Kinross Gold Corp (KGC) 2010 Q1 法說會逐字稿

Hello. This is the Chorus Call conference operator. Welcome to Kinross Gold Corporation's first-quarter 2010 results conference call and webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions). At this time of I'd like to turn the conference over to Mr. Erwyn Naidoo, Vice President, Investor Relations. Please go ahead, Mr. Naidoo.

Thank you and good morning, ladies and gentlemen. I'd like to welcome you to Kinross Gold's conference call to discuss our first-quarter 2010 financial results.

With us this morning, we have Tye Burt, President and Chief Executive Officer; Tom Boehlert, our Chief Financial Officer; Tim Baker, our Chief Operating Officer; and Ken Thomas, our Senior Vice President of Projects.

Please note that certain statements may contain forward-looking information and our actual results may differ materially from the conclusions and projections in that forward-looking information. In addition, we caution you that certain (technical difficulty) factors or assumptions may be implied in our conclusions or projections. Additional information about risk factors and assumptions are contained in our news release dated on May 4 and Management Discussion & Analysis for the same period, as well as our recently filed AIF and other regulatory filings in Canada and the United States. Now I'll turn the call over to Tye Burt, our CEO.

Thanks and good morning. I'll make some first-quarter comments and give an overview of our next series of growth projects, while Tom and Tim will give financial results and operational reviews while Ken provides an update on our projects.

Overall, Kinross had an excellent first quarter. We delivered strong financial results, met our operational targets, continued to make progress on our suite of development assets and continued to optimize and refine our asset portfolio with a number of transactions even while strengthening our balance sheet.

Company-wide attributable production was 544,134 gold equivalent ounces, up 3% over Q1 '09 at a cost of sales of $461 per ounce.

On a by-product basis, our cost of sales was $417 per ounce on gold only sales of 526,815 ounces.

Revenue in Q1 of 2010 was $657.6 million, representing a 23% increase from Q1 '09. We delivered strong cost of sales margins, and those margins increased some 26% year over year to $604 per ounce.

We had adjusted operating cash flow of $226.3 million or $0.32 a share, an increase of 5% from Q1 '09. Adjusted net earnings were $97.4 million or $0.14 a share, which increased 38% from Q1 2009.

Speaking briefly to some operational highlights, we're particularly pleased with Paracatu, which showed continued strong progress in Q1, producing 117,472 ounces, which is a 37% increase from Q3 of '09 and 8% higher than Q4, so a steady rate of climb there. And a cost of sales which decreased to $556 per ounce, a 27% improvement from Q3 and a 14% improvement from Q4.

We're continuing to make progress optimizing the Paracatu expansion plant and the construction of the third ball mill is continuing on plan. Ken will give some further comments there.

At Fort Knox, the heap leach performed well again and ahead of plan with 660,000 tons of ore stacked in the quarter. At Kupol in Russia, ore extraction in the underground and the open pit was consistent with our expectations for the quarter, and mine development is proceeding on plan.

In the first quarter, we continued to refine and optimize our asset portfolio, starting with the announcement of an agreement to acquire the high-grade Dvoinoye deposit and Vodo properties, which are both located at some 100 kilometers north of the Kupol mine in Russia.

We've submitted our application to the Russian government authorities to approve foreign ownership of Dvoinoye as required by Russian law regarding strategic deposits. A number of conditions related to the transaction have already been satisfied, and we remain on track to close the transaction by Q3 this year.

Upon closing, we expect to begin work immediately on a 43-101 compliant resource estimate, as well as to commence permitting and feasibility work, including engineering and baseline studies.

On March 31, we closed the sale of half of our 50% interest in the Casale project in Chile. Total transaction value in the sale to Barrick was approximately $474 million. Kinross now owns 25% of the Casale project. We feel this transaction right-sizes our participation in Casale relative to our portfolio mix and strengthens our balance sheet. At the end of the quarter, our cash, cash equivalents and short-term investments totaled approximately $1.1 billion.

On April 26, we announced that we had acquired 87% of Underworld Resources and that we'll acquire the balance of those shares over the coming weeks. With this transaction comes the White Gold exploration property located in the Yukon territory of Canada, along the Tintina gold belt. It adds high potential exploration property in a prospective jurisdiction where we have both experience and expertise. And we currently plan to spend about $15 million on drilling programs at White Gold in 2010 aimed at expanding that resource.

I would say this acquisition is a great example of our strategy for investment in junior exploration companies that have excellent management teams, attractive projects, and a compelling valuation. The purpose of that strategy is, of course, to maximize our exposure to new prospects and growth opportunities.

Yesterday we announced that we're making a $600 million investment to gain a 9.4% strategic equity stake in Red Back Mining. The investment redeploys cash on our balance sheet, especially strong after proceeds from the Casale sale at the end of March into a key stake in a high-growth, well-managed West African gold mining company. Kinross will receive the right to nominate a member to the Board of Directors of Red Back as well as anti-dilution rights.

The rationale for this investment is simple. West Africa has been a region of tremendous growth in our sector, showing substantial increases in gold reserves compared to traditional gold producing countries. In fact, in that region, proven and probable reserves have almost doubled to over 85 million ounces for the region in recent years. We have consistently said we like the gold mining potential there and would invest in the region when we saw the right assets along with an exceptional management team. The structure we have here this morning let's us continue to focus on our core operations and projects even as we have a strategic front-row seat for West Africa.

The transaction gives our investors enhanced leverage to the gold price through an advantaged investment in a high-quality gold producing company with excellent growth potential. It's consistent with our disciplined and measured approach to expanding our business in growth regions.

And finally, on Monday, May 3, we announced that our Chief Operating Officer, Tim Baker, will be retiring effective December 31 of this year. Tim has had a key role in transforming Kinross into one of the world's top gold producers and brought four major gold projects into production during his tenure here. One of Tim's great legacies is the strength of the team that he's assembled to manage our regions and our operations, and we're pleased that Tim has agreed to remain with Kinross until the end of the year to carry on his current responsibilities and to ensure a smooth transition following the selection of his replacement. Thanks, Tim, for your commitment and your leadership.

To sum up Q1 overall, Kinross had a very strong first quarter with significant year-over-year increases in revenue, in margins and adjusted net earnings.

Looking forward, we are making progress on many fronts. Paracatu is showing significant improvements in operational performance and the third (technical difficulty) is progressing on target. We continue to advance our organic growth projects at existing sites, along with our major development projects.

We also approved at the quarter significant enhancements of Paracatu and Maricunga, which Ken will describe. The feasibility study to expand Maricunga is on track for completion in Q2, and drilling at FDN just surpassed the 18,000 meter mark this past weekend, well ahead of schedule. We continue to advance permitting and engage with the government in Ecuador.

And finally, drilling continues at Lobo-Marte. We're seeing some very encouraging results there with some excellent intercepts in the last few weeks, and more info and step-out drilling to follow. We also continue to optimize the asset portfolio as I mentioned, with the acquisition of Dvoinoye announced and the White Gold exploration project with Underworld.

I'd like to turn the call over now to our CFO, Tom Boehlert, for a review of financial results. Tom?

Thanks very much, Tye.

Gross sales for the first quarter were approximately 619,000 gold equivalent ounces at an average price of $1,065 per ounce. This generated revenue of $657.6 million, a 23% increase over the same period in 2009.

First-quarter attributable cost of sales per ounce were $461, and a by product basis cost of sales were $417 per ounce.

Compared to the same quarter last year, our cost of sales margin in Q1 grew to $604 per ounce, a 26% increase, while the average realized gold price increased by 19%.

Depreciation, depletion and amortization for the quarter totaled $128.9 million, or approximately $208 per gold equivalent ounce sold. And we would expect DD&A to continue at approximately that rate for the balance of the year.

First-quarter adjusted net earnings were $97.4 million, or $0.14 a share compared to $70.7 million or $0.10 a share in the first quarter of 2009, a 38% increase.

First-quarter adjusted operating cash flow increased quarter over quarter by 5% to $226.3 million or $0.32 a share.

During the first quarter, an after-tax gain of $16.8 million was recorded on the disposition of one half of Kinross's 50% interest in Cerro Casale. During the quarter, we reduced our debt by $52.2 million to $640 million. For the full year, we expect to make $177 million of scheduled debt repayments.

Our cash, cash equivalents and short-term investment balance stood at approximately $1.1 billion at the end of the first quarter. Capital expenditures for the quarter were $82.2 million. And based on the addition of the SART plan at Maricunga, and desulphurization project at Paracatu, we've increased our capital expenditure plans for 2010 by $40 million, up to $590 million for the full year.

Our full-year production and cost forecasts remain unchanged. We expect to produce 2.2 million gold equivalent ounces at a cost of sales of $460 to $490 per ounce.

Our sensitivities to commodity prices are a $4 per ounce impact for a $100 move in the price of gold from our base assumption of $1000 per ounce for the year; a $3 per ounce impact for a $10 per barrel change in the oil price from our base assumption of $75 at the beginning of the year; and an $8 per ounce impact for a 10% change in foreign exchange rates.

I will now turn the call over to our Chief Operating Officer, Tim Baker, for a review of the operations.

Thanks, Tom. The final page of our press release has a review of operations and a mine by mine summary for key metrics. I'll give a brief review of the operational highlights for the quarter.

At our US operations, Round Mountain and Kettle River performed well. The heap leach at Fort Knox is performing as expected, and we stacked 660,000 tons of ore in the heap during the quarter, ahead of plan.

At Kupol, attributable production was 144,691 gold equivalent ounces in Q1 at a cost of sales of $314. To date, results show the ground control concerns encountered in Q3 last year have been resolved, and the refinements of mining methodology are having the desired impact, with production in first quarter right on target.

Ore extraction in the underground mine and the open pit was consistent with expectations during the quarter, and mine development is proceeding according to plan.

At Paracatu in Brazil, operations at the new plant continued to improve through Q1, with production rising 8% from Q4 2009 and with cost of sales improving 14%. Recoveries have also continued to steadily improve from 72% in Q4 to 76% in Q1.

Weekly gold production has been trending upward since our (technical difficulty) last year. Group performance of the expansion plans are primarily due to improvements in plan availability, stability, and throughput, which, in turn, are the result of ongoing (technical difficulty) and refinements, better ore blending, use of new reagents, and continuous improvement initiatives in maintenance and plan control (technical difficulty).

In Maricunga in Chile, production was 14% (technical difficulty) in Q4 2009, as production was impacted by lower grades and reduced throughput, resulting from lower equipment availability.

Construction of a new 600-person employee camp, located at lower altitude than the previous camp is nearly finished. And it is expected to be fully occupied during the second quarter.

Increases in proven and probable reserves at La Coipa have extended mine life to 2015. Q1 production was 16% lower than Q4, primarily due to changes in ore blend. (inaudible) have been [adjusted] through plant refinements and blending of ore to the plant.

We've had a busy first quarter in exploration, counting out almost 43,000 meters of drilling with a strong focus on La Coipa, Kettle River and Kupol. Drilling results from the 2009 metallurgical drilling program at the Marte deposit in the Maricunga district with two holes showing 200 meters at an average rate of 3 grams per ton, confirm our confidence in the quality of this deposit.

With that, I would like to turn the call over to Ken Thomas, who will provide an update on our pipeline of at-site growth and greenfield projects.

Thank you, Tim. First, I'll review our outside growth projects.

At Paracatu in Brazil, installation of the third ball mill is proceeding as planned. Procurement commitments are at 40%. And as you can see by the picture on the webcast slide, construction activity has started at site and concrete is being poured. Fabrication of the mill is well advanced in anticipation of delivery in mid-2010.

The project remains on budget and is expected to be on schedule (technical difficulty) and commissioning in the first half of 2011. We're also continuing to explore additional (technical difficulty) to further increase throughput and production at Paracatu.

As part of our plans to optimize this operation, the Board of Directors has approved the installation of a $30 million desulphurization circuit at Paracatu. This new circuit is expected to reduce sulfur content of the tailings, and increase gold recovery in plant two by approximately 4% when fully commissioned. We expect to have the new circuit operational in the third quarter of 2011 and ready for commissioning of the new in Stack Yard tailings facility in 2012.

At Maricunga in Chile, the feasibility study on the proposed optimization remains on schedule for completion in quarter two. The project contemplates upgrading the mine fleet, installing new primary and secondary crushers, and converting the existing secondary crushers to tertiary duty. Our goal is to increase ore processing and ounce production and to reduce unit costs. Key water studies are ongoing to support environmental permitting for the project.

We've also approved a $46 million investment in a SART plant at Maricunga. With solid copper content in all mines in the new pit expected to increase significantly beginning in the second half of 2011, we expect the SART plant to deliver two major benefits, optimized gold recovery by removing copper from the heap leach solution, which adds approximately 10,000 ounces of gold equivalent production per year in copper. It will also significantly reduce reagent consumption. We expect the plant to be operational by late 2011.

Turning now to our greenfield development projects, at Lobo-Marte in Chile, our drill program continued in the first quarter. The drilling program continued in quarter one with approximately 3,000 meters of hydro-geological drilling being completed.

Results from 2009 metallurgical drilling were obtained during the quarter and showed very encouraging intersections. We have received approval to undertake an additional 12,000 meters of infill and geotechnical drilling to support the project feasibility study, targeted for completion in the quarter one 2011.

We will be submitting a permit application for an additional 20,000 meters of drilling, including step-out drilling this month.

Baseline studies support preparation of the environmental impact assessment, which are on track for submission to the authorities.

At Fruta del Norte in Ecuador, we have made excellent progress, and we have completed our 18,000 meter drill program well ahead of schedule. The results will be used to complete a pre-feasibility study which we expect to finalize by year end. And optimization studies for mining, processing, and infrastructure are in progress.

Implementation of the new mining regulations continues. And as part of that process, Kinross is completing transitional licensing for its concessions. Title substitution, as required by the new mining law, has been completed and our land titles have been approved by government authority. Progress continues towards submitting the permit applications required for geotechnical drilling and construction of an exploration decline.

As Tye mentioned, we closed the sale of 25% of the Cerro Casale project in Chile. And Kinross now owns 25% of the project. The feasibility study for the project is expected to be submitted to the CMC joint board for approval this month. The selection process is underway for an EPCM contractor to advance basic engineering.

And with that, I would like to turn the call back over to Tye for his concluding remarks.

Thanks, Ken. A few comments in closing. To summarize, our first quarter is a solid start to the year. Paracatu's performance is improving steadily, and we look forward to making further progress in our development projects and refinements to our portfolio. We're making very good progress on our suite of on-site and greenfield development projects, and we continue with our exciting investments for the future.

Today, we have a strong management team and 5500 hard-working employees dedicated to advancing our projects and delivering the next wave of growth for Kinross shareholders. Thanks for listening this morning. I'd now like to open up the line for questions, operator.

(Operator Instructions). John Bridges, JPMorgan.

Good morning, Tye, and thanks for the call. I was just wondering, could you give us a bit more detail on what you are trying to get out of the Red Back purchase? The valuation multiple on this is definitely significantly higher than yours. How do you see this going forward?

Thanks, John. Listen, I'll be very clear on the Red Back investment. First, we won't speculate on what comes next. That will unfold in due time with the world changing around us. I will explain carefully here again the rationale for our investment and a couple of key points.

One, focus for Kinross remains only the very best assets. And if you look at the pattern of buying Kupol, of buying FDN, of buying into Tasiast and Chirano, we think these things continue attractive buying into the very best deposits.

Secondly, West Africa is a region of really high growth. I think I mentioned some stats there. In the last four or five years, the reserves in this region overall have almost doubled to 90 million ounces, and we see lots of growth for the future. So we think the party gets bigger. We don't think we're late to the party. We want to have a dance partner very early in that progress.

You will recall we did exit our African assets in sub-Saharan Africa four or five years ago when we sold in Zimbabwe and the Congo. We think West Africa, different story, and exciting for the future.

Next, I would say we had a lot of cash on our balance sheet, especially after the March 31 closing of the sale of half our Casale interest. We've been working on West Africa and telegraphing this potential for a couple of years, and we've been busy for quite a while, looking carefully at a number of opportunities there. Red Back was clearly the best and we think that compared to holding cash and T-bills, holding a 9.5% stake in an exciting, growing gold producer is a good use of our cash.

Next, I would say having an excellent management team with West African experience was critical. So, that allows our Kinross management team to continue our focus on our core operations and our core projects, even as we look to long-term options in the future in new regions.

So I'd just reiterate, we looked carefully for a great management team. We think Lucas and Rick have put together a tremendous team at Red Back.

I'd also say, John, we've done our homework here. I mentioned West Africa has been on our radar screen for a couple of years. We've got months of technical due diligence and site visits. And the pattern is clear from our past investments and this one. We usually go into a new region up to our ankles if I can use the vernacular. I'll look carefully, assess what the future holds and what our options are.

And then the end result here, we became an advantaged buyer of a high-growth vehicle with a board seat into anti-dilution rights. So, we're keen on our position.

And then finally, just speaking to price, it's been a bit of a moving product target at Red Back of course. Our investment is at or about a 10-day average price here. But we obviously believe that there's long-term accretion from this potential in this projects and in the equities here.

And as I've said so often, we are always looking for asymmetric risk when we make investments. That is much more upside than downside. And we think that once again, it is the case here. So, bottom line, we used some extra cash to get more leverage to the gold price with a high-growth vehicle.

Have your geos walked the property in Mauritania?

Yes, indeed.

And you're comfortable that there's still more exploration there?

Yes, we're very excited. It stands out as quite a geologic anomaly when you look at that banded iron formation and then the new green-schist zone. Very exciting, and we look forward to continued drill success there.

Many thanks for your thoughts there, Tye. I appreciate it. Thank you. Good luck.

David Haughton, BMO.

Yes, good morning and thank you for the run-through. I've got a couple of questions on Paracatu. Quite an improvement this quarter compared to what we've seen in the recent past, a lot of it driven by the grade and of course the recovery staying intact. Do you see that kind of grade going forward through the balance of the year, or is it going to come back to a lower level?

It'll drop down a bit for the rest of the year.

All right. And the recoveries, you're comfortable with that throughput matching the recovery for the balance of the year?

Yes, we continue to do a lot of work on fine tuning the plant and are getting good results. The recoveries are inching up as we go forward and the throughput is inching up. We have seen some improvement in the throughput based on the hardness, so.

David, just to confirm what Tim said, if we were 0.46 in terms of grade for the quarter, average for the year is probably going to be 0.43 order of magnitude.

And -- sorry, go ahead.

Not significantly different but lower.

And when we're looking forward with the desulphurization, adding another 4%, that implies moving up to the 80% or the high 70% recovery?

Ken Thomas speaking. Yes, we anticipate with the present recoveries, the 4% will take us up to the 81% mark.

Having a look at the CapEx spend for the quarter at Paracatu, significantly below what we would have expected for an annualized run rate. I presume that there's going to be a huge catch-up spend for the balance of the year. Will that be more in the second half fourth quarter? Or do you see it fairly evenly spread for the balance of the period?

Hi, it's Tom. It's really all timing, as you alluded to. So, I would expect it to ramp up really over the course of the year.

All right. And, Tom, while I've got you, depreciation rates seem to have stepped up in most of the assets. Should we use the per ounce metric that we can back calculate for each of these assets as indicative for the balance of the year and going forward?

Yes, I would say on an overall portfolio basis, that would be the right approach. From quarter to quarter, we have swings in depreciation rates depending on the cost base built up in inventory and so on. But, the $200-$210 per ounce for the full year I think would be a pretty safe range to use.

And while we're talking about rates, income tax rate looked a touch higher than previous expectations. Should we use that kind of run rate going forward in the 36%, 37% for the balance of the year? Or do you expect it to come back a touch?

As I mentioned at the beginning of the year, we would expect the range to be between 34% and 39% for the full year. It was a little bit high in the quarter as a result of the tax on the sale of the Cerro Casale interest. So our effective tax rate was 36.2%. If you back out the Casale sale, it would've been 34%.

I got you. And final question, I heard as we had the run-through that drill hole of, I think I got it right, at 200 meters, three grams, Lobo-Marte, how does that fit into the general picture for Lobo-Marte development? Is it a higher-grade portion of the ore body that this is reflective of? Or just trying to think about how this might impact the overall grade for the ore body.

At the moment it doesn't significantly change the overall grade, but it's a good confirmatory hole that the grade exists and that we are getting good substantial depths of it, but it's not outside of the ore body that we had to find at the beginning.

And will these results be included in your next round of reserve and resource calculations, presumably released for year end?

Yes, absolutely.

Anita Soni, Credit Suisse.

Thank you. Just wanted to confirm the -- did you say 34% to 39% effective tax rate or 35% effective tax rate?

The range was 34% to 39%.

39%. Okay. And then, just a couple of questions with respect to the grades at Kupol, similar to the question that we had at Paracatu. Is that expect -- that 20 gram per ton range, would that be sustained or would it tend to creep down over the course of the year?

It will creep down a little bit through the course of the year.

And (multiple speakers)

We're looking about at 18.5 gram I think over the course of year.

Okay. And then the recovery rates to remain relatively strong at 95%?

Yes, it's been good. I mean, as the grade comes on, obviously, we expect our recovery to come down, but they're holding the recovery pretty well. It will creep down a little bit. We are budgeting at a lower recovery for the --

Okay. And then kind of an opposite question at Round Mountain. It seemed like the grade dropped a little. Is that expected to come back up or to remain at the current levels?

Hang on.

It went to 0.53 from 0.65 in the previous quarter.

Yes, it will -- it went -- it certainly won't increase. It will probably decline a little bit through the course of the year. It depends on how much heap leach material we put out, but it's going to stay around about the same.

And lastly at Fort Knox, you put 660,000 ounces on the leach pad this quarter. Can you give us an idea of how much for the full year you guys are planning on putting on leach pad?

Well that was 660,000 tons. Yes, I think we're planning about 14 million tons.

Okay. Thank you very much.

Barry Cooper, CIBC.

Good day, everyone. Tye, just wondering, what is your understanding of the use of funds going to Red Back? Obviously you've got anti-dilution provisions that you've talked about. Was there a discussion of what this money is going to be used for? And are they in a position to use it as they wish?

No strings attached to the funds, Barry. They are for general corporate purposes as we understand it. And one could only speculate, so I would leave it up to the Red Back management. But they obviously have lots of drilling to do and lots of technical work to do on potential expansions. So we presume that is what it will be used for.

Right. Okay. So there was no discussion specifically on the growth aspects in terms of building a bigger breadbox if you want to call it that?

No, we did not try and tie them up for a specific use, no. Listen, they've got a good management team. I think they've got their eye firmly on the ball and that's one of the reasons why we made the investment, because we believe those guys have got a good team doing the right kind of work.

Right. And then for Tim, the La Coipa mine life expansion, you talk about reserve changes there. Are these new or are these just a formulation of what happened with your year-end reserves there? I'm trying to sense whether there's new information here or not. If it is a new reserve, what kind of figures are we talking about?

It's what we reported at year end. It's --

Okay. So it's nothing really new then, okay. Thanks a lot.

John Bridges, JPMorgan.

The SART plant, there was supposed to be a SART plant at Marte Lobo, and now it's at Maricunga. Is that correct?

Ken Thomas speaking. Technically, you are correct. The SART plant will be installed at Lobo-Marte when the project goes into implementation. But also we are installing one at Maricunga. Both properties have similar characteristics in the fact that [saleable] copper increases as we proceed forward for the next couple of years.

Okay. I was thinking maybe that the one at Maricunga might be a good test bed to get experience with it before the Lobo-Marte one. But it doesn't sound as if the timing is going to work there either.

No, it will be an excellent experience. In addition, these plants are operating successfully at Yanacocha and Telfer in Western Australia. So for Kinross it will be a good learning ground to go forward with Lobo-Marte.

Okay. Have you got more information on these things? Because there doesn't seem to be a lot of information out there.

John, it's Tye. Perhaps when we could sit down -- we'll be visiting in the next few days. Maybe we could sit down with some of the technical stuff and hook up Ken on the phone for you. It's interesting technology. And as Ken mentioned, two or three different ways it helps the economics.

Brilliant. And then, there -- I just wondered, you were very successful with buying into diamonds at the Harry Winston thing. I just wondered what you thought about PGMs as a possible addition to a precious metals portfolio?

Let's be absolutely clear here. Gold is business number one. Precious metals, we do produce a bit of silver, but we are in the gold and silver business. Our investment in diamonds, thank you, has been quite successful from a financial return point of view and the diamond prices continue strong and our investment value there continues strong. We don't have any current plans to invest heavily in other metals at this time.

Thanks for that clarification, Tye. Good luck.

David Christie, Scotia Capital.

At Maricunga, when is the expansion and feasibility study coming out?

The completion of the feasibility study will be in the second quarter. I anticipate it to be somewhere a month to six weeks from now. And it's on track for completion as per the share deal.

Any idea what the CapEx will be that you can give us at this point in time?

No, we're still -- that's one of the reasons it will take us a couple of weeks or a few weeks to understand the capital. We're putting those figures together at this point in time.

Okay. At Fort Knox, you mentioned how many tons you are going to place there. What's your sort of goal you expect to get out of the heap leach this year?

I think it's about 60,000, 70,000 ounces.

Okay. And just in a follow-up to the last question, on the HWD shares there, you've made a good sum of money on them. Any plans on what your future is for those shares?

This is a -- continues to be an opportunity. We're watching closely. We think that given where prices have gone, David, there's more upside there in the stock. But to us, we don't want to close off any options. It could be a source of liquidity.

Obviously, we get investment banker calls all the time, but at this point, no particular plans other than watch carefully and be opportunistic. That's our sort of bottom-line comment on that investment.

Well diamond prices are rising. That's great. Thanks.

George Bernstein, Deutsche Bank.

Good morning. A question I had I guess for Tye would be, is there any specific lockup period on your end regarding the Red Back investment? Or as part of the purchase, was there any option to acquire further stake in Red Back? What I'm trying to get at is, are you okay with keeping sort of a passive 9% stake in that Company as a long-term investment?

A couple of comments, George. One, our stock is subject only to the standard statutory four-month hold period in a typical private placement. Point two, we have a 9.44% interest, and a board seat. So I would call that a little bit more than passive. We also have done a lot of homework on the district and the company and the assets. So, it's a front row seat. It's a careful watch and look-see. But as for future plans, we wouldn't want to speculate right now.

Okay. And my other question was, in terms of your adding significant African exposure here, are -- is your company I guess okay with the message that you are sending by basically adding another major geography now back to your portfolio mix in terms of the -- I guess you are saying that this is a region with high growth, but it does bring a little bit more complexity to your stock.

Well, I would say this. One, w distinguish between sub-Saharan Africa and West Africa quite carefully. We had assets in sub-Saharan Africa which we have exited. We note that others are maybe doing somewhat similar moves recently, but West Africa is quite different. Obviously you have to go country by country, but we see it as high-growth.

One of the important messages and what we said a little earlier was that we wanted to have, and we've been telegraphing this for a couple of years, if we entered West Africa, we wanted our investment to come with an experienced management team there, and we think this is one. And therefore, we don't think, from an operating perspective yet, it doesn't add complexity for us because we have this team at Red Back that is doing so well. So, that's one of the reasons for the strategic investment structure that we've used here.

And lastly, just in terms -- could you maybe share your thought process in terms of when you came into this pool of money, was any thought given to perhaps dehedging the company, buying out the remaining gold hedges? Or was the decision as you said versus a parking the money in treasuries, simply putting it in a higher return asset?

Tom, do you want to speak to the dehedge?

Yes, the method we've used to basically offset those hedges is to enter into offsetting purchases. So, we've basically closed out the exposure for 2010. Before the beginning of the year we had entered into -- or sorry, by the end of the first quarter or by the end of January -- had entered into offsetting purchases for all of the ounces for 2010. And, we have also offset about two-thirds of the ounces for 2011. So, bottom line is, we only have about 180,000 ounces of uncovered hedges left on the book. So we've really pretty much wound it down, but, not by buying them back, but by offsetting them with forward purchases.

And then the second point, you asked about cash in T-bills. Look, we closed the Casale sale end of March. That gave us some $454 million of cash proceeds. And so we saw some symmetry in that cash availability compared to our long due diligence and work in West Africa. So, that brought the whole thing to an interesting opportunity to move investment into the Red Back equities.

Okay, thanks very much.

Steven Butler, Canaccord Adams.

Good morning, Tye. On the two process enhancement studies, Paracatu, desulphurization and Maricunga SART, do you have rates of return on each of these process enhancements? They look kind of positive, but again we're lacking some data. If you have rates of return at current or a near gold price, would be great; if not, fine.

And, what would you -- is it more on the Maricunga SART a matter of more stabilizing the gold recovery? Or when you say optimizing or improving gold recovery? And if so by how much, to what level? Thank you.

On the first question regarding the IRR, on both projects, they're very attractive and they're in the double digits. Even at the $800 gold price. And further up, I would say the IRR increases dramatically.

On your second question with regard to recovery, on the SART plant, it not only stabilizes recovery, but it enhances it as well. As probably a lot of technically advanced people would understand, copper has an adverse impact in the refinery process in a gold plant. So, the SART plant will definitely stabilize our process and in fact enhance recovery.

And can your long-term recovery assumption for Maricunga would be around that level now?

At about the same level, yes.

Okay. Thank you very much.

Mark Liinamaa, Morgan Stanley.

I know you have no exposure to the tax discussion or potential changes in Australia, but can you provide any comments of how you see maybe the world changing as far as how profits are shared between host countries and providers of capital? Thanks.

Sure. Quite right to observe, Mark, we don't have Australian operations. We sold those some years ago. So, my comment is a general one.

We are I guess disappointed to see another example of possible, not certain yet of course, but possible resource nationalism, which we see regularly, not dissimilar from some things that happened in Canada or draft legislation that is under review in the US. So, it's a bit unfortunate one of the bright spots in the economic world today has been chilled a bit by that initiative.

But I would say that overall, one has to go country by country. And when we look at our portfolio, we think we have some pretty attractive tax rates in Chile given their reinvestment structure there and in Russia given the low corporate tax rates there and stable rates at least so far in the United States.

So, Australia, not a direct impact. Overall not probably a good thing for the overall mining sector. But any other discussion would have to be country by country. And I think it bespeaks a bit of a trend, but I don't think it's going to light a fire if I could use the vernacular, it's not going to light a fire under a lot of other nations. And I think it will frankly face some opposition from the major companies that are heavily invested in Australia.

Great. Thanks for the comments, Tye.

David Christie, Scotia Capital.

Just one quick question, guys. On anti-dilution clause in the Red Back shares, how long is that good for?

Yes, it's anti-dilution rights for one year, David.

One year. Perfect. Thank you.

Anita Soni, Credit Suisse.

I just wanted to get some clarity on some -- I guess the special levy in Chile. What's your understanding of that? And do you think it will be passed? And when do you think that will take place, in terms of the earthquake rebuild?

There are two components to it, and they're both proposals at this stage. One would relate to the income tax. And the proposal is that the tax rate would go up from the current level one rate of 17% to 20% in 2011 and 18.5% in 2012, and then back down to 17% and 13%.

And, then there is a second proposed tax which is the mining tax, and this is a voluntary tax. Current rate is 5%. The proposal is that it would be increased to 9% for 2010, 2011 and back down to 5% in 2012.

They are proposals. They are subject to debate. We don't have a view at this stage on if and when the actual legislation would be proposed. But, to give you an order of magnitude, if all of those taxes were implemented based on our projections over those three years, it would amount to about $8 million of incremental tax for Kinross.

In aggregate.

Yes.

Okay. Thank you very much.

This concludes the question-and-answer session. I will turn the conference over to Mr. Burt.

Thanks very much for your questions this morning, folks. When we look at the bigger picture over the last few years, we would say that Kinross has aggressively transformed itself to the 2 million ounce producer we are today. We built Kupol, Kettle River, Buckhorn, Paracatu, Fort Knox, and are in a much stronger position today from a financial and operating perspective as we launch this next wave of growth.

We have a suite of high-quality projects, the right teams in place to advance them, and a very substantial investment addition to our balance sheet announced yesterday. Thank you very much for your questions and patience this morning. Thanks, operator.

Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines. Thank you for participating. Have a pleasant day.