DENVER–Newmont Corporation announced its 2021 outlook with attributable gold production guidance of 6.5 million ounces and AISC2 of $970 per ounce. Attributable gold production is expected to be between 6.2 and 6.7 million ounces per year in 2022 and 2023, increasing to between 6.5 and 7 million ounces in 2024 and 2025, while improving costs.
Newmont’s outlook reflects increasing gold production and ongoing investment in its operating assets and most promising growth prospects. The company has included Ahafo North and Yanacocha Sulfides in its outlook for the first time as the development projects are expected to reach execution stage in 2021. Additional development projects that have not reached execution stage represent upside to guidance. All production, cost and capital figures assume a $1,200-per-ounce gold price.
Newmont’s 2021 and longer-term outlook assumes operations continue without major COVID-related interruptions. Newmont continues to maintain wide-ranging protective measures for its workforce and neighboring communities, including screening, physical distancing, deep cleaning and avoiding exposure for at-risk individuals. If at any point the company determines that continuing operations poses an increased risk to our workforce or host communities, it will reduce operational activities up to, and including, care and maintenance and management of critical environmental systems. Please see cautionary statement in the end notes for additional information.
Attributable gold production is expected to be stable at 6.2 to 7.0 million ounces across the five-year period. The 2021 outlook of 6.5 million ounces increases from 2020 with a full year of production at the five operations that were placed into care and maintenance in 2020 due to Covid-related precautions. Production is expected to remain between 6.2 and 6.7 million ounces per in 2022 and 2023, respectively. This is supported by a steady base from Boddington, Tanami, Ahafo, Peñasquito and the company’s equity ownership interest in the Nevada Gold Mines joint venture. Production is further enhanced by the company’s eight other operating mines and its equity ownership in Pueblo Viejo. Production is expected to increase to between 6.5 and 7.0 million ounces due to the inclusion of profitable production from Ahafo North and Yanacocha Sulfides and reaching higher grade in North America.
Costs are expected to improve throughout the five-year period with continuing Full Potential improvements and ongoing investment in profitable projects. 2021 CAS is expected to be $750 per ounce with a full year of production at the five operations that were placed into care and maintenance as noted above. CAS is expected to be between $650 and $750 per ounce for 2022 and $625 to $725 per ounce for 2023, improving to between $600 and $700 per ounce in 2024 and 2025. AISC is expected to be $970 per ounce in 2021 driven by CAS. AISC is expected to improve to be between $850 and $950 per ounce in 2022 and $825 to $925 per ounce for 2023. Longer-term through 2025, AISC is expected to improve to between $800 and $900 per ounce.
Consolidated expense outlook
Interest expense improves to $275 million in 2021 due to the maturity and expected pay off of the 2021 Notes and refinancing of $1 billion senior notes in March 2020 at a 2.25% coupon rate. Investment in exploration and advanced projects is expected to be $390 million in 2021 with a full year of production at the five operations that were placed into care and maintenance in 2020 due to Covid-related precautions. The 2021 outlook for general and administrative costs remain flat at $260 million. Depreciation and amortization is expected to be $2,500 million with a full year of production from the five operations that were placed into care and maintenance in 2020 due to Covid-related precautions.
Assumptions and sensitivities
Newmont’s outlook assumes a $1,200 per ounce gold price, $22 per ounce silver price, $2.75 per pound copper price, $1.05 per pound zinc price, $0.90 per pound lead price, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate and $50 per barrel WTI oil price. Assuming a 35% incremental tax rate, a $100 per ounce increase in gold price would deliver an expected $400 million improvement in attributable free cash flow. Included within the attributable free cash flow sensitivity is a royalty impact of approximately $20 million (or $3 per ounce) for every $100 per ounce change in gold price.
Newmont’s capital-efficient project pipeline supports stable production with improving margins and mine life. Funding for the current development capital project Tanami Expansion 2 has been approved and the project is in execution stage. The company has included the Ahafo North and Yanacocha Sulfides projects in its outlook as the development projects are expected to reach execution stage in 2021, but have not yet been approved for full funding. Additional projects not listed below represent incremental improvements to the company’s outlook.
• Tanami Expansion 2 (Australia) secures Tanami’s future as a long-life, low-cost producer with potential to extend mine life beyond 2040 through the addition of a 1,460 meter hoisting shaft and supporting infrastructure to achieve 3.5 million tonnes per year of production and provide a platform for future growth. The expansion is expected to increase average annual gold production by approximately 150,000 to 200,000 ounces per year for the first five years and is expected to reduce operating costs by approximately 10 percent.
• Ahafo North (Africa) expands our existing footprint in Ghana with four open pit mines and a stand-alone mill located approximately 30 kilometers from the Company’s Ahafo South operations. An investment decision is expected in the
first half of 2021 and the project is expected to add 300,000 ounces per year with all-in sustaining costs between $600 to $700 per ounce for the first five full years of production (2024-2028), with estimated capital costs of between $700 and $800 million. Ahafo North is the best unmined gold deposit in West Africa with approximately 3.5 million ounces of reserves and more than 1 million ounces of Indicated and Inferred Resource and significant upside potential to extend Ahafo North’s current 13-year mine life.
• Yanacocha Sulfides (South America) will develop the first phase of sulfide deposits and an integrated processing circuit, including an autoclave to process gold, copper and silver feedstock. The project is expected to add 500,000 gold equivalent ounces per year with all-in sustaining costs between $700 to $800 per ounce for the first five full years of production (2026-2030). An investment decision is expected in 2021 with a three year development period and estimated capital costs of approximately $2 billion. The first phase focuses on developing the Yanacocha Verde and Chaquicocha deposits to extend Yanacocha’s operations beyond 2040 with second and third phases having the potential to extend life for multiple decades.
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