Kinross Gold Corp (KGC) 2009 Q3 法說會逐字稿

Good morning, ladies and gentlemen; thank you for standing by. Welcome to the Red Back Mining Third Quarter 2009 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session; instructions will be provided at that time for you to queue up for questions. (Operator Instructions)

I would like to remind everyone that this conference call is being recorded today, Tuesday, November 3, 2009 at 8am Pacific Time. I will now turn the conference over to Mr. Richard Clark, President and Chief Executive Officer. Please go ahead.

Thank you, Operator. Good morning everybody and welcome to the Third Quarterly Conference Call for Red Back Mining.

Good morning to everybody in North America and good afternoon to those of us who are here in Europe. On the call, on behalf of management today is myself, Richard Clark; Simon Jackson, VP Corporate Development; Alessandro Bitelli, Chief Financial Officer; and Hugh Stuart, our VP of Exploration. Unfortunately we won't be able to have Kevin Ross, our Chief Operating Officer, on the call as we're having communication problems with Ghana at the moment.

However, the usual format in terms of how we conduct these calls is I'll make some brief opening comments and then I'll turn the call over to Alessandro to go through the quarterly results. At the end of Alessandro's report, I'll get back on and do a corporate review and update you on what's happened this quarter corporately. And then we'll turn it over to questions and answers and depending upon the questions, I will direct it to the appropriate person in management of Red Back to answer to give you the most detailed answer.

So at this stage, what I'd like to do is at the outset-- is first of all, point out that we had another record quarter. We're very happy with the financial results. Chirano exceeded our expectation this quarter. Unfortunately and as I think everybody now noted and we basically foreshadowed in the last quarterly call, we had issues at Tasiast that are predominantly related to the issuance of permits from the government of Mauritania. We were hoping that those permits would come early in the quarter. Unfortunately they came at the end of the quarter and consequently we had to delay or slowdown production at Tasiast and we can go into more details on that.

But effectively, what took place; we needed two key permits. One was in respect of our second tailings facility and the other was to give us the permission to commence dump leaching. We were not prepared to go ahead with either of those processes without the permits, and the delay was caused by an election in Mauritania that effectively took the summer to resolve. It was a very successful election. It was invitulated by the African Union and European Union and the former General Aziz, now President Aziz, was elected in the first ballot with 52% of the vote.

The first thing that his new cabinet did was grant us permits we were missing and needed; whereupon we immediately started up and ramped up to full production at Tasiast on discharging and tailings facility 2 and we immediately started irrigating the dumps and we're ramping up to full production from the dumps as we speak.

So we had-- this was a third-quarter issue only. It was resolved in the third quarter. And we're carrying forward fully right now into the fourth quarter at full expansion mode in both Tasiast and at Chirano and we will not see a repeat of obviously the permit issues going forward.

So with that initial comment, what I'd like to do is turn the call over to Alessandro to go through the financial statements and the key highlights of the quarter.

Thank you very much, Rick; and welcome all to the call. As Rick alluded to, the third quarter again saw record profits for Red Back. Our key contributor to the record profits was a one-time break fee of $13.2 million from the election that Red Back made not to exercise its right to match superior proposal under the Moto arrangement agreement earlier in the third quarter and we benefited from that as a result of it, net of any costs incurred during that period.

With respect to ongoing operations, our results continued to show very strong gold prices as we are un-hedged and take advantage of the strong gold price going forward. In terms of gold produced, as again Rick alluded, Chirano produced almost 50,000 ounces for the quarter of which 40,000 ounces were sold and realized as revenue in the financial statements, with approximately 9,000 ounces capitalized against the ongoing development costs of Akwaaba Deeps.

At Tasiast, on the other hand, production was just over 31,000 ounces and of that a small portion came from the dump leach. Full irrigation has started now and the results obtaining the benefits of the full irrigation of dump leach will be clearly shown in the fourth quarter.

From the perspective of cash costs; the cast costs at Chirano continued to decrease in the third quarter. We're at $392; benefitting from the higher production as well as benefitting from the lower power costs in the quarter.

With respect to Tasiast, the lower production caused operating costs to increase on a per-ounce basis and we expect that trend to reverse in the fourth quarter as the capital expansion and dump leach operations are now fully operational.

Our forecast for the fourth quarter both at Tasiast and at Chirano is to produce between 60,000 and 70,000 ounces and (inaudible) as I said, is approximately 350,000 to 370,000 ounces for the year for the Corporation as a whole.

Another item that was recognized in the third quarter was a $4 million foreign exchange gain realized on foreign currencies as well as (inaudible) has been holding as part of its Treasury Australian dollars as well as Canadian dollars. And as some of these foreign currencies have been utilized with the strengthening of these two currencies against the other reporting currency being U.S. dollar; we have recognized that particular foreign exchange gain.

We are starting also to recognize income taxes as a result of our increased profitability in Chirano in Ghana. While Tasiast is enjoying (inaudible) holiday that will continue to the end of 2010, Chirano has been benefitting from tax deductions that had not been recognized in the prior years and now those tax deductions have been fully utilized, and as a result, future income taxes are starting to be recorded with respect to deductions that have been taken for tax purposes regarding (inaudible) deductions that have already been taken for accounting purposes.

Also in the third quarter, the government of Ghana passed a new temporary law whereby there's a levy of 5% on profits for 2009 and 2010 and we have recorded an estimated provision to the end of the third quarter of approximately $2 million to reflect that levy. We are still waiting for the details of exactly how that levy on property is going to be calculated and some adjustment might occur on our results on those details being provided by the government.

Our capital projects are nearly complete. As of the end of the third quarter, we're nearly complete and broadly our overall capital costs including the plant expansions, additions to mining fleets and other [elements] together with ongoing exploration and development costs, the development of Akwaaba Deeps at Chirano; are in line with our forecasts and with the continued strength of the gold price and our increased production in the fourth quarter, we expect to have approximately $150 million in our Treasury by the end of 2009.

In the third quarter, we also made a payment of $8 million to the government of Mauritania as part of an agreement to pay expansion fees due to 2009 and 2010, following our decision to expand our plant and effectively double our production capacity. That payment is being amortized over the production for the balance of 2009 and a similar payment will be made in 2010 and it's going to be also amortized based on production.

There are no other significant items to report with respect to the financial results for the year. Again, a very good profit reported at the end of Q3, $35 million; the highest ever reported by the Corporation. And we are looking forward to a fourth quarter with record production for Red Back and continued very strong profit as we move into 2010.

Thank you very much; Rick, back to you.

Thanks, Alessandro. I think what's important for everyone to recognize and appreciate in terms of where we are now with Red Back, is our two expansions are completed. The only real item outstanding at the moment is the gold room at Tasiast which will be completed by the end of this month. But all operating facilities at both Chirano and at Tasiast are now fully functional.

So going forward, we don't have any construction at the moment; certainly anticipated in 2010 in regard to our plants. So a lot of that risk, a lot of that cost is now behind us going forward. And we should and expect to see significant cash flow generation in Q4 and going into 2010.

Now particularly talking about Chirano; the nameplate tonnage production profile for the expansion is 3.5 million tonnes. We've achieved nameplate and we are operating at those levels. And as you've noted from the quarter and you'll see from the results, that Chirano is producing at record levels and we expect that to continue.

In terms of-- we've put out a lot of news over the last couple of weeks in anticipation of the quarterly call and particularly in respect of Chirano we've announced confirmation of the Paboase South discovery. It's a new underground deposit. We will be continuing to drill that to the end of this year. We will be calculating the resources and running economics on that towards making a development decision in the first quarter of next year which will involve we anticipate the commissioning of the portal and commencement of the decline at Paboase South.

Obviously our objective there is to, as quickly as we can; add more high-grade ounces to the Chirano plant, offsetting the open-cut production. And in this way, we intend to increase production at Chirano even more than we currently have anticipated for next year. And that will be going into 2011 and 2012.

We will come out with our forecasts early in the New Year for next year. We're currently working on our budgets now and we'll give you an idea in terms of what we anticipate on expanded ounce production going forward towards 2012's results at the Paboase South discovery at that time.

So in terms of-- we are also exploration-wise at Chirano-- our anticipated budget for next year is approximately $10 million. That will involve drilling off Paboase South from this point forward into reserve. And we have approximately four or five other targets, similar to Paboase South that will be drill-tested in the New Year under that budget.

Going into Tasiast; again as I pointed out at the outset, Tasiast is now fully permitted for full production of the CIL plant and dump leaching. We are in the process of bringing up the dumps to full charge. They are performing extremely well and in line with forecasts and expectations now that we've been able to charge them. We fully expect that they will be a significant contributor to the monthly ounce profile going forward in this fourth quarter and into the New Year.

The expansion of the plant, as I said, is completed and the gold room will be completed by the end of the month. We are running above nameplate. Nameplate on an expanded basis is 2.5 million tonnes. We're currently running at about 2.7 million tonnes. We fully expect to bring that towards 3 million tonnes a year in 2010.

We also announced last week very exciting exploration results. It is the discovery of a new zone at Tasiast. We call it the green schist zone. It was discovered as a result of an ongoing drilling program at West Branch. The zone barely daylights its surface, which is why it's been missed in the past certainly by previous operators; and we've discovered, as it's gone down to depth and now dip; that it expands significantly to widths in excess of 125 meters.

We continue to drill that. We are sitting on a large number of samples still in the lab. It's a very, very exciting discovery and it looks to change dramatically the future profile of Tasiast. Exploration budget is accordingly robust to do that. Anticipated budget is about $30 million. That will involve 10 drills which will be onsite in January; eight of which will continue to drill this discovery and also fill in, in respect to the other zones in the main ore bodies, and two drills will finally be able to start testing some of the reconnaissance targets we've identified in and around Tasiast within about a 25 kilometer radius.

We also announced last week very positive heap leach results. We've been doing this for some time. Our objective here is to be able to heap leach the low-grade sulfites at Tasiast, along the same lines as we are leaching the low-grade oxides and with the introduction of high-pressure grinding roll technology, we've achieved recovery rates of 60%. We will be finalizing that test work in the New Year and the conversion of low-grade sulfite resources into reserves will occur by the middle of next year, along with a recalculation and a re-optimization of our mine and principle pits also by midyear next year. And that'll take into account these drill results that we put out last week.

I would point out to you just and emphasize that the drill results that we put out are outside the current resource shown.

In respect of corporate activity, I think Alessandro alluded to the fact that we realized a profit of approximately $13.5 million in respect of the break fee involving Moto Gold Mines. And we, as obviously everyone knows, we decided not to continue with the Moto transaction. Part of the reason for that was when we first bid Moto we had not proven up Paboase South as a significant underground discovery; and we certainly had not confirmed the discovery of the green schist zone at Tasiast.

We think and fully expect that those discoveries are going to add significantly to our reserve and resource profile and that'll become more clear over the coming months. And when you look at it on that basis, we believe we're increasing the Company's profile in those respects, without dilution to shareholders.

If we had continued along the Moto transaction, obviously there would have been dilution to shareholders and we feel certainly as Moto is right now, it would be less of a return to us than the discovery profile that we now have.

There were many other factors, some of which we can talk about in respect to specific questions; some we can't because we're still under confidentiality agreements in a couple of cases.

So in summary, we are extremely pleased with the quarter. Yes, we had a hiccup in production. It is fully explainable. It's a one-time off item. And the expansion at Chirano was extremely smooth. The commissioning was very smooth; a couple of hiccups at Tasiast at the same time as we were having the permit issues and those have now been resolved.

One instance in particular which was detailed in the news release was a freak lightning storm that took out our water pumps down at [Gapelberg]. Those pumps have now been replaced and again we're pumping water at full production levels in the fourth quarter.

So again, with the-- we expect to be back fully on target for the fourth quarter and going into the New Year in terms of production at both mines. And at the same time, we've added on very exciting exploration discoveries both in Ghana and in Mauritania.

As some of you may know, we also have a couple of exploration projects in [Coat Dubois]. We have been patiently waiting for our permits on those and we have now obtained them and we've been able to do first pass reconnaissance work and in one in particular, we've come up with what we think is a significant anomaly and we'll be drill-testing that in the New Year as well.

So we think 2010 is going to be a very exciting year for the Company and that'll be following on a very strong quarter for the year end 2009.

So that's the summary of the quarter. What I think would be valuable now is to turn it over to questions and answers. As I said at the outset, we've got the majority of senior management at Red Back on the line and available to take your questions. Operator-?

Thank you. (Operator Instructions). Your first question comes from Don MacLean with Paradigm Capital. Please go ahead.

Good morning, Rick, guys; good quarter. I just wanted to touch on the Akwaaba-- how the grade reconciliation and dilution is going in that startup.

I'll let Hugh answer that question.

So far, I mean it's obviously fairly early; overall reconciliations though at the moment are slightly positive. We do seem to be finding some sort of patches of very, very high grades which were sort of between areas drilled occasionally. They've been intersected slightly by the drilling, giving us some very nice grades over sort of shorter areas. But until the production really sort of gets into full swing, it's probably too early to say As I said at the moment, it's positive and there are some very nice grades coming out of some part of Akwaaba.

How about the dilution?

Again, it's probably early to say, because we're still drilling and the drill points that we've got going at the moment, we're still just drawing ore and we're not seeing any dilution which would be sort of above the ore.

Sure, okay, yes; okay, too early to say. Maybe while you're on the line, Rick and Hugh; can you give us any kind of broad parameters for the Paboase in terms of how the operating costs might look relative say to Akwaaba capital costs, if you think you're going to put a shaft in, that sort of thing- just something to help us try to figure out what it might be worth?

Well, you know what, Don? What I do is-- it's early to say. Kevin and Hugh and Brendon are crunching those numbers that as we continue to drill. Our intention at this point is like Akwaaba Deeps, to do decline and so that's how we're modeling it at the moment.

I can tell you that in terms of production numbers, we certainly would like to push to the same levels as Akwaaba Deeps. But also-- there was something else-- oh, the capital.

Well, the capital costs on the decline, Don, I think are going to be very similar to Akwaaba Deeps and it's costing us about $20 million a year to drive the decline. I doubt we'll spend $20 million on in next year, obviously because we'll be starting it towards the end of the first quarter, if everything goes well. So it will be somewhere around the order of $15 million is a pretty good thumb (inaudible).

Now on the operating cost side, again we don't have any specific numbers but what I can tell you is you've got to keep in mind that Akwaaba Deeps is seven kilometers away from the plant and Paboase South is directly opposite the plant really; about a kilometer and a half away.

Okay. Then in terms of the grade widths though; are you liable to see a compensating factor on that mining-cost wise versus transportation cost?

That I'll let Hugh answer.

Yeah, I think in terms of the grade width; I mean Paboase South is very similar in a lot of ways to Akwaaba. It's a vertical ore body. It's got a strong (inaudible) shear. The grade distribution through the ore body is very similar to Akwaaba. We don't quite so far, get up to the sort of amazing true widths that we've seen down in the guts of Akwaaba, but we in the heart of Paboase getting up to sort of 25 meters, 30 meters in true width. There is the potential at Paboase for a little bit more strike extension, I think, although it's early to say that; but I think the nature of the shear in that area indicates that we may get a little bit more strike extension out of it.

So it really comes down to mining method and whether a modified cave like we're using at Akwaaba can be used, or it has to be a different type of method. But in general, the geometry, the geo-technics of the ore body are very similar. So it should be a relatively straightforward ore body to mine.

So it sort of sounds like I should just copy my Akwaaba model and put Paboase on it?

Yeah, at this stage that's probably a good plan.

Works for me; thank you; thanks, guys.

The next question comes from Sayan Ghosh with Citadel Investment Group. Please go ahead.

Hi, guys. Thanks for taking my question. I know you mentioned that you're going to provide us a longer-term roadmap of production on a two-to-three-year basis in early 2010. But just as investors, as we try an understand what your company looks like on a normalized basis, given the exploration success you've had recently; can you just help provide some indication of let's say 2010 you guys have previously mentioned 500,000 ounces roughly of production, give or take a little bit.

But on a three-year basis at the out year, looking at Paboase South, the potential HPGR at that works and the new zone at Tasiast right? I mean what sort of normalized production potential can the company have say by 2013? Is it an order of magnitude larger than 500,000 to 550,000 ounces, closer to 650,000 or perhaps you could just help us bridge that a little bit?

Did I mention the forward-looking statement thing at the beginning of this? No, I'm kidding. I think that it's safe to say that the range certainly that we're shooting for and again this is extremely early days and a bit of a wish list and it's going to take a lot more information to come in on the mining method at Paboase South and exactly the new optimizations that will take place at Tasiast; but we think the production levels going forward into 2013 are going to be somewhere between 600,000 and 800,000 ounces.

Okay, that's a pretty wide range. And in terms of the cash cost profile, let's just take 600,000 ounces but add on the cash cost profile, incrementally do you think you're going to do better than the average-- than you're at right now?

Look, our cash costs are still coming down at Chirano to forecast levels. We had the blip this quarter at Tasiast but we're very confident going forward that Tasiast is going to be a sub-$300 dollar an ounce mine. If your cash costs could go lower than that with further production, that would be fantastic. But if they stay at those levels, we're still at the top end of the industry, so we'd be happy.

Alright; thank you.

The next question comes from Nicholas Campbell with Canaccord Adams. Please go ahead.

Good morning, guys. I think you already went through this a little bit; but is it reasonable to think that you could do a similar level of throughput for an underground operation at Paboase South as at Akwaaba Deeps?

Yes, I mean look; in terms of throughput, the idea would be we would mine it at whatever production levels make the most sense in terms of the mining method being employed. We would basically then reduce surface mining. There would still be some blending but the idea is to increase the number of high-grade tonnes going through the mill. The mill would then require some tweaking because your head grade is going to be going up. But the tweaking is going to be mostly at the backend of the mill, and we don't expect a high capital cost in order to reconfigure that.

So that test work will continue on. So that's certainly the intention of the Company.

What sort of-- if you wanted arm wave on a potential CapEx; can you throw a number out there?

I can't at this point in time, Nick. But I mean it's going-- I think-- Simon what was the total CapEx of the expansion?

In total it was in the $50 million to $60 million range, Nick. So it's going to be way less than that.

Okay. And have you guys given thought to potentially expanding, doing a further expansion at the Tasiast mill on the back of some of these exploration results that you've had there?

Absolutely.

When would you be-- when could you make a decision to do that? Would that be after you-- is there a certain threshold you're looking for in terms of expanding the reserves at Tasiast?

Look, what's happening in terms of our target for mid-year and you can step in here; but, part of the key in terms of how big we make this pit, particularly at West Branch, is the economics on the heap leach. And obviously the more material we can heap leach at those recoveries, the deeper we're going to be able to take the pit to get after the green schist. So that work is continuing on and I expect that the definitive sort of reserve optimization of what we've discovered now is going to take place probably around mid-year next year. And at that point, we'll have an idea of what we're looking at in terms of CIL tonnes, heap leach tonnes and oxide tonnes and exactly what cutoffs we can use and how to maximize it from an economic perspective.

So we can wave our arms a bit here, but we're effectively looking at six to nine months to be able to come back to you guys and tell you exactly how big this is and what it's going to look like.

Okay. And how about other targets as (inaudible) Akwaaba Deeps target-- obviously the Paboase South is coming along extremely well. Are you going to be testing-- are there any other zones that you consider to be high priority to test the steps and see if you can find another Akwaaba Deeps or another Paboase South?

Well, I'll let Hugh answer that but my comment would be-- look, I think that what's significant about Paboase South at this point; I mean the market has wondered whether or not Akwaaba Deeps was a one-off wonder. We've always maintained that it isn't; it's a model and we just had to figure out how to apply that model and go looking for these things.

Hugh and his team have come up with five targets-- Paboase South was the first one that was drilled. And we've been successful and we've hit. But I'll let Hugh comment.

Hi, Nick. Yes, we do have a number of other targets for example, chasing the very high-grade shoot that we see at Chirano which we think now is fault displaced. I think one of the things like Rick says-- one of the things that Paboase gives us once we've got it drilled off is a bit more impetus. Things were quiet, sort of until the second half of this year where we were trying to peg something else. Now we've done that. It's looking pretty good, as you say.

That gives us the impetus to sort of really start stepping out and hence, the budget we talked about for Chirano-- and I think now you'll-- given that, we'll keep a much higher level of drill activity going at Chirano and we'll really just get after a lot of these outlying targets, both in areas where we know we have open high-grade shoots within at the existing open pits, but also in some of the sort of the parts of the shoots that don't have any mining on them at the moment; for example, in the gap between Akwaaba and Suraw.

A lot of the geological work we've been doing over the last probably year, is starting (inaudible) in these targets and I think this gives us the impetus to start going after them a little more aggressively next year.

Okay, great; thanks, guys.

Your next question comes from David Haughton with BMO Capital Markets. Please go ahead.

Good morning, Rick, Alessandro, Hugh and I guess Simon in the background. I've got a question for you with regard to what we've seen so far out of Akwaaba. How much ore has come out of the SLC during the third quarter?

How much ore has come out of Akwaaba?

Yes.

Let me get you that information. In the third quarter it was 77,000 tonnes, so not a lot. (Inaudible) a quantum leap in the amount of ore that we started mining in the fourth quarter and we won't reach what we expect to be the monthly production rate of 100,000 tonnes a month until sometime next year; now that's--

Now with the production that was shown in Chirano; did any of that include ounces coming out of Akwaaba or are you capitalizing that until you declare commercial?

We try to identify the total production in the tables in the MD&A and in the press release to show the total production which includes the ounces coming out of Akwaaba at this point in time. But in terms of the ounces that are actually recorded as revenues, it's a lesser amount and that is also noted as roughly for the third quarter would be 9,000 less. So those would be ounces capitalized in the third quarter. We do expect to switch from capitalization to treating all operations at Akwaaba Deeps as operating sometime in the fourth quarter.

Now with the guidance that you've got for between 60,000 and 70,000 ounces for the fourth quarter; that would include Akwaaba commercial production-- is that correct?

That includes the Akwaaba production, irrespective of whether it's capitalized or not.

Okay so if during the course of this quarter, you're going to decide commercial production then what you'd record as revenue would be less than that guidance number; is that correct?

If we don't switch from capitalization to operating, then the production number of 60,000 to 70,000 saved; but the revenue impact would not be seen. If there's a positive revenue impact is when we switch from capitalization of those ounces to treat them as revenue.

Understood. So it could be-- I don't know-- maybe 10,000 ounces less of commercial production compared to what you're declaring here as guidance.

Oh, in terms if we don't go commercial production, you're looking at less ounces in terms of revenues, absolutely, yes.

Similar kind questioning now on Tasiast dump leach; for the production that we had in the third quarter, I'm presuming that some of that was not commercial; some was? What was the total production of the dump leach? I know that you've got it disclosed here separately but I'm just wondering whether that's only the commercial production or total.

That is-- the total production and literally the reason it's marginal as of now during the third quarter is because we haven't been able to irrigate the dump leach pads until we started doing (inaudible) the permits and after solving irrigation issues as a result of the electrical storm that hit us in September. And so (inaudible) profiles on the dump leach starting in October is significantly different.

Okay. And of the ounces that you've got for guidance for the fourth quarter coming out of Tasiast, so 60,000 to 70,000 ounces; about what would you include to come from the dump leach?

We're looking at 3,000 to 4,000 a month, average.

Okay, that's good.

Hey David, are you still there?

Yes, I'm still here.

Alessandro?

Yes.

Okay, good; yes 3,000 to 4,000 a month, David.

Okay, thank you. Now, I'd also at Tasiast that the D&A levels had kind of stepped up a bit and I'm wondering whether that's the kind of level of per ounce figure which was in the order of about 280-ish; whether that's something that we should be looking at as a go-forward basis for depreciation rates.

The depreciation is going up, as a result of a lot of the equipment and the construction of the plant expansion to coming on stream and available for use. And I do expect the depreciation to be higher in Q4 at a more normalized level as we also bring in the depreciation on the Akwaaba Deeps development at Chirano.

Okay. And the final area of questions relates to CapEx. We've had a lot of items being introduced to the capital expenditure program in the course of 2009 and 2010; mainly on the back of success of exploration, etc. and developing plans. What should we think about as being the capital expenditure target for Chirano and for Tasiast for 2009?

I'll let Simon answer that, David.

For 2009 or 2010, David?

I'd like both, thanks, Simon.

Well, I'll to the 2010 one and Alessandro can do the 2009 one. Next year, and we'll give a bit of arm waving as well and they're necessary preliminary numbers, but if we do all of the things that Rick mentioned already and that's commence a decline at Paboase South at some point towards the end of the first quarter, if we continue the decline development at Akwaaba, if we spend $10 million of exploration at Chirano and do the regular kind of sustaining capital; the total cost of that is likely to be about $50 million at Chirano-- plus the exploration which makes it $60 million.

Similarly, at Tasiast if we spend roughly $25 million to get the heap leach up and running, probably about $10 million on fleet additions, plus $30 million on exploration, plus the regular sustaining capital gives you roughly $60 million there as well. So in really round kind of numbers we could see total capital for 2010 being in the $120 million range.

Okay; and 2009?

In 2009 we are not changing our forecast outlined at the end of the second quarter at this point in time and we expect to have total capital costs inclusion of plant expansions and other probably (inaudible) as well as exploration and development costs to be around $150 million to $160 million for the year.

Alright, that's great. That's my questions; thank you.

Your next question comes from Anita Soni with Credit Suisse. Please go ahead.

Okay, my first question I think was answered; exploration budget in 2010- how much was capitalized and how much was expensed- so I guess it's all being capitalized?

Correct.

And secondly with the 5% temporary levy that the government of Ghana has imposed; can you just let me know-- is that on top of all the other taxes that you guys are paying there? And what's the nature of that? Why is this a temporary and not a permanent levy?

The taxes-- at Chirano, income taxes are 25%; no cash taxes have been paid to this point in time because of capital taxes pools available to us. The 5% profit tax is going to be levied by the government in 2009 and in 2010 and that is what the law says. It's based on 5% of profit. There have not been clarifications on the part of the government as to the definition of profit and so it is difficult to be 100% sure as to the extent of the impact of that 5% tax at this point. We have made an initial estimate of $2 million; it could be possibly less, depending on the basis of taxation. And that is a $2 million to the end of Q3.

Sorry. Could you repeat that last part?

The $2 million that we have recorded in the third quarter is just our own estimate of what it might be to the end of the third quarter of 2009, but we don't know the exact procedures for calculating that tax and the definition of profit because the regulations with respect to the law that was passed in the third quarter have not been made available yet.

So that's $2 million and your assumption is that it's retroactive to January 1st?

That is correct, and it may not be-- again, we may have taken a very conservative approach here. We are-- a lot of the mining companies are sort of trying to interpret the law at this point in time.

Okay, I think that's it for my questions-- oh, no; and the last question was-- you mentioned that you were going to be doing a re-optimization. I missed which asset it was that you're going to be doing it and you would release it midyear next year-- which asset is that?

Tasiast, Anita.

Tasiast. Okay, thank you very much.

Your next question comes from Trevor Turnbull with Scotia Capital. Please go ahead.

Good morning, guys. I just had a quick question regarding the grade profile at Tasiast. Grade was obviously a bit lower than it had been the preceding quarters and even last years. I was just wondering if you could give us a little bit of color on that and kind of what to expect, not just in Q4 but going into next year.

Hugh-?

I think basically the lower grade was just part of the point in the general scheduling in the last quarter. I think going forward, it should stay fairly even.

Sorry, Hugh. You mean fairly even with kind of these levels or--

Fairly even, getting back up towards the other levels of some of the new areas; especially in the (inaudible) central pit become available.

So a bit more like it was say last year around the 3 gram mark?

It will probably be just sort of under three in sort of the 2.6 to 2.8 range I think.

So where does it start to trend closer to the reserve grade? Is that a few years out as the pits get a bit deeper?

It's getting complicated with all the addition of the dump leach coming in on the reserve grades. Over the life of the mine, especially things like West Branch are lower grade which are obviously later in the schedule. Obviously with the new results coming out of West Branch, that grade profile should change. But the way things are going, in terms of the grade, as Rick has alluded to; with the introduction of the heap leach and the extension of West Branch and everything else that's going on, there's some fairly fundamental changes that are probably going to go come together at Tasiast in terms of working out what actually is the grade which will ultimately be the CIL grade and how much material goes on the heap, how much material goes into the CIL and what grade ends up going in the CIL. So then you'll see in terms of the life of mine grade, there's a huge amount of work that's got to be done sort of over the next sort of six to nine months to actually a year; and get ourselves on top of that for the moment.

But it's safe to say that with the introduction of not just the dump leach, but the heap leaching operation; that the head grades going to the CIL in fact are going to trend higher as opposed to closer to the overall reserve grade?

Exactly, yes.

Okay, that's great. Thank you.

Your next question comes from Pierre Vaillancourt with Macquarie. Please go ahead.

Pierre Vaillancourt. Hi, guys. I just wanted to follow up also on the subject of grade profile, if you could just elaborate on the same matter for Chirano; I'm just wondering where that's at because I think again, this quarter they're up but there's quite a discrepancy from the reserve grade. So I was wondering if you could give me a little bit of outlook on that.

I think it's going to be, in terms of the grade at the moment, we're probably seeing a slight kick up due to some of those high grades coming out of the development and the production that we've had so far out of Akwaaba. I think that going forward into next year, the proportion of the-- or the amount of material coming out of Akwaaba increases, you should see that grade maintaining.

Okay. So, okay; can you break it down, though; in terms of what the non-Akwaaba grade is?

Generally, the non-Akwaaba grade is in the region of an average of between 1.8 and 2 grams.

Okay. So that's-- is that not above the reserve grade?

That's above the current reserve grade. Obviously that depends on schedule guidance beyond that. There probably will be a dip in open-pit grade going into I think years three or four; further down the line. But obviously that's going to be made up to a large extent by the grade coming out of Akwaaba; especially by that time once we get down into the higher grades and obviously again things are also in a state of flux because we will be able to bring in the high-grade ore out of Paboase hopefully, to be able to keep that grade profile moving up as the project moves forward.

Right, right. Okay, and then while on the subject of Akwaaba, can you maybe-- you mentioned it's going commercial in Q4. So how does that ramp up to full-scale production? Maybe you can just give me an idea of how this is going to evolve over the next couple of quarters just the production profile there until it gets to steady state?

It's going to ramp up to 100,000 tonnes a month up here. And how it does that; that's an issue of opening up enough ore faces and that's ongoing. But I can tell you that the development right now is on schedule.

Yes, I know it's going to 100,000 tonnes. I just want to get a better sense of from here to there-- what we can expect in subsequent quarters.

Well, we're expecting to reach 60,000 tonnes by year end and then increase incrementally as we get towards midyear to 100,000 tonnes.

Okay. So that sounds (inaudible). So midyear is when you'll get to your 100,000 tonnes rate?

Correct.

Got it, okay; thanks. And one other thing, you're talking about the importance on the heap leaching at Tasiast for the future and any idea on the scale there? I mean is it going to be much, much larger than the dump leach or have you given a thought to that?

I think the current projections we're using-- and it's all going to be a question of what happens when we remodel this-- but the current idea was to be heap leaching approximately 5 million tonnes a year.

And that's based on the existing resources.

Yes, that's the existing resource. I think what Pierre, everybody has got to appreciate--the game is going to change significantly for both Chirano and for Tasiast by midyear next year. And my guess is the mine schedule is going to look completely different for both mines than it does now.

Okay. And just on the subject of HPGR-- I mean how comfortable are you with that? Because I don't know of any operations right now; so I guess my first reaction is-- is this going to take a long time to scale up and get fully comfortable with? I mean obviously you seem to be happy with the test results and I guess really the proof will be when you do scale up. So maybe if you could offer a little more detail on the results from this and how confident you are really in this process?

Well, we've been doing this test work for some time and I think you'll find if you have a look at (inaudible) gold fields; our understanding is they're using that technology now.

Okay.

It's not rocket science.

I guess Pierre, always we're talking about test work here and we're obviously confident on the results of the test work and the like. Like any industrial application, when you build it to size and build it to scale, you're absolutely right-- the proof will be in the pudding.

Right, right; okay. Well, I'll guess we'll just wait and see. But so the idea there is to have that up and running by 2011 then?

No. The idea is to start making a decision on it-- well; we'll make a decision on it probably by the end of the first quarter, into the second quarter. We will then effectively design and we will engineer it and start construction in 2010, looking for production in 2011.

Okay, well thanks very much.

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

Just a bit of a follow up on-- really like Rick, you used the word very, very important for the green schist. Maybe we could bring that into the discussion. You have to re-scope everything based on distribution between oxides and sulfides, heap leach, etc. But can you maybe characterize what's going on at green schist a bit more so that we can grasp how important this is?

I'll let Hugh do that for you, Don.

Okay, thanks.

Yes, the green schist; obviously the results that went out last week were some of the best results I think we've ever put out. As Rick said earlier, almost all of those results lie outside the existing resource which we also put out with the reserves in September. That was very much an interim reserve number and it's very much work in progress. And the effect will be-- the implication of the green schist obviously coupled with the introduction of the HPGR and the heap leach technology is really going to drive the West Branch to a much larger size and then obviously drive that general reserve increase at Tasiast.

The second implication really is that this green schist lies almost completely hidden within the (inaudible) unit that sort of sits between the two main zones at Tasiast. Some of the results that we put out last week said we're right at the northern end of the West Branch starting to go into the gap between West Branch and Piment which is becoming much less of a gap as we go forward. And probably in the next reserve calculations, it will cease to become a gap.

We're finding significant intersections of the green schist in that area. Off the top of my head, we had 87 meters at 2 grams, 67 meters at 3.6 grams. And essentially lying hidden within the core of this (inaudible) zone which on the core of the (inaudible) zone runs all the way through the whole Tasiast mine site; we see the same (inaudible) right at four kilometers north at Piment north and it opens up the possibility that this green schist that is sitting underneath; obviously in places it's got a lot of dead material sitting above it, but given the sort of grade and (inaudible) some of the higher grade such you've been seeing in our press release, it does open up a new scope and I think coupled with the overwhelming continuity of the geology of Tasiast, I mean it has a remarkable degree of continuity.

We see things continuous over huge distances and I think that, coupled with the green schist sitting in this (inaudible) could open up an awful lot more scope, which again when coupled with the HPGR and the heap leach possibilities, are really going to drive a quantum shift in the reserves of the Tasiast mine.

How deep is the green schist relative to the surface?

The deepest intersection we've got is vertically about 320 meters below surface. We've now drilled it at West Branch up to around 130 meters below or down dip from the previous resource blocks, and it's still going strong.

And if you were to try to characterize this and Rick this may take your arm waving; would you say economics-wise it may have a similar kind of cost profile per ounce or is this liable to be somewhat higher because of the nature of the strip and the lower-grade mineralization halo?

It's a bit early, Don. But our view on this is the flexibility that we have because of being able to heap leach and dump leach at Tasiast; this allows us to play with costs quite a bit to determine how deep we can go on this zone. So I think it's going to be a balance about economics as to where exactly the pit is going to bottom out going forward. But current cost profile; I think we're going to have to wait for some more information.

Would it be fair to characterize it that you can have-- you have the flexibility to almost define what amount you want to bring in at what cost per ounce?

That's a good way of putting it.

Okay. And then just back on the heap leaching; if we could kind of get a characterization of that within the existing resource, what's your sense of the cost per ounce of that? And let's be fair; plus or minus $50 an ounce; but would it have a similar kind of cost profile to Tasiast CIL?

Yes. Yes, that's how we're looking at it at the moment, Don. And I can tell you that I think you'll see if you run the numbers on the release we put out; out of the current resource that we put out in September '09, it looked like about 1 million ounces will convert to reserve. So that gives you a quantum as we go down and change the pit outlines because of the green schist zone. It'll give you an idea. There are a million tonnes of this stuff.

Terrific. That's great, guys; something to dream about.

Your next question comes from Cailey Barker with RBC Capital Markets. Please go ahead.

Good afternoon, gents. Just-- most of my questions have been answered it's just some more overall question really in terms of your M&A strategy now. You've got a lot on your plate which is all nice problems to have. I was just wondering what your thoughts are in terms of M&A. I mean is it more-- you're going to focus more on organic growth now or if an opportunity arrives you're still going to have a stab at it?

You know, Cailey; we're transactional guys. That's how we built the Company. With that being said, the Company is certainly now growing exponentially on organic growth. In terms of M&A activity, both the discovery of Paboase South and what that means for Chirano and also the green schist zone at Tasiast; what that does it means that any M&A activity we might be interested in-- the bar has got to be a lot higher in order for us to make an impact in the Company; that's not dilutive to shareholders-- given these new discoveries.

And we appreciate that. We recognize it. And that's how we're looking at the world. I think that what we're looking for-- I know a lot of stuff out there right now is well kicked and fully valued. What we look for when we're assessing projects on an M&A basis is whether we see a potential like we saw and Chirano and Tasiast or the ability to expand it, exploration upside and potentially our ability as miners to come in and do something in terms of lowering costs. So that's how we're going forward.

But certainly we can't look at the 100,000 ounce a year deposits anymore; we've got to set our sights higher.

And Cailey, just to add to that; realistically we're going to do what we've done for the last three or four years and continue to do that which is have a look at what's going on in other projects in the regions that we like and we'll continue to keep an eye on those and run our own process internally and if we see opportunities that we think may be accretive to our shareholder, then we'll pursue them. If we don't, then we won't.

Okay, fair enough-- plenty of 100,000 ounce projects out there and not so many good ones, so let's keep our fingers crossed.

Well, we'll be setting our bar higher than 100,000; trust me.

Good stuff, alright; cheers, guys.

Your next question comes from Etheru Senevi of Equinox Partners. Please go ahead.

Good morning, gentlemen. Congratulations for a great quarter. A question on cost; I know that you broke down the sort of grade profiles going forward but maybe a bit on the cost side-- cost per tonne figures for both operations, if you could.

Are you asking on a going-forward basis or are you asking for the quarter and year to date?

For both-- just for this quarter and going forward.

For this quarter at Tasiast we are looking at a cost per tonne milled of roughly $31 and at Chirano, closer to $32-- $31.7 to be exact. That's how we calculated it. Going forward, for the year Tasiast is going to be still in the 30s-- 33 and change and the forecast '09 for the full year at Chirano $28.50.

Okay. What's the breakdown of that on a mining, milling, processing, G&A--

Mining cost at Tasiast $8.15, G&A $5.70, and you've got processing $18.00 with power costs included. And at Chirano--

What was the strip rate at Tasiast?

The (inaudible) is $2.60. And at Chirano, mining costs per tonne milled for the quarter, they were at $12.90, process costs, $10.70 excluding power. Power was very low at $1.20; G&A at $6.80.

What was the strip rate at Chirano?

The strip rate at Chirano was $7.60 and that included the open-cut work that is being capitalized as it's going to be (inaudible) a new portion of the reserves.

Okay, so we now see open cut to be in the $4 to $5 range?

Without the open cut we would actually be probably less than that. I don't have that fact with me at this point in time.

Okay, great. Thank you.

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

Thank you, Operator. Well thank you everybody for attending and your questions. As I said, we're very pleased with the progress of the Company and our discoveries. We're very happy to have completed the expansions. That is behind us now. And those capital costs are substantially behind us and obviously our hiccup in the third quarter is behind us as well. So we're looking forward to a very strong fourth quarter and very strong year 2010 with lots of exciting results to come from both projects. So thank you very much and I look forward to reporting to you on year end next year. Thanks again.

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