Kinross Gold Corp (KGC) 2005 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Kinross Gold Corporation Third Quarter Financial Results Conference Call. At this time, all participants are in a listen only mode. Following today's presentation, instructions will be given for the question and answer session.

[OPERATOR INSTRUCTIONS]

As a reminder, this conference is being recorded on Thursday, February 16, 2006. I would now like to turn the conference over to Matt Wilcox who will coordinate today's conference. Please go ahead.

Good afternoon ladies and gentlemen. Welcome to the Kinross Gold Corporation's Third Quarter 2005 Conference Call.

Before we begin, we would like to briefly caution everyone about any forward-looking information or predictions that we present to you today. In short, these are the best estimates that Kinross has at this time but there are many assumptions and uncertainties involved and actual results may differ materially. It is important that you refer to the cautionary language in our news release regarding forward-looking statements. Also, we will refer to total cash costs in this call, which is a non-GAAP measure. Please refer again to our press release for disclosure on this measure. We wish to refer everyone to the media release we issued last night on the company's financial results.

Following remarks from Tye Burt, we will be happy to answer any questions from the listeners. In order to be placed in the queue, please press star one on your phone. Could you also please ensure that if you are on a speakerphone that you pickup your hand set when asking your question.

I would now like to turn the meeting over to Mr. Tye Burt, President and Chief Executive Officer. Tye?

Thank you Matt. Good afternoon ladies and gentlemen and thank you for participating on the call.

Joining me today is Scott Caldwell our Executive Vice President and Chief Operating Officer at Kinross, Lars-Eric Johansson, Executive Vice President and Chief Financial Officer at Kinross, and Chris Hill, Senior Vice President of Communications and our acting treasurer.

On the call, we will address the first three quarters of 2005, briefly speak to the filing of our restated 2003 and 2004 financial statements and then address our future direction at Kinross. We will also outline the strategic four point plan that we're implementing, that's aimed at increasing net asset value and cash flow per share.

Kinross is the third largest primary gold producing company in North America and the seventh largest in the world. We're in a great position to strengthen our standing in the industry. I am pleased to report, that we have now press released the results for the first three quarters of 2005 and filed our restated 2003/2004 full year financial statements. We are in progress of filing the 2005 quarters right now and this process will bring us up-to-date with our financial reporting requirements.

When I joined Kinross last March, I committed our management team to best in class standards across the board, including our merger accounting methodology. We have addressed it this year. As you know, the new accounting rules for business combinations requires to allocate asset values and good will to the individual [mines] acquired in relation to our merger with TBX and Echo Bay.

This methodology also requires that we compare the book value of these assets to market value, every year, to test for impairment. It's important to remember that the impairment charges relating to the acquired assets and goodwill associated with the '03/'04 year-ends are all non-cash items and do not affect our cash flow and cash position.

The most recent restatement of those years was related to accounting for the TBX and Echo Bay transaction, when our new auditors identified that we had not previously applied the appropriate foreign exchange rates in translating future tax liabilities in the purchase price discrepancy relating to our non-U.S. operations. These adjustments of the exchange rate resulted in a non-cash foreign exchange loss. This is now behind us. I am now very pleased that we're driving forward with a solid and stronger Kinross.

I will now address operating highlights for the first three quarters of 2005. In our quarterly updates last year, we spoke to operational results and individual mine performance. The key points from this reporting period include, plant production for the nine months of 1.23 million ounces at a total cash cost of approximately $272 per ounce.

Kinross revenues rose 10% to $535.5 million as compared to the similar period in 2003-- or 2004. Over the same period, cash flow from operating activities increased by 6% to 109.9 million in 2005 compared to 103.4 million in the same period of 2004. This was primarily a result of a 9% increase in our realized gold price.

Our cash margins, on a per ounce basis, have increased strongly in the last five years at Kinross and are competitive with the other majors in North America. As an unhedged producer, we enjoy the full benefit of rising gold prices. In addition, over 60% of our production costs are denominated in U.S. dollars.

For the first three quarters of 2005, the company reported a net loss of 61.7 million or $0.18 per share, including a non-cash, foreign currency impact on future tax liabilities totaling 22.9 million and a non-cash write-down of the Aquarius property of 36.8 million.

Earnings were also affected by higher general and admin costs primarily as a result of professional fees incurred in the review of the acquisition of TBX and Echo Bay. Our results reflect management's commitment to pressure test all assets and eliminate those that are redundant. As an example, Kinross agreed to sell the Aquarius project to St. Andrew's Goldfields for a 14% strategic equity stake in the company and give us another position in the [inaudible] district. This deal will be expected to close shortly.

Finally in the period in '05, nine months, Kinross increased estimated proven and probable reserves at Paracatu in Brazil by an additional 4.8 million ounces to bring the total of this project to 13.3 million ounces. This is truly a world-class mine and one that we're very proud of.

We achieved Kinross' full year target in 2005 of 1.6 million equivalent ounces of gold production at expected cash costs of 275 to $280 per ounce in 2005. Of course, we were going to release our annual year-end numbers in our 2005 reserve update shortly.

On a management front, we continue to make notable additions to the team at Kinross. They will help drive our strategic objectives going forward. Recently, Wes Hanson was promoted to lead the Kinross Technical Services Group as vice president of technical services. Wes joined Kinross in 2002 [inaudible] and has been an instrumental part of our tech services team.

I would also like to thank Chris Hill for the terrific work he's done to date in investor relations. Chris will now head up our treasury department, a particular area of strength for him.

Internationally, we have decided to go to a more regionally focused approach which allows for more autonomy and local experience in running the operations with continued leadership from corporate offices in Toronto, Brazil, and Reno, Nevada.

In South America, Manuel Secara has been appointed Vice-President of Brazil overseeing all aspects of Brazilian operations and in Chile, we are pleased to welcome [Tulio Benevonet] as vice president Chile, who will be overseeing all our Chilean properties.

I would also like to thank Fred Mason, who has just been appointed vice president and general manager at Refugio in Chile. Fred has been instrumental in re-commissioning the Refugio mine, which is currently running smoothly and above expected levels.

Turning to 2006, our core operating mines provide the foundation for our strategic plan which is aimed at maximizing net asset value and cash flow per share. To that and, where executing against a four point plan: 1) Growth from our core operations, 2) Expanding Kinross capacity for the future, 3) Attracting and retaining the best people in our industry, and 4) Driving new opportunities from exploration and acquisitions.

In line with that plan, we continue to invest in a major an ongoing capital program aimed at generating growth from existing facilities. The key element of this plan is the Paracatu processing expansion, which will increase capacity from 17 to 30 million tons of throughput by 2008.

As stated earlier, Kinross maintains a no gold hedging policy. The company does from time to time, generate premiums for the sale of call options as part of cash management programs. We limit these positions in both size and duration as we sell our annual gold production. This is managing our gold sales.

The company currently has a call position of approximately 100,000 ounces at $530 an ounce. Although this position was somewhat higher at year end, we will not exceed this 100,000 ounce ceiling going forward. We have a strong belief in transparency and we've had a few questions. I'd like to be absolutely clear. 100,000 ounces against a 22 million ounce reserve base is not a hedge program.

Looking forward to 2006 operations, Kinross is estimated production of 1.44 million ounces of gold equivalent with total cash costs in the range of 285 to $295 per ounce. 2006 represents the transition year in our operational profile, leading to future contributions from our current capital program. The decrease in production from 2005 represents the planned shutdown of Kubaka and Kettle River mine sites and some reductions and plans at Lakoipa, Fort Knox and [Round] Mountain.

Our Refugio mine production will increase significantly in 2006 over 2005 results as it achieves its first full-year of production. We believe this 2006 forecast is conservative and has upside. That will increase from 2006 and forward as new projects make their contribution. We expect costs to be lower as full year contributions for our new projects kick in.

The support and improving production and cash cost profile, capital spending this year is expected to approximate $285 million. The bulk of that spending relates to the 30 million ton per year expansion at Paracatu and the ongoing pit laybacks at Round Mountain, Fort Knox as well as future growth from Buckhorn.

Finally, we have increased our exploration spending to more than $26 million, which includes higher allocation to generative and district programs. This represents approximately 30% increase over our 2005 program.

2007 and beyond, as I mentioned earlier, we're executing against a four point strategic plan. The first point of the plan is growth from the core. We will focus on extending the mine life and reserves our existing mines as we have at Paracatu and the four major capital projects at Paracatu, Fort Knox, Lakoipa and Round Mountain.

We expect production to increase and cash costs to decline. We are committed to keeping you up-to-date on these developments. At the same time, we will continue to divest non-core assets to redirect investment into our core programs.

Second, we will establish solid building blocks for future growth. This will include extending our financial systems capacity, optimizing our corporate structure, as well as continuous improvement and cost control programs.

Third, we want to attract and retain the best people. We're proud of our commitment to an excellent record in environmental health and safety as all our mines and to protect our more than 4,000 employees and their communities. We are also committed to becoming an industry leader in corporate governance and transparency.

Fourth, we have a team dedicated to building a pipeline of acquisition and exploration opportunities, which aims to extend our cash flow growth in the future. This part of Kinross' history and we plan to continue the tradition.

I'd like to leave you with this thought. We had a unique confluence of events in our industry and in our company's history. We have a 25 year gold price high. We have been busy scrubbing and refocusing our plans in resolving accounting situation. We have reserves, production, and cash flow that Kinross has never achieved before. We have nine mines worldwide and a slate of low risk projects that we're building in stable countries.

We believe we have a talented leadership team and with current cash flows, cash balances and blowing capacity we do not need to issue equity at this time. With the market capital of $3.5 billion and an increasing reserve profile, we have the size and the experience to capitalize on the right opportunities. We have the agility of a growth company. Thank you for your time and we'll now take your questions.

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. [OPERATOR INSTRUCTIONS]

Our first question comes from Robert [Razowski]. He's a private investor. Please go ahead with your question.

Congratulations on the progress you are making. I wonder about an old item if you can bring me up-to-date on it. What is the status of the Kinross [Kin-am] preferred class action suit?

Thank you for your question Mr. Razowski. Lar-Eric, would you mind addressing the Kin-am class action suit?

There has not been much progress since we did the last MD&A, which was released early this week from 2004. There has not been any major change during 2005.

Two quick follow-ups. Have you bought in any of that preferred in the last two years?

No, we haven't.

What is the current amount of unpaid dividends?

I can't tell you.

We will get back to you on that. It's beyond the exact amount there. We're re-looking at what we're calling to do with those Kim-am preferred because -

It seems like it would be nice to get it off your back.

Thank you for that. We will look at that and if you could leave you number with us after, we will get back to you and give you a clear view on what the value of the unpaid dividends are. But as I say, we are re-looking at that and it is part of our cleanup process.

Thank you.

Our next question comes from John Bridges from JP Morgan. Please go with your question.

Hi Tye, everybody. The 1.44, obviously you do not have hard plans for the growth of your core projects further out but could you give us an order of magnitude as to where you go from 1.44 going forward? Are we going to get back to 1.6 and beyond?

John, to be specific on where we're going, we do have solid plans on the growth profile from here. I mentioned on the call the five capital programs that we're pursuing. That will see strong growth over the next three years in both production cash flow and we believe lower cash costs.

We have not released details on that yet. The first details will be released with the completion of the Paracatu feasibility study and final engineering drawings which will come out at the end of March, early April and that will have details on capital an exact timing for the project. Of course, we are moving forward on the laybacks at Round Mountain in Fort Knox as we speak, and of course, we've already finished the capital projects at [inaudible] and at Refugio, which are going to be contributing to first full year in 2006.

I presume you're going to get back above the 1.6?

We believe we'll go significantly above the 1.6.

Okay. The Aquarius sale is a bit intriguing. I was thinking that had synergies with the [Timmins] group. Could you just detail the logic behind the sale?

The logic behind the sale was we had a project that we did not believe fit our portfolio of assets. When we think of portfolio, we think of doing projects that upgrade and enhance the very large core assets that we are already operating. So, it was not of a scale or a size that we thought, and had the kind margins, that we thought would contribute to our production profile going forward in a major way with the kind of margins we would want. So what we were trying to do was translated into a strategic stake in a young company that has a big land position in Timmins. So we think we would successfully achieve that.

Okay. That is helpful. Thank you. Good luck.

Thanks, John.

Our next question comes from Tony Lesiak from UBS. Please go with your question.

Good afternoon Tye. With respect to your four point plan, can you comment on any specific opportunities for rationalizing the numerous ownerships structures you have and perhaps comment on which of those assets that you are hoping to divestiture non-core?

Sure. But obviously I'm limited, Tony. I would be happy to speak to the general principles. Obviously, I am limited to what I can say about any specific transactions. We think our big core assets and with think where Kinross' operating expertise that we are driving for growth at the core projects I mentioned. Of course, as most folks on this call will know, the three joint ventures that we currently share with Placer Dome we understand will be transferred through Barrick to Gold Corp. in the future and we would be happy to sit down with Mr. Duffer and with Gold Corp. to talk about rationalizing those.

One of the core points in our plan is that Kinross will operate and manage our own mines and therefore control our own CapEx, operating spending, and exploration at those projects so those would be three that are on the list for discussion. We look forward if the opportunity comes up.

With respect to Refugio, we really like Refugio, but I suspect Mr. Johnson also really likes Refugio and it is performing above our expectations, so we would be open to acquire more should that opportunity ever arise. At [Crixas], small mine, great cash costs. What I would consider to be a contribution that makes us the biggest gold producer in Brazil. But obviously we would be open to ideas, but at this point, I would either buy the other half or figure a way to optimize it.

As to other non-core, we're looking at options with respect to a blanket. Of course, we have already written that to zero, but I would consider that not a long-term future asset for us. We do get interest regularly in some of the land positions we hold around - in New Brit and we've even had inquiries about Lupin. Those would be other non-core matters. I would just stop it there and say, as soon as we have something to say, we will obviously get back to you, but those will be the areas we are focused on.

Okay. You've mentioned a number of acquisition opportunities. Are divestitures of some of these shared ownership structures also potential in order to perhaps acquire some others?

Absolutely, Tony. I think the possibility of trading and swapping is an obvious one. We are looking to control more and use the synergies and skills that are our operations can generate. Absolutely, we would consider a swap or a trade in this kind of gold market.

Okay. Quickly, on CapEx, you gave us the '06 number. Can you give us the '07/'08 ballpark if everything goes as planned?

I will ask Scott our COO to tackle that one. Scott?

Sure. Looking at - I have '07 in front of me right here. '07 capital combination of sustaining and growth capital would be similar levels to the 265. It's actually around 270 or so.

And that reflects the heavy spending at Paracatu and in order to taper down to just -- rough order of magnitude range Scott for 2008?

It would be less than 100 million for sustaining only.

But we think Tony, in summary that with our current CapEx program, of course we control the timing on that. Cash flow, cash balances and financing capacity, as I said earlier, with this suite of assets and these projects we do not need to issue equity.

Okay. And just a final question on closure costs at Kubaka and maybe the holding costs at Kettle River.

Scott, would you tackle that one as well, please?

Sure. Kubaka, we hope we're not going to have to close it. We're looking at some options involving Birkachan low grade and that sort of stuff but if we were to close Kubaka it would cost us about $8 million in total. I do not think we're going to have to do that. We are optimistically looking at some options there. Kettle River, we are holding it right now, waiting for the Buckhorn expansion or bringing in the Buckhorn and if everything goes according to plan, we would be working on that toward the end of the year. So the holding costs of Kettle are a couple million dollars for the year.

Great. Thanks very much.

Thanks, Tony.

Our next question comes from Victor Flores with HSBC. Please state your question.

Yes, thanks. Good afternoon. I was hoping you could give us a bit more detail on the breakdown of production for this year if at all possible.

I think at this point, Victor, appreciate the question, but we have not given out the full guidance on that and we probably won't in terms of the exact breakdown. So, I would say that is one we cannot tackle on this call. We will have -- Scott, do you want to give sort of directional perspective on those that are going to be a little better and those that--?

Sure. The big decline in production is roughly over this year -- next year is really because of the planned suspension of operations at Kubaka and Kettle River. We do not show any production out of Kettle River. That is the real decline. Some ins and outs of the various operations. The real increase is Refugio goes from partial [reel] production in 2005 to a full years production and as Tye mentioned, right now the mines performing - producing more gold than we expected. So things are going well at Refugio. So really, Kubaka down. Kettle River down. Both planned and Refugio up and that's kind of where you get to where you're at.

Okay. The second question goes to Buckhorn. You said, you hoped to be working in there by the end of the year. When you actually expect to have production from Buckhorn Mountain?

Let Tye have that one. Go ahead, Tye.

From the perspective of the Buckhorn, we absolutely have to close the crown deal to get that one online. The crown deal has its final expiring time at the end of March of this year. It may be that we cannot get closed on that timetable so we may have to sit down and talk to them about that. We've been moving ahead with permitting. We've been moving head working with the folks there. That is part of the transition for Kettle River, which is of course shut now. So we'd look at this capital spending assuming the permitting goes well coming goes well, which it is. We're looking at construction spending late in 2006 and contribution early in 2007.

So a pretty quick contribution then?

Well the development, you need to look at the Buckhorn deposit. But basically underground mind of course that we caller in ores. So you're really starting more of a second and start to mine there and start your development work.

Okay, excellent. Thank you very much.

Thanks Victor.

Our next question comes from Terrance [Orkplan] from PSO & Associates. Please go with your question.

I guess one question to ask is the exploration. You've acquired to jump in 2006. Can you also see some more details on exploration and were the focus is going to here?

We will give a little more detail on that as we roll out some of our exploration plans. But to give you an idea Terry, we are at 26 million for the year, order of magnitude. We will spend about seven or eight on our joint venture exploration programs. Another seven or eight at our operated mine sites and that leaves, of course about eight or nine million in generative -- or I'm going to call it district greenfield's around our other mine sites.

So the leftover Tye, 8 million or so of new projects. Any investment opportunities and what the category would be?

Sure. Specific geographies on where we're going to spend the money. In the area around the Round Mountain mine in Nevada, we're currently doing some careful looking around Fairbanks and Fort Knox. We've got a very large land position around Paracatu, which we are starting work on to try and do some sampling and testing to start zeroing on targets there and we're actively drilling on a couple of targets in Chile and the [Americacunda trend] not far from Liquopa. We will give some more detail on those projects and I would say the investor half day which we're going to announce and hold in late March early April.

Okay, thanks a lot. Just on Kubaka itself. You implied that low-grade mining could be [inaudible] for a little while longer. How long would that be?

Scott, do you want to pick that one up?

We're looking at material that has been mined and stockpiled over at the Birkachan deposit which we would truck and process at Kubaka and it's a function of metal price and other economics. Obviously, cost inputs -- but could go through a full year perhaps a little longer if we decide to proceed with that option.

Okay, thanks a lot guys.

Thanks.

Thank you. Our next question comes from Michael Fowler with Desjardins Securities. Please go with your question.

Yes, good afternoon. I've got some accounting questions here for Lars-Eric. G&A going forward, can you give us some guidance for this year on G&A because G&A was inflated obviously 2005?

Yes. We had some nonrecurring items in 2005. The most significant one being professional fees for the accounting issues, evaluators, lawyers, and accountants. That's accounted for about 5 to 6 million in non recurring items in 2005. We also had some severance and recruitment costs that were quite significant. Of course, the strengthening of the Canadian dollar, as we have most of our overhead or corporate costs in Canadian dollar, increased. Going forward, we expect the level for next year 2006 to be lower, probably by about 5 or 6 million.

Order of magnitude, low 30 million. Michael.

Okay, thanks for that. On the tax side going forward, Lar-Eric, can you give us some feeling as to how much tax - an effective tax rate that you may have and what portion of that may be cash taxes and what portion of that might be deferred?

I tell you cash taxes is basically only Chile, not Coipa and Paracatu in Brazil and the effective tax rate for Lacoipa is about 17%. The first category tax in Chile and [Paracatu] is about 33% in Brazil. That's the only cash taxes we are paying. When it comes to what our tax is going to look like, it's a tax number in the income statement. It's a bit difficult because going forward, we will most likely have a positive taxes because we are coming back to what we did set up in our last restatement.

We did set up a future tax liability for the purchase price discrepancy. That future tax liability is amortized over the life of the various mines we acquired. So, that is a positive cash - positive tax in the income statement and that will depend on foreign exchange rates and a lot of other things.

Okay, fair enough. Lars-Eric, I won't test you on any more of that. On other income in the accounts, can you explain the - finish the negative 9.5 and the 22.4 negative for nine months and what do you see going forward?

The 22.9 million is mostly Brazil. To make it easy, the purchase price discrepancy at Paracatu was about 100 million and the tax we had to set up there so it was 300 million and the tax was 100 million and the Brazilian Real is strengthened by about 44, 45% since we did the acquisition. So, the tax line has increased by about 45, 50 million in total because we have Canadian dollar and Chilean pesos also. If the exchange rate is flat going forward, there won't be any exchange rates. If the Brazilian Reals and Chilean Pesos is weakening, then we will have positive exchange rates. All of those are non-cash items because they're not any real taxes being paid.

Okay, fair enough. I think the last question here is on depreciation expense. I guess going forward, I mean I calculate depreciation expenses about $105 per ounce. But going forward give us some sort of idea of what you might expect?

It will be about the same level for the next few years.

In Paracatu, obviously, you've got increased reserves there so you would expect lower depreciation at Paracatu?

A lot of this - I mean we will amortize some and it will come down. We will add capital as we have said 285 million this year. That will increase the capital and it's about the same level next year 2007, which will increase our amortization. On the other hand, we will have amortized some of the previous capital. So I think it will be about the same level going forward for the next few years.

Okay, well thanks very much for those answers.

Our next question comes from Kerry Smith with Haywood Securities. Please pose your question.

Thanks operator. Lars-Eric, just on the 26 million of exploration, how much of that would actually get expensed through the income statement in 2006?

Most of it will be expensed.

Okay. So, you won't capitalize. Will we assume 100% expense then?

I think will have a few million that is not going to be -- couple of million that's going to be capitalized.

Okay. And for '06 and '07, Scott, is the sustaining CapEx is around the same as what you suggested for '08 sort of somewhere between say 80 and 100 million bucks?

Yes, if you look at capital programs, we have a total of 285 and of that, about 100 is sustaining capital. By sustaining, in that number for 2006, we include the stripping campaigns at Fort Knox and Round Mountain. And then if you go out into '07, you have a similar level with the big dollars at Paracatu and '08 again in Paracatu and then you have your sustaining, which is under underground development/stripping, [inaudible], et cetera.

Okay. And just on the reserves for year-end 2005, when will they be out and what gold price do you intend to use to calculate those reserves?

We will be using $400 gold for the reserves and 450 for the resources Kerry. We expect that within two weeks we will have our year-end reserve updated. That's certain normal course timing for us.

Okay, so it's sometime by the end of the month?

That's right.

Going back to Tony's question on the rationalization of some of the assets that you talked about. Have you had any discussions to this point in time with Gold Corp. about any possible rationalization?

I think we better let them close the deal first and get their hands on the data and get into the driver's seat over there. Then we are open for business to talk about them. We will look at, obviously our rights of first refusal, which exist at the asset level for those assets. So, we will be looking at the allocations in the purchase price. But I think we'll let them -- see what the information is. Get fully up to speed with that and then go forward. Once Barrett gets closed and we'll know exactly where we stand.

Okay, and I presume there is reciprocal rights of first opportunity on all the assets I guess?

Yes, those are all modern JV agreements.

Right okay. So there's no funny stuff in there. Just on your comment about no equity, I think that is obviously quite an important comment because I think there are a lot of people sitting around assuming that you would raise a lot of equity once your SEC problems were behind you so I'm happy to hear you say that.

Listen. You're absolutely right to point out. We have heard the same rumor, which is why we wanted to address it head on. We do have additional debt capacity on our current line. We have other financing opportunities. Obviously, lots of bankers calling right now with this capital program and with this gold price and this cash flow, it is clear to us we can do the current program from internal sources. So, I do not want to dilute our upside potential here. Now if we go out and buy an asset or do a deal, that's of course, a different question. But with the current suite, the current slate, we're quite comfortable.

Right. And just can I ask Lars-Eric one more question regarding the taxes. Lars-Eric, you mentioned you would have a positive tax in 2006. Can I interpret that to mean that the tax credit essentially not taxes payable?

That is correct.

Okay. Just wasn't clear on the usage of the words. Thank you.

With respect to the deferred taxes, right?

Yes it is. There will be some taxes being paid as I mentioned Crixas and LaCoipa. But the big amount - and if you look at our balance sheet we're about 150, 160 million of deferred taxes sitting there and those deferred taxes will be amortized. Basically, say over a 10-year period on average which means it's about 50 million that might come back as earnings.

Right, okay. Just to be clear on actual cash taxes payable in 2006, just off the two operations, LaCoipa and Crixas?

Yes.

Okay. Understand. Thank you.

Thanks Kerry.

Our next question comes from Mark [Senteroso] from National Bank Financial. Please go with your question.

Good afternoon guys. Quick question. Can you give us a break up of the 170 million development CapEx by project?

We would be happy to give you some general views on that. On the Paracatu engineering study, which is not completed yet, we will have the full breakdown. So Scott, I would say let's give some big picture views as to those numbers. But we're not going to be able to get it down to the specific dollar until we finish the engineering market.

Okay.

If you'll have some patience with us here let's give some overview please, Scott.

Sure. Again as Tye mentioned, we have not finalized the detailed engineering, which will be done in another couple of months. As it sits right now, Paracatu next year on the expansion, we spend roughly $100 million and then the other big item if you want to talk growth capital would be Kettle, Buckhorn and then the timing is on permit, permits mid year. This is capital for mining equipment as well as underground development at some minor facilities. That will be about $35 million for the year.

Okay. Can you give us order of magnitude on the sustaining CapEx how it breaks down for next year as well? To 115, I guess?

Sure. I can go through that. Again, this includes the stripping campaigns at Fort Knox and Round Mountain for both of those capitalized development programs, i.e., the expansion of both of them. Fort Knox's around $35 million and Round Mountain is about $9 million on that. We have some sustaining capital that makes up the rest of that spread out over all the mines from sales stand LaQuiopa, the [Perim] development is about $8 million and then it is broken off over the various mines for builds dams, plastic for heat bleach bad, mining equipment replacement.

Great thanks. I guess nearing the year-end numbers, can you give us a sense of where your cash and debt balances are as of December 31?

Lars, would you - how much room we have left on the line? We're drawing down our-

At the end of December, we had close to 100 million of cash available and in addition to that about 35 million on our credit line.

And the credit line is 200 million in total in total here to take what's been drawn on that?

As a matter of fact, our credit line is 295 million. But we use almost half or about half of it for letter credit bonds for reclamation costs and close out costs. So our net debt actually at year-end is not more than about 50 million if we net cash from our debt.

Okay, great. Do you guys have a sense as to when you're going to be releasing your year-end and Q4 financials?

Our normal course details - audited statements go out in March, probably be the third week of March but we will as part of our cost as I mentioned earlier in the next two weeks, we will give some top line indication in addition to our reserve update.

Perfect. Thanks a lot guys.

Thanks.

Thank you. Our next question comes from Katherine [Gigna] from Wellington West. Please go with your question.

Hi. Most of my questions have been answered already. But I will comment. Some of the larger mines that you have in your portfolio, you are the operator. You have control over to a certain extent in terms of direction and destiny. Can you talk specifically about some of the cost control programs that you are working on or plan to implement for 2006 and onwards? The second part of that is if you can clarify and maybe this is all part and parcel of the same question. Part of the four point plan you've got expanding our capacity for the future. Specifically, are you talking about financial or operating capacity? In other words, financial leverage, utilizing different forms of financing or as far operating is concerned, expanding the volume of throughput that sort of thing?

Here's what we'll do Katherine. I will speak first of all to the four point plan and then Scott if you could speak to some of the cost control measures.

Absolutely.

Katherine, just to give more specifics on the four point plan particularly under the capacity. That speaks more to our corporate capacity and we call the internal program building blocks for the future, so that is broadening our finance capacity at the sites and unifying the systems that we use. That is expanding our communications program internally as well as externally. That is a continuous cost control and CI initiatives in addition to optimizing our corporate structure.

So those are the non sexy but important parts of running a company and stretching our corporate capacity to match our aspirations on the operations side and supporting those operations. So that's not a pure operating point, but it's in support of the operating growth that would drive from the big projects. Now with respect to the cost controls, specifically the cost control building blocks, Scott, maybe you would like to tackle that one?

Sure. As Tye mentioned, we have a continuous improvement effort and have had for a number of years. Eight years that I've been with Kinross and will continue with it. But basically our focus right now for this year, as it always has been, our focus this year hasn't changed much is low metal prices, high metal price is to really look at a couple of things. One is productivity. More throughput if you'd like with no capital. I'm talking about a higher throughput through and the ones to really focus on would be Fort Knox, Round Mountain and Paracatu would be the big three and Refugio is in there, too. How can we get more ounces without any additional capital the throughput side.

Costs, the specific cost control initiatives and we've quite successful in 2005 and we'll continue in '06. We really focused on energy and meaning by that I'm talking the use of fuels -- diesel fuel as well as power. We have routine power audits looking at things as simple as timers on lights rather than light switches. We have seen some amazing gains there. Use of compressed air. Drop the use of compressed air at some of our sites. It's energy intensive.

We've also focused on commodity uses, how can we reclaim some cyanide at Paracatu, i.e. with thickeners and things like that to lower our consumable uses on our input costs if you like cyanide and others. So, it is across the board and I think if you look at margin per ounce compared to our peers, you can see how we are being really effective in our cost control measures. But it's a never ending process on productivity and costs control

And I guess that is a strong message that we have been hearing from all of the operators and the producers and as you say, having a plan in place for the last eight years through good times and bad is very important but even though we're seeing potential here for great margins with high gold prices and high silver prices there's still room for improvement.

Well if you look Katherine at our margin per ounce, and look at its growth over the last five years, I mean it's compounding about 11% a year given obviously -- move up in the top line with the realized gold price and what I think Scott's team has done which is a great job on the control side. So margins slightly less than Barrick and Newmont. Slightly better than Placer in terms of the margins perhaps.

Thank you very much.

Thank you. Management, at this time, there are no further questions. Please continue with any further remarks that you would like to make.

Thanks operator. We do not have any further remarks other than to say thanks very much for your time today folks. I hope the call has served to bring you up-to-date on Kinross' position. Again, we'll be happy to respond to any of your questions you may have after we hang up on the call. Thank you and good bye.

Ladies and gentlemen, this concludes the Kinross Gold Corporation third quarter financial results conference call. If you would like to listen to a replay of today's conference, please dial-in to 877-289-8525 or 1-416-640-1917 and use the access code of 21177379. Once again, if you would like to listen to a replay of today's conference please dial in to 877-289-8525 or 416-640-1917 using the access code of 21177379. Thank you for your participation. You may now disconnect and have a great day.