Kinross Gold Corp (KGC) 2010 Q3 法說會逐字稿

Hello. This is the Chorus Call conference operator. Welcome to Kinross Gold Corporation's Third Quarter 2010 Results Conference Call and Webcast. The conference is being recorded. (Operator instructions).

At this time, 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. Welcome to Kinross Gold's conference call to discuss our third quarter 2010 financial results. With us today, we've got Tye Burt, President and Chief Executive Officer; Thom Boehlert, our Chief Financial Officer; Brant Hinze, our Chief Operating Officer; as well as Ken Thomas, Senior Vice President of Projects.

Before we begin, I'd like to bring your attention to the fact that we will be making forward-looking statements during the presentation today. For a complete discussion of the risks, uncertainties, and assumptions which may lead actual results being different from estimates contained in our forward-looking information, please, refer to the news release of November 3, 2010 and a management discussion and analysis for the same period, as well as our most recently filed AIF, which is available on our Website.

With that, I'll turn the call over to Tye.

Thanks for joining us this morning. I'd like to welcome Brant Hinze, our new COO, to the call today. Brant joined us October 1 and has been visiting the Kinross mines to meet our team and become familiar with the operations. We look forward to your contribution based on your many years of experience operating gold mines around the world.

Overall, Kinross had an active and productive third quarter. We continued to deliver strong financial results, with a 26% increase in revenue; a 28% increase in adjusted operating cash flow; a very significant increase in adjusted net earnings; and a 37% increase in our margin, which grew to a record $673 per ounce. Third quarter attributable production of 575,065 ounces included 20,238 ounces from the former Red Back assets based on the closing date of September 17 through the end of the quarter.

Some highlights from our portfolio of operations included Paracatu, which continues to exceed our budget and expectations. The site produced over 129,000 ounces this quarter, which is a 51% increase from Q3 of 2009. Cost of sales decreased to $505 per ounce, a 34% improvement from the same period last year and a 4% improvement from Q2. Year to date, Paracatu has produced approximately 365,000 ounces, above our budget and guidance expectations.

The addition of a third ball mill at Paracatu expansion plant remains on budget and on schedule for commissioning in the first half of 2011. Our Board of Directors yesterday approved the addition of a fourth ball mill to the Paracatu expansion plant, which provides the grinding capacity necessary for the expansion plant to sustain planned throughput of approximately 41 million tonnes per year, even as the work index increases in future years. We expect the additional mill to be operational in the first half of 2012.

At Kupol in Russia, measures implemented to improve ground control management in the underground mine during the warmer, summer months proved to be effective in Q3, and production was ahead of forecast.

At Fort Knox in Alaska, production and costs improved significantly in the third quarter, with a 26% increase in gold production and a 22% reduction in cost of sales per ounce compared to Q2. Looking year over year, the heap leach has contributed to a 79% increase in production and a 15% reduction in cost of sales.

In Chile, the worst winter on record in the Maricunga district continued to impact our operations. Both La Coipa and Maricunga are also experiencing challenges that affected performance, which we expect to somewhat impact Chilean production and costs in Q4.

Adjusting for the Red Back assets and the addition of Tasiast and Chirano and performance at the Chilean assets, we've updated our full-year production and cost guidance, which Thom will discuss shortly. Given our two mines and future projects there, we've initiated a comprehensive unitization review for our Chilean operations. Opportunities we're exploring include improving efficiency and reducing costs by consolidating operating functions and services across our assets in the district, and Brant will speak to this later in the call.

Of course, during the quarter, we closed the acquisition of Red Back Mining in late September, adding the Tasiast mine in Mauritania and Chirano in Ghana, west Africa. Kinross now has a portfolio of ten operating mines and five new growth projects, as well as the best growth profile through 2015 among our senior peers.

Based on new production from Kinross' existing suite of projects, combined with the significantly expanded production we expect from the Tasiast mine, Kinross forecasts production to grow 75% from 2010 to 4.5 million to 4.9 million ounces in 2015.

Employee integration post the merger is proceeding smoothly, and we've had a high-level series of meetings with both the Mauritanian and Ghanaian governments. We're encouraged by our meetings with the governments, and we look forward to building on Red Back's excellent relationships and reputation in west Africa.

We commenced management of the Tasiast exploration program on September 17, the date of closing. Since then, we've added five core drills, bringing the total onsite to 16 rigs. 65,000 meters were drilled in the quarter at Tasiast, bringing year-to-date total to approximately 157,000 meters. We expect to add another seven core drills, scheduled to be onsite and operational shortly. Kinross plans to complete 50,000 meters for the rest of the year, focusing on extending the Greenschist zone. We are also conducting a parallel exploration program, drilling targets beneath the pits along the mine corridor and testing surface geochem targets in the district. We're also increasing our capacity to analyze samples from the site by constructing a new site lab and plan to be in commissioning a sample prep facility in Mauritania shortly.

We announced that we increased the inferred mineral resource estimate at Tasiast to 5.1 million gold ounces by including recent drill hole assay data and reclassifying the Greenschist ore to represent the demonstrated and significant continuity of the mineralization there. This is an increase of 3.2 million ounces since the prior updated estimate from Red Back on September 7, 2010. Our work continues to confirm Kinross' view of Tasiast's tremendous potential, and we will continue to update you on our progress there.

Turning to other development projects, at the Lobo-Marte site in Chile, development work remains on plan to complete an update pre-feasibility study in the fourth quarter, with a feasibility study expected in the first half of '11.

At Fruta del Norte in Ecuador, we continued to make progress with drilling and permitting. The pre-feasibility study there is scheduled to be complete by yearend, and a full feasibility study is scheduled to follow in the first half of '11. Kinross continues to consult with the Ecuadorian government regarding the form and content of a model development contract for the mining industry. We are encouraged by the government's commitment to the FDN project and to developing a responsible mining industry in that country.

In light of the Red Back acquisition and the expected capital and resource demands of the Tasiast expansion, we are also conducting a review of project sequencing and capital planning, as we aim to best prioritize our at-site capital spending over the next few years. For example, we've designated the fourth ball mill at Paracatu as a near-term priority. The upgrade to the ADR plant at Maricunga has also been set as a near-term priority. It remains on schedule for completion at yearend. And work is progressing well on the SART plant there, which is on schedule to be operational in late 2011. We've also decided to postpone development work in the Maricunga optimization, in light of the Chilean unitization review that's now starting. Permitting work there will continue. We plan to reassess that project as part of our review to identify opportunities to consolidate and centralize common operating functions and business services along the 110-kilometer Maricunga belt. Equipment previously ordered for the project has been redeployed to Tasiast and to Fort Knox.

This quarter, we continued to rationalize our investment pipeline. We closed the sale of the Diavik mine interest for $189.6 million, which resulted in a $95.5 million gain. We also sold down our equity position in Harry Winston, resulting in a $146.4 million gain.

In Russia, we received approval from the government to acquire 100% ownership of Dvoinoye and Vodo, and we closed the acquisition of the deposit and that surrounding exploration land on August 27. We had already begun development work on the project in anticipation of closing, and exploration work progressed ahead of plan through the quarter.

Also, at Kupol, on August 27, we closed the transaction to consolidate the Kupol east and west license areas, which gives us more exploration potential in what we believe is an emerging, high-grade, epithermal gold district.

In October, I attended a meeting in Moscow of the Foreign Investment Advisory Council with a number of other CEOs from international companies and banks. Prime Minister Putin was in attendance as the Chair of the meeting. It was a very productive session, where the Prime Minister reaffirmed the country's commitment to increasing foreign investment.

In summary, Kinross had a strong quarter, with solid financial results and good progress made at our development projects. While our Chilean operations are experiencing some challenges, we are on track to meet our 2010 production guidance of 2.3 million to 2.35 million ounces, which has been updated to reflect the contribution of our new west African assets from the date of acquisition.

Today, Kinross is focused on project execution and delivering on our plans and commitments. Our balance sheet is stronger than ever. Key operations are delivering on their potential and adding capacity for the future in Brazil, the US, and Russia. New projects are moving forward in Mauritania, Chile, and Ecuador.

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

Kinross closed the acquisition of Red Back on September 17, so the results for the Tasiast and Chirano operations have been consolidated with Kinross only for the sub-period from September 17, the acquisition date, through the end of the quarter.

Gross sales for the quarter were approximately 619,000 gold-equivalent ounces at an average price of $1,190 an ounce. This generated revenue of $735.5 million, an increase of 26% over the same period in 2009.

Third quarter attributable cost of sales per ounce was $517. On a byproduct basis, cost of sales was $477 per ounce. Cost of sales for the west African assets includes a $4.3 million fair value purchase accounting adjustment. Without this adjustment, overall cost of sales would have been $510 per ounce. Compared to the same quarter last year, our cost of sales margin in the third quarter grew to $673 per ounce, a 37% increase, while the average realized price of gold increased by 24%.

Included in our results is a $242-million gain on the sale of our indirect interest in the Diavik diamond mine and the direct interest in Harry Winston Diamond Corporation, which we acquired in 2009. We will not pay tax on this gain, as it will be absorbed by our loss carry-forwards.

For Kinross operations, excluding the impact of Red Back, our third quarter adjusted net earnings were $121.6 million, or $0.17 per share. Third quarter adjusted net earnings, including the impact of the acquisition, were $123.6 million, or $0.16, compared to $1.7 million, or $0.00 a share, in third quarter of [2003]-- prior year.

Excluding the impact of the Red Back acquisition, our third quarter adjusted cash flow was $258.7 million, or $0.37 a share. Adjusted operating cash flow, including the impact of the acquisition quarter over quarter, increased 28% to $260.8 million, or $0.34 a share.

Capital expenditures for the quarter were $135.3 million, and exploration expenses were $31.1 million with $2.6 million of exploration expenses capitalized in the third quarter.

During the third quarter, we decreased our debt outstanding by $186.7 million to $524.2 million. And, at the end of this year, we expect our debt balance to be approximately $500 million.

Our cash, cash equivalents, and short-term investments balance increased to approximately $1.4 billion at the end of the quarter, compared to $695 million at the end of the second quarter.

Now, moving on to the outlook, we expect operations, not including west Africa, to produce 2.2 million gold-equivalent ounces, consistent with our January 14 news release.

We are revising our 2010 regional cost of sales for Chile. We now expect cost of sales to be between $700 and $720 per gold-equivalent ounce versus our previous forecast of $630 to $680 per ounce. And, following on from that change, we expect overall cost of sales, not including west Africa, to be $495 to $510 per ounce.

With regard to west Africa operations, we expect production to be between 135,000 and 155,000 gold-equivalent ounces at an average cost of sales of $650 to $675 per ounce. These estimates are for the period from September 17 through yearend only. As outlined in our press release, our full-year production forecast for the west African assets would be 20,000 ounces less than the previously estimated production by Red Back.

There are three items that differ in the way that Kinross and Red Back report costs and production. First, Kinross includes royalties in our cost of sales. Second, Kinross will record a fair value adjustment, whereby Tasiast and Chirano product inventory acquired was increased to reflect their fair value. This is an accounting adjustment required under purchase accounting. And, thirdly, Kinross reports attributable production statistics, net of minority interests, whereas Red Back reports total production statistics.

Slide 14, if you're looking at the Webcast, shows the buildup of our cost of sales forecast, beginning with the Red Back basis forecast of $460 to $485 per ounce, adding royalties of $85 per ounce and the impact of the fair value adjustment of $105 per ounce. As a result of these adjustments, Kinross cost of sales forecast for the west African assets for the period from closing through the end of the year is $650 to $675 per ounce.

Pages 14 and 15 of yesterday's news release provide detailed reconciliations on all these production and cost numbers. And we'll be happy to address any questions relating to these adjustments offline.

As a result of the inclusion of the west African assets and a $40-million reduction in the expected capital expenditures at Kinross for the year, we're now expecting to spend a total of $630 million on capital expenditures for 2010. And our exploration forecast for the full year is also being increased to accommodate the west African assets to $130 million. And we expect depreciation to be approximately $320 per ounce on the newly acquired west African assets.

So, overall, while there were a couple of unusual accounting items this time, we had a very solid third quarter.

I'll now turn the call over to Chief Operating Officer, Brant Hinze, for a review of all the operations.

The final page of our press release contains a review of operations and a mine-by-mine summary with key metrics. I'll give a brief review of the operational highlights for the quarter.

At Paracatu in Brazil, operations at the new plant continued to perform ahead of plan through the third quarter, producing 129,000 ounces at a cost of sale of $505 per ounce. This is the operation's highest quarterly production and lowest cost in 2010. Production at the operation averaged 43,000 ounces per month over the quarter, a 23% increase over market guidance earlier this year.

At Kupol, measures implemented to improve ground control management in the underground mine during the warmer summer months proved to be effective. And attributable production of 119,000 ounces was ahead of forecast for the quarter.

At Fort Knox, production increased 26% from quarter two 2010, with costs improving by 22%. Increased mill throughput, higher grades, and lower reagent costs helped Fort Knox's improved performance. The heap leach at Fort Knox is performing well and has had a positive impact on the operation by both increasing production and reducing overall cost per ounce. We placed 4.4 million tonnes of ore with an average grade of 0.27 grams per tonne on the heap leach pad this quarter, while the mill process 3.2 million tonnes at an average grade of 0.96 grams per tonne, with an 82% recovery rate. The heap leach produced gold at roughly $227 an ounce, while the mill produced at roughly $639 an ounce. When combined, Fort Knox production was 108,680 ounces at a cost of sales of $501 an ounce for the quarter. In summary, the heap leach facility is making a very positive impact at the operation and providing us with the flexibility to process lower-grade ore that would not ordinarily be profitable.

Moving over to the newly acquired Tasiast mine in Mauritania, production for the full third quarter at Tasiast was 34,207 gold-equivalent ounces at a cost of sales of $632 an ounce. Production was below Red Back's previous forecast, due largely to leaks in one of the two water supply lines, which limited dump leach operations and mill throughput during the quarter. Work to replace the 15 kilometers of water pipeline was completed by the end of October, and production is expected to continue according to plan for the remainder of the fourth quarter. We are installing the new ADR facility at the Tasiast and increasing pumping capacity to the leach pad.

At our other newly acquired operation, Chirano in Ghana, production for the full third quarter was 65,247 gold-equivalent ounces at a cost of sales of $592 per ounce, in line with Red Back's previous forecast.

As Tye discussed earlier, our Chilean operations underperformed our expectations in the third quarter, as they were impacted by a combination of unusually severe weather and some operational challenges.

La Coipa's performance has improved since the second quarter, with third quarter production increasing 52% while costs improved by 11%. However, severe winter weather resulted in three complete days of shutdown and four days of partial production. An overhaul of the filter plant and enhancements to operational controls advanced according to schedule and, by the end of the quarter, had improved filter plant capacity and issues caused by the high clay content from the Brecha Norte, Puren, and stockpiled ores.

Production and costs at Maricunga were negatively impacted by the combination of severe winter weather, which reduced equipment availability, and by slower-than-expected heap leach performance. Leach performance was further impacted by higher lime consumption with the new Pancho ores. Test work is underway to determine the factors that are slowing leach extraction. Based on results to date, there are no indications that ultimate gold recovery has been impacted, but it does appear that the leach cycle is extended longer than expected. We expect a similar impact to Chilean production and costs in the fourth quarter.

A comprehensive review of our Chilean operations is underway. We're exploring opportunities to advance our shared services model by consolidating common operational functions and business services for our two existing mines and the Lobo-Marte project in a centralized location near Copiapo. The result of this unitization of Chile operations is expected to enhance operating efficiency and reduce overall capital and operating costs for the region.

In conclusion, I'd like to summarize my impressions of Kinross since joining a month ago. I have now had the opportunity to visit all of our key operations and development projects in person. I was very impressed with the quality and experience level of the people I have met throughout the Company. I think Kinross has assembled a great suite of mining operations, development projects, and the right people to build and run them. And I'm proud to be joining the Company at this time.

I see a lot of opportunities to enhance operations at our sites even further through initiatives, like I mentioned, such as the Chilean unitization as an example. I look forward to working with our teams to implement these types of improvements at all of our sites. And I'll be reporting back to you on our progress with each quarter call.

And, with that, I'd like to turn the call over to Ken Thomas, our Senior Vice President of Projects, who will provide an update on our pipeline for at-site growth and greenfield projects.

Thank you, Brant.

First, I'll review our at-site growth projects.

At Paracatu in Brazil, installation of the third ball mill is proceeding on schedule and on budget and is expected to be commissioned in the first half of 2011. Procurement is 90% complete. The total project is 60% complete, and physical construction is 40% complete at site. The mill concrete foundation was completed in September, and the ball mill is now in the process of being set on the foundation. Structural steel and the electrical installation has also commenced.

A feasibility study has been completed for a further expansion at Paracatu. As a result, the Board of Directors has approved installation of a fourth ball mill for an estimated cost of approximately $120 million and the purchase of an additional electric shovel and mine truck for $25 million. The addition of a fourth ball mill will give the expansion plant the necessary grinding capacity to maintain the planned throughput level of approximately 41 million tonnes per annum as the ore working mix increases in the future years. This additional ball mill was originally envisioned when the expansion at Paracatu was approved back in 2006. The added shovel will improve blending of the ore delivery to the plant. The mill is expected to commence operations in the first half of 2012.

At Dvoinoye, exploration has progressed ahead of plan, with over 10,000 linear meters of drilling now completed. Exploration work will continue for the remainder of the year and will include further geotechnical, condemnation, and confirmation drilling. The road connection between Dvoinoye and the northern road, paved highway to Pevek has been completed. Work on the all-weather road between Dvoinoye and Kupol is finished for the season and will recommence in the summer of 2011. Clearing of the old mine infrastructure is also well underway. We are targeting to commence commissioning in 2013.

Turning now to our greenfield development projects, at Tasiast in west Africa, we are progressing with conceptual engineering plans based around a 20-million-ounce pit, significantly larger than the current 5-million-reserve-ounce pit design. We are currently drilling ore to a depth of roughly 600 meters, an ore depth that is well within the scope of an open-pit mining operation. With this significantly larger resource, our development plans for Tasiast include construction of a new mill with increased capacity from the current 10,000 tonnes per day to approximately 60,000 tonnes per day and a new, larger mining fleet tailored to the scale of the expanded operation. A scoping study of the expansion is expected to be complete by yearend. We are in the process of selecting a firm for the feasibility study, which is expected to be completed in mid-2011.

At Fruta del Norte, we have made good progress advancing the project. Geotechnical and hydrological drilling continued during the quarter on both the La Zarza and Colibri concessions. La Zarza is the location of the FDN orebody, and Colibri is the site of the process plant and tailings facilities. The terms of reference for an EIA for the planned exploration decline at La Zarza were approved, and the EIA was submitted to the regulatory agencies, while the associated public consultation process was completed in October. Agency review of the EIA will continue in quarter four, with approval expected in the first half of 2011. We submitted the terms of reference for exploration and condemnation drilling on the Colibri concession in Q3, and we expect to submit an EIA in quarter four. The project pre-feasibility study remains on schedule, to be completed by yearend. A full feasibility study is expected to be completed in the first half of 2011.

At Lobo-Marte in Chile, development work remains on schedule. Geotechnical drilling is complete, with condemnation, hydrological, and infill drilling associated with the existing permit expected to be completed by yearend. Agency review of a permit application for an additional 20,000 meters of drilling continues, with approval expected by the first quarter of 2011. We expect to complete an updated pre-feasibility study for Lobo-Marte in the fourth quarter, followed by a feasibility study in the first half of 2011. And we remain on schedule to submit the EIA in mid-2011. Commissioning for the project is targeted to commence in 2014.

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

Thanks, Ken. A few comments I'd like to make in closing.

We had strong performance from current operations. Particular standouts included Fort Knox and at Paracatu, which continues to perform above our expectations. We look forward to increases in throughput there with the addition of the third ball mill in '11 and the newly approved fourth ball mill, which we expect to be in operation in the first half of '12.

We did have operational challenges at our Chilean operations during the first half of the year, and these continued into this quarter. We're exploring ways of consolidating operational and business services to improve efficiency and reduce costs across our Chilean assets.

Looking forward, we're making progress on many fronts. Our exploration and development program at Tasiast is progressing right on schedule. We expect to have a total of 23 rigs onsite and operational later this month. The post-merger integration process has proceeded smoothly and quickly. Our work at the project continues to confirm our view of Tasiast's tremendous potential.

We continue to optimize our asset portfolio, closing the Dvoinoye and Red Back acquisitions and completing the sale of the Diavik and Harry Winston interests.

When we look at the larger picture, over the last few years, Kinross has transformed itself and grown into the 2-plus-million-ounce producer that we are today with a suite of projects in our pipeline advancing through engineering, permitting, and construction to bring on Kinross' next phase of growth.

Looking forward, we'll be continuing that transformation as we grow our production by 75% to an expected 4.5 million to 4.9 million ounces over the next five years.

Thank you for your attention this morning. I'd like to open up the line for questions, please, operator.

Thank you, Mr. Burt. (Operator instructions). John Bridges, J.P. Morgan.

I just wanted to dig into Paracatu, this fourth ball mill. Was this envisaged in the original plan? And, with bringing it on earlier, what sort of tonnage profile can we look forward to prior to you getting into the harder ore?

It was envisaged earlier on. We're building it about three years early, given our continued efforts to move up NPV from-- on a 35-year mine life. I would say that there is some potential, as we're still in the soft ore, to increase tonnage a little higher than we have had in the past in the next couple of years. But, look, what we're trying to do here is extend our capacity to process that 41 million tonnes annually in that plant, too, right through the transition to hard ore. So we're being conservative in our outlook, but, yes, there's some upside in that forecast, John.

I wanted to-- I recognize the need for conservatism. I just wonder what sort of range we could expect, given whether it's hard or soft as you go forward.

I would say-- We're still working on our budget right now for 2011. Best suggestion is that we stay tuned. As you know, we'll put out our budget for '11 in January. We'll be updating our outlook for beyond January in normal course. So I would say best to stay tuned. The first full year with third ball mill and fourth ball mill is obviously going to be 2013, given that we expect to start up the fourth ball mill early '12. So it would be '13 which we would expect that we would still have some soft ore to run through what will then be one SAG and four ball mills.

Okay. Great. And just a mining question. I'm just stunned by the low cost at the heap leach at Fort Knox when you're just mining 0.27 grams per tonne. Is there anything special about that situation?

I would say, at this point right now, it's a new heap leach operation. And, certainly, we're learning more about that operation. But it's performing quite well and better than expected.

Okay. Well, I'll definitely be watching that one. Thanks a lot, guys. Good luck.

David Haughton, BMO.

Just following on from John's questions, having a look at the Fort Knox stacking rate, it seems to be quite a bit better than what we would have anticipated. The original guidance had been about 14 million tonnes per annum, but you seem to be able to get beyond that. What's the outlook going forward?

As far as the heap leach, what I would say right now-- I'll reiterate what Tye said. We're in the budgeting process right now, and we're reviewing what our stacking plans will be on that heap leach. And we'll come back with more information in January as we put the 2011 budget out.

But, again, I'd like to come back to a statement that I made earlier. We are getting the tonnes to the leach. The leach is performing as or better than expected. It's a new leach pad. It's early. As we put our budgets together, we'll have better information in the future.

I think you're understating that because 25% better is just a little bit better than-- more than just a marginal improvement.

Thank you for stating that.

Also, following up on John's question at Paracatu, again, you're exceeding expectations. I think, at Denver, Tye had mentioned you were achieving in September month something like 42,000 ounces per month. Previous guidance had been only in the 30,000-ounce range. Can we expect that 40,000-plus ounce per month going forward, even before the third mill is tied in?

I think, [John], we guided at the beginning of the year, as you say, at 35,000 ounces per month. We're now averaging, as you saw from the quarter, a little over 40,000 ounces. We want to stick with a conservative number. Each day that goes by, of course, our guys are gaining confidence, costs are coming down, and contractors are being shed. So I think, based on what we're seeing so far in Q4, that we're in good shape at that rate. But I would say let's just stick at 40,000 ounces a month as a run rate and hold it there. Again, this is a very, very large operation with a very, very long life. And, as you can see from the approval yesterday of the additional CapEx, it's starting to live up to our expectations, and we're pretty excited about how it's performing.

I guess, Tye, the longer-term question here is that, as plant one fades away, as that ore type is depleted, post 2015/2016, would we be looking at a further expansion?

Yes. What happens, as you quite rightly note, is that, as we run out of soft ore, the B1 ore, then we will look at ways of upgrading plant one. Adding the third and fourth ball mills gives us the capacity to sustain our current rate, even as plant one reaches the end of its useful term. So, yes, I would say on the three-year horizon, we'll review where plant one improvements or overall changes could take that throughput up even further.

All right. Just switching assets and countries, you say your development plans for Dvoinoye looking forward to coming into 2013, which kind of offsets the likely depletion of the open pit, we've only really got the Russian C1/C2 numbers to guide us for grade. Have you got any drilling that suggests that the grade is in line or different to the C1/C2 measures?

Drilling is still going on right now for this season. So that's-- We'd like to wait 'til yearend to give you answers on that. So far, so good is about the best I'd like to comment on that. And you're quite right. As we get into the lower grade, planned life of mine further underground at Kupol-- That's precisely the reason we made the Dvoinoye acquisition is to add back that higher grade, which will take the production rate up further at Kupol, even as we get into the lower-grade, deeper material at Kupol mine proper.

So we're excited about where Dvoinoye goes. We're excited about the drilling results that are starting to come on the horizon for the Kupol site itself. So I think the best time to update all that will be our February release with the reserve and resource update.

And, while still at Kupol, and this will be the last question, what was your split between open pit and underground throughput and production in the quarter?

I'll have to get back to you on that one. I would guess it's in the range of two-thirds underground and one-third open pit, but we'll have to get back to you.

All right. Thank you very much, guys.

Don MacLean, Paradigm.

Ken, you mentioned the 20-million-ounce pit design. What depth would that take it to?

We're looking at depth of about 400 to 500 meters. And I think there was a drawing on the Webcast that gave you a fairly good picture of the pit. Obviously, it's rather early to establish a definitive depth, because, as we drill, we are refining the outline of the pit. But 400 to 500 meters would be a good estimate.

Is that below surface, or is there another 100 meters on top of that to get the below-surface number?

No. That is the complete depth of the mining that we have.

So maybe we could just talk about some things about the comfort level of getting to that 20-million-ounce design. You're at 14 million ounce with the resource. How deep is that 14-million-ounce resource?

At this point in time, we're at about 400 meters, and we are doing drilling to deeper depths. And, at this point in time, we're looking at depths of 600 meters.

So how deep would the deepest hole or deepest holes be at this point?

Don, we're not stopping in ore; put it that way. But there are limitations on the RC rigs, and we're just getting our new core rigs to site. So we'll be taking the core rigs down to 800 meters and beyond. As you know, there are lots of open pits that go down 600 or 800 meters. So we're not stretching the envelope by any means.

But what is happening is the orebody is flattening a little bit in its steepness, which will help the strip ratio. Grades are very solid [at depth]. Widths are, in some cases, a little wider. So we're-- I just understated a bit here. We're excited about what the indicative drilling looks like.

We put out that resource update yesterday just to incorporate the methodology changes that we've had and a couple of the new holes, but there is still a freight train of samples to be processed in the pipeline today, which is why we have to upgrade the sample prep and sample analysis facility at that site and in Mauritania generally.

So stay tuned is the bottom line. I don't want to predict with any kind of precision where that resource number goes. What we put in the slide there was the 600 meters below surface with the 20-million-ounce target. We're highly confident we're going to get there. And that's basically the same tonnage number that we put out just before the end of the Red Back bid with the tonnage and grade that we talked about there. So we're optimistic and confident.

So, to just characterize what you've been seeing since you did the bid, does it look like the grade widths and the rate at which you can add ounces is living up to your expectation?

It is, indeed.

Terrific. Okay. Thanks, guys.

Barry Cooper, CIBC.

Tye, just wondering-- You've indicated that you're going to have the pre-feas for Fruta del Norte by yearend. What I'm wondering about-- Just what subset of all of the resources is that going to include? Obviously, we've got measured and indicated, which is usually the limitations that you can use for defining reserves, and that consists of about 5.7 million ounces. Then you've got that huge inferred of 6 million ounces. Are you going to be able to tap part of that to include that in the pre-feas that's coming out?

Your figures are reasonably accurate. What we're doing is a disciplined approach, at this point in time, to get us a pre-feasibility study at yearend. Our targets are within the range you just mentioned with regards to proven and probable. And the pre-feasibility study will have those proven and probable figures within what you've just indicated.

Out in the marketplace, obviously, there's a figure of around 13 million ounces, and we will continue to drill to try and establish exactly where we are with regards to measured and indicated and proven and probable. So, roughly, of those 13 million ounces, about half will be in the proven and probable when we publish the PFS.

To be clear on the dates, Barry, we're talking feasibility mid-'11 and pre-feas end of this year. And we need that pre-feas done, as you well know, to move ounces from inferred into M&I. Right now, just to verify the numbers there, we're carrying 5.7 million ounces of M&I at 11 grams, approximately, and 6 million ounces of inferred at 7.8 grams. So we have a Hollywood opportunity here to move ounces from inferred into the M&I with that pre-feas.

Right. Okay. And, then, just further clarification. When you say complete by yearend, does that really mean when you report your Q4 numbers?

Yes. When we say yearend, we're referring to our yearend reporting, which is early February.

Yes. Okay. Good enough. Thanks. That's all my questions.

John Tumazos, John Tumazos Very Independent Research.

Congratulations on the progress. In your 4.5-million-ounce to 4.9-million-ounce projection, does that include anything for Fruta del Norte, first?

Second, your shares are lagging the early 2008 level. What is your view on share repurchases, given that your stock hasn't kept up with your last few additions to resources?

Given-- John, let me just speak to your timing question first. FDN-- in our minds, we're still targeting a 2014 start, and the numbers we're reporting to you are on that 4.5 million to 4.9 million ounces go out to 2015. So we are including a bit of FDN there in 2014 and 2015. Of course, that timetable is still subject to change because it's, at this point, an estimate, and we need to finish with the government a development agreement and finish the permitting, obviously, before construction. So, right now, it's an estimate.

Could you repeat the second part of your question?

What's your view on share repurchases, given that your stock is not reflecting the last half dozen good things you've done?

Great question; of course, one we think about every day. Look, we're running this business for the long term. And, with mine lives that are going out there 20 and 30-plus years and a five-year capital program in front of us right now, which is a big capital number-- I don't want to-- I want to be clear on that. So, in our minds today, we can invest very aggressively in our capital program, which, of course, is putting in dollars at NPV to generate, we think, very strong IRRs. So, at this point in time with this big capital program, we're focused on doing our job, operating our mines, and investing for the future. And I don't think at this few months, at least, with where we are in that program that we would contemplate a share repurchase.

Down the road, as the projects kick in and the cash flow spikes up, we would review both direct ways of returning capital to shareholders, whether dividend or share repurchase. But, at this point, we're absolutely zeroed and focused on the projects in front of us.

Thank you.

Anita Soni, Credit Suisse.

Tye, could you just run over those numbers again with the splits on the M&I and the inferred and what grades they were at?

Sorry, at which--?

At Tasiast. I think you said 5.7 million ounces of M&I. At what grade was that?

I think we were talking about FDN at the time. But let's just-- If you look back at the Webcast pages there, you will see Tasiast on page 8 of the Webcast, which splits it between M&I of 9.3 million ounces, and about 5 million ounces of that, a little over, is actual reserve. And then there's another 5.1 million ounces of inferred, and we just updated that by 3.2 million ounces last night.

Okay. Sorry. So those 5.7 million ounces and 6 million ounces, you were talking about FDN.

Yes. You want me to go over the FDN numbers for you again?

No. I just-- When you said 11 grams per tonne, I thought it was (inaudible).

That's that beautiful deposit at FDN.

And, then, just another question with respect to the Tasiast. The pit shell that you've shown there-- You said that grades and intercepts are-- I guess grades are coming in relatively well at depth, as I recall, where they were somewhere in the 2-gram-per-tonne range up to about 3 grams per tonne 250 meters below pit level. So that's about the 400- or 500-meter level. Is that continuing?

The tonnage and the ounces we're showing there are at a 1.5-gram-per-tonne average grade. We are seeing holes that are higher grade at depth, and we're optimistic about what that will mean as we start moving forward at the next update. So, without getting into too much detail there, grades are strong, improving, and the widths are staying solid. And, as I mentioned, the shape of the orebody is flattening out a little bit as it proceeds south. So stay tuned for further updates there.

And, then, so the intercepts are coming in at around 50 or 60 meters still, then, or better than that?

The width is staying steady at 50 to 60 meters. Yes.

Okay. All right. Thank you very much.

Steven Butler, Canaccord Genuity.

Just on Tasiast, is that resource actually a pit-constrained resource or more a global resource above a certain cutoff?

Definitely the latter. There are no constraints on the pit. As you know from the geography there, we can go 360 degrees with no constraints in that desert environment. So we're simply optimizing the pit shape to the orebody.

We've done a provisional layout of the pit and the associated infrastructure as required. There's no constraint with regards to the pit or future discoveries.

Okay. And the resource-- Can you characterize--? I'm looking at sort of that stylized or that sectional view here of the conceptual pit, 20 million ounces. Where did you, specifically, add 3.2 million ounces, guys? Is it simply-- more at depth than along strike in terms of the 3.2 million ounces added?

Yes. Let's be clear. I think we tried to explain it in the press release. The addition of the 3 million ounces comes from two sources - updating the methodology to how Kinross does 43-101 measurements, which means we can move out the spacing slightly from what Red Back was doing, and then we added a couple of the new holes that results from which have moved through the assessment assay labs and into the model. So a combination of those two factors. And that's where we stand today. As I mentioned earlier, there is still a massive amount of sample backup right now in the labs and at site, so lots of work to be done to catch that up. And, yes, what we were doing was simply extending it slightly down, along strike.

Down along strike or at depth?

Both.

Okay. Thanks, guys.

[Peritash Misrah], Morgan Stanley.

Just one question. What's your sensitivity to US dollar? And do you have any FX hedging in place right now?

Yes. We generally hedge about half of our foreign currency exposure. And our sensitivity on an overall basis is for a 10% change in our overall foreign currency basket against the US dollar would impact our cost of sales by about $7 an ounce. We have not had a lot of variation in our FX this year. As I say, we had hedged 50%. And the actual FX rates have not varied hugely from what we had put out in our January press release, at the beginning of the year.

And, just to add to Thom's comment, about 50% to 60% our costs are denominated in US dollars. So that gives you sort of order of magnitude.

Got it. And, actually, if I could ask one more-- A few months ago-- I think it was in second quarter there were some changes to-- National Instrument 43-101 rules were proposed. Do you know anything about that? What's the status?

On the 43-101, there's been some conferences and meetings to establish what should be done. And there has been a document published with some suggestions. But it has not been finalized.

We're at the very conservative side on all of that, Peritash. We pride ourselves on our QA/Quality Center, and Rob Henderson, our qualified person, is right at the cutting edge in terms of following potential changes. They haven't been implemented yet.

Thank you very much.

Greg Barnes, TD Newcrest.

Tye, you have a pretty aggressive expansion scenario at Tasiast. I think it's 60,000 tonnes a day by 2012/2013. Is power going to be an issue?

I'll answer on the top and then ask Ken to jump in. Power is a big piece of infrastructure that we will require for that big mill and for our electric shovels, of course. So I would say it's a necessary requirement, obviously, for what we're doing but not an issue. And, Ken, maybe you want to speak in a little more detail about what we're planning?

We've done some preliminary work with regards to the power. We've established, roughly, what size plant we need. So now what we're looking at is a base case with a generation plant at site. It could be HFO, or it could be even crude. But, at this point in time, it's based on HFO. There's also an alternative of putting a power plant at Nouadhibou, which is the northern port close to the Western Sahara border and running either a power line or a buried line to the site. And there are other alternatives - putting in a rail spur off the SNIM railway line. But these are all conceptual at the moment, but we do have a base case. And Total has a very large receiving facility at Nouadhibou with regards to HFO and diesel. So there is an infrastructure there, and we need to piggyback on that and develop it a bit further.

So the third option is an HFO plant at site?

At this point in time, it's the secure option. And we have to investigate a delivery chain to that plant. The other reason for the Nouadhibou idea is it's easier to have the HFO at a port and then deliver the power down the line.

Right. And how big--?

Sorry. Go ahead, Ken. How big a plant, I think--

I'm sorry. How big a plant? Provisionally, at this point in time, we've looked at what we call an N+1 configuration of gensets, and we are looking at an installed capacity of around 150 megawatts. But the power draw will be, obviously, less than that. It will be somewhere around 110 or 115 megawatts. But we're at the very early stages. We haven't even finished a scoping study yet, so these are order-of-magnitude figures.

Great. Thanks very much.

Don MacLean, Paradigm.

Just to follow up on the Fort Knox heap leach, if we could get any kind of a guidance as to what percentage of 2011/2012 that might represent going forward--

Compared to the overall Fort Knox?

A quarter, a half, bigger than a breadbox?

Just looking quickly here, overall tonnes processed in Q3-- Obviously, you've got to compare milling to heap leach. But, overall tonnes processed at about 7 million tonnes. And, of that, 4 million tonnes were placed on the heap leach, and, of course, that's at lower grade. So that gives you order of magnitude of the split, I would say.

Given the apparent success in the quarter, would you be likely to expand the heap leaches role in the overall production for Fort Knox in 2011 and 2012? And would it represent maybe a quarter of the production for the project going forward or something like that?

As we indicated earlier, from a 2011 and 2012 (inaudible) the fact that we're still putting those budgets together. But, certainly, going forward, the heap leach is going to be an important component of the Fort Knox success and their production profile. And we're looking at continued opportunities to expand that.

Sorry, Don. I said 7.7 million tonnes overall. It's 7.7 million went through the mill, and 4.4 went onto the leach pad. So that's the rough split. Call it a third/two-thirds.

Okay. And maybe you could remind us again, roughly, what number of ounces of resource might be applicable to heap leach as opposed to mill feed?

I think that's a get-back because, obviously that's a function of cutoff and what the outlook is. We'll be able to answer that question a little better when we get through our budget process and our outlook for '11/'12.

Intriguing. Okay. Thanks, guys.

Anita Soni, Credit Suisse.

Just a question with respect to the increasing costs at Chirano, ex the inventory adjustment that we did increase-- you guys did increase costs there. But what was the nature of that? Is that the increasing power rates in Ghana?

As far as any increase in costs at Chirano, we have experienced increased power rates in Ghana, which, I think, is consistent with what everybody in Ghana is experiencing to date. And that would be, from an operating perspective, the primary reason.

Right. And so, obviously, that would impact the processing. Can you just let me know how much of your processing costs are related to power and what the power rate increase was?

I think that's a get-back on that one, as well, too.

Okay. And just, secondly, with respect to the $320-per-ounce depreciation rate for Q4, is that a good number to use going forward in 2011 and beyond at this point, until you upgrade reserves?

The purchase allocation is preliminary at this stage. And so we'll be finalizing that over the course of the next year. And, as a result, the allocation between mineral interest property, plant and equipment, and goodwill could change. But, absent changes in that allocation, I think that's a pretty good base to use going forward.

Great. Can I also have someone call me back about the dimensions of the pit? That would be great.

Sure. Which pit was that?

Sorry; the Tasiast pit.

Right. So we have the little outline there in the slide show, Anita. And we're happy to talk about it some more, but, of course, it's still in scoping study stage right now.

That is the best that we have at this point in time.

All right. Thank you.

There are no more questions at this time. I'll turn the call back over to Mr. Burt for closing comments.

Thanks, folks.

In closing, as I mentioned earlier, Kinross is on target to drive dramatic growth in our production and reduced costs as we bring on these new projects. So, this quarter, strong operating cash flows from existing mines, very strong balance sheet, and, I would say, an experienced operating and development team to realize on those growth plans.

So, thanks for listening this morning, and talk to you soon.

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