Notes from Bloomberg Interview with Tom Palmer - 07 November 2023

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Notes from Bloomberg Interview with Tom Palmer - 07 November 2023


LINK:
https://www.bloomberg.com/news/videos/2 ... tegy-video

Tom Palmer, President and CEO at Newmont, discusses the company’s business strategy and outlook for the mining sector. He speaks with Haidi Stroud-Watts on ‘Daybreak Asia’. (Source: Bloomberg)

HOST
Look, first, congratulations on getting this done. Of course, this is not just a marathon. You saying it's a triathlon because the kind of next leg begins now. As I just said, you're now the world’s biggest gold miner by far. Acquisitions are going to be very hard to move the needle on. Is the priority now to return capital to shareholders? How do you see growth going forward?

TOM
Good morning, Heidi. A really exciting day for Newmont. My ear is still ringing from the... from the bell at the ASX But it was great fun this morning to do that. Our real focus now is we've got five new operations to incorporate into the Newmont business. And that's the work that starts today to ensure we do that safely.

And first and foremost, we're going to be making sure that we get after the $500 USD million in synergies that we have committed to over the next 24 months from those operations. So really excited about the portfolio that we've created and what we're going to be able to do in not only the gold industry but also the role play in the copper industry. So it's a really exciting time in Newmont's 102 year history.

HOST
You touched on a couple of key things, including copper, which I'll get to in a moment. But when it comes to those... the integration timeline, I guess, and being able to see the synergies at the cost benefits, the output benefits, the markets have not necessarily been that patient. How do you expect... how long will that be before they start seeing that materialise?

TOM
We get the keys to the car today? We've got the track record from our acquisition of GoldCorp just four years ago. And the synergy value that we delivered from that transaction, we committed $365 USD million and we've delivered over $1 Bn USD. So Newmont has a clear track record. We have the same team in place.

So as we bring two Australian based assets into our Australian business, stand up a new business in PNG and bring two Canadian businesses into our North American business unit, we have a very clear pathway in how we we get after delivering G&A synergies, supply chain synergies and then what we call our full potential operation improvement synergies.

So we'll have teams on the ground on those new operations this month starting to define those key projects and then getting after them, working with those new teams that join the Newmont portfolio. So we will start sharing information about those improvements in the weeks and months ahead. And we'll be pointing to the track record that we have from having done this before.

HOST
Tell us about the assets shed and divestment, because as you pointed out, you've done this before in 2019, same team in place. Back then, I believe you sold one mine and a couple of project stakes. Do you know what you're prioritising this time?

TOM
Our priority this time is managing 17 operations in our global portfolio and ensuring that we safely integrate a team of around 6000 new employees into the Newmont business, so we will grow to a workforce of 21,000 employees. When we think about our contracting workforce, about 42,000 people and our focus is going to be ensure that they safely integrate into the Newmont business and our focus will be on the synergies.

In terms of portfolio optimisation, we'll take our time, we'll take our time to understand mine plans and project sequences and do what we did four years ago and just very sensibly understand our new portfolio, understanding that we can very comfortably run 17 operations in our global operating model.

HOST
Of course, there's a couple of major things given that unit costs have soared, I believe almost 40% over the past six quarters, and that's going to be one of those major synergies, as well as the guarantee of more output, which has also stalled over the past three years.

Are you comfortable that this merger removes most of that risk? And at the same time, can you give us some commentary on how you see the global demand picture as well?

TOM
Sure. The portfolio we created today has at its foundation 10 Tier gold mines. They're the strongest, longest life gold mines that any gold mining company can have in our portfolio. We have half of the world's top tier gold mines in our portfolio, and that provides us with the strength and resilience to be able to manage our costs over the long term.

And it's complemented by an organic project pipeline that is the envy of the mining industry in terms of the gold and copper projects that we can sensibly bring on with discipline to grow in both gold and copper. So the combination of our operating portfolio and our project pipeline means that Newmont can produce and grow gold and copper for literally decades to come.

The gold price is stubbornly, stubbornly held in that band between 1900 dollars and 2000 all of this year. And that's in the context of of rising interest rates, pretty solid inflation and excuse me, my earpiece is dropping out... pretty solid inflation and in conditions that would normally start to see gold price come off, you've got obviously some volatility around the world that's supporting gold price and you've got central bank buying that supporting gold price.

So when I think about gold stubbornly saying that staying in that band and looking at interest rates and other things easing as we look into next year and the year after, I think it's a very positive outlook for gold going forward.

HOST
What's your views on copper because obviously you get some significant copper assets as well through this.

TOM
We have a out of the gate where we’ll be producing 150,000 tonnes of copper a year. That makes us a meaningful copper producer and we're filling a gap on the ASX with Oz Minerals coming off the ASX a few months ago.

There's an opportunity for the Australian investor to get exposure to the world's best gold mining company with great exposure to copper. So we're excited about the copper we’ll be producing from our operations in our portfolio and then we have projects sitting at feasibility study and pre-feasibility study that allow us to grow both gold and copper through the latter part of this decade, well into the 2030’s and 2040’s.

Copper is an essential metal for the energy transition. There is going to be a demand supply shortfall and we very much look forward to be able to balance the gold in our portfolio with the copper in our portfolio and enjoy the benefit of the inevitable run up in copper prices as we move through the latter part of this decade and into the next.

HOST
We've seen really protracted organised labour strikes across a number of industries, including mining. Obviously you've experienced that in Mexico. Does it make you reassess investment in certain markets? How do you deal with that risk going forward?

TOM
We look at our balanced global portfolio and the real strength of the portfolio that we that we had prior to today and the even stronger portfolio that we’ll have going forward from today is that we can balance out risk through through the operations and the strength of the operations that we have underpinning our portfolio.

So we were able to take a decision in Mexico this year to ensure that the collective bargaining agreement that we had signed only last year was honoured and we were prepared to take the time necessary to ensure that we had an outcome that protected the long term value of that operation, but also supported the local communities, our workforce and the provincial and national governments in Mexico.

We will continue to do that as a sustainable mining leader and the portfolio that we have created as of today allows us even greater strength to Be able to make decisions for the long term.

HOST
Tom, very quickly, what's a big risk for the next year is that inflation and causes that labor in that technology and the energy transition.

TOM
I think technology in the energy transition is.. is one that will grow over time. And you certainly need to be doing work on that. Today, our autonomous haulage that we’ve got up and running at our Boddington Mine in Australia is an example of that, as is the work we're doing with Caterpillar on accelerating the development of battery electric vehicles.

That's work you have to be doing today. But that's an emerging risk for our industry in the latter part of this decade. I think it's about keeping a close eye on your costs and ensuring that you’re providing a workplace that is safe and inclusive to ensure we've got good, good retention of your workforce and in managing your costs. That's the most important thing right now.