巴里克黃金 (GOLD) 2015 Q1 法說會逐字稿

Welcome to the Barrick Gold Q1 results conference call.

(Operator Instructions)

As a reminder this conference is being recorded on April 28, 2015.

I'll now turn the conference over to Amy Schwalm, Vice President Investor Relations.

Please, go ahead.

Thank you, operator.

Good afternoon, everyone.

Before we begin, I would like to point out that we will be making forward-looking statements during the course of this presentation.

For a complete discussion of the risks, uncertainties and factors which may lead to our actual results and performance being different from the estimates contained in our forward-looking statements, please refer to our latest year-end report our most recent AIF filing.

With that I would like to turn it over to our Co-President Kelvin Dushnisky.

Thank you, Amy.

Good afternoon to everyone on the call.

Thank you for joining us.

I'm here today with our Co-President, Jim Gowans, and our Senior Executive Vice President and CFO, Shaun Usmar, as well as other members of the Management team who will be available to answer your questions at the end of the call.

Looking at our first-quarter highlights, production and costs were in line with our expectations for the quarter, keeping us on track with our full-year guidance.

We continue to expect 6.2 million to 6.6 million ounces of gold production in 2015 at an all-in sustaining cost of $860 to $895 per ounce.

For our five core mines, which will generate about 60% of our production, we expect even lower average all-in sustaining costs of some $725 to $775 per ounce.

As we've previously indicated with our year-end results, we anticipate a little more than half of our production to occur in the second half of the year, and as a result we expect all-in sustaining costs to be 20% lower for that same period.

Looking beyond 2015, we continue to forecast gold production of more than 6 million ounces in 2016 and 2017 with all-in sustaining cost lower than this year by 2017.

With respect to our copper operations, we are pleased that the proposed amendments to Zambia's tax system will enable our Lumwana mine to continue operating and to generate free cash flow at current copper prices.

Given these developments, we were able to improve our copper outlook for the year, and I'll talk more about that a little later.

We remain committed to our debt reduction target of at least $3 billion by the end of 2015 and are well advanced on certain asset sales and other joint venture opportunities.

During this quarter, in line with our new and more rigorous approach to capital allocation, we launched a thorough review of our capital budgets for 2015 and 2016.

To date, we have identified $200 million in CapEx reductions for 2015, and we expect there is more to come following further evaluation.

Shaun will touch on this a little more later in the presentation.

In addition to our sharp focus on capital discipline, late last year a multidisciplinary technical team embarked on a mind by mine value realization review exercise.

Jim will take you through some details on this initiative and the value we're seeing it generate.

We're also excited to announce a new gold discovery called Alturas in our Andean core region.

While it is early days, Alturas has the makings of another Veladero, which has been one of our great core mines, well outperforming its original production expectations.

We will provide more details on Alturas later in the presentation.

A conservative financial approach was one of Barrick's original hallmarks, and no priority is more important to us than restoring a strong balance sheet.

We outlined a concrete plan to reduce our debt by at least $3 billion this year with our fourth-quarter results, and we intend to use three key levers to achieve this target.

The first lever is by maximizing free cash flow through our decentralized operating model with more disciplined capital spending and reduced G&A.

The second lever is by disciplined non-core asset sales.

We recognize this is a challenging market in which to sell properties, but nonetheless we are seeing that there are serious buyers with strong interest in quality assets.

Numerous companies have participated in the sales process for Porgera and Cowal.

Detailed due diligence on both assets is now underway, including site visits with prospective buyers.

As we've said, however, we will only move forward on terms that are favorable to our shareholders.

The third lever for debt reduction relates to the potential for joint ventures or strategic partnerships.

In this context, we just announced the sale process for a partial interest in our Zaldivar copper mine.

Since we acquired this high-quality asset through the Placer Dome transaction, we have consistently received unsolicited expressions of interest.

So, as you might expect, the level of interest is very robust now that we've announced the formal process.

As we have said, our strategy is to focus on core mines in the regions we know best.

Therefore, our divestment efforts will be focused on our non-core assets.

On the left side of the slide you can see the top five we consider to be our core gold mines, and with Turquoise Ridge they were responsible for approximately 4 million ounces of low-cost production last year.

Although we have not formally identified Turquoise Ridge as a core mine, after completing a pre-feasibility study in January of this year, we are confident this high-grade operation has all the attributes to soon become one.

On the right side of the slide, you see our other gold and copper assets, which we believe can leveraged to adequately cover our debt reduction target.

I will now ask Shaun to provide some more context on our capital allocation efforts.

Thank you, Kelvin.

As we announced with our year-end results, we've adopted an extremely rigorous approach to allocating capital within our portfolio.

This represents a step change in our capital investment proposal, motivated, assessed and allocated in our business with a degree of attention to detail and diligence that I'm told surpasses any former proj in Barrick.

First, individual projects are being assessed against a hurdle rate of 15%, and we will defer, cancel, or sell those that cannot achieve this target.

This is driving a different, leaner and more creative mindset in assessing our many investment opportunities across the business, where the traditional, bigger-is-better mindset is being replaced with a stringent eye on the ability to generate our target returns while paying close attention to the quality of underlying business cases and the ability to manage the risks associated with each investment.

This new approach is expected to ensure that our portfolio will ultimately deliver on our target of return on invested capital of 10% to 15% through the metal price cycle.

The expectation of 10% to 15% is captured in the performance metrics in our long-term incentive awards for our leadership and carries the highest weighting of any metric at 20% when we're aligned.

While many companies have limited their analysis to project capital, we've taken it a step further in evaluating all of our planned spend at existing operations including sustaining capital in a detailed manner.

Funds will not be spread equally across operations, they must compete for capital with priority given to those that ultimately meet our strategic objectives and return expectations.

Otherwise, we'll harvest, suspend or sell as needed over time.

We're not wasting any time in bringing this level of discipline to every aspect of the Business.

As Kelvin mentioned, we've launched a detailed review of 2015 and 2016 CapEx budgets.

All spending will be reevaluated against our capital allocation objectives and put through our return filter.

If they fail to meet our requirements, we will cancel or defer those plans.

However, we will ensure that none of the cuts compromise the objectives of maximizing cash flow per share or introducing unreasonable risks to the business.

We will not compromise in our commitment to the well-being of our people and the environment.

Our goal is to achieve a capital base that makes us sustainable through the gold price cycle over the long term.

So far, we've identified about $200 million in CapEx reductions and as such we were able to decrease our capital intensity by roughly $30 an ounce.

The reductions identified to date have been partially offset by an increase in sustaining CapEx following our decision to continue operations at Lumwana.

As a result, our total CapEx guidance for 2015 has been reduced by $100 million to $1.8 billion to $2.1 billion.

This equates to a decrease of about 11% from the prior year.

We anticipate further reductions as we continue to implement our more (technical difficulties) framework and we look forward to providing an update (technical difficulties).

We are relentless in our efforts to maximize free cash flow.

We haven't stopped at CapEx reductions and this is not only for our goal of debt reduction but as part of an ongoing pursuit to continually improve the effectiveness and efficiency of our lean business model, one that is sustainable, as well as positioned to deliver attractive returns throughout the metal price cycle.

We've identified a number of action plans across different levers.

First, as I just discussed, we've done a lot to reduce and optimize capital in this business.

We're looking at all of our project spend and the team at Pascua-Lama is focused on minimizing those holdings.

Now, we plan on aggressively tackling our operating cost structure.

Here we see a number of opportunities within supply chain, maintenance and inventory management to name a few, which have the potential to further improve cash flow.

We're also carefully reviewing closure plans to minimize the spend in this area wherever we can.

Finally, while we continue to be bullish on gold prices longer term, the reality is that our industry is cyclical and we've seen a lot of volatility.

In light of this, we are constantly evaluating our mine planning scenarios and potential actions to remain cash flow positive at weaker price levels.

Actions are prioritized based on limiting long-term downside risk to the business while maximizing net present value at any particular price scenario.

We have developed concrete contingency plans as a result of this exercise.

All of these efforts should drive an improved free cash flow profile.

Currently, we're comfortable with our liquidity position.

At the end of the first quarter we had $2.3 billion of cash and an additional $4 billion available on our fully undrawn credit system.

As this chart also shows, our debt repayment schedule is modest: less than $900 million due through 2017.

Turning now to a little more detail on our first-quarter results, we're off to good start, having met our operating targets this quarter.

We are maintaining good gold production guidance of 6.2 to 6.6 million ounces at all-in sustaining costs of $860 to $895 per ounce.

Our 2015 all-in sustaining cost guidance remains unchanged; however, we believe there is potential for positive revisions as the year presses.

As Kelvin mentioned, production in 2015 is anticipated to be 55% weighted to the second half of the year, resulting in 20% lower costs for the same period.

This is due to Cortez transitioning into higher-grade material and stronger production at Goldstrike with the ramp up of the TCM circuit and at Pueblo Viejo, due to higher grades and improved autoclave availability.

Additionally, the second quarter is expected to be our highest cost quarter for both cash costs and all-in sustaining costs on lower sales due to the ramp up of TCM and the timing of sustaining capital.

Turning to the financials, Q1 adjusted earnings and net earnings per share were $0.05.

Operating cash flow for the quarter was $316 million, and we expect to generate positive free cash flow this year at current gold prices.

I'll now turn it over to Jim for a review of the operating and project side of the business.

Thanks, Shaun.

We continued to expect our five core mines to produce above 60% our 2015 production at an average all-in sustaining cost of $725 to $775 an ounce.

We had strong performances from several of our operations in the first quarter, including at Cortez, Lagunas Norte and Veladero.

We have a growing pipeline of projects in the Americas some of which are at our core mines, which have strong potential to grow free cash flow.

I'd like to provide a little bit more color on these right now.

At Goldrush, there are about 16 million ounces of resources and this is an excellent potential to expand further to the north.

We have already commenced work on this initiative.

In addition to the completed prefeasibility study at Turquoise Ridge, we expect to finish three more prefeasibility studies on projects in Nevada this year.

There is good potential to upgrade a significant portion of the resources at these projects to reserves over the next several years, and we expect some to begin contributing new production within the next 4 to 6 years.

I'll talk more about these studies in a moment.

As Kelvin mentioned, a team of Barrick's leading mining experts and technical specialists are assessing the economic potential of every Barrick mine.

Specifically, they are identifying projects to maximize free cash flow, increase production and/or lower costs.

The benefit of these studies are twofold.

One, they will ensure we understand the full value of every mine before we proceed with any sale.

Two, they are providing us with concrete opportunities to improve efficiencies and reduce our costs.

We are well underway on the studies over 10 operations, including our five core mines.

Opportunities will be incorporated into current mine plans where they meet our 15% return hurdle, or where more work is required, they will be added into mine plans for 2016 and beyond.

We've completed the Value Realization study at Pueblo Viejo, and I'd like to give you an some examples of key initiatives we've identified here, which have the potential to create substantial additional value.

These include: mine plan enhancements to increase the reserves and to extend our mine life; modifications to our fuel and power supply, and increasing plant throughput.

With respect to the first opportunity we've identified about 7 to 8 million ounces of resources that could be converted into reserves through continued optimization and by removing tailings capacity constraints and other bottlenecks.

CapEx for this opportunity over the life of mine is expected to be about $120 million to $150 million.

A second initiative involves converting fuel supply at our dedicated power plant from heavy fuel oil to liquefied natural gas.

This could significantly reduce power plant operating costs and is expected to require minimal capital as the plant is already designed to operate on both fuels.

We could complete this project as early as the end of 2017.

Also, by converting the fuel supply of the lime kilns at the site from diesel to LNG, we could reduce energy consumption, reduce our costs and the greenhouse gas emissions.

This would only require modest capital of about $25 million over 18 months, and we would have a payback of about three years.

Lastly, we anticipate being able to increase plant throughput capacity by up to an additional 10% through a series of ongoing upgrades.

Again, we would only be looking at limited CapEx here of about up to $20 million.

We are completing the technical analyses of all of these projects identified, while our Value Realization teams continue their site by site reviews.

Some of these projects are a way out into the future, but we also have seen some excellent near-term potential.

Overall, the studies have shown us that our assets continue to have more to offer, and we look forward to providing future updates.

I would like to spend a moment on some other opportunities we are advancing to improve returns and extend mine lives.

At Cortez, a considerable portion of the additional value lies in the potential to add reserves and expand our underground mining by developing the oxide zone below the 3,800 foot level.

The oxide zone is higher grade than the areas of current underground mining.

We're on track to complete a prefeasibility study for this scenario by the end of the year.

At Goldstrike, the new TCM circuit is being commissioned and will be allow us to bring about 4 million ounces forward in the mine plan.

We are achieving recoveries from the circuit that are consistent with the feasibility study.

Just last week, we started making some adjustment to the filters in the water treatment plant to improve our throughput.

We previously piloted these new filters on a side stream with good results.

We are also commissioning parts of the circuit, still commissioning the rest of the circuit, and while testing these new filters, but at some point we're comfortable with the original ramp-up schedule.

Turning to our emerging core mine, Turquoise Ridge, it is our highest grade operation and nearly 17 grams per tonne and also has considerable expiration potential to the north.

But production here is currently limited by haulage and ventilation constraints.

To unlock the potential, we are advancing into feasibility study and detailed engineering for an additional shaft.

This would bring forward more than 1 million ounces of production and roughly double output at an average of about 0.5 million ounces per year on a 100% basis at an all-in sustaining cost of between $625 and $675 per ounce.

This project has strong economics with an estimated payback of about two and a half years based on the initial CapEx of between $300 million and $325 million.

I view this as one of our most exciting opportunities.

If approved by the joint venture partners, production could commence in 2019.

Lagunas Norte is a great example of a mine that keeps on giving.

It has outperformed our production expectations since it started up 10 years ago, and we are now focused in on an opportunity to significantly extend the mine life by developing the refractory ore below the current oxide ore body.

We intend to initiate a prefeasibility study to evaluate this opportunity.

We did look at this a few years ago.

At that point, the economics were not favorable, but we're now approaching it much differently.

The revised plan is based on a significantly smaller pit, which would mine only the higher grade areas and would require less initial CapEx.

This isn't currently reflected in our resources, so it represents pure upside.

At Veladero, we've identified opportunities to reduce our costs by improving the efficiency and the effectiveness of our inventory management and our maintenance systems and improving productivity in equipment availability.

Even without the potential from the Value Realization results I've just discussed at Pueblo Viejo, this mine is one of the industry's best.

On a 100% basis, production is expected to exceed 1 million ounces for the next three years at an all-in sustaining cost of under $700 per ounce.

I'd now like to turn to our new Alturas project in South America.

This is a significant discovery, which is located in one of our core regions, the Andean region of Chile.

Seven years ago our exploration group embarked on a reevaluation of the 140 km-long El Indio belt on which Barrick controls almost all of the prospective grounds.

This area is host to some of the world's largest gold deposits, including our own Veladero and Pascua-Lama, and it's why this region continues to be core for us.

We identified numerous targets, but Alturas was the clear front-runner.

It's located about 30 kilometers south of the old El Indio mine.

The geology is similar to Veladero, as it looks to be mostly oxide, but it could be significantly higher grade.

So far, we've completed 35 core drill holes and the mineralization appears to be thick and continuous.

We've identified an area of more than 1 square kilometer to date, but we believe there's lots more here.

Alturas is just one part of a very large system, which extends well beyond the area of current drilling.

We've had some great results so far.

Two of the best drill intercepts have been 168 meters at 1.7 grams per tonne and 97 meters at 4.4 grams per tonne, both starting from a depth of less than 200 meters.

This discovery remains open in multiple directions and our focus going forward will be on defining its full extent as well as exploring for additional targets nearby.

Given its considerable potential, we're advancing it as quickly as possible, and we expect to report an initial resource with our year-end results.

I will now turn it back over to Kelvin to provide an update on our Lumwana mine.

Thanks Jim.

As we discussed earlier, plans to transition to care and maintenance at Lumwana were put on hold at the end of the first quarter as we awaited details of changes to Zambia's new mining tax regime and engaged in dialogue with President Lungu and his administration.

Last week, the Zambian government proposed amendments that would replace the 20% royalty on open pit mines, which took effect on January 1, 2015 with a rate of 9%.

Based on this revised rate and other proposed taxes, Lumwana is able to continue producing and generate positive free cash flow at current copper prices.

Our operating and technical teams have been very successful at reducing the cost structure at the mine, and we believe there's still room to improve.

As a result of the proposed amendments, we have increased our 2015 copper production guidance to between 480 and 520 million pounds from 310 to 340 million pounds.

C1 cost guidance remains unchanged at between $1.75 to $2 per pound.

I'd now like to turn to the results of our efforts to return Barrick to a lean, nimble and financially strong Company.

In less than a year, we adopted a rigorous capital allocation framework, restored the Company's original partnership culture and implemented a compensation system that makes our leaders true owners of the Business.

The most critical part of our back-to-the-future approach has been a return to the lean, decentralized operating model, which removed management layers between Toronto and the mines.

This has empowered our mine general managers and country executive directors to focus on maximizing free cash flow, and in turn, to head office focuses on two key mandates: setting strategy and allocating human and financial capital.

To align with this, we reduced the size of our head office by close to half this year.

As I said earlier in my remarks, no priority is more important to us than returning our balance sheet to a position of strength, and we're taking concrete steps to achieving this goal in 2015.

And we are not done.

We are continuing to drive fast-paced change and to meet the commitments we have set.

We look forward to updating you on our progress out the year.

Operator, can we now open the line for Q&A?

(Operator Instructions)

Stephen Walker, RBC Capital Markets.

Great, thank you.

I've got a question for Jim, and then one for Shaun.

Jim, can you talk a little bit about Zaldivar?

And I guess two components to my question, there's a high wall that has to be moved at some point, a fair amount of capital involved in that.

Can you give us a sense of the timing when the high wall for that next phase of deeper development needs to be moved and the timing and how much capital you could expect?

I don't have the numbers in front of me.

The high wall I think you are referring to is the pushback towards Escondida?

Yes.

I think it's going to be in the next five years, but I don't know the exact capital but it's in our current plans.

I could get back to you on that.

Is that a one- or two-year program?

I think it's longer.

Okay, so it's a substantial program.

Just to follow up on Zaldivar, 15-years ago Placer sold the water rights at Escondida.

That contract comes up, I've believe, at some point in 2015 here.

What are your intentions with the water rights and is there an opportunity to unlock value with the renewal of that contract with the HP-Escondida joint venture?

It was contract to sell partial or water rights all Zaldivar, not the complete water rights.

I would say that we would never part with the complete water rights on that is too valuable for the continued development of Zaldivar.

But it's suffice to say the $135 million that Escondida paid for those water rights 15 years ago, if that were renewed that would be significantly greater amount even with the desalination plant that they are building now?

I would say yes.

Stephen, look, obviously we have got to look at any opportunities to maximize value from these assets, so if the make more strategic sense to keep and we can realize more value, we will do that.

But if there's more value to be had, we will look at it.

Shaun, maybe just a quick question for you.

We've seen the global diversified companies and miners in general pull a lot of capital and cash out of working capital, whether it's supply chain efficiencies, inventories, obviously, adjusting maintenance.

Just with the sale of a non-core assets, can you give us a sense of what you think you can pull back into the balance sheet when we have the cash or preservation of capital here in 2015 and presumably into 2016?

Could you give a sense of the order of magnitude?

Stephen, I can't give you an order of magnitude, but what I can tell you is you're a bit of a mind reader.

It's a bit of a preoccupation because of course we have, at some of our sites at surface infantry levels at some of the sites which are up for sale.

We've clearly been looking at ways to monetize or realize value for inventory, which frankly, we wouldn't be paid for.

So we are making sure that, if there is anything, which is of this -- that it is realizing value in that sale.

Jim has got a team, which has actually been taking a fresh look at all the inventory across this business.

Working capital is a source of cash, which frankly, we're pulling all the levers.

We hope to be able to provide some more definitive guidance, I think in future quarters, but that work is ongoing and it's a very focused effort.

I know you are still working on it, but is it a $200 million to $300 million or potentially $500 million plus over a 12 to 18 month period?

At this point, it's on the lower end of that range, but we continue to look at this.

Okay.

Thank you very much on that, Shaun.

Thank you, Jim.

Kerry Smith, Haywood Securities.

Shaun, as part of the process to put Zaldivar into some sort of an auction, have you, in the mandate have you said that you're only prepared to sell 25% or less?

Or are you prepared to sell 49%?

Are you prepared to give up operatorship?

I'm just wondering what the parameters were around that process?

I can comment, Kerry.

It's Kelvin.

The process right now is the stake we're looking to sell is up to 50%.

As you can imagine and as indicated in the call very, very strong interest.

The question would we ever decide to sell more?

Right now, 50% is the number.

Like anything else, we've always said, if there was a knockout price, we would consider it.

But our target at this point is 50%.

Would we consider someone else operating the asset?

Possibly.

If we had a view that they could generate more value for shareholders than we could, then by all means.

At this point, we feel pretty comfortable how we are wondering Zaldivar, as well.

Okay.

Do you think that process would come to a conclusion within three months or is it a longer process than that, Kelvin?

We expect it probably would, Kerry.

So, you're hoping -- okay, good.

Then, just one quick question for Jim, maybe, on Alturas.

I just wonder about if you could talk a little bit about the logistics?

It's a pretty impressive discovery and the team should be congratulated for that.

But just in terms of water, logistics, any issues with the Argentinian border, all that kind of stuff, I'm just wondering if you can give me some clarity on that?

First off, the congratulations should be to our exploration team.

Rob's and his guys have done an excellent job on that.

It's pretty exciting to see the results coming in.

Maybe, Rob, you could comment on the logistics?

Thanks very much, Kerry.

It's located about 30 kilometers in a straight line from El Indio.

In fact, we're using the El Indio camp now.

It's about a two-hour commute.

One of the things we're looking at is pretty the camp a little bit closer.

We have power to El Indio.

I think we have some legacy water rights associated with El Indio property and the Tambo mine, which we're looking at the moment.

That's a work in progress.

We're a ways from an international highway that sealed, but we don't have access to that, but that's something that we'd consider in the future as well.

So logistically, for the high Andes, it is at altitude.

It is a little bit difficult to get to, but it's in an area that we've mined in the past.

Right, okay, so there's no real red flags from all of those issues, as it were.

Also, if I could just add, Kerry, the Coquimbo area, where the project is, the communities nearby, very supportive of mining.

Credit to Rob and his team, they done a great job of building relationships early.

Okay.

Congratulations to Rob and his group, there.

That's pretty impressive.

Thank you.

Greg Barnes, TD Securities.

Thank you.

Kelvin, Shaun, how quickly do you put Lumwana up for sale?

(laughter)

Great.

(laughter) We're just trying to get our heads around it.

Good afternoon, Greg.

(laughter)

Greg, I think the answer to that is we're happy that the project is going to continue to operate.

It's free cash flow positive at these copper prices.

Non-core, and we've said before that those particular assets are assets we'd consider.

It's got great leverage to copper, though.

It's 6 billion pounds and seeing great leverage.

It's something we'll consider, but the for sale sign is not up on it, at this point in time, but if you make an offer.

(laughter) I just want to add to what Kelvin said, because I think just a call ago there were a lot of people asking a lot of questions about how we were going to get to our targets, and I hope that the recent announcements are starting to give people a sense of not just the achievability in that, but the quality of the follow-through.

So, to your point there are a lot of non-core assets out there, which are being very rigorously evaluated.

We are not going to provide the road map, but we certainly are going to (technical difficulties).

Fair enough.

Shaun, can you characterize the $200 million in CapEx savings?

Is it projects you've deferred?

Is it true cuts?

What are you doing to get to that number?

I'd say it's a bit of both, but at this point, the first focus here and the bulk of that number really is residing -- the painstaking 1,700 line item review of the sustaining capital in the business.

In particular, looking at the capital intensity, the associated risks and working with both the technical services and then hand-to-hand discussions with each of the general managers.

So that's been a process that played out and just finished a week or so back.

It is ongoing.

A lot of the effort now is really on the few hundred million, which we've got in projects and exploration as well as ongoing efforts to reduce just our general capital intensity.

I think, to your point, particularly the quality of the investment cases, understanding the risks, and making sure these things meet our hurdle rates, is where a lot of the time and effort is going into on this team.

Okay.

Thank you.

Thanks, Greg.

John Bridges, JPMorgan.

Good afternoon.

Was that hand-to-hand discussions or hand-to-hand combat over the -- (laughter)?

You know the industry well.

I'm more used to the latter description of discussion.

To be fair, it hasn't been bad actually.

Fine.

I'd like to follow on with Kerry's question on the border.

It looks as though a little bit as if there'd be a layback into Argentina, which I guess would require international discussions?

Well, I'll turn to Rob to comment based on where the exploration has been ongoing.

Certainly, John, the mineralization is open towards Argentina.

I will point out, though, that there are -- the mineralization so far that we've intersected is quite thick and parts of it are fairly high grade, so although it's very early stages at this stage, conceptually you can think about an open pit and potentially even some underground.

Do you have any comments, Jim?

No, I would agree with you.

Some of the grades are certainly capable of underground as well.

Do you need significant extensions to make it worthwhile?

If I do a thumb-suck, it looks like 2 million or 3 million ounces, just a very rough calculation.

Do you need to add more to give it critical mass?

I think it's too early to say, John.

One of the things that we are doing is kicking off a scoping study, next month actually.

We'll have a little bit more visibility on that in the near future.

Okay, great.

Then, Quantum Pacific Exploration, are they coming in as free agents into your property to test the water?

What's the deal with those guys?

I'll ask Rob to comment on that.

He's been close to the deal, and we have our General Counsel, as well.

But, Rob, why don't you start?

This really is a collaborative partnership.

We provide access to our properties, and I want to make it clear that we have absolutely unfettered access to gold exploration and development and production.

Quantum Pacific Exploration, their focus really is on copper and copper-gold, and so we get the added benefit of any discoveries that they make, the copper elsewhere in Chile.

On other properties as well as our own, we get to participate in the rewards together with them as partners.

Okay, great.

Thanks a lot, well done, guys.

Thanks, John.

Patrick Chidley, HSBC

Hello, everybody.

My question is more on the process technologies that you are using at the TCM and the Goldstrike, and what kind of recoveries are you getting on that process?

Can you give us a better idea of what the ramp-up is supposed to be and when you think you'll be up to design recovery rates and throughput?

Okay, it's Jim.

I'll answer that question.

First off, our ramp-up, we were looking at the end of Q3 to be ramped up on that.

We've actually had good correlation between our grade recovery on the TCM projects, so we're really happy about that.

It's coming right in on the test work.

We had a couple of challenges with respect to the associated water treatment plant, but we did some pilot plant work on some different types of filters.

Just to clarify, the water treatment plant is to be able to recycle the chemicals to actually help us on the reduction of costs and save money on that.

So we've done the skids.

We've actually installed them last week, and they've been ramping up very quickly.

Actually, more quickly than I anticipated, some I'm pretty excited about that.

I would say that, right now, we're quite confident that we can achieve the original ramp-up schedule.

It's basically two streams, and we've tested 100% of each stream.

So it's just a matter of getting it coordinated once we have the water treatments problem sorted out.

Okay.

On the recovery level that you'd be expecting there?

The recovery levels are consistent with the grades, so they would be similar to what we were getting on the autoclaves previously.

Okay, thanks.

Then, on Pueblo Viejo, that appears that there's still a few issues going on there in terms of recovery?

Yes, we did have some challenges.

As you know, that's probably the most complicated processing circuit in the gold world.

We had some carryover of some acidic solutions to our CIL circuit, which resulted in some precipitation of gypsum on our activated charcoal.

We've resolved that issue.

We have a large inventory of gold bearing carbon, and we're processing that and feeding it back into the circuit, so it's not really a challenge from lacking recovery.

Let's call it a little bit of a boost in inventory on a temporary basis.

Okay.

Is that a significant figure, like 50,000 ounces?

What would you say?

No, it was less than that.

It was about 40,000 and we're bleeding that back into the system in the next few months.

Okay.

All right.

I appreciate that.

Thanks.

Thanks, Patrick.

John Tumazos, John Tumazos Very Independent Research.

Thank you for taking the question and having the call.

You have a wide variety of assets for sale.

Would you only sell to repay $3 billion of debt, or if bids came in that were satisfactory for more of them, might you repay more debt?

At this point, John, it's Kelvin.

We've set our targeted $3 billion.

We'll do at least that.

We're always open and we'll see, depending on where the figures come in, but we've set that target and that's what we're aspiring to this year, and we're open-minded.

John, I just want to add to that, though.

A lot of the focus is not just on selling things, obviously, for good value in decent multiples, but obviously trying to generate as much cash as we can in this business.

There's a lot of effort going into that component as well.

Thank you.

Thanks, John.

Andrew Quail, Goldman Sachs.

Afternoon, Kelvin, Jim and Shaun.

Thanks very much.

Two questions, one is, obviously, Turquoise Ridge looks like a pretty core asset these days.

Obviously, you transport the ore to Twin Creeks for processing.

Can you step-by-step with the JV partner there, how do you go about it proving this site extension?

What we're doing there right now with Newmont, our partner on Turquoise Ridge, is we have an agreement out to 2018, but we're in conversation with them as a result of the feasibility study for the shaft in the terms of looking at expanding our production there to extend the processing contract and change the throughput on that.

We're currently, actually, in discussions now.

Great.

Last one, just on the debt.

If we saw a rebound in metal prices and we do get these asset sales come through soon, is there any -- you guys, obviously, don't have that much debt due in the next three years.

Is there any discounts or penalties that you have to pay if you want to pay down more of that debt coming up?

Andrew, the focus, obviously, as we're doing the -- regardless, as we're doing the planning for the $3 billion of debt reduction, we're doing a lot of work on the liability management side.

Particularly, your right where blessed in not having too much due in the next few years.

As we've outlined, less than $900 million.

I think we'll obviously look to try and term those out.

Then, do, probably, like we've done previously with a tender offer to a great level of success in 2013.

There's a lot of competing focuses for us in that in terms of realizing value obviously and making sure that we can reduce our interest charges as we do so.

Thanks, guys.

Congratulations on a strong quarter.

Thanks, Andrew.

(Operator Instructions)

John Bridges, JPMorgan.

Just a quick follow up, I wonder if we could do a quick scoping study over the phone?

(laughter) What's the condition of the mill at El Indio?

Is it -- I remember it was quite old when we last looked at, it is it still working?

We've reclaimed it at El Indio, John, so I think that mill is now gone.

Okay, scratch that idea.

(laughter)

I like your thinking.

Thanks, John.

You're welcome.

Thank you.

Howard Flinker, Flinker and Company

Hello.

If one annualizes your earnings, you get a 4% return on capital this year.

There must be some mines that are costing you money.

Besides the ones that you want to sell, shouldn't you be considering shrinking some or putting some into hibernation?

It's Shaun, again, so I will lead off and I'm sure Jim and Kelvin can contribute.

The first point I want to make is that we are focusing very intently on a cash flow per share.

Return on invested capital, as we said up front, is a key metric.

It's embedded within our business.

The core focus is on reducing our capital intensity and pulling the levers we have to reduce our cost base within this business.

To your point, going forward, first question is are we -- do any of these operations, because a lot of this is legacy cost from prior transactions in order to generate that return.

The question is, what is the best way that we can realize value with these assets going forward?

We are doing everything we can to operate them efficiently and at same time any incremental capital that we're investing, we're making sure that that meets our hurdle rates.

So, whether it's an asset that we've deemed potentially for sale, we're making sure that we, through these Value Realization studies, understand what the intrinsic value is.

Those will be done by May, as we heard earlier.

The ones we intend to keep, we will continue to run those as efficiently as low cost as we can.

If any of those are hemorrhaging, we will take them down or we will sell them.

We are not in that position though, just to be clear.

That makes sense.

Thanks.

Thank you.

This will conclude today's question-and-answer session.

I would now like to turn the meeting back over to Mr. Dushnisky.

Thank you very much, operator.

Thanks, everybody, for joining the call and for your questions.

They were good, as always.

We look forward to speaking to you again with our second-quarter results.

Thank you very much.

Thank you.

The conference has now ended.

Please, disconnect your lines at this time.

Thank you for your participation.