Newmont Corporation (NEM) Q4 2022 Earnings Call Transcript - Feb. 23, 2023
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Company Participants
Tom Palmer - President and CEO
Rob Atkinson - EVP and COO
Brian Tabolt - Interim CFO
Conference Call Participants
Emily Chieng - Goldman Sachs
Jackie Przybylowski - BMO Capital Markets
Carey MacRury - Canaccord Genuity
Anita Soni - CIBC World Markets
Cleve Rueckert - UBS
Fahad Tariq - Credit Suisse
Lawson Winder - Bank of America
Tanya Jakusconek - Scotiabank
Greg Barnes - TD Securities
Operator
Good morning, and welcome to Newmont’s Fourth Quarter Results and 2023 Guidance Conference 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. Please go ahead.
Tom Palmer
Thank you, operator. Good morning, and thank you all for joining Newmont’s fourth quarter results and 2023 guidance call.
Today, I’m joined by Rob Atkinson and Brian Tabolt, our Interim CFO along with other members of our executive team. And we will all 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.
We have quite a bit to cover this morning. So, I wanted to give you an overview of the topics we’ll be sharing. First, I’ll cover the highlights for ‘22 and our strong finish to the year. Then I’ll pass to Brian to take us through the financials. Next, Rob will walk us through our operational results for the fourth quarter and give a preview of what to expect this year from each of our operations and our two key projects. I’ll then summarize our 2023 and longer term outlook, along with our capital allocation strategy, and the expectations for our 2023 dividend. And finally, I’ll wrap up with some comments on our proposed combination with Newcrest.
So, with that, let’s get started with our 2022 highlights.
Newmont finished the year with a strong fourth quarter, leveraging our scale, our teams and our unmatched portfolio of world class assets to deliver industry-leading ESG, operational and financial results. We are well positioned to continue leading the sector, whilst remaining firmly grounded in our values and driven by our purpose to create value and improve lives through sustainable responsible mining.
At Newmont, when we talk about being a values driven organization, we have at the very core of this work, the protection of the health and safety of our workforce. This simply must be at the heart of any sustainable and responsible mining business. And perhaps the most important thing to share with you today is that we have remained fatality free for over four years.
We remain committed to continuously improve our disciplined and dedicated approach to safety, maintaining a clear focus on eliminating the risks that could lead to a fatality. We do this through the globally consistent management of the critical controls that must be in place at all times to prevent a fatality.
Last year, we completed more than 620,000 interactions by our leaders in the field that were focused on these controls, a process that we call Critical Control Verifications. This was an increase of more than 30% over the previous year, demonstrating the importance that we place on visible felt leadership to maintain a safe environment at every one of our 12 managed operations, our major projects and our exploration sites around the world.
We also continue to work to improve the effectiveness of our critical control verifications, through increased coaching and development of our frontline leaders. And last year, more than 50 Newmont leaders from across the world participated in field based fatality risk and culture reviews at sites that they do not typically work at. The purpose of these reviews is to identify any systemic issues or improvement opportunities at our managed operations.
As a direct consequence of all of this work, in 2022 we experienced a 36% reduction in the number of significant potential events from the previous year. However, health and safety is an area where you must always maintain a sense of chronic unease. We still experience at least one significant potential event every 10 days, and each and every one of these are an opportunity to learn and improve.
At Newmont, we recognize that a strong safety culture is not only an indicator of a reliable well run business, it is fundamental to sustainably delivering on our commitments to our employees, our contracted partners, our local communities, and all of our stakeholders.
Newmont delivered a strong fourth quarter, safely meeting our commitments in ‘22 and finishing the year in a position of strength with momentum coming into ‘23. We met our original guidance for production set back in December ‘21, producing an industry leading 6 million ounces of gold and 1.3 million gold equivalent ounces from copper, silver, lead and zinc. We ended the year in line with our guidance ranges for unit costs, as we continued to manage our exposure to the global pressures on input prices and labor costs that have impacted the entire mining industry.
These results generated $4.6 billion in adjusted EBITDA and $3.2 billion in cash from continuing operations, with $1.1 billion in free cash flow after reinvesting $2.7 billion into our business last year. As a key part of that reinvestment, exploration has always been and continues to be a core competency at Newmont. It is a critical component of our long-term strategy.
This morning, we announced that our global reserve base now sits at 96 million ounces. And we have successfully replaced depletion for the year. In fact, in the almost four years since we acquired Goldcorp and established the joint venture in Nevada, we have replaced all of our depletion with strong reserve additions.
As well as our robust base of gold reserves, we also reported nearly 600 million ounces of silver reserves and 16 billion pounds of copper reserves, providing natural exposure to a metal of growing importance, reducing carbon emissions.
Throughout 2022, we maintained a strong, flexible, investment grade balance sheet, whilst continuing to reinvest in our future and providing shareholder returns of more than $1.7 billion through our established dividend framework. These results, along with our stable financial position and strong free cash flow from the world’s largest attributable gold production base has Newmont positioned to safely deliver on our commitments in 2023.
And with that, I’ll hand it across to Brian to take us through our financial results for the fourth quarter.
Brian Tabolt
Thanks, Tom, and good morning, everyone.
Let’s start with the financial highlights for the quarter. Newmont had a strong finish to the year. In the fourth quarter, we delivered $3.2 billion in revenue driven by higher sales volumes and strong gold prices, adjusted EBITDA of nearly $1.2 billion and an impressive $4.6 billion for the full year, despite historically high and industry wide inflationary pressures, and strong free cash flow of $364 million.
It is worth noting that fourth quarter free cash flow included nearly $650 million of capital spend, an increase of more than $200 million from the fourth quarter of last year, as we are now firmly in a period of meaningful reinvestment. This demonstrated commitment to reinvestment is a core component of Newmont’s clear strategy to progress the most profitable projects in our industry-leading organic pipeline, further strengthening Newmont’s portfolio for the long term.
Compared to the third quarter, Newmont delivered strong top-line performance with a 16% increase in gold sales driven off the back of a strong fourth quarter production and an improved realized gold price of $1,758 per ounce. However, fourth quarter GAAP net loss from continuing operations was $1.5 million or $1.87 per share, driven by approximately $2 billion of non-cash accounting adjustments.
These adjustments which are further detailed in our earnings release and 10-K include $700 million of non cash reclamation adjustments, primarily related to higher estimated closure costs at Yanacocha and Porcupine resulting from cost inflation, and increased water management costs at operating portions of the sites and $1.3 billion of non-cash impairments which were comprised of approximately $500 million of asset impairments at CC&V and $800 million of goodwill impairments that Cerro Negro and Porcupine.
The site specific goodwill announced originated from the Goldcorp purchase price allocation four years ago, which was based on best estimates of each site’s value and country risk assumptions at that time. It should be noted that incrementally more value has been generated at Peñasquito that was originally allocated at the time, as Peñasquito alone has since delivered more than $700 million in annual synergies, far exceeding the value of these non-cash charges.
Taking these adjustments into account along with other immaterial items, we reported the fourth quarter adjusted net income $348 million, or $0.44 per diluted share, which, despite slightly higher costs from inventory write-downs and royalties, represents an increase of $0.17 from the previous quarter. Delivered by our balanced global portfolio, these strong results demonstrate Newmont’s continued financial strength and stability, enabling us to be flexible and resilient as we continue to generate long-term value for our shareholders, heading into 2023.
Now, I’ll hand it over to Rob for an update on our operational results for the fourth quarter and a preview of 2023.
Rob Atkinson
Thanks, Brian, and good morning, everyone.
As Tom mentioned, our team safely delivered an exceptional finish to the year, and we’re very proud of what our 30,000 strong Newmont team was able to achieve during 2022, despite the very-challenging and volatile operating environment that the whole mining industry was navigating. Today, I’ll cover the site level highlights for the fourth quarter, along with an overview of what to expect in 2023 from each of our operations and our two key development projects.
So turning to the next slide, let’s get started with Peñasquito. When we acquired Goldcorp in 2019, we committed to delivering synergies of $365 million per year by applying the Newmont operating model to deliver value from G&A, supply chain, and most importantly, the implementation of our proven Full Potential continuous improvement program. Peñasquito alone has blown that target out of the water, delivering more than $700 million in annual synergies since we closed the acquisition nearly four years ago.
Our core capability at Newmont is safely operating Tier 1 open pit and underground mines, and over 80% of this value is delivered from mining and processing improvements. And we have not stopped yet.
Peñasquito delivered a strong fourth quarter, setting a new record in December for the tons we moved ex pit and exceeding our full year production guidance for the third consecutive year under the Newmont operating model.
During the fourth quarter, mining was primarily from the Chile Colorado pit as planned, resulting in lower gold grades and higher levels of silver, lead and zinc contents. And as we progress this year, we expect this mining sequence and trend to continue at our two-pit polymetallic mine as previously communicated and in line with our long-term mine plans. In the first quarter, we expect gold grade to decline more than 20% compared to the fourth quarter due to this mine sequence. And for the year we expect gold production to be around 25% lower than 2022, whilst our gold equivalent ounces will be steady year-on-year.
In South America, Yanacocha delivered slightly higher production during the fourth quarter compared to quarter three. With higher production expected in 2023 from higher leach recoveries due to the continued use of injection leaching, we continue to progress our review of the scope and the pace of the Sulfides project and expect to spend approximately $300 million to $350 million of development capital in 2023 and again in 2024. This spend is related to advanced engineering, procurement and completing camp construction.
At Merian, the site delivered its highest quarterly production in two years due to record mill performance combined with higher grades mined from both the Maraba and Merian II pits. Merian is expected to deliver lower production and higher unit costs in 2023 as we begin stripping the next phase of the Merian pit, resulting in lower grades presenting to the mill as part of our planned mine sequence for the site. In particular, in the first quarter, we expect grades to decline more than 15% compared to quarter four as we enter the stripping campaign.
And finally, at Cerro Negro, the site delivered another solid quarter due to higher grade and strong mill performance. Production from Cerro Negro is expected to steadily increase each quarter in 2023 due to sustained productivity improvements from our Newmont operating model. This will result in progressively higher tons mined and processed throughout the year.
We continue to progress the first wave of district expansions at Cerro Negro, which will contribute to the higher production this year. And we just hit an important milestone with the first blast to commence development at the Silica Cap portal. In December, this project received approval for $200 million that will be spent over the next two years to develop Cerro Negro’s future through both the Marianas and Eastern Districts. And these funds will primarily be spent on underground development activities. This investment will extend mine life beyond 2030, and we expect to see annual production increase to above 350, 000 ounces beginning in 2024.
Since we acquired Cerro Negro nearly four years ago, we’ve improved underground development rates by more than 50% and doubled the size of our land package to over 1,000 square kilometers, demonstrating both our operating capability and our confidence in the untapped growth potential from this highly prospective gold district in Argentina.
In North America, our Canadian operations all delivered higher production in quarter four, a combined increase of 30,000 ounces compared to quarter three due to strong grades and improved productivity.
At Éléonore, we finished 2022 with the strongest quarterly performance of the year. And importantly, key roles are all filled, and the team is ready to deliver higher ounces in 2023. This increase is largely driven by sustained productivity improvements as higher underground mining rates and strong mill performance will offset the lower grades coming through.
At Musselwhite, we delivered our best quarterly performance in terms of gold production, development meters and total tons mined in more than five years. We anticipate production in 2023 to be weighted around 65% to the second half of the year, steadily increasing each quarter as mining continues in the PQ Deeps area.
Porcupine delivered its strongest quarterly performance of the year and annual production is expected to slightly improve in 2023 due to higher tons mined and higher grade. We continue to progress the project to replace production from the Hollinger pit production with a layback of the Pamour pit. An investment decision is now expected in late ‘23 as we’ve been able to implement improvements to extend the life of the Hollinger pit.
And at CC&V, we achieved our highest December production in over three years, resulting in a solid fourth quarter from higher tons mined and placed on our leach pads. Production in 2023 is expected to decrease slightly due to lower grades as we extend mine life through the stripping of a layback in the Globe Hill pit.
In 2023, our four North American operations are expected to deliver nearly 1 million ounces of gold. This increase over 2022 will be safely delivered by a strong leadership team of experienced general managers who are in place, a stable workforce and without the challenges and constraints from COVID that we had to navigate through during the first half of last year.
Boddington delivered an exceptionally strong quarter with 20% higher gold production and more than 50% higher copper production compared to quarter three. We set two important records in the fourth quarter, a new all-time monthly production record in December for both gold and copper on the back of higher grades and strong mill performance, and the best quarterly performance for our autonomous haul truck fleet for the tons moved per hour, a key metric for every open pit mine.
Reaching these important milestones at a cornerstone operation like Boddington is a tremendous achievement, and we are proud of the hard work and dedication that our team has demonstrated in implementing leading technologies to promote both safety and productivity. The lessons we have learned will benefit not only Newmont but the gold industry as a whole, and we will look to leverage this technology and our experience at Boddington as we expand the use of autonomous solutions across our global business.
In 2023, gold production is expected to remain steady compared to 2022, as continued strong mill performance and tons mined offset lower grade associated with further stripping in Boddington South pit.
Tanami maintained strong production throughout the year and reliably delivered a solid fourth quarter from higher tons mined combined with higher grades despite an extreme weather event and record rainfall across Northwest Australia late in the quarter. Gold production is expected to be lower in 2023 and 2024 due to lower grades from the planned stope sequencing to allow for the underground construction of the crushing and conveying infrastructure associated with the Tanami Expansion project.
Due to the extreme weather events and associated flooding, the main access route for supplies to Tanami and Tanami track has been closed from late December through mid-February. And although our fourth quarter was largely unaffected by this event, critical consumables such as cyanide, explosives and other reagents that can only come to site by road have not been able to be delivered over the last 6 to 8 weeks, and we have consumed the stocks that we maintained on site. As a consequence, we had to cease milling operations at Tanami over the last few weeks, and this will have an impact on gold production for the first quarter. However, the bottleneck at Tanami is the mining operation, not the milling plant, and mining has continued throughout this period with the ore being stockpiled in front of the mill.
We restart the mill tomorrow and expect to recover the ounces that will be delayed from Q1, but that now means that we will have a production profile this year that will be strongly weighted to the second half. And with this impact, we expect only around 10% of Tanami’s 2023 gold production to be delivered during the first quarter.
We also continue to progress the expansion at Tanami. Overall progress is now at 50% with engineering and procurement effectively complete, protecting the project from any new inflationary or supply chain challenges in the coming years. 373 meters of concrete lining has now been installed in the upper part of the 1,500 meter deep shaft, and this furnishing of the shaft continues to be the critical path work for the project. Underground development for the project has largely been completed with crusher and conveyor chambers, all fully excavated and ready for construction of infrastructure to commence.
And as I signaled last July, following the completion of the four important project milestones of shaft reaming, head frame construction, underground development and the opening of state and international borders in Australia, we would assess project capital cost and schedule. We are expecting total capital costs of between $1.2 billion and $1.3 billion and the project completion in the second half of 2025. This is consistent with the direction we provided last July.
Tanami Expansion 2 remains a key project in Newmont’s portfolio and underpins Tanami’s future as a long-life, low-cost producer well into the 2040.
Turning to Africa. Our two operations in Ghana delivered this year’s strongest quarterly performance in Q4, increasing production by more than 45,000 ounces compared to Q3.
In December, Akyem delivered its strongest monthly production in seven years on the back of higher tons mined, higher grades and strong mill performance. In 2023, Akyem is expected to deliver lower production as we progress stripping of the next layback in the pit. And as a consequence, 2023 gold production will be around 20% lower than last year as a result of lower grades. Ore grade is expected to decline by more than 40% in Q1 compared to Q4.
Moving across Ahafo, the mill achieved record throughput during the fourth quarter, benefiting from higher grade and mining rates as Subika underground really starts to hit its stride. In 2023, gold production from Ahafo is expected to steadily increase each quarter as we open up more draw points in the Subika underground, lifting mining rates and resulting in the delivery of more higher grade ore to the mill over the course of the year. As a consequence, gold production will be strongly weighted to the second half of the year with around 15% of the year’s production to be delivered in the first quarter.
And I’m pleased to announce that we are making great progress with our new mine in Ghana, Ahafo North, where we gained land access and have commenced construction and highway relocation activities.
Ahafo North expands our existing footprint in the Ahafo complex, adding more than 3 million ounces of gold production over an initial 13-year mine life. And when combined with Ahafo South just 30 kilometers away, we expect to deliver an average of 850,000 -- I beg your pardon. 350,000 -- sorry. We expect to deliver an average of 850,000 gold ounces per year through until at least 2030 from our Ahafo complex.
Leaning into one of Newmont’s core capabilities, we have conducted extensive regulatory and community engagements to ensure that from the very start of this project, we earn and maintain social acceptance. The process of engagement is critical work that cannot and must not be rushed. There’s an African proverb that we consistently apply at Newmont. “If you want to go fast, you go alone. If you want to go far, we go together.” And as I signaled last July, gaining land access and commencing construction activities was a key milestone for us to reach in order to assess project capital cost and schedule. We are expecting total capital costs of between $950 million and $1.05 billion in project completion in the second half of 2025. This is consistent with the direction we provided last July.
We remain very excited about Ahafo North and look forward to bringing you updates as we develop this new mine over the next two years and create value from the best unmined gold deposit in West Africa.
Finally, to our two non-managed joint ventures. Our 38.5% ownership of Nevada Gold Mines and 40% interest in Pueblo Viejo contributed 1.45 million ounces of attributable gold production in 2022. For Nevada Gold Mines, disappointingly, fourth quarter and full year production fell below the lower end of the guidance range and above the higher end for costs that were provided by Barrick in November 2022. However, most concerning was that these two non-managed joint ventures have experienced three tragic fatalities over the last 12 months.
As for the 2023 guidance provided last week by Barrick, gold production is expected to increase by around 10% from both Nevada Gold Mines and Pueblo Viejo in 2023. Both of these joint ventures are core to the Newmont portfolio, and we look forward to our managing partners safely delivering on their 2023 commitment.
And with that, I’ll hand it back to Tom.
Tom Palmer
Thanks, Rob.
So bringing everything that Rob just covered together, we finished ‘22 strongly, and we are bringing that momentum into this year. As we’ve been signaling for some time, in 2023, we are expecting to produce around 6 million ounces of gold at an all-in sustaining cost of around $1,200 an ounce. Sustaining capital lifts to around $1.1 billion. Exploration and advanced project spend will be around $500 million. And we will see our highest development capital spend in a generation at around $1.3 billion.
At Newmont, we developed our business plans with discipline around the assumptions we make. In 2023, we anticipate that the current economic environment will continue to be volatile, and with this context believe that it is particularly important to understand the sensitivity of our free cash flow and all-in sustaining costs to the key assumptions we have made.
We have taken a conservative view of gold price for 2023 and are assuming $1,700 an ounce. This table provides our sensitivities to other metal prices, oil as well as the Australian and Canadian exchange rates. For ‘23, we have assumed normalizing levels of inflation as we progress through the year with an assumption that the year-over-year escalation rate will be around 3%. And as we do each year, we expect that this escalation will be offset by our ongoing discipline in delivering on full potential improvements.
This year, we are also including a guide on the sensitivity to our three main cost areas. 50% of our direct costs are labor, an area under continued pressure in our mining industry. We have assumed our labor costs will increase 4.5% compared to last year before returning to more historical levels, and we are keeping a close eye on contract labor, which tends to be much more volatile.
Materials and consumables account for the next 30%. We are seeing input prices for cyanide and explosives beginning to normalize with improvements in global supply chain performance. In addition, the price of the steel we use for grinding media and spare parts is now in line with last year’s average prices. These two categories, along with fuel and energy, remain highly volatile and impacted by the many macroeconomic events the world is experiencing. High levels of inflation have a material impact on our unit costs, and we will continue to remain transparent with the market as we monitor the inflationary environment over the coming months.
Turning now to seasonality on the next slide. We anticipate that gold production this year will be weighted 55% to the second half, driven by Ahafo, Tanami, Peñasquito and Cerro Negro, as Rob just explained. Q1 is expected to be our lowest gold production quarter with approximately 21% of annual production. However, we expect to have relatively steady spending for both, our sustaining and development capital throughout the year. We anticipate that production will increase and unit costs will decline each quarter as the year progresses.
Turning to our five-year outlook on the next slide. Supported by the industry’s most robust, balanced and diverse portfolio of operations and projects, we expect to deliver strong gold production and improving unit costs over the next five years, bringing our all-in sustaining cost to around $1,000 to $1,100 per ounce by 2025. This cost improvement will be driven by strong production from our world-class assets, Boddington, Tanami, Ahafo and Peñasquito, combined with the delivery of new low-cost ounces from our investments in Ahafo North, Tanami Expansion 2 and the district expansions at Cerro Negro.
Our near-term cost reductions are also supported by the delivery of full potential cost and productivity improvements across our 12 managed operations. This solid outlook, combined with the strength of our team and the quality of our assets, has the ability to generate substantial, attributable cash flows throughout the gold price cycle, allowing us to confidently execute on our capital allocation priorities and maintain our position as the world’s leading gold company.
Our capital allocation priorities remain unchanged with a clear and balanced strategy, first and foremost, to maintain the industry’s strongest balance sheet with financial strength and flexibility; second, to reinvest in our business through exploration and organic growth; and finally, to return excess cash to shareholders through dividends. I’ll take a moment to step through each of these priorities, explaining their significance to Newmont and how they work together in order for us to deliver a long-term stable outlook.
Starting with our first priority. Newmont has maintained an investment-grade balance sheet with financial strength and flexibility to ensure we have the right balance between resilience, returns and the ability to react. We have made deliberate efforts over the last few years to build the industry’s strongest balance sheet, growing our cash balances to $3.7 billion with total liquidity of $6.7 billion and no debt due until 2029.
This robust platform has allowed Newmont to enter the current phase of the commodity cycle in a uniquely strong financial position, enabling us to be resilient and agile in times of market instability.
Our second priority is to reinvest in our business through exploration and organic growth, ensuring that our current and future reserve and resource position can continue to support our industry-leading portfolio of operations and projects.
Our long-term outlook assumes annual investment of around $1 billion to $1.2 billion in sustaining capital, around $400 million to $500 million in exploration and studies, and around $800 million to $1 billion in development capital. Combined, this is an average annual investment of around $2.5 billion, a critical component in Newmont strategy to sustain strong production levels and improve margins over the long-term.
[Technical Difficulty] we are currently [Technical Difficulty] Due to the higher capital spend anticipated this year, Newmont expects to reinvest approximately $2.9 billion in 2023, which is around $400 million higher than our average annual investment. And it’s also important to note that these numbers exclude our equity method contributions to support the Pueblo Viejo expansion.
[Technical Difficulty] to maintain our [Technical Difficulty] profile for the next 10, 20, 30 years. Our portfolio of operations and organic project pipeline will produce more than [Technical Difficulty] of attributable gold each year, through [Technical Difficulty] in our industry. This profile [Technical Difficulty] production of approximately 1 million gold equivalent ounces from copper, silver, lead and zinc. Importantly, the majority of this metal production comes from the most favorable mining jurisdictions, balanced across 12 managed operations two non-managed joint ventures in nine countries around the world.
And it is this strength and scale that enables Newmont to confidently execute on a clear and consistent long-term strategy to deliver value to our workforce, our local communities and to our shareholders.
Then our final capital allocation priority is to return excess cash to shareholders, which is primarily done through our industry-leading dividend framework. Recognizing the importance of shareholder returns, 2.5 years ago, Newmont was the first in the gold industry to introduce a structured dividend framework. This framework provides shareholders with a stable base dividend of $1 per share, centered at gold reserve price of $1,400 per ounce and a variable component based on incremental free cash flow above that base assumption.
As we do each year, we have evaluated the 2023 dividend payout in conjunction with our annual business planning process. The expected range for dividends to be paid this year is $1.40 to $1.80 per share, and this range has been calibrated at a conservative $1,700 gold price.
Anticipated incremental free cash flow in 2023 has been adjusted to incorporate the current input costs being experienced across the mining industry from unprecedented levels of global inflation, the $400 million of higher capital spend above our long-term average, and considering the strength of our balance sheet during this period of meaningful reinvestment. Taking all of these considerations into account, and in line with what we have been discussing since our last earnings call in October, this morning, we declared a fourth quarter dividend of $0.40 per share or $1.60 per share on an annualized basis. This continues to be the highest dividend per share in the gold sector and within the top 80% of large cap dividend payers in the S&P 500.
With this dividend declared, Newmont will have returned over $4 billion to shareholders through dividends since introducing our framework in October 2020, maintaining a dividend yield above 3% for nine consecutive quarters.
Our proven track record of returning cash to shareholders clearly demonstrates our ongoing commitment to shareholder returns and the balanced long-term approach that we apply to our capital allocation strategy, ensuring that Newmont is well positioned to create value for many decades to come.
So, I’ve just taken you through the gold industry’s strongest business. Now from that solid foundation, let me walk you through the value proposition for our potential combination with Newcrest. Before I begin, please understand that other than these prepared remarks, I’m not able to provide any further details about the Newcrest proposal at this time as this is a live engagement.
Our proposal would combine two of the sector’s top senior gold producers and set the standard for sustainable and responsible gold mining. Newmont has a long history and shared heritage with Newcrest, establishing our Australian subsidiary way back in 1966, a subsidiary that would become Newcrest some 25 years later. As part of that shared history, our companies also have shared commitments to a strong safety culture and leading ESG practices, which is in addition to the complementary portfolios of world-class assets located in low-risk mining jurisdictions.
Our proposed combination would strengthen our established position in Australia, creating efficiencies and value with a shared workforce and large-scale supply chain optimization opportunities. And it would build upon the district potential in British Columbia’s highly prospective golden triangle through a combination of operating mines and development projects that would deliver value through shared technology, local capabilities and orebody experience.
With our scale and track record of successfully managing some of the mining world’s top Tier 1 assets, this combination would leverage Newmont’s experience from the Goldcorp acquisition, which demonstrated that we can generate meaningful improvements to performance, stability and profitability, especially at large open pit and underground operations. We have delivered more than $1 billion in annual synergies from our Goldcorp acquisition in 2019, far surpassing our initial estimate of $365 million and improving the ongoing performance of the acquired assets through Newmont’s operating model.
At Peñasquito alone, we have generated over $700 million of annual synergies by optimizing the processing plant and mining fleet while sustainably addressing community relations issues that have disrupted that site for over a decade. And as a reminder, upon completion of the Goldcorp acquisition, we focused on optimizing the combined portfolio, completing asset sales of more than $1.5 billion from that combined portfolio within the first 12 months.
And given the challenges that the mining industry is currently facing from a volatile macroeconomic environment, there has never been a better time for Newmont and Newcrest to come together.
We are disappointed that the Newcrest Board rejected our proposal, and we are currently engaging with the Newcrest team in relation to their offer to provide us access to more information. And if we can reach an agreement, this combination of industry-leading talent and decades of collective experience would create significant value across the global business with an ideal mix of gold and copper, strengthening Newmont’s overall position as the world’s leading gold company.
As I indicated, I will not be able to make -- provide any further details on the Newcrest proposal at this time as this is a live engagement. But I want to be clear with everyone on today’s call that we will continue to be disciplined as we assess all of the options to move forward, and we will act in the best interest of our shareholders.
Thank you. And with that, I’ll now turn it over to the operator to open the lines up for questions.
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