Tom Brady, Chief Economist Newmont Mining June 2017 · June 2017 Newmont Mining Corporation -Slide...

Gold Market Review & OutlookTom Brady, Chief EconomistNewmont MiningJune 2017

Newmont Mining Corporation - Slide 2June 2017

Cautionary statementCautionary statement regarding forward looking statements: This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbor created by such sections and other applicable laws. Such forward-looking statements may include, without limitation: (i) estimates of future production and sales; (ii) estimates of future costs applicable to sales and All-in sustaining costs; (iii) estimates of future capital expenditures; (iv) estimates of future cost reductions and efficiencies; (v) expectations regarding the development, growth and potential of the Company’s operations, projects and investment, including, without limitation, returns, IRR, schedule, decision dates, mine life, commercial start, first production, capital average production, average AISC and upside potential; (vi) expectations regarding future debt repayments and reductions; (vii) expectations regarding future free cash flow generation, liquidity and balance sheet strength; (viii) estimates of future closure costs and liabilities; (ix) expectations of future dividends and returns to shareholders; and expectations regarding closing of the Continental investment. Estimates or expectations of future events or results are based upon certain assumptions, which may prove to be incorrect. Such assumptions, include, but are not limited to: (i) there being no significant change to current geotechnical, metallurgical, hydrological and other physical conditions; (ii) permitting, development, operations and expansion of the Company’s operations and projects being consistent with current expectations and mine plans, including without limitation receipt of export approvals; (iii) political developments in any jurisdiction in which the Company operates being consistent with its current expectations; (iv) certain exchange rate assumptions for the Australian dollar to the U.S. dollar, as well as other the exchange rates being approximately consistent with current levels; (v) certain price assumptions for gold, copper and oil; (vi) prices for key supplies being approximately consistent with current levels; (vii) the accuracy of our current mineral reserve and mineralized material estimates; and (viii) other assumptions noted herein. Potential additional risks include other political, regulatory or legal challenges and community and labor issues. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the “forward-looking statements”. Other risks relating to forward looking statements in regard to the Company’s business and future performance may include, but are not limited to, gold and other metals price volatility, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, political and operational risks, community relations, conflict resolution and outcome of projects or oppositions and governmental regulation and judicial outcomes. For a more detailed discussion of such risks and other factors, see the Company’s 2016 Annual Report on Form 10-K, filed on February 21, 2017, with the Securities and Exchange Commission (SEC) as well as the Company’s other SEC filings. The Company does not undertake any obligation to release publicly revisions to any “forward-looking statement,” including, without limitation, outlook, to reflect events or circumstances after the date of this presentation, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Investors should not assume that any lack of update to a previously issued “forward-looking statement” constitutes a reaffirmation of that statement. Continued reliance on “forward-looking statements” is at investors' own risk. Investors are reminded that this presentation should be read in conjunction with Newmont’s Form 10-Q which has been filed on April 24, 2017 with the SEC (also available at www.newmont.com).


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2004 2006 2008 2010 2012 2014 2016China India Global Total

$1,050

$1,150

$1,250

$1,350

40

45

50

55

60

65

70

Jan-16 Apr-16 Jul-16 Oct-16Gold ETF Holdings Gold Price

2016 gold prices driven by investment demand

1 Source: Macrobond2 Source: WGC; annual totals (jewelry, bar & coin demand

• 2016 ETF gains held strong until U.S. Presidential election– Post election, ~7.5Mozs. (~11%) liquidated from global ETFs– End of year holdings remained ~10Mozs. higher than at beginning

• 2016 global jewelry, bar and coin demand declined nearly 15% from year prior– India demand impacted by jeweler’s strike and currency demonetization scheme– Relatively aggressive gold price increase and subsequent decrease limited demand in China

Physical demand remained weak in 2016 (Moz)2Gold ETF holdings (Moz) gold price ($/oz)1


$1,100

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$1,350

Dec Jan Feb Mar Apr May Jun

Macroeconomic forces driving gold in 2017 YTDGold performing well under current interest rate hikes ($/oz)

1 Source: Bloomberg. Real Interest rates: U.S. short-term real interest rates (Fed Funds rate less inflation (Headline CPI); Source: MacroBond

• Gold prices have trended higher post 2 most recent U.S. Fed interest rate increases– Markets have over-estimated pace of rate increases– Anticipate 1 additional rate hikes in 2017 (Sep or Dec)

• YTD gold price increase compares favorably across various asset classes and other metals– Improving economic conditions driving equities higher across many emerging markets – Continuing infrastructure activity in China supporting many base metals

Gold price increase compares favorably across assets1

U.S. Fed interest rate increases

-30% -20% -10% 0% 10% 20% 30%Nat. Gas

WTIBrent

Iron OreZinc

CopperLead

Aluminum

PlatinumSilverGold

U.S. Govt Bond IndexCorp High Yield

S&P 500All-Country Index

EuropeEmerging Markets


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105

Jun-16 Sep-16 Dec-16 Mar-17 Jun-17

U.S

. $ In

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(trad

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US dollar has weakened, US equities appear expensive

U.S. dollar retreating from post-election euphoria1

1 Source: Macrobond. Long-term average from 1967 onward2 Source: Macrobond.. U.S. corporate profits in real (or inflation adjusted) terms

• U.S. dollar has declined ~6% in 2017

– Markets concerned on ability of administration to deliver on health and tax reforms

• U.S. equity markets appear over-valued with S&P 500 up ~250% since 2009

• For majority of bullish run, corporate profits climbed but peaked in 2015 and have retreated

– Bullish condition for gold with increased downward pressure on the U.S. dollar

Equity market run appears over-done2

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S&P 500 Index U.S. Corporate Profits

S&P 500 up 250% since 2009 floorLong-term average


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Jan-2016 Jul-2016 Jan-2017

Strong Indian gold imports buoy physical demand

• Indian gold premiums traded at a discount for most of 2016, but have since recovered

– Premiums have recovered in 2017, averaging nearly $1/oz.

• YTD Indian gold imports surprisingly strong, countering previous year’s of weakness

– Through May 2017 imports >100% year prior quarter and 30% higher than long-term average

– Revised tax regime expected in July has potential to create downside risk later in 2017

Through May, Indian gold imports >100% vs. 2016 (Moz)2India gold premiums have recovered ($/oz)1

1 Source: WGC2 Source: Bloomberg. “Average” represents 2002 onward;

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Momentum with gold investment thesis continues

1 Source: Bloomberg2 Source: Macrobond; The economic policy uncertainty index quantifies newspaper coverage, federal tax provisions set to expire and disagreement among economic forecasters

• Safe-haven investment demand remains supportive to gold prices

– Global ETF holdings have climbed by nearly 3Mozs. YTD (or 5%)

– Speculative net-long positions on Comex above 20Mozs., increasing by >9Mozs., to date in 2017

• U.S. uncertainty with ability of current administration to achieve reforms contribute to demand

– U.S. economic policy uncertainty index trending higher (at highest level since 2013)

– Changes to health-care and tax policies driving index

U.S. policy uncertainty (index); gold price ($/oz)2Gold ETF holdings (Moz); gold price ($/oz)1

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2010 2011 2012 2013 2014 2015 2016 2017Gold ETF Holdings Gold Price


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Q1

Con

sum

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eman

d (M

oz)

China India Global Total India/China avg.

2017 YTDGlobal: up 4%; India: up 10%; China: up 8%

Gold markets appear more stable in 2017…so farGold ETF builds relatively gradualGold prices have climbed less aggressively in 2017 YTD

$1,000

$1,100

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Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17

1H 2016Gold up ~$280/oz (>25%)

2017 YTDGold up ~$150/oz (~13%)

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Glo

bal G

old

ETF

Hol

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oz)

1H 2016ETFs up ~16Moz (~35%)

2017 YTDETFs up ~3Moz (5%)

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-Lon

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1H 2016Spec positions up >31Moz

2017 YTDSpec positions up >3Moz

Comex speculative-long positions less aggressive as well Physical demand has recovered…slightly


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2014 2015 2016 2017 2018 2019 2020

Lower oil prices can drive gold investmentLower oil pushes tame inflation expectations (%)Global oil markets digesting a supply glut

Analysts expect prices to average ~$55/bbl. through 2020

Tame inflation pressures lower bond yields

-4%

-2%

0%

2%

4%

6%

2008 2010 2012 2014 2016 2018CPI (Headline) PCE (Core)

Analysts expect inflation to remain ~2% over the near-term

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Dec. 30, 2016 Current

Low opportunity costs support gold investment1

1 Source: Bloomberg. Real Interest rates: U.S. short-term real interest rates (Fed Funds rate less inflation (Headline CPI);

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2009 2011 2013 2015 2017

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U.S. debt leading to increased gold price volatilityU.S. Fed holdings ($T)…how will these unwind?1

1 Annualized volatility of 3 month gold options on Comex; Source: Bloomberg

• Post 3 rounds of quantitative easing (QE), U.S. Fed now holds >$4T in treasury & mortgage securities

– Balance sheet has remained constant since 2014 (Fed “replace and roll” strategy)

• After initial interest rate increases, Fed is now planning on how to unwind this portfolio

– Market expecting portfolio holdings to decline to ~$2.5T by 2025

• Previous Fed messaging to reduce balance sheet in 2013 resulted in significant gold market volatility

Prior attempts resulted in volatile gold markets (%)1

“taper tantrum”

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2002 2004 2006 2008 2010 2012 2014 2016

Mortgage Securities Treasury Securities

QE 1 QE 2 QE 3

?

Views on Gold for the Next 10 YearsJune 2017


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1900 1920 1940 1960 1980 2000 2020E

Gold Mine Supply (Moz.) Gold Price ($/oz.)

Gold mine supply (1900 onward)

1 Source: various (US Bureau of Mines; 1982 Gold Commission; 1929 Dept. of Commerce summary data; Gold prices in real terms (2016 $)

Global gold mine supply (Moz.), Gold Price (S/oz)1

Growthdrivers

1971: Nixon removes U.S. dollar from Gold Standard

1979: NEM operates 1st heap leach at Carlin

1984: mining begins at Gold Quarry

•Heap Leaching •CIL / CIP processing•Autoclaves•Economies of scale•Global supply up >2X•U.S. increases 11X

2002 - 2012Gold Price & China

•Gold price up 4X•Global supply up ~10%•China supply up ~150%

2017 - 2021

WW I WW II

•Global mine supply up ~3X•S. Africa = ~45% of global cumulative total over period

•S. Africa output peaks at ~70% of total in 1970

1993: mining begins at Yanacocha

1900 - 1970Discovery (S. Africa reef deposits)

1980 - 2000Technology

•NEM expects global supply to decline by

1% annually

1934: Roosevelt increases official gold price to $35/oz. (from ~$21/oz.)


Path forward: exploration and grade challenges• Average gold discovered continues to trend downward

• Average processed gold grades declining

Avg. gold discovered (Moz); Exploration spend ($B)1

1 Source: SNL Financial – trailing 3-year average gold discovered through exploration2 Source historical annual reports and reserve and resource reporting; Reserve gold grades for Carlin open pits and underground

Carlin gold grades <0.1 opt since 1980s (oz/ton)2

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1984: mining begins at Gold Quarry

1994: underground mining begins at Carlin East & Rain

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Path forward: mine life and grade challenges• Average copper mine life 3X longer than global gold mines

• Average gold processed grades have fallen faster than copper

Avg. mine life (years)1

1 Source: Wood Mackenzie (Mar. 2017); Average mine life of current operating mines and stated reserves2 Source: Wood Mackenzie (Mar. 2017); Industry average processed grades; shaded areas indicate periods of market down turns

Avg. processed grades: gold (g/t) and copper (%)2

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Gold Copper

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1992 1998 2004 2010 2016Gold Copper


-20%-10%

0%10%20%30%40%

3-Month 6-Month 1-Year 2-YearPost Closing

Goldcorp HUI Gold Index Gold Price

0%20%40%60%80%

100%120%


Barrick HUI Gold Index Gold Price

0%50%

100%150%200%250%300%


Newmont HUI Gold Index Gold Price

-70%-60%-50%-40%-30%-20%-10%

0%10%


Newmont HUI Gold Index Gold Price

Path forward: Transformational M&As have not translated

NEM Announces Santa Fe Acquisition (Dec. 4, 1996) NEM Announces Normandy/Franco Merger (Nov. 14, 2001)

ABX Announces Placer Dome Acquisition (Oct. 31, 2006)

1 Cross-hatched bars indicate superior performance to NYSE ARCA Gold Bug Index (HUI) which currently includes: Newmont, Goldcorp, Barrick, AngloGold, Goldfields, Kinross, Agnico Eagle, Harmony, Yamana, Buenaventura, Eldorado, New Gold, Randgold and Alamos

GG Announces Glamis Gold Takeover (Oct. 31, 2006)

• Large acquisitions/mergers in with Gold Sr.s have failed to generate superior price returns1


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2000 2002 2004 2006 2008 2010 2012 2014 2016100

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2000 2002 2004 2006 2008 2010 2012 2014 2016

Sr. Avg. Shares Outstanding have increased ~3x

Senior Avg. Share prices, ~flat and lag gold prices

1 Source: WoodMac, GFMS and Bloomberg: Gold Senior Average (weighted on annual gold production) and includes Newmont, Goldcorp, Barrick, AngloGold, Goldfields, Kinross, Agnico Eagle, Yamana, Randgold, and Newcrest

Randgold stands out, share price up nearly ~50x

• Since 2000, lots of shares issued and debt raised… sector average share prices ~ flat1

• Randgold stands out = limited share increase (~95M vs 66M in 2000) and debt (~$0 vs. ~$100M in 2000)

Sr. Avg. Total debt lower but has increased ~7x

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2000 2002 2004 2006 2008 2010 2012 2014 2016

Sr. Avg. Share PriceGold Price

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Randgold Share PriceGold Price

Path forward: Transformational M&As have not translated


Path forward: creating value and a compelling vision

• In past, value generally driven by exploration success, technology and economies of scale

• Industry challenges to continue:– As grades trend lower, cost and social pressures will increase– Barring significant technological advancement, large-scale exploration success limited– Significant gains with economies of scale (larger equipment) not anticipated– Large-scale M&A to generate limited shareholder value– Marginal growth to be driven by cost saving operational opportunities (automation)

• Over the longer-term, emphasize:– Continual cost discipline across broad periods of gold price volatility– Balanced exploration with selective M&A– With lower job creation, clearly demonstrating economic and social contributions

• Significant local community infrastructure and economic development• Agreements with governments clearly define mutually agreed upon community

investment ($ amounts, distribution to national and local levels)

Appendix


Path forward: demonstrating mining value (employment)

“…in 2015, the Akyem mine contributed to the creation of nearly 21,000 jobs, including approximately 750 people (or 4%) directly

employed by Newmont…”

Newmont Total: 751local: 357national: 368expatriate: 26

Newmont 751 (4%)

Direct Suppliers

5,100 (25%)

Indirect Suppliers

8,100 (28%)

Induced 9,900 (48%)

“…each Newmont Akyem employee indirectly contributes to create 28 additional jobs in Ghana through

supply chain activities and re-spending of salaries…”

0.8 3.5 0.0

11.3 1.6 3.9 1.2 0.4 0.0

2.5 4.1 20.7

New

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Agr

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Man

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IT /

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Employment Impact by Sector ('000 jobs) Re-spending of salaries Indirect suppliers Direct suppliers NewmontBlanks

0.2% ofGhana’s

labor force

Job multiplier

of 28

0.85.1

5.0

10.0


Akyem is expected to generate nearly $5.6B in cumulative revenue From exploration, through construction and operation, with the majority remaining in Ghana.

Exploration

Construction

Operation

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$6.0

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Cum

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Rev

enue

($B

)

Government IncomeOn-Shore SuppliersOff-Shore SuppliersNewmont

Revenue Breakdown (% of Total)

Newmont15%

Off-Shore Suppliers

27%On-Shore Suppliers

45%

Government Income

13%

“…Akyem is expected to generate well over $xxB in cumulative revenue, from exploration, through construction and operation, with the majority remaining in Ghana…”

Path forward: demonstrating mining value (revenue)

$0


Housing and electric vehicle demand support copperChina’s housing inventory falling (month’s of supply)1

• Strong housing investment and lower inventories in China to support prices over near-term

– YTD copper prices have averaged nearly $2.65/lb., with markets expecting prices to average ~$2.80/lb. through 2020

• Electric vehicles expected to be a significant demand source for copper over longer-term

– Annual sales to climb to 6.5M by 2025 (or by 7-fold from ~800K currently)

– Each electric vehicles requires ~165lbs (compared to 55lbs for gasoline powered)

Electric vehicles (M sales) important for longer-term demand (Kt) 2

1 Source: Source: Macrobond; Chinese country-wide inventory supply calculated as cumulative housing starts less sales, divided by average sales over last 12 months2 Source: Simon Hunt Strategic Services (March 2017)

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2014 2016 2018 2020 2022 2024Electric Vehicle Sales Associated Copper Demand


Global supply growth to limit oil price increases

11 Source: Macrobond EIA Short-Term Energy Outlook – Feb 2017

Analysts anticipate prices to average ~$55/bbl in 2H 2017 US and OPEC crude production (mbpd)1

• Analysts anticipate prices to average ~$55/bbl in 2017, climbing slightly to $60/bbl by 2019

• Despite OPEC production quota, global oversupply remains a concern

– Both OPEC and U.S. production expected to progressively increase through 2025

– Global output climbing by nearly 1% annually over next decade

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Gold Quarry


Haul truck at Yanacocha, Peru


Shovel at Yanacocha, Peru

Tom Brady, Chief Economist Newmont Mining June 2017 · June 2017 Newmont Mining Corporation -Slide...

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