費利浦·麥克莫蘭銅金 (FCX) 2002 Q3 法說會逐字稿

Ladies and gentleman and welcome to the Freeport-McMoRan third quarter conference call.

At this time, all participants are in a listen mode only.

My name is Phil and I'll be your conference coordinator today.

If at any time during the call you require assistance, please press '*', followed by '0' and a conference coordinator will be happy to assist you.

As a reminder, this conference call is being recorded.

I would now like to turn the program over to the host for today's conference call, Mr. Chris Sammons.

Mr. Chris Sammons, please go ahead sir.

Thank you operator.

Good morning everyone and welcome to our third quarter conference call.

The FCX earnings announcement was released earlier this morning and you should have a copy by now.

If you do not have a copy, its available on our website fcx.com.

Today's conference call is being broadcast live on the internet.

Anyone may listen to the call by accessing our website fcx.com.

The financial press has also been invited and is listening in on the call today.

A replay of the call will be available on our website.

Before we begin today's comments, I'd like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements regarding sales, production volumes, production costs and other costs, operating cash flow estimates, estimates of debt reduction, the impact of copper and gold commodity prices and price changes, capital expenditures, development projects, mineral reserves and resources, exploration activities and other matters.

Important factors that could cause future results to differ from these projections are described in FCX's annual report on Form 10-K filed with the Securities and Exchange Commission.

Also with me today on the call are Richard Adkerson, President and Chief Financial Officer and Jim Bob Moffett, Chairman and CEO of Freeport-McMoRan.

As usual, after our comments this morning, we'll open up the call for questions.

For third quarter 2002, FCX reported net income of $61.5 million, 39 cents per share on a fully diluted basis compared to net income of 4.2 million, or 3 cents per share for third quarter 2001.

Included in the net income for third quarter 2002 is a deferral of net income of 20.9 million, about 11 cents per share, which is related to the inter-company sale of PT-FI to it's affiliated smelters.

As we reported to you earlier this month, our third quarter 2002 results reflect the mining of hard grade ore, which we began to access late in the second quarter.

As a result, sales for third quarter from PT-FI share were 446 million pounds of copper, compared to 351 million pounds last year and 885,000 ounces of gold, compared to 686,000 last year.

The third quarter sales from PT-FI were records for both copper and gold.

Third quarter net cash production cost was a net credit of 10 cents per pound of copper as compared to last year a cost of 5 cents per pound.

This reflects the higher gold grade and higher copper grade.

Site production delivery costs were 33 cents per pound this year versus 41 cents per pound last year and gold credits were 63 cents a pound compared to 53 cents per pound last year.

Average copper realizations were 67 cents a pound, slightly better than last year's 65 cents.

And average gold realizations were $314 per ounce compared to 43 -- excuse me, compared to $277 per ounce last year.

Also, affecting revenues in the current quarter were the final pricing and final assays on previously priced sales from our prior quarters.

Those adjustments reduced revenues by $10 million on a gross basis, 5.3 million to net income or about 3 cents per share.

With respect to open pound at September 30, 2002, there were 170 million pounds provisionally priced at an average of 66 cents per pound.

Most of this were priced during the fourth quarter.

A 1 cent change to the final pricing from the provisional price on these pounds would approximate $900,000, or about 0.6 cents per share.

Now let's turn the call over to Richard to discuss operations and financial matter.

Well as we had given you guidance at the beginning of the quarter and as we reported to you recently, we had an excellent quarter from an operating standpoint.

During the quarter, we had very good production in the mine.

Our mill operated very well, our ore fluid (Ph) system operated very well and our concentrate delivery system at port site also performed well.

In total, it was a quarter in which there was great coordination between the various sectors of our business and our operating team performed well.

We were in a very high-grade inspection of the Grasberg pit and it was great to have that kind of overall positive and strong performance when we had to opportunity to mine such hard-grade material.

Underground performed well, as we have reached the targeted level for the BOZ (Ph) expansion and are moving forward to expand that to 35,000 tons per day.

In this quarter, we had aggregate gold sales for the total operation of 1.1 million ounces, that include ounces that were in our inventory as we reported them into the second quarter.

Our concentrated inventory was half because of weather and shipping delays.

We had over 50,000 tons of inventory at the end of the second quarter.

During the third quarter, we were able to proceed with our shipping plans and had approximately 15,000 tons of concentrated inventory.

So that gave us additional ounces to sell during the third quarter.

Aggregate copper sales were 535 million pounds, and as Chris said, this allowed PT-FI to record both record copper and gold sales for the quarter.

We expect to continue with strong operations into the fourth quarter and we expect to have sales of 1.4 billion pounds of copper and 2.25 million ounces of gold.

And that was the targeted copper sales when we started the year and higher gold -- gold sales for the quarter.

It's 1.5 billion pounds in copper and 2.25 million ounces of gold.

We've set a number of operating records that we pointed to in the press release.

Our recoveries at over 90% for copper, was the best we've done and that's excellent performance for our mill.

Because of the higher volumes of both copper production and gold production, as well as having gold at $315 an ounce better, we had a net credit of unit cash cost of negative instance per pound.

Our Underground ore production was 46,800 metric tons per day.

That makes us, you know, very large underground producer.

And that's importance to us as we look forward because more than 60% of reserves now are underground reserves.

We also loaded 826,000 metric tons of concentrated during the quarter.

All of this just reflects the quality, high grades and ability to produce products by the Grasberg Mining Complex, including the open-pit operations and the underground during the quarter in which all areas of our operations performed smoothly and with coordination.

We had strong cash flows for the quarter despite the fact that we had such low copper prices.

We had over a $150 million of cash flow.

Looking forward for the year if copper prices stay at - or in the 65-cent range and gold at $315 an ounce, we would generate over $500 million in cash flow.

We reduced debt by $70 million in the quarter and over $130 million year-to-date and pointing towards at current copper and gold prices approximately $225 million of debt reduction for the year.

Capital expenditures remained on budget.

We expect them to be about $200 million dollars for the year.

So we're moving forward with our plans.

We have currently over $300 million dollars of availability under our bank credit facility and our total debt -- net of cash is $2.5 billion including our commodity prefers.

Our smelter operations after going each through some repair activities earlier in the year, performed well.

During the quarter, Atlantic Copper had cash cost of production of 12 cents a pound, generated a $1.5 million of operating income, expects to produce total metal of 300,000 tones for the year.

Our PT Smelting equity investee (Ph) also had 12 cents per pound.

Its operations are running excessive design capacity after going through its turnaround during the second quarter.

Of course these smelter operations are important to us because they provide operating hedge for world smelter charge rates.

As the largest producer of custom concentrates in the world, its important to us from a marketing standpoint.

Their segment operations are adversely affected by the very low PC and RC rates and that continues to remain low.

That's offset in our operations by the fact that it generates more profits for our mining operations.

Before turning the call over to Jim Bob, I just want to point out one accounting issue in terms of our earnings per share calculations.

Our diluted net income from share is for the third quarter is based on the assumed conversion of our convertible senior notes that we issued last year.

And the way this works is our earnings are adjusted for the interest expense for these notes, which was $12.6 million, and then we include the shares that would result in the conversion of the notes, which is 42.4 million shares in the earnings calculation.

This is all driven on the relationship between that interest cost and the shares outstanding.

So the bonds in any particular quarter do not have a diluted effect unless the earnings are over 30 cents per share.

On an annual basis, they do not have a diluted effect unless the annual earnings are in excess of $1.21 per share.

So, just wanted to point that out that standard accounting it's been in place for many years, and in this way you account for convertible bonds such as one we issued last year.

With that I'll turn it over to Jim Bob.

Thank you very much Richard.

I won't repeat the operating results.

They speak for themselves.

We had indicated when I was in Jakarta that we're going to have this record month of over a million pounds, and 500 million ounces excuse me, of gold and 500 million pounds of copper.

We don't really need to spend any more time on that.

I think the thing I will emphasize is in spite of all the distractions with the incident we had on August of 31st which was we thought unbelievable that it could happen and now the most recent incident in Bali.

It only emphasizes as we said on occasions after the August 31 that the whole world is in a violent state.

The fact that our staff has been undeterred and basically unaffected by these two events in this record quarter add up that to fact that the incident in Bali came after the end of the quarter, just re-emphasizes that what I think we've told you and that is that this mine is not affected by these outside activities.

Obviously, all of us in the world are more aware of our security then we've ever been when it comes down to try and to say where in the world you might be most secure these days.

As I've said to our staff in my visit out there, what we have to do is to remember security is financial security as well as personal security and we believe that the mine, especially after the comments from the central government in the most recent disaster in Bali that they will protect the vital assets of the country which includes in their statement oil and gas assets and mining assets and mentioned in particular Freeport.

So, what we like to do is to think about the fact that the ore we have because of the unique nature of the chemistry that has this gold and copper and silver encapsuled in one deposit, is really the reason why we began --when we began mining of this area I said we knew we had a unique ore body.

It's also meteorologically so clean that we do it with a mechanical process that just requires us to crush the ore and concentrate it.

There is no chemicals in our ore, and of course the recoveries as you saw this quarter only indicate that when you can get 90% or better recoveries from copper, it only is because this ore has good qualities as far as the ability to crush it and concentrate it, and that's why our process continues to be so effective and so efficient.

The underground as well as the open pit has this gold content, which allows us to have in this case a negative 10 cents per pound production cost.

There is not a whole lot more you can say about this team of people that are -- and this ore body than the results of this fourth quarter.

We are -- we look forward to the rest of the year, all of this financial results I just want to emphasize has been done in a quarter where we had to book our copper at 65 cents at the end of the quarter.

I think all of you have heard us say we don't predict copper prices.

If copper prices were more buoyant and copper were to move into the 80-90's dollar a quarter, you can imagine what kind of cash flow we would have generated this year since we are going to generate $500 million of cash flow in a year, where we have had sub-70 copper prices.

So I think everybody understands why this ore body is the right ore body to invest in, and we understand the risk in worldwide natural resource projects today whether they be in South America, Africa or for that matter in the United States.

We know the ore bodies in the United States are struggling because of their low grade nature and the high reclamation cost that they face, it's all been well publicized, and I think that the earnings releases of the other mining companies will put in the fact that if you're going to invest in copper, and you're going to invest in gold, that this is the, gold and copper property, its going to deliver at any prices and by the way interestingly enough as all of you've seen in some of our presentations, we Freeport-McMoRon Copper & Gold have the most exposure in terms of the ability to reap hard cash flows if gold prices move up or down than any of the gold companies.

So you have a copper company, which gives you profits in 65-cent copper and a gold company that is more sensitive to gold prices moving than even the pure gold companies.

It's a unique asset and that's why we -- since we discovered it in 1988 have been able to report to you these continued results and we'll be able to do so in the open pit through 2016 and then we go underground through the year 2040, and that is just based on current crude ore.

So this is a complete story, it's a story that talks about the best ore body in the world performing at its record in the third quarter in a world that's got a lot of distraction both the volatile acts that are going on around the world both on and off Wall Street and this business climate as we discussed several quarter ago, I'm also happy to report to you that as you've seen Freeport-McMoRon Copper because its had the best asset in the world, does not have any of the issues that continue to plague Wall Street in terms of accounting issues, in terms of corporate governance.

We think the fact that in the aftermath of all of this scrutiny, which certainly we've been through as a result of the fact that we were obliged to change our auditor because of the incidents we just talked about that has challenged the business community on Wall Street.

You've seen no indication that our reporting or corporate governance had been an issue.

We pride ourselves in the fact that we have been able to conduct our business through all of this without being drawn into any these controversies.

Certainly, the fact that the company continues to have to deal like most of the natural resources companies in the world with these new issues that are the result of the headlines and the terrorist incidents around the world is a new challenge for us, but frankly in terms of the way we run this mine what we do is to think about the safety of our employees.

We believe other than this incident that of August 31st, especially with the heightened security that we in the Grasberg operations have one of the safest operations in the world because of its remote location and because of that we will continue to operate through these interesting times and emotional times until the world figures out how to start living together in a peaceful situation and some of these unpredictable things keeps punctuating the headlines, especially as they relate to natural resource projects.

With that rather than trying to anticipate things that we may not have covered in our very complete quarterly report, I'll open the floor to questions and myself, Richard and Chris can follow -- field the questions.

Operator, we would like to do the questions, please.

Thank you sir.

Ladies and gentlemen if you wish to ask question please press *1 on your telephone.

If your question has been answered and you wish to withdraw your question, please press*2.

Questions will be taken in the order they are received.

Thank you, so *1 for questions.

Thank you.

First question comes from Alex Larson (Ph), please go ahead sir.

Alex Larson (Ph): Thank you, Alex Larson (Ph) from Merrill Lynch, great quarter guys.

Question on the 11 cents of earnings that were deferred because of inter-company transfers, when do you expect to realize the bulk of that metal through your earnings?

This is Richard.

These earnings depend on the timing of the shipments to the smelters in which we own or have the equity interest in of course.

We will have -- we expect to have based on our current shipping schedule, a turnaround of part of that amount during the fourth quarter and currently that estimation is roughly half of it, but as we have mentioned I think at every conference before, those numbers are -- a lot of our numbers are predictable, for example our cost structure in large part is really predictable, our unit cost vary depending on the grades that we are mining and processing and so they will fluctuate with that, but we are subject to inter-company sales affects at the end of the quarters depending on the shipping schedule and then things such as we encountered at the end of second quarter where we had weather delays.

But based on our current shipping schedule and normal loading for weather, we would expect about half of that turnaround in the fourth quarter.

Alex Larson (Ph): Okay, does that mean maybe your ship [inaudible] and that's changed and so as we look to the fourth quarter shipping schedule, you know, you may have some inter-company transfers as well, but that your guidance is not of any of that occurred during the current quarter.

Yes

Alex Larson (Ph): Ok, thank you and then my last question is that as you go underground, but of course the grade will probably improve a bit, how do you -- is that a valid assumption or what will be your cost profile as you move slowly to the underground relative to being in the open pit and I know that's a multiyear process, but in general are you able to offset what might be higher cost going underground?

Because of the grade as you mentioned and because of the chemistry of the ore still having higher gold credit in the underground.

What happens there is we literally are sensitive again to the price of gold, depending on the price of gold our operating results can be in the 10-30 cents or pounds depending on what the gold price is and where we are in the ore bodies, but in essence when we go underground because it is high grade, the cost is high because we are mining underground, but it reduces -- but it is also reduced because all of our huge truck force and our stacking that goes on in the open pit as you know, once we get the stocks finished and close the open pit all of that infrastructure goes away and that's why when you -- as you go in the deeper part of the ore body, we still remain the lowest ore body in the world, mainly because of the gold credits.

Alex Larson (Ph): Okay, great.

Thank you.

Thank Alex, next question please.

Thank you sir, the next question comes from Lee Cooperman, please go ahead sir.

Jeff Gotham (Ph): Hi this is Jeff Gotham (Ph) for Lee Cooperman [inaudible] Advisors.

Question for Rich.

Rich you gave some very good cash flow guidance, and those are very strong numbers, I guess the question we have is, if we assume that commodity prices then unchanged and the stock stays where it is what point can you channel some of that excess cash flow into share repurchases and do you any sense of the timing or potential magnitude.

Well to be able to that sort of flexibility, requires us to be able to refinance or repay our current bank credit facility that extends to 2005 and even at current prices we project cash flows that would allow us to repay that before then and obviously when that credit facility gets reduced to a low enough level and market conditions opens for us we are waiting for the right opportunity to be able to replace that with a financial structure that would give us the kind of flexibilities to consider the stock buybacks, dividends and things that are currently prohibited by the bank credit facility, but it depends on two things: one, the level of commodity prices even at today's commodity prices we, you know, have the financial wherewithal to manage our obligations effectively; and then two, the market conditions that open up refinancing opportunities for us.

So, in summary, we have the ability today, if we wanted to take and do a bond that would replace our bank facility, if we could make sure that the arbitrage from the interest rates we are paying in the banks versus what we are paying the bonds is acceptable to everybody, So if we don't create a situation where we give up the value of our low interest rate financing that we have from the banks and our revolver, the whole issue is one that is overcome by the fact that the markets -- the interest rates have moved in our favour and give us the ability to raise the bonding versus the revolver.

The whole issue of whether we can buy stock back or not would be strictly a decision based on the market opportunities and the share price, which today of course will be very opportunistic for us to be able to buy back some of the shares.

Specially at these levels.

Yes.

Jeff Gotham (Ph): What is the difference, I am sure you have looked at this, how far away are we from being at the right place in terms of interest rates?

Well, that is a very interesting question because it depends in the eye of the beholder.

Again, it is a complicated issue, if you get the money and it allows you to create value for the shareholders, can you pay a double-digit interest rate whether it is 10 or 11% and have that arbitraged between the current bank rates with interest rates so low, you just have to sit and look at whether you think on the behalf of the shareholder and the stake holders, the best opportunity is do not worry about the additional interest that you pay after taxes and slated by being able to take the ability to buy shares back and/or pay a dividend -- and continue to reduce debt.

I mean the fact is we can do all three which we did during our whole period before the copper prices broke and went down.

As you know from sensitivism (Ph), I am sure you looked at them, an issue of $500 million dollars of cash flow.

You can look at our sensitivity of the copper prices.

If copper prices were up then in mid 90's, which should be the average that people use in their projections on long-term projections at the increase of about 30 cents and that would have added, I see that our current rates it's about $75 million dollars for every 10 cents in that kind of copper.

Those were the right numbers aren't they Richard.

Yes.

So that you take that 30 cents, you can see even in this year we would have had an additional 220,000 -- $220 million or almost $750 million in cash flow in 2002 at the mining rates that we're mining in.

That's a huge leverage for us and so -- so, those were the factors we would look at to be able to use that flexibility, and so that we can put the trigger on the bond.

It is not just how much are the interest-rates, looking at the interest rates after taxes versus the interest rates for the bank and what do you do with the money.

And I think that's the real challenge and it's the tight rope we have been walking down for the last year, since we sold the converts and got us in a position of being able to make the decision to assure our self to be able to get the flexibility you are talking about.

So I hope that explains different pieces that are required for us to pull the trigger on behalf of the shareholders and the stakeholders.

Jeff Gotham (Ph): Now it is very clear.

Thank you very much.

Thank you.

Next question operator.

Yes sir.

The next question comes from Wayne Atwell.

Please go ahead.

Thank you and congratulations on a great quarter.

Just a couple of quick questions.

I did a bit of algebra and based on your goals for the year that would imply fourth quarter copper volume of 308 million pounds and gold of 636,000 ounces.

Is that right?

It seems a little a low based on the high grade of ore you're in.

No lets see.

What we have been looking at to get to the 1.5 million tons...

I'm sorry its 1.5 million, I thought it was 1.4?

No its 1.5.

There would be over 400 million pounds of copper.

Ok that will be 408, right.

Right in that range 415 -- 408 -- current estimates 630,000 ounces of gold and of course those are the estimates going into it and as we did this quarter -- our team will work hard to try and beat those.

Ok.

So, ok.

So that's I misunderstood.

I thought that it was 1.4 million.

Its 1.5.

And do you have any guidance for '03?

Well, in terms of '03, we are in the process of completing our planning process now, but we are looking for the operation of producing at this point and this has been the discussion that we've been having in analyst presentations.

It's been publicly exposed previously.

We have been talking 3 million ounces of [growth] for the total operation, 2.5 for our share, 1.6 billion pounds of copper with 1.4 of our share.

Okay, so it's 2.5 million ounces of gold and 1.4 billion pounds of copper?

Right.

And lastly, in the quarter, just basically doing a rough calculation of copper and gold volume times price.

We came up with a little revenue versus -- your numbers seemed to be below what we have calculated just using the market price for copper and gold in your volume.

Did we do something wrong or -- what was the revenue missed?

Your revenue seemed to be a little lower then we would've expected.

Yes.

I can't tell you exactly what you are doing, but one common area you need to look at is the open-pound pricing, because our open-pounds at the end of quarter were priced at 66 cents where we average 67 for the quarter, you know, because of the pricing mechanism under our contracts, big portion of our quarterly sales get priced at the end of the quarter and then there would be an adjustment for our open-pounds that we've priced at the end of the second quarter.

The other way, I've heard and know you read the release and heard the words the other one is the deferral of the 11 cents that we have because of the inter company sales.

We actually earned it during the quarter, but we don't book it because we can't do it until we've actually make -- complete the sale and are paid by our 100% [loans to Northern Atlantic], compounded at 25% loans [smelter] and [inaudible] and that may be --.

If you add that 11 cents and that we didn't have these inter company, you will be more -- you would be close to the 50-cent number.

Okay.

That might be, you know -- the money is actually earned and it's in the bank, but we can't book it until we actually have a sale as a opposed to the way we book the sales we have to non-affiliated smelters.

Okay, thank you.

If you add those two, I think, you come up with the numbers that you were expecting.

Okay [inaudible], thank you.

Thanks. [inaudible].

Our Next question please.

Yes Sir.

Next question comes from Ernest Nutter.

Please go ahead.

Good morning, gentlemen.

Not to beat this deferral question to debt [inaudible] and understanding the predictability problems, When you have a big concentrate shipment quarter like this, you know, roughly half of your concentrate goes to your holding your own equity smelters and half to the rest.

Is there a disproportion amount in a in a quarter like this that will go to your own smelters or is it kind of roughly fifty-fifty, as well?

Well it -- In fact it is fifty-fifty thing occurs over a period of time and its what you can expect on an annual basis.

We supply all of the concentrate for PT Smelting.

So, that results in sort of a constant shipment over time.

We supply roughly half the concentrate for PT Smelting, it varies year by year, I mean for, Atlantic Copper, depending on their other purchases and their relationships with their customers.

But you would expect in a higher concentrate period for our lower portion to be going to our smelters, because it has to be coordinated with their needs for concentrates so you would expect a lower percentage in higher concentrate shipments and then -- and that to be averaged out over time over an extended period such as a year you'd reach this 50-50 level.

Okay.

That's great.

And I guess just on the minority interest.

Is any of the stuff sort of impact that as --we go through the timings of some of these things exempt or any other rest of that business as we go forward to that?

And does that end up with any kind of a funny little calculation in there?

No.

The minority interest is just the minority share the current period earnings that we have.

And of course we had the adjustment to the minority interest earlier this year when we acquired the Nusamba interest, which was previously a minority interest.

And now the only minority interest in the operations is the government share in PT-FI, which is just under 5% -- just under 10%.

We acquired the 5% from the Nusamba.

So, that would be the only wrinkle in the calculation for what you've done in past years.

Okay.

We got that.

And I guess just on the minority interest, just I am doing this on the back of cigarette package sort of thing, so apologize.

But when looking at about 14% of post-tax earnings, is the minority interest there this quarter?

And I guess it's actually about 10.

I guess we just haven't corrected for the smelters and that is it?

Right.

There are two corrections that you have.

That interest is in PT-FI.

So, the government does not have any interest in Atlantic Copper.

PT-FI does own the 25% interest in PT Smelting and then there is corporate numbers FCXs corporate overhead and certain interest expense on its obligations that aren't effected either by taxes or the government's minority interest.

So, that's why the percentage in FCXs consolidate result is higher than their equity interest in PT-FI.

That's great.

Thank you very much.

Thanks Ernie.

Next question please.

Thank you sir.

The next question comes from [Terence Auckland].

Please go ahead.

Terence Auckland (Ph): Thank you.

Good morning.

Could you tell me given that you are running a pretty high volume on your underground operations.

What's the dollar per ton number you are achieving right now -- underground?

The dollar per ton of costs? or -- what dollar per ton number are you?

Terence Auckland (Ph): Mining costs dollar per ton.

Mining costs dollar per ton for the underground?

Terence Auckland (Ph): While you looking at it, may be I have another question on the PT Smelting.

If you look at your concentrates treated versus anode production versus cathode production, there was a big discrepancy.

Question number 1.

Why cathodes were so low? and number 2 what the cong rate (Ph) is running at?

Is it a big factor in the PT Smelting for the fourth (Ph) quarter?

Well.

For the reason for that discrepancy between anodes and cathodes had to do with the turnaround during the second quarter.

During that period, the anode inventory levels were worked down to low levels.

So that had to be built back up.

So that's just a function of the timing of the turnaround.

And since they process only -- our concentrates, you are gonna see -- that 's going to be fairly consistent particularly -- in relation to copper [inaudible] of 30% cong (Ph) level.

So, that's not gonna vary very much, much at all.

Terence Auckland (Ph): And there's no turnaround scheduled for PT for the remainder of this year or for Atlantic?

No.

No.

Atlantic had its turnaround last year and PT Smelting.

That won't happen for major turnarounds for several years, for '06 for PT Smelting and '04 for Atlantic Copper.

The mining -- the underground mining costs turns about $2.50.

Terence Auckland (Ph): That's a fairly respectable number.

Well -- its in areas that we've operated before and unable to use our existing infrastructure.

And it's a very large block cave.

We're working through the end of the life of IOZ (Ph) and starting BOZ (Ph).

It's automated.

We have modern technology and high grades.

And high grades result in lower costs.

Terence Auckland (Ph): This is all in costs before milling and including [inaudible] watering and all right?

Yes.

Terence Auckland (Ph): And did you say Atlantic turnaround time was Atlantic 2004 and PT was 2006?

That's correct.

Terence Auckland (Ph): Thank you very much.

Thanks Gary.

Next question operator.

Yes sir.

Next question coming from Tom Williams (Ph).

Please go ahead.

Mr. Tom Williams (Ph), your line is open.

Please go ahead.

Tom Williams (Ph): [inaudible]

Operator next question, please.

Okay.

Ladies and gentlemen, for additional questions 'star one', 'star one' on your touchtone phone.

Thank you.

Well, ladies and gentlemen if you don't have additional questions, we appreciate everybody been available for the call this morning and remind you that we will be reporting to you on a regularly basis with these quarterly updates and we will update you quickly as we have done using this media.

If we have things that we think are important, for everybody to know about them during the fourth quarter.

We look forward to continued great performance in ore body during the fourth quarter and as all of you have seen we are very leveraged to both the increase in copper and gold prices as we go forward, in this predicament of everybody trying to figure out what's gonna happen to the world economy which will have a huge impact on the copper prices obviously and to an extent the gold prices as we said in the past.

It's short of an interesting dilemma, since our ore bodies is at current prices is about 60% copper and 40% gold, and higher gold prices of over $400 an ounce, we will be 50% copper-50% gold.

What here lately -- what's apparently good for gold is bad for copper because of bad economic news makes gold prices go up and copper prices go down.

If the scenario turns and gold prices and copper prices ever move in parallel, which would be interesting to see what happens, if ore prices stay high and the economy -- economic reports have any tendency to improve, as some people suggest they will, even early yesterday and the day before people were talking about the short sellers covering their position in the copper market, all of you know that price of copper is basically the result of whether the people are long or short in the markets.

So, we look forward to an interesting fourth quarter and we thank everybody been on board for the quarterly call.

Thank you everyone.

Thank you for your participation today.

You may now disconnect.

Thank you.