Kinross Gold Corp (KGC) 2003 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Kinross Gold Corporation fourth quarter and year end results conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session and instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties during the conference please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded on Tuesday, March 2, 2004 at 11:30 a.m. eastern time. I will now turn the conference over to Mr. Robert Buchan, President and Chief Executive Officer. Please go ahead, sir.

Thank you. And good morning. I'm very pleased to present these financial statements to you yesterday. We weren't able to have our conference call yesterday. The board was actually in Chile visiting the Refugio mine and and also La Coipa and we got back from Chile this morning. Anyway the key statistics we are likely to focus on is clearly the return to profitability with earnings of 9 cents a share in the fourth quarter and a 6 cents per share number for the full year.

Most importantly from my perspective is the reserve increase at the $325 number, up 7.5% to 14.1 million. But probably more importantly, looking into 2004, we expect that the Brasilia expansion that we have with RT Zed, the Brazilian mine with RT Zed, we expect that expansion to be approved in the second quarter and we also anticipate the completion of the purchase of the BuckHorn mine from Prime Resources in the second quarter and those two events alone will replace reserves mined in '04.

Now you add to that, reserve expansions that are fully anticipated to come from infill drilling at Gold Hill, infill drilling at Puren, detail drilling at Kettle River, taking the Roopie(ph) from a resource to a reserve, the significant increase in reserves and resources that were seen at Clishon(ph) and further expansion of reserves at Kubaka, Musselwhite and the Porcupine Joint Venture. These alone, you should expect to see our reserves increase to over 60 million ounces based on, again, $325 gold price by the end of '04. We are also doing some detailed work on taking resources to reserves at higher metal prices and they require info drilling and that could result in further significant increases being seen.

One point I would also like to make is that our DD&E charge has been going down consistently as we have been able to replace and improve our reserve picture. In 2002, our DD&A charge was $101per ounce. It dropped to $91 an ounce in '03. It is budgeted to go to $86 an ounce in '04 and with the expansions that we have on the books, it would be expected to go lower in '05. The production schedule for 2004, we've identified as a little over 1.7 million answers and you should expect to see quarterly increases throughout the year as the various mines come on full stream.

With the first quarter being similar in size of output to the fourth quarter, with slightly higher operating costs. The production levels will increase and the operating costs will decrease as the Lupin, which started in March, the Kettle River started in January, and Birkachan in February, come on to full production and stabilize at their operating costs. Without introduction I'm going to hand it over to Scott Caldwell who will review the operating statistics for the quarter.

Thanks, Bob. As you can see the operations had a strong quarter producing 406,000 ounces of gold equivalent at a total cash cost of $215 per ounce. I will spend a few minutes discussing the operations in more detail beginning with Fort Knox. The Fort Knox mine produced lightly more than 100,000 ounces at a total cash cost of $223 per ounce. Production was below what we had hoped for due to lower than planned gold production from the True North deposit.

Total spending was as per plan. Looking forward, management is confident that we have accurately predicted the performance of the remaining True North ore. We have made the decision to delay mining of True North ore and waste in order to utilize this mining equipment to do work on a plan Tails Dam lift. Why? Contractors are in great demand right now, earth moving contractors in Alaska. And their bids are very expensive.

The fleet will place a portion of the course rock fill required on the dam, reducing the overall capital costs of the dam. Contractor that's being mobilized at present will of course see the finished work on the dam. By that I mean the clay core, the filter material, et cetera. The capital cost savings resulting from this decision will offset the cash flow lost in 2004 by delaying the True North ore for several months. The Fort Knox team is confident that we will meet or exceed the 2004 guidance given yesterday. We will spend a couple of minutes talking about Round Mountain.

Despite problems with a failed transformer, the team at Round Mountain had another great year exceeding expectations for the year. The way the team was able to respond to the transformer issue, by changing ore feed schedules, is a credit to the team and a fine example of how a good ore body can give the operators flexibility. We are looking forward to another great year at Round Mountain, meeting expectations in 2004. Porcupine joint venture had a very good year despite the strength and the effects of a strengthening Canadian dollar.

It still produced more gold at a lower cost than we were hoping for. Looking forward to 2004. Work is on schedule in the Pamour project targeting ore production in 2006. The joint venture management is confident that production and cost goals will be met in the year. Talking about New Brit mine for a few moments, the New Britannia mine continues to struggle. The ore body is flattening at depth causing increased hanging wall dilution, lowering the mill head grade.

The team at site has done an excellent job on containing operating costs. Kinross and our joint venture partner, High River, are closely monitoring the situation and will take appropriate action if required in the future. Kubaka. Despite some short-term production problems in the underground operation, we are confident the underground program will exceed our expectations. We will produce more gold at a lower cost when the project is completed. Mining at the Birkachan deposit has begun. The first store will be mined late in the first quarter and shipped to the Kubaka mill.

As work at Birkachan advances, our confidence in the deposit grows. The management has decided to permit and construct an all season road with a bridge connecting Birkachan and the Kubaka mill. This will allow us to transport ore from Birkachan to the mill year-round. Lupin. Mining of the development ore, the developed ore at the site will begin in March of 2004. The mill will be started up and we plan on pouring gold this month, March of 2004. The mining is going to be performed by a contractor. Kinross personnel will operate the mill, power plant and other surface facilities.

Kettle River. First gold pour took place in December of '03. The mine is at targeted production rates. The mill startup went very well and it is milling at planned rate. The Manuel deposit is performing as expected, although we haven't mined that much of it but it is performing as expected. And perhaps some exciting news, recent exploration success, and you can see that from the ore reserve table, but Ron has been able to extend the life of this deposit through 2005. Hopefully it will bridge with the BuckHorn deposit as Bob has mentioned.

In Brasilia, the mill expansion feasibility study is nearly complete. It will be completed by mid year. Prior to mid year a decision will be made on whether we go forward or not with the project. It is a very robust project. We are really excited about it Rio Tinto will approve it, and see what happens go forward. Refugio. Construction on the extensive retrofit of the plant has begun. Site construction management is in place.

The operational team is coming together and we are ready to start the operation in the fourth quarter of 2004. The EPC contractor is in place. Orders have been placed for long lead time equipment. And as Bob mentioned, the Kinross board was there for a site visit and review of the project. And I think they are very pleased with what they saw. In summary, the operations had a good solid fourth quarter.

The worldwide operating team is in place to meet or exceed our overall production and cost goals laid out for 2004. In fact, two milestones were met in the first quarter. The first, Kettle River Mill, it is already in full production. Mining going very well at Emanuel. The second, mining of the developed ore at Lupin will begin in March of 2004. That's all I've got, Bob.

Thank you, Scott. In conclusion, we're very confident that we have the people in place, we're very confident that we have the tools in place to deliver on the deliverables that we have for '04. We have a strong financial position with well over $200 million in cash and no debt. We're highly focused on reserve growth, particularly from the drill bit rather than from the market. And with that I open it up for questions.

Thank you, one moment, please. Ladies and gentlemen, we will now conduct a question-and-answer session. If you have a question, please press star one on your touchtone phone. You will hear a three tone prompt acknowledging your request and your questions will be polled in the order they are received. If you would like to decline from the polling process, please press star two and please insure you lift the handset if you're a speakerphone before pressing any keys. One moment please for your first question. Your first question is from Kerry Smith from Haywood. Please go ahead.

Thanks operator. I had a couple of questions. One, could you tell me about what the maturity of 50,000 ounces of calls that you sold in '04 is? I'm just trying to figure out what quarter that is going to come out in.

That is the end of June 2004.

So it will all come in Q2 then?

Yup.

Okay. Great. And the second thing, can you give any guidance on what the capex might be for the expansion of Brasilia?

Yeah, to 100%, approximately $80 million.

Okay. And the third question I had, Scott, was Plaster Dome has already said in their quarterly call that they approved the Pamour Pit. I guess they're waiting for you to approve it. Is that where it sits?

Yes, the Pamour Pit expansion was approved by the Placer board late last week. And our board, as soon as we receive the final information, we will vote on that project.

Okay. So you're still waiting for some --

It was just approved by them I think Friday. Thursday or Friday.

Okay. And the last question, for Bob, just to sort of a general question, just in terms of '04 guidance for capex and G&A. Your G&A was pretty high in Q4, and it seems higher than I thought it would have been. I'll just wondering what the guidance will be for '04 and what the capex guidance will be.

The G&A guidance for '04 is 18.5 million. There were quite a few issues in the year relating to new compliance regulations, much higher level of accounting costs, some severance charges, there was a debt at Lupin from past that was $250,000. There was a bunch of things like that That came into the fourth quarter. And there was a bonus pool, but it was only like a million dollars or something in the fourth quarter. So the number of 25 million, we are still holding at 18.5 million dollar G&A budget for '04.

Okay. And how about cap ex?

Capex is 165.

Okay.

Kerry.

Hello?

This is Scott. Sorry, the capital costs for the mill expansion is estimated at 70 million to 100%.

Okay. That's for Brasilia. Okay, great. Thanks, Scott. Thank you very much.

Your next question comes from Joe Hamilton from RBC Capital Markets. Please go ahead.

Hi, gentlemen. Could you tell me what your realized gold price was in Q4?

We didn't have Q4. We had 257 on the year. 357 on the year.

Tom, are you on the line that you can answer that one ? We will come back to it, okay? We've got our guys in Toronto working on it right now.

Okay. Thanks. When I try to back out of your financial statements, I end up with a number that doesn't match the average for the quarter so I was just wondering what the deviation was. The only other thing on the cash flow statement, operating cash flow doesn't seem to total to the number, at least the column above it. It is out by about $2.2 million. I'm just wondering if there is a line that was missed on the press release or not.

Are you looking for the quarter or --

Yeah, for the quarter. Quarter and year, they're both out of balance. Maybe you can come back to me on that one as well and we can move on to a few other questions.

Okay.

Thanks.

Your next question comes from Steve Butler from Canaccord Capital. Please go ahead.

Thanks. Good morning, guys. Just a couple of questions relating to resource or reserve addition, in particular Kettle River. In the reserves you have 181,000 ounces, I assume that is eManuel Creek itself. Is that excluding anything from the eManuel creek north? Or could you give us a sense for --

No reserves at eManuel creek north as of yet.

Okay. No resources either, Bob?

No, there is a resource number.

There is?

It is inferred.

Okay.

Resources on eManuel north are inferred at this stage and we've got a drill campaign to upgrade them into M&I this year.

Do you have a sense for how many ounces are there, Ron.

Loosely the target is about three times the size of eManuel Creek so 3, 400,000 ounces, 500,000 ounces, something like that.

And Puren North or Puren itself, do you know what the reserve was this year?

I don't have that in front of me.

Okay. Any sense for how much reserves may go up at Paracatu or Brasilia for the mill expansion?

I think the mill expansion at Brasilia adds about a million and a half in total. If you go back to our exploration update conference call, there is a slide there that gives you the tonnage increment, which from memory is about 140 million tons or something like that. So I think it is a about a million and a half.

Okay. Thanks, Ron. And enjoy your golf, guys.

Your next question comes from Mark Smith from Dundee Securities. Please go ahead.

Yeah, hi, a couple of quick questions. Just on the Kettle River reserve, what did you use for a top end cutoff, Ron?

A top cut?

Yeah.

I don't have that detail, Mark. I'm sorry.

Okay. And secondly, on blanket, just how are you reporting blanket these days?

Well, what we did, we have excluded blanket in the fourth quarter, because the numbers were so silly, our operating costs to blanket exceeded the goal price, yet we made money. And it is a function of how we have to -- I don't even want to bother you with it. It made no sense. And the first quarter, it looks like the operating costs have dropped from about 500 to 220, based on a rejiggering of the game that's played between the Central Bank and the mine companies. We don't know what to do.

So you just left it out in general?

We just left it out because it was -- I mean how could you put down a $510 operating cost?

Right.

It wouldn't look like you had a brain. Notwithstanding that you've got gold that sold for 630.

So we just leave it open for the next little bit.

yeah.

What are you going to do just declare it cash as it comes out of the country?

We're not sure what to do with it. It actually looks like things are starting to get better on the way they're allocating but we will wait and see until -- the mine is in production. It is producing cash. Our guy there has done an amazing job to keep it in the shape it's in and is actually in the process of expanding it. With almost all the money is coming from cash flow. So we're supporting him as much as we can.

Okay. But there's no guidance as to how we can treat it go forward then?

No I'm sorry, I don't know what to tell you on that one. It's a very small portion as you know but it is hard to know what to do other than keep it out.

All right. Okay. Thanks, Bob.

Your next question comes from John Bridges from J.P. Morgan. Please go ahead.

Hi, Bob, everybody. I just wondered if you could perhaps do a bit of arm waving on Anatolia and give us an idea as to where you see that situation going?

Well, as you know, we made an investment in Anatolia, we are one of their best shareholders, one of their largest shareholders at the moment, and within the scope of that investment, we're in a 90 day period to have a look at whether or not there is some other business that we can do with them.

Have you been to cape LaTauge(ph) yet?

Yeah, I have been over there and had a look and we're sitting down and chatting with them within the scope of that release that we're looking at the assets and seeing what we can do.

I saw a presentation from those guys years and years ago, and it looked interesting then. I just wondered why things have taken so long for them to find a partner. On the gold side. I know they're involved with the base metal majors.

Well, John, they were involved, Rio Tinto was involved in their Terkler(ph) project until early this year. So Rio Tinto has been really been setting the pace.

Okay. Okay. Thanks a lot.

Your next question comes from Uno Retton from Scotia Capital. Please go ahead.

Yes, good morning, gentlemen. I have a few minor questions. First of all, (inaudible) made to a minority ownership in (indiscernible) in Greece. Is that all over or do you still retain -

Could you just speak up a little bit. I'm sorry.

Okay, sorry. Minority ownership in TVX Hellas in Greece is being deferred to. Is there still a minority ownership of Kinross in TVX Hellas or is it all settled?

It is all settled and there is an opportunity for us to reinvest in it to a small amount if we choose.

Okay. If you choose. Okay. Secondly, the Fort Knox, could you elaborate a bit on the plans in '04, '05, because that's the phase five on the Fort Knox space, within the reserves, jill and high and low, have also been included. Could you elaborate on the bid scheduling that you currently envision?

Yes, Fort Knox, we have a phase five, which is essentially going to be in ore very quickly and then phase six which is a major pit expansion, a major pit development that will start later this year. And those two phases, phase five would provide ore in 2005, and '06 and then phase six is beyond that. So those two campaigns, again phase five nearly complete and phase six just begins this year, we will provide the mill feed from Fort Knox. The True North, as we mentioned, the True North ore we've elected to move the True North mining fleet in order to reduce our capital costs, on the tails dam lift. It's a scheduled lift, about every other year we have to put a lift up. And so we are going to move that fleet over for a period of time. And then bring it back to Fort Knox -- excuse me, from Fort Knox back to True North and we will begin actively mining the True North deposit. Later in the year, a minimum of 90 days delay up to a seven month delay. It just depends on how things work.

And jill and high and low, are they in the mining plans currently.

Gill and Ryan lode?

Gill and Ryan lode. You would see them in latter years. In other words beyond 2005 and 6. We finish at True North and then we had moved to Gill, so say in 2007, or 6 we will be shipping Gill ore.

Okay. Understood. And then on the bookkeeping, there was a 7.1 million interest, and other income reported in Q4. But there was mention being made to a sale of assets, and reclamation recoveries, could you elaborate when this sale took place? Was it in Q4 or during the year?

We did a deal on the Sleeper mine, and we had $4 million of reclamation posted for that mine which we recovered in the fourth quarter.

And the Mexican assets of Echo Bay, was it also in the fourth quarter?

I believe it was. And that was a million dollars that we received for the tax pools that were embedded in the Mexican companies.

Should I consider these as recurring or nonrecurring assets?

Those would be nonrecurring.

Okay thank you. And finally, on the reserve additions, Gold Hill has been included on the Round Mountain. Could you give an order of magnitude for the ounces that was included for Gold Hill?

On 100% basis it was about 300,000 ounces, I think.

Okay. Thank you. That's all on this side. Thanks. Have a good day.

Your next question comes from Barry Cooper from CIBC. Please go ahead.

Yes, Scott, first question, what kind of grades are you looking at for Fort Knox this year?

Well, close to ore body average, about 025 ounces per ton.

And then when you get back to True North and restart that, are you running the risk of having sulfide and mixed ore in there once again, or is the sulfide stuff that caused you troubles in Q4 in essence gone?

It is still there, but we've accounted for it in our mine plans. So in other words, we are going to minimize the impact. But we've accounted for it in our forecast with slightly lowering the recovery of the material but the grade is actually a little bit higher. So we've accounted for it. And if January and February performance is any indication, we've done quite well. On our adjustments.

Okay. Then Brian, maybe you can just refresh my memory. Newburg, Kenya, as I recall, had something in the order of $60 million in debt that you were 100% responsible for. Can you just refresh my memory as to what the terms are of that, and what we should expect when that mine closes in mid 2005?

Yeah, Barry this is Scott. Tom, are you on the line?

I am now, Scott.

Could you answer Barry's question as to what is that loan, what is outstanding?

Could you repeat the question, please, Scott?

They're asking about the High River debt that we are responsible for associated with the New Brit mine. What's the amount?

The amount outstanding at year end is approximately $1 million. On our books. The loan is actually outstanding for a much higher amount. But through our understanding of the joint venture agreement, and consistent with the disclosure that High River has in their financial statements, the loan is recoverable. It is only recourse to cash flow generated by the mine. We are currently applying High River's 50% of any cash flow against recoverability of the loan.

Okay. So I'm a little confused there. Who is taking the hit? Because I think the amount is close to $60 million, is it not?

That's where you're wrong.

I think the original -- Michael, what was the amount before the decision was taken? Was it 9.-something?

Yes, in our preliminary purchase equation we had set up the value of the High River loan at approximately $9 million. Upon further review and understanding of the joint venture agreement, and the operations, we revised that amount in our final purchase equation to approximately $1 million. Which we believe is the amount that we're going to recover.

Between now and then?

That's right.

Right.

Okay. And then on the Brasilia expansion, I guess that you indicated that the pre-feasibility was completed in Q2 of '03. Just wondering why if everything is favorable and it seems to be fairly straightforward in the sense that just the site mill is being added, though I'm assuming there are a few other things, why is the process taking so long.

Well, it is a very robust project. And the pre-feasibility study, quite frankly, was more like a feasibility study if you looked at the amount of test work, costing internal and external review, a very rigorous process, and Rio Tinto is moving through their internal process and it is just taking longer than we would like to see. But it is on track to be completed in May. And through their process, I'm assuming that their board will have approved it, and then we can go from there.

We were told that it was going to go to the March 4 meeting and now we're told it is going to go over the February and it is going to the April 4 meeting.

They are doing final detailed engineering right now on the plant. But it is going to be a large sag mill. And it's got some great economics. It is a great project.

Right. Okay. Thanks. That's all my questions.

Operator before we go to another question, we would like to go back and answer the two questions from Joe Hamilton. So Tom or Mike, could you deal with that?

Number one, the realized price in the Q4 was $376. And on the second question, there was a typo in the first number on the cash flow statement. In the Q4, it should be 32.4, not 30.4.

Joe, you get the award.

Would you like to proceed sir.

Yes.

Your next question comes from Don Maclean from Paradigm Capital. Please go ahead.

Good morning, guys. Just following up on Barry's question on Paracatu. Since the pre-feasibility was such a robust thing, if we could get a few more details, maybe from 10,000 feet, the view of whether the ore is transitioning to harder, greater sulfides than what we saw in the second half, is that basically what it is going to look like going into the future? And then maybe a sense of with the expansion what either the cost per ounce might be or what the incremental cost per ounce would be.

To answer your first question about the deposit, as you get deeper on the deposit, it does become harder, and slightly more sulfides contained in the ore. And so we talk about the sag mill, but it is really a two phase project. One is gravity separation. More gravity separation either jigs or Nelson concentrator, they are on the final throes of that test work, which to decide is the optimum way to go, and that will improve recovery. The sag mill addresses the ore hardness type. And you know, the sag will actually double our current through-put through the plant, bumping production 300,000 ounces, plus, to 100%. Cash costs, depending on how you want to treat the Brasilia/U.S. dollar relationship you are looking sub-$200 an ounce.

And is that with current exchange rate, Scott?

Yeah. At around three.

Great. And just a quick one on La Coipa, the costs for 2004, up to 288, can you just give us a bit of explanation for that?

Yeah, well, it is a function of if you look at the ounces, they are in sort of a bit of a low grade cycle so the ounces drop off a little bit. But it is more of an accounting treatment. We do not defer stripping, Kinross does not. And Placer does. So you will see a difference there. But it is a high strip cycle for 2004. And then in 2005, you will see a dramatic drop as all that stripping is done and we don't have that stripping expense.

Great. Thanks very much.

It is about a $50 difference I'm told between how Placer reports '04 guidance and how we report '04 guidance. And the difference is the stripping charge. And our operating costs will obviously drop dramatically in '04 and '05. Sorry, in '05 and '06s.

The marvels of accounting. Thanks, guys.

Your next question comes from Haytham Hodaly from Salmon Partners. Please go ahead.

Good morning, guys. I apologize if I'm asking this question again because I did get on the call a little late. Bob or Ron, can you give me an idea of how your reserves change at 300 (inaudible). I saw the sensitivity at 400. But how much of the actual 2.7 million ounce increase would actually still be there at 300?

The question, if the price was down by another $25, what would we lose? Is that --

Right.

I think it is about 30% that was a metal price. 30% was relative to metal price and 70% was exploration, and engineering out.

Okay. So it is only down 30%. Let me ask you another question.

No, no --

I apologize if I'm asking it again. Refugio capex in 2004 and '05.

Hold on. 30% of the 2.7 gross.

I understood that. Sorry.

What were you saying about Refugio.

Refugio capex numbers in 2004 and '05? Just the break down.

Sure. Just a second. It is about $50 million in this year to our account. And next year, very low. It is 2.3 million dollars.

Okay. And in terms of timing of commercial production, when are you expecting that now?

The plant, the plant will start up -- the day is 1 November. And so commercial production, the crushing process will start in November, so commercial gold production later in the quarter.

And you know, that can't be obviously, given the cycle, that can't be that much production in that quarter, though, right?

No, well, if you look for the year, it is -- the numbers, less than 20,000 ounces.

Okay. Perfect. Thank you very much.

Your next question comes from Steve Butler from Canaccord Capital. Please go ahead.

Guys, just a question following up, then a followup just on Kubaka, 137,000 gold equivalent ounces at 260 per ounce, Scott, could you elaborate on the cost increase at Kubaka, or maybe you can give us a sense for the head grades milled and any guidance in '05 and beyond on cash costs? Thanks.

First, I will just talk about why the increase in costs. Obviously, we're now mining ore at about an average of about eight grams per ton and we have to transport it from Birkachan, which is 25 kilometers or so, over the road and then put it in the mill. So it is higher cost material. And so hence, the greater cash costs on ounce and of course the divisor's down. We still have to run the mill. And we still have to run the camp. That being said, the capital is very low. So on a total cost, or if you like to look at what it is going to cost us to produce an ounce of gold on a go forward basis, some very profitable ounces there. Capital is essentially just the pre-strip and the construction of this bridge that I was talking about, for the participant road so it is very low.

Okay.

Go forward, we would evolve into an underground program at Birkachan and then Socle(ph) and again higher cost ounces as we see them today but again very low capital.

Okay. So cash cost guidance not materially different than 260?

In the next couple of years, correct.

Okay. Thanks, Scott.

An interesting point to add on Kubaka, is that if you look at our current plans and the resources we've identified there, oil reserves and measured indicated, it looks like the life is now going to extend, again at those higher cost, the 250 range or so, 130 to 150,000 ounces a year through 2010.

Based on measured indicated and a portion of inferred or let me see, --

Yes, yes proven problem measure indicated in a bit of inferred but we're comfortable that we are going to be able to get this thing to stretch to 2010 with what we see in front of us and if Ron keeps going the way he has, we get better.

Because I actually see zero measured in indicated resources. Beyond reserves.

The inferred.

Okay. Thanks.

I said the M&I, sorry.

Okay, thanks.

Ladies and gentlemen, if there are any additional questions, at this time, please press star one. As a reminder, if are you using a speakerphone please lift the handset before pressing any keys. You have a followup question from Don Maclean from Paradigm Capital. Please go ahead.

Just on the Musselwhite, can you give us a sense of what is shaping up to PQ deeps in terms of the resource size and whether any of that was included in the 2003 number?

Yeah, there was a portion, Don, of PQ deeps reported into reserves. I think it was a couple hundred thousand ounces. The target itself represented about 200 or 250 meters of about a 1200 meter long target area. So they're drilling on it right now and see that as a potential for continued expansion or replacement of reserves.

Great, Ron. Thanks.

You have a followup question from Uno Retton from Scotia Capital. Please go ahead.

Yes, the Simmons camp, two questions. First of all the Porcupine JV showed an increase in reserve. Where was that located? Is that the Hoyle Pond exploration?

It was a combination at Hoyle Pond, was the biggest contributor, but Pamour went up as well.

Okay. Thank you. And on what grade does Pamour now currently being decided upon then?

I don't have the grade in front of me at Pamour, sorry.

Okay. Thank you. And one more question. Aquarius, there was a reduction in the reserve. What was that due to?

That was just a remodeling issue at Aquarius. There is an issue at Aquarius in terms of the low grade and how to treat that ore body. It is a very complicated deposit to model. And what we did was we went through and have been working on remodeling it, and as a consequence, we dropped off some lower grade ounces, trying to tighten this up.

Okay. Thank you.

Mr. Buchan, there are no further questions at this time. Please continue.

Thank you all for listening to our conference call. As you can tell, we are very encouraged with the position that we find ourselves in, strong financial position, our vice president of explanation has got the total support of his CEO to go find places to turn drills, and I'm sure you will see continued improvement in operating costs, cash flow, and reserve life into 2004 and beyond. So with that, I look forward to showing you more good results in '04. Thank you and goodbye.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating and please disconnect your lines.