the early part of the project, we obviously have engineering that we assume. But it's only now that we've actually done the work you can actually see the geology, the overbreak, the actual specifics. And those engineering amounts or the engineering maturity have changed quite markedly. So whilst to say about 60% of the capital increase is due to COVID, about 25% is really due to the engineering maturity amongst other things. But the last thing I'd certainly see, Tanya, is that, hopefully, you can see in the picture, there is significant work that has been accomplished. It's been done safely during a COVID pandemic. We're very, very proud of what we've achieved. But as Tom said, this is a point in time we're able to assess what have the last 18 months really meant to that project and this is the outcome.

Thanks, Rob. And Tanya still an absolutely terrific project. This production shaft, the crusher chamber underneath opens up 1 of the great gold resources in the world. So still incredibly excited about this project as we reached this milestone and have a greater clarity on the cost and schedule to bring it home.

And maybe just on the other projects, and I know -- I think it was Josh asked about the CapEx at Yanacocha Sulfides. I'm just wondering, you mentioned that you've done the costing as of now, but you still are working on some steel and others. So as we get to December, when you have to make an investment decision on that one, we -- I just want to clarify, we are expecting potentially a further update on that one, including maybe Cerro Negro and Pamour?

Why don't I pick up sulfides again, and Rob, just cover off where we're seeing Cerro Negro and Pamour sitting. We have -- as we've looked at some of the inflationary or escalation pressures on steel, in particular, and in providing that sulfides number, the go-forward number of $2.5 billion from full funds is starting to incorporate some early views and trending views as to what that number looks like. We still have to do the definitive estimate, which will actually give us some quoted numbers. But we are starting to incorporate in that number, some of those things in terms of the update this quarter. And Robert, do you want to cover Cerro Negro and Pamour?

Yes, I'll kick off with Pamour, Tanya, is that certainly good work is progressing there at the moment, that as you may remember, a large part of the more project is really about dewatering the current pit. So we're well on track for having all the dewatering installed and mechanically complete by the end of this year. So we actually take it forward to the investment committee in the latter part of this year for the actual layback. And we'll be able to provide the assumptions and the estimate there post that. But the good thing about Pamour is it's certainly progressing well. And certainly, in Cerro Negro, there's a lot of work going on there at the moment. We've got 3 portals, which we're working on and have established. So that's growing great guidance. I mentioned about the first blast as well. So we are working along there quite nicely and certainly, again, from the end of the year, we'll provide updates, but it's really going to be more about progress and perhaps an update in terms of development. We're still looking at $300 million development CapEx for Cerro Negro in total. But again, the key thing I just want to make across is the very good progress that we're making at Cerro Negro, in particular around productivities.

Okay. And then lastly, just another technical question. How should we think about CC&V going forward from an operational standpoint? I know you gave us guidance of reduction for this year, but I'm just keen on understanding this asset just longer term, how we should be thinking about it?

Thanks, Tanya. I'm going to pick that up again, Rob will build on it. CC&V,moving to focus on open pit mining and heap-leach only. We will be working to have CC&V running as simply as it possibly can as efficiently as it possibly can because it's got a single-minded focus on mining efficiently and stacking on the heap-leach efficiently. And with that focus, we expect that we'll have a mine that's very long life because of that simplicity and that efficiency. Rob, do you want to add?

I think that's the key. For me, Tanya, it’s about how do we strip as much cost out of that operation, in particular, the operating support networks, how do we leverage off that, the proximity to Denver and obviously, the technology that we're working on with Caterpillar. But the key to this is the simple mining, leaching operation and which we are really expecting to give us significantly longer life -- a long-life asset that's an important part of the Newmont portfolio.

Is this going to be a 100,000 ounce producer? Is that how I should think about it?

No, more than that, Tanya. I think it'd be pushing to get to 200,000, but between 150,000 and 200,000 run as efficiently as it can leading into, as Rob said, that that proximity to the demo is how we're approaching it as opposed to trying to have something that's maybe creating between 200,000 and 250,000 with all of the complexity of trying to produce concentrate and all the bandwidth that gets taken from running a mill for a relatively small part of the value of the operation.

Our next question comes from Anita Soni from CIBC.

I'm just going to ask 1 more question about the dividend and then move down to Yanacocha Sulfides. But on the dividend, Nancy, you mentioned 40% of the -- you're using a 40% and being conservative currently. I'm calculating it nearly like 80%, 90% of your free cash flow for the past few quarters. So I just want to understand when you're -- are we talking about the same basis of where you guys are using your free cash flow for the dividend?

Yes. Thanks, Anita. And so how we think about it is we look at our plan period and our forecasting, and we calibrate over the cash, we believe we will generate during our -- for us, it's a 5-year planning period and certainly over the much longer term. And so we -- yes, in terms of our forecasting and our modeling, our view is that we are around still the 40% payout calibration at the $1,800 gold price.

Okay. So you're factoring in perhaps better outlook rather than what's near term and happening currently?

Well, I think you're seeing that. We're investing in our business and investing in our future, and those are the indicated returns from these capital projects from the cash flow they will generate when complete.

Okay. And then the second question was Yanacocha Sulfides. Just to be clear, how much do you plan on spending this year and that would not be included in the $2.5 billion -- current $2.5 billion estimate, correct?

We're thinking -- we're looking at about $300 million to $400 million this year, Tanya, on the project, building up to full funds approval. So there's money we're spending on key critical path items that we're procuring. There's money that we're spending on using local contractors to do some of the early earthworks, which is a critically important part of ensuring that there is meaningful work for the communities in and around Cajamarca and Yanacocha. We are building the construction camp, 4,000 beds, and you still saw that in the photo, how advanced that was. My experience in these mega projects is that they often fall behind in the very early days because they don't have the camp accommodation for your workforce. So derisking the project with the construction of that camp this year. And the fourth key area for that spend is the engineering work that we're doing with Bechtel and Hatch that enables us to derisk the project because of the level of engineering that we have that allows us to then be comprehensive with our definitive estimate and our definitive schedule as we move towards full funds. So those are the 4 key areas that, that $300 million to $400 million is being directed to. And just if you picked it up, we actually, as we thought -- as we've looked through our development capital spend, we have adjusted our overall debt cap for this year down to $1.1 billion.

Okay. And then my last question is with the outlook in 2024. So I appreciate giving you guys -- giving us this 2023 similar numbers. So I assume that means the $6 million at about $900 cash costs. If we look into 2024, I mean, I think the original with Yanacocha with that -- the half -- the Tanami expansion, that's where you would have seen perhaps an uptick in production, would you expect at this stage 2024 to be similar to 2023 and 2022? Or are there any other areas where you could probably potentially see improvement into 2024 outside of the 2 projects?

Yes. Thanks, Anita. Yes, as inevitably, these projects are impacted and affected by experiences over the last couple of years and that timing is pushing out, we'll start to see those ounces come on in '25 rather than '24. So if you look beyond '23 to '24, you're going to see a relatively flat production profile year-on-year as those ounces then kick in in '25 and into '26 and then you've got Yanacocha Sulfides coming beyond that. So 2024 looking pretty consistent through 6 GOs, it's going to be the 7, 7.5 million ounces gold and around about the 6%. And that's really what we're aiming to do is to be a steady producer of gold at or around the 6 to 6.5 million ounces of gold, 7.5 million to 8 million ounces of gold equivalents, all up and '24 being pretty stable, '25 will start to kick up from Tanami, 2.5 and on.

Our next question comes from Brian MacArthur from Raymond James.

Most of them asked, but I just want to follow up a little bit on the provisional pricing. And again, I guess when I comment on this, you realized price to zinc say for $1.08. Given where it closed, it seems awfully low. Did you have a lot of open pounds quarter-over-quarter to just -- you said 46% were settled in June, but even the June price was a lot higher than that. So there seems to be a big back half weighting. So can you just go through how that works again specifically at Penasquito. And the second part of your question then is as towns open now. And where I'm going with this is how much of this is cash versus accounting because all these questions we're writing a bit of cash flow over the last couple of quarters, there seems to be a pretty big base metal influence here that's sort of varying quarter-to-quarter.

Yes. Thanks, Brian. And I think it's an important area to unpack in terms of how the quarter played out, but I'll pass across to Nancy and I’ve got Senior Officer available, so I’ve got Daniel Horton, who leads our commercial team and does a lot of those sales. But maybe with you Nancy an answer and then Daniel is available, too.

Great to have you chime in, too. So we did have a big change from March to June. And so that's one way to think of it. And then really, our concentrate sales take 3 to 6 months to finalize. So that had a pretty significant impact, and then also our ounces outstanding at the end of Q2. So our mark-to-market adjustments were about $40 million for zinc and $23 million for copper, gold was about $21 million and silver at $15 million. So that was the largest component. But that's really what drove some of those provisional pricing adjustments. Daniel, anything else you'd add?

Yes, that's right. And Brian, maybe the only thing else I'd add is the average price in June was around $18.30 per ounce. So it was significantly lower than what you thought for the average for the quarter. And then the other point I'd make too is where gold price is trending right now. Obviously, we could expect another similar adjustment if prices continue to decline in the third quarter.

Sure. And what's -- I mean, you got a lot of sites, but I mean some of those aren't delaying 3 to 6 months What's your general timing lag on that normally for the gold side? Like the base metal side, I can see it can be 3 to 6 months. But what's the general gold rule, too?

Yes, Brian. The majority of our gold production comes in the form of dore and that really settles in the near term. So that's not where we're seeing the biggest impact, slight impact to the Peñasquito and Boddington. The new schedule on the concentrate shipments are about 3 to 6 months on settlements. And so they are a longer time frame and Boddington is more on that 3-month time frame. So that's, call it, 20% to 30% of our total production of a concentrate does have a pretty significant impact on the realized price when prices are dropping like we've seen in the recent months.

Makes sense. Now the other thing then, so all this discussion about how you said that, I know everybody focused on the gold price for your gold dividend and you are a gold company. But how do you start to think about this? I mean just this quarter, as you said, you had like $90 million in adjustments from byproducts or whatever. How is that generally thought into your long-term thinking for setting that dividend as well? And over time, you might grow other parts of the business as well.

Yes. Thanks, Brian. And we do look at the longer term as we consider it, and as we put the framework in place 2 years ago. So we certainly think about those puts and takes, and we have our long-term economic guidelines that we use, and we do quite a lot of work on a regular basis to look at that forward curve, where is consensus headed and then the impact on our plan. So all of that is baked in, and we do see some pretty significant disconnects from time to time. But I would say, over the long term, the trend line stay very much in alignment with our economic guidelines. So this is -- I would say this was a bit of an unusual quarter in terms of just the way the timing and the pricing aligned. But over the long term, we do sort of see those peaks and valleys flatten out.

Our next question comes from Greg Barnes from TD Securities.

Just a question around the inflationary pressures that you're seeing. Are they peaking now? Or do you sense that what we've seen in the first half of this year is going to continue in the second half of the year?

Thanks, Greg. Good question to ask. Everything we're seeing is that at a commodity level, they have peaked and are flattening out. So as we look forward, we're seeing that $20 an ounce that builds into that increase to our all-in sustaining cost that that's pretty flat. Labor, I'd say, is the difficult one, so that's specialized labor. I think there is -- I think globally, the world's been shifted on its axis in terms of what availability of labor and decisions people are making about things. The -- so there's -- give you by way of example, in the Australian context. There's something like $200 billion to $250 billion of infrastructure projects that are on the slate in Australia, typically in around major cities. Look at that specialized labor, by going to fly and fly out for mine site to work on a shutdown or to work on a project or am I going to go and work on this bridge or this freeway extension, I think you're seeing that play out across the world in different places. So I think still a question mark over labor. We've got $20 an ounce built in. I think we -- as best we can predict the year going forward, it's a pretty good estimate. And in fuel and energy, obviously, you got the global impacts on fuel in particular, diesel price. So some instances, I'd say probably commodity is probably best predicted. There's still some volatility and that's where we're going to be leaning into controlling those things that we can control. So the work we're putting into those, as I've described before, our operational support networks to ensure that we are leaning into our global supply chain that we are ensuring that we've got inventories where they need to be, that we're maintaining those inventories. We have moved more to local or regional supply than trying to navigate a global supply network. So there are a number of things we're doing to mitigate the work we've done with suppliers, leading into the relationship we’ve spent years building to ensure that we have got one supply and two price protection. So focusing on those things that we can control in still a volatile world. So it's probably not the most satisfactory answer, but there are some levels of stability, but still some levels of volatility.

Okay.

Maybe there is a technical question for Nancy, but I mean we are not alone in this. Why the gold sales always get heavily weighted towards the end of the quarter?

I think it's that way with most of the miners, but typically, we will have a gold core scheduled for the last week of the quarter, and we ensure that those get shipped and sold at market. And I think that's very common. We do the same thing at the end of every month. And so that's a very normal cycle for us. But the gold pours are scheduled to really align with closing everything out at the end of the month and ensuring we have time to check -- get sales accomplished and those kinds of things, but that's a very common cycle for us in terms of sales.

Yes. And everybody else -- just seems 46% in June alone does seem like a lot?

That's quite normal. And also sometimes it has to do with transportation contracts and there have been disruptions in those as well. And so simply just getting the dore to market can be a challenge from time to time. So in this particular quarter, I do also think that had an impact on a bit of the back portion weighting.

Our next question comes from Adam Josephson from KeyBanc.

Tom, forgive me if you've addressed this in various parts of the call, but you talked about your expectation that gold cost will be flattish next year. And on the one hand, I think you said you've entered into some contracts that embed some degree of inflation next year. On the other, you have the onetime costs in 2Q at Penasquito that won't repeat. And I think others have referenced the fact that many global commodity prices have fallen quite considerably in recent weeks because of expectations about an imminent global recession. How are all those factors weighing into your preliminary thinking that gold cost will be flattish? And how much upside or downside risks do you think there is to that flattish cost next year?

Thanks, Adam. I think the starting point for us is how we see -- I mean, production is a key driver of our costs. And so seeing that production level year-on-year being at or about the same, maybe a tat better as we see improvement come through. So that's -- that becomes the #1 driver in terms of costs that we see that pretty consistent production. Then we're right in the middle of our business planning process at the moment where we're then looking and debating and discussing what we're seeing in terms of our input costs and how we're seeing the various contracts that we've got playing out in terms of whether it be contracted services label, whether it be our own workforce, whether it be the assumptions you make around diesel in the next year, the assumptions we make around spare parts, the assumptions we make around explosives and cyanide and the contracts that we've got in place with those suppliers. So we've got what's happening in the world in terms of inflation. And then we've got one other things that go to our cost base what have we got -- what are we seeing in terms of those costs in those locations based upon the contracts that we have. And we put all that into our melting part and start to do our planning work, and we're seeing unit cost for next year on a very similar production profile come out at or around the same levels that we're seeing for this year. So in terms of trying to give you some indication as to how '23 is looking compared to '22, where we sit here in July, early on in our planning process with that melting pot that's looking at or around the same number. Nancy, do you want to go on that?

Yes. We also have, in the past, continued -- and we'll continue to do so, provide great sensitivity around some of our most critical input costs. So when you think about the free cash flow generated from our operations, you'll be able to really indicate in there if we have another $10 change in diesel price, what impact is that going to have on free cash flow as well as other inputs. So we will continue to provide that transparency and all of that will be a part of our guidance in December once that's updated for 2023. To Tom's point, at this point, it looks quite similar, but we haven't finished all of that work.

Just 1 follow-up to that, Tom, before I ask one other question, which is on the labor piece, how sticky do you think that inflation is likely to be? I know you mentioned, Tom, there's some global infrastructure projects happening, which is taking some labor away from you arguably. On the other, there's a school of thought that if the global economy goes into recession, some of those folks who would -- who had stopped flying in and out to mines will perhaps have little choice but to go back to their previous jobs.

Thanks. It's -- I think we see it most pronounced across United States, Canada and Australia. And if I look at Canada and Australia, there's some big projects and demand for labor and a diminishing pool for labor into the mining industry. So I would predict that, that would be reasonably sticky at least into 2023 when I look at the markets in which we are operating in those countries. So Rob, and I've got Dean sitting alongside me, who run our supply chain. Rob and Dean, anything you'd add to that?

I'd just echo what you said, Tom. I think in those countries, in particular, the sales coming into mining are not flowing as much as in the past that we are relying on the established skill base. And with that increased competition, it would be highly unlikely that those wages, et cetera, would go down. So I completely agree.

And I think saying -- Thanks, Adam.

Yes. Okay. Sorry to interrupt, Tom. Just on the production you're expecting flattish gold production this year and next year and it sounds like into '24 as well. And obviously, your peers are experiencing similar bottlenecks in terms of their ability to grow production, just myriad supply chain, labor, COVID difficulties. What do you think -- it's as if no matter how high the gold price is and it's still relatively high by historical standards. The industry just doesn't have the ability to increase production, and that doesn't seem like it's going to change anytime soon. Agree, disagree, any thoughts along those lines?

Yes. Thanks, Adam. Certainly, from a Newmont perspective, as we transformed our business 3 years ago, the strategy is to be able to maintain 6 to 6.5 million ounces of gold each and every year and another 1.5 to 2 million gold equivalent ounces from copper, silver, lead and zinc. Although we might have some years, we have some -- as you move to the upper end of that band and other years at the lower end of that band, our strategy is around that consistent delivery of metal over the long term and our focus on reinvesting back in the business is to bring on lower-cost gold ounces and the other metals, but to extend mine life. So when we think about growth, it is much about growth in margins as it is about growth in mine life as opposed to focusing on trying to have growth in ounces. It's margin and mine life. So these projects Tanami, Ahafo North sulfides will bring on lower-cost ounces that will help strengthen our cost base, but they -- more importantly, they extend our mine life and our narrative of being a very reliable, long-life producer of gold at those levels is maintained.

Tom, and just one last one for me, Tom, along those lines. In terms of the jurisdictional risks that you and others are dealing with, I mean, there's growing social unrest throughout the world, not just in mining, heavy countries. How is that affecting your thinking about just long-term production planning and your ability to grow production in the future, given the specter of higher taxes, increasing disruptions, et cetera?

Yes. Thanks, Adam. I mean a very important part of our strategy is, as I talked about, it's scale, its cost base, it's mine life and the other key component is where we choose to operate matters. So we pay a lot of time and attention in terms of understanding the jurisdictions that we're in, maintaining and developing relationships with the jurisdictions that we're in, we’ve been in all those jurisdictions for a very long period of time. And if we were to choose to go into a new jurisdiction, we will spend a lot of time and attention on that to ensure that we could operate in those locations for the long term. So every location that we're operating in, we're very comfortable with the relationships that we have and the relationship we can maintain to support our business going forward. And we believe it is a differentiator for Newmont in the gold industry today, our very clear focus on where we choose to operate matters.

Our next question comes from Mike Parkin from National Bank.

You kind of answered my question there on where you're seeing the contractor service labor competition that seems to be largely kind of government-related infrastructure builds. My other question was in terms of concentrate processing, are you seeing any pressures there in terms of that group's ability -- smelters group's ability to process con or the cost process con escalating due to, as you've kind of alluded to, input commodity costs rising? Are you seeing anything on your smelter relationships showing pressures in terms of processing the con?

Yes. Thanks, Mike. Just before I pass across that, Daniel is probably best placed to give you some color on that question. But on your -- but on your comment on the first one, certainly, there's government-related infrastructure, which I think will continue to see in some of those jurisdictions even in a recessionary environment. But some of those jurisdictions also have pretty significant demand for mining projects -- mining works and mining projects. So I think there's a couple of dynamics playing out there. Daniel, do you want to talk about the concentrate?

Yes, definitely. Thanks, Michael, for the question. I think the strategy we use in terms of our customers is long-term in nature. And so while we may see periodic disruptions in our smelting and the smelting costs, the relationships are very strong and very long term. Many of these partners have been with us for decades at our different sites. So not seeing anything that we would flag at this point, and our concentrates, especially for Penasquito are pretty unique material that the smelters are in high demand for. So nothing notable at this point.

The next question comes from Bob Brackett from Bernstein Research.

In terms of the Ahafo North delayed land access, do you have a sense of where those local stakeholder concerns are and how intractable or tractable they are and how maybe slow or how quick they will be to address?

Bob, we have very robust relationships with all of the key stakeholders in that process. So there are -- the government plays a key role in all of the various important arms of the government, whether it be the Regional Minister, the EPA, the Mining Minister. It's very, very good relationships with those key stakeholders. The traditional leaders, the Asantehene, the King of the Ashanti is a very important stakeholder in that process, very good relationships with the Asantehene. And then the communities in and around Ahafo North are 5. 5 communities, 5 chiefs of those communities, and we are working very closely with them to work through to a resolution of all of outstanding matters so that we can clear crops and structures and start work. So this process is one of ensuring, and I think it's one of the hallmarks of Newmont and our ESG practices. It's ensuring that we work together with all stakeholders and ensure that we are always aligned together before we move forward. So we don't want to barrel in and start building a mine if we haven't got everybody working together on this project because with 100 years of experience, we know if you don't do that well, you will pay the piper for that in the years ahead. So we don't want to start work until we've got everyone aligned. And I think the work we're doing is progressing very, very well, very pleased with how it's coming together, but we want to make sure that every one of those stakeholders is supportive of this project as we start to break through it. But Rob, do you want to build up on that?

I think the only other thing I'd add, Bob, is that in Ghana, this type of development is critical for economically sustaining the area, the providing jobs and training as well as the other benefits that come to community. So certainly, the vast majority of people absolutely see that, absolutely want it. But the key thing for us is just making sure we've got that full alignment for this last part of gaining access before we actually turn the first saw on the ground. But the support for the economic development is very, very strong in Ghana as well.

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

Thanks to the Newmont team for the service and keeping the results this good in a tough time. Is it right to sort of interpret that in terms of the background macros, you're not reacting to the July 25 coefficients, specifically that your expectation of the long run likely normal. And since the balance sheet is so great that if you borrow a little bit for CapEx or to fund the dividend or share buybacks, that's okay with a 0.3 debt-to-EBITDA ratio. And I'm specifically thinking about how difficult it is right now with the gold price falling and the costs having risen 12% and the spot gold market having a bad climate for jewelry demand with disposable incomes and Central Bank purchases or less and the ETFs are selling. And for all we know the euro goes to 50% because a lot of these European governments are broke and the dollar’s inadvertently strong. So you're looking through these things because who knows maybe the Ukraine war ends. And by the way, the dividend is tagged to price, but costs are going the wrong way. And I'm not sure that there's a natural ceiling or floor in the gold market because we don't know what the natural ceiling or floor is for inflation, interest rates, the euro exchange rates, all that stuff, please?

Thank you, John. I think you characterized how we think about our business over the long term very nicely. And it's one why we put a lot of time and attention to maintaining a very strong balance sheet that gives us the strength when there's some volatility. But we do take a long-term view and the long-term view, our view on gold price is still robust over the long term. But you characterized our approach quite nicely. Nancy, do you want to build on that?

Yes. Thanks, Tom. I would also add, we know that the gold price is cyclical over time. And so our goal is to ensure we're preserving margins at times of high gold price and adding cash to our balance sheet, which is exactly what we've done during this last cycle of rising gold prices, who knows where it's headed today, but that's why we wanted to be in the position that we're in. Very strong production profile for decades to come as well as a lot of cash on hand. So we'll continue to evaluate all those factors, but we truly have engineered the business to navigate through all parts of the cycle.

So following up the various capital projects to strengthen the company for 5, 10, 20 years from now are paramount?

Exactly, John, and I think the strength of our company over the last several years has been a result of the capital investments that we made over the previous 5 years through the cycle. I mean we're investing in Merian at Suriname at the bottom of the cycle back in 2014, '15. So it's taking a long-term view, working through the cycle, ensuring you've always got a robust base and reinvestment in the business so that you can be strong for a very long period of time.

And congratulations on weathering things as well as you have.

Thanks, John. And I think operator, is that it in terms of people?

Yes, that is correct. Ladies and gentlemen, this concludes the question-and-answer session. I would like to turn the conference call back over to Tom Palmer for any closing remarks. Tom, please go ahead.

Thank you, operator, and thank you, everyone, for your questions today and for taking the time to sit through our summary of the second quarter, a discussion on where we sit for the remainder part of this year, and please enjoy the rest of your week. Thank you, everyone.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may disconnect your lines now.