Hello and welcome to KitKo Mining with me, Paul Harris. Today we have a very special guest, Tom Palmer, who in a couple of weeks on the 31st of December will be stepping down as CEO of Newmont, the world's largest gold mining company. Tom, welcome back to Kiko.
Thanks, Paul, and good to see you again.
Likewise. Congratulations on the change. I want to start with a bit of a summary. You became the 10th chief executive of Newmont in 2019 at a time of massive change for the gold sector and the company with the mega mergers occurring about then, and you had to make sense of that for Newmont. The year leading up to your appointment saw rival Barrick Gold merge with Randgold Resources, prompting your predecessor Gary Goldberg to respond with the acquisition of Goldcorp to maintain primacy in the sector. Barrick then took a run at Newmont, which while unsuccessful forced the creation of Nevada Gold Mines into which Barrick and Newmont merged Nevada operations with Barrick as the operator. This is the state of things more or less that you inherited from Gary Goldberg. After dealing with COVID-19 and the cost inflation that followed, you later added your own stamp through the 2023 acquisition of Newcrest Mining, a transaction that made more strategic sense than the Goldcorp buy. And after absorbing Newcrest, you focused on portfolio rationalization which resulted in the divestiture of six mines in 2024 and some other assets. Tom, let's start there. You took over Newmont at a pivotal time. What shape is Newmont in today compared with when you took over in 2019?
Yeah, thanks Paul. That's quite the summary. But I think about Newmont that I'm handing the baton over to Natasha in a couple of weeks. And I think about the Newmont that I joined back in 2014. I joined in early 2014. If you remember back in April of 2014, we came very close to merging with Barrick. That was the context in which I joined Newmont as a managing director of our Asia-Pacific region. I was on the Newmont executive team for 10 years. So I was a key part of the team working with Gary Goldberg as we worked through and strengthened the business through 2015, 2016, 2017, 2018. I was a key part of the work that we did to acquire and integrate Goldcorp. I was at the negotiating table for the Nevada Gold Mines joint venture. I've been on that board for six and a half years. So I was an intimate part of that work. It was a core part of the strategy that we developed as a business, and there was continuity from Gary to me as we moved through my tenure as CEO. So if I think about Newmont today, I compare it to the Newmont of 2019 and compare it to the Newmont of 2014 when I joined. We are a much stronger company. Our safety performance, the underlying safety decisions around fatality risk management that are fundamental to a sustainable mining company, are chalk and cheese compared to the company that I joined. The leaders in our organization are much stronger than the leaders in the company that I joined back in 2014. A much stronger leadership team into the depth of the business down into each of our operations. Our balance sheet is in really robust shape compared to 2019 or back to 2014 in terms of its strength, its resilience, and its flexibility. And most importantly, our portfolio is very different. We now have 12 managed operations. Each of them have very long life ore bodies that we can confidently make decisions on a 20 to 30 year timeframe as opposed to a 5 to 7 year timeframe. And we have an organic project pipeline that is the envy of not just the gold mining industry but the mining industry, in terms of the gold and copper projects that come together that we can develop to further strengthen our portfolio. So really proud of the work that the team have been able to do that I've been a member of to hand over this portfolio.
Tom, with so much success, why step down now?
Thanks Paul, a really good question. There's a couple of aspects in answering that. The first is that as an organization we clearly understand that we are custodians of our role. So very firm expectation from day one in the role with my board that I'm working on the development of successors not only to replace me but as future leaders, particularly the CEO role of Newmont. So that has been a key part of my mandate, it's what sets Newmont apart. So roughly a six-year timeframe is pretty typical if you look back over Newmont's modern history. And the second aspect is that we've been through a lot of change. The acquisition of Newcrest, the rationalization of the portfolio, setting up our 12 managed operations going forward. We are at a beautiful inflection point for me to hand the baton across to Natasha and allow Natasha to take this transformed portfolio to its next level of performance. So governance and a perfect inflection point in our portfolio.
As the biggest gold company, you've been the sector leader in many ways, and some of the decisions you've taken will continue to shape the sector going forward. I want to touch on a couple of those with you: the divestment program that created a number of other gold producers and your capital returns policy. Taking those one at a time, when you sought to divest the six mines, you said you wanted to raise $2 billion US and you netted almost $5 billion with interest from more than 50 companies. Were you surprised by the response and the monetization you were able to obtain?
Two aspects there, I think Paul. One is that as we set about the opportunity to acquire Newcrest, we did that with a very clear understanding of our organic strategy as an organization, where our strengths were, what we're looking to do in terms of managing our existing portfolio, and out of that we informed an inorganic or M&A strategy. So we were very clear in terms of three filters that were applied to that. One was that we believe we can run world-class operations, large long-life operations, as well as or better than anyone else. Second was that we wanted to further consolidate in the key mining jurisdictions of Australia, the United States, and Canada. And the third was that if we could get greater exposure to copper as a gold mining company, that would be of interest to us. That's why Newcrest came to the top of our list. When the opportunity to acquire Newcrest came about, we were very clear about what our go-forward portfolio would look like. So those six operations that we divested were a clear part of that strategy linked to the acquisition of Newcrest. So we were very clear from the start. That's why we identified those as assets held for disposal and went through that process through 2024 and into 2025. We don't get to choose gold price, but we were very clear about the assets that we would take forward and the assets we wanted to divest. So I think that helped, the clarity of strategy helped, and we obviously got the benefit of tailwinds from gold price that allowed us to have a very competitive environment and to achieve some very good prices for those assets and to put every one of those assets into the hands of companies that will be able to continue to take them forward and deliver value for the workforces at each of those operations and the local communities around each of those operations. So very pleased with how it played out from a number of dimensions, including the price that we received for each of those operations.
Newmont is the leading returner of capital to shareholders in the sector. You've returned $2.7 billion so far this year, not including the fourth quarter, which amounts to about 60% of your free cash flow so far this year. You returned $2 billion in 2024. Head and shoulders above everybody else in the sector. Why is this level of capital returns so important?
Well, when I step back and think about our capital allocation strategy, which remains unchanged through this period of transformation, it starts with ensuring that we have a business that is generating free cash flow through the price cycle. So we remain pretty sober in terms of understanding what the gold price is. I've grown up in the mining industry, I've spent more time at the bottom of the price cycle than the top. So remaining pretty sober about ensuring that we have a business that can generate margins through the cycle is the first point. With that as a fundamental starting point, then ensuring we have a strong, resilient, and flexible balance sheet comes first and foremost. Then ensuring that we're allocating the appropriate amount of cash to reinvest back in the business, whether that be sustaining capital or growth capital. And there's an amount of cash that you allocate and there's also the project execution risk that comes with that. So ensuring that you can confidently reinvest that money and ensure you'll get the returns from that investment. Having done all those things well with discipline, then it's about returns to shareholders through either share buybacks or dividends. Dividends in particular have to be sustainable and thinking through the cycle is critically important, which is what we've been focused on. And then we have buybacks as the other vehicle to return capital. Some of that buyback has come from the free cash flow we generate. An important part of that buyback has come from the proceeds of the divestments. So in being through a transaction, we used our shares to do those transactions. We're now taking the proceeds from that rationalization to buy back shares from our shareholders. So for Newmont, share buybacks are an important part of that given the transformational process we've been through.
With the gold price moving higher, Tom, is there investor pressure to return more capital to them? What are some of the conversations you've been having with your key shareholders?
Yeah, the key conversation with shareholders, and as part of us leading the conversation, and I think reinforcement from our shareholders, is let's manage this business with discipline. We have had experiences not just in the gold mining industry but in the broader mining industry when we've seen bull runs in commodity prices where value has been destroyed. You only have to look back to the early part of this century to see that taking place through gold and other commodities. So very firm focus on managing this business with discipline, ensuring that we have free cash flow margins through the price cycle, ensuring that we remain disciplined in terms of how we run our operations, how we build our projects, how we manage our balance sheet, and how we think about returns. That's our focus. That's what we're sharing with our shareholders, and what we're hearing back from our shareholders is reinforcement that that's how they would like us to run the business. A key part of the conversation with Newmont is that we now have a portfolio where we can look forward 20 or 30 years and be thinking about those decisions over that timeframe. We've never had that opportunity in the past with a gold mining portfolio that had shorter mine lives.
Now, as part of that discipline, Newmont was one of the pioneers of issuing 10-year guidance, production guidance, cost guidance. In terms of investors, that obviously enables them to better model what they can expect from Newmont going forward. But over your time at Newmont, how has the investor pool changed? And how has that changed the dynamic of what gold companies or gold miners do?
I think about Newmont. We're the only gold company in the S&P 500. We've seen our shareholder base change over my dozen years with the company. You go from more of a gold-bug-centric shareholder base to a shareholder base that is broader, with more of the generalist investor coming into our business. Certainly a good percentage of our shareholders are from North America or the United States. What they're expecting is, 'Say what you do, do what you say.' So if you're going to commit to something over the next quarter or the next year, do what you say in terms of delivering against that so that we have confidence in your business. So that has been a fundamental part of our approach, particularly as we come out the other side of the series of transformations. We're very much focused on starting with our guidance in February this year to give a set of numbers for the next 12 months that we can deliver on each and every quarter, and then to do the same next February, and so on and so forth. That's a pretty strong message and approach we're taking, and it's resonating with our shareholder base. They do that in the understanding that we have a very long-life portfolio. So they know and we know that we've got a business that will produce on average around 6 million ounces of gold and around 120,000 tons of copper for a very long period of time. So, in the context of a large long-life portfolio, do what you say you're going to do in terms of what you'll say for the next year and what you deliver each and every quarter.
