Kinross Gold Corp (KGC) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Red Back Mining year-end results conference call. At this time, all participants are in a listen-only mode. (Operator Instructions). I would like to remind everyone that this conference call is being recorded on Tuesday, March 3, 2009, at 11 AM Eastern time. I will now turn the conference over to Richard Clark, President and CEO. Please go ahead, sir.

Good morning, everybody, and welcome to the 2008 financial report for Red Back. We're here in Vancouver and I am accompanied by Alessandro Bitelli, our Chief Financial Officer, and Simon Jackson, our VP of Corporate Development. And, as usual in these formats, what I propose is just a very quick introduction, and then I'm going to turn the meeting over to Alessandro to go through the Q4 and the annual numbers for the Company.

I think that everyone will agree that we had a very solid 2008 financial performance and an even stronger Q4 performance. I can tell you that that operational trend is continuing into the first quarter of 2009. We're very pleased with operations to this point, and are anticipating and looking forward to the commissioning of the expansions at both Chirano and Tasiast, and also the first sublevel cave blast at Akwaaba Deeps at Chirano.

In addition to that, I think it's safe to say at this point that we have had very strong exploration results for 2008, both at Chirano and particularly at Tasiast. I'll go into those in a bit more detail after Alessandro has gone through the financial numbers.

Following Alessandro's explanation of the numbers and presentation, I'll give a bit of a project update on each of the projects and, as I said, discuss where we're going exploration-wise, and also briefly touch upon our corporate development plans and what's happened over the last year.

So at this point, I'd like to turn the meeting over to Alessandro.

Good morning, everyone. I'm very pleased to report the results for the year. Almost $62 million of net income, and the two key factors that led to Red Back's strong performance in 2008 are the investment in Tasiast and the taking out of the hedge in late 2007.

As a result of that, in 2008, Tasiast produced 140,000 ounces and contributed significantly to the profitability of the Company. And Chirano was able to produce gold at -- and sell it at market and therefore that also contributed to a significant increase in the revenues for the Company.

Compared to 2007, revenues tripled, and that is a very, very strong result indeed, and we expect that to continue in 2009 with expansion of production at both Tasiast and Chirano.

The cash cost increased from 2007 as a result of continued pressure on materials and energy, particularly at Chirano in the second half of the year. In addition to Chirano, there were some other contributing factors with respect to our higher cash costs.

Having said that, compared to our forecast at the end of the third quarter, our cash costs over all came in at 5% below that forecast, at $428 for the year.

With respect to other items that affected operations, we had a foreign exchange gain, as well as a gain on sale of securities. That contributed roughly $7 million to our bottom line. And overall, excluding those two items, that we have earnings per share of almost $0.30.

Cash flow from operations was almost $100 million, and again, we expect that number to increase in 2009. Our capital expansion programs continued on target, in terms of budget. And significant capital commitments were made in 2008 and will continue in 2009, leading to the plant expansion and the underground development.

With respect to the planned expansion projects, overall $58 million was spent at Chirano and Tasiast. We purchased a mining fleet in the second quarter of 2008 for approximately $22 million, and we also moved to using heavy fuel oil at Tasiast by purchasing two power plants and trying to take advantage of lower fuel costs there.

Other significant expenditures included continued commitment to exploration, both at Chirano and Tasiast, and new resource in the reserves, as a lot of that work will become available later on in the first quarter of this year.

Other transactions in 2008 relate to the purchase of common shares of mineral deposits limited, and those shares were then subsequent sold in 2009, this past month, as well as the loan security for the purchase of those shares was also repaid at the end of February.

We finally -- we made a significant commitment to those capital expansions, and in order to continue at the same pace, we were successful in very difficult market to raise $60 million in December, and subsequent to that, in February, we raised a further $165 million, which put us in a very strong financial position to pursue other initiatives and assets.

Rick, I think that's a pretty good summary.

Thanks very much. Just before touching on the projects, and I think Alessandro may have mentioned this, but to emphasize -- last year we sold 258,278 ounces of gold as against 2007's figure of 125,155.

The cash cost for '08 was $428, as Alessandro said, and the cash cost including royalties was $454. So, we think we are very solidly in the bottom half of the cost profile for gold production and comparables, and we expect to be improving upon those numbers going forward.

Anyway, in particular, talking about Chirano, the commissioning -- there's two phases to the expansion at Chirano. One is the commissioning of the new crushing facility, which will address an ongoing factor that we've had at Chirano, being the unusual hardness of the ore.

Up until this point, we have been dealing with that with a series of portable crushers, up to four at any given time. Those will all be replaced with the permanent crushing facility, which is on track for commissioning in Q2.

Later in the year, towards the end of Q3, early Q4, we will commission the actual new mill facility, and we will start enjoying the benefits of the full expansion on both phases by the end of the year. What that means is, although cash costs for Chirano will start off the year as they substantially ended in 2008, that cash-cost number will gradually decline towards the end of the year as these expansions come online.

We will get the full benefit of the cost saving going into 2010.

In terms of Akwaaba Deeps, Akwaaba Deeps is on time and on budget. The decline is now down almost two kilometers. To this point in time, we've had relatively little ore production out of the decline and out of the operation, as we've been dealing predominantly with development waste, etc., and focusing on the decline.

But to this point in time, we produced approximately 10,000 tons of ore at 7g a ton, and that is going to very quickly ramp up as we get towards the first substantial cave, which is looking to be at the end of Q2, beginning of Q3.

As we've forecasted the market from Chirano, from both the underground and the open pits, we expect to produce around 170,000 ounces this year at a cash cost of approximately $480 an ounce. And as I said, most of that cash cost is a reflection of the full expansion not coming on until sort of the beginning of Q4. But we expect Q4's numbers to better reflect the cash costs that we're going to be seeing in 2010.

Going onto Tasiast, Tasiast's commissioning of the full plant will be before Chirano. That commissioning will take place in the second quarter of this year. Obviously, I think for all of you who have been following the development of Tasiast, that's turned into a spectacular operation for us. And we are forecasting to the market this year 230,000 ounces at a cash cost of $320.

Q4 of '08 had a cash cost in front of it at Tasiast with a 2, in front of it. We'd like to duplicate that result, but I think that everyone will agree that we are pretty -- have a policy in the Company of being relatively conservative on our numbers and looking to overachieve, which I think we have been quite successful at doing up to this point.

So again, Tasiast well on time, well on budget right now. And as I said, we look forward to a commissioning in Q2. We have an analyst tour taking place starting on April 20, and by the time we all get to Tasiast, we expect the new mill to be turning.

Going on to exploration, as I said at the outset of the call, we have had a very successful year on exploration. Starting off with Chirano. I think it's the best summarized by saying that continuous exploration program since we first started producing gold in 2005 up to this point has replaced all the ounces that we have produced, and that is in excess of 400,000 to date.

And that replacement is all from surface ounces. It does not include anything that we have discovered and added to the reserve from Akwaaba Deeps.

We expect to continue that rate of replacement over the next few years. We don't talk about that very much in our news releases or in our reporting, because it hasn't been as exciting as, say, the discovery of Akwaaba Deeps or the work and the discoveries that we're making at Tasiast.

But it is a key factor in the Company that we have been able to replace those surfaced ounces and maintain the mine life that we started with originally.

At Chirano, we expect to come out with a new resource reserve by mid-year. We have very positive indications to this stage of another potential underground development, and the central part of the ore body right across from the plant site.

The initial numbers are now in the hands of our consulting engineers, and we will be looking to convert what we have done into resources -- sorry, into reserves, and come up with a development plan. And that's what we will be looking to report sometime mid-year this year.

We continue at Chirano to test the high-grade potential at depth, both under the existing deposits and anomalies that we've identified on the surface. Drilling will commence again next month, and at this stage of the game, we have about 10 targets that we have prioritized -- that we will be testing over the next few months at Chirano.

In terms of our other land package in Ghana, we have three projects right now joint ventured out to Newmont and one project joint ventured out to Etruscan. All those projects are being worked, and we are currently in the process of considering another exploration program for our Enchi project, which is to the south of Chirano.

Going onto Mauritania, we expect to have a new resource reserve estimate for Tasiast out in the next couple of weeks. That will be -- that is based on -- or those new numbers will be based on about 120,000 meters of drilling that were performed in 2008.

We did not come out on, obviously, on a drill by hole by drillhole basis last year. The purpose of this program was to convert inferred resources into measured and indicated, and subsequently into reserves. I can say that at this stage of the game, we're very pleased with the results, and I think that we will be looking for -- certainly supporting the presentations that we have been making to investors in the market that Tasiast is looking to develop into a major ore body in Africa.

We will be doing a similar type exploration program at Tasiast this year, and budgeting approximately 120,000 meters, roughly. We do our exploration budgets on a six-month basis. And based on the results for the first six months, we re-jigged the program for the second six months.

We expect to be doing a lot more reconnaissance work in addition to resource development in and around Tasiast in this first six months, and again, we expect to be into resource definition mode in the second half of 2009 in and around Tasiast.

In terms of -- just finishing off on that, so again I emphasize the very strong exploration success at Tasiast, and again, our target profile has broadened as we are now looking for a number of different types of ore in and around Tasiast, not only the high-grade material that would feed a CIL plant, but also lower-grade oxide material that can go into dump leach operations, and lower-grade sulfide material that will potentially go into heap leach operations.

We have charged our first commercial dump leach pad. We expect to be able to give the market some more definitive numbers on that in the next couple of months. Early indications are supporting our test work and, going forward this year, I think out of the 230,000 ounces that we are targeting for this year at Tasiast, we budget about 30,000 ounces coming out of those -- the dump leach operation.

In terms of any forecasts that you have seen for 2010, none of those production numbers include anything from either dump leach or heap leach at Tasiast. We will be re-forecasting our numbers for 2010 hopefully by mid-year this year, once we've got our -- a lot more information coming out of the first dump leach pile.

But what is significant about that is -- obviously, our original focus was, at Tasiast, was targeting one gram plus material to feed the CIL plant. What's interesting is there is a much, much larger volume of lower-grade oxide material that we are now looking to be able to realize a financial -- a strong financial benefit out that we certainly didn't even consider when we went into that project originally. So very pleased with that going forward.

Going on to -- just before I leave my exploration of the Company, a lot of people may not know we have two what we consider to be quite strategic exploration projects in Cote d'Ivoire. We have done a lot of preliminary work on those projects, and we are currently awaiting permission to go in and do drill programs.

We have the targets outlined. We would look -- be looking to start drilling on those projects sometime in the next couple of months in Cote d'Ivoire.

Now going on to corporate activity, as Alessandro indicated in his report, we have been very successful in equity raisings in the last quarter of 2008 and the first quarter of this year. In November, we raised $60 million to backstop our capital expansion requirements. That allowed us to continue full speed ahead on those and keep them on track and on budget.

In addition to that, we -- obviously, we have built this Company from acquisition. That was how we acquired Red Back. That's how we acquired Tasiast. We continue in that mode as a management team, and one thing we realized from some of the negotiations we were in at the end of last year was that we were looking at a disadvantage against our peers in that we were the only ones without any type of a cash base on which to go in aggressively on any type of corporate deals.

Given the vagaries of the market and certainly the up and downs of the market, we made the decision that we wanted to be the ones to pick when we went to raise our cash, as opposed to having to come back to the market at any given time for a corporate opportunity, and be at the mercies of the market pricing at that time.

We also saw a window of opportunity for doing that, and up until this point in time, we think that Red Back realized the smallest discount of any financing done in the gold sector for some time, in that $165 million financing.

So as we sit right now on a U.S. dollar basis, our expansions are fully paid for, both from that $60 million facility and from cash flow, going forward from this year. And that $150 million realized from the last financing is available for us for opportunities that may come our way.

On that front, again, as Alessandro indicated, we have now liquidated our position in Mineral Deposits. I think this is an interesting business. We see the Sabodala Project of MDL's, this is very interesting. Of course, I think we would have liked to have done a deal, but we're not going to do a deal just for a deal's sake.

We pride ourselves on making good corporate transactions, which we have done with Chirano and Tasiast. We're not going to just jump into a deal because we think the market expects it. We could not reach reasonable terms with Mineral Deposits, and rather than sit there and sit on that position, we have gone onwards and upwards.

We purchased that position at AUD0.54 and we sold it at an average cost of AUD0.60. So we're -- again, in any of the corporate transactions where we've taken an equity position, I think we're batting 1,000 and we've come out ahead on every single one. So we're quite happy with that result and we'll carry on looking at other projects.

Where we are looking, predominantly West Africa, second to that, Africa as a whole minus some particular countries that we're not prepared to go into at this stage. And following that, we're looking in South America and in Asia on a selected basis.

For us to move out of Africa will require a significant project size, with the potential to very quickly ramp a project up to the 200,000 ounce a year range.

But, as I said, we see this year as a very opportune year for gold producers, particularly at our level that are looking at projects at the size that may not be big enough for majors. And we're seeing some -- not only from the junior opportunities, but we're also seeing some project shedding from the majors that we're looking at as well.

At this point in time, I think there are six different projects that we're looking at seriously. And whether or not any deals are done, I can't guarantee. You can always lead a horse to water, but you cannot necessarily make them drink.

So, anyway, we're going to be very active this year on all fronts, on the finalization of the expansions at Chirano and Tasiast, on the continued development of Akwaaba Deeps, very aggressive on exploration, both in Ghana and in Mauritania, and hopefully in Cote d'Ivoire sooner rather than later.

And also, we have a very strong corporate development team, a technical team now, and we've got the capacity to not only look at new opportunities but also to take another one on without stretching the resource -- management resource base of Red Back.

Anyway, thank you very much for listening to that presentation, and I would like to open the conference call to questions.

(Operator Instructions). David Stein, Cormark Securities.

Good morning, guys. My question is on the Tasiast dump leach. What kind of tonnage are you using to forecast the 30,000 ounces?

We're all scratching our heads here. I don't think we can give you that off the top of our head.

I'll tell you what, I will dig that out and get back to you. I've got about four pieces of paper in front of me, but I don't have that on it.

Just back of the envelope, and Simon will confirm it to you, but I think we're looking at about -- it's about 700,000 tons.

And then, a follow-up to that would be how much tonnage of 0.3 to 1 gram material do you have on there, if you extended the grade tonnage curve downwards?

Could you repeat that (multiple speakers)

If you extended the grade tonnage curve, how much more material would you have between 0.3 and 0.8 grams per ton there -- sorry, 0.3 and 1 grams per ton, below cut off? What is the total tonnage of the potential for dump leach?

I think the best way to answer that question is to wait until our new reserve resource comes out, and then it's going to be a lot clearer to everybody what's going on.

Which is when?

About two weeks.

Other than that, quarter was good. That's all my questions. Thank you (multiple speakers)

I just worked out your first question.

I was looking at the wrong number.

It's somewhere between -- for the 30,000 ounces, it's somewhere between 2.5 and 3 million tons. Average grade around 0.6, recovery we're using 51.5 for our budgeted numbers, even though the test work gives indications of around 70. So you can run your numbers from that. That should come out around 30 percent (multiple speakers).

30,000 ounces.

Around 30,000 ounces.

30,000 ounces.

Great. Thank you very much.

Anita Soni, Credit Suisse.

Good morning. Congratulations on a good quarter. I'm glad, Richard, that you addressed the MDL and the transactions that you have done over the last [alaska]. I was going to ask what you were intending to spend on with two equity raisings, and I think you've addressed that pretty well.

With respect to Chirano, are you going to be capitalizing any waste this year?

If I may answer that question. Yes, we will be capitalizing waste with respect to the [cat back] programs that are designed to access approximately 600,000 ounces out of the 1.6 million ounces that we have in reserves. And -- (multiple speakers).

That's the open pit reserve (multiple speakers).

That is the open pit reserve, yes. So we are looking at approximately $14 million, one-four million dollars of CapEx that are going to be capitalized.

And then, in 2008, can you let me know what your exploration expense -- sorry, what was the total exploration budget and how much was expensed and how much capitalized?

We capitalized exploration as part of our accounting policy, and the exploration amounts were $12.3 million in Chirano and $13.1 million in Tasiast.

That's the full amount that was spent and it was all capitalized, right?

That's correct.

And then -- I guess I got the dump leach questions. That was the other question that I had. Okay, I'll let someone else take the floor. If I think of anything else, I'll call back.

David Haughton, BMO Capital Markets.

Good morning, gentlemen. I presume that you'll be booking a profit in this quarter on the MDL stake.

Correct, on the [map] -- on the sale of securities, correct.

So, that would be in the order of something like $5 million, thereabouts?

We haven't done the final numbers, but it's probably a little less than that.

And would you pay tax on that?

No, because it is sheltered by losses.

When you had the headline numbers for increasing reserves at Tasiast and Chirano, I understand that we will wait a little bit longer to see the details of it. With the huge increase that we saw at Tasiast, does that include the heap leachable or dump leachable ore?

You're talking about the numbers in the release?

Yes.

That was the increase that we -- of resourced reserves that came out in July '08. [After that], the historical highlights (multiple speakers). We have not told anybody what the new reserve is or is not, and you have to wait two weeks to find that out.

But would that include the dump leach ore?

Correct.

It's sort of like Christmas.

Yes, you got to wait for it. I saw quite a bit of detail on the CapEx for 2009, so it's good to get that level of detail. Can you give us a view as to what we would expect at Chirano and at Tasiast in 2010?

In round -- in kind of round, flowery numbers, we can. The average cost per year of the [LD] Akwaaba Deeps development is around $15 million to $20 million. So I would expect that type of number in 2010 for Akwaaba.

On top of that, there will be just normal sustaining capital. We're re-running the plants a bit at the moment, but you can imagine that's probably going to be somewhere between five and 10 at Chirano.

At Tasiast for 2010, barring some increase in the fleet size, which obviously would depend on new mine schedules, etc., which are still in the works. But barring that, capital for 2010 should be relatively low, just on a regular sustaining type capital, which, once again, you could put five to 10.

On top of that, obviously, you've exploration, which we obviously are not at the stage of having put together the exploration budget for 2010.

Just for clarity on that Akwaaba of $15 million to $20 million, do you see that only for the first number of years, or is that an ongoing?

No, once we get to the bottom of -- the budget for the Akwaaba Deeps development in total still remains at $67 million. Once we've got to the bottom of the decline, which gets us to that $67 million, at that point that will stop, but obviously, we are going to set up exploration stations and drill deeper and we're obviously hoping that the decline will continue.

Okay. With the Akwaaba underground, can you give us an idea as to what the profile could look like there in 2009 and outwards?

In terms of production?

Yes.

We're looking at 100,000 tons of ore a month, is the budgeted full commercial rate. And if you apply the reserve rate to that, which is just under four, and apply the regular Chirano recovery of 91%, then that's probably your starting point.

We're obviously hoping that it will have a higher growth profile than that due to less dilution. But we won't be able to tell that until we do it.

Given what we've reported, the ounces are about half and half from the underground and from the surface (multiple speakers).

So, somewhere either 120,000, 130,000 ounces (multiple speakers) a year range.

The only other point I would like to make is on your question on capital for 2010. The unknown at this point is what we might do with this new discovery in the central part of the ore body. And it's too early at this stage to have any idea of capital on that. And also on scheduling.

Yes, which is an ongoing process.

That's understood. Thank you very much.

Trevor Turnbull, Scotia Capital.

Good morning. I had a question and I missed a little bit of the answer that you were giving to David, so I hope I'm not recovering the same ground. But looking at the profile at Chirano as Akwaaba comes on, can you give us kind of a sense in terms of tonnage and throughput, how it ramps up through 2009?

In other words, do we have to wait until the fourth quarter to fully see the new throughput figures, or do those numbers start to climb a bit, say, in Q3? And then, likewise, are you starting to blend in a bit of Akwaaba grade earlier in the year, say before Q4 when you actually have the full expansion ready to roll?

I think the answer to that is that the Akwaaba -- the first cave at Akwaaba is mid-year, and it's not until that point that we're really going to get any significant tonnage from Akwaaba through to the middle. Obviously, we are taking small amounts of Akwaaba -- of ore out there at the moment.

So the grade profile should start increasing around that time. And then, once the new mill is commissioned, then we get to that full ton of throughput rate early in the fourth quarter, you really start seeing that production ramp up.

But the real -- to get to the full -- the full going-forward basis -- full going-forward basis, 100,000 tons a month of ore from Akwaaba, probably won't happen until early in 2010.

No, it doesn't. To make it very simple, we will do about -- under the current schedule, we're going to do about 500,000 tons of ore out of Akwaaba Deeps this year. And in 2010 and going forward, it goes plus 1 million.

Right. I was just looking at the fact that you've got 120,000 ounces, give or take, this year, and you're going up towards 170,000. I guess it's going to be a really back end-loaded year, kind of a pig and a python at the back end.

That's right. What you can assume is that the production from the open pits remains relatively static. So we're looking at somewhere between 40,000 or 50,000 ounces from the underground this year, but you're right -- that's going to be heavily weighted in the last quarter.

Okay.

Last two quarters, but -- . Yes.

Just to refresh me, because I've kind of lost track with the variability, what is kind of your average daily throughput at Chirano before the expansion takes hold?

On a daily basis --.

Like 6,500? Somewhere in that range?

Let me just work that out on the calculator because we don't do it on a daily basis.

Or in whatever terms makes sense.

Yes, that's about right. 6,500 is about right. That gets you to about 2.4 a year. That's probably what we're doing roughly now. Yes.

Okay. And then, just the other quick question I had was related to Tasiast and the last quarter. You did extremely well there, obviously, in terms of production and cash costs. The grade looked extremely good as well. I just wondered was that a bit anomalous and how should we think about where grade goes from here after -- I guess you did about 3.7 in the quarter?

It was anomalous for the time. Hopefully, it won't be for this year. As we're getting to understand Tasiast more and more, we think -- we hope and expect that we will get some more pleasant surprises. But we mined a very high-grade zone in the fourth quarter at Tasiast.

Okay. Great, that's all I've got. Thanks, guys.

David Stein, Cormark Securities.

It was answered, thank you.

Pierre Vaillancourt, Macquarie Capital Markets.

I just wanted to clear up, so -- post the financing, how much cash have you got right now?

Right now, we have approximately CAD150 million. (multiple speakers)

That's here, right?

Yes.

That doesn't include our operating accounts on-site, which is probably another (multiple speakers) $5 million or $10 million.

Okay. Can you just give me some detail on what your power costs were for the quarter?

Our power costs for the quarter -- at Tasiast, we're probably looking -- sorry, at Chirano, you're probably looking at being roughly 16% of our total costs. And (multiple speakers).

Okay. So, in terms of -- what were you paying in terms of cents per kilowatt-hour?

At Chirano, Pierre, we've -- it's been very well documented. We're paying 22 Ghanaian (multiple speakers) [pixel watt] a kilowatt-hour. Same as everybody else. And at the current exchange rate that -- sorry, the exchange rate that was in effect in the fourth quarter, that probably averaged about $0.16 or $0.17 a kilowatt-hour at Chirano. (multiple speakers)

Obviously, at Tasiast, it's more -- I can't give you that number because we're generating it ourselves so we don't look at it in terms of a per kilowatt-hour basis at this level.

We were looking at, from a cost per liter for HFO, we were looking at roughly $0.65, and for diesel, we were looking at roughly $1 for the fourth quarter.

Is that what you're budgeting for this year (multiple speakers)?

Yes. Let's -- one of the things I should emphasize is in terms of how we have worked on our budgets and our forecasts, we have kept all the consumables, whether that's power, whether it's fuel, whether -- whatever, [todd and I] steel, we've kept them at the January 1 numbers. So we haven't done a declining cost curve on any of our consumables.

So how is that reflected in your cost per ton? I'm just trying to understand if some of these lower costs are more attributable to the higher grade, or have you actually been successful in bringing down your operating costs?

It's a combination of everything. It's higher throughput, it's higher grade, and it's also seeing costs come down in the last quarter of last year.

We hope that that continues. I'd love to be able to be back here at the half-year call and be telling you that we've got to re-forecast our cost curve because we've seen a lot of benefits with the declining commodities markets.

Certainly, in terms of power, just as one example, in the fourth quarter, the power costs of both operations came down, but at Chirano it was mainly due to exchange rate. And at Tasiast, it was due to the -- it's finally started to come down in terms of the fuel prices that have been input. So the power generation costs are coming down. That is part of the better cost curve.

So can you give me your operating cost per ton, then?

For power?

No, I mean overall.

Sure. Operating costs per ton at Chirano for the fourth quarter was about $33, and at Tasiast, it was also about $33.

They're just the same, you're saying?

Yes. (multiple speakers) Yes, there's a coincidence and we don't expect them, necessarily, to stay the same, but for the fourth quarter, they were about the same.

So -- to what extent is that coming down this year? Are you looking at some significant reductions (multiple speakers) there?

As we've said, Pierre, we forecast based on those numbers. We're not building in any reduction in costs. We obviously hope and expect to bring costs down, both on the basis of operational efficiencies and in terms of falling input prices. But it's impossible to predict the quantum of those at this point (multiple speakers).

Your call on this is as good as ours, and my view is, we basically tell the market and the analysts that this is how we fixed it for forecasting to you. How you guys want to opine on where you think costs are is up to you, and you can make your fudge factors.

Now, obviously, we will have a better idea of this when we get to the first quarter call in a couple of months.

Just remind me, the Cedi exchange that you're using at Chirano is what?

It's whatever 22 divided by 16 is. We're paying $0.22 at this point -- (multiple speakers) that works out to be about [six to eight cents]. About 1.35, something like that.

Great. Now, just finally, back to what Trevor was discussing on the Tasiast, the higher grade there. Are you implying that you have discovered more of these high-grade zones, so this kind of grade, this 3.7 that you realized, is that sustainable or something close to that?

All I can say, have we discovered more high-grade zones? The answer is yes. Is it sustainable over the same type of volumes and everything else? It's too early to tell you.

Thanks very much.

[Esuru Semavee], [Equinox] Partners.

Good morning, guys (multiple speakers). A few questions to follow up on the last couple of guys. What -- let's focus on Tasiast. What were -- the recovery seemed to be lower at the much higher grade. Is there metallurgical differences in the higher grade material, or should we expect 92% grade recoveries going forward?

Esuru, obviously it's going to bounce around a bit. The CIL recoveries are going to remain in the low to mid-90s. But the thing that we have to build into that is obviously your dump leach recoveries.

Okay.

So, I guess the answer to your question is the higher grades going through the CIL, we don't expect to see any significant loss and recovery from CIL.

In terms of Tasiast operations, what was the strip rate in the fourth quarter?

Hang on, I'm just looking that up. My [schick] is silent. Hang on one minute and I'll work that out for you.

It was about 1.9 in fourth quarter.

So looking at the mining cost per ton, which is $1.52, the strip rate of 1.9, I don't see how you get to the $33 per ton cash cost. Is your processing cost a lot higher than what it was in the last few quarters, or your G&A, and do you have a breakdown of that?

Esuru, I don't really want to go through all the details right now. I'm happy to run you through -- I had all the numbers [for that], if you want me to call you back after the call.

Yes, a breakdown of the cost per ton numbers would be great.

Sure. I can put that all together and tell you how it all hangs together.

And the same for Chirano, as well.

Yes, yes. No problem.

Maybe on a different subject. Chirano underground -- original -- originally, when you discovered this, you were thinking this would be in production in '08, something like 60,000 ounces. In December of '07, you were thinking '08 production would be 14,000 ounces.

Obviously, you discovered that, with a different mining method, the grades are going to be lower and production is going to be lower. But -- see the Chirano underground now coming on third or fourth quarter of '09 seems to be substantially later than originally expected. What is going on here? What's the big picture in terms of the delay in Chirano underground coming on?

We started forecasting sort of mid-year last year in terms of the new schedule for Akwaaba Deeps. So it's no big surprise today where we are. And I think in terms of -- there were some normal delays, both in terms of permitting and some other issues.

But another factor on that was we got slowed down quite a bit as we were going into the fourth quarter because of cash constraints and issues with suppliers. And that got all solved with the $60 million financing and then we were back full on track.

But it's been for some time now, for the last couple of quarters, certainly, that we have been forecasting the expansion to come online about mid-year -- well, certainly in the second quarter, as I said, for the crushing facility and then the end of the third quarter for the plant.

The Akwaaba Deeps stuff itself has been relatively much more on time and on budget than, say, the expansion was. I am not really sure where you're getting (multiple speakers) your timing.

We're forecasting this year 170,000 ounces from Chirano. I'm not sure that we've ever really forecasted any higher than that, so I'm not sure (multiple speakers).

Where you're getting your delay.

This is from talking to you guys. I can't tell you which dates you told me this. But, obviously, things change, and -- I just wanted to get a big picture assessment on the delay in bringing Akwaaba underground. It sounds like you didn't have much cash to work on that project in '08.

No, no, no, no.

We actually forecasted we were going to reach first ore in the fourth quarter, and we did. And -- we are just ramping up to a significant level of production, mining production, and that will be reached early in the third quarter, mid-year, as we indicated earlier in this call.

The development, as I said, has gone extremely well. We're down, as I said, two kilometers. But you got to remember, in this type of mining method, you do a lot more advanced development than, say, in other types of mining method in order to start the caving.

And so, as it -- we're getting some production, high-grade production, into the mill at this point in time. But we're not going to significantly ramp up until the first cave, which is going to take place at the end of the second quarter.

I see. So basically, most of the CapEx comes upfront, and then after that, it would be (multiple speakers) --?

If you looking for the big picture segment, we -- we are delighted with the way that the Akwaaba Deeps development is going. And as far as we're concerned, everything is 100% on track and effective and marginally ahead of track. So we don't see any problems with the Akwaaba Deeps underground development.

The -- once Akwaaba Deeps is in full production and Chirano is running at 3.5 million tons per annum, what kind of annual maintenance development cost would you have, including the underground?

If we assume that Akwaaba Deeps doesn't go any deeper than where it is right now, which we obviously don't assume, but if we make that assumption, the ongoing development cost is minimal. And the ongoing sustaining capital for the underground operation is also fairly minimal.

I mean, we'll end up, other things being equal, if we don't do any more development further, which I don't think is the right assumption, by the way, but if we make that assumption, you know you have sustaining capital at Chirano is going to be somewhere, as I said earlier, in the $5 million to $10 million range.

I see. I guess, on another subject closer to the capital spend, with the production ramp-up coming to the closer to the end of the -- the year, 2009, you might need a bunch of that capital that you raised in the first quarter to fund these projects until you get cash flow in the latter half of the year.

No, that's not true either. We are cash flowing a lot right now, $900 gold. [Over if you] gives us -- if you annualize it, and I recognize what -- you're looking for more details than that, but if you annualize it, we are going to cash flow over $200 million from operations this year at a $900 gold price.

And our total capital spend for the year (multiple speakers)it's over 100, of which a lot of it is already done. Or not a lot of it, a significant portion of it happens upfront. But it's all funded from the $60 million financing that we did in November, and cash flow and treasury. We do not need to touch the funds we raised in January. And we haven't.

And you can use that to make acquisitions. Okay, great.

We can use it for acquisitions or whatever.

Thank you very much, guys.

Anita Soni, Credit Suisse.

Just a couple of follow-up questions. Can you just refresh my memory in terms of the ramp-up at Tasiast in terms of the mill. So this year, it was about 1.5 million that you produced or that you ran through the mill, right? And next year, what was the ramp-up to? 2009?

No, it's -- we produced about 2.4 through the mill. And it's going up to about 3.5 in -- no. [no ere] Akwaaba 3.3 million in 2000 -- when it goes into full production.

Right. I'm just looking for a breakdown, kind of the ramp-up in 2009, because you're not fully ramped up in 2009, are you?

No, that's right. We did -- it was about 1.5 for '08. It was also about -- let's say 3 million for '09, maybe a bit more, and then we will be up to around the 3 million (multiple speakers) when it reaches steady-stream state.

That's 3.3 million in (multiple speakers)--?

Look. Say around a three. We're obviously -- but you know -- you understand the way that we operate both of our plants above nameplate at the moment. We're also expecting to be able to do that once they're expanded. But ultimately, exactly how -- what the throughput is going to be, we will have to wait and see how the things operate.

I do have you mining 2.5 million tons of ore, but I only have about 1.5 million going through the mill for 2008. Is that incorrect?

For 2008?

Yes.

It's about 1.5 went through the mill, that's about right. (multiple speakers)

That's what I was trying to figure out. And then, could you let me know what the strip ratio was at Tasiast?

For the year?

Yes.

2.8.

2.8. And just, I guess the same question for Chirano. I mean, I had, to the previous caller's question, I had a small ramp-up in Q1 and Q2 for the underground. And I am assuming about 175 tons in Q3, and 250 in Q4. Is that too aggressive?

That sounds ballpark. We'll actually have to see how it all falls out, but as Rick said earlier, we're looking to do about half million tons for the year.

Right. With the small ramp-up, that adds up to about a half -- just under 0.5 million tons?

(multiple speakers) That's about right.

And then, from the open pit, still for 2009, running about 2.4 million tons?

Yes, give or take.

And then 2010, you fully ramp up to 3.5 million tons (multiple speakers) 100,000 coming from the underground. Okay. And then, again (multiple speakers) right, 100,000 a month, so 1.2 for (multiple speakers) tons for the year. And then, your strip ratio expected in 2009? Ex-any capitalization.

I don't have that in front of me. I'll have to get back to you on that. One of the reasons we don't have -- we are reworking the schedules and everything at the moment, so that number is probably going to change as well.

And -- can you remind me on the royalties, what -- what you're paying right now?

No problem. In Tasiast, the royalty is 3%. In Chirano, it's 3% as well, and as we have discussed before, there is an additional small amount of royalty paid on some of that production, which is 0.6%, so the average is somewhere in the 3.4%, 3.5% range, and I would expect that to marginally drop because Akwaaba and therefore Akwaaba Deeps is not [coveted] by that additional 0.6.

So no additional amount.

No.

No. So it's just over 3% at Chirano and 3% at Tasiast.

I'm not sure if you provide it, but any effective tax rate guidance for 2009?

Effective tax rates to 2009 will be zero.

All right. Thank you very much. And I wouldn't mind that unit cost breakdown as well. Thank you.

Eldon Brown, GMP Securities.

Hi, guys, looking good for 2009 here. I just wanted to touch base on a couple little things that ended up with Q4, and then just one question about 2009 guidance.

Just in Q4, it's pretty common to not always have production sales equal exactly as you either have stuff in transit or just haven't booked a sale. Was it intentional to hold back some ounces in Q4 from the production because of the costs -- the gold prices that were prevailing then, or is that just something that happened luckily?

No, there was no intention on the hold back of sales.

So that was just a timing issue and those will be sold in Q1 from Chirano.

Yes.

Terrific. And then, also, just at Chirano, it's good to see that the grade's picked up again in Q4 as you guys worked around the pit wall issue. Is that going to be something we should continue to look forward to for the rest of the year, or return to sort of the 2 to 2.25 grade?

It should be -- I think it should be around the 2 mark, from the pits.

So that pick-up's something we can expect to continue throughout the year. The issue that had risen previously has been worked around for now.

[Because the people] -- that's -- we've got past that now and we will be doing cutbacks this year, which is scheduled. But ultimately, we are always looking to get about two grams out of the pits.

Yes, exactly, that's what we're expecting too. Terrific. Just the last question, is it possible to give any kind of guidance on what you feel depreciation will be in 2009, either on a per ounce or maybe on overall basis?

I think that's probably a question that should be asked in a couple of weeks once we (multiple speakers)have new reserves out.

That's a good idea. I see what you're saying there, with the increased reserves, you can figure that out a little better.

Yes.

Terrific. Thanks much, I really appreciate that.

(Operator Instructions). Mark [Tuner], Jennings Capital Inc..

Just a quick question about corporate SG&A. Guess sort of saw on the last quarter here about 3.5 million, which I think was roughly double what it was in any other quarter this year. Just in the short term, going forward, because I imagine a lot of the increase in that could've been related to due diligence work on the projects and whatnot that you were looking at. Is that sort of a reasonable number to carryforward for the first (multiple speakers)â€"-or next few quarters?

No, most of that change in G&A (multiple speakers) was management bonuses.

So, outside of the stock-based comp, just typical management bonuses.

Correct. It was a good year.

Thanks a lot.

There's no further questions at this time. Please continue.

If there's no other questions, thank you very much, everybody, for listening in on this call.

And just in conclusion, just want to emphasize that we're very, very pleased with the '08 results and the trend that's coming forward from Q4. 2009 is going to be a very big year for us. Last year was a big year for us as well.

But we're going to see the culmination of all our efforts, both in terms of construction work, development work, exploration success, and financing success, happen this year. And subject to the gold god and pricing, this will be the strongest year that Red Back has ever had and 2010 looks to eclipse that.

So stay tuned. We look forward to reporting to you after the -- on the next financial call, and as I said, the next news that you'll hear from the Company will be in a few weeks on the new reserves and resources at Tasiast. Thanks very much, everybody, and have a great day.

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