Kinross Gold Corp (KGC) 2009 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. 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, Friday, February 26, 2010 at 11 AM Eastern time.

I will now turn the conference over to Mr. Clark, President and Chief Executive Officer. Please go ahead.

Thank you, operator. Good morning, ladies and gentlemen, and welcome to the year-end financial report of Red Back Mining. It is a pleasure to have you on the call.

Needless to say, we put out our numbers this morning before the open and I think you will agree with me that Red Back has performed, I think, exceptionally well in 2009, particularly on the financial results side. We -- what I propose to do at this meeting like other meetings is, I will make initial comments and review -- briefly review 2009 in terms of accomplishments and issues in the Company.

And then I'm going to turn the meeting over to Alessandro Bitelli, our Chief Financial Officer, and -- to go through the numbers and following that, after Alessandro has completed I will give you a forecast and foreshadow for what we expect to see in Red Back for 2010.

On the call with me from Red Back, obviously, is Alessandro Bitelli, CFO; Kevin Ross, our Chief Operating Officer; Simon Jackson, VP - Corporate Development; and Hugh Stuart, our Vice President of Exploration. So we are well represented in respect of your questions and please feel free at the end of the -- our presentation to ask any questions you might like to any of the people that are from Red Back that are on the call.

Well, obviously, 2009 was a very, very busy year for Red Back. As I said, we are extremely happy with the financial results. I guess it breaks down to after paying for two plant expansions, underground development at Akwaaba, aggressive exploration over the year, the end result is that we have come out of the year with an increased cash position and have, as we forecast to you, we've come out of the year with $150 million in the bank.

We are extremely well-positioned financially. We continue to have no debt. We have no hedge position. So we are ready to carry on with activities in 2010, both in terms of further development at a project exploration and also corporate activity that might come up.

Now, as I think many of you know, over the year we have to change our initial forecasts for 2009. That was primarily due to permitting delays in Mauritania and obviously start-up -- some start-up issues at both Chirano and Tasiast, all of which are behind us. But I'm happy to say that the final results for the year are in line for the last forecast that we gave you.

So what did we achieve in 2009? As I said, extremely busy when you think of the size of our Company and where we came from only a few short years ago. 2009, we successfully commissioned the Chirano plant expansion and achieved commercial production. We successfully commissioned the Tasiast plant expansion and also achieved commercial production.

For 2009 Red Back had record gold production, a material increase over 2008. And I'm happy to report that that trend will continue over 2010, '11 and '12 and going into 2013.

We discovered the Greenschist Zone at Tasiast. This has substantially changed the fortunes of Red Back and will continue to do so over the next couple of years. And I will go into that a little bit more as we go through the call.

At Chirano, we discovered the Paboase underground deposit. That deposit looks to be as big if not larger than Akwaaba. We are continuing to evaluate it. Drilling is ongoing and we are on target to be able to report a reserve there, at least by the end of the second quarter of this year.

At the same time, we expect in the second quarter of this year to commence development of Paboase shelf and start the decline there, along the same design parameters that we have done for Akwaaba.

At Akwaaba itself, we achieved commercial production of the underground mining operation. At Tasiast, we commenced operations, dump leach operations, which is the second process stream at Tasiast. The third stream will be heap leaching, which we expect to commence production on in 2011.

In terms of the underlying reserves of the Company, [specifically] at Tasiast we increased reserves by 85% in 2009, and they currently stand at 3.05 million ounces.

So in short, this has been a pretty wild ride in 2009 for Red Back. I think we have achieved our objectives. In some cases, they took a little longer than we would have hoped, but we are there. 2010, we are in full operating mode. In fact, at both plants we are above nameplate. We expect that to continue.

We are comfortable with our forecast to the market. Go through that a little bit later after Alessandro has gone through the financial numbers for 2009.

In respect of our year, I think the market will concur with management's conclusion that we have been very successful about certainly being reflected in our stock price. And we very much appreciate the confidence that our shareholders and the market in general have in Red Back and in our management.

Now just before I turn over the meeting to Alessandro, I note this morning that a number of analysts had commented on our G&A, specifically the increase over the third quarter. In fact, I am happy to tell you that that increase is substantially related to management bonuses that were just recently granted by the Board of Directors.

Obviously, we are not in a position at the beginning of the year to forecast that because we can't predict as management what the Board is going to do or what the year effectively is going to happen in the year specifically with the gold price and stock prices.

But that is the answer to questions that you may have on G&A.

So at this time what I'd like to do is turn the meeting over to Alessandro to go through the numbers in detail. And after that, as I've said, I will give you a bit of a picture of what we think is going to happen in 2010. Alessandro.

Thank you very much, Rick, and good morning to all. Following on Rick's overview of the results for 2009 in terms of how far the Company has gone, indeed, we are very pleased with our record profits for the year.

These record profits at least stem from a significant increase in mining profits, up 92% from the year before. And that is largely due to production, up 31%. Specifically Chirano ended up ahead of target in terms of production offset by Tasiast, somewhat below target because of the permanent delay mentioned by Rick earlier on.

Gold price also increased by 15% and that contributed to the increased profit. We also had lower cost compared to 2008 and the combination of those three factors brought about the 92% increase in profit.

I should also point out that the depreciation was higher, in particular in the fourth quarter, as there is also the completion of plant expansion and the commencement of commercial production at the Akwaaba underground. That high depreciation is expected to continue 2010.

Royalties also reflected the expansion fees that were paid on account of the expanded production in Mauritania. That expansion fees applicable to 2009 and will continue to be applicable in 2010.

G&A is indeed higher as explained by Rick. And in addition to the significant result from the mining operation, corporate activities also contributed to profits in 2009. $13 million came from the termination fee on the Moto transaction or our decision not to proceed with the Moto acquisition.

We recorded a $3 million gain on the sale of marketable securities earlier on in the year. That was [securities in mineral deposits] limited, a gold company and also a significant gain on the foreign exchange as a result of treasury management organization.

We still hold a significant position in Canadian dollars as part of our treasury operations. And that has resulted in an unrealized profit of approximately $24 million that is recorded in our comprehensive income.

Of note is the fact that profits at our operating subsidiary in Ghana will start to give rise to the recording of the effect of taxes, not cash-based taxes but generally future income taxes. In addition in Ghana, the government has established a 5% levy that is applicable to 2009 and 2010 and that is also recorded in the -- against income 2009 and with respect to Mauritania 2009, so it could go through the second year of our tax holiday.

2010 will be our last year of our operations in Mauritania to be exempt from income tax. Again, our profitability at Chirano ultimately is going to give rise to minority interest and that is the case indeed and started to be the case in 2009. And we expect that with profits continuing to be strong we can continue to record that minority interest that was expected in the operations. That is (technical difficulty) 10% interest held by the government.

Lastly, of note in the financial statements as will the MD&A there is an assessment of taxes in Ghana that relate to the treatment of hedge contract. And that is a complex issue. Our tax advisors are working on it and we believe we are in a very strong position as we move forward on that front.

Briefly, as we move into 2010, the [capital] of the comment on the financial impact of [higher] operation, we are going to have obviously significantly higher production with targets showing a ramp up of the dump leach operations in Chirano's (inaudible) the ramping up of the Akwaaba underground mining.

The cash costs [around], we expect them to be stable compared to 2009 partly because of lower grade for Tasiast and high underground mining costs above Chirano who is [standing] the high production profile. Depreciation overall is going to be a higher cost although we do expect it to be stable in the (inaudible) stations because of the high production profile.

And finally as I mentioned, in Ghana we would expect to record future income taxes at the rate of 25% which is the standard rate of [tax] as well as continuing to record the stabilization levy of 5%.

Gentlemen, this is my report and I am happy to pass it back to Rick for further comments.

Thanks very much, Alessandro.

Before I talk about 2010 I just want to briefly touch on the tax, some of the tax points that Alessandro has indicated and more from a political perspective.

I think everybody has to understand that we are operating in the developing world. Certainly, Ghana is more developed than Mauritania, but I think that whether it's been explicitly mentioned by companies, I certainly think everybody understands it implicitly that most of the companies producing gold in this region, very few of them would be paying taxes at this given time.

Given pools, depreciation, allowances, and capital investments and repaying the debt whatsoever, so what we're seeing right now is, I think, a realization by the governments that some of these deals need to be rethought. And certainly that is what is going on in Ghana.

We do not expect to be significantly, in any way, adversely affected by this. We are on top of it. We are in discussions with the government and we are getting some guidance now and all of the companies are going through the same thing and there will be some uncertainty on that over the next couple of months.

In Mauritania, as Alessandro mentioned, we will be taxable in 2011. In fact we are quite happy in that position. That obviously means we are making a lot of money, and at the same time it is going to generate a significant income stream for the government of Mauritania.

This is one of the most -- one of the poorest countries, I think, in the world. It can certainly use the revenue from large resource projects. And Red Back is certainly developing into one of the largest resource projects in Mauritania, and that is a very good thing.

Anyway going forward with 2010, as Alessandro touched upon, Tasiast production for 2010 is set to obviously increase substantially over 2009. Our forecast to the market is 245,000 and 265,000 ounces from Tasiast. At Chirano, also an increase forecast is 240,000 to 260,000 and our forecast cash costs are between $390 and $420 and I think that Alessandro touched on where those costs are coming from.

Specifically looking at Chirano in 2010, our objectives are to continue expanding production of Akwaaba Underground towards 100,000 tons a month of work. That process is ongoing. It is substantially on schedule and we are on track for our forecasts.

We are also, will be continuing with the decline development at this point in time. The decline is approximately halfway completed and we expect to substantially complete the design depth by the end of the year and going into the first quarter of 2011.

At that point we will be setting up exploration stations at depth and we will be continuing to test the depth extension of Akwaaba Deeps.

We will be coming out also in the second quarter of this year with initial reserve for Paboase Deeps at Chirano. At the same time, we will be commencing -- as I indicated at the outset of this call -- we will be commencing development of the decline at Paboase Deeps. And we expect to be going hard at that in the second quarter and it will take approximately 14 to 16 months for this decline to get down to the point where we are in commercial [ore].

In terms of exploration, obviously with the success of Akwaaba Deeps and Paboase Deeps, we've -- I think -- shown the world that the potential for underground deposits under these low-grade surface pits is excellent. We think we understand what is controlling the mineralization, what is causing this high-grade.

Paboase Deeps is the first opportunity we had to test our geological thinking on that. And it was a success.

We were -- are going to be continuing to test other high-profile exploration targets in 2010. Currently, the six-month budget for Chirano exploration predominantly drilling for these types of targets is $6 million. And we will reassess that budget in midyear depending upon the success, but I fully expect that we will be increasing that budget and looking to drill off another resource at, hopefully, our third discovery at Chirano.

Moving on to Tasiast, 2010 we will be looking to expand our dump leach development and operations. That has gone extremely well. Very, very pleased with how the dump leach is performing. And as I said, based on that success, we will be expanding that aggressively.

We will be completing the heap leach feasibility study as well. We are looking to be able to add reserves in respect of heap leaching in around the midyear update for reserves at Tasiast. And by the -- towards the end of the year we will commence the development of the heap leach operation. And we are looking to go into production on heap leach which will be the third process stream in Tasiast in 2011.

We are rapidly expanding our resources and reserves at Tasiast. I think that everyone will have followed the news flow over the last six months on that. I can tell you that that news flow will continue. In fact it is probably going to accelerate.

That is predominantly based on the discovery of the Greenschist Zone at Tasiast, but also we have been having continued success expanding the more plebeian units that were originally formed the reserves at Tasiast, namely the banded iron formation units and the [cell side] units. The whole geological picture of Tasiast is changing which is likely to result in a complete new mine schedule.

We are working very diligently on that schedule. I think what I can foreshadow is that you can expect a lot bigger equipment to be coming into Tasiast over the next 12 months.

Just to give you a heads up -- and this is all I will tell you about it at this stage -- we will be putting out a new reserve update for Tasiast next week. I will be happy to take your questions on that after that release comes out. But suffice it to say that it is continuing the trend that we established in 2009.

We -- The exploration budget for Tasiast for the first six months of 2010 is $22 million. This is predominantly focused on conversion of resource and reserve and expanding all of the mineralized units in and around the central part of the mine site. Namely, expanding the Greenschist Zone's and also the banded iron formations in the cell site units that currently form the pits that we are -- or the mineralization data that are contained in the pits we are currently mining.

As I indicated we are looking to put out an additional reserve update approximately around midyear. And at that time we will incorporate the heap leach numbers and also continue drilling, and we will also be looking to put out a new mine schedule. So the whole picture of Tasiast is likely to be completely different in the third quarter of this year than it is now. So I'd give you a heads up on that.

Also in terms of exploration, we haven't -- it sort of got lost in the shuffle a little bit in terms of our presentation on Tasiast, there are numerous satellite targets that we have identified over the last couple of years at Tasiast predominantly from surface exploration. We are currently testing many of those targets now, both in terms by drilling and by trenching. We expect to be in a position to look at preliminary resources on at least a couple of those in 2010.

So all in all, a very, very busy year for shadowed for Tasiast for 2010. And by the end of the year, if the success continues at the rate that we expect, it [may] very well be that we may end up having to do a complete rethinking of how we want to go forward with Tasiast in terms of further expansion over the next few years. Not a bad problem to have.

In addition to having operations in Mauritania and in Ghana, we have also got some exploration projects in Côte d'Ivoire. We've had those for a number of years. They have been in permitting. We have been able to do some work on them in 2009 that has generated two very high-grade targets for us. We will be drilling both of those targets this year and I look forward to being able to put out some results on that. Hopefully, by midyear.

Now just in terms of exploration before going on to discussing our corporate activity a bit and our corporate development activity, just to give everyone notice, we will be attending the PAC and in specifically we will be holding a technical presentation of Tasiast. The presentation will predominantly be done by Hugh Stuart, our Vice President of Exploration.

Over the past six months, one of the things that has become apparent to us is -- we have gone around and talked to shareholders, talked to analysts -- is that it is difficult to get your heads around the potential size of Tasiast, exactly how it is growing, and that is partly because of the speed at which it is growing. So what we thought might be very useful is to give everyone an opportunity to come get a detailed technical explanation on what we have achieved at Tasiast, specifically in respect of the Greenschist Zone and where our [exploration] is focused to grow that project.

Right now I can tell you that it is looking to be one of the largest gold discoveries in Africa in a long time. And we are continuing to push that characterization and, by the end of this year, we expect great things from Tasiast.

So I highly encourage any of you that are interested and are in Toronto to attend the session. And it will be on Tuesday, March 9 at 4:00 PM after the market close and it is being held in one of the conference rooms at the Hilton Hotel.

Okay, going on to corporate. I think the one thing that everybody all knows is that we took a run at Moto during the year. That certainly was in line with our corporate growth plans.

At that time that we made the decision to go after Moto, we were looking for a project that basically in one fell swoop would give us resource and reserve depth that we didn't otherwise have at that time. And that -- the resource and reserve numbers were really what was setting us apart from our peers in the space. And Moto solved that issue for us.

We did not go into this transaction blind. The lending group has been in the DRC for over 12 years and we have babysat [Tinky Futarami] from effectively an exploration project, an advanced exploration project now into development with Lundin Mining's partner, Freeport. So we had a lot of knowledge about the DRC which gave us the confidence to go after Moto.

Now many people will ask us why we didn't jump back into the ring when Randgold and Anglo came in and outbid us. And the predominant reason -- there are many reasons, but I can tell you that the predominant reason that we didn't jump back was the discovery of the Greenschist Zone at Tasiast and the confirmation that we got from drilling that we were onto another Akwaaba Deeps look-alike at Paboase.

We went to the Board management, went to the Board of Directors and sort of at the 12th hour on Moto and we said, "Look, we think that Tasiast is going to prove up to be a significant ore body. It is going to add the resources and reserves that we were looking for."

And when you supplement that with what Paboase Deeps was potentially going to add, we thought that we were going to get the growth from those two prospects -- projects that we would get with Moto. And we were going to do that without diluting our shareholders.

I can tell you that the decision of the Board was unanimous. We walked away from Moto. We took our (technical difficulty) fee and we put that $15 million into drilling. And that is where we are today.

And as I said Tasiast is turning into one of the larger new discoveries in Africa if not the world. So we are very pleased with that decision.

But what that tells you is that we are not afraid of corporate activity. We are not afraid to look at projects that are going to add, that are going to be accretive to Red Back and its shareholders, that are going to add value.

We are focused predominantly on West Africa. We are looking at other things in Africa, but we now have the luxury of time. We would very much like to remain an African company. And we are looking not only at advanced projects in Africa; we are also going down the food chain a bit looking at prefeasibility projects as well as potential investments in juniors. And there's some exciting things happening in West Africa that generated in 2009 and we expect that excitement to continue in 2010 with the discoveries that are being made.

So we see a lot of opportunities going forward. And we are in a great position financially to capitalize on that.

Finally, just on a corporate governance basis, I am happy to report that we have completed our Global Reporting Initiative. The GRI report will be launched today on our website at 12 PM and I encourage you all to go on the website and have a look at it. We have put a lot of time and effort into that report. And I think it gives a very clear picture of Red Back's position on sustainability.

So that is the presentation from management on 2009 and our forecasts for 2010. I would like to turn the meeting over now for questions. And as I said, the senior management team of Red Back is on the line and quite happy to answer any questions that you might have. Operator?

(Operator Instructions). [Lilie Hamuni] from Scotia Capital.

Just had a quick question about depreciation. I know Alessandro talked about why the number was a little higher in Q4. What should we expect in 2010, ballpark, if you can't provide a number?

I think that the depreciation for the year in 2009 will be a reasonable reflection of the depreciation per ounce in 2010. The high depreciation costs should be upsized by the higher production profile.

Thank you.

Don MacLean from Paradigm Capital.

Good morning and congratulations on a spectacular 2009, particularly on the discovery front. I guess I would be one of the guys who is looking at the G&A and the compensation side though as well, for a bit more explanation of what happened there. And, Rick, maybe you can give us a sense of how much -- I guess that number increased by about $12 million over Q3.

How much of that went to bonuses and how it may have been distributed between your operating and exploration people -- up to the top management group of that and down? And what we might be looking at in the future, because as the Tasiast continues to grow fairly dramatically, what kind of policy has the Board?

I'll do the -- I will volley the [SoC] question there, Don. In terms of the Board you're going to have to ask the Board.

But you know as I said during my presentation, I mean, I can't predict what the Board is going to do. I can tell you that we do have sort of a bonus policy in place and factors that the Board looks at and that's been approved at the Board level in terms of the number.

In this case we went out and hired a consultant. The Board hired a consultant and there was a number of reports prepared by that consultant and recommendations made. And the bonuses and the salaries which have been established for 2010 are in line with those recommendations, and that was after an extensive review of our peer group.

So in terms of the exploration bonuses, again what I can tell you is the way that Red Back is run might be quite different than a lot of other companies. We are a very unified management team. We are lean and mean. We moved most of our G&A down to the projects and into the gold cash cost of production.

I can tell you that the senior management team of Red Back gets the same bonus and they also get paid the same. There is no differentiation. We are involved in all major decisions of the Company from a management perspective and we are all growing in the same direction.

That being said, I will be blunt. I get a bit more than everybody else, but that's the beauty of being the CEO.

Cailey Barker from RBC Capital Markets.

Hello. Just a couple of questions for me. The Paboase Deeps. What is that going to do to your overall grade at Chirano? Will it increase its substantially or what's your feeling there?

I will let Kevin answer you. Kevin?

Good morning. We are anticipating that the grades are going to be similar to Akwaaba and our plan is that, therefore, we will reduce the open pit material going through. And so we will have two high grade feeders streaming into the mill from Akwaaba and Paboase from -- let's say, when it is in full production from 2013 on. And it has got a similar profile to Akwaaba in its lower grade in the upper levels where we'll start off mining, and it will increase as we go down.

So we anticipate that the grade going through the mill in Chirano will rise from the high 2s to the low 3s gram a ton as we develop in the -- we get into the deeper section of Akwaaba and we get into the middle section of Paboase. That is where we'll get our highest grade.

And by that stage she will have found another one and we will be able to just keep on extending that profile going forward.

I like the confidence. The other one I have is the 800,000 ounces, probably 2012 that you've [made] it to get. What would be the split there that you anticipate between Tasiast and Chirano?

I'll answer the first part. The 200, the 800,000 ounces in 2012 is a run rate. We are not going to produce 800,000 ounces in 2012. We will achieve that run rate. I'll let Kevin answer the split.

The split is roughly going to be Chirano will be in the high 300 and Tasiast will be in the high 400. And as Rick was saying, I mean the growth that we are getting at Tasiast right now actually looks as though that -- so that's today, on the current reserves prior to publication of next week's release. And I'm pretty confident that we will be able to change that as well.

So obviously the majority is going to be coming from Tasiast and that is going to keep -- that is where the real growth potential list. But Chirano is a very respectable high 300,000 ounce producer going forward. So there's nothing to be ashamed of there and that just makes a great combination between the two operations.

Lovely. Thanks so much, chaps. Keep up the good work.

Kerry Smith from Haywood Securities.

Good morning everybody. Just a couple of questions maybe for Kevin firstly. The average grade and the recovery at Tasiast for '09, the grade was marginally lower than '08, but the recovery was down, [turn] of 1.5 points.

I just wonder if that's all grade-related or whether there's something else there in the mineralogy that maybe the recoveries might be a tad lower as we go forward here.

Good morning. The recovery issue is due to the blend of fresh and oxide. We typically in our forecasting or in our mine planning we use 2% lower recovery for our fresh material than in the oxide material. So last year was 100% -- sorry.

'08 was 100% oxide.

Yes. 100% oxide. Last year, we are starting to get a bit of transition of fresh material coming in. As we move forward into this year it is going to be a blend again and then, next year when we start into -- moving into West Branch then it will be oxide.

And so over these next couple of years it is very much going to depend on the actual blend within the lithologies. Having said that, one of the things that we installed in the circuit was a gravity recovery section. That is now operational.

And one of the things that we certainly expect when we moved into the fresh material that we may be able to nudge that recovery up. Because we are able to pick up the coarse gold early on and that has been where our problem has occurred, in the lower recoveries and the fresh material. That coarse gold is just we don't have enough [written] in time in the CIL tanks and so we certainly anticipate that we will be able to improve on that fresh recovery as we move forward in the future.

And Alessandro, just on the $28 million of exploration that you've budgeted for the first half of this year, how much of that would you capitalize? Or how much would you expense? Let's ask it that way.

The policy at [Akwaaba] is to capitalize all of that amount and the effect of continuing the policy obviously with the transition to higher perhaps a lot of these policies are being reviewed in light of the consequences, over the -- call them the [RFIX]. Specifically there's a long-term project relating to what will be appropriate policies with respect to exploration in mineral properties in the mining industry that RFIX is undertaking and that might actually -- it will change the playing field in a couple years' time.

And Kevin, just on the Akwaaba underground, can you just give a little bit of an update as to how many tons a month you are running at now? And it sounds like you are going to get to 100,000 tons by the middle of this year. But I was just curious where you're at today?

Yes. We are sort of in the run about the 60,000 ton rate plus or minus. I mean, it's not an absolutely smooth transition because as new levels come on, we have got to reslot or slot and then as we start to different drives on each level, again we have to slot.

So there are -- it's not a smooth line growth but we are pretty comfortable with where it's going. And so, as Rick was saying that by midyear we anticipate that we will be up to our full strike rate.

Okay. And has there been anything in the whole development plan that has been different than what you sort of predicted it to be, whether positively or negatively?

In the development plan?

Yes, well just in the mining of the underground there.

The only thing that we've changed is right on the upper levels. The original design had twin drains on each level. The more that we looked at that, we very -- we found that we could actually stoke the -- a single drive so anything up to 15 meters is our minimum stoking width. So that's the only change that we've really made to the layout and that's obviously increased the grade.

A couple of other areas -- we have extended the ore body a little bit further to the north. But when we actually looked at the grade, one of the things that we found was that we are following the main horizon with an -- and had good grades under the width of the ore body -- over the drive, I beg your pardon.

But when we came to drill it, the ore body tapered quite quickly. And so we've taken a little bit longer to do some of that development and, on hindsight and reflection, maybe we shouldn't have. So it's wide enough for just a development drive but it is not wide enough for a 15 meter slope. Or the grades aren't good enough for a 15 meter slope.

So in those upper levels we've learned a little bit more about the ore body there and we won't be following that as we go deeper.

Okay, and then that doesn't really affect the [viability] in terms of the size of the reserve?

No (multiple speakers) this is beyond the --.

It was beyond it --?

Extending the reserve but when we -- so we got excited with the development but when we really looked at that in the overall [life of mine] (inaudible), realized that that was not going to be an economic viable option.

Right. Okay. And just one last one, Kevin. The cost per ton still sort of tracking with what you had expected then so there's no surprises there either?

Absolutely, yes. And again, it makes it pretty easy when we've got contracted [raise] there.

Yes sure. And then just one -- I don't know if Hugh is on the call, but the $6 million at Chirano, can you just give me some idea as to which targets that is going to be primarily focused on?

Hello, yes, I'm on the call. Basically as soon as we've drilled the rest of Paboase out we are going to step sequentially north and south from Paboase. We will also be testing the -- I said I think I said before the sheer zone in the Paboase area tends to be a lot more linear than we've seen we say we see for example at Akwaaba. And I think there is room for some growth along strike.

We will also be looking at trying to locate the extension of the Tano, high-grade shoots of depth below the Tano pit. And those are the sort of first two main targets.

We've got some drilling laid out. In fact we have a man portable rig on site now, which will be testing some targets to the north of Akwaaba between Akwaaba and Suraw, where we see some fairly reasonable disruptions on the -- in the Chirano [chutes] and surface and some internal line emplacement close to the sheer zone. And we will be targeting that. We will do a little bit more work around the Obra pit.

But probably the primary targets will be the extensions of Paboase, Tano and the area around Akwaaba -- probably North first. And we will also be drilling some holes to the South.

The secondary targets will be Obra and we also are starting to have a much better understanding of what is controlling the higher grades at Suraw, now we have been able to see the pit and get a feel for what is actually, where the grade is coming from in the Suraw pit. And we're starting -- we will be targeting some more holes below the Suraw.

That's great. Thanks for the update.

Anita Soni from Credit Suisse.

Good morning. Congratulations on all your exploration success this year. I'm just wondering, what is your target in terms of reserves for the middle of this year?

I don't think I will do that, Anita.

I thought I would give it a shot.

Something north of 3.

That will be an easier one to extrapolate after next week. How's that?

Then, okay, getting down to the quarter and nitty-gritty. Can I get strip ratio? How much waste was mined this quarter at both Tasiast and Chirano? And in terms of the dump leach, the tonnage and grade that was put onto the pad?

At Chirano, total waste mined was 6.3 million tons. And the strip ratio, 6.5 million. At Tasiast, total waste was 3.1 million tons and strip ratio of 1.9. Dump leach all placed was 900,000 tons. What was the other question?

Grade for the dump leach.

Grade was .61.

And then, if you could just give us an idea of unit mining cost per ton at both assets for now?

Basically very static. Chirano was $2.00, Around $2.10 and at Tasiast, we came in at $1.45.

And is that per ton of material moved or (multiple speakers)?

Ton of rock, yes.

And process cost still about the same or anything fluctuating there?

Process cost was just a shade over $9.00 at Chirano. $9.10 or $9.16 beg your pardon. And at Tasiast it was $8.75.

That is excluding power.

Beg your pardon, yes. And then power on top of that, $2.20 at Tasiast and $1.48 at Chirano.

$2.70

Beg your pardon.

$2.70, did you say?

Let me rephrase, let me go back over those, Anita.

We're getting Kevin new glasses.

Yes the way these costs are split both the total process cost, including power at Chirano, is $10.60. And the total cost -- processing cost, including power at Tasiast was $13.17.

And then, just in terms of the new mine plan at Tasiast. Is that -- I mean, would we expect to, you know, include a capacity expansion there? I mean you said you were talking about much bigger trucks and a new mine schedule.

One of the interesting things that we are running through at the moment is how big should the heap leach and the dump leach elements be. What we have is we have an awful lot of room to play with the cutover grades as opposed to cutoff grades. The cutover grades is giving us the top end of dump leach and heat leach, which is still economic as opposed to the low end of the cutoff break in the CIL.

And we have at least 0.5 gram play in that above the 0.7 cutoff in the CIL and we've got at least 0.5 gram that is potentially -- that material could go both ways. So it's -- until we get the full reserve as Rick was earlier, midyear, it's very much an issue of how big is this reserve going to be?

So one of the things that we're looking at we know that we are going to have to move this dirt. That is why we are going with a significantly bigger fleet where the mining range is probably going to triple to quadruple, at least, the annual mining rates.

And the real decision is obviously the best 3,000,000 tons go to CIL and then the balance of that -- the off-site material goes to the dump leach and the fresh material would go to the heap leach. And it is really what is the -- the dump leach is very easy to make that totally flexible. It can take whatever tons we stick in it.

The heap leach obviously we need to find that because we don't want to rehandle that. It is a lot of tons that we're talking about. Significantly more than we'll go through the CIL.

So sizing of that heap leach is going to -- is one of the prime factors that we will be establishing in the feasibility study. And then the next site following that we'll didn't really come out and say is the Greenschist Zone within the West branch big enough that it justifies further expansion or a new CIL plot?

And that is, right, it's probably a year or 18 months away before we make that decision, but it is the sort of thing that we are starting to think about right now.

And that feasibility study that you are talking about outside of the Greenschist Zone option, that would be what you would be releasing in midyear, right? With the heap leach, new mine schedule and --?

No. The only study guess the only thing that we will be studying and or releasing midyear is the heap leach study. We need to establish the full size of the reserve but if it keeps on growing as we've got it right now, we are pretty comfortable that today, on the reserve that we will be releasing next week, that we will be in a position that we can treat all the material through the currency of our plant, the new heap leach plant and the dump leach.

But if the expansion of that Greenschist Zone carries on as it has done over the last six months, the grades that we're establishing now they're really need to go through a CIL plant. The grade is just too high to go through a heap leach and so -- but we obviously need to establish exactly how big that is to make that call.

So that is going to be a little while away.

Thank you.

You are right, Anita. The feasibility studies for the heap leach we are looking at for midyear. And feasibility for further expansion we are probably a year away.

Okay and then what is the current capacity of the mining fleet?

The current mining fleet will -- well, we just -- we place some orders and we've just received the first batch. With the current fleet we will be sitting at around about 28 million tons.

So a triple would bring you up to 100 million tons?

Well it will take us up into the -- sorry, I was thinking of last year's production which was 15 -- 16 million tons. So we are in the 50 million to 75 million ton range, is the sort of numbers that we will be looking at.

And just a little bit more clarity on the grades. You were talking -- so you said that you've got about 0.5 grams to play with on the low end of the higher grade stuff. So --.

No of the well -- the CIL, the cutoff of the CIL is right about 0.8 grams a ton for both dump leach and off-site. Fresh -- for fresh and off-site.

It is economically viable to stick anything up to run about 1.3, 1.5 grams -- slightly depending on process into a leach process. And it is above that that you really start saying, no, it must go to CIL.

So but is certainly viable to seek that material through either CIL or through heap leach. And so we've got an awful lot of flexibility there and as to the next expansion that will be putting into processing in Tasiast is the heap leach plant, we can design that to handle whatever we -- whatever the reserve is indicating.

And one last question. With respect to the heap leach recoveries, what is the last known recovery for heap leach?

60%.

How much -- 60?

60, yes.

I'm sorry. Five zero or six zero.

Six zero.

Six zero. Thank you.

[Barry Cooper] from CIBC.

While Kevin's on the line there, I'll just flesh out a little bit more on the 60% recovery. I'm assuming you are referring to the test work that is ongoing on the sulfite component of the heap leach for Tasiast. Is that correct?

It is actually 59%. 60% is our recovery on the heap leach. We have another measure of variability samples going through right now and so that will give us more clarity on whether there is any significant variation between the various lithologies.

So the 59 -- is that being done with a high-pressure grinding system or what kind of system and where's that been done?

That is an HPGR test work that has been completed last year.

Whereabouts was that done?

At [Humboldt Vidag].

Okay. So when you say that there's still work being done on that, what modifications or what things are being done to change that number?

No, no, no. It's just that was a suite of 10, seven samples that we twinned to establish was there any benefit. And so we did a set of column test work on a cross sample, with an ordinary [cone] pressure and then we also did another three examples using HPGR.

We ran contests to compare the improvements in order to verify whether there was any improvements in recovery using an HPGR. And that established clearly on the seven samples that we would get an indicative 20% increase by using an HPGR within the crushing circuit.

What we have now done is we have now taken -- we've established more -- lithologies, and we've taken samples from each of the lithologies and a suite of samples through those to ensure that one lithology is not significantly different from the others. Or if it is that we can plan for that within the processing design.

So this is variability test work which we will give and -- will give us an indication of how process design should be catered for. Just as you do the CIL plant you take variability samples so that you can then size your equipment to handle the whatever proportion of the feed you're looking to design for.

Right, okay, so Kevin I don't have too much experience with these HPGRs in terms of bench testing versus practicality. In fact there may not be too many places in the world where there is a long history of that.

But typically bench tests are quite often never as good as what happens in the field. Do you have any specific experiences on those?

Well there's two areas. [Topware] is actually running an HP GR on circuit right now that is installed and is operational. Our maintenance -- sorry, our process manager at Tasiast has just come from -- joined us from Topware. So he has got personal experience on the design and construction of that.

The other area that is using HPGR with not quite the same process and heap leaching is one of the first places, where we will be one of the first places to use HPGR within the heap leach. But HPGR is just a pressure.

Right, I'm familiar with that (multiple speakers). Kevin?

Micro fractures within the crush product --

Yes. Kevin?

Solution to flow better. So it's not as though -- I mean HPGR stuff has been used in the iron ore industry for many years.

Yes. That wasn't my question. My question was on testing -- you know quite often, you will go to a column called the heap leach test and you'll get 80% recovery. And then when you put it into practicality it is 70. That is what I am trying to assess.

The typical stuff that we have been using on our -- in our dump leach test work because we knock it back about 5%.

Right. Okay.

Let me just interrupt on that. And I know there's a lot of skeptics about our dump leach recovery and I can tell you that our dump leach recovery is between 70 and 75%.

It's on the track for that.

So that's the same type of test work, it's the same type of ore.

Right.

[Cassius] are closely involved with all of our leach test work. And I think anybody would say that are probably the leading consultants on leach test work and interpretation thereof.

Yes, I wasn't challenging the viability of it. At the end of the day we have to come up with a specific number for recovery and that's what I am trying to assess.

Just so I and everyone else understands specifically what is coming out next week on the reserves. So if I were to look at things and I were quoting reserves for Cassius -- and given everything that you've told me, I would include numbers for whatever is in the dump leach and I would include numbers that are going to the CIL -- but I would exclude numbers that would be applicable to a sulfite heap leach process.

If I were quoting real reserves I -- that which had a, let's call it the feasibility and a viable option there. Is that the --?

We are not quoting heap leach reserves next week.

Okay, good enough. I just wanted to understand that to make sure.

You and everyone else.

Okay.

You can do your extrapolations next week.

Yes okay and then finally, Paboase. Are you basically -- is that going to be a carbon copy of Akwaaba with respect to the mining methods?

At Paboase?

Yes.

That's certainly the plans that we are going for at the moment. We are just completing the prefeasibility. And we're in the final stages of the geo-tech work.

That needs to be very final left but certainly everything at the moment looks like and certainly huge views of the rock mass and its strength. It is extremely similar to (technical difficulty).

And the is dimension somewhat similar as well?

Yes. It's probably is a little bit deeper. It's the -- and a little bit less on strike, but it's very applicable.

Right, okay, thanks a lot. That's my questions.

Don MacLean from Paradigm Capital.

Hello again. A couple of questions related to cost. Maybe I'll just rattle these off so just in case I get cut off again.

On the -- with the discovery at Tasiast you ended up paying -- was it a 5% NSR for 2009 and 2010? What are the odds that that sort of thing will be repeated with all the changes you are likely to make to the project? I guess that was one.

The second was maybe a top side view of what the profile costs for the Company will look like beyond 2010 on a browns basis. You've guided to 390 to 420 in 2010. What would that profile look like going forward to 2011 and onwards? Maybe the direction is good enough.

Then maybe, lastly, when we are trying to calculate G&A for next year, Rick, what would be a reasonable run rate to assume for that?

You've got to talk to the Chairman of the Board. And it's good -- I mean you know.

Well, is it a reasonable assumption to take 4 times Q4?

No, that's not a reasonable assumption.

Okay, so maybe a little more guidance than that.

All I can do is tell you the trend continues as it has in terms of discovery and success and everything else. With Red Back, you can expect a -- I'd probably look at it, D&A around what this year has been.

Okay.

Yes, not on an annual basis, right. It's an annual thing.

Okay. Fair enough, that's good.

(multiple speakers) Q4 right? But it's based on -- it's on the annual results. Now just dealing with your first question with royalties. First of all, in taxes we pay a 3% royalty to the government. There is a 2% royalty to [Franklin Nevada] but it doesn't kick in until 600,000 ounces have been produced.

Understood.

It will probably be in that range next year.

But there was a special royalty that was added because of the expansion.

Yes. That is -- the final payment on that is done.

Right but you are going to be expanding again. So does that open the doors for yet another --?

No. No. What has happened on that is that in the feasibility study that was originally filed by Rio Narcea, they filed it. They filed numbers, production numbers, etc. And the permits were granted by the government -- based on that study.

So we came along, made the discovery and while we were in the tax holiday that was granted in respect of that study, we tell the government we are going to expand. And they went, "Well, hold the phone. You are going to expand, but you are going to get capture all those ounces in revenue within your tax holding."

Okay, so the royalty, extra royalty we paid was to take into account of that expansion while we were in the tax holiday granted under Rio Narcea's tenure. Now that it is over or will be over at the end of this year, we are fully taxable. And so those issues go away.

I think this is going to be something all the companies are going to be facing with the higher gold prices. And especially if you make a spectacular discovery it would be natural for a government to want a larger piece of the pie.

So are you getting any indications from the Mauritanian government that anything other than they are quite satisfied once you are paying your full 3% NSR plus income tax rate. They are quite happy with that?

Yes.

Perfect.

There has been no indication at all from the government that they are in any way, shape, or form looking to renegotiate the contract.

Okay and then maybe --.

Now Don, I should point out on that that the government will be coming out with changes to their mineral laws and more likely the taxation laws, but in terms of the mining side and anything that affects us in terms of mining taxes and things like that, we are grandfathered. And they have confirmed to us that we are grandfathered.

Perfect.

And that also applies to First One.

Great. That simplification makes all of our lives easier.

Then in terms of, Rick, just the cash cost profile going from 2000 and, say, '11 on would you expect that, say, let's take $400 $410 an ounce cash cost number to be skewed more downwards or do you think it's likely to be going higher?

Let's -- in some respects, Don, your guess is as good as ours. All I can do is tell you it's been both at Tasiast and at Chirano. Let's look at Chirano.

We are looking to put in higher grade ore through the mill and getting more ounces than we would be by moving low-grade dirt from the pits. So our expectation is we will see some cash cost benefit from that, going forward. All things being equal.

Now at Tasiast I think it is safe to say that we will be looking at benefits on the cost side just as a result of how much dirt we're going to be moving. So you are going to get economy to scale. So our expectation is we are going to see this trend down. I can't tell you how much.

That's fine. That's good enough. That's great. Okay, thanks very much.

[Marco Lacassio] from Equinox Partners.

Good morning. Wanted to ask a question about how you guys are thinking about the balance sheet with the cash you have and the strong cash flows that we all hope will be coming through this year? You know is there a level that you want to keep on hand for the growth at the assets you have currently and absent that and M&A activity, do you have any other views as to how much you might accumulate or do you think about paying some out at some point?

Look. We are not a bank. So we are looking at our cash policy both in terms of what we see corporately going forward and the type of cash we are going to generate. But certainly, one of the issues that is going to be presented in the very near future to the Board is cash management and the potential for paying out dividends.

Okay. Fair enough. I mean do you have a ballpark guide for sort of how much you would want to have on hand just for the internal projects you have coming over the next few years?

Look. I think $100 million to $150 million is a nice round number.

Dan Rollins from UBS Securities.

Just two quick questions. Just on -- at Chirano, could you just confirm what royalty you are paying to the government? Is it 3% or is it 6% now?

What I can tell you is -- what we've paid isn't really relevant. It is what we're going to be paying. We have just been notified by the Minister of Mines that the royalty, the government has fixed the royalty at 5%. Okay. That is still in discussions with the Chamber and other companies and everything else.

So, however, all I can do is tell you that the government's position at this point in time, 2010 and onwards, the royalty is 5%.

Okay. Great. And just moving quickly on to Tasiast, given some of the numbers you have been throwing out there and the potential for reserve increases and bringing on the heap leach, what is the current capacity of your pipeline to the CIL [aquifer]? Is it capable right now of doing what you want or would you actually have to twin that to bring all of expansions in the play?

I'll let Kevin answer that.

That's an integral part. There are two areas that obviously fall in with the heap leach expansion or introduction. One is water and we've got two sources. Obviously the aquifer is one of them. But with the potential volumes of water we (inaudible) C, it is about another 25, 30 kilometers around the park, the (inaudible). So we are evaluating the options between those two alternatives.

And then the other one is [offsea] power. So we would need to put in some more (inaudible) generation and one of the things we are investigating right now is potentially of buying power over the fence. We have a US company that is speaking to us and, too, are potentially going to give us some favorable power rates coming forward into this year.

So those are the two other areas that will be infrastructure-related benefits. That will be -- or infrastructure-related expenditures that will be needed to handle the -- I'm sorry to handle the heap leach. I beg your pardon.

Perfect. Just how long is the current pipeline?

60. 60.

And how much does that cost to build?

Well the recent expansion was around about $14 million --.

To $20 million.

That was for a 500 mil and originally richly we had a 300 mil -- sorry 400 mil pipeline in there which was on the ridge built by Rio Narcea. We then put a 500 mil line in.

That gives us 14,000 cubes a day and we are still evaluating -- depending on the size of the heap leach is -- and the dump leach will determine how big the new pipeline needs to be.

Perfect. I'll share that later on. But yes, and then just quickly just going on to drilling on the Greenschist Zone. Have you started drilling in the [Piment] Zone for that yet?

Hugh, you answer.

Yes. We've got -- we've drilled a couple of the hole so far and we are now drumming basically all the rigs are on Greenschist's exploration over the next till probably the end of March. So at the moment we are drilling holes looking for Greenschist from the far south end of West Branch as far north as the far north end of Piment.

How many drills do you have currently drilling?

We have eight rigs on the site. Two or three of them are actually on geotech work at the moment and but all the LC rigs and some of these rigs are they are sort of the larger LC rigs drilling up to 500 meters. They are basically targeting looking for Greenschist, both in the area directly around the current Greenschist Zone and in that area between there and Piment, but also through that Piment Zone to the north of the Piment Zone, and to the far side of West Branch.

So basically you are drilling geotechnical on the current .9 to 1 k strike that you already have a resource on. You've got the (multiple speakers) rigs drilling out to the 500 meter extension in the North end and then potentially stepping up from there. And then you have a couple exploratory drilling around a little farther away from the current resources?

Yes. Yes. We are going to be drilling holes looking for Greenschist over about a -- about an 8 kilometer strike.

And how current I guess angle of the Greenschist looks like it's going and would it actually take you to run under I guess the current mill. How much of that Greenschist if it were, and I stress if it were to go the full length of the pit, would you lose given the location of the current mill?

It's more likely to -- it depends on how the deep we get it. If we were -- it's more likely to have an affect on the [footwall] side it's going to be sitting in the footwall of the (inaudible). If it was at depth and it would be in the Piment area, it would obviously be restricted by the location of the mill.

So about 500 meters, a kilometer or so?

Yes. Probably around 500 meters.

Okay, perfect. Thanks very much and I look forward to hearing the results next week. Thank you.

Anita Soni from Credit Suisse.

Just on the Paboase reserves, can you remind me again when you are going to release those? You said Q2. That's not next week though.

Q2.

Okay. It was at March 20 -- (multiple speakers).

Tasiast is next week.

Tasiast is next week.

We get them confused.

Could you just reiterate the royalties at Mauritania? I know you went over them but my phone was cutting out.

What it is, is a 3% NSR to the government. We have paid a -- call it two payments for the recent expansion we just commissioned. Those payments are done. So those royalties will not continue. But going forward it's going to be 3% NSR and in 2011 we are taxable.

Okay but your tax holiday store remains for 2010?

It remains for 2010, yes.

And then there is also a 10% royalty in (multiple speakers) Franco.

Right, yes, I got that one.

It's in once total production from Tasiast we think [seeds] 600,000 (multiple speakers) (inaudible). That is roughly the end of this year.

But we will be paying that royalty next year. So I guess the best way to look at it is to assume going forward in 2011, that we pay a 5% NSR and we are taxable.

5%. Thank you very much.

Philip Lamoreaux from Lamoreaux Capital Management.

This is [Ishogen] for Phil. I just -- first of all -- want to thank you and congratulate you for our great job in the quarter as well as your excellent judgment in execution for these past few years.

So a really really really good job. Just wanted to ask a very big picture question. You guys have been talking about Greenschist. I don't see any mention of [Black Gretcha]. I just wanted to know is that still a growth driver for you (multiple speakers) .

Hugh?

The Black Gretcha is one of the or a part of the mineralization at Akwaaba in Chirano. And it is quite distinct from what we're seeing in the Greenschist at Tasiast. The Black Gretcha forms a sort of sub zone within the mineralized envelope but at Akwaaba which is very generally of limited thickness, but very very high grades usually plus an ounce. Whereas the Greenschist is a very broad geological unit and with some continuity that we are getting significant widths of sort of 80 plus meters at 2 grams within.

Excellent. So --.

So. The Black Gretcha forms a part of Chirano but it is really the Greenschist that is driving the growth or part of the growth at Tasiast.

Okay, great. Thank you very much again and great job.

(Operator instructions). Mr. Clark, there are no further questions at this time. Please continue.

Thanks very much for attending, everybody. As I said in closing, I encourage you to attend if you can Hugh's technical presentation on March 9. I think that it will help everybody who attends get a much bigger understanding of where the potential of Tasiast lies.

Also you will get a pretty good indication of that next week as a basis. Again late 2009, 2010 is going to be a very exciting year for the company. Both obviously in terms of cash generation but exploration results and growth opportunities.

So stay tuned and I look forward to reporting back to you again for the first quarter of 2010. Thank you very much. Have a good day.

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