Kinross Gold Corp (KGC) 2011 Q3 法說會逐字稿

Welcome to Kinross Gold Corporation third quarter 2011 results conference call and webcast. (Operator Instructions). At this time, I would like to turn the conference over to Mr. Erwyn Naidoo, Vice President Investor Relations. Please go ahead, Mr. Erwyn Naidoo.

Thank you, and good morning, ladies and gentlemen. Welcome to Kinross Gold's conference call to discuss the third quarter financial and operating results. With us this morning we have Tye Burt, our President and Chief Executive Officer; Paul Barry, our Chief Financial Officer; Brant Hinze, our Chief Operating Officer; Ken Thomas, Senior Vice President of Projects; as well as Glen Masterman, our Senior Vice President of Exploration.

Before we begin, I would like to bring your attention to the fact that we will be making forward-looking statements during the presentation. For a complete discussion of the risks, uncertainties and assumptions, which may lead to actual financial results and performance being different from estimates contained in our forward-looking information, please refer to page two of this presentation, as well as the news release for November 2, and management discussion analysis for the same period, as well as our most recently filed annual information form available on our website.

With that I'll turn the call over to Tye Burt, President and Chief Executive Officer.

Thanks for joining us this morning. Kinross delivered another strong financial results. Revenue was a new record for us, exceeding $1 billion for the first time. Adjusted operating cash flow increased 82%, and adjusted net earnings more than doubled compared to the same period last year, up 134% to $273.4 million.

Our margins continue to expand, as described on the webcast there at slide five, exceeding 1,000 dollars for attributable ounce sold for the first time. Costs per ounce were higher than the previous quarter, however, mainly as a result of higher labor and energy costs, higher royalties, and mining in the lower-grade portions of the ore bodies at some of our operations.

Overall, we remain on track to deliver on our previously disclosed production and cost of sales guidance of 2.6 millionto 2.7 million gold equivalent ounces at an expected cost of sales of $565 to $610 per ounce in 2011. With two months left to go in the year, we are target approximately the middle of that cash cost range. However, we have updated our production and cost guidance for our particular regions, and Brant will provide more detail on those calculations shortly.

In the third quarter we made significant progress advancing our growth program. At Tasiast and Mauritania we received approval of the environmental impact assessment for early works. Construction contractors and equipment are now being mobilized. Additional EIAs for the project expansion are on schedule. Engineering work and project procurement is also continuing on schedule. The feasibility study is expected to be complete at the end of the first quarter of 2012, and the project startup is targeted for mid-2014.

At Fruta del Norte in Ecuador, we expect to finalize a feasibility study for year-end 201. Mine and plant EIAs were submitted in October, and we continue to target startup of that mine in late 2014. Kinross and the Ecuadorian government have made progress on negotiations regarding the exploitation agreement for FDN, and have also commenced negotiations on the investment protection agreement.

Our other major growth projects continue to advance on schedule. Our global exploration efforts continue to see positive results. Are some notes on slide seven, and yesterday we were pleased to announce a significant gold and silver discovery at La Coipa in Chili. The Pompeya target is located on joint venture property where Kinross has a 75% beneficial interest and is approximately three kilometers from the La Coipa mill. We currently have two diamond rigs and one RC rig drilling on that project. We'll be [completing] further step out and infill drilling of Q4 this year and into 2012 to define this new target, as it remains open in all directions. We currently expect to complete a resource estimate initial on Pompeya later in 2012.

The ongoing drilling campaign at Tasiast continues to confirm our confidence in the mineral resource there. We have set out several examples on slide eight. The infill program was extended in Q3 and focused on the West Branch and Piment areas. This work is now 95% complete. We'll be redeploying drills in Q4 to accelerate exploration along the mine corridor and on district targets.

Toward the end of the quarter we mobilized three core drills to the C67 area north of West Branch to follow up strongly encouraging results on RC drilling completed earlier in Q3. Several examples are noted on slide nine. Drilling will continue in Q4 and into 2012 to better understand the mineral system and the geologic controls on gold grades. We would expect to start modeling for a mineral resource estimate on C67 in 2012.

More information on the drilling results at both La Coipa and Tasiast are available in yesterday's news release, and we have Glen Masterman, our head of exploration, with us this morning to answer questions.

In the third quarter, we obtained investment-grade ratings -- credit ratings for our debt and successfully completed a $1 billion offering, strengthening our financial foundation for growth and confirming the market's confidence in our ability to deliver on that strategy. Kinross today continues to extremely well positioned as a pure gold leverage producer with growth from what we consider best in world assets and a very strong balance sheet.

I would like to hand over the Brant for a review of our operations.

Thank you, Tye. The final page of our press release contains an overview of operations and a mine-by-mine summary with key metrics. I'll give a brief review of the operation highlights for the quarter.

Performance at our US operations remains strong, while the mines experience an unexpected droop -- or an expected drop in grade. The heap leach at Fort Knox continues to perform well. Production was slightly lower compared to the second quarter due to processing of lower grade stockpiles.

Round Mountain in Nevada had a good quarter, with production increasing 16% from the second quarter. The production cost of sales per ounce improved by 10%.

At Kupol in Russia production and costs are on target for the year. We expect operations in Kupol open pit to end as planned in the fourth quarter, as the mine makes a transition to a fully underground operation.

Production and cost of sales at La Coipa were impacted in the third quarter by lower than expected grades and higher sulfide content in the ore blend, which is being encountered as the final benches of [pure end] phase three are mined out. We expect mining of phase three to be completed early next year.

At Paracatu in Brazil the third ball mill had its first full quarter of operation, which helped the mine to achieve a record number of tons of ore processed through plant two. In late October plant two was temporarily shut down to address an electrical malfunction affecting the sag mill motor. Repairs are underway, and we expect the plant to restart within a week.

At the Tasiast mine in Mauritania, production costs were higher than the second quarter. This increase was largely due to plant and crusher maintenance, a ramp up in administrative costs in preparation for expansion activities, and higher royalties.

At Chirano in Ghana production was slightly lower and cost increased, as it took longer than anticipated to enter a higher grade of the Akwaaba orebody.

We are on track to achieve our 2011 Company-wide guidance of 2.6 million to 2.7 million gold equivalent ounces at a cost of sales of $565 to $610 per ounce. However, we have made some adjustments to our regional guidance.

We have lowered South American production guidance, and now expect to produce approximately 945,000 to 980,000 equivalent ounces at a slightly higher cost of sales of $650 to $675 per ounce.

In West Africa, we have slightly lowered the top end of the production range, and now expect to produce between 440,000 to 480,000 ounces at a higher cost of sales of $685 to $715 per ounce.

In -- North America is now expected to produce 625,000 to 645,000 ounces at $625 to $685 per ounce, an increase in production from our previous guidance. Cost estimates remain the same.

And we have increased our production guidance for Russia, where we now expect to produce 555,000 to 575,000 ounces. Cost of sales guidance remains unchanged at $395 to $435 per ounce.

Overall, we are pleased with operational performance during the quarter, particularly given the inflation cost environment the industry is experiencing, with upward pressures on foreign exchange, energy prices and higher royalties from rising gold prices.

I'll now turn the call over to Paul.

Thank you, Brant. Third quarter revenue was $1.1 billion, driven by consolidated sales of 670,000 gold equivalent ounces. Third quarter trivial production was 648,000 gold equivalent ounces, a 13% increase from the third quarter of 2010.

Third quarter attributable production cost of sales were $634 per gold equivalent ounce. This is an increase of 23% year-over-year, which is main due to increases in labor costs, energy costs, and royalties. Byproduct cost of sales was $593 per ounce. Q3 attributable margin increased to a record of $1,012 per ounce, up 50% from the same quarter last year, while theaverage realized gold price increased 38%.

Third quarter [adjusted] operating cash flow increased by 82% quarter over quarter to $421.6 million. On a per-share basis, adjusted operating cash flow per share was $0.37 per share, a 23% increase from Q3, 2010. Third quarter adjusted net earnings were up 134% to $273 million or $0.24 per share, compared to $116.8 million or $0.15 per share in the third quarter of 2010.

Turning to our balance sheet, Kinross continues to maintain a strong liquidity position, providing a solid platform to finance our growth program. In August we took advantage of favorable debt market conditions and the lowest US Treasury rates in history to secure funding for a Kinross capital expansion program, with a $1 billion inaugural US debt offering. The offering consisted of a three-tranche $250 million principal amount of 3.625% senior notes due 2016, $500 principal amount of 5.125% due 2021, and$250 million principal amount of 6.875% due 2041.

Kinross received investment grade ratings with stable outlook from all three major rating agencies in connection with this offering. Cash and cash equivalents at September 30 were approximately $1.9 billion.

Kinross has never been in a stronger financial position, and we are confident in our ability to fund our growth objectives through a combination of existing cash balances, operating cash flow, project financing, and available debt capacity without issuing new equity.

I'll turn the call over to Ken for a review of our growth projects.

Thank you, Paul. In the third quarter, Kinross continued to make steady progress on all of our projects, and capital spending remains on track for the year. Key project development activities at Tasiast are proceeding on schedule. Work on the feasibility study remains on schedule for expected completion at the end of the first quarter of 2012. Production startup is targeted for mid-2014.

As Tye mentioned, with the approval of the early works EIA, mobilization of the construction contractor is underway. This allows for early earth works and concrete foundations for the mill and on-going -- on-site power plant, interim expansion of the existing water supply system to meet construction and current operational requirements, construction and operation of the initial phase of the new tailings facility, and an expansion of camp facilities by 6,600 additional beds.

Basic and detailed engineering is continuing on the 60,000 ton per day process plant and associated process infrastructure facilities. Equipment ordered during the third quarter includes two concrete batch plants and associated crushing and screening plants, and also the first phase of the power plant, including three gas turbines with a combined capacity of 120 megawatts.

Capital commitments to the end of September for mining, processing, and power generation equipment total $782 million, withcommitments expected to be approximately $1 billion by year end. Total actual spending by year end is expected to be approximately $400 million. Construction of the Piment and West Branch dump leach plants and ADR plants have been completed on budget and schedule, and are currently being commissioned.

At Paracatu in Brazil we have started pre-assembly of the fourth ball mill, with mill installation expected to commence in December. The fourth ball mill is scheduled to be operational in the third quarter of 2012 as envisioned by the mine plan.

At FDN, development of the underground exploration decline is ongoing and on target for completion in 2013. The feasibility study is expected to be finalized by year end 2011, and we continue to target startup of the project in late 2014.

At Dvoinoye, development of the exploration decline and construction of surface facilities advanced on schedule, and procurement and engineering activities are also proceeding on target. The feasibility study is on schedule for expected completion in the first quarter of 2012, and processing of Dvoinoye ore remains on target to commence in 2013.

At Lobo-Marte, drilling for the feasibility study is now complete, and we will be redeploying drills to exploration programs at the Valy and Marte Northwest targets. We have completed geotechnical and mine block models, and Metallurgical plans are targeted for completion in quarter four, 2011. Project permitting remains on schedule, and the project feasibility study remains on schedule for completion in the fourth quarter of 2011. We are targeting construction startup in quarter four 2012, with project commissioning targeted for 2014. Additional detail can be found in yesterday's news release.

I'll turn the call back over to Tye for come final comments.

Thanks, Ken. Kinross's strong operating and financial perform continued in the third quarter, delivering record revenue and adjusted cash flow as well as adjusted net earnings and margins. We continue to advance our drill program at Tasiast, which continues to confirm our confidence in the mineral resource there. We're also making good headway both our at-site and new development growth projects.

Overall we are focused on building our new projects and optimizing existing operations to deliver the growth from 2.6 millionto 2.7 million ounces of gold production this year, to 4.5 millionto 4.9 million in 2015. We have a strong growth profile with pure precious metals cash flow from ten operating mines that we're using to build our gold projects.

Kinross's strategy, simple and clear;provide investors with cash flow per share growth from our portfolio of pure gold assets to generate long-term exploration opportunities and to drive that growth from a rock solid balance sheet.

Thanks for listening this morning. I would now like to open up the line for questions, operator.

Thank you, Mr. Burt. (Operator instructions). The first questions comes from John Bridges of JPMorgan. Please go ahead, sir.

Good morning, Tye, everybody. Congratulations on the results. You can probably guess what I'm asking about. It's that old drill hole underneath the Piment pit, and I just wondered if there was any schedule from Glen as to when we can expect news on what is underneath that thing.

John, it's Glen here. We are currently drilling the target at present, and as we ramp up the infill drilling program, we'll be able to put more rigs to acceleration exploration of that area. To date we have encouraging results, indicating that the structural and stratigraphic position is mineralized along strike from West Branch. So we're feeling excited about that, but we also have a lot of technical work to do and a lot more drilling ahead of us. So as I said, we'll be accelerating this program through the fourth quarter and into 2012.

You managed to get some rigs back from the infill drilling, did you?

That's right. Yes.

And then the C67 drilling, a mixture of what appears to be heap leach material and then some higher-grade material. What do you think is going on there, and what could that be?

John, C67 is a different style of target, and as you say there is both an oxide opportunity and a sulfide opportunity. The style of target, we're starting to understand it's a different geological host rock, and it's also something that we would in these types of greenschist-style [successions] expect to see. So different styles of mineralization in different types of house rock. So as we continue to build information on this target and others in the district, we fully expect to see these things to develop.

Now, we've put some core drills onto it. All of the previous drilling was reverse circulation. The core drills have gone on to it so that we can start to understand the geologic controls on grade distribution, the geometry of the orebody, and this information is going to help guide the exploration program through the fourth quarter and again into 2012.

And so there will be a detailed breakdown of what is going on, particularly underneath Piment, with the Q4 results?

We will see -- we'll determine that when the information comes along, but what I can say is that we're actively drilling it right now, and we'll be talking about those results in early next year.

Thanks a lot, Glen. And congratulations, everybody. Thank you.

Thanks, John.

The next question is from Barry Cooper of CIBC. Please go ahead.

Yes, good day everyone. Just following up a bit on that,Glen, just wondering how excited should we get about material that's sub-two gram at what I assume is around 750 meters below surface, assuming those are 60 degrees holes? Just wondering how much can you suck down that pit to get to those levels, if indeed you can?

Barry, it's a little too early to tell at this point. We need -- you are absolutely right. Those intersections are very deep, and we have a full drill program planned to test the full extent of that area, which also means bringing it back towards the surface as far as we can track it.

Again, these results are encouraging. They are not the new orebody yet, but we're encouraged by the fact that this position is mineralized, [so they] are along strike. So that is again, proving the concept that the target opportunity along strike is real. And as I mentioned a moment ago, a lot more work to do in terms of trying to vector into the next potential ore shoot. And obviously we would want to pin it down as close to surface as we can possibly get it.

Right. Okay. And then a question for Brant or -- I assume Brant. You talk about Kupol where your part of the shortfall in production and what not increased ground support. Obviously we have just gone through the summer situation, and typically in the past, sometimes that's giving you problems, vis-a-vis the thawing and what not. Has that problem basically resurfaced which was an issue a couple of years ago?

Yes, Barry, I would say that if you look at the overall grades that we're seeing year to date and that you see in the press release, it's pretty consistent with expectation. We have experienced thawing effects in the past, and what we did to compensate for that is we have increased and improved our ground-support systems. We brought in new equipment on last year's winter road, which I think are -- we have them -- the machines assembled, and they are working underground today, and I would say we're seeing positive increase in improved ground-support systems that we have.

I think the thawing in the summer months will always be -- will always have an impact, but I think we have mitigated to a degree that impact with the improved ground-support systems.

Right. And does that cause extra dilution when you run into that situation?

One would look at it and theoretically say that it does, butI would say at this point right now we haven't seen any significant dilution impacts from that. It's more of a spalling effect from the hanging wall, and it's -- I wouldn't characterize it as a large ground falls that would impact the overall grade from a dilution standpoint.

Right. Okay. Well, I guess regardless, we're into November now, so a lot of those problems disappear for at least six or eight months I suspect.

Correct.

Okay. Thanks. That's all of my questions.

Thanks, Barry.

The next question is from George Topping of Stifel Nicolaus. Please go ahead.

Thanks. Could you elaborate on the FTN process? Whether any royalty or tax rates have been agreed, and indeed if you seen any documents with the government so far?

George, we have not signed documents yet. The negotiations with the government are -- we are making progress. The terms of the negotiations are of course confidential, so we can't disclose any particular numbers yet, but we are closing the gap on things like royalties and tax rates and so on. The negotiations have been tough. The range is narrowing. They are not done yet, but we would expect to see progress there over the next 30 to 60 days, and depending on the timing of the investor production agreements and the government itself. So I would say in summary, progress; not done yet; stay tuned.

Okay. Good. Then secondly on Pompeya, just a question on what is the average grade with depths , et cetera, that you've had on the drilling today.

I'll ask Glen to tackle that. I'm not sure we can give details.

Yes, that's right. It's too early to start to talk about the average grade of Pompeya. Again, we really only have 20 drill holes into the target. A lot more work to do to fully delineate the size, extent of the body, and obviously infill drilling to understand geometry and grade. So more work to do, and a little bit too early to start (inaudible -- multiple speakers) --

Yes, I was thinking the average of those 20 holes.

Well, the average of the 20 holes are published in the back of the press release, so I -- it's -- the calculations can be made by based on that information.

Okay good. Okay. Thank you. And lastly on the Tasiast [site], the gas generators, the dual fuel generators that have been bough for Tasiast. Can we have a comment on the early indications of the economics of gas delivery to site?

No, we are still in negotiation at this point in time with the Banda field owner, which is [Tula], and we are still negotiating what is an acceptable price with the gas field supplier.

Bottom line, George, the Banda Field is owned by Tula out of the UK. There is substantial gas reserves there, but we'll have to complete negotiations and discussions to finalize a price, a contract, and timing.

I see. Okay. Thank you.

Thanks.

Next question is from David Haughton of BMO Capital Markets. Please go ahead.

Good morning, and thank you for hosting the call. Following on from Barry's comments about Kupol, perhaps Brant could give us an idea of what the capacity is of the underground is to pick up the slack, given that 2012 ore will only be sourced from the underground? Is there potential for that to step up to the 2,800 tons per day kind of level?

Yes, we have ramped up Kupol, recognizing and in anticipation of finalizing the open-pit operations. So we have brought in the extra equipment necessary to do that, trained the additional people necessary to accomplish our production rate, and are now doing that.

And as far as the grade goes, this quarter appeared to be a bit of a dipping grade. Obviously going through the depleted part of the open pit, but I would suspect that the underground was also a little bit off of the mark as well. What should we be thinking about for reasonable grade going forward into 2012?

As we -- I don't want to give any numbers. We're not in a position to give any numbers for 2012 at this point right now. But going forward, as anticipated the Kupol grade will continue to reduce down to expected life of mine grades.

The one thing that I will mention here as well, if we look at the development of the Dvoinoye operation, as we develop that and bring that into operation, we will see that grade supplement the Kupol grade as well. So we're on track with the Dvoinoye development, and we should see some of the first production come out of that in second half of 2013.

And I guess the whole idea there is to top the mill up, and I'm presuming that you might be able to get as much as 4,000 tons a day out of the mill once you've got both Kupol and Dvoinoye operating?

Yes, and we're still looking at the upgrades to the mill, but we'll certainly get a larger mill throughput with some minor upgrades to the mill, so we expect to be in excess of where we are today. Still working through the final numbers, but it will be a higher throughput than what we see today.

All right. Switching back to Tasiast now, saw that you have got approval to move ahead with the 120 megawatt power station or power facilities. Is that enough to get you going once you get to the full scale? I was of the understanding it was a somewhat higher requirement for power.

What we have done -- Ken Thomas here. What we have done is we've purchased the gas turbines themselves, which is 120 megawatts. The power draw expected at Tasiast is approximately 140 megawatts. We are still negotiating with GE what the appropriate combined cycle is to go with those three gas turbines. So the gas turbines are the longer delivery, and we will have those delivered. And in the meantime we have time to understand what we need with regards to combined cycle. So the combined cycle will be the addition to the 120 megawatts.

Okay. Now a very big commitment to the CapEx, $1 billion by the end of this year, but the cash outlay will be about $400 million? I presume that is all to lock the long lead items in? The queues are getting longer for some of this material. We hold from Gold Corp the other week that it was as much as two years to order a big truck. Are you coming up to any of those kind of lead times extending, now that you are in the order situation?

We placed orders quite a while back on the critical items, such as the sag mill trucks, and the most recent we have done is to secure a catering contractor and, most importantly, the general contractor for site. Yes, the lead items are -- lead times are extending. We, in our particular case, have been proactive, and we have secured what we need at this point in time in the long lead item. And as we move forward, we will purchase such items as -- or secure such items as agitators, pumps, but the major equipment, such as the mills and the mining equipment, have been secured.

And thinking about the CapEx ahead, obviously still a lot to chew through, but should we be thinking for 2012, 2013, 2014, in the amount of $900 million to $1 billion per annum as you typical spend rate?

It's Tye. I would say, David, it's likely to be higher than that in the 2012, 2013 timetable, but we will give more precise numbers at our Q1 guidance calls. So we would not expect it to be lower than 2011, especially next year, when we're at full throttle on Tasiast, and then as we get into 2013, FDN and Lobo-Martia ramp up. So I think the $900 million will be low, but we'll give detail when we come up to January.

All right. I guess lastly, thinking about Chirano. It took a while to get into the higher grade portion of Akwaaba. That was the commentary in the report I presume that is getting into that bed grade material. What are your thoughts about exploiting underground below existing pits? Is that part of the development plan for that asset? And what kind of time line would you have in mind there.

Brant?

We have -- we are developing the Paboase, as you know. So that is on going development project in -- at Chirano. But in addition to that, we have exploration programs that are targeting potential opportunities underneath some of our open-pit operations there. And Glen can probably speak a little bit more to those targets, but at this point right now certainly we're optimistic that we'll continue to see progress in our drilling programs aimed at additional underground operations.

Thank you, Brant.

Glen, you want to make a brief comment?

Yes, very briefly. The focus of the drilling program at Chirano right now is this discovery of new underground ore chutes, and the program has concentrated on looking for these new opportunities under the existing pit, so that will be an ongoing program into next year.

All right. Thank you very much.

Thanks, David.

The next question is from Stephen Walker of RBC Capital Markets. Please go ahead.

Thank you, operator. Good morning, everybody. Just again at Tasiast -- or, Tye, more important I guess, when we were at the project in the spring, we were expecting the Mauritania government to come out with the new mining code at some point earlier I guess this summer. I'm just curious, is there any update on where the Mauritania mining code stands at this point?

There is an existing mining code, and we do not expect a so-called new mining code. What I think the minister was referring to was the trial balloon last year on potentially higher royalty adjustment and potential Ghana-style carried interest. Neither of those initiatives have proceeded yet, but the crucial point, I think, Stephen, is our existing license for Tasiast and, for that matter, extending north to C67 are all included in the grandfathered, currently existing stability and mining regime. So we can comfortable that Tasiast and the expansion are included in that. So no further development there yet that we have seen.

Great. Maybe just a question for Ken. With the feasibility study expected at the end of the first quarter, 2012, for Tasiast, Ken, what percentage of the detailed engineering drawings and work do you expect to have been completed by that time?

At the moment we're at about 14% engineering, and typically engineering firms proceed at somewhere around 4% a month. So we're looking at, at the end of the cutoff, somewhere between 30% to 35% engineering.

Just as a follow-up, does this -- what degree of confidence does that give you with respect to capital cost estimates. I know a lot of the more expensive long-lead items have been locked in, but when you look at earth works and other costs over the next couple of years at that level detailed engineering work, what is your level of confidence on the capital number once it is announced?

We have done quite a bit of early purchases, and they -- as you can see, we have secured about $780 million worth of commitments, so that's roughly -- close to a third when you put in the contingency. We know what the contingency is, so you add the contingency in. And the major items in front of us now are the construction contract, with regards to civil, concrete, and structural steel.

And what we have done is we have done a direct hire with a construction contractor, very well experienced in the Middle East. In fact, globally. And we have unit rates from that contractor, and we are at this point in time understanding how that affects our budget and the forecast going forward. So to answer your question, we have got about 33% of our commitment secured, and the direct hire gives us greater degree of confidence, and we have checked the unit rates, so with regards to the quantities, those at the moment are being rechecked. We've taken them off as the material quantities. So, yes, we're somewhat confident with regards to the path forward.

Great. Thanks, Ken. And maybe just one last question for Glen on the exploration at C67. This is near surface material. Presumably it is oxide? Or do you know enough about the metallurgy to determine what the next steps are for this material, and what do you think the potential of adding it to the front end of the plant at this stage may be? The front end of the mine plant -- excuse me -- of the extended plant?

Steven, it's too early to tell in terms of what the oxide, sulfide mix is going to be, what the average grade is. I mean, we're still drilling the target, and as the -- as we build our knowledge, then we'll be able to plug that into the overall scope of the project. But one thing I can say is that we're anxious to bring in as much information as we can quickly, and so we'll be accelerating exploration of the target.

Great. Thank, Glen. Thanks, everybody.

Thanks.

Next question from Greg Barnes of TD Securities.

Thank you. Ken, you have pushed out the start of the Tasiast slight to mid-2014. What's causing you to do that?

Actually, Greg, we haven't -- it's Tye. There's no change intended in the timing. We have -- we're saying first half of 2014. We're on or ahead of schedule currently, so we have no reason to change that, and we're on track today.

Okay. Secondly, the Banda gas field. I hadn't heard of that before. Just wondering where that is.

It's offshore, close to Nouakchott, so east obviously of the coast of Mauritania in the southern half of the country. Tula Oil is the developer there and working on a potential pipeline to shore. About a trillion cubic feet of natural gas has been discovered so for.

But It is not been developed yet?

It has not. They are using it to -- in some of their oil exploration in the same sector, but not developed so far. But it would be rapid to develop, I would say.

I have no idea how long it takes to develop those things. Do you have a time frame that you would expect?

Paul, do you want to speak to that? Well, we would expect it would be available at our production period.

Under current contemplation, it would be within the next three years.

We understand they're using natural gas for enhanced oil recover, and so they would need to complete it for gas production.

Okay. Thank you.

Thank you.

(Operator instructions). Next question is from Patrick Chidley of HSBC. Please go ahead.

Hello, everybody. I just have a quick question on the natural gas electricity generation there. Will that lead to a lower capital number for the project? I think you mentioned that maybe that -- the HFO route would have been more capital intensive.

We'll determine that with the feasibility study, Patrick, but our base case up till now has been HFO on-site. We're still working our way through the all-in cost. And of course there are a couple of sides to that, both the turbines and the generation station. And then we'll need ether a gas pipeline to bring gas to site or a transmission line if we build the generator station closer to the source. So bottom line in all of that, similar capital numbers, not greatly variant, but may include transmission or gas transmission. So that's work in progress, and to be determined with the feasibility.

So you would actually fund the gas pipeline? That wouldn't be the seller? Would be the government or Tula Oil?

All up for discussion, and of course the reason for considering gas is the potential to lower our operating costs at the site in terms of cents per hour.

Right. Right. Okay. And just one quick little follow-up. Most of my questions have been answered already, but at Kupol, do you have a large stockpile there? And can you tell us how big it is and what the grade is?

We do have a stockpile. It's lower grade than average underground mine grade, and what we have been using the stockpile for is to supplement mill capacity. So it -- the stockpile size,I don't have the figure in front of me, but we can certainly get that to you afterwards.

We'll do a get-back on that, Patrick.

Okay, thanks. Just wondering whether the underground going from one quarter to the next is going to be able to ramp up that quickly?

Yes, it -- we planned for it, so we have the headings open. We have the people. We have the equipment. So we're in the process of that ramp up, and have been for the year.

Great. Okay. Thanks a lot.

Thank you.

The next question comes from Tanya Jakusonek of Scotia Capital. Please go ahead.

Hi, guys. Most of my questions have been answered, but just -- maybe if I could just get a bit more clarity on what exactly has happened at the sag mill motor at Paracatu? And then just, as we go into Q4, the costs for Q3 were a bit higher than I was anticipating. I appreciate we have only been one month into Q4, but are we starting to see some of these costs come down as we have accessed some of the higher grades in some of these mines? Thanks.

Thanks. Brant?

The first question on the sag mill, we did have a fault to ground on one of our windings, and there are a couple hundred of them in there. The manufacturer is on-site, and we're going through the repairs right now, and it doesn't appear at this point to be anything that we would consider material by any means. Repairs are underway, and we expect to see everything back in operation within a week.

So how long would we have been down for? Two weeks or so?

Yes, roughly two weeks.

Okay. And you have all of the pieces on-site? That can be done within the next week?

We do.

Okay.

We do.

Q3 costs?

Yes, as we go into Q4, yes.

Yes. And as we -- as we go into Q4, we did experience a little bit lower grades, and a little bit lower recoveries in Q3, mainly because of positioning in the pit. And we have worked through that, and we're back into some of the higher grades for the fourth quarter in the Paracatu pit. So I would expect to see a little bit better performance in Q4 than Q3.

Yes, I think --

And just generally overall as a portfolio, I think, I was asking.

Yes, I think it was -- we made it pretty clear, Tanya, that we're staying on our guidance as originally --

I think you said mid-range of that, $565 to $610?

Yes, approximately the middle of the range, so we're feeling good about. We did give more precise adjustments, both up and down, at the various regional guidances, but overall staying on our guidance, and as we said, approximately middle of the range.

And you have seen that improvement in October?

We -- do be clear, we wouldn't have stuck on our guidance if we didn't intend to, so we're on it.

All right. Okay. Thank you.

Thank you.

There are no more questions at this time. I'll turn the conference back to Mr. Burt.

Thank you. We had another strong quarter of operating and financial results, and with performance here to date, we believe we are well positioned for 2012 to unlock the value from those projects by advancing them to a stage where we can show you concrete and steel coming up out of the ground. And operations continue with their strong performance, sostay tuned. Thank you for your attention this morning.

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