Kinross Gold Corp (KGC) 2006 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to Kinross Gold Corporation's fourth quarter earnings conference call. Please note that this conference call is being recorded, and an archived recording will be available on Wednesday, February 21st, 2007, at 7:00 p.m. Eastern time. Check www.kinross.com for further details. I would now like to turn the meeting over to Mr. James Toccacelli, who will moderate today's conference call. Please go ahead.

Thank you, and good afternoon, ladies and gentlemen. This is James Toccacelli, Senior Vice President of Communications. And I would like to welcome you to the 2006 Kinross Gold Corporation earnings conference call to discuss the financial results for the fourth quarter and year ended December 31st, 2006. Please note that the fourth quarter media release is now available on www.kinross .com, and has been filed with SEDAR.

We caution those listening to this call that certain statements we make contain forward-looking information, and that our actual results could differ materially from a conclusion, forecast, or projection in the forward-looking information that is presented in this call. In addition, we would caution you that certain material factors or assumptions were applied in our conclusions, forecasts, and projections, included in the forward-looking information presented in this call. Additional information about our applicable risk factors and assumptions are contained in our media release dated February 21, 2007, relating to our fourth quarter results and forthcoming management's discussion and analysis for the same period, as well as our other regulatory filings in Canada and the United States.

As we have not yet completed the Bema acquisition, we will provide Kinross guidance only on this call. Guidance will be updated to include Bema after the completion of the acquisition. There will be a question-and-answer portion after the presentation. At that time, analysts and media who wish to ask questions can press star one, on their telephone keypads. All other parties are welcome to participate in listen-only mode. I would now like to turn the call over to Mr. Tye Burt, President and Chief Executive Officer of Kinross Gold.

Thanks, James. And joining me here today is Tom Boehlert, our Chief Financial Officer; Tim Baker, Chief Operating Officer; Ron Stewart, Senior Vice President of Exploration; and Geoff Gold, our Chief Legal Officer. We will begin by reviewing the highlights from '06, Tom will then provide more details on our financial results, followed by an operational summary from Tim, and an update on exploration from Ron.

First, congratulations to Kinross employees on a spectacularly successful year. 2006 was an excellent year on a number of fronts. Our health and safety stats are very strong. And our environmental track record continues to be top of class. Financial performance set a number of records, and we will give more details on that in a moment. Thank you also to Kinross shareholders for your support, especially during the Bema acquisition that is leading to such a positive conclusion for all our investors. And welcome to Bema shareholders joining the call, who placed their support between -- or, behind this transaction and the Kinross team and strategy.

Yesterday, Kinross announced that we expect to close the $3 billion acquisition of Bema on February 27th, 2007. This will be a landmark day for our organization, as we become an even stronger Kinross, with a combined market cap of nearly $8 billion, more than 4,500 employees, 10 mines in five countries, more than 50 million ounces of gold reserve and resource, 80 million ounces of silver, and 3 billion pounds of copper. Further deal highlights include a gratifying 91% approval rate by Bema shareholders. Assets acquired include the world class Kupol project which will produce an average of 494 ounces -- 494,000 ounces per year to Kinross account, making Kinross the second largest gold produce in Russia. Significant additions to our district's position in Chile include 100% ownership of our Refugio mine and the surrounding exploration ground, and of course half of the Cerro Casale project, one of the world's great undeveloped copper and gold projects.

Should say that integration of Bema operations and staff is already underway, although we are still a week away from closing. We decided to proceed with closing based on the support and cooperation of the Russian authorities in respect to Kupol. We are confident that the administrative processes related to the long term lease there are well advanced, and we expect them to be successfully completed. To provide some additional insight, the long term lease process was initiated back in August 2006 by Bema. We put in the conditions precedent when we negotiated the purchase documents in November of last year. We due diligence this aspect of the lease, and over the last few months have been quite satisfied. In summary, the transaction process worked as it should have, the administrative process is proceeding smoothly, and we have a strong comfort level. This led to our decision to close. Looking at the big picture, with major construction projects in Brazil, the U.S., Chile and Russia, we are extremely excited about Kinross's growth prospects. More about that later.

Now on to our financials for the quarter and year ended December 2006. 2006 was a record-breaking year at Kinross in many respects. Highlights include aggregate earnings and EPS, revenue, cash flow, debt repayments, and new gold reserves. Net earnings for the full year were a record $165.8 million, or $0.47 a share, compared with a net loss of $216 million in '05. The $382 million positive change reflects the 2005 repositioning of Kinross that sorted out our balance sheet, combined with a higher gold price and excellent operating results this year. We generated more positive net earnings in each of the second, third and fourth quarters of '06 than in any full year in the Company's history. Kinross also achieved record revenue in 2006, reporting $905.6 million, a 25% increase over the same period last year. The average gold price realized for the year was $604 per ounce sold.

Cash flow from operating activities was the strongest ever, with $292 million for the full year, compared to $133.7 million for the same period in '05. We ended the year with a strong cash position of $154.1 million compared to $97.6 million at year end '05. And we reduced our debt significantly over the year to $89.9 million at year end, compared to 159.3 at year end '05. Our global operating teams continue to manage costs, despite higher consumable prices. Our cost of sales per ounce was $319 for the full year, on sales of more than 1.5 million gold equivalent ounces. Exploration results were also strong, with an increase of proven and probable reserves at year end of 3.1 million ounces of gold, to a total of 27.9 million ounces, net of 2006 production, a 13% net increase over year end '05.

Let's give some brief project updates. Paracatu, we are very excited about the expansion there. This project is a cornerstone asset for Kinross and, of course, it will triple production after start-up in 2008. Despite heavier than usual rains in the last few months, which has slowed us down slightly, we expect to complete the project on time and on budget. At Buckhorn in Washington state, state and federal permitting is continuing. Necessary mining construction permits were received, and site [inaudible] excavation commenced at Buckhorn in late September. As we previously said, we do have a third party appealing the water and reclamation permits, but we believe there are substantial defenses to the appeal. Federal permitting for the proposed haul road is anticipated for mid 2007. At the site, preparation is underway for construction of the upper portal area and other basic surface infrastructure. The project remains on track for targeted initial production later this year.

Speaking to the Bema assets in anticipation of closing, first I will just speak briefly to Kupol in Chukotka region, this project of course, comes in with Bema after closing, and will complement our growth profile, adding high quality low cost ounces for the future. The project is approximately 60% complete and is being managed by a very strong project management team. It will represent about 8% of our gold reserves after closing. I'm asked regularly about Cerro Casale in Chile. In 2007, we'll be driving to complete our plan to optimize the value for our share in the strategic asset at Casale. This is one of the world's largest undeveloped gold and copper deposits, and will become a Kinross asset upon closing. Looking forward, 2007 production is expected to be approximately 1.5 million gold equivalent ounces, at cost of sales per ounce of $320 to $330. In 2008, we expect to produce 1.6 million ounces to 1.7 million ounces, and in 2009, 1.8 million ounces to 1.9 million ounces of gold equivalent. We will update those production and cost forecasts for '07 and production beyond '07 after we close Bema next week.

With projects like those described ramping up at Paracatu, Buckhorn and Kupol, we are targeting aggregate production from the two Companies combined of 2.6 million ounces to 2.7 million ounces in 2009. This makes us the fastest growing major gold producer. In summary, our results demonstrate how our global coordinated team effort has paid off and delivered superior value for our shareholders. I would like to turn our call over to our Chief Financial Officer, Tom Boehlert, for a financial review and analysis. Tom?

Thanks very much, Tye. We concluded a great year, with net earnings for the fourth quarter of $41 million or $0.11 per share, compared to a loss in the fourth quarter of 2005 of $154.3 million, and that was a loss of $0.45 a share. Earnings for the fourth quarter were reduced by about $0.01 per share as a result of the impairment of certain long-term equity investments, which was partially offset by a gain on the sale of our interest in New Britannia. As Tye mentioned, our net earnings for the full year were an impressive $165.8 million or $0.47 per share, compared to a loss in 2005 of $216 million. During the quarter, Kinross sold 375 -- 375,684 gold equivalent ounces at an average price of $615 per ounce, generating revenue of $231.4 million. So this is a 22% increase in revenue over the same period last year, when we sold about 389,000 ounces. Production for the fourth quarter was just over 362,000 gold equivalent ounces, and just over 1,476,000 ounces for the full year 2006.

Fourth quarter cost of sales was $317 per ounce, which is an increase of 11% over the fourth quarter 2005, and $319 per ounce for the full year. The 16% year-over-year increase in cost of sales was due to increased power, fuel, labor and production costs, which really has impacted all of our peers industry-wide. Also, the high cost of producing the final ounces at Kubaka added about $7 to the average cost of sales per ounce for the full year. As Tye mentioned, our 2007 forecasted cost of sales is $320 to $330 per ounce, so we think the Company is doing a good job of containing costs, and that we stack up well to our peers. Comparing 2006 to 2005, the average price of gold realized increased by 36%, while the average cost per ounce increased by 16%. So as a result of that, the margin of revenue per ounce over the cost of sales per ounce increased by 68% year on year. So I guess the point is that our margin increase was almost double the increase in the price of gold year on year.

Exploration and business development spending for the quarter was $12.3 million, up from $8 million in the same period last year, and it is expected to be about $44 million in 2007. General and administrative expense was $13.7 million in the fourth quarter, compared $11.5 million in the same period of 2005. This difference primarily relates to the appreciation of the Canadian dollar against the U.S. dollar, period over period. General and administrative expense for the full year were $52 million, and that is expected to decrease a bit to about $48 million for 2007. For 2006, Kinross recorded a provision for income and mining taxes of $25.9 million, on earnings before tax of $192.2 million, representing an effective tax rate of 13.5%. The taxes result primarily from our Brazilian operations, from La Coipa, AMT on our U.S. operations, and mining taxes in Canada.

Cash flow from operating activities increased 118% to $292 million, from $133.7 million in 2005. And for the fourth quarter, cash flow grew by $67.4 million to $91.2 million, when compared to the fourth quarter of 2005. So higher cash flow was really largely due to the higher gold prices. Capital expenditure for the fourth quarter was $65.3 million, and $202.9 million for the full year. Capital expenditure in '07 is expected to be about $450 million, of which $260 million relates to the Paracatu expansion, $60 million to the Buckhorn project, and about $100 million to sustaining capital. Reclamation spending for the full year of '06 was $22.8 million, and expected to be about $29 million in 2007.

Cash increased from $97.6 million at the end of '05 to $154.1 million at the end of '06. And debt decreased during the same period by $69.4 million from $159.3 million, and about 5 down to 89.9 at the end of '06. In addition to that, we ended the year of 2006 with unutilized capacity under our credit facilities of $307 million. So it is expected that the Company's existing cash balances and cash flow from operations and our existing credit facilities will be sufficient to fund all of our exploration and capital reclamation programs which are budgeted for '07. So I would now like to turn it over to Tim Baker, our Chief Operating Officer, for a review of the operations.

Thanks, Tom. As Tye mentioned, we're really excited about the close of the Bema acquisition, set for February the 27th. This gives us the Kupol project in Russia, which is a great, high-grade ore body, well advancing construction, the operating Julietta mine, and the Cerro Casale project in Chile, which we think has very interesting potential. These projects complement our existing geographical spread and are in countries where we are very comfortable operating. Our current portfolio of mines delivered production as planned in 2006 with 362,000 ounces for Q4, and 1.48 million ounces for the full year. As Tye mentioned, our $470 million Paracatu project in Brazil continues to be on time and on budget. The [new mill] will be commissioned in 2008. Revenues have increased to $104 million from $79 million in 2005, with a higher price of gold, partially offset by a reduction in ounces due to processing [inaudible], and an increase in [ Inaudible ] On completion of the expansion, we expect Paracatu to produce an average of 490,000 ounces of gold per year for the first 10 years of production. Be a significant cornerstone of our future operations.

The Refugio mine in Chile, soon to be 100% Kinross, began production in the second half of 2005, and produced for Kinross 28,000 ounces during the quarter, and 117,000 ounces during the year. Revenue of $70 million reflects the high gold prices throughout 2006, though the cost of sales during the year, like everywhere else, was negatively impacted by increased energy and [inaudible]. During 2006, we strengthened our management team at Refugio, successfully completing the transition from construction. We are now fine tuning the operation. At Round Mountain, most ore production is coming from phase D. Phases E, F, and G are now being stripped. The mine's total revenue increased 29% in 2006, due to higher realized gold prices. Gold production was down due to low grade stockpile material being available [inaudible].

At Fort Knox in Alaska, gold sales were up 6%, with gold revenue increasing 46%, a reflection of the robust gold prices in 2006. Phases four and five are now complete. Phase six is producing. 750,000 ounce increase in reserve at Fort Knox is great news. This is due to an increased gold price, and to the heap leach project, which is now in the permitting process. Higher realized gold prices at the Musselwhite joint venture mine in Ontario boosted revenue by 23% in 2006, despite a decrease in production and higher input. Successes in the La Coipa joint venture mine in Chile include a 23% rise in gold equivalent production in 2005 to 2006, due to an earlier than scheduled processing of material from the Puren pit and higher than planned silver grades. Revenue increased because of a 56% rise in metal sales compared to 2005, contributing $94 million to Kinross. The average price of silver for 2006 increased 58% of that of 2005, to $11.55 an ounce.

Kinross' Crixas mine in Brazil remained relatively consistent from 2005 to 2006 in terms of tons mined and ounces produced. The higher gold prices resulted in a 37% revenue increase to $57 million in 2006 compared to 2005, despite higher input costs. Gold production for 2006 at Porcupine joint venture in Ontario, Canada, was 15% lower than in 2005. The Pamour pit has lower ore grades than the Dome pit, which was shut down in 2005. This was further complicated by unexpected dilution in the early stages, and delays accessing the eastern portion of the Pamour pit. However, by Q3, this was resolved. The operators worked hard to contain costs with reasonable success. [Other than] the acquisition of Crown Resources was complete, and with the receipt of the requisite mine construction permits in late September 2006. Construction is well under way, and subject to the appeals mentioned earlier by Tye, the Buckhorn mine remains on track for initial production in late 2007. Elsewhere, the Kubaka mine in Russia sold 40,372 ounces in 2006 and ceased production in the third quarter.

We are pleased with 2006 Kinross health and safety track records. And we are making it a key component in 2007 by building on more than a dozen mining industry health, safety and environmental awards over the past year, including ones that we're particularly proud of, namely the 2005 Sentinels of Safety Award at Kettle River. This is the premium mine safety award in the U.S. And the Brazilian Safety Agency's annual safety award at Paracatu. An outstanding achievement considering the importance of the mining industry in Brazil. Our increased focus on the training and development of our people with a real emphasis on health and safety will continue through 2007. We truly believe that this is a key foundation for operational excellence. If we can operate safely, we will operate efficiently. The key to the success in mining is people. Kinross has excellent people at all of the operations. We have put a lot of emphasis in the last year on training, developing, setting standards, recruiting, acknowledging, and rewarding. We are already seeing improved retention of our talented people, and are committed to continuing this drive. We will obviously be focusing on integrating Bema's operations into Kinross. And ensuring that the Kupol construction project remains on time. I will now turn the call over to Ron Stewart for an update on Kinross' exploration activities.

Thanks, Tim. Our exploration effort has been focused on two main fronts. First is to continue to expand our reserve and resource base at our core operating assets. And the second is our long-term effort to upgrade our pipeline of high quality exploration projects. 2006 marks the fifth consecutive year that Kinross has posted reserve growth, net of production depletion. In fact, since 2003, we have achieved a 37% compound annual growth rate in the Company's reserves, net of production depletion. In 2006, we increased our total proven and probable reserves by 3.1 million ounces of gold to 27.9 million ounces, versus 24.7 million ounces at the end of '05. Reserves increased at seven properties. In addition to the acquisition of reserves at Kettle River by closing the Buckhorn deal, major increases to reserves were recorded at Paracatu, due mainly to optimizing the mine design in light of the increased gold price supplied, and the completion of a program on the [Alvarnez] ground on the north margin of the pit. At Fort Knox, as Tim had mentioned, optimization of phase six and the addition of a heap leach processing option to our plan, resulted in a three-quarter of a million ounce increase to reserves. And at Refugio, we completed a major growth program and updated our mine plan on the Pancho ore body. This resulted in more than 0.5 million ounces of new reserves to our account.

On the year, the total add to reserves was 4.7 million ounces, translating into an average discovery cost of less than $10 per ounce. Measured and indicated resources grew by 1.9 million ounces to 8 million ounces at the end of '06. Significant new resources were added at Fort Knox, where we advanced the pit expansion opportunity and the heap leach project, and at the Porcupine joint venture, drill definition not only replaced reserves at Hoyle Pond, but expanded the resource base by more than 1.4 million ounces of gold to our account coming from Hollinger, Brulan and Pamour projects. The exploration campaigns at both Fort Knox and the Porcupine joint venture are high on our priority lit list for future exploration and engineering analysis in 2007. At Round Mountain, we completed the decline access into the underground target and commenced our planned drill program of nearly 13,700 meters. We expect this program will be substantially completed by the end of the year.

In respect to our exploration portfolios, the addition of Bema's Casale and [cape rata] projects in Chile, together with our exploration joint venture in Russia, boost our commanding exploration position in both those two key districts. In Russia, we're now positioned on one of world's best epithermal gold deposits at Kupol. We're very excited about both the potential of both the mine itself, and the surrounding district. In addition, we have aggressive plans to continue to explore and extend the mine life of Julietta. In the Maricunga belt of Chile, Kinross now has interests in eight separate exploration projects. In addition to our ongoing campaigns at Refugio and La Coipa, Kinross drilled economic results on two early stage projects in early 2006, and we're currently drilling on a third.

In late 2006, Bema completed a drill program on the [Cape Rata] project, where they have already identified an inferred resource of over 1 million ounces. And finally, at Cerro Casale, the joint venture has proposed a $4 million exploration budget to complete a drill campaign and collect metallurgical samples from the deposit. We remain very enthusiastic about the exploration potential of this project, and the entire Maricunga district, and we look forward to adding these resources to Kinross's portfolio post-closing. The details of all of Kinross's current reserves and resources are provided in the news release. This information is based on gold price assumptions of $475 per ounce for reserves, and $325 per ounce for resources. At our joint venture projects, we rely on operators' estimates, which are based on their own price assumptions.

Looking forward to 2007, we plan on increasing our exploration and investment to approximately 44 million, excluding the Bema project. We believe that our continued perseverance in investment and exploration will continue to reap benefits for the Company in the future. In summary, 2006 was another great year for Kinross on the exploration front. In 2007, we will continue toward Kinross' goal of delivering disciplined growth by enhancing our position in key strategic districts, actively managing our portfolio of assets, and maintaining our track record of above average resource growth. Now, I will turn the call back to Tye for his concluding remarks.

Thanks, Ron. While 2006 was a tremendous year by almost any standard, the Kinross team is really looking forward to what lies ahead in '07 and beyond. This year we will be executing our production and cash flow growth plan. In 2007, as we noted, we expect gold equivalent production to be approximately 1.5 million ounces, and cost of sales to be in the range of $320 to $330 per ounce. Looking beyond '07, our gold equivalent production is expected to grow to 1.6 million ounces to 1.7 million ounces in '08, and 1.8 million ounces to 1.9 million ounces in 2009, as the Paracatu expansion and the Buckhorn project come into full production. Capital spending is expected to be approximately $100 million for sustaining capital, and $320 million in capital expansions, primarily at Paracatu, Kettle River and Buckhorn.

In summary, Kinross has some of the best growth metrics among the major gold producers. With the Bema acquisition nearing completion and major developments in core projects well underway, the new and improved Kinross look for 2007 is enormously promising. The acquisition of Bema is completely consistent with our four-point strategic plan, which includes growth from the core, assuring we have the best people and the best talent, creating our building blocks for the future, and driving growth opportunities. We now have an excellent project pipeline with a sound balance of exploration, prefeasibility, development and construction projects. Our record 2006 results, buoyed by high gold prices, confirm that our strategy is on track and on target. As you can tell, we're proud of the progress last year with our financial results. We also had the best stock price performance among the majors. And we appreciate investor and Street support. We believe we're in the sweet spot in our industry, with the agility and size to capitalize on our opportunities. Close in saying the Kinross team is wholly committed to building high quality, low cost gold production in a balanced geographic portfolio for the benefit of our shareholders. A proven management team, coupled with a disciplined growth strategy and the hard work of our employees worldwide has achieved what we set out to do two years ago, to build a great gold Company with an even brighter future. Thank you. I'd now like to open up the call for questions.

We will now open up the call for questions. Please note that we will be taking questions from analysts and media, while the general public is welcome to participate in a listen-only mode. [OPERATOR INSTRUCTIONS] Tony Lesiak, UBS.

Good afternoon, and congratulations on the results.

Thanks, Tony.

Ron, I was hoping to get a little more information on the reserve and resource statement. In particular, I noticed that you included the heap leach Fort Knox resource in with the rest of the Fort Knox reserves. Could you break that out for me?

I think we mentioned that about 0.75 million ounces came from the heap leach side of the equation on the reserves.

Does that reflect the ultimate potential?

No, that's where we are right now.

Okay. And for Gold Hill, what was the inclusion there?

I don't have those details in front of me. We've got the release that includes Gold Hill as a reserve at Round Mountain, but we don't have it broken out separately here.

Okay. I also -- .

We will get back to you on that Tony.

Okay. And for Buckhorn, I noticed the reserve went down and there was no resource included. Could you comment on that?

The reserve change at Buckhorn is an update to integrate an underground plan. The Crown Reserves were built and developed around the old open pit concept. Our work is -- has completely redesigned the mine to accommodate the underground mining method. So the change, which is relatively modest in and of itself, is where we are at year end with our underground plan.

Okay. So you're not expecting the 140,000 odd ounces to come in from the resource at this stage?

I fully expect that we will see future opportunity from Buckhorn. But where we are at year end in respect to the underground plan is the reserve that we've got. The previous Crown Resources, as I say, was an open pit plan. So there is still great opportunity at Buckhorn.

Okay. Quick question for Tim. I was hoping you could break out the -- I guess the mine by mine guidance for a couple of the key assets, anyway, if you could. Particularly for 2007, for Refugio, Round Mountain, and maybe La Coipa.

Tony, we haven't been doing mine by mine guidance in terms of costs. But looking at our results for '06, of course, you will get all of that. And then I think you need to apply general industry inflation factors to the consumables side.

Okay. So you're not going to be providing that going forward, the mine by mine?

No.

Okay. Thanks very much.

Victor Flores, HSBC.

Listen, just following up on Tony's question, I can understand you are not ready to give us guidance on costs on a by asset by asset basis. Is -- does that apply for production, as well? Or can you give us a sense of where some of these assets will be production-wise this year, especially -- ?

That has not been our practice, Victor. So we're not going to be providing mine by mine. I think we have to leave something for the analysts to actually -- .

You want us to do some work, huh? All right. I guess we're going to have to get to work then. [ Laughter ] Just a follow-up question, maybe for Ron. If he could give us some of his key or most exciting exploration projects for this year, above and beyond what was already mentioned.

Okay, Victor, well, as I say, Fort Knox, we're pretty excited about the opportunities that we're pursuing there. Porcupine joint venture, it has turned out really well in terms of the resource growth that we're seeing that is emerging out of that camp. We've got some exciting results coming out that are a little earlier stage out of La Coipa. The Refugio property, once we bed down the Bema acquisition, it will open up new ground for us. So that too is going to be pretty interesting for us to pursue. Effectively, at year end, with 8 million ounces of measured and indicated resources, excluding the Bema projects, there is really good opportunity for us to continue the track record of reserve growth within this basket of assets.

And frankly, folks, I think Ron is being a little modest here. We have now an extremely exciting portfolio, up and down the Maricunga in Chile. And as part of our whole district approach here, you build knowledge of the trend, you build knowledge of the various properties in there. And with the Bema acquisition, we get a substantial uptick in our exploration ground around Refugio. Add to that what we already have in separate properties up and down the trend. Then there is La Coipa, then there is Cerro Casale, all of which are getting a fair amount of drilling money this year. So we're quite excited about the whole district.

Great. Anything else to add, Ron? Or that about does it?

I guess the only other place that I would really go to, is I'm chomping at the bit to get exploring on the Buckhorn project. And as we move forward, I expect that we're going see -- have great news to give to you. We're focused on getting it developed right now. But it will be fun to get it stuck in there with a drill.

Excellent. Thank you very much.

Haytham Hodaly, Salman Partners.

Just a couple of quick questions. The first would be with regards to -- I will give you a simple one. Your gold equivalent ounces forecast, what gold/silver ratio are you using?

The gold equivalent primarily relates to the silver in La Coipa, and you know, roughly speaking, it is -- use the silver price today, and use the gold price today.

Okay. So current pricing. That's fine. Another simple question. Effective tax rate in 2007. I'm assuming it is going to be similar to 2006?

Yes.

And for 2008, if I recall, there was an increased forecast. Is that still the case?

I guess that is two questions. 2007, I think, we haven't done an estimate at this stage. But I think, based on 13.5% effective tax rate for '06, we might expect to see an increase going forward, maybe 20% range or something like that, as we use up tax losses, and we have the opportunity to generate more and more taxable income.

Obviously, it depends on a gold price assumption.

Right. Yes. Exactly right.

So you're not saying this year will be 20%. You're saying as time goes on, correct?

I would say we would tend toward that kind of an effective tax rate.

In 2007?

And I'm also saying we haven't done our estimate yet for '07. But just to give some sort of directional guidance there.

So as we continue to get sustained periods of higher gold prices, obviously our royalties and our taxes are higher. But secondly, as we burn through losses in the U.S. and Canada, with good profits, at some point, they will start to trend higher. And I think what Tom is saying is we will trend a little higher this year.

Okay. Fair enough. Last question, I guess, just to touch a little bit further on the Buckhorn project, you say you're now looking at an underground plan. What throughput, type of throughput are you considering?

You want to address that? The question is about throughput at Buckhorn, Tim. Just to start it off, obviously, we have the mill at Kettle River, which has throughput capacity substantially beyond the underground output that we're expecting for Buckhorn. But Tim, maybe you want to expand upon that.

We're looking at about 1,500 tons a day.

Those are short tons or metric tons?

That will be short tons.

Okay. And then recoveries -- have you done any additional work on this deposit in terms of metallurgy? What are you finding?

We feel pretty good about metallurgy. We are not expecting any surprises. We've done lots of test working. I can't remember what recovery we're using, but it is consistent with what we have been getting out of Kettle River previously.

Okay. And last question, I guess with just CapEx. I can't remember, did you guys ever throw a CapEx number out for the development of this project?

It will be order of magnitude -- we have, but it will be order of magnitude, $90 million to $100 million.

Okay. And now, you have put out a budget, I think it was $60 million this year will be spent on Buckhorn. Is that -- will you actually begin spending some of that, even though the final permits of start and federal are not in yet? Are you that comfortable at this point?

We already are. But Tom, do you want to give a bit of a background piece there?

Sure. If you look at the CapEx schedule in our release, you will see what we spent to date, which is about $16 million, and $60 million is expected for '07.

Okay. Is that $16 million, what is your -- I guess what is your carrying value of Buckhorn so far these days?

I would say it is probably a little over $100 million, given the acquisition price.

Okay. And your cash costs, are they going to be consistent with what we previously saw at Kettle River sort of thing?

No, they will be different. We think we've said in the past that we're expecting slightly higher than $200 cash costs, in the order of $200 million -- or sorry, $200 per ounce.

That's perfect. Thank you.

Chantal Gosselin, Genuity Capital.

First question is for Ron. Could you give us a little bit better sense of where the eight separate other projects in the Maricunga are located that you're drilling, because I know you mentioned there is two of them that you are drilling right now on. You can give us a sense where it is compared to Refugio?

Chantal, we've got a number of early stage projects around the mines. We auctioned some ground called the [Pontenilo] project north of Refugio. We've staked a few blocks of claims that we're working on. We have got another joint venture with a local partner very close to the La Coipa ground. It is called [Comodor]. I'm including in that basket of eight the Cape Rata project, which is 100% Bema. The interest in the Casale project. So eight projects, the two mines, the two Bema projects, and some other earlier stage projects in the -- in between effectively where La Coipa is to the north, and Casale is to the south. It's about 120 kilometer bend of -- that we're working on.

Okay. So they're all about 100 kilometer radius to each other, within the La Coipa and Refugio that you mentioned?

Yes, it's all within the 100 kilometer distance between the two mines.

And how many drills do you have right now drilling those projects?

La Coipa has two. We've got a drill out at Refugio. We've got, I'm going to say five in the district right now.

Okay. And what is your budget for this year in terms of grass root exploration like that, in that region?

I don't have that number. Basically, we've got about $44 million in our exploration budget. My breakdown is about $20 million is going to go into the mines and around mines, and about 15 is directed at other exploration efforts.

Okay. My second question is regarding the phase six of the mine development at Fort Knox, can you give us a sense of the grade? Is there a big difference in grade from, I assume phase five, that you were mining last year?

The grades stay pretty consistent, Chantal. I can't remember what -- .

So about 0.83 to 0.86, Chantal, for the A ore at Fort Knox.

Okay. And last question is just accounting. Trying to get the operating cash flow before change in working cap. And when you -- there is two different numbers and two different release of Q3, to get the -- to back out, I guess, Q4 operating cash flow before a change in working cap. I don't know if somebody can enlighten me up.

You are looking at two different -- what are you looking at Chantal, I'm sorry?

Well, the press release of Q3, which recapped the first nine months, is different from the financials, both of them filed on SEDAR. And it is the change in working cap has a different number. So I wasn't sure which one we have to take.

I think that's what I will get back to you on. I don't have the Q3, or at least -- in front of me, if that's -- why don't we do that one that way.

Okay. Thank you.

Steve Butler, Canaccord Adams.

Just a question again on the update or status of the Gurupi project in Brazil.

Okay, Steve, fire away.

At Gurupi, we've been working on that. We did [meromag] project on that in '05. We've been following up on that in '06. We've got a drill -- , we developed some drill targets late in '06, started drilling in Q4, and we're following along and drilling right now on a new trend of mineralization. So as we go forward, we will see how it goes.

Yes, Steve, as I think we've said before, what we did, as you may know at Gurupi, is basically the deposit was not big enough in our minds, from the last round of sort of prefeasibility work. We decide we wanted to make it bigger and look at it in the light of this gold price. So we've given Ron more drilling money, and basically backed the project down the pipeline to take a fresh look at it.

Right, because it doesn't -- I mean, the resource is unchanged I think year-over-year pretty much. So you didn't do much work on it in '06?

That's correct.

Okay. What is your implicit assumption on the Brazilian real has on your cash costs, if have you it, for '07?

Tom, you want to speak to budget, what we've assumed on the real?

Yes, the budget assumption is 215.

215. Okay. The other question I have is just coming back to the heap leach at Fort Knox. Is this obviously intended to help bring down the cost structure at the operation?

Yes, and also expand -- extend the life. I mean it is all that we wouldn't process through the mill, which is not economic.

The reality is we have a large low grade ore body, and we're looking at ways to get at that lower grade stuff in an economic way. And of course, we have got energy costs up there that that are relatively high, labor costs that are high. So better economics, longer mine life.

Is it about -- is it just under the point -- I assume it is just therefore under the 0.53 gram per ton reserve grade. Do you know the grade of those 750,000 ounces?

Not off the top of my head.

Okay. Guys, that is it for now. Thank you very much.

Catherine Gignac, Wellington West.

Good afternoon. Congratulations on a good report.

Thanks.

Capital spending this year, your big component is Paracatu. Can you break down what those components are? $260 million in total?

It is mostly -- we have some equipment payments to do, and the -- but the bulk of it is the actual construction work, the civil work, the steel structures, installation costs.

Okay. So I was just looking for a breakdown in terms of processing capacity versus, as you say, delivery of equipment, whether that would be taking place or commitments for it this year, and delivery later. And I guess also, do you see any changes in terms of production being impeded by the construction process for this major project?

To the second question, no. We've got things pretty well figured out that there will be no interruption to production. The old plant will continue to run. We've got some major equipment ordered. And thus, we start delivery of the SAG mill and the first ball mill later on this year. The mining equipment will mostly arrive early next year. It is all in order. A couple of things are a little bit tight. But we don't foresee any delay impact. Everything is working well. And the equipment is coming in on time.

And just to be clear, we were just down there last week, Catherine. I mean, it is worth a visit to the mine, because the current operations are proceeding as they always have. And the new construction is, of course, immediately adjacent to. And then as you probably know, once we start up the new SAG and ball mill, then and only then, will we shut down the old line to refurbish and -- .

And we will keep plugging away with it. It will keep running as long as we have soft ore that will go through it. So there is no intention to shut anything down. It is fire up the new mill, and keep them both running.

Okay. Good. Well, good to know the timing and scheduling and that sort of thing is still in place. Good. And Ron, on Buckhorn. When was the last reserve or resource estimate done? And how does that compare to what you came out with today?

I would have to go back, Catherine, to look at when the Crown Reserve was published. I'm not exactly sure off the top of my head. I know it was built as -- or designed as an open pit operation. And my recollection is 970,000 ounces in the Crown Reserve versus our 932. So it is really no big difference. But I would have to check on the date. I don't know that off the top of my head.

Okay. But you put a new set of eyes to it, and are quite comfortable with your new number? And I -- ?

Absolutely. And as I say, I'm really quite enthusiastic, both the opportunity to expand it, and the future of the project as we get it built and get it going.

Okay. Great. And last thing, are you planning on hosting another conference call once the Bema transaction is complete? Can we tie you into that, giving us some updates in terms of overall guidance for what you see going forward?

Sure, we will have to put out a release once we get our arms around the Bema numbers. And if it makes sense and it is a lot of stuff that is new, then certainly we will have a conference call.

Great. Well, thank you very much.

David Christie, TD Newcrest.

Most of my questions have been asked. But -- and answered. I just wanted to ask the about gold price sensitivity and the silver price sensitivity on the reserves. How much of the 3.2 million ounces is from the change in the gold price?

A little over a third of the change in reserves was gold price-related. The rest is -- there is obviously a component was the Crown acquisition, or the Buckhorn acquisition. And the rest was our work at Refugio, and Fort Knox and drilling and engineering optimization work.

Okay.

The other third was -- a little over a third was gold price-related.

Okay. Thanks a lot.

John Bridges, JPMorgan.

I just wanted to -- I see your partners in some projects are cleaning up their portfolios. I was just wondering if there had been any discussion with them about some of your joint ventures?

Well, we thought we made good progress on one of those joint ventures by buying Bema. So that brings in Refugio. And as to other joint ventures, no, we haven't had any progress that we would report on right now on those JVs. But obviously, we're excited about what is happening at the PJV. We're excited about what is happening at La Coipa. We would be happy to move forward on just rationalizing any of those joint ventures, but nothing to report right now.

Maybe Ron, you could comment on the drilling of the lake at Musselwhite? How is that going along?

At Musselwhite, they continue to drill. They've been working on extending the deposit under the lake and doing some relatively aggressive step outs. They're seeing the right types of horizons and the mineral system is very consistent. So Musselwhite marches forward. It is doing okay.

When do you expect results from that?

It is hard to say. What I -- year on year, we've replaced reserves at Musselwhite, and update our position. It is really not something -- we have a 32% share. And so it is not really our highlight from Kinross.

Yes, okay. Finally, just going back to Catherine's question. I seem to remember there is some one ounce material at Buckhorn. Are you likely to see any of that this year?

Our mine plan is developed to go in and access some higher grade areas. But we don't have a detailed schedule of mining in front of us. But clearly, we're going to be going after higher grade areas early in the mine life.

Okay. Good luck.

[Eric Leechy], Fairbanks Daily News Miner.

At Fort Knox, you mentioned an increase of 750,000 ounces to reserves due to heap leaching. In the press release, you guys have that number at 1.2 million ounces? Is the difference in that related to the optimization at phase six, or something else?

The change of reserves is 750,000. There was 400,000 ounces, or there was a depletion through mining. Can you tell me the page that you're looking at?

Yes -- there is no page numbers. I think it is on five. At the bottom of the page there.

Well, that matches the -- hang on. We're just still trying to reconcile the page numbers here.

Okay.

I think we're going to have to get back to you on that, Eric. We will double check that and give you a call.

Okay. And then the other question I had was, I was wondering if you could break down the capital spending at Fort Knox for '06, and then describe what you've got planned there for '07?

We don't generally break down all of the detail on our CapEx program, as we noted earlier. But Tim, do you want to -- ?

It is mostly in the stripping -- capitalized stripping, a big portion of it.

Are you able to say what you -- the dollar amount that you have planned for '07 there?

I'm sorry.

No?

I don't know what it is.

Okay. And then the last thing I wanted to ask, was I noticed that you guys had an increase in production and sales there, but that it had been kind of trending down. Is there a reason why it jumped up this year?

Nothing in particular. I mean the place ran pretty well during the year. We certainly -- we normally schedule some days for weather. And we didn't have them. So that helped. We had some slight increase in grade at the bottom of the pit, the last stages of stage five come in pretty well. So that helped a bit. But nothing -- there was nothing significant there.

Nothing new, other than I think just good operating ability on the part of the team there.

All right. Thank you, gentlemen.

Tony Lesiak, UBS.

Just a few follow-up questions. Firstly on La Coipa, how are you accounting for the [acdelco] 35% ownership in Puren?

So to be clear, 35% acdelco and the other two joint venture interests are split evenly between GoldCorp and us.

Right. So on La Coipa, we're just doing proportional consolidation. We're consolidating our part of each of those companies.

Okay. Can you give us the [inaudible] production for 2007?

It was roughly 2.5 million ounces from memory.

Our share.

Okay. And is there a timing set for a decision on the sulfide project at La Coipa yet?

No. We haven't specified that yet.

Just moving to Buckhorn, can you give us the per ton operating costs?

Off the top of my head, I can't remember.

We aren't -- we haven't released the per ton operating costs yet. You will have to give us a little bit of time. I think with the operation and what we're reporting historically on that, but it is not typically what we give guidance for in the future.

Okay. If I remember correctly, you gave a cash cost recently. I'm just wondering, I mean, we can back calculate what the per ton cost might be, but perhaps just give us a sense of cash costs. Life -- .

Yes, as I mentioned, I think it will be a little over $200 an ounce, and then depends on where we are in the ore body. As I recall in the feasibility study, it got up to 240 in some years, and was as low as 200 in other years. So in that range.

Okay. And perhaps if you could update us on your view of the potential for the Round Mountain underground?

Ron, do you want to give a note on what our timing is there?

Yes, we are in the middle of the drill program right now. And really, it won't be finished, that program, until late in Q2. It is going to take some time to put it all together. We expect to have the entire project done by -- essentially by the end of the year. So until we've got enough data to put it all together, we're still working on it and we will update you when we can.

Okay. So you can't give us an order of magnitude potential based on the drilling to date?

It's too early to say.

Okay. And finally, just if you could elaborate on the permitting issues for the Fort Knox heap leach?

They're in process. What more can I say? I think you probably are aware that permitting in the U.S. is not something that you can put a firm date on. We've done the steps. We've had the public consultations. Things are moving ahead, and we feel pretty comfortable with it. Obviously, Alaska is a little bit complicated now, with what is happening at Pebble, but we don't see any concern. Fort Knox has got a great reputation.

Which of the permits are the ones that are the most contentious?

None are contentious. It is a routine matter, of course. But obviously, we will be -- we need water permits and construction permits.

Great. Thanks very much.

Michael Fowler, Desjardins Securities.

Tye or Tim, how is Kupol going? Any update on the construction there?

Well, go ahead, Tim.

It is going really well. Guys have performed miracles in terms of the winter road, which is the key part of the project at the moment. The last word I had was that 40% or so of the material that needed to be hauled, had been hauled. They're now gearing up to haul in the big generators, which is going to be the big job in March. The building is up. The construction of the [inaudible] which a key component, is on schedule. They've started to put liner in, so that is working well. Pre-strip of the pit is on schedule -- is ahead of schedule, and the development underground is ahead of schedule. So they're doing a great job.

And overall, a little over 60% through the construction process.

Just the last, I think, capital estimate was 490, $490 million. Is that still a good figure to use?

I think now we're speaking on behalf of Bema, and a good question for Clive here, pre-closing. But as I recall, it was in the order of magnitude, 530 to 540.

Okay. Thanks very much.

Haytham Hodaly, Salman Partners.

Sorry, guys. Just one follow-up question on Buckhorn. Just given what you expect in terms of construction, assuming the permits came in as were you spending your $60 million this year, how much does that leave for next year? And when could you theoretically throughout the year be in production?

We're actually targeting production at the end of this year. So there is obviously a little more development capital in next year. And as I recall, we haven't given guidance on that, but order of magnitude is $10 million or $20 million to go.

Okay, and the start date in theory, commercial production, end of this year, early next year?

Well, end of this year is what we believe today.

Okay. Perfect. Thank you.

Mark Smith, Dundee Securities.

Just a quick question. I was just noticing the -- about a $7 million increase in stock-based compensation in 2006. Is this sort of 10.4 number the kind of number we should look for going forward?

Obviously, Mark, a lot of that is driven by the fact that the stock price performance was so strong. So, I hope we -- I hope we have that sort of problem in the future, because it means the price performance has continued. But obviously what happened is, one, we had a lot of new hires. Two, we had significant appreciation in the share price, which at the end of the year, you have to mark to market. So I wouldn't expect it will be as high as that this year, just in terms of we won't have as many new hires.

So it should be back down to the 3.1 sort of level?

Well, that is pretty detailed question, and we can't call what the stock price is going to do for the end of the year, so I don't think that is an unreasonable number.

Okay. All right. Thanks very much.

That concludes the question-and-answer portion. I would now like to turn you over to Mr. Burt for the closing remarks. Please go ahead, Mr. Burt.

I guess I first joined Kinross two years ago, and the obvious potential of the Company was evident. And now, that's culminated for us in tangible, measurable results. And I think our performance this year against the disciplined plan of the past year, included record sales, included production ahead of targets, cash flow that more than doubled, and acquisitions like Crown and now to be closed Bema, that have benefited our shareholders. Looking forward, we think we're in a very strong position to continue to provide value for our investors. And I would like to thank everyone for their questions and their comments today. Thank you.

That concludes Kinross Gold Corporation's fourth quarter earnings conference call. An archived recording of the conference will be available at 416-640-1917 for Toronto, and international callers. Or toll-free within North America, at 1-877-289-8525, pass code 21217852, followed by the pound key, later tonight, until March 7th, 2007. The conference call and audio Webcast will also be archived at www.kinross.com. Thank you.