Responsible, sustainable and profitable businesses are anchored, first and foremost, in strong safety cultures. The tragic accident in Ghana at our Ahafo Mill Expansion project in April – resulting in six fatalities – and the death of a colleague working underground at Newmont’s Pete Bajo underground operation in Nevada in November, serve as sobering reminders that nothing is more important than everyone going home safely. The loss of our colleagues will have a lasting impact on their families, friends and the entire Newmont family. Following in-depth investigations, we are applying lessons learned from both accidents across our business, while sharing our learnings with the broader mining industry to help prevent similar accidents from ever happening again. We have redoubled our efforts to fully integrate our Fatality Risk Management program across our sites while consistently applying the critical controls we have in place to keep people safe.
The long-term success of our company requires the integration of sustainability into all aspects of our business. Leading environmental, social and governance performance is strongly correlated to strong financial performance and creation of long-term value for our shareholders and other stakeholders. This includes striving to meet the highest standards, contributing toward sustainable development and serving as responsible natural resource stewards to ensure we make positive and lasting impacts on the communities and countries where we operate.
Sustainability also includes delivering strong operational and financial performance. Our teams overcame geotechnical and other challenges during the year to deliver $805 million in consolidated free cash flow1 and over $600 million from our Full Potential continuous improvement program.2 This performance supported profitable growth, which included the completion of three new mine expansions in 2018 – Northwest Exodus and Twin Underground in Nevada, and Subika Underground in Ghana – and we began to advance promising exploration prospects in all four of Newmont’s operating regions.
Enhancing our transparency and disclosures relating to sustainability is a key priority and a strong indicator of our commitment to best practices in corporate governance. Through economic impact reports, we are measuring the overall economic contribution – inclusive of taxes, royalties, jobs, supplier contracts and induced benefits – our operations generate for host countries and communities, and sharing this information with government officials and community leaders. Our global strategies on water and energy and climate include expanding our reporting to align with new global frameworks including the CEO Water Mandate and the Task Force on Climate-related Financial Disclosures.
Our human rights strategy, and use of the United Nations Guiding Principles on Business and Human Rights Reporting Framework to disclose our performance, continue to expand our understanding of human rights risks throughout our operations and within our supply chain. Insights from previous reviews informed an integrated approach to assessing human rights impacts at the Sabajo project – a proposed gold mine near our Merian operation in Suriname. This review was the first conducted under our improved approach to free, prior and informed consent (FPIC) of indigenous peoples.
The UN Sustainable Development Goals (SDGs) are a call for governments, businesses, civil society and other organizations around the world to take action and achieve a better and more sustainable future for all. Out of the 17 SDGs, Newmont has prioritized five where we believe we can make the greatest impact. These five SDGs are discussed throughout this report. In 2018, we formed two new global partnerships – with Project WET and the International Union for Conservation of Nature – to amplify our efforts to advance the goals.
For 2018, we achieved our public targets to more effectively assess human rights risks in our security teams and global supply chain, hire and procure services from local communities, reduce our fresh water use, and execute concurrent reclamation activities according to our plan. For the targets we did not meet – related to injury rates, female representation, community commitments, and community complaints and grievances – we are taking steps to drive improved performance.
Creating a more responsible and sustainable business is a continuous journey, and recognition from reputable, independent organizations helps us determine if we are on the right path. For an unprecedented four years in a row, Newmont was named the mining sector leader in the Dow Jones Sustainability Index, an important benchmark of sustainability leadership. Our assessment grade in the 2018 CDP (formerly known as the Climate Disclosure Project) Climate Change report improved to “A-” (up from “B” in 2017), and Newmont was one of 230 companies named to Bloomberg’s 2019 Gender-Equality Index in which we achieved a score of 84 out of 100 – above the Index average of 73.
In addition to rankings and recognition, we directly engage with our stakeholders to find out what is working well and where we have room for improvement. A global survey with a broad range of regional stakeholders confirmed that our performance in the areas of transparency, community development and engagement, and environmental performance heavily influences their view of Newmont. Results of an employee survey revealed high engagement levels, but also a need to focus on skills development and career advancement opportunities. To extend the conversation to investors and analysts, we held our first environmental, social and governance (ESG) briefing, which showcased our current sustainability practices and provided opportunities for questions and feedback. Insights from these engagements will help us further improve our performance and adapt to society’s long-term expectations.
The tragic failure of Vale’s Brumadinho tailings facility in Brazil in January 2019 highlights the need for the industry to improve its approach to design, construction, operation and closure of these facilities. Recognizing this risk, Newmont continues to review and enhance our existing practices. Annually, the Company manages and places more than 100 million tonnes of tailings in the 26 tailings facilities across our operating sites. Newmont’s engineering, construction and operating standards and technical guidance explicitly cover tailings management and establish requirements throughout their operating and post-mine closure life. The design, construction and operation of all tailings impoundment facilities are scrutinized through our investment system process, and are supported by inspections and audits, critical controls and strict application of annual inspections by independent qualified geotechnical engineers. Newmont’s environmental standards also cover the long-term management of tailings impoundment facilities. To improve awareness of these facilities, we have published a Tailings Fact Sheet that provides further details on the facilities and our approach to tailings management.
A number of Newmont representatives are collaborating with industry peers and organizations to develop consistent and comparable metrics that address stakeholders' expectations for the mining industry's performance. In 2018, the International Council on Mining and Metals (ICMM) surveyed external stakeholders on their views of responsible mining. These findings are being used to develop performance expectations that ICMM member companies can commit to. We are also working with the World Gold Council to develop the Responsible Gold Mining Principles – a new framework that consolidates existing international standards under a single structure.
Following a rigorous due diligence process that included site visits and analyses of safety and sustainability matters in addition to financial and operational reviews, at the beginning of 2019, Newmont and Goldcorp announced an agreement to combine our two companies. This combination will create an unmatched portfolio of world-class operations, projects, exploration opportunities, reserves and talent in the gold mining industry. Goldcorp shares our commitment to protecting the health and wellbeing of people and the environment and to being a catalyst for sustainable economic empowerment in our communities. After the transaction closes, which is expected in the second quarter of 2019, we will honor Goldcorp’s community commitments, including those to Canada’s First Nations, to ensure their interests are acknowledged and protected. By combining with Goldcorp, we expect to advance our track record of creating value and improving lives through sustainable and responsible mining.
In March 2019, we entered into an agreement with Barrick to form a joint venture that will combine our mining operations, assets, reserves and talent in Nevada. We believe this arrangement will generate long-term value for all of our stakeholders by unlocking synergies; allowing profitable production to continue well into the future; and creating opportunities for our employees and other stakeholders through a broader, unified mining enterprise in Nevada.3
Ensuring we have the best leaders in place to lead Newmont through these transformative changes is essential. During the year, we welcomed René Médori to our Board of Directors, further diversifying a Board that was recognized in 2018 by the National Association of Corporate Directors for excellence in diversity. Among my executive leadership team, Tom Palmer was promoted to President and Chief Operating Officer, and he will become the President and Chief Executive Officer of Newmont Goldcorp when I retire in the fourth quarter of 2019.
This report details our past performance and future programs and targets. On behalf of the entire Newmont team, I thank you for your interest and welcome your feedback.
Gary J. Goldberg
Chief Executive Officer
1 This letter to stakeholders includes non-GAAP financial measures. Please see the Form 10-K under the heading Non-GAAP Financial Measures in the Item 7 – MD&A section for a reconciliation of these measures to GAAP and a discussion of why Newmont is presenting this information.
2 Full Potential cost savings or improvements as used in this presentation are considered operating measures provided for illustrative purposes, and should not be considered GAAP or non-GAAP financial measures. Full Potential amounts are estimates utilized by management that represent estimated cumulative incremental value realized as a result of Full Potential projects implemented and are based upon both cost savings and efficiencies that have been monetized for purposes of the estimation. Because Full Potential savings/improvements estimates reflect differences between certain actual costs incurred and management estimates of costs that would have been incurred in the absence of the Full Potential program, such estimates are necessarily imprecise and are based on numerous judgments and assumptions.
3 Cautionary regarding forward-looking statements. Forward-looking information representing JV expectations is inherently uncertain. There can be no assurance that the proposed Nevada JV transaction will close or that the forward-looking information will prove to be accurate. See cautionary statement on page 2 of press release dated March 11, 2019, titled Barrick and Newmont Forge Nevada Joint Venture Agreement, for more information.