Newmont’s secret: maintain community ties

Companies must maintain a close relationship with workers and local communities if they want a quick rebound from the coronavirus.

The Newmont Boddington mine southeast of Perth, Western Australia.

The boss of the world’s biggest gold company says companies must maintain a close relationship with both their workforce and the communities in which they operate if they want a quick business rebound when the coronavirus abates.

Newmont boss Tom Palmer, one of Australia’s most senior global executives, told The Weekend Australian the $78bn company’s experience in dealing with Africa’s ebola outbreak, along with government-imposed shutdowns on its operations for other reasons, had given it valuable experience as it approached the coronavirus crisis.

A company’s relationship with its staff, even if they were temporarily not working, and strong support for the communities in which it operated, were the key to a quick return to normal business, Mr Palmer said.

“The decisions we make now are absolutely essential in terms of ensuring that all of us come out the other side stronger than when we went in,” he said.

Australia’s mining industry is working through the crisis, with support from state and federal governments. But a massive wave of lay-offs has seen Australia’s other corporate giants — including Qantas, Virgin, Crown and Myer — collectively stand down more than 120,000 workers, and smaller businesses have put off hundreds of thousands more.

The federal government’s JobKeeper program, which pays $1500 a fortnight to furloughed workers to maintain their relationship with their employer, is the centrepiece of its strategy to ensure a quick rebound in the economy when the immediate threat of the virus recedes.

Mr Palmer said Australia and its mining industry was leading the world in its response to the coronavirus. But Newmont’s experience of running its mines through crisis periods, and returning them to operation after an enforced closure, meant it was focusing on maintaining its relationship with furloughed workers, their communities and governments ahead of any decision to return to work.

Mr Palmer was speaking from a stronger position than the bosses of companies in industries such as airlines, where revenue disappeared almost completely when travel restrictions hit.

The economic uncertainty caused by the coronavirus has helped spur the gold price to new heights above $US1700 an ounce, and Newmont’s assets are run to make cash even if the price falls to $US1200/oz, so its operating mines are still churning out plenty of cash.

But five out of 12 of Newmont’s global operations — in Canada, Argentina and Peru — are in mothballs due to government restrictions, or because of Newmont’s own decision to close them to protect vulnerable communities surrounding its operations. With gold prices set to stay high, the best way to return them to production when the crisis recedes is a key issue for Newmont, as it is to the rest of the corporate world.

“In a number of instances we’ve made decisions to move operations into care and maintenance ahead of the government putting in place restrictions because of the work we’ve done to understand the impact of this virus and the impact on some of the vulnerable communities around our operations,” he said.

“Working with those community leaders, we wanted to ensure we were making decisions that were for the long term to support those communities, rather than any decision we’d make because of the short-term impact of the pandemic.”

The company’s experience in operating mines in Ghana during Africa’s ebola outbreak had given it a wealth of experience, Mr Palmer said, as well as government-imposed shutdowns on its operations for other reasons.

“There are Newmont assets in Ghana that had some exposure to ebola. What we see in Ghana is that the protocols that the government and the community had in place to respond to ebola were able to be used very quickly to manage this pandemic,” he said.

“The other experience we’ve had is that about six years ago we had the Batu Hijau operation in Indonesia at a time we had to cop a copper concentrate export ban in that country, and we had to put a very large mine into care and maintenance for seven months.”

Mr Palmer said the company’s decision to keep paying all of its furloughed employees until at least the end of June was a key element in its plans for a quick return to production when it was safe to do so.

“Our experience in maintaining an operation in care and maintenance for extended periods was about maintaining your relationships with your workforce and communities — such that when we got our export permit at Batu Hijau and ramped up again, we ramped up within a couple of weeks because we’d managed that circumstance well. We’ve drawn upon that experience as we’ve moved our operations into care and maintenance.

“In the decisions we’ve been making around how we manage this pandemic in the short term we’ve been keeping an eye on that longer-term view, so in terms of our employees in putting our operations into care and maintenance — five of our 12 managed operations are currently in care and maintenance — we’ve made a decision that we will maintain the pay of our workforce. So we’ve got more than 15,000 people globally, we’re maintaining their pay through until at least the end of June.

“That supports our employees, and also supports the communities and governments they work in. That is so that when we come out of this we’ve maintained the relationship and we’ve supported their ability to be resilient, and I think that puts us in the best position to work with key stakeholders as we come out the other side.”

And the immediate future for gold is bright, making it even more important to ensure it gets product flowing into the market as quickly as it is safe to do so.

Even before the coronavirus hit Newmont had been flagging a structural shift in the gold price from the $US1200 to $US1300 levels it had been trading in to new levels around $US1400 to $US1500.

“The fundamentals of reducing mine supply, and a growing middle class in China and India and the move into ETFs — those fundamentals were supporting gold at those sort of levels. I think you’ll still continue to see all of those fundamentals remaining in place,” Mr Palmer said.

“But what we’re seeing now in the level of stimulus in both fiscal and monetary policy is really underpinning the potential for an extended run of gold at high levels on top of those basics. We certainly see a lot of support for gold.”