Gold Fields Ltd (GFI) 2004 Q3 法說會逐字稿

Good morning and welcome to the Goldfields Ltd. third-quarter 2004 earnings conference call. At this time all participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation.

I would now like to read the following statement. Statements in this conference call concerning the Company's business outlook or future business performance, anticipated profitability, revenues, expenses or other financial items, and product line growth, together with other statements that are not historical facts are forward-looking statements as that term is defined under federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those set forth in such statements. Such risks, uncertainties and factors include, but are not limited to, foreign business risks, industries, cyclicality, fluctuations in customer demand, and ordering pattern. The seasonal nature of the business, changes in pricing and general economic conditions, as well as other risks detailed in the Company's filings with Securities Exchange Commission. I would now like to turn the floor over to your host, Willy Yacobs (ph). Sir, you may begin.

Thank you very much, Mess (ph). Ladies and gentlemen, thank you for joining us for this conference call. The call will be led by Ian Cockerill, the Chief Executive Officer of Goldfield, and he will make a few brief introductory remarks. Following him, Nicholas Holland will give an overview of the financial situation. Michael Prinsloo will give us an overview of the South African operations, and John Munro will talk to the international operations.

I'll hand you over to Ian Cockerill now.

Thanks very much, Willy, and good morning or good afternoon, everybody. It is always nice to be able to report (indiscernible) the positive outcome when the plan comes together. So, that's what we're able to do here today.

You may recall that last quarter we said we had initiated a plan to accommodate the current realities of the South African economic scene. And we were in the process of repositioning the South African mines to deal with this more challenging economic environment.

We said that we had inherent flexibility within our oil (ph) bodies to lower volumes, increased grades, and then enhance profitability. In other words, sound oil (ph) body management. And it's very pleasing to be able to report back today that this strategy is beginning to bite, and we're starting to see positive results coming out of this process.

For this quarter, which is always characterized as one of the toughest in the mining calendar -- because of the extended holidays over the Christmas period -- we were able to declare operational results with a certain (indiscernible) the industry trend down here in South Africa.

Essentially, because the plan that I mentioned before has come together, but that also allied with the traditional way in which Gold Fields handles the long Christmas breaks. In fact, if look at previous years, you will notice that Gold Fields Limited doesn't tend to have a dip in the March quarter, as many people seem to have.

If we break down the highlights for this quarter, it's fair to say that in essence, first of all, our total safety statistics are showing a very pleasing, improving trend. Our overall gold produced is down marginally 1 percent to 1.033 million ounces. The operating profit is up 20 percent to $96 million. The cash cost per ounce is a flat at $309 per ounce. Net earnings were off 8 percent to $38 million. And the bottom-line earnings -- excluding gains, losses on financial instruments, foreign debt and exceptional items -- has doubled from $17 million to $34 million for this quarter.

And earnings were very trendsible (ph) -- 7 U.S. cents per share or 48 cents per share South African.

What's most encouraging is that the operation margins at our South African operation -- at the overall mines -- have improved from 19 to 22 percent. But particular pleasing is the fact that at South African operations, the margin has increased to 14 percent from the previous 7 percent. Now, this is still somewhere (ph) off our target of 20 percent -- the minimum target of 20 percent. But the trend is in the right direction, and clearly shows that the strategy is starting to work.

The strategy to improve underground grades to higher yet sustainable levels is bearing fruit, and this is what is impacting on the operating profit. And it is particularly nice to see improvements at Dreifontein from 7.5 to 8.6 grams a ton, and from Kloof at 8.6 to 10 grams ton in terms of underground yields.

But the charge from here on out has to be to increase volumes at these higher grades in the final quarter of this year. And that's the next quarter.

Our international operations had a quieter quarter, and John will explain those in a little more detail later. But, I believe are very well set up, certainly, to return in the fourth quarter this year, to the levels that we saw in the December quarter. Importantly, the two international organic growth projects -- at Tarko (ph) and Sendai (ph) -- are on track, on budget. And they will begin to deliver enhanced output from these operations, certainly before the end of this calendar year.

And finally, it's also encouraging to see further evidence of good cost control and clearly (technical difficulty) going to see some of the benefits come through from our shared services project. And this is starting to impact on the bottom-line as well. Nick will take you through some of that.

And with that brief introduction, let me hand over to Nick to take you through the financials in more detail.

Thanks, Ian.

Due to an increase in the dollar gold price received from $390 an ounce in December to $407 an ounce in March, revenue has increased by 3 percent to 444 million U.S. dollars. This has been achieved despite the 1 percent drop in production.

With costs flat quarter-on-quarter, operating profit has thus increased by 20 percent to 96 million U.S. dollars per quarter.

This improvement in operating profit has been achieved not just through an improved gold cost, but also through a significant improvement in cost control at these South African operations.

(indiscernible) costs were reduced by 3.5 percent due to improved inventory management across the local operations, as well as improved vital (ph) management and reductions in contract of costs.

The operating margins of the local operations improved from 7 to 14 percent. And as you heard, the overall margin up from 19 to 22 percent.

On the doubling of the operating profits, at the South African operations from 21 million U.S. dollars to 40 million U.S. dollars -- some 40 percent of the improvement can be attributed to lower costs.

A continued drive for efficiency improvements around consumption and pricing materials used in the process, can be expected to yield further cost benefits over the next six to eight quarters.

The increase in price also means that the operating profit contributed by the South African operations in relation to total operating profit increased to 42 percent compared to 25 percent in the previous quarter. This gives an indication of the leverage of the local operations to price and cost reductions.

Profit before tax and exceptional items reduced from $59 million -- $54 million to $50 million, mainly due to an unrealized exchange loss incurred on the Euro front held offshore. And that amounted to 4.7 million U.S. dollars, which arose from the 200 million U.S. dollar equity placement concluded during the latter few months of last year. This compares to a gain in the previous quarter of 8.5 million U.S. dollars.

These proceeds have been redenominated into Euros as part of a diversification strategy -- at a rate of 120. And again in the previous quarter rose due to the Euro approaching to 125 at the end of the quarter. The Euro has since repressed to 122 at the end of the March quarter. But the overall position is still in the money.

Gains on financial instruments this quarter -- being mainly gains on the Australian dollar currency hedges -- reduced to 6.6 million U.S. dollars from $17 million in the previous quarter. The main reason for the reduced gain was the crystallization of the mark-to-market value of these currency instruments during the early part of the quarter. And a significant gain incurred on the currency instruments during the previous quarter when the Australian dollar appreciated from 68 U.S. cents to 73 U.S. cents against the Australian dollar.

The crystallization of the gain has secured profits on the position of 115 million U.S. dollars, as the position closed out at 76.7 U.S. cents and the original hedge had been established at 50 U.S. cents.

These earnings have largely been accounted for in the previous quarters, but the cash flow will only take place of the period after the end of December 2006. As a consequence of these nonoperational related items, net earnings reduced from 42 million U.S. dollars to 38 million U.S. dollars.

However, should the impacts of the gains and losses on financial instruments and other extraneous book entries, as well as exceptional items be excluded -- then earnings more than doubled, from 16.5 million U.S. dollars to 34.4 million U.S. dollars quarter-on-quarter.

Cash generated from operations for the quarter was $77 million compared to $95 million in the previous quarter, with the reduction mainly due to half-year tax payments which started in the March quarter.

Capital expenditure was $110 million for the quarter -- which was up from the previous quarter’s expenditure of $97 million, with the increase due to higher expenditure on the Tookreth (ph) project in Australia and Ghana. That is the construction of a large replacement mill in Australia, and the installation of a new mill in Ghana. As well as the conversion to owner mining.

Certain significant capital can be expected (indiscernible) the balance of the year as these projects should be complete by the end of December 2004.

Conversely, expenditures at the South Africa operations was curtailed from $37 million to $22 million -- in line with a deliberate drive to reduce capital and to maintain expenditure only on key projects that are essential to the management of production machines going forward.

During the quarter, the remaining offshore debt was repaid and our international operations are now the (technical difficulty). The transactions within Mvelaphanda and Mvelaphanda Resources was (indiscernible) the quarter. And this brought in gross cash proceeds of $630 million U.S., of which $50 million U.S. was reinvested into Mvelaphanda Resources in the form of an equity placement.

And as (ph) for a third of the amount and the balance was put into redeemable (indiscernible) shares. As a consequence of the Mvelaphanda transaction, cash at the end of the period was $721 million U.S. These funds will be used to finance our growth projects in the group, which include the Toper (ph) and Sidious (ph) expansions, which require funding of around $240 million in aggregate from ourselves. The Arctic Platinum project, on which a decision is to be made before the end of this year. And which may (indiscernible) expenditure of around $250 million U.S. The Cerro Corona project in Peru, the development of which is expected to cost around $125 million U.S. As well as the Dreifontein and Kloof (indiscernible) which are economically current prices, and which between them could cost around $500 million U.S.

(indiscernible) after-tax cost of the Mvelaphanda funds is approximately 7 percent. We have said this is as a minimum benchmark of turns to be achieved on these projects, into which we wish to invest this cash. So, as to ensure that shareholder value is created as a consequence.

The financial position of the group thus remains strong. And taking into account the debt position on the Mvelaphanda loan which is the present value of the future interest payments over the five-year term of that facility, and which amount to $250 million, cash net of debt is $470 million.

In addition to this as mentioned earlier, we have crystallized the value of the Australian dollar hedge. And that has generated future cash flows of $116 (ph) million, which are scheduled to be realized in quarterly installments over the next 2.5 years. However, we could accelerate the cash flow should we need funds earlier.

In addition, we had investments on our balance sheet of $150 million U.S. The majority of which is embedded in liquid investments that could be quickly set into account as and when required. So the group is thus well-positioned going into our growth strategy.

With that, I will hand you over to Michael Prinsloo.

Thanks, Nick. Good afternoon, everybody.

Overall, the South African operations produced 695,000 ounces which was 3,000 ounces down on the December quarter. And we regard this as a good achievement. As Ian mentioned, the March quarter is traditionally a very difficult and challenging quarter, with a Christmas break impacting on operations. And we saw this with the reporting of the other South African producers early on last week.

Dreifontein showed a nice turnaround, producing 299,000 ounces, and was back up to the 9 tons of gold level a quarter. That is a 6 percent increase on the December quarter.

Kloof and Beatrix were slightly off the price on the gold production compared to the December quarter because of the Christmas break.

All operations have now been repositioned on the switch to the low-volume, high-grade strategy. And all the restructuring processes are in place to (indiscernible) the effect of the stronger rand to protect our margin.

These programs will continue and a lot of cost measures in terms of cost savings has also been put in place.

The strategy to include the guidance and reduce the cost is starting to show results. And as Ian mentioned, Dreifontein's grades from underground reach 5.6 (ph) for the quarter; and Kloof, 10 grams a ton. Beatrix was slightly down, at 4.5 grams per ton. That was mainly due to grade (indiscernible) and mining mix.

All improved in the marginal panels that we're not making a contribution have now been repositioned on the panels of higher grades. And that will make positive contributions in the June and September quarters.

The secret (ph) now, the big challenge for us is to improve the volumes on these high-grade panels and the early (ph) impact on the bottom line.

In terms of costs, costs were well contained, especially at Dreifontein and Kloof. Beatrix was slightly off the price. And as Ian mentioned, the margins across the South African (indiscernible) improved from 7 to 14 percent.

On the sitely (ph) front we had an excellent quarter with all the frequency rights improving and Beatrix managed to achieved a million (ph) Fidelity three shifts (ph) during the quarter. Which just reinforces the theme that good site and good production goes hand-in-hand.

Our capital finance was in line with the reprioritized capital budget, (indiscernible) 153 (ph) million rand in the quarter.

Turning to Dreifontein, the results, driven by natchiev (ph), resulted in operating profit which more than doubled, from 10.5 million U.S. last quarter to 23 million U.S. this quarter. Overall, very good achievement for Dreifontein. And if we look at the outlook for the coming quarter, we believe that the production there will remind similar to the March quarter. Despite the disruption of the Easter break and the voting public (ph) (indiscernible) that we just had.

A lot of the production shortfall, in terms of service, (indiscernible) gold clean (ph) up at Dreifontein -- which is now complete -- the number one and two plant gold clean up on surface, will be made up with improved underground volumes.

Turning to Kloof -- Kloof's results resulted in an increased operating profit, from 7.4 million last quarter to $11 million U.S. this quarter. And the emphasis at Kloof reminds on restoring volumes in the high grade areas, and to exploit the (indiscernible) mining opportunities and old gold (ph) initiatives that have been put in place.

We look at the outlook for Kloof -- Kloof can expected to be slightly higher than the March quarter, despite the interruptions of the Easter and voting (ph) holidays.

Beatrix had a bit of a tough quarter. Although on our pricing profit line, it more than doubled its operating profit from $2.7 million to $6 million U.S., and the challenges at Beatrix is to restore pushoffs (ph) to breakeven or even better, and to consolidate the mining mix and improve on underground volumes at all the shafts. In terms of outlook -- an improvement can be expected at all the shafts of Beatrix in the June quarter.

In conclusion, the pressure remains on the interops (ph) because of the strength of the rand and other factors. We have come through the Christmas break relatively unscathed, and are well-positioned and well motivated for the June quarter.

We've successfully repositioned all the marginal crews and grades are up. Our mine focus, as I mentioned, for the June and September quarters, is to ensure that we improve our volumes in these higher grade areas and to further reduce on our costs and consolidate on our position.

Thank you. I will now hand it over to John.

Good afternoon and good morning, ladies and gentlemen. Turning to international operations, we certainly had another consistent results from this group of assets. Although the results are slightly off the previous levels of the December quarter, we must recognize that some of the numbers there were record results from the operations.

In terms of highlights for the quarter, it certainly was an outperformance (ph) from our two smaller operations, at Agnew (ph) and Demang (ph). But importantly, as Ian indicated earlier, we also made very good progress on all four of our development projects around the world.

Looking at the total international operations group and the key numbers, attributable gold production was down from 2 percent to 337,000 ounces for the quarter. And that's largely St. Ives (ph), which I'll talk about later.

Importantly, operating profit was only slightly off at $56 million for the entire group versus 59 in the December quarter.

Looking at the individual operations and starting with our Ghana (ph) in Tacoko (ph) mine -- gold production was down slightly by some 3 percent to 137,000 ounces for the quarter to March. And this really reflects ongoing movement GIP. You may recall in the previous quarter we had seen a release of gold in purchase from the (indiscernible). And in the March quarter we saw a 4,000 ounce accumulation in the leach pads (ph). This largely reflects a move to higher (indiscernible) on the leach pads. As well as the lag time between stacking of gold and its recovery.

In the December quarter we had seen a slight topple (ph) from gold added to the pads (ph), and that was obviously was felled from the March quarter. In effect, the GPI move in the March quarter also reflects an increase in the volume of gold stacked to the pads in that period -- which bodes well for the future.

In terms of actual movement of tonnage on the pits and to the plants, production went very well. We exceeded tonnage through the plant of some 4 million tons per annum (ph) -- that's through the two leach (ph) plant. While we had excellent movement of both ore and waste in the open pits. We managed to increase stripping up to some 2.7 tons versus 2.2 in the December quarter.

As you (ph) indicated, in previous quarterly results, that's an intentional strategy to improve flexibility on the open pits. Particularly ahead of the transition to (indiscernible) mining later this calendar year.

Total cash costs at Tarco (ph) were slightly up to 237,000 ounces -- $237 per ounce for the quarter. And that's only on the back of the increase in stripping I referred to earlier. If you break it down to the fundamental dollar per ton numbers, all elements of the operation, processing and mine, are well in hand. (indiscernible) mining costs were below what they were in the previous quarter.

So, that move is really on the back of a plan to increasing stripping volumes.

In terms of outlook, we're going to move gold production back somewhere between this quarter and the previous quarter, and we're intending to maintain this level of stripping. So we're looking for a stable result in the fourth quarter of the 2004 financial year.

I've indicated previously that we do intend to pull total cash costs back in the coming financial year. (indiscernible) indicates it will happen with the completion of the two expansion products I will refer to later.

As demand at our head operation in Ghana, we had an excellent result with gold production up to (ph) 76 -- 78,000 ounces for the quarter. And as that really reflects an excellent performance from the high grade demand pits, which is our primary source of gold for that plant at the moment.

Total cash costs were down below 220 -- up $20 an ounce. And that again reflects the increase in volume and the higher grades. So this mine made an excellent contribution to earnings, and particularly pleasing that the demand can make use of the higher realized U.S. dollar gold price. When, particularly our Australian, South African operations are unable to leverage that on the back of the currency strength in those two countries.

In terms of outlook, we warned a similar thing last quarter and in fact, beat expectations. But, we would look to demand to be slightly off in the coming period. But, we could see a surprise in the upside -- (indiscernible) progress to date on that line.

Moving across to Australia and our St. Ives mine -- probably the most disappointing results for the quarter -- gold production down to 132,000 ounces for the period. And that's against some (ph) expectation of being higher than that. That's really on the back of a reduction in volumes, (indiscernible) shutdown some sightings (indiscernible) rate as well as some problems with grade. The main problem with grade occurred in the Mars (ph) open pits. We mine some very complex structures there. And we introduced some quite large volumes of waste into the ore stream, which had an impact both on volumes of gold produced as well as total cash costs.

Total cash costs were up some 10 percent for the December quarter -- an unacceptable number. That's on the back of the lower volumes being produced. Because of the shutdown. the lower grades are referred to (indiscernible) earlier, and in fact, the cost of drawing down to GIP has both some stockpiles and in the plant on the back of the lack of gold available from the open pits.

Before the end of the quarter, the problem in the Mars open pit was resolved, and we are looking at returning to volumes seen previously from this mine.

In terms of outlook, I will remind you, as we had indicated that the '04 financial year would be a tough one, particularly with the commissioning of the new underground mines as well as the commission of the Imarg (ph) open pit. And that remains the case, we will start to see these benefits flowing through in the '05 unhedged full year, however.

So, in terms of the final quarter, we look to volumes to return to roughly the December levels, and (indiscernible) improvement in the margin.

Finally, onto Agnew (ph) -- this mine had a superb quarter with gold production just short of 53,000 ounces versus 50 in the previous quarter. And that's on the back of an ongoing outperformance of the (indiscernible) underground mines -- regarding some exceptionally high grade (indiscernible) folks there. And the increased availability of high-grade ores on that mine has allowed us to reduce volumes of low-grade ores been treated from the stockpiles that exist from that asset.

Total cash costs on Agnew were stable at some $300 Australian an ounce.

In terms of outlook, we do expect a slight reduction in gold production from this mine and a (indiscernible) effect on margin. And this was largely on the back of the closure which we have expected for some time of the (indiscernible) Libera (ph) complex, which is a very mature mine.

Moving across into our development projects, and starting with the two that are underway at the moment.

The first of these, St. Ives expansion, you'll recall that we're building a new 4.5 million ton granite mold to replace the existing 3.1 million ton granite mold. That cost was approved in December, and we've made an excellent start in this first quarter of the project. The team has been mobilized. Construction is, in fact, well advanced on the site with site preparation and in fact (indiscernible) and mole (ph) foundations being very well advanced by quarter end.

In this period we also delivered the sag mole (ph) to the site -- which is very important in terms of managing risk to the schedjel (ph). You'll recall that the sag mole is the one that we acquired in the transaction with WUCES (ph) in 2001 in (indiscernible) filling crates in Europe and we're leveraging that for this project.

To date, we have employed (ph) expenditures (ph) from $19 million Australian of the total budget of some $125 million Australian for this project which we do expect to commission by December of this year.

Moving across to the toper (ph) project, the first leg of the expansion of the purchase facilities with the construction of a new 4 million ton granite mold during the quarter, very good progress was made. And All major (indiscernible) and concrete foundations were completed in this period. And the erection of steelwork and equipment is advancing very rapidly.

Again, we actually delivered the sag mole to site, which removes substantial risk in this project given that it had to be shipped across the sea as well as across land. So we continue to reduce the risk in this project.

To date, we've spent some $54 million on this project of the $85 million budget for construction of the (indiscernible). This project is similar to the St. Ives expansion with commission of the new mold by December of 2004.

The second leg of the tarco (ph) expansion is the conversion to (indiscernible) mining, which is now in full swing. We've had some 9 of the 24 ultimate 784C (ph) (indiscernible) being delivered to site. Those are being assembled and commissioned to reflect commissions from other ancillary equipment in the fleet, which are already being put to work upgrading the roads and other infrastructure on the site, with a view to the (indiscernible) June.

On this project, we spent some $19 (ph) million of the total budget of some 74 million.

In terms of timeline, we expect to build up mining operation with our new fleet starting in about June, and being at full volumes by September when the contracts will be demobilized.

Moving across to our other two development projects. The first is our Arctic Platinum project in Finland. We have indicated previously that work there continues to focus on the large (indiscernible) open pit development projects. And work is really continuing on a number of fronts there. And most important at the moment is this question of resolving the great uplift that we've seen and we reported on previously. And really, in simple terms, what we've seen, is the more we drill this ore body, the higher the grade gets.

Although this a nice problem to have, (indiscernible) to quantify to fully be able to leverage the benefits that it will offer us in making investment decision on this operation.

The other leg there is receiving key attention, is the development of downstream treatment options and discussions continuing with a number of parties around the world.

At the same time, we have completed the (indiscernible) on the site, which has allowed us to verify a number of geological models, as well as providing a large volume of ore for a pilot scale protection program to allow (indiscernible) a number of treatment options -- both at the concentrated level and in providing concentrates for downstream treatment.

The third leg is, obviously, the continued focus on developing the permitting. And that continues to advance well.

We remain on track for our objective of achieving investment decision on this project by about December of 2004. And just in terms of time, and that will take about two years from that date to get this project into production thereafter.

Finally, our Cerro Corona project in Peru -- in December we announced that we had completed a transaction to acquire this project which is located in northern Peru. And although this is subject to a number of conditions (indiscernible) we are advancing through those rapidly.

The first CP (ph) was sorted out in this quarter. That was a due diligence. And on the back of that we have mobilized a very substantial team in Peru, which is really focused on three key areas. Dealing with social and community interaction issues, sorting out the -- completing EIA (ph) with a view to getting permitting going later this year, as well as the detailed engineering completion and optimization of the feasibility study.

The most important timeline in this project is the (indiscernible) which is also a condition (indiscernible) which is in fact (indiscernible) goldfields. And we expect to complete that by about May of 2005.

We (indiscernible) go to production from around 1.5 years from that date.

So, in conclusion, our operations have continued to perform well, we're looking to turn around the St. Ives performance -- get it back initially (ph) to where was in the December quarter. And then move back to levels that we really expect from St. Ives. While our development projects around the world continue perform very well. Thank you, and back to Ian.

Thanks very much, John. I think just in this final summing up session, I would just like to raise one or two issues. And then we will move onto questions.

Firstly, Nick mentioned that the Mvelaphanda transaction was concluded in this quarter. And that certainly has bolstered the goldfields balance sheet with (indiscernible) $630 million. Having completed this deal, Gold Fields has satisfied the equity ownership requirements of the mining charter.

And this is a necessary prerequisite to conversion of our mining rights from the old order into the new order.

In addition, there's been good progress made in the other components of the mining charter. Certainly, we have achieved closure on many of those. And Gold Fields is currently in discussion with the DME concerning a possible application for conversion to the new order mining rights.

And that would draw a line on a very important transformation process within this Company.

Secondly, the enhanced balance sheet, as you've heard from John, will enable us to internally fund the growth projects that Gold Fields has in its pipeline. And John has gone into some detail about most of those projects.

And I do think that at this stage it's important to reiterate our previously stated goal. And that is -- drawing out production by a further 1.5 million value adding ounces through organic growth projects -- some of those that John has already mentioned -- acquisitional projects, and exploration success.

Within a five-year time frame, that will be specific bias towards the dollar-denominated areas of the world, such that we can create a more balanced portfolio of production of the strong South African base.

And already, the Tomerus (ph) St. Ives expansion, together with the potential of Arctic Platinum and Cerro Corona in northern Peru, are going to take us a long way towards achieving this goal.

And after 1.5 million ounces, those projects that I just mentioned probably would deliver around about 800,000 ounces of the 1.5. So in other words, we are somewhat short of our goal by about 700,000 ounces, which you would hope to fill either through acquisition or through expiration success.

Leading onto the expiration front, Craig and his team continue to make excellent progress on several of the expiration projects. And we certainly hope to be in a position to announce some additional orders (indiscernible) statements from the Montayea (ph) project in Ghana, by the third quarter of (indiscernible) 2004.

In addition, some of you may have seen the release that came out -- the press release which came out yesterday from ore zone on the esacon (ph) project in vakimafasso (ph) where we have a very significant stake or interest in that project. And that is certainly looking particularly intriguing. And good progress is being made there.

Tomorrow, here in South Africa, we're going to be having an open day for analysts and the media. And we're going to go through a lot of detail on our financial and operating strategy, and update on existing project progress -- and there will be a more comprehensive release with regard to Arctic Platinum and Cerro Corona.

There will also be an overview on how Gold Fields shapes up with respect to the mining charter requirements, and Craig will give an update on how the global expiration program is going.

Now clearly, some of you will not be able to attend this in person, but it does not matter because we will have all those presentations available on our website.

Finally, probably the most important event for the quarter, was the sale by Anglo-American of their 20 percent interest in Gold Fields to Norilsk Nickel of Russia. Both Gold Fields and Norilsk have indicated their desire to work together to explore potential for possible cooperation between the two groups, around their respective gold assets.

I'm sure most of you are aware, but just to emphasize a point, Norilsk does have about, just over a million ounces of gold that it produces every year from projects in Russia. Now, (indiscernible) is still very early days, and far too soon to say whether anything concrete can come out of these preliminary discussions.

Certainly Gold Fields is committed to evaluating the potential for value accretion to our shareholders.

But I would like to stress that anything that we may or mayn't decide to do, clearly, shareholders would be informed and will be in a position to take their own views.

So, in conclusion, I think it's fair to say -- or to characterize this quarter -- as one where the plan certainly has begun to come together. Operational performance is showing signs of steady improvement. Margins are increasing and costs continue to be well-controlled.

Our growth projects are all on track, our balance sheet is robust and gold fields is well positioned to deal with an environment that is likely to remain challenging for sometime into the future.

And with that, thank you very much, and we'll hand it over to questions.

(Operator Instructions). Dave Kusmanich, Renaissance Capital.

In your South African margins had a great recovery -- particularly Dreif. Can you comment on the sustainability of this and how you see them getting closer to your international margins at your offshore mines?

I will get Mike to respond to that.

Dave, Dreifontein -- although it still had some impact on the fire in this last quarter, the underground repositioning of the marginal crews there -- that will being (ph) completed. And underground volumes are building passed (ph) the fire -- the impact on the fire.

The big swing on Dreifontein, or a lot of the swing was on the surplus gold clean up at the number one and two plants in the ausmode (ph) sections. That is sort of nearing completion and will be both a lot quarter on quarter, but underground volumes will (indiscernible) and we're pretty confident that we will keep the production levels at the (indiscernible) level.

Now, in terms of costs, on the cost side, we've got the restructuring and repositioning programs in place. You would have seen last week, there was a press article on the restructuring at Dreifontein, and (indiscernible) issued. That program has been in place since September, and negotiations have been on going with the unions and associations since then. We signed off an agreement in terms of the repositioning of the labor. And it basically involves Intermine and Intershaft transfers from all the shafts to the (indiscernible) the new long life bulga (ph) shafts in terms of the production ramp up.

So I'm pretty confident that on the cost side we will make further impacts as well.

I think, David, in addition, if one looks at Kloof -- Kloof certainly has scope to increase the absolute underground volume. But more importantly, Kloof has not really built up it old gold recovery program to the extent that we believe it should do. There's going to be some work required in providing additional ventilation to the older areas of the mine. Because Kloof is mine which is fairly challenged when it comes to ventilation. So, it requires a little bit of additional layout to be put in place.

The Kloof certainly has scope to increase the old gold output.

The biggest challenge of getting the margins up is going to come from Beatrix where great flexibility is more constrained than it is on the west (indiscernible). But we're looking to four shaft and three shaft at Beatrix. Three shaft is in a buildup phase, and certainly starting to pick up quite nicely. And we're starting to get our act together at Beatrix four shaft. And they are a bit short on volume. But those volumes are starting to pick up as well.

Thanks, Ian.

Heather Douglas, BMO Nesbitt Burns.

Hi, good afternoon, everyone. I was wondering if I could follow-up some comments made by, I think it was Nick, about 500 million per CapEx for a drop-down project at Dreifontein and Kloof. Can you give us more detail? The reserves that would be accessible and what kind of costs we would be looking at?

I will let Mike this question on the reserves, Heather.

Heather, tomorrow we're going to give a lot more detail on both the decline project at Dreifontein and the (indiscernible) project at Kloof. But roughly, we're talking about 3 million ounces at Dreifontein in the first (indiscernible) project, and a cost of around about 1.5 billion (ph) rand. And then on the kyeie (ph) project, about 3.5 million ounces at a cost of about 2.2 million rand. But, the full detail of that we are going to share on the website tomorrow and in the presentation.

Okay, great, I'll watch for it. And then, just one quick question about Cerro Corona. When will you be in a position to tell us how much you're going to be paying for Cerro Corona? Or maybe --?

This is John, if it has taken longer (indiscernible) because of ongoing discussions with the third party (indiscernible) what to do with (indiscernible) probably at least a month or two before that's going to be resolved to point that it suitable to do that. Unfortunately, I can't give you anymore on that.

Okay. Thanks very much.

Barry Cooper, CIBC.

John, when I first read your situation at St. Ives, I guess the words were the -- great recovery problems and I first interpreted that to mean that there was a metallurgical issue that (technical difficulty) pit. Your description suggested it's not a metallurgical thing, it's more, in part (ph), dilution (ph) (technical difficulty) could you just elaborate, clarify, that for me?

Yeah, it's intended to describe, Barry, it's actually recovering grade out of the open. And in simple terms, we had is that in general the structures in the area we're mining are these flat line shears (ph). What happened to the great control during the (indiscernible) some vertical structures that have been misinterpreted. And some core practice had in fact incorporated large blocks of waste into the interpretation of what was the ore then. So if you can actually picture a vertical structure cutting a horizontal structure creating a cross. It's (indiscernible) triangles that would be created -- which is actually waste and not ore.

And once we went through a very detailed order process of (indiscernible) originating model and once the grade control is picking up and you can see (indiscernible) you can see exactly where it was. And we could -- it was only really in (indiscernible) in January and February, but it was (indiscernible). And it's really just got to do with the incredible complexity in that area which is not very typical of the style of mineralization.

Should we expect that part of the interpretation to perhaps be you know an issue at some of the other pits, or not?

You know, it shouldn't. In fact, some of it was (indiscernible) practice and that is being resolved. So it was a convergence of a practice that had been introduced -- which is an error. And can be highlighted by a particular type of style of mineralization. So, we continue to learn lessons and also it has to do with the changeover of people. To be quite blunt, it's quite embarrassing.

Okay. Just on another matter, the I guess the split between surface material and then underground coming from Kloof and Dreifontein. It's tough for us to assess just how much of the benefits that you're talking about in terms of the cost and what not, of those operations are, related to (inaudible) improvements versus the product mix that's coming from both the underground and open pit. Can you kind of explain a little bit better as to what improvements have been done from the underground standpoint? Because obviously, the grades have been up, but the tonnages are down. And you only give us, kind of, the costs per ton on a rand basis for the combined.

So if you could kind of break that out into what is the cost -- underground versus surface material, might be more beneficial.

Barry, it's Mike. Traditionally, over the Christmas break, we put through more surface tonnage than underground tonnage. And then post-Christmas, the buildup from underground is slower than just a short break, a weekend break. So, what we've done is we've moved all the marginal mining areas. All the crews that were in the marginal mining areas that were not contributing at the rand kilogram gold price -- we have cut off. We moved those and repositioned them.

That whole process took anything between six and twelve weeks to convert them and move all the crews into the higher grade areas. And that was an interruption in terms of the production machine.

So, we should see a lot of the volume buildup come through now in the June quarter, and then that will displace surface tonnage. And then so that equilibrium will be restored with more tons from underground, and less tons from surface.

Barry, if you look at page 17, of the quarterly handout, it gives you a complete split -- both of the surface and the underground tonnages, as well as the costs attributable to both costs of activity.

Okay. I missed that. Sorry (indiscernible) that. Can you give us any more details on what the plans are for Arctic Platinum?

In terms of the detailed project parameters, we will be talking about those tomorrow in quite some detail on the website. (indiscernible) look at that, and hopefully you can join us on the call.

In terms of the actual plans, (indiscernible) we're going to talk about today -- the objective is to complete the feasibility study by the end of the calendar year to allow us to make an investment decision. And we wouldn't be doing that if we didn't believe that we had a case that is going to fly, and we can take this thing to production within about two years from that date.

Two years from the end of this year is kind of a target?

That's right. Because of some of the size equipment there and the conditions there, probably longer than an 18 months ramp up construction period.

So, to be a little conservative, talking about two years. Also, cognicent to the scale of activity in the industry at the moment making us a very cautious about the availability of construction teams and equipment around world.

What kind of output are we talking about there?

The (indiscernible) projects we're talking about is a 10 million ton per annum project, and that's from 10 million tons per annum of ore being mined from two open pits. And that's producing a flotation concentrate on (indiscernible) treatment on the offshore smelter. And that's producing between 400 and 450,000 ounces a year of precious metals.

Okay. Thanks a lot. I guess that comes on stream more or less, then, at the same time as Cerro Corona (multiple speakers)

Probably working (indiscernible) six months of each other, depending on timeliness. Both of them are -- actually, pretty dependent on permitting, but so far so good on both of them in terms of that aspect.

Right. Okay. Thanks a lot.

Gary Pearson (ph), Medcore Securities (ph).

I actually think they have been largely answered. But maybe just to follow up a little on the grades at Drief and Kloof. Obviously up quite sharply.

Just wondering -- are they the sort of grades that you feel comfortable looking forward to over the next year or six months to a year? Or do you think that we should actually expect slightly higher, perhaps?

And then, just a little bit more (multiple speakers) (technical difficulty) can you guys hear at all? (multiple speakers) (technical difficulty)

Okay, just a little bit more with regards (multiple speakers) strike at Beatrix and Dreifontein. Has that been completely resolved? (multiple speakers) Is it something which is like totally history now? Or should we still expect a little bit more on that front?

Gary, it's Mike. In terms of the guidance. Last quarter I put up slides which showed the range of cm/gram sort of ranges that we would be mining the mines at. We've managed to achieve over last sort of 14, 15 weeks to mine in those ranges. And the grades that you see coming out of Kloof from underground -- 10 grams a ton -- that is about it. If we hydrate any further than that, then we are actually going to affect the ore body.

So, I think that's a very comfortable range where we've got flexibility, and which allows us the flexibility in terms of our mineable valuable (ph) ores, to mine the plan that we put forward for the coming financial year.

Dreifontein at 8.5 (ph) 5.6 is also a very accurate number. So that's about what you can expect -- to expect higher -- we all wish that it can be higher than (multiple speakers)

Beatrix on the other hand, at 4.5, we can expect higher. We want to get Beatrix more up to 4.8, closer to the 5 levels in the mix with four shafts than five. Which is the higher grade areas that four shafts coming into play over the next two quarters.

And if I can (multiple speakers) hello?

Sorry. And to answer (indiscernible) those grades should continue for -- at those levels for quite a few quarters going forward.

And, Mike, obviously -- if you're targeting the higher grade sort of areas, there's going to be an element of sterilization of the ore body. Do you have a rough feel for -- is it 2 present, 5 percent (multiple speakers) sterilized in this process of sort of going off to the higher grade areas?

Gary, it's difficult to put a number to it. But when we changed our strategy to sort of a higher volume, lower grade, when the rand price run up to 110 (ph), 115,000 at a kilogram. At that time, we made the point that the flexibility of the ore body isn't such that you can just stop and start and switch it on and off. There is a lot of (indiscernible) we said we would probably be able to exploit an additional 5 percent of the reserves.

So, I think that's probably what maximum that we would leave behind if the rand situation never changed.

On the union front -- yeah, we've had some wildcat action. We had one night incident at Beatrix post-election. That was on the back of not any mine issues. It's linked to infighting inside the union ranks. That was resolved. We've been in negotiations on the repositioning of the labor, and we've issued the (indiscernible) mines we've had the CCMI (ph) processes followed.

While there is still a bit agitation, I don't expect that we will have too much trouble.

The fact we are restructuring -- we (indiscernible) restructuring with huge numbers. So, it's more repositioning labor and exiting some contract labor and replacing the contractors with mine labor that would have lost their jobs if we were just in the (indiscernible) mode.

And a lot of it is done through a voluntary process and a consultation process, with the unions and associations -- and that has been ongoing now for -- since November at Beatrix. So, it's not a new process.

At Dreifontein, we've been going since September last year with the process and that we signed off on the back of the evening of the threat (ph) in the newspapers last Friday. We had actually signed off the previous day an agreement with the unions and associations on the final restructure. So, no, I think we are not expecting any kind of fun and games unless the ethics of the unions and associations (indiscernible) next two or three weeks.

Okay. Thanks, Mike.

James Copeland, Goldman Sachs.

I'm sorry my questions have been answered. Thank you.

Brenton Saunders, Deutsche Securities.

Afternoon, everybody, and well done. This is a good result and pretty fine quarter. Everybody else seemed to fall in a bit of a heap.

I just wanted to touch on a couple of things. I think most of my questions have also been answered surrounding the South African Ops.

Nick, one for you. Just -- interest rates swap is done on the Villa interest payments. Traditionally, you guys have done these kind of structures like Aussie dollar hedge basically as a business risk management tool. Swapping a fixed for a floating rate in an environment where interest rates have been known to get (indiscernible) by 500 basis points for various external almost unmanageable reasons, as far as the South African economy is concerned, and puts you in a relatively risky position. What was the thinking behind that?

The thinking behind the question was two things. First of all, there's a fairly steep upward tipping curve on the interest rates. If you look at the yield curve over the next five years, you can see that in the short end, there is a 1.5 to 1.8 percent benefit compared to the longer end. And we have a view -- but that will continue for the foreseeable future. That's the first thing.

And with these things you have to take a view.

The second thing is that -- if you look at a scenario where interest rates rise, the most likely scenario is that we will be seeing a (indiscernible). That would be one of the reasons possibly why interest rates will pick up.

And in that scenario, we would be paying higher interest rates, but we've had a tax relief against that. At the moment, we don't have a tax relief on that interest. And we're seeking to try to manage the net costs accrued accordingly.

It's interesting to note that in the short end, one can save around 15 to 18 million rand a quarter by entering into this arrangement. So, if we see interest rates flat over the rest of this year, then we should be able to crystallize at least 60 million rand in value in the short end. And as always, we will be actively managing this swap on a daily basis. If we see conditions change we will look possibly to cap our exposure.

I don't know (technical difficulty) I just get the impression that there are number of instruments (technical difficulty) that (technical difficulty) financials (technical difficulty) (technical difficulty) (technical difficulty)

It would be speculative in nature if there was no underlying position to hedge against. We have an underlying position to hedge against which is the loan. And we're looking to try to manage the interest rate exposure on that loan in the most cost-effective means.

So, we are reasonably comfortable with what we've done. But we obviously we will watch the market very carefully. And if conditions change, the we will change our strategy.

Thank you.

Peter Townsend (ph), Bernard Jenkins (ph).

Good results. Nice to see the grades picking up in South Africa like some of the people before, I think I've also had most of my questions answered. (indiscernible) I still have I expect to be answered tomorrow.

But, very briefly on the expiration side -- a question that's for John. (indiscernible) the main seems originally I got the feeling that they were looking quite good. And then in the visit in the beginning part of this year, it seems quite downbeat in terms of expiration potential at the (indiscernible). And now you report that 13 has been mobilized and you are looking at the number of alternative. Could you just talk through that, John, is that just incremental tonnages? Or is that pushing up the life of the demang (ph) operation there?

Yeah, there's two elements (indiscernible) demang extension project. And I'll certainly, to use your words, talk about a more upbeat (indiscernible). That tends to change around. And until you've actually got detailed models of these deposits, it's very difficult to assess whether they're actually going to be of value or not. That's why we tend to see a bit of a swing in outlook.

But, in terms of the first priority, that is to extend the life of that asset. So we're looking for more feed on the same as what we've got. And the biggest requirement we have is for (indiscernible) one or two grand (indiscernible) source of ore. Similar to what we're depleting in the (indiscernible).

And we've got a number of opportunities for that (indiscernible) in Rwanda, which have been completely drilled now. They have been modeled and we are now into the mine planning stage in those.

We've also got now an opportunity that has been opened up in (indiscernible) itself to go for some answers there. So, that's actually changed (indiscernible) quite a bit on what demang (ph) could offer us in terms of just extending its life.

In terms of opportunities -- in terms of incremental answers, in parallel with those, that's what we've got to focus the moment on -- what we call the above so underground. And that is a shallow underground mine, looking at the conglomerate (indiscernible) in the southern end of the botaless (ph). (indiscernible) it meets the top line.

And that could be incremental either to taca (ph) or deman (ph). But, we've got (indiscernible) on there at the moment. We're looking -- exploring that (indiscernible) more detail.

Good. Thanks very much. I look forward to tomorrow.

Steve Shepard (ph), J.P. Morgan.

And again, can just add my (technical difficulty) worth on congratulations on turning that grade around. Very pleasing to see that. Hope you can keep it up.

I've got two questions, really, one relates to development -- having looked at the very interesting development results that you published in this very well put together pack. And the second has to do with the way we account for the cost of development.

So, the first one is -- I'm looking at the centimeter gram per ton values that you have published here. And I wonder if you're not developing above the average grade of your reserve at Dreifontein and Kloof? And I find that quite interesting. Maybe you could talk to that, Mike?

And also could you perhaps tell me why it is that you're bothering to develop the main (indiscernible) at Dreifontein? I mean, it's obviously a grade that you're never going to mine. But, what would be the reason why you are doing a kilometer a quarter of development there? It must be costing a lot of money. Those are the mining kind of questions I've got. And then, I wanted to ask, Nick, if you would consider what AngloGold has done with the cost of development?

Okay, Steve, in terms of the value that we are mining. We're opening up a lot of the one (indiscernible) shaft and (indiscernible) Dreifontein.

And the (indiscernible) this quarter we have been impacted with pretty high-grade sort of in-between certain levels. The ore body tends to have sort of channels. And as you move closer to the wider channel, you get more centimeter grams in your development values, (indiscernible) ultimately you are mining cut will not give you that full exposure.

As to -- and similarly at Kloof, we are putting out (indiscernible) lines mostly in the areas that we have defined as your terrace areas. And we have been very selective in where we're placing the under pillars. And we're placing them in the lower grade areas and obviously wanting to exploit the higher grade areas.

But as to (indiscernible) mining in terms of the life of mine grades -- no, I don't believe so. And we will have to open up a lot more before we can actually quantify that as a statement.

As for the main (indiscernible) on Dreifontein, why are we developing it? There is large tracts of land in (indiscernible) way section that we're opening up in terms of VCR pillars that were left. At the same time, inside those areas the main (indiscernible) areas they are (indiscernible) or pay areas. Which will give us a return on a very selective basis.

And the plan there is to expose (indiscernible) through gully development and more internal development to define these blocks well. And then mine them at a breakeven or better basis to add to the mining mix.

Okay. I think the last question, Steve, you had was on the accounting policy.

Our accounting policies and (technical difficulty) our policy are policies is to capitalize ore development until (indiscernible) the South African operations. That's been our consistent policy since Gold Fields was formed. We intend to maintain that policy. We believe that is a more appropriate way of accounting for development. Such that (indiscernible) It's expensed. I understand Anglos' policy is to capitalize for a further, I think it's 24 months. But we believe it's more prudent to expense once you (indiscernible) but at the end of the day, Steve, cash costs are cash costs. One has to look at the total costs, total production costs of the operation. And whether you capitalize (ph) to brief intercession or whether you expense thereafter, it doesn't really change that picture. So we don't spend a lot of time thinking about.

Well, thanks for that, Nick. I just kind of understood it a little bit differently. I think Anglos expenses is capitalizing its main development -- most of its main development now. In other words, the (indiscernible) development and the ancillary development that goes around that. And that's expensive, isn't it?

It adds substantially to the operating costs which investors look at. So you're -- if I'm right about that, then your costs are going to be somewhat more conservatively stated than the likes of AngloGold American Barrick (ph) and all these other major gold producers that are in your peer group.

Yes. This is probably a discussion that we should have further afterwards. But, our view is that we are applying a conservative policy, and we don't have any plans at this stage to change it.

Thank you very much, Nick.

Matt, I think we'll take one more question. We have been going for more than an hour now.

Sam Robins, Robins Planning.

First of all, I want to say to you that I've known the Company well now for five years, and I find you incredibly competent, particularly in the way you prudently seem to concern yourself as trustees for the shareholders. Your transparency is wonderful.

Now so saying, that transparency revealed that you lost money in your currency hedges. I think was $5 million. And that's a relatively small amount in your big Company. But I would wonder why you would lose money in currency hedges at all if you're doing them right?

Sam, as I say, I think you're referring to the offshore (indiscernible) we have in Euros. We raised U.S. dollars towards the end of last year (indiscernible) our equity placement that I think you probably remember. And we took a decision to re-denominate those funds from U.S. dollars into Euros. Because we felt that the U.S. dollar was overvalued. And that, in fact, that would reflect in higher gold prices -- which I think we've seen.

From the Company's perspective, had we retained the funds in U.S. dollars, there would not have been any exchange loss.

The mere fact that we have converted them into Euros and the functional currency of the offshore entities that retains these funds is dollars -- that creates an accounting exchange loss. That is all it is. It is a book entry.

And unfortunately, with accounting standards being what they are, we have to book that through accounts.

I think the more important thing here is to look at why we have done what we have done. We have done it because we have taken the view that we think -- the U.S. dollar could be under more pressure. And certainly, that (indiscernible) ore and gold prices going forward. And if that's the case, there's a well-established correlation between the U.S. dollar and the Euro.

So, we think for the time being that it would be better for us to have those funds in a currency that's likely to appreciate as opposed to depreciate. I hope that explains it, Sam.

Have some rather long-term type of questions. Number one, platinum is slow growth outlook from here on out. Insufficient to produce an adequate return. Hello?

I'm sorry, Sam. I think we lost you there. Could you repeat the question please?

My question is, has platinum become -- is the outlook for platinum slow growth? And is that slow growth in demand likely to produce inadequate returns on your investment in platinum?

Sam, the prices that we need to get (indiscernible) return on this project are (indiscernible) than where these prices are today. Both, particularly (indiscernible) metals.

So, we have no concern that, even taking a very conservative view on the platinum outlook, assuming that all the expansion in this country come off, that (indiscernible) effect on the price restore confidence about the return (indiscernible) platinum.

I think one of (indiscernible) important points to make about Arctic Platinum is that its not a pure (indiscernible). A very substantial portion of its revenue stream will come from copper and nickel, which does provide some relief from the volatility that (indiscernible) and platinum markets will offer in the future.

All right. Now, getting onto Palladium, I understand you have some substantial Palladium holdings. Is there a possibility that that could replace platinum and exhaust pollution control devices? And therefore, have a substantial demand?

Sam, your reference to our substantial Palladium holdings presumably refers to Palladium we have (indiscernible) Arctic Platinum, because you're correct -- it is primarily Palladium (indiscernible) with about a 41 Palladium to platinum ratio at the Arctic Platinum project, which was the one we were referring to earlier.

In terms of your question about the answer for Palladium -- our function in respect of the metal and in its own (indiscernible) see a blowout in Palladium like you've seen in the past.

Palladium is a single use commodity, largely (indiscernible) as a result is pretty exposed from that point of view. But (indiscernible) point about substitution with platinum, there was the announcement recently by Unicore (ph) which is -- the markets seems to have taken quite seriously about the opportunity to further use Palladium in (indiscernible) catalysts (indiscernible) previously has not been thought possible to do this. And they often talk about the volume of Palladium that could substitute platinum when it is brought to commercial production.

We've already (ph) seen that there is an overlap or a substitution opportunity for Palladium -- for platinum, (indiscernible) catalysts and it's also never (indiscernible) in a total disconnect between the platinum and Palladium price. Although they can go up a long period, with a substantial move in different directions, as you've seen over the last period.

So, to summarize and answer your question, we do see Palladium having a decent outlook and some leakage in re-establishing platinum price. But again, never having quite the excitement of platinum, platinum is a lot more useful, particularly in jewelry, which will always differentiate it.

One final question -- Russia. Russia has lately been looking like a one-man state. Does that creates special problems for you as you tie up capital in Russian investments and how can you -- what's your view of those risks -- those political risks in Russia?

There's no doubt, Sam, that Russia is new territory for us. We have not tied up any capital in Russia. But before we do, we will clearly take a very, very careful view as to whether it was the right place to do business or not. And that's part of the process they we're currently undertaking. We're evaluating all sides of the equation which is Russia.

And I think that you can rest assured that we're not going to do anything that's reckless, we haven't done anything in the past that is reckless. We're not about to do anything that's reckless.

But if we do see that there are reasonable returns, and that the risk is not unduly elevated, then clearly we would look to proceeding there. But it's still far too early to even think that we're going to do anything in that part of the world this year.

Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.