巴里克黃金 (GOLD) 2016 Q1 法說會逐字稿

Welcome to Barrick's first quarter 2016 results conference call.

(Operator instructions)

As a reminder, this conference is being recorded on April 26, 2016.

I will now turn the conference over to Angela Parr, Vice President of Investor Relations.

Please go ahead.

Before I begin, I'd like to highlight that during the presentation, we will be making forward-looking statements.

This disclaimer slide includes a summary of the risks and factors that could affect Barrick's future performance, and their ability to deliver on these forward-looking statements.

A review of our most recent AIF will provide you with a more complete discussion of these risks and factors.

This conference is being recorded and a replay will be available on our website, barrick.com, tonight on April 26, 2016.

With that, I'd like to turn over to our President, Kelvin Dushnisky.

Good afternoon to everyone on the call, and thank you for joining us.

I am here today with our Chief Financial Officer, Shaun Usmar, and our Chief Operating Officer, Richard Williams.

As many of you know, this is Shaun's last day with Barrick.

Shaun, we want to thank you for all your many contributions to the Company, and wish you all the best in your new venture.

Shaun will be succeeded as CFO by Catherine Raw, who is also here with us today.

I am also joined by two of our GMs, Matt Gili from Cortez and Jim Whittaker from Lagunas Norte.

Matt and Jim will review the performance of their respective operations, and they will also comment on the updated technical reports we filed for Cortez and Lagunas Norte.

In addition, we have a number of our other mine general managers on the line, who will be available to answer questions later.

This morning, at our annual general meeting, I discussed strategic goals that define our efforts to create long-term value as measured by free cash flow per share.

The first goal is building partnerships of depth and trust with both external and internal stakeholders.

You've heard us say that transparency is the currency of respect.

We think that's an important starting point, and it is our goal to be as transparent as possible.

The second is to produce industry-leading margins.

Through a continuous cycle of improvement and innovation, we will expand our margins, which in turn will support our ultimate objective of growing free cash flow per share.

The final goal is superior portfolio management.

We will measure our production by quality, not quantity.

We will apply rigorous capital allocation criteria and discipline to ensure that every dollar we invest generates the return we expect for our shareholders.

We will continuously look for opportunities to upgrade the quality of our portfolio by discovering new reserves and resources through world class exploration programs, developing our robust project pipeline, and by carefully assessing opportunities in the market.

As we did last year, we've established four priorities for 2016, and just like we did last year, we intend to stay sharply focused on them.

Our first priority is to continue our emphasis on capital discipline.

Requests for capital are rigorously evaluated through commercial, technical and peer reviews even before they advance to the investment committee, where they undergo another round of detailed evaluation and analysis.

As we progress through the year, we'll continue to subject our spending plans to rigorous review as we try to identify additional savings opportunities.

The second priority is growing free cash flow per share.

This year, our goal is to generate free cash flow at a gold price of $1,000 per ounce, and we're well on track to getting there.

Our third priority is to continue to focus of improving our balance sheet.

We intend to reduce total debt by another $2 billion in 2016, using the same three levers as we did last year, drawing on our existing cash balances, delivering free cash flow from operations, and selling non-core assets and potentially creating new joint ventures and partnerships.

Our fourth priority is all about operational excellence.

Our mines are among the lowest cost in the industry, but we know they can do even better.

We set a goal to drive our all-in sustaining costs below $700 an ounce by 2019 through our Best-in-Class [ore] productivity improvement initiative.

We made solid progress in each of these priorities during the first quarter.

We've been prudent in our capital allocation decisions, resulting in lower capital spending in Q1, with additional capital savings identified improved for the rest of the year.

We generated $181 million in cash this quarter, our fourth consecutive quarter of free cash flow, and we had adjusted net earnings of $127 million.

We further strengthened our balance sheet, with $842 million in debt repayments this quarter, and we remain on track to achieve our $2 billion target in total debt reduction for the year.

And finally, we are very pleased with the early results we're seeing as we implement Best-in-Class across the Company.

Costs across the portfolio continued to trend down, and we've reduced our guidance ranges for the year on an approved cost outlook.

Our financial and operating performance in this first quarter has been strong, as Shaun and Richard will discuss now in more detail.

Disciplined allocation of capital was central to our success and fundamental to our future growth plans.

During the quarter, we established a growth group, capitalizing on the experience and strength of our exploration, corporate development and finance leaders, with a mandate to develop an integrated growth strategy.

We are evaluating how to maximize the growth potential of our existing operations and projects, and how best to sequence that growth, and we are looking at long-term organic Greenfield exploration in addition to external opportunities.

On the exploration front, we're building a comprehensive mineral database updated with real-time data.

When complete, this will enable us to evaluate and prioritize all emerging opportunities and act on them to capture early value.

We analyze and schedule our projects according to priority, the likelihood of success, and our ability to finance them, allowing us to determine a development or exit strategy for each.

Of course, we also look externally at projects and opportunities to provide seed financing or to create partnerships.

In fact, building partnerships is core to our business, and we intend to do so early on with projects of interest.

At this point, let me hand it over to Shaun Usmar for a review of our financial performance.

Thank you, Kelvin.

We started our journey last year on prioritizing cash flow over production, reducing capital intensity through disciplined capital allocation, shrinking overheads, releasing working capital, and focused on generating minimum cash margins per ounce through better planning.

We're delivering against these financial objectives, generating our fourth straight quarter of positive free cash flow, and around $380 million higher free cash, in Q1 2016 versus the same period last year.

Despite recent robustness in gold prices, we continue to drive financial discipline across this business and focus on targeting being free cash flow breakeven below $1,000 an ounce this year, by delivering on our mine plans and minimum cash margins per ounce, improving productivity, and further reducing our capital intensity.

As you can see, we are making good progress.

We needed over $1,300 an ounce gold price at the start of 2015 to be cash flow breakeven before we embarked on our transformation journey.

That includes dividends and excludes the cash flow we [contact sys] from Acacia and the cash we don't own at PVDC.

2016 was, in fact, the worst in our five year outlook at the time, requiring gold price of around $1,700 an ounce to generate positive free cash.

This was a combination at the time of inadequate capital allocation and a mindset of spending our way to growing ounces and net asset value, rather than truly maximizing cash flow per share and being disciplined about generating a return on the capital we spent.

The results of our transformation efforts was embedded in our 3 year guidance at the start of the year, and is being improved upon this quarter.

Notably, we have achieved a free cash flow breakeven of just over $1,000 an ounce during Q1 2016, and are on track to achieving our objective of being free cash flow breakeven at $1,000 an ounce for the year.

Comparing Q1 2016 against the same period last year points to the extent of the improvements in approach and results, with all-in sustaining costs improved from $927 an ounce to $706 an ounce.

Cash costs reduced from $642 an ounce down to $553 an ounce, and free cash flow now positive at $181 million.

And that is despite low volumes and gold prices in the same period last year.

Our ongoing improvements are reflected in our revisions to our guidance on cash costs and all-in sustaining cost, which have been reduced to $540 to $580 an ounce, and $760 to $810 an ounce, respectively.

Capital guidance has also been improved by around $100 million.

Roughly half of the capital improvement is due to deferrals, with the rest representing reductions in execution capital.

The primary drivers behind the improvements in guidance so far include lower oil and energy prices, as well as favorable foreign exchange movements.

As the Best-in-Class programs at the sites gain momentum, we anticipate the associated improvements in productivity, costs and efficiency to result in further improvements to our outlook through the year.

Catherine and I have had an excellent handover during the past six weeks, and she will be building on the financial transformation that Barrick has undergone this past 15 months and taking it to the next level, with a rejuvenated and motivated team of finance professionals supporting her.

You can be assured of ongoing financial discipline, and her background makes her ideally suited to help Barrick on this next stage of its journey, targeting value accretive growth and effective capital allocation.

The improvements of our balance sheet remains one of the top near-term financial priorities for the Company.

As we continue to boost cash margins and improved productivity, and exercise financial discipline on capital allocation, we will continue the debt retirement trend towards achieving our midterm goal of $5 billion.

We are as committed to achieving our debt reduction target this year as we were in 2015, and have already achieved 42% of the 2016 target, primarily from the proceeds of the Nevadan asset sale.

Since we embarked on the debt reduction journey in early 2015, we've repaid nearly $4 billion in debt through a combination of net proceeds from asset sales and the PV stream, operating cash flows and cash on hand.

Annualized interest payments have been reduced by around $180 million as a result of debt repayments since the end of 2014.

The liquidity of the Company is its lifeblood, and essential to its financial stability over the long-term.

In 2015, we elected to prioritize improvements of our near-term liquidity with our liability management efforts, to allow the Company to weather any foreseeable gold price environment, and continued this approach into this year with our debt reduction effort.

The team now has more flexibility, looking to the future, to reduce low-cost, long-dated debt, refinance short-term debt or to continue to reduce our nearer-term [callous].

We now have less than $200 million due before the end of 2018, and manageable maturities over the next 5 years, and we will continue to look for opportunities to reduce our debt even further.

We have been successful in retaining a low coupon rate, despite extending the average tenor of our public debt by more than 2 years.

The continued strengthening our finances relies on our ability to run our operations as efficiently as possible.

So for more on that, I will hand it over to Richard Williams.

Okay, thanks, Shaun.

When I last delivered on Best-in-Class, we were in the midst of a rollout.

It is now live, and it is delivering real effect.

Importantly, it is now embedded as part of our operating system.

And although it is centrally managed, it is a key part of our decentralized operating model.

Operational leaders and their teams at the mine sites are now properly incentivized to deliver real improvement towards Best-in-Class performance, from ideas that they generate themselves or from ideas that are shared between sites.

In contrast to before, greater than 90% of our conversation is now related to business improvement in a deep sense, from talent, how to change it, to systems, how do improve it, to mine systems to machinery and more.

In the past, it was more about simply delivering against plan.

And now, as a result of this cultural change, we're seeing much more focus on execution and planning improvements in a dynamic and exciting way.

Critical to all this is transparency on opportunities, progress and risk, achieved through improved data gathering and analysis, as well as through a cultural shift, the latter being the most important.

We now operate as one team seeking continuous improvement, as opposed to a bunch of miners on a mine site trying to gain the corporate center, in ways that secure individual performance scores but don't secure optimal portfolio performance.

Mine leaders also cooperate across the portfolio with each other, sharing in ideas and resources, and sacrificing, occasionally, individual scores for the greater good when necessary.

From the center, we evaluate performance monthly and compare it to Best-in-Class benchmarks and behaviors.

And as a result, both behaviors and actions are changed accordingly and immediately.

Improve or leave is the mantra, improve and get rewarded is the counterpoint.

This is not some centrally generated task list produced by technical services, as in the old model, aging examiners marking the essays of students, if you like.

Rather, it's a system designed to harness the initiative and insight of those who are the most creative and closest to the source of the problem and the opportunity.

The brightest teams that we can put together, on the ground, full time.

And to that end, accountability rests 100% with those operations, and they're stepping up to the plate, as is always the case.

And that has become our custom through the BPR.

We meet regularly to jointly evaluate our progress.

Once a month are our optimizations studies, and GMs and EDs across the sites work together to achieve all of this in the way that I've just described.

Now, we've made a good start in the first quarter of this year, and I'll highlight some of the general areas as reference before we hand over to some of the general managers.

Working with our supply chain team based out of Henderson, we consolidated our sourcing procedures in Nevada.

Combined with a dramatic reduction in the total number of suppliers, this has not only simplified our internal processes, but improved the pricing we receive.

We've been over-paying for years for stock, and this is changing and changing fast.

And with a move to more proactive maintenance procedures, we were able to lengthen our lead time for spares ordering, again improving prices, but more importantly reducing inventory.

It is amazing how far behind industry best practice we as a Company had become, but we are moving fast to catch up lost ground, learning from others.

At our investor day, Michelle gave you a very simple example of how we are increasing [winch] time in the maintenance team.

Such small steps, done everywhere, add up to a lot of dollars.

And these types of labor efficiency initiatives are being rolled out across all departments, and all our work force are engaged in achieving them now that we have tied them to compensation for these more demanding targets.

And in addition, we've taken an intense cross-portfolio look of both operator and leadership excellence.

The former, the operator, getting the most from every [act], increasing labor intensity, and the latter ensuring that supervisors and bosses spend a minimum of 50% of their time actually leading their teams in ways that are enhanced by training, rather than feeding the bureaucracy from behind their computers.

And at the same time, the continual scrub of our capital plan, improving our capital intensity, with its corresponding effect on all-in sustaining costs.

I am very pleased now with how the team has stepped up to the challenge, One Team.

Good people, given the right opportunity and incentives, can do great things.

And for some color, I will hand over to Matt Gili from the Cortez Mine, where Best-in-Class was first rolled out this year, to provide you with further insights.

Thanks, Richard.

Cortez had a strong first-quarter start to 2016.

While heavy snowfall impacted open pit operations, this was offset by contributions from the underground.

You will recall underground productivity enhancement was a big focus in 2015, and we are continuing to see improvements here.

Based on our strong first-quarter performance and improved cost outlook, we are revising 2016 AISC guidance down by around $60, to $580 to $640 per ounce.

With production expected to remain at around 950,000 ounces, the bulk of this savings is in reduced total operating expenses, which should also reflect in lower cash costs.

Despite the identification of potential reductions in capital expenditure, we still expect to incur higher sustaining capital this year than last, the bulk of which relates to water management projects and open pit mobile fleet maintenance.

As Richard said, Cortez had the distinction of being the first in line for Best-in-Class.

Each of our three divisions adopted a different strategy on how to deliver on this.

The open pit is focused on decreasing gross spend while maintaining their current production profile.

All of our efforts are concentrated on the ore producing benches, which increased stripping not necessary until later in the year.

Emphasis here is on producing ore with reduced gross spend.

The underground is focused on increasing volumes while maintaining current gross spend levels.

Very different approach.

This is all about maximizing efficiency by increasing the number of ore [headings].

Now, the strategy for the processing division is positioned between these two.

A strong focus on increasing operational efficiencies and lowering costs while simultaneously ramping up volumes.

We are increasing the tonnes per hour through the sag mill, to increase tonnes processed through the plant, with the incremental tonnage coming from existing stock piles.

This has the added benefit of reducing working capital.

Lastly, I would like to give an update on the Deep South pre-feasibility study results.

The study supports the conversion of 1.7 million ounces, at an average grade of 10 grams per ton, at Deep South, a significant endowment that has the potential to extend mining at Cortez underground into 2028.

Now, the CapEx estimates included in the report were based on the life of mine plan in place to support our year-end reserve statement.

Subsequently, we have made improvements to the mine plan that resulted in the deferral of certain CapEx.

It is this optimized plan that is reflected in the guidance provided by the Company in February for years 2016 through 2018.

The technical report also details the change in mining method with long hole stoping now planned for Deep South.

We expect this will reduce our underground mining cost per ton for Deep South by about 20% when compared to the cut and fill method currently utilized in the Cortez Hills underground.

Lastly, I can confirm that the permitting has commenced, and is tracking to our expectations.

I'll hand over to Mr. Jim Whittaker now to take you through Lagunas.

Great.

Thanks, Matt.

Over the quarter, we systematically improved our gold recovery through improvements in final recovery circuit of our processing plant.

We also successfully renegotiated a number of major contracts that were entered into at a higher point in the gold cycle.

The combination of these efforts allowed us to achieve a solid quarter of low-cost production, and we are tracking well to guidance.

Over the remainder of the year, we will be focused on equipment productivity and improved maintenance practices.

As you know, we completed a feasibility study on a plan to extend the life of Lagunas Norte by about 9 years, by mining the deeper refractory ore that is sulfitic in nature, and we are releasing the technical reports supporting this study about a month back.

The report provides a helpful timeline on our development plans, and from that, you can see that the bulk of the spend will be from 2018 to 2020.

Two things you should be aware of on CapEx.

Firstly, we are taking a staged approach to this project, with the aim of deferring capital spend, where possible, to reduce risk.

That is also evident in our two-stage feasibility study.

Secondly, the closure costs are not actually included in the CapEx, but are accrued for in the cost.

However, what is pleasing to note about this sulfide project is that it is not only deferring closure costs, but is expected to reduce them.

We still expect firm -- first gold production in the late 2021, with solid levels of production out to 2027 and tapering off thereafter.

Since the start of the year, we have been doing some RC drilling on the sulfides, as we hope to see some upside in the current grade distribution.

Obviously, we will continue to report on this as we go through the process.

I will now hand back to Richard to take you through our other operations.

Okay, thank you, Jim.

On to Goldstrike.

As many of you know, Bill MacNevin joined Goldstrike earlier this year from Lumwana to refocus the operation on productivity and cost cutting.

Year to date, I am pleased to say that Goldstrike is on track and focusing on structured improvement through the Best-in-Class process.

That said, the mine has had some issues in the first quarter on plant availability, which combined with the lower grade area they're sequenced in, impacted unit costs.

Capital improvements of around about $40 million in the quarter were made on developing [Arturo] and our underground operations, pretty much in line with what we guided at the year end.

TCM performance continues to improve, and Bill's effort there has been important.

Our understanding of the chemical processes in this recovery technology are now very solid, but there remains room for improvement on the physical processes.

With some equipment upgrades planned, we still expect to achieve design throughput of 11,000 tonnes per day and a recovery of around 70% by the third quarter.

On to PV.

With the oxygen plant's power issues behind us, PV has had a very solid quarter.

Costs are tracking down as energy, fuel, and most importantly contractor costs are reducing, and PV is reducing the use of their contractors in an effort to increase their labor intensity.

As I said earlier, it is an important part of the Best-in-Class.

Silver recoveries are around 50% in the quarter, and these lower levels are a function of limited availability and ancillary processes in the plant, specifically the circuits that control the slurry temperature.

That said, when the plant is running at design capacity, the recoveries are over 80%, and we continue to target these higher recoveries in the second half.

Turning now to Argentina.

Veladero has had a solid quarter, with most of the underlying operating trends improving.

With a buildup of inventory on the leach pad, production was impacted, but this is expected to be released as the year progresses, resulting in higher production from the second quarter onwards.

Progress on key 2016 cost initiatives and productivity initiatives continues, and this includes reducing the cost (inaudible) contractors again, and we increased the amount of maintenance we manage in-house.

The Veladero team has been aggressively focusing on upgrading the mine plan to optimize short-term benefits while maximizing the full potential of the asset.

And this includes stretching the technical limits for crushing and conveying, along with selective high wall steepening.

As discussed at our investor day, increasing the high wall steepening has the potential to dramatically reduce stripping and improve cash flows from this mine.

As the Argentine economy and business confidence improves, operating expenses are expected to be favorably impacted.

This benefit will be supplemented by the government's decision to lift import restrictions and an elimination of the export duty, both of which were announced in late 2015.

Result of this is we reduced our all-in sustaining cost guidance for the year by around about $30 an ounce.

Now on to the third of our Nevada mines, Turquoise RIdge, which continues to challenge itself to increase volumes.

Daily tonnes mined was sustained at 1,850, which you will recall was -- increased the technical limit that we identified as we went through the expansion study.

However, the high-grade ore body at Turquoise is [hosted in] challenging ground conditions, and ground support is critical for safe mining.

And we made it our priority over the years to improve Turquoise Ridge's safety record, and have been successful in this regard.

Having achieved that important milestone, we are now in the process of evaluating how to reduce ground support expenditure in ways that don't compromise this essential safety record.

Now moving across to copper, returns from the copper area are improving.

We have had a strong performance on cost reduction at Lumwana, combined with improvements in performance on mill productivity, and this is from a brand new mine manager, Sam Ash, that you saw at the investor day.

He's doing very well.

As you know, Lumwana production is impacted by seasonal rains, which are now largely behind us.

And as a result, mine productivity is expected to improve.

In Q2, we expect our Saudi operation, Jabal Sayid, to reach commercial production, and we will give you more granularity on that operation when we next report.

On the back of downward cost trends and revised royalties at Lumwana, we've reduced our cost guidance for copper while keeping production constant.

Our forecasting process is appropriately conservative, and I think this is evidenced in the low gold price assumptions we use.

However, we have progressed in the year.

We are pleased with the positive trends we are seeing in costs, and have elected to revise our guidance downwards accordingly, both in gold and copper.

As we continue to [embed] Best-in-Class across the portfolio, we expect to realize additional savings opportunities throughout the course of the year, and we will update our guidance accordingly.

Momentum has really only just started to build.

Now on to Alturas.

One of Barrick's undisputed strengths is its exploration expertise.

Alturas, in the El Indio district of Chile, is our most recent discovery.

Our exploration team is so convinced of the rare quality of this project that they completed a pre-scoping study, which indicated all the key fundamentals were realizable, even at this early stage.

Technically, Alturas has some remarkably similar traits to two of our core mines, Veladero and Lagunas Norte, both of which could be both described as giant deposits.

Since completing the study, we have undertaken aggressive exploration drilling program focused on three priorities.

The first was to establish sufficient resources with favorable economics for a startup pit.

The second was to confirm continuity of mineralization with in-fill drilling, and the third is to delineate the full potential of this district.

We know, or at least Rob tells me from the other systems, that these types of deposits can tend to cluster.

And we're now at the final stages of our field season, and have completed over 70 drill holes in Chile and a further 8 holes on additional targets in Argentina.

And the results are meeting, and in some instances exceeding, our expectations.

It is easier to demonstrate these results in a section on the next slide.

This is a section through the central part of the deposit, highlighting some recent significant results which have not been incorporated into the resource calculation.

On the left, which is the west, is a shallow and high-grade intercept of 83 meters, at 2.63 grams a tonne, which is double the resource grade and starts from around 30 meters, which could not only reduce the strip ratio but also define the location of the starter pit.

In the center of the deposit, we are confirming strong and continuous mineralization.

And to the east, two holes highlight the potential, either for a new system or areas of very high grade within the Alturas deposit.

So from this, you can see we are establishing optionality within this -- by this drilling at Alturas.

But our goal for this project is aligned with our philosophy to stage development of projects, and is still very early in this deposit's life.

The next steps for Alturas is to complete the scoping study towards the end of this year, and assuming positive fundamentals, progress this through to pre-feasibility next year.

And with that, I'll hand back to Kelvin now to wrap up.

Thank you, Richard.

Our year is off to a good start.

We are delivering on our priorities, and that is reflected in strong operating results and cost management.

With a strengthening balance sheet, we are not only more resilient but better placed to progress the growth opportunities we have in front of us today.

At our AGM this morning, the Company welcomed two new Directors to our Board.

One of them is Graham Clow, Chairman of Roscoe Postle and Associates.

Graham has more than 40 years of experience in all aspect of the mining industry, from building, operating and closing mines, so we know he is going to be a major asset and contributor.

The other is Gary Doer, Canada's former ambassador to the United States.

Given the significant role of our US operations, having a Board member with deep knowledge of the US political and regulatory system is a great advantage.

We look forward to working together with both of them.

That concludes our presentation, and we now welcome any questions you might have.

(Operator Instructions)

Your first question comes from the line of Andrew Quail with Goldman Sachs.

Your line is now open.

Good afternoon, Kelvin, Shaun, Richard and team.

Congratulations on another strong quarter.

I have for a couple of questions here.

First one is about production, and the [whiting] of maybe each quarter -- you can do it on a half basis.

But if you times it by 4 what you guys produce, the low end of your guidance -- within your guidance, but low-end.

Can you give us some more color on which quarters you expect to be stronger, going forward?

Sure, Andrew.

Why don't I pass it over to Richard?

Yes, hi, Andrew.

It's basically going to be the same through each quarter.

We've obviously not quite hit everything this quarter that we wanted to, because there has been a couple of small instances with weather, and it will track up through the year to catch up on that, another little specifics.

But you should look at it basically being the same each quarter, and as catching up on that which we didn't delivered in this particular one.

Okay.

Second question is on Cortez, so I'm glad Matt's on the call.

Matt, it looks like from the [43 101], you guys are going to have a big 2017 and 2018 on better grade.

Looking at Cortez South, and you talked about the study that has been completed.

Is there any way that that can be accelerated to see that drop off in the 2019, 2020, 2021 numbers?

Yes, thanks, Andrew.

Certainly, our intentions are to speed up that permitting and construction phase as much as possible.

We are allocating ourselves the normal amount of time to secure an EIS, and that is 4 to 5 years, and then 2 more years for de-watering and then some further two years for development.

A very strong point for us, and we are doing everything we can to wrap that up as fast as possible.

And last one.

Shaun, thanks for everything over the last couple of years, mate, but I've got one for you.

I just went back and did some analysis on the financing cost, so just interest cost, on a cash basis.

And just looking at so from 2014, when you guys had about $13 billion of debt, you paid about $201 million in cash, in the first quarter, interest.

Now, you have probably got about $9 billion, but you paid [$215 million] in this quarter.

Can you reconcile that for us?

Is that something that will drop off next quarter?

Or is there any guidance you can give -- and maybe throwing Catherine in the deep end here.

But going forward, is there any guidance you can give us on how much interest you guys are going to be paying in 2016?

And maybe going forward?

Andy, yes, hi, thanks for the words.

And the way you need to think about it was the (inaudible) billion of reduction since last year.

Because when you think about this sort of interest expense that we had at that point, annualized rates of cash interest expense right now would be -- or cash interest would be about $180 million reduction.

So in some of those numbers, as you start thinking about the [core key] reconciliation, there is also some interest expense linked to accretion in there, for streams.

And so you just need to strip that out.

I think, from recollection, $25 million or so.

Okay.

Got it.

Thanks very much, guys.

Your next question comes from the line of Greg Barnes with TD Securities.

Your line is now open.

I just wanted to delve into a little bit into what is going on at Goldstrike.

Is it a problem with the biosolfates?

Or is another part of the operation that is having challenges?

So, Greg, listen, Bill MacNevin, the new GM from Goldstrike, is in the room, and I'm -- turn that over to Bill, please.

I've only been at Goldstrike for a couple of months, but I'm very excited at what I've been seeing from both the progress and the talent we've got on the ground.

The team we've put together, a solid program of what we're doing to make sure we can improve the recoveries there.

But fundamentally, there's nothing standing in our way at lifting these recoveries.

What we're doing is two major things.

We've got some equipment to upgrade and replace.

And at the same time, we are putting some improved operations and process controls in price.

So essentially, we're ramping through that at the present, and you'll see the results coming through with that in this quarter and the quarter after.

Is it in the biosulfate circuit that the issue --

It's in the main area where we're focusing things.

It's actually twofold.

Some of the works on the throughput in the grinding circuit, and that is pretty fundamental.

But in the biosulfate circuit, fundamentally, it is with the screens, the physical work, and then just control issues around the circuit.

All right?

(multiple speakers) Recovery issues with the -- are coming from the (inaudible) sulfide, RIL circuit.

Okay, that will do for now.

Just another question for Shaun and/or Catherine, on the cash balance you're carrying.

You have been caring well over $2 billion for a long time now.

It doesn't seem like you need to be carrying that much cash now.

You're well past any problems with liquidity or the balance sheet.

Is that something you're going to look at bringing down and accelerating the debt pay-down, potentially?

Greg, ultimately, Catherine is going to revisit the assumptions in the last year or so, but we have come through a period of quite a substantial amount of volatility, obviously.

We actually did a cash balance -- or minimum cash on hand review just a month or so ago with the treasury team, and really it's -- I think we mentioned on the last call, in fact, for us, on a fully consolidated basis, we concluded about a $1.5 billion to $2 billion is a number we're comfortable with at this point.

But clearly, depending on the price environment and also the variability in gold price and in the underlying asset base, we will be able to revisit that, I am sure, later on.

I think the last point to consider on this is, we have erred on the side of allowing some flexibility.

Of course, we've retired, as you've heard, about $842 million by the end of this last quarter.

From a debt standpoint, we are focused on that $2 billion, and of course, cash on hand remains a very viable area for us as the year progresses.

Catherine, I don't know if you --

Yes, I would just reiterate that comment, and essentially, it's around the volatility of the gold price, managing that with the liquidity.

But as the Best-in-Class improvements come true, as we look at our planning and our forecasting, and become more confident in our understanding, then we will review that minimum cash balance at the time.

Thanks, Greg.

Any other questions?

No, that's good.

Thank you very much.

Your next question comes from the line of David Haughton with CIBC.

Thank you for the update.

Richard, you had said that we would expect to see more a little bit more granularity in the next quarter on Jabal Sayid in the next quarter, but we have not seen much of it for a while now.

Can you just give us some fairly high level numbers as to what you are expecting, as far as the operating costs go?

And given that you would've been mining there already, ahead of your commercial production in this current quarter, wondering what you're seeing from a mining point of view?

Is the grade stacking up to as you would've expected?

Do you get the kind of recoveries that you wanted, et cetera?

No, thank you very much for that.

We are at the phase right now where we're commissioning the plant and when that's all done, and all the various testing has been achieved, we'll then be able to declare commercial production.

But to give you -- as I said, I am more comfortable giving the detail when that has been done.

However, we do have with us, at the moment, one of the (inaudible) we've been working with the [Ma'aden] Group in Jabal Sayid, who happens to be here, who can perhaps give you a little bit of granularity on how the mining is showing, and how the cost management -- and indeed, how the partner is, of Ma'aden, who we are finding to be very helpful in terms of development and how we are understanding.

Brian, (multiple speakers).

Thank you, Richard.

Thanks, Richard.

The Jabal Sayid operation has actually gone very well.

The team has been developing very well there.

We've got a great relationship with our partner, Ma'aden, in the area.

We're working through towards commercial production, as we've said.

The mining is going very well.

The plant is operating very well; it's meeting the expectations.

We're hitting our targets on delivery of product for sales.

We are working closely with the underground contractor, producing and fitting the targets that we've set ourselves.

Now as we go into commercial production, those targets would be more transparent, more itemized, and we will comment on those as we go forward.

Okay.

And very rough figures, we haven't seen what the costs should be like for a while.

Should we be looking at something in the $1.50 per pound region for cash costs?

Is that something that we should be thinking about, or higher, lower?

That is reasonable, at this point, for a cash cost number.

But again, I think as we go forward into Q2 and into Q3, those numbers will become part of our regular conversation here on these calls.

All right.

Just switching now, Goldrush, quite a bit of work underway, I guess now, on a few different fronts.

You have got your feasibility study and your permits.

Just wondering if you could give us an update as to when we could expect something to come out of either the fees, when you are expecting it to come?

And where are you are standing on those permits?

David, I'm going to put that back over to Matt, please.

Thanks, David.

Okay, so for -- regarding Goldrush, our team is progressing very well there.

The first matter, of course, for that is to permit a portal so that we can go underground and complete the resource drilling and compete the reserve delineation from that.

So that is the first matter of course of action that we have.

That is being -- the permitting there is being handled by the Executive Director for North America, Andy Cole.

You'll remember Andy Cole from the Goldstrike days, and very pleased with his input and his ability to secure those permits.

So then as we start to roll through that, as we get the drilling done, that's going to roll into the feasibility study.

It's really -- to complete the feasibility study is really going to be dependent on completing that drilling.

So we're going to keep you updated as we progress.

We hope to start the portals in the very beginning of next year, and we will keep you updated as we progress, David.

Okay.

And what about the fees?

When would we expect to see something like that come out?

It's going to take a good year or two to get the drilling results in.

Once we get the portals into location, and then roll that into a fee.

So the feasibility study is a good 2 or 3 years out.

All right.

Thank you very much.

Your next question comes from the line of Anita Soni with Credit Suisse.

Your line is now open.

I think most of my questions have been answered, but I have two.

The first just regards to Veladero.

How should we think about the leach kinetics, now that the first quarter is behind you?

You had a pretty good recovery rate on relatively low grade.

But at the same time, I think you said it was the first layer that was stacked onto the pad there?

Anita, listen, you are in luck.

We have Rick Baker with us, the GM from Veladero, and he will be happy to answer the question.

Rick?

Thanks, Kelvin and Anita.

During the first quarter, we built a bit of inventory on the leach side, and we expect that that is going to then come out into production in the second quarter.

Okay.

And then, the grade there is relatively low compared to what I think -- prior quarter and my expectations for the year.

Is that going to improve over the course of the year?

The grade is slightly below the average grade of deposit for the first quarter, so we expect that the grade will pick up during the year.

The fourth quarter of 2015 was a very good grade quarter for us.

Okay.

All right.

And then moving onto Lagunas Norte, I think the tech report had about 410,000 to 450,000 ounces for production in 2016.

And I think the guidance is about -- sorry, the opposite way, 500,000 ounces in the tech report versus the 410,000 and 450,000 in the guidance.

Have you pushed out some of those tech report production into 2017 to 2018?

Jim Whittaker here.

That is a very good question, and it is good that we correct that.

The guidance range is correct.

And so the technical report is referring to the mine (inaudible) ounces does not factor in the time line for leach recovery.

So when you are looking at the 503,000 number, that actually would be the mine production coming out this year, but it is not the heat leach production.

Because that is dependent on a leach curve and rate kinetics.

So our guidance, we're well positioned in the guidance from 410,000 to 450,000 ounces.

All right, so that is basically just like contained ounces?

All right.

Okay.

So how long is the leach cycle there?

Leach cycle is about 45 days.

Okay.

All right.

Thank you very much.

Thank, Anita.

I just want to go back quickly to, David, your question regarding Goldrush and the feasibility study.

Just did a quick check, and Q1 2018 is the target for that.

Your next question comes from the line of Kerry Smith with Haywood Securities.

Your line is now open.

Thanks, operator.

I had just a couple of questions.

One, Richard, on -- you talk about this three-phase plan for Turquoise Ridge versus the original plan, which was just to put the whole shaft down.

And the original plan was $300 million to $325 million in capital.

I'm just wondering, with this phased approach, does that actually increase the capital?

Or does it -- does the capital roughly stay the same, but just it's a slower ramp up and it's a bit less risky?

Is that how I should look at it?

Kerry, it's Kelvin.

Nigel Bain is here, from Turquoise.

He is going to respond to you.

We are trying, as much as possible -- you're getting a theme here?

It's we're having the GM, to the extent possible, address the questions directly.

They're there on the ground.

Thanks, Kelvin.

Kerry, to answer your question, yes, depending on the timing, we could increase the capital costs.

We'd see, if we get a good flow of approvals, that we can blend those two phases together and do it -- optimize those capital costs.

Okay, so -- kind of.

So if the CapEx go up with this phase 3 approach, would it be 10% or less or 10% or more?

I'm just trying to get a sense for the magnitude of what it might cost.

We are aiming at zero, but we think we can do it, just sink it, and midway, get approvals to equip it.

And then -- and also have a lead on the long lead items.

A lot of us aspired to a ventilation upgrade that was commissioned in 2015 that would be pretty successful [with too].

So it just feeds into managing the capital, like Kelvin and Richard have been describing.

Okay, okay.

That's helpful, thank you.

And just on, the CapEx in Q1 was $175 million on the [stain] side, and the guidance is -- I think it was $1.25 billion to $1.35 billion.

So should we just assume that the remainder of the CapEx gets spent equally over the next three quarters?

Or might it be weighted to the back half?

Kerry, it's Shaun.

This was a low CapEx quarter.

We've had some deferrals, and with the current forecasting, next quarter is probably looking at being slightly higher.

Having said that, the work that Richard and the general managers and that are doing, one, to improve forecasting, but to also reduce the capital intensity and the quality of the full costs.

I think could see that change.

But I think --

Yes, just to double up on Shaun's thing, the Best-in-Class process that went outlined in [orange] brief was the scrubbing of the capital, he is actually seeing some capital taken out of the annual budget.

And some is -- and it will be a relatively lumpy year, as Shaun outlined, a little bit more in Q2.

But what we're finding in engagement with the general managers -- and our next optimization study is Friday -- is we're finding the capital plans were adjusting the positive side, by which I mean the capital intensity is improving, as we would like it to, not going the other way.

So what we're finding is -- what you will find is, our forecast will change through the year as these processes become more developed.

Okay.

Okay.

And Richard, just on your Best-in-Class -- or your productivity initiative, this Best-in-Class thing, where do you think, generally, you are in that process?

Do you think you're 50% there, in terms of where you would like to be?

Or are you 75% there?

I'm just curious as to where you think you could actually go from where you are today?

I think we are short of 20%.

I would love to say 25%, because it would sync very nicely with the quarter.

But actually, in terms of the process that we put in place, (inaudible) continuous improvement has been part of what the general managers have been doing over years.

We've just obviously removed the layer that existed between general managers and the head office, and we have become much more focused on it now, as terms of a delivery process.

At the end of last year, quite a lot of work was done, and that locked in and benefits were yielded.

But as we look forward this year, we have been rolling out, as Matt outlined.

He is really leading the way, just in terms of sequence.

But in terms of actual effect at Cortez, and the other general managers, as our system is rolled out towards them, that they're getting on the bus as well.

So I would say we are short of 20%, in terms of where we are going right now.

And what I am really looking forward to is, in the next quarter, being able to report, in greater fidelity, the type of productivity improvements by site that we're going on.

And Michelle Ash, as you know, who has been answering some of the questions over the last couple of calls, is driving that for us.

But again, doubling up on a point I made at the brief at the start, this is general manager owned business.

We are helping to enable it, and we are helping to drive it, but all of the ideas are coming from them, at that level.

That is where the talent is really yielding the advantages.

Okay, okay, no, that is great.

Thanks very much.

Thanks, Kerry.

Your next question comes from the line of Jorge Beristain with Deutsche Bank.

Your line is now open.

Congrats on the results.

I just wanted to ask about the guidance or the change in the -- at Lumwana in the Zambian royalty rates.

When you have given us your AISC guidance there of between $1.80 to $2.10, is that already inclusive of the expectation that the royalty rates would be cut from 9% to 5%, roughly, going forward?

Yes, Jorge, it's Kelvin.

It is.

Perfect.

And then my other question was just, in terms of M&A, obviously, it has been great to see the tail wind of the gold price play out across the industry.

But are you guys having as much sense of perhaps internal urgency as you would've had toward pruning your portfolio six months ago?

And I'm talking about assets such as KCGM in Australia or Acacia in Africa.

Just if you could maybe just update us, in terms of what your thinking is?

Is it going to be the same, in a more benevolent gold cycle, than it would have been six months ago?

Thanks, Jorge.

I guess a couple of things.

First of all, as we said last year, and I think that we showed as disciplined sellers, no fire sales on any of the assets, even the non-core assets.

Still, obviously, a robust interest in everything, as you can expect.

But no, we don't deal -- we haven't changed at all our focus.

We outlined the $2 billion target for the start of the year.

We said that non-core asset sales, and potentially partners and JVs, will be part of that.

And so that hasn't changed.

So no different focus.

Whereas, as we were last year, we're going to proceed through the course of the year, and we are confident that we will achieve that number.

And we will go from that.

Okay, and then maybe just one last one.

I just noticed you kept your dividend the same, sequentially.

Other companies out there are starting to raise their dividends a little bit as the gold price recovers.

Can you talk as to what your policy would be for your dividend, going forward?

A Board decision on that, Jorge, but I think the same approach we've taken, low rates, and you saw the announcement today, the Board will reevaluate on a quarterly basis.

But again, the focus has been on getting as Shaun said, volatility, we want to do our debt reduction.

That has been our priority, and will continue to be our priority, as we move through the year.

So you should expect no changes, as far as that goes at this point.

Okay, thank you.

You are welcome.

Your next question comes from the line of Stephen Walker with RBC Capital.

Your line is now open.

Thank you.

Just wanted to follow up on Kerry's question.

Shaun and Richard, if I might, on the capital spending and the rate of capital spending.

My understanding is, as you go through the gating process or the approval process for sustaining capital and project capital, there's a certain amount of iteration that occurs.

How much of the planned capital spending in the first quarter has been approved, coming into the quarter?

And how much iteration occurs, or approval process occurs, as the quarter unfolds, as the year unfolds?

I guess what I'm trying to understand here is, given the lower capital spend, is it fair to assume that number is low because the planning was low?

Or because projects got pushed back to the general managers, for sharpen the pencil, improve return, or this project no longer works?

Can you talk a little bit about that process as it unfolded in the first quarter?

And as you expect it to potentially unfold over the course of the year?

Yes, sure, Steven.

We did a lot of that, really, through last year.

And by that I mean, firstly, scrubbing, call it, the efficacy and the need for all the capital.

But really, in a business sense that was adjusting to, let's say, a more rigorous process, sending things back and working with the respective projects and sites, to ensure that we had something that was robust and really timed appropriately and that is what is reflected in the guidance.

Directly to your question, that is the backdrop.

We did not see a lot of that this year.

I'm thinking, offhand, it is probably like something 50 of these through the course of the year that are going to be going through, and that includes contracts.

The team keeps revising it to say, is this appropriate, how do we balance discipline with bureaucracy?

And we are always trying to strike that balance.

But this was really more a function of some deferrals, and less about things which were not suitably considered and were rejected by the IC.

Great.

Thank you for that, Shaun.

Thanks, Stephen.

(Operator instructions)

Your next question comes from the line of Jeremy Sussman with Clarksons Platou.

Your line is now open.

Hi, and thanks very much for taking my question.

Obviously, you gave detailed all-in sustaining cost guidance, beyond 2016, in February at the investor day.

Should we be flowing through similar savings to, say, 2017 and beyond?

That we are now seeing in 2016, relative to what you were expecting in 2016 before?

Look, we haven't changed our guidance for 2017 or 2018 at this point, so we'll assess at the end of the year.

And if there are adjustments to be made, we will do it then.

Okay, great.

And just a quick follow-up.

This is probably for Matt.

Matt, thanks for the brief rundown of what you're seeing on the cost side at Cortez.

With that said, it does seem like clearly, that is where the biggest reduction in your 2016 all-in sustaining cost guidance is coming out of any of the mines.

Can you just maybe give us a bit more detail of, say, one or two key things that have changed, in particular, over the past quarter?

Yes, certainly, Jeremy.

Okay, so you are looking at about a $490 per ounce reduction in AISC, from Q1 of 2015 to Q1 of 2016.

Of course, very pleased with that reduction, and a lot of hard work from the team.

About $70 of that $490 reduction is attributable to reduction in spend, [along with] some sustaining capital, some gross operating expense.

A series of initiatives, mostly focused around reduction and cost in the open pit.

The other $420 is just a reflection of increased volumes.

If you will reflect back to first quarter 2015, it was a particularly low-volume quarter for Cortez, with the open pit being in a strip phase.

So those two things together add up to the $490.

Understood.

Thanks very much for the color.

Thanks, Jeremy.

And there are no further questions at this time.

I will now turn the call back over to the presenters.

Thank you, operator, and thanks, everybody who joined us on the call today.

We are very pleased with our momentum, and we'll look forward to updating you on our progress on our Q2 call.

Thank you.

This concludes today's conference call.

You may now disconnect.