Newmont Mining Earnings Call Nuggets: Capital Projects and Sustainable vs Growth

Newmont Mining Corporation (NYSE:NEM) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Capital Projects

Jorge Beristain – Deutsche Bank: My question is regarding capital and if you could just update us on the large capital projects particularly Conga in terms of what would be required to finish up that project, getting it to get to the Water First stage page and if your thinking on that project has changed at all given the recent down dip we’ve seen in gold prices?

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Gary J. Goldberg – President and CEO: The plan for this year was to spend consolidated $300 million as we look to both to build the two water reservoirs that we had planned to build this year but also wind up engineering and certain equipment receipts and make sure we could get the equipment that we had already purchased put into a good position. We continue to look at how we get social acceptance for that project and the work we’re doing on the ground there and also look at the economics of the project. Clearly we keep an eye on where short-term prices have gone, but that’s one of the other criteria where are prices going and where are economics for the project going for the longer-term, to make that decision on whether we proceed beyond just the Water First, we’re working on now.

Jorge Beristain – Deutsche Bank: I guess my question is, what would be the next natural junction in terms of dates that you could make the decision to proceed fully with the project or not? I’m assuming that would be out by 2Q 2014, but how are you handling the ordering of long lead equipment that would be tied to a potential go or no go decision and you have optionality on any of that equipment that is being ordered to not go through with it, if you decide by next year not to proceed with the project?

Gary J. Goldberg – President and CEO: We basically, once we made the decision to move to the Water First, stop any further acquisition of equipment, but we had a good deal of the major equipment, the mills for instance, the motors and even the mining equipment was on order. We’ve placed some of that equipment that we could sell and we’re looking at a total of between $200 million and $300 million in mining equipment, but we’ve been able to place some of that already and continue to place that in the marketplace. So, there’s no more long lead time items that we have out and really, the mills are the long lead time items and those we’ve got purchased and held in inventory.

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Sustainable vs Growth

Michael Dudas – Sterne Agee: Gary, following up on some capital thoughts; the $100 million reduction you announced, is this just what you found over the last three months? I’m sure it’s an on ongoing process, but is it going to be gold and copper price dependent or do we anticipate more squeezing of that budget as we move through 2013? Then, as we look out to ’14 and ’15, that 60-40 mix between sustainable and growth, where are we going to be in that mix, looking at ’14, assuming gold prices are still relatively under pressure?

Gary J. Goldberg – President and CEO: The 100 million really comes as we looked at spend. We had the Lone Tree mill that we’re looking to restart and some work on the underground of Vista Vein in Nevada and we’ve backed off on those right now, as we’ve looked at the economics in this price environment. So, those were tied to that. As we look beyond that, we’re taking through this full potential process, I talked about, a very hard look at all of our sustaining capital spend where we can improve where we might be able to defer, keep in mind we’re looking to make sure these are sustainable cost reductions. So, it’s not just cut today and then put ourselves in problems tomorrow. So, we’re making sure, as we do these evaluations, we’re doing it for the longer-term. So, in terms of the split between development capital and sustaining capital, I’m going to ask Randy Engel to give you an overview on what that looks like…

Randy Engel – EVP, Strategic Development: We’ve got really three main areas where we expect capital to be down between 2013 and 2014. Really, we expect roughly on an attributable basis about $0.5 billion, down in between this year and next year. Broken fairly evenly between Africa, South America and our North American operations, primarily in Nevada.

Michael Dudas – Sterne Agee: My follow-up is, looking at a team, what are the guide posts or milestones to look at to make that a successful startup and how confident as we look towards the end of the year that, that will be such?

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Gary J. Goldberg – President and CEO: I think from my standpoint, completing the construction, they’re finishing up the reticulation, getting the power lines in, which is a major milestone. I visited there a couple of months ago and all the different elements are coming together well. The mine, we have actually got the material stockpiled so we are in a position. We have got the ore ready to go and since completing the construction of the mill and then doing all – really its, electrical hookups is the big part. This mill is very similar to the mill we have at Ahafo. So in terms of startup and debugging and things like that we don’t expect any major issues. We do plan for a normal sort of ramp up but since it’s one that’s very similar to what we’ve done in the past we are comfortable with that and we are still looking to see first production by the end of this year.

Michael Dudas – Sterne Agee: My final question is how do you foresee or how is the progress and when do we –could anticipate announcement of a new CFO?

Gary J. Goldberg – President and CEO: We continue to go through the process interviews. As I mentioned earlier we’ve got Tom Mahoney who has taken on – who will be taking on the Acting CFO role from May 2nd, taking over from Russell and he will provide leadership for the team in the interim.