巴里克黃金 (GOLD) 2015 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Barrick Gold Q3 results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded on October 29, 2015.

I'll now turn the call over to Ms. Susan Muir, Vice President Investor Communications.

Please, go ahead.

Thank you, operator, and good morning, everyone.

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

This slide includes a summary of the significant risks and factors that could affect future outcomes for Barrick.

For a complete discussion of these risks and factors please refer to our most recent AIF filing.

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

Thank you, Susan, and good morning to everyone on the call.

Thank you for joining us.

I'm here today with our Chief Operating Officer, Richard Williams; our Chief Financial Officer, Shaun Usmar; and our Chief Technical Officer, Basie Maree.

This is the first earnings call for Richard and Basie in their new positions.

However, both of them have been playing critical roles at the Company for some time.

Richard has been driving many of the important organizational changes we've made over the last year, some of which he will elaborate on today.

Basie is our Senior Technical Leader and plays a key role in advising and supporting our operational teams.

And as part of our decentralized model, you've also heard us speak about how we are advancing the role of our mine general managers and our country executive directors to that of true business owners.

I'm pleased to introduce you to two of them who are here with us today: Andy Cole, General Manager of Goldstrike, and Matt Gili, General Manager of Cortez.

Barrick has always had a reputation for strong technical and operating talent, and so today we wanted you to have the opportunity to hear from two of our best.

Before I go on, I would like to welcome Angela Parr to Barrick.

She is our new Vice President of Investor Relations and will work closely with Susan Muir, who was recently appointed Vice President of Investor Communications.

Angela has a strong background in IR at a number of UK and Canadian-based mining companies, and we're excited to have her on board.

We know she'll make a great contribution to the Company.

I'm pleased to report that we had a very strong third quarter, and we continued to deliver on our key commitments for the year.

But before we get into the financial and operating details, I would like to talk for a moment about how we're driving value for our owners.

We have one simple overriding objective, to create shareholder value by growing free cash flow per share.

And we've really started to deliver, with two consecutive quarters of positive free cash flow.

We are a low-cost producer and we're not done yet.

You can expect us to build on the cost and productivity improvements we've achieved this year.

Our capital allocation decisions are governed by strict discipline and clear requirements for all investments, including a 15% hurdle rate, and we will not waver on this.

We are running the Company with financial prudence.

This means living within our means and making smart financial decisions, while preserving the entrepreneurial spirit that has always defined Barrick.

Our technical expertise is second to none, and you can see that in the use of groundbreaking technologies that unlock value for our shareholders.

We're also talking about being obsessed with talent.

Attracting top talent to Barrick and developing our people is absolutely central to our success.

Our partnership culture means that we are owners in the business, with an emphasis on trust and transparency.

Over the past year, we've reshaped and focused our portfolio.

We now have a smaller, higher quality portfolio, underpinned by assets that drive free cash flow in our core regions in the Americas; assets with significant optionality for delivering growth in the coming years.

And finally, our balance sheet is much stronger today than was a year ago.

Our ultimate objective is to get Barrick back into a position of true financial strength, and we're making steady progress.

It's also been very important for us to be clear about our priorities and to do exactly what we said we would do.

We set aggressive targets and we are seeing strong execution across the business as we work to achieve them.

I'm not going to go through every point on the slide, but it shows how we're delivering on our commitments.

From free, cash flow growth and cost reductions to a stronger balance sheet and a more optimize portfolio, we are advancing on our key priorities.

With that, I'll ask Shaun to walk you through our strong three-quarter results.

Thank you, Kelvin, and good morning, everyone.

We reported adjusted net earnings of $131 million, or $0.11 per share in the quarter.

The net loss of $264 million largely reflects the impacts of $476 million goodwill impairment which we took at Zaldivar, and lower realized gold and copper prices as well as $20 million more in depreciation compared to a year ago.

The key point I would like to highlight here with our financial results is that despite the higher depreciation and lower realized price of $1,125 per ounce, there was $160 below our realized price a year ago and $65 lower than $1,190 per ounce in Q2.

We generated significantly higher adjusted earnings and free cash flow compared to both those prior periods.

This underscores the benefits of Management action, cost reductions, and productivity improvements.

And it really tells the story of how we're positioning Barrick to become increasingly cash flow generative even at these lower prices.

Without these improvements, our pretax adjusted earnings would have been about $390 million lower than a year ago, and about $175 million lower than the second quarter based on the low gold and copper prices.

Adjusted EBITDA of $942 million reflects the same factors impacting the net loss, partially offset by an increase in gold sales despite the divestiture of Cowal and Porgera in Q3.

Free cash flow of $866 million included the $610 million in proceeds from the sale of Pueblo Viejo steam, which we received at the end of the quarter.

However, excluding this amount, free cash flow improved dramatically from $26 million in Q2 to $256 million this quarter, or nearly nine fold.

Operationally we produced 1.7 million ounces, in line with our plan, and a better-than-expected, all-in sustaining cost of $771 an ounce, driven mainly by lower cash costs of $570 per ounce versus $589 just a year ago, and lower mine site sustaining CapEx of $342 million compared to $410 million a year ago.

Copper production was 140 million pounds at C1 cash costs of $1.53 per pound, reflecting improved operating performance at Lumwana and the affect of the weaker Zambian kwacha.

In addition to cost reductions and productivity improvements, we benefited from lower oil prices and favorable currency movements compared to 2014.

This was reflected in our initial guidance for the year, and we continue to see a positive impact flowing through our costs.

Our direct mining costs in Q3 were about $30 an ounce lower than in the same quarter last year before the effect of our currency and fuel hedge positions.

They also reflect about $15 per ounce of overhead costs which were not previously included in cash costs, and which are now allocated to the sites.

So on an apples-to-apples basis, excluding the effect of the change in our G&A reporting, direct mining costs would have been about $65 an ounce, or $10 lower.

These lower direct mining costs reflect the benefit of lower currency and ore rates as well as productivity and cost improvements.

However, we do have some legacy hedges at higher rates, and factoring these in, the net decrease year over year is about $45 an ounce, or 8%.

We have no Canadian dollar hedges after this year and only 20% hedged on the Australia dollar next year with nothing in place beyond.

Our ore hedges will decline significantly starting in 2017 and drop further in 2018.

Turning to our balance sheet, we've made strong progress against our target to reduce debt by $3 billion in 2015, and we expect to meet it.

Subsequent to quarter end, we used $1.1 billion of our $3.3 billion cash position to repurchase some of 2016 notes and to complete the tender for some medium-term debt.

And as of today, we repaid a total of about $1.9 billion this year.

Building on these repayments, we intend to use the $1 billion in proceeds from the sale of 50% of Zaldivar and free cash flow towards debt reduction.

We continue to expect the result of our transaction to close in the fourth quarter.

We reduced total debt by 15% so far this year to just over $11 billion on completion of the debt tender yesterday.

And this has considerably strengthened our liquidity position.

We now have less than $250 million in maturities due before 2018 and about $5.5 billion for the 2018 to 2023 period, and only $100 million between 2024 and 2032.

About $5 billion of our total debt is very long dated, maturing after 2032.

Overall, the asset sales incurred a positive and along with our stronger cash flow are driving improvements in our total debt-to-EBITDA ratio.

Over time our objective is to reduce it to a level which would be consistent with a strong investment-grade rating, 2 to 2.5 times.

After repaying $3 billion total debt will have been reduced by 23% to just over $10 billion as you saw in the previous slide.

We expect annual pretax-interest expense to be reduced by about $140 million.

Our $4 billion credit facility remains fully undrawn, and our consolidated tangible net worth has improved to $6 billion from $5.7 billion last quarter.

I would like to provide the progress updates on the $2 billion in cash flow improvements we are committing to achieve by the end of 2016.

This is relative to our original internal plans for 2015 and 2016, and it excludes the dividend reductions.

These improvements are coming from productivity gains and reductions in operating expense, capital spending, corporate costs, and working capital.

We have now booked $1.8 billion, or 90% of this target into our plans for the benefit of our revamped and more robust life of mine plans: $400 million in 2015 and $1.4 billion in 2016.

Our focus in 2016 will be on continuing to drive productivity and sustainable cash flow improvements while striking a balance with identifying value accretive investments and growth options for the Company.

We've added the working capital component for next year, as we have given our GMs specific targets to reduce supply inventory and increase turn rates.

And they are already starting to deliver against those targets.

This work is strengthening the resilience of our business in a lower gold price environment and positioning us to deliver significantly stronger margin when gold prices recover.

Here is the proof of our actions this year, and the picture is pretty compelling.

Despite the more than $500 drop in the gold price from three years ago including the $100 decline just in the last year, we've turned the corner on free cash flow.

To breakeven in 2012 we would've required a gold price of more than $1,800 per ounce, more than $1,500 in 2013, and nearly $1,300 per ounce for 2014.

But we're now generating free cash flow at $1,100 per ounce and are focused on improving our breakeven price further.

At the same time, our all-in sustaining cost has come down by 16% over this period.

I'd like to acknowledge the truly exceptional efforts from our operating, finance, technical support, and our license to operate teams to make these numbers a reality, and to return Barrick to a more flexible position that supports our key objective of growing free cash flow per share.

Turning now to our 2015 guidance, we tightened our production guidance to 6.1 million to 6.3 million ounces to reflect lower expected production from Acacia.

Although we had a brief shutdown at the moment at Porgera due to low water levels, operations are resumed and this will not impact our guidance.

We've reduced our all-in sustaining cost guidance to $830 to $870 per ounce from $840 to $880 and brought down the top end of our cash-cost range to $625 from $640 per ounce.

Our copper-production guidance is unchanged, 480 million to 520 million pounds, and C1 costs have been reduced to $1.60 to $1.85 per pound to reflect currency benefits and improved costs at Lumwana.

As part of our improved all-in sustaining cost guidance, we have narrowed our mine-site-sustaining and overall capital-expenditure guidance for the year, and now expect total CapEx of about $1.7 billion versus our original guidance of $1.9 billion to $2.2 billion.

We expect about 30% higher depreciation in the fourth quarter compared to the third quarter primarily related to a drawdown in inventory stockpiles at Cortez, Lagunas Norte, and Goldstrike, and high expected sales volumes at Pueblo Viejo.

This was anticipated and will bring the full-year total in line with our original guidance range, $240 to $260 per ounce.

To cover our operating results, I will now turn it over to Richard, our Chief Operating Officer.

Thanks, Shaun.

Good morning, everybody.

Before we go to operating results, I'm just going to take a minute to tell you about how we are now operating as a company and how we're at developing our operations.

The decentralized model that you've heard about is key to our improved performance this year, but not just as a cost-cutting tool.

It's a key part of transforming the long-term way in which we're operating.

What you see on the left on the slide in front of you is the old hierarchical command and control model, with operations run by regional business units reporting to a central chief operating officer.

In this model, this old model, operational decisions, included business plans, happened in offices away from the mines.

Information and ideas were contained within functional or operation stove pipes, and there was limited sharing of ideas between those mine sites and those operational leaders.

Adaptability was sacrificed for order, and the ability to deal with volatility and change was highly restricted.

One of the major drawbacks of this model is that bad news took to long to arrive at the head office, by which time things had become worse or become difficult to fix.

Another is that responsibility for creating solutions rested with only a few people at the top of the organization as opposed to using the whole network of talent of the Company.

So in our new model we removed the regional corporate layers of command, pushed decision making and technical expertise down to the site leaders where it is as close to the source of the problem as possible.

The role of the head office is reduced to focusing on setting strategy and allocating capital, human and financial, in ways that maximize returns.

But this typical of decentralization, or what others call the devolved model everywhere, is only half the story, for we've done more than that.

We've done two other critical things to improve our adaptability and our effectiveness.

Firstly, we've improved the ways that the operations are led.

I don't mean just by upgrading talent, which is obviously what we're looking at, but building operational leadership teams at each of the sites comprised of: the mine general managers, two of whom you are going to hear of from here; executive, or in other companies is called country directors; and finance leaders all working together to ensure that decisions are made to take due account of licensed to operate mining and finance straight commercial needs.

They operate as independent business leaders, with the authority that all that comes with that and the responsibility too.

Secondly and critically, we've replace the old hierarchy with a technology-enabled network thereby creating one team across the Company.

Information, such as progress against plan, problem description, and so on plus ideas are shared by and with every leadership team in the Company via the weekly business plan review.

A video conference that links everyone in the Company and all those leadership teams together into a single interconnected mind, improving idea flow across the Company in ways that far outmatch the old system.

In terms of access to debts we now know more by accessing the whole team.

500 brains if you like are better than 10.

And speed, we solve problems and innovate faster; no bureaucracy.

In this model, and just as a slight reference to myself, I'm the neighbor of that system, policing and developing the critical processes and the behaviors that ensure information and resources are placed with those that need the most in the right time frame, ensuring that we avoid the silos or the bureaucracy that kills efficiency and adaptability, and just as importantly, ensures that we have the right talent to meet our standards of transparency, collaboration, and determination.

Supporting this process and me with it are two critical advisory teams, and they both report to me.

One led by Basie as the Chief Technical Officer, described well by Kelvin earlier, and the other not here, Peter Sinclair, is the Chief Sustainability Officer on the license-to-operate side.

Both provide critical decision-making support to the Executives with capital allocation and talent decisions, and to the operations with their problem solving and planning issues at their level.

All of these teams, including the finance teams clearly with Shaun and all of those involved there, operational, advisory, and executive, work together to maximize the commercial returns from the Company's portfolio of assets in a changing and highly volatile market.

Mining, license to operate, finance, operations, head office, and advisors all operating as one team with one purpose, growing free cash flow.

Well that's the model, let's turn to operations.

We expect our core mines in the Americas to contribute 60% to 65% of our 2015 production and 75% of the overall mine site free cash flow from our portfolio.

The average 2015 all-in sustaining costs have been reduced from $700 to $725 per ounce, down from $725 to $775 at the start of the year based on all that, that Shaun has just described.

It's my great pleasure to hand over now to one of our business leaders up from the ground Andy Cole, the General Manager of our Goldstrike mine to give you an update on his operation and the ramp up of the TCM process.

Thanks, Richard.

Our third-quarter production was in line with plan at better AISC on lower cash cost and sustaining capital.

As a result we've lowered our 2015 cash-cost and all-in, sustaining-cost guidance.

Fourth-quarter production is expected to be similar to the third quarter at slightly higher costs.

I am pleased to report that our new TCM circuit reached commercial production in the third quarter.

We expect the complete ramp up in the first half of 2016.

The TCM circuit provides incredible processing flexibility for our Nevada operations.

For example, we've had great coordination with Cortez and Goldstrike in optimizing ore routings from a value perspective.

Now for Barrick rather than just Goldstrike we are seeing the benefits to cash flow by processing more Cortez ore through the roaster.

There may be opportunities to expand this in the future to other operations such as Turquoise Ridge.

The project came in at a capital cost of $610 million compared to our latest guidance of $620 million.

And we are now reporting on a cost-of-sales basis.

Throughput has averaged over 9,000 tons per day since July, approximately 75% of the designed capacity of 12,000 tons per day, and throughput is trending upward.

Our recovery rates have been a bit more challenging, and this is where our focus is right now.

Recoveries are more variable than anticipated, primarily due to higher carbon from some ore types which may be better suited for roasting.

We are working to better characterize our ore sources.

As well we are modifying the resin to improve overall recovery rates.

But expect recoveries to average around the high 60%s depending upon grade.

This is not unusual with the introduction of a new technology, and will not affect our 2015 guidance.

I'm extremely proud of the team for this achievement in light of the fact it's a brand-new, Barrick-developed technology and is the only commercial use of this innovative cyanide-free processing technique in the world.

I will turn it over to my colleague Matt Gili to talk about Cortez.

Thanks, Andy.

Cortez had strong production in the third quarter largely due to better than expected ore tonnages from the open-pit operations.

Our all-in sustaining costs of $501 per ounce also reflected improved underground productivity following the implementation of short-interval controls, an initiative identified as part of our value realization review.

2015 production guidance has been improved to 900,000 to 950,000 ounces at lower all-in sustaining costs of $675 to $725 per ounce.

We passed a very significant milestone this month when we poured our 20 millionth ounce, and this is half of what Goldstrike has produced, but we are a younger mine with a lot of potential ahead of us.

The pre-feasibility study for the Cortez Hills Deep South underground expansion is on track for completion by year end.

Here we are looking at the potential to develop approximately 2 million ounces in largely oxide resources below the 3,800 foot level.

This is pending receipt of the required permits.

This zone averages a higher gold grade than the sulfide reserves above, and there are deeper targets along the trend that have not yet been drilled.

We will access these resources by twin declines, which have just received permitting approval.

Development on these declines is expected to start in the first quarter of 2016.

In addition, there is very good exploration potential for the future within our 382 square mile land package.

So overall, Cortez remains a very prospective district for us.

And with that, I will turn it back over to Richard.

Thanks, Matt.

Obviously we can't have everybody here today and I'm speaking on behalf of Ettiene Smuts and his team down at PV.

Okay the PV third quarter production was slightly below plan as their mine processed a larger portion of carbonaceous ore.

All-in sustaining costs were impacted by lower silver recoveries associated with autoclave maintenance and lime-boil limitations.

The advisory teams and the teams on the ground are adding two lime-boil tanks which will be operational in November.

And this is expected to improve recoveries at the targeted 80% level that around 60% current.

We continue therefore to forecast attributable production of 625,000 to 675,000 ounces at an all-in sustaining cost of $540 to $590 per ounce in 2015.

Production is expected to be higher and costs lower in the fourth quarter on higher grades, improved recoveries, and better autoclave availability.

We highlighted last quarter the potential to convert a significant portion of the 6 million ounces of those resources to reserves by removing tailing storage constraints, and we intend to commission a pre-feasibility study in the second half of 2016 to confirm this.

Now on to Lagunas Norte and Jim Whittaker's operation down there, which produced 108,000 ounces at all-in sustaining costs of $581 per ounce in the third quarter, which was in line with expectations.

Production in 2015 is now anticipated to be 550,000 to 590,000 ounces at a lower all-in sustaining cost of $550 to $600 per ounce, with stronger production expected in the fourth quarter driven by improved performance at the Phase 5 leach pad.

The lower production guidance reflects lower recoveries with some leach pad irrigation issues which are in the process of being resolved by Jim and his team.

Fourth-quarter, all-in sustaining costs are expected to be higher than in the third quarter on the expected sale of higher cost inventory as well as increased sustaining capital for Phase 6 leach pad construction.

A pre-feasibility study on a plan to extend the mine life by up to 12 years by mining nearly 2 million ounces of sulfide ore below the existing open pit is on schedule for completion in 2015.

And now on to Veladero.

Veladero production in the quarter was below plan due to lower grades and adverse weather, which impacted leach operations.

All-in sustaining costs were higher than planned on lower ounces sold, timing of sustaining capital, and lower silver credits.

Production guidance for 2015 is unchanged, and all-in sustaining cost guidance has been narrowed to $950 to $1,000 an ounce, and cash cost guidance has been lowered to $550 to $600 per ounce from $580 to $630.

Fourth-quarter production is expected to be higher than Q3 at lower all-in sustaining costs.

The Veladero leadership team has optimized pit design this year to focus on higher grade material, which is expected to more than double the annual cash flow over the next four years while retaining the option to expand the pit in the future.

Just a short update on the recent and unfortunate environmental instance which led to a discharge of processing solution to the environment following a valve failure and a diversion gate that was open at that time.

Third-party water monitoring, included that by the United Nations, has confirmed there are no risks to downstream communities.

Restriction on leaching activities were lifted following the implementation of additional monitoring and corrective actions, and there is no impact to our guidance.

With that, it will be a pleasure to hand it over Basie to talk about the optionality within our portfolio.

Thanks, Richard, and good morning to all.

At the end of 2014 we had 93 million ounces of proven and probable gold reserves.

These are high quality reserves.

At 1.37 grams per ton, our reserve grade is more than 50% higher than the senior-peer average, and the grade of our operating mines is even higher at 2 grams per ton, which is more than double the industry average.

We have the strong potential in our portfolio to convert the 94 million ounces of measured and indicated gold resources into reserves at the various sites, projects, and early-stage opportunities you see listed here, and to add new reserves and resources into the pipeline.

A feasibility study at Turquoise Ridge and pre-feasibility studies at Cortez Deep South, Goldrush, and Lagunas Norte Sulfides are on track for completion by the end of this year.

To give you a bit more context for the opportunity of our assets, we have maintained a mine life of 10 to 20 years for more than 20 years through a strong track record of adding reserves at our existing operations, and by discovering and bringing new projects into production.

We have an unparalleled track record in exploration, having found 150 million ounces of gold in the last 25 years at the very low average finding cost of $25 per ounce, which is roughly half the industry average.

The total attributable value of the 10 major discoveries made over this period is about $107 billion according to the SNL Financial, and this excludes the recent Goldrush and Alturas discoveries.

What also distinguishes Barrick is the value add not just from new organic discoveries, but of additional ounces we found post acquisition.

Mine life and production at the majority of our operations has far surpassed initial estimates, one notable example being Goldstrike.

The original mine plan expected production to end in the year 2000, and currently extends well into the next decade.

Our exploration budget is two-thirds weighted to [minings] and opportunities around our existing operations, and we continue to identify excellent potential for resource conversion at many of the operations.

[Turning in] feasibility study were to convert resources to reserves over the next five years at Cortez, Goldstrike, Lagunas Norte, PV, and Turquoise Ridge is progressing well.

In addition, we expect to convert part of the 16 million ounces of resources at our Goldrush project in Nevada once we have fermented and developed the underground exploration dig lines, establish additional underground access, and complete in-fill drilling.

Drilling to more fully define the limits of mineralization at the Alturas project in Chile, is expected to resume shortly following a harsh South American winter.

A good illustration of the optionality in our portfolio is the new drilling program at Hemlo.

In the first quarter of this year we completed the acquisition of some ground adjacent to Hemlo from a subsidiary of Newmont, which included an area of geological potential adjacent to our existing underground workings.

We are currently conducting underground diamond drilling in this area to evaluate its potential.

Drilling has encountered several high-grade intercepts, which demonstrate the ongoing potential of prolific mineral districts, such as the Hemlo camp, even as they become more [in] mature.

Turning to our Pascua-Lama Project.

A temporary suspension plan has been approved by the mining authority in Chile.

This will enable us to fully complete the transition to care and maintenance and should allow us to significantly reduce cost at the project in 2016 from the $170 million to $190 million estimated spend to this year.

The team at Pascua-Lama will be focused on developing an optimized plan for 2016, and we'll assess this plan when it is complete.

But we've been clear that the project must ultimately meet our minimum 15% ROIC hurdle rate before we consider restarting it.

I will now turn it back over to Kelvin with his concluding remarks.

Thanks, Basie.

So to finish off where we started, we've made great strides this year to reshape Barrick into a leaner, more nimble company.

We've grown free cash flow for two consecutive quarters, our balance sheet is stronger and steadily improving, we're already in a very competitive cost position, and we intend to drive down costs even further through improved productivity and efficiency.

We will maintain strict capital discipline.

Regardless of whether the gold price is $1,100 or much higher, all investments must meet our minimum investment hurdle of 15%.

We have a fantastic low-cost, asset base that includes high quality reserves and resources, with significant optionality for growth at our existing operations and at our projects, which include some of the largest undeveloped gold deposits in the world.

And you can count on us to stay sharply focused on delivering results as we finish the year and move into 2016.

That concludes our presentation, we'd now be happy to take any questions.

Thank you.

(Operator Instructions)

Andrew Quail, Goldman Sachs.

Congratulations on a very strong quarter; very encouraging.

Just a couple of questions.

On the flagged asset sales that you guys have mentioned, can you give us a brief update on where we are in that process?

Thanks, Andrew, I appreciate your comment.

Process is moving really well.

Look, I've got Kevin Thompson here who is actually writing the process.

Kevin, do you want to give a little more background?

We have just started round two of the process.

These assets are highly sought after; it's a very competitive, robust process, and our expectation is to sign one or more binding agreements before the end of the year.

Great.

Second question is actually on Cortez.

Obviously a great quarter.

Matt, you're obviously in the room.

Grade obviously went up and you've given some set of guidance about what happens with production, but do you think that as we head into 2016 are we going to come back to a more of a Q2 grade of 1.7?

Well, Andrew, we haven't yet produced guidance for 2016, and so I hesitate to talk about 2016.

But I will say, Andrew, as we discussed earlier the first two quarters were showing us as we were coming down on that ore body going through what was largely stripping.

In the third quarter we hit solid ore on the Cortez Hills open pit, and that ore will continue for the next several years.

Great.

And throughput?

I mean something -- obviously that went up too so it was a gray quarter.

Is that something you guys are aiming to maintain?

Yes.

The great quarter, or the improvement over the great quarter was really attributable to two things.

One was we were getting a slightly positive ounce reconciliation on the Cortez Hills deposit, and the second half of that was really due to increased underground production.

Just not a great reconciliation, but just more tons being produced by the same teams.

And last question quickly, I think I just missed a bit, you were talking about Pascua-Lama and obviously the holding cost is coming down.

Can you give us what you expect it to be from 2016 onwards with care and maintenance?

It's Kelvin, Andrew.

We'll give that guidance at the end of the year more specifically.

We're working hard.

Now that we have the temporary suspension plan approved, it allows us to really ratchet down costs on a going-forward basis.

So we'll give you a little more detail on that at the end of the year if you don't mind.

Great.

Thanks very much, guys.

Greg Barnes, TD Securities.

Kelvin, you've got the balance sheet in much better shape and you've been playing defense for the last three or four years.

Are you now starting to think about getting a little more on the offensive side of things?

To do things to improve your production profile longer term and moves some of these projects forward more quickly?

Thanks, Greg.

We're staying very sharply focused on our commitments and priorities for the year.

As we indicated earlier the $3 billion commitment for this year, we are pleased with it and -- but that was the first step.

We're going to continue to strengthen the balance sheet.

We'll weigh other opportunities on a going-forward basis.

We always evaluate the landscape; if there opportunities that make really good sense and would generate value then obviously we'll consider that.

But at this point we're staying pretty sharply focused on what we set out to do.

What are going to be your principal priorities for 2016?

We'll outline those with our -- at the end of the year, Greg, but we're going to continue -- one thing is for sure, to focus on generating free cash flow per share is really driving the business.

And you're hearing that through everything we presented this morning.

When we come back to you and outline next year as we did this year, what our objectives are, you can count on that as being what's underpinning everything.

Thanks.

Stephen Walker, RBC Capital Markets.

Just a couple questions.

Just with the focus that you have on converting resources to reserves and growing reserves, I guess it begs the question whether we're going to see Pascua-Lama and Cerro Casale recorded as reserves at year end.

Can you comment on that?

And also comment I guess on the carrying value of the assets, the gold assets in particular?

You've obviously adjusted the carrying value of the copper assets, but whether it's gold or copper assets what assumptions are going to be made at year end as far as those carrying values?

And what we could expect or what we should start thinking about as carrying value for assets going into 2016?

Thanks, Stephen.

Look, I'll touch on Pascua-Lama and Cerro Casale, and perhaps Richard should comment on the other aspect.

Pascua and Cerro Casale both, we'll give our reserve estimate at end the year.

Both projects at this point qualify.

And even though the economics of both Cerro Casale and Pascua-Lama aren't such that we could go forward with those projects today.

We certainly believe there will be a point in time in the future when we would.

But as far as making the decision, we'll do that with the year-end reserve calculation and report back then.

In terms of the other aspects, Basie did you want to start?

Apologies, Kelvin.

Stephen can you repeat it?

It was very difficult to hear what you said.

You were very faint for second part of your question.

Sure.

It's just the assumptions that you would likely be using for the carrying value of the gold and copper assets.

Are they going to change significantly year-over-year?

At this stage, I know it's early in the process, but give us a sense of what we could expect as far as carrying values for the goodwill and the book values for the gold assets in particular but also the copper assets?

Stephen, it's Shaun here.

Look, we are as you say going through that as we go into Q4, which is the norm for us.

I'd say we're well advanced in not just our -- we've revamped our life of mine planning process, but we're feeding that through into our models.

And we've talked on prior calls, as you may recall, about the work that was done as part of the asset sales process surround by new realization.

We are factoring those into the models as well.

On the one hand we may see some changes in macro assumptions, but I think we will see some offsets in the work that's being done this year.

Thank you, Shaun.

Thank you, Kelvin.

Anita Soni, Credit Suisse.

Good morning.

My question is with regards to the reduction at Veladero.

Could you provide a little bit more color in how you see that transpiring over the course of the year and perhaps into next?

Sure.

Richard?

Sorry, not Veladero.

It was Lagunas Norte.

Sorry.

Sorry.

Matt.

Forgive me, Kelvin.

I think with respect to Lagunas Norte, Basie.

Why don't you have a view on Lagunas Norte going forward.

As we know Lagunas Norte is nearing the end of its life underground ore body, hence the project -- pre-feasibility study to look at the deeper sulfide ore body there.

The guys are moving into a bit of a transition down there between the oxide and the sulfides, and we're focusing for the next quarter to have a little bit more refractory ores coming into operations.

The guys classify it what they call M1 to M3 dark material.

We're seeing a little bit more refractory M3s coming in which lower the recoveries.

They are looking at optionality in the mine plan and the design to see if they can bring a bit more oxides forward.

But it's going to become difficult between now and the transition to the new project because the ore body is nearing the end of its life.

Just a follow-up question with regards to capital.

I think I calculated that the total CapEx from the $1.7 billion from what you had spent to date would require about $400 million in the fourth quarter?

Is that correct?

Shaun here.

Yes, it's slightly more than that.

We've done a lot to prevent any borrowers of capital in this business, and with our event planning we're seeing that actually have a big improvement through the five years.

We are pretty comfortable with that.

It's just over $400 million, and that's being consistent with our run rate over the last couple of quarters.

Is there any specific projects or mines that will see a little bit more spending than the rest in the fourth quarter?

Not really.

We're just finishing off the studies that we've talked about in the presentation and most of this is sustaining and developing capital in our profile.

And then last, could you talk about some of the improvements that you've seen at Lumwana?

A couple things.

First of all the team has worked very hard to drive down costs, and you can see from the numbers.

It's benefited from the kwacha devaluation certainly.

I think the kwacha is down 50% roughly for the year.

And that represents about 30% of our costs at Lumwana.

So we benefited from that.

But the team has been consistent across the operation, driving down mining costs and they've done a very good job year over year.

Thank you very much.

David Haughton, CIBC.

The first one I've got is trying to understand a little bit of a conflict if you'd like between Shaun's slide 9 and Basie's slide 20.

From Shaun's discussion of cost saving or cash flow saving, about one-third of that is coming out of capital.

And I then have a look at Basie's slide 20 and you've got a lot of really interesting opportunities there.

I'm wondering where are those CapEx savings coming from?

And to what extent do the projects that Basie has been talking about get sacrificed as a consequence?

David, as we've gone through firstly revamping our capital allocation, what we've focused on there is not just the robustness of the plans, but really the sequencing of some of these.

Because we've got a number of projects which clearly exceed our hurdle rate and really represent lower risk.

And those are the ones that we're prioritizing.

And you'll see in the presentation there was a big emphasis on the 94 million ounces of resources here, which represent the best near-term growth given the skill sets and what we have.

So with our life of mine planning you'll see this come up on the guidance next quarter, the big focus on upgrading the capability and the benefits over a reasonable period of time.

And then the sequencing of the higher return, better -- near-term and better return projects that we've got.

I'll make one last point for this.

I'd say that there was a lot of parallel spend that we found when we started improving our capital allocation.

We've reduced the burn in the areas that you would expect, which are things that will come off in a different price environment or need work.

But we're not -- we've got a very strong focus on improving not just our balance sheet, but also trying to replace the reserves that we're depleting with mining.

So stay tuned for Q4

It's quite the balancing act, I can see that.

It is.

And based on your comments there I'm just wondering to what extent would those capital reductions through 2016 be simply deferral of expenditure for projects that do look promising?

We've got some deferrals, but what I'm seeing in our latest revised or improved life of mine plans is actually a re-imagining of some of the projects that we've got there to be less capital intense and higher return.

So this isn't about just moving things down the road.

We are having to try and balance those alternatives with continuing to improve the balance sheet, but obviously focusing on growth.

And again, we'll give more guidance on that in Q4.

We are seeing a good effort from not just the guys at the mine sites, the product teams too embrace the different approach we've got now.

Okay.

Thank you for inviting Andy and Matt on the call.

I do have a question for Andy.

I'll just stay with the one given we've got time issues.

Looking at the TCM project, you'd spoken, Andy, about the ramp up of both the throughput and also the recoveries.

Can you give us an idea of what kind of time line you've got to get ultimately to the 12,000 ton per day limit and what your goals would be of those recoveries through time?

The question as far as throughput, we hope to be near 12,000 tons per day very shortly.

As I mentioned we are continuing to see improved throughput every month.

Hopefully by the end of the year.

As far as recoveries, David, there are a few surprises related to some of the ore characteristics that we are working through.

As I mentioned, we will continue to work on those and hopefully have them worked out by the end of the first half.

My recollection was there was a goal for it to be in the 80% kind of level?

Is that still a target?

That's fair.

It is really dependent upon the grade feeding the plant.

At this point in time, as I mentioned, we have with the flexibility of having the autoclaves as a viable option for processing, we're able to optimize our routing.

Right now the higher grade is going through the roaster, the lower grade is going through the autoclave facility.

We have the grade versus recovery curves, and so at the lower grades it's going through there.

Right now we're in the 60%s, ideally we would like to see it come up a bit higher than that.

We're talking here about ideally plus 3 gram kind of material, I presume?

Right now we're running in the neighborhood of 1.5 grams -- somewhere in that neighborhood.

All right.

Just last question, did you record any throughput in the third quarter or was it considered pre-commercial then?

No.

It was --

David, we did.

We transitioned from pre-commercial to commercial I think was in July.

Andrew Kaip, BMO Capital Markets.

I've got a follow-up question with Andy and the TCM circuit.

You indicated that production for the fourth quarter was going to be comparable to the third quarter, but that costs were going to be slightly higher.

Can you provide any additional information on why costs will escalate slightly in the fourth quarter?

And then will the slightly higher costs be something that we should be looking at for 2016?

The slightly higher costs are primarily related to the fact that we are bringing TCM online fully, and so reporting on a cost of sales basis, Andrew.

The costs are slightly higher at this point in time.

Once we get tonnage fully ramped up we'll expect the cost to come back more in line.

That's useful.

Just regarding Veladero and the optimized design, you've optimized for grade over the next four years.

I'm just wondering if we look out beyond that four-year time frame, are we expecting there to be an increased stripping requirement to get back into higher grades over a period of time?

Can you give us more insight on how Veladero will look beyond that four-year time frame?

Thanks, Andrew.

Basie has been spending a lot of time in Veladero.

Basie?

Yes, Andrew.

We've looked at two mine plans there, what we call plan 20 and plan 24.

The most optimized for design for us at this stage is to go with the reduced life mine for Veladero and de-optimize.

Which means the life of the mine might be shortened when the final plans comes out.

However, it gives us the best cash flow going forward in the near term.

There is the opportunity still for us in the next planning cycle, and the guys are already starting to work on that, to look at what needs to be done to get that -- but step back into place again.

It will all require additional capital spend in later years, and that's a trade-off study that the guys need to do between now and the next planning cycle.

Can you give us a sense of how much the mine life is potentially shortened?

Those are the studies the guys are doing, the trade-offs at the moment.

But it will be two or so years.

So this is something that we'll expect to get more information from at year end?

Absolutely.

Thank you very much.

Jorge Beristain, Deutsche Bank.

It's actually Chris Terry here.

I had a couple of questions relating to slide 9 on the cost out target.

Thanks for giving some more clarity on the breakdown of the pie there.

Just wanted to check that the like for like is done post the asset sale that you've completed in 2015?

I mean obviously corporate costs have come down from some office restructures probably related to those deals.

But everything else is done on like for like.

And then just following on from that.

In terms of the great job you've done at reducing the debt and nearing the targets for the year, now that you are generating free cash flow, is it fair to say that into 2016 we wouldn't expect another aggressive target?

You're pretty much at a level where you are now comfortable that the operations will do most of the deleveraging of the balance sheet for you?

Chris, I think I would start with the second of your questions.

And the short answer is that we've been able to identify improvements in generating cash, not just at the operating level, but obviously at the corporate level.

And we've tried to capture that just in the summary.

We've actually got internal plans which are focusing more intensely as we go forward on productivity and efficiency.

I expect from 2016 and beyond you're going to see these very data-driven improvements at the site level starting to feed through.

Richard and Basie are really spearheading those, and that will be the next incarnation.

Because there is opportunity.

You've seen the sector as a whole.

I think you see the deteriorating productivities in a relative -- pretty long period of time.

And that's the next frontier we seek to address.

On the first question the answer is yes, we are looking at this on a like for like basis and ultimately just because you sell an asset you're selling the cash flow with that as well.

We're focusing on generating cash to cover the overheads and the costs that this business carries.

We are not trying to game it by selling an asset and selling the cost with this.

This is a window into the improvements that we are driving within this business.

Thanks very much.

Patrick Chidley, HSBC.

Just a couple of questions.

First, a bit of an exploration question just on Hemlo.

You've pointed out that this is a bit of a drilling success story amongst -- across the whole portfolio.

Can you give us some more detail on what's been going on there and is the -- what kind of intersections are you talking about and how close are they to the current operations?

Patrick, I'm going to ask Rob Krcmarov who is with us to comment on that.

As you know, we completed the acquisition of surface and mineral rights next to Hemlo, and they extend for about 4 kilometers to the west of the property.

At Hemlo in the David Williams area underground development, stope mining, and visible gold mineralization, they extend right up to the former property limits in what we call the C zone.

And so we have a high level of confidence that continuity and extending the mineralization beyond the property boundaries was going to be there.

And more recently we've reviewed the core and the data that we've acquired with the property and it confirms the potential.

And really much of the existing but sparsely spaced drilling on the property is broadly consistent with those that we've encountered in areas that we've been mining at the Williams portion of the Hemlo mine.

So our initial drilling has been encouraging, and a key point is that the mineralization is very close to development and can be mined fairly shortly.

So I think we'll continue to add reserves there for many years to come.

So sort of a strike extension onto a neighboring property?

That's right.

And there's about six other areas where we expect to see extensions both underneath the B zone, underneath the C zone, up closer to the surface, plenty of potential there.

Thanks.

And anywhere else in the portfolio that you're highlighting for geological increases and reserves, not just economically defined but geologically defined?

Yes.

So some of our key exploration projects, for example, starting off around the mines, I think many of them really still have good potential for remaining reserve and resource additions.

But if I had to highlight some, instead of organic growth we've got options to increase the production from the TR shaft and Cortez underground expansion.

Lagunas Norte Sulfides, that could extend the mine life by about 12 years or be at lower levels than today.

We've also got good potential to convert resources to reserves in the next five years at many of our operating sites.

And looking further ahead and farther afield in what we call global exploration.

I think there is still tremendous upside elsewhere on the Cortez property, and that includes extensions of high grade mineralization at Goldrush and the Four Mile Project.

And that's roughly about 1 km to 3 kilometers further north of Goldrush.

That's in a geological position that's somewhat analogous to the high-grade deep post and deep side deposits which are near Goldstrike.

And also like at Goldstrike adjacent to an intrusion, some very recent wide-spaced drilling intersected mineralization well above Goldrush's average M&I resource grade.

And then in Chile while drilling will resume any day now at Alturas after the spring thaw, we've learned a lot at Alturas and we will be applying that to ongoing exploration on both sides of the border.

I think a key point to highlight is that our non-mine exploration is really seeking to find better deposits from those in our existing and already strong project portfolio.

Thanks, Rob.

And that extension at Goldrush, is that close to where you're planning to start that decline?

It is.

It would be closer to what's currently planned as a decline portal.

Okay.

So you found similar mineralization up there really?

It's actually higher grade than what we've encountered, than the average M&I grade.

We don't really know.

If you project directly a long strike from Goldrush, it looks like it may be turning a little bit.

That was a surprise or that was something that you knew about from previous exploration?

No, it was a surprise.

This was a very wide spaced drilling.

This is a significant extension well north of Goldrush.

And the drilling was spaced 200 meters apart.

So very widely spaced.

Excellent.

Thanks, Rob.

Just more question if I may.

Just on to Shaun maybe.

In terms of your inventory, you're obviously decreasing your inventory.

Can we expect that trend to continue at similar rates, or was this quarter special?

I'm really hoping we will continue to see improvements through next year if not at similar rates perhaps even better.

We're looking at opportunities not just at the site level but throughout.

So the short answer is yes.

We are targeting this and there are areas for more opportunity.

There are no further questions at this time.

I'd like to turn it back over to Mr. Dushnisky.

Thank you, operator.

And thank you, Patrick, for bringing us to the end of the call.

I would like to thank everybody for joining us today, and we look forward to speaking to you again when we report our year-end results.

Thank you very much.

Thank you.

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