Kinross Gold Corp (KGC) 2014 Q4 法說會逐字稿

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the Kinross Gold Corporation 2014 Q4 and full year financial results conference call.

(Operator instructions)

At this time, I would like to turn the conference over to Mr. Tom Elliott, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning. With us today, we have Paul Rollinson, Chief Executive Officer; Tony Giardini, Chief Financial Officer; Warwick Morley-Jepson, Chief Operating Officer; and Sylvain Guerard, Senior Vice President, Exploration.

Before we begin, I would like to bring to your attention the fact that we will be making forward-looking statements during this 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 2 of this presentation, our news release dated February 10, 2015, the MD&A for the period ended December 31, 2014, and our most recently filed AIF, all of which are available on our website. I'll now turn the call over to Paul.

Thanks, Tom. Thank you all for joining us today. As you can see from our Q4 and year end results, 2014 was an excellent year for Kinross. Guidance is something that we take very seriously, and we are very proud of the fact that we have met or exceeded our targets for the last 10 quarters in a row. In 2014, we continued to deliver, with record production of 2.7 million ounces, production costs of sales of $720 an ounce, and all-in sustaining costs of $973 an ounce, and capital expenditures of $642 million.

These results reflect standout performances at operations across the Company. Warwick will speak to these achievements in greater detail shortly, but I would like it highlight a few. Including record full year production at three operations, Paracatu, Tasiast and Maricunga, a 22% decrease in the cost of sales at Chirano year-over-year, and a 19% reduction at Maricunga, a continuing decline in the cost of sales at Paracatu to $764 an ounce in the fourth quarter, the lowest level in three years.

In Russia, the region exceeded guidance on production and costs, producing 751,000 ounces at a cost of sales of $507 an ounce for the year, a 50% reduction in our capital expenditure from $1.26 billion in 2013 to $632 million this past year. And finally and very importantly, we not only achieved the best safety performance in the history of the Company, but we finished the year with one of the best safety records in the industry. Our performance on all these metrics can be tied back to the Company's commitment to its core principles of operational excellence and financial discipline.

They also underpin a third pillar of our strategy, namely balance sheet strength. Kinross generated solid cash flow in 2014, despite a continuing decline in the gold price, and ended the year with approximately $1 billion in cash on the balance sheet. We have taken, and will continue to take a financially disciplined and careful approach to our business that prioritizes balance sheet strength.

This brings me to the Tasiast mill expansion. As we announced yesterday, we have decided not to proceed with the mill expansion at the present time. That said, we continue to believe in the project's potential to add significant value over the longer-term. The expansion has the potential to offer both large and low cost production with relatively low execution risk. Nevertheless, we intend to balance what is an attractive growth opportunity with the reality of the current gold price environment, and the project's funding requirements over its three-year construction period.

There are three components to financing a possible expansion, cash from the balance sheet, project financing, and cash generated from ongoing operations. We have approximately $1 billion in cash on the balance sheet, and we are confident in our abilities to successfully conclude a project financing agreement. However, we would also need to generate sufficient operating cash flow to fund the balance of the expansion's initial capital during construction. If the decline and volatility we have seen in the gold price in recent months continues, it would jeopardize our ability to generate the necessary cash component required during that construction period.

By taking the decision not to proceed at this time, we preserve our cash position and liquidity, which will position us well should market conditions improve, and we decide to proceed with an expansion in the future. It also allows us to preserve our financial flexibility to take advantage of other opportunities should they arise. In the meantime, we will focus on reducing operating costs at Tasiast, which despite improvements in the past year are still higher than we would like.

Part of those costs can be attributed to the optionality that we had retained at the site, in the event we elected to proceed with an expansion. We now have an opportunity to reduce the costs associated with that optionality, and redouble our focus on improving efficiencies at the existing operation. We have a strong track record of turning around higher cost operations such as Maricunga and Paracatu, and our team at site is committed to applying the same rigor and discipline at Tasiast.

As we enter 2015, we are determined to deliver another solid year of results. That means meeting the guidance we forecast for the year, namely production of between 2.4 million and 2.6 million ounces, production cost of sales of $720 to $780 an ounce, and all-in sustaining costs of $1,000 to $1,100 an ounce, and CapEx of approximately $725 million.

Our production guidance is slightly lower compared with 2014, as we have taken into consideration the potential impacts from power rationing in Ghana, and possibly in Brazil. Guidance for all-in sustaining cost in CapEx is also slightly higher. This is essentially because we are planning to undertake additional stripping to access more of the ore body at Fort Knox and Maricunga. It is also important to note that we have been prudent in our cost assumptions, using $90 oil and RUB40 to $1 as benchmarks compared to current spot prices.

So to sum up, over the past year, we have continued to deliver on our four strategic principles, operational excellence, quality over quantity, capital discipline and balance sheet strength. This track record has positioned us strongly as we move into the year ahead, and we expect to keep on delivering in 2015. I'll now pass the call over to Tony.

Thank you, Paul. As emphasized during Paul's opening remarks, our focus on balance sheet strength and financial flexibility are key pillars of our strategy. I'm proud of the fact that our balance sheet was further strengthened in 2014.

We increased our cash position by $231 million, which includes the $150 million of cash proceeds from the sale of FDN completed in the fourth quarter, and we repaid $60 million of debt. We also reduced our net debt position to $1 billion. As a result, our net debt to EBITDA ratio at December 31 decreased to 1.19 to 1, which is well within our debt covenant of 3.5 to 1. With a liquidity position of approximately $2.5 billion, including approximately $1 billion of cash and cash equivalents, we enter 2015 in solid financial position.

Turning now to our financial performance in the fourth quarter. We delivered strong production of approximately 672,000 attributable gold equivalent ounces at a cost of sales of $714 per ounce, and an all-in sustaining cost of $1,000 per ounce. Adjusted operating cash flow for the quarter was $198 million or $0.17 per share. Fourth quarter adjusted net loss was $6 million, compared to an adjusted net loss of $25 million in the same quarter last year.

As a result of our continuing focus on capital discipline and reducing spending, capital expenditures in the fourth quarter were $190 million, a 43% decrease from the same quarter last year. We completed our annual impairment testing, and recorded an after tax, noncash, impairment charge of $932 million in the fourth quarter. This charge consisted of $787 million relating to property, plant and equipment, and $145 million of goodwill. We have provided a table summarizing the impairment charges on slide 17 of the webcast.

The largest components are PP&E write-downs at Tasiast and Chirano. The impairment charge at Tasiast takes into consideration our decision not to proceed with the expansion at this time, and corresponding changes to the life of mine model. Regarding Chirano, while we are encouraged by the exploration prospects at the mine, changes to the life of mine plan necessitated a reduction in the value of exploration potential which resulted in an impairment.

To the extent that we have exploration success in the future that translates into increases in economic reserves and resources, we may reverse a portion or all of the impairment recorded. Impairment charges at Lobo-Marte and La Coipa, which are outlined on the slide, are the result of declines in valuations of development projects in Chile, and the reclassification of mineral reserve estimate at Lobo-Marte. We also recorded an impairment charge of $157 million relating to our investment in Cerro Casale, and $168 million inventory write-down primarily at Tasiast.

Looking forward, we expect 2015 production to be approximately 2.4 million to 2.6 million gold equivalent ounces and an expected cost of sales of $720 to $780 per ounce. The regional breakdown of our production and cost guidance is available on slide 18 of the webcast, and Warwick will provide additional context when he discusses our operating results.

Our budget assumptions for the gold price, oil, and foreign currencies are outlined on the slide, as well as a sensitivity of operating expenditures to these assumptions which take into account existing currency and oil hedges. Given its volatility, we have broken out sensitivity to the rouble separately. Assuming that there is no associated inflationary impact, a 10% change in the exchange rate from our budget assumption of RUB40 to $1 is expected to result in an $11 per ounce impact on our cost of sales for Russia.

Our 2015 forecast for capital expenditures is $725 million, including approximately $40 million for capitalized interest. We also provided guidance for the following items, overhead expense of $205 million in line with 2014 overhead, our exploration budget of $95 million, and other operating costs of $50 million which includes $11 million for care and maintenance at La Coipa. Our focus on disciplined capital management, and the strength of our balance sheet will continue to be priorities for us as we head into 2015. I'll now turn the call over to Warwick.

Thank you, Tony. We had a solid quarter and an excellent operational performance for the full year. Our operating results reflect the strength and quality of our people, and our ongoing commitment to managing costs in a challenging environment.

The Americas region performed very well this year, exceeding 2014 guidance on production, while achieving costs at a lower end of the range. Our largest operating region in the Americas contributed approximately 53% of our annual production this year.

We've had a number of significant accomplishments, and I would like to share some of the highlights with you. Our Paracatu mine in Brazil is a great example of our focus on continuous improvement efforts. The operation continues to see the benefits of the innovative ore blending strategy we initiated in the latter half of 2014. We began processing a blend of the softer B1 and harder B2 ores through both plants. While the results in the lower throughput, it has advantages of high grades, and improved recoveries to both plants.

The impact is evident in the mine's 2014 results. Paracatu achieved record annual production, while also reducing costs by $20 per ounce year-on-year. And this focus continues, with the site generating new continuous improvement opportunities that we will explore in 2015.

It's a similar case with our Maricunga mine in Chile. We brought in a new management team, made sure we had the right people with the right expertise and experience in place, and focused on improving performance. You've seen the results in a number of areas at the operation, the heap-leach, the ADR and SART plants are performing very well, and the strong performance in the crushing circuits has resulted in a record of 16 million tonnes crushed and delivered to the heap during a single year.

For 2015, we have budgeted additional capital for stripping of the Verde southwest pit. Considering where the mine's operating costs were at the beginning of 2014, we would not have considered the stripping campaign without seeing the progress the operation has achieved over the past year, bringing down cost per ounce by 19% compared to 2013.

Fort Knox had a strong year, despite challenges resulting from a wall failure which occurred in the end of 2013, which restricted access to the higher grade portion of the pit, increased operating [weights] and haulage distances which impacted costs in the second and third quarters. However, we regained access to the higher grade portion of the pit at the end of the third quarter, resulting in a 39% increase in mill grade, and a 17% reduction in the cost of per ounce in quarter four, as compared to the third quarter of 2014.

In 2015, we plan to initiate stripping of the Phase 8 pushback, which is forecast to extend mining through to 2018 and beyond. Similar to the past year, we expect the Americas region to contribute over 50% of our 2015 production, with a guidance range of 1.3 million to 1.4 million gold equivalent ounces. The cost of sales are expected to be between $790 and $850 per ounce.

Our Russia region delivered excellent performance in 2014, exceeding its production guidance with costs below the lower end of the range. The contribution of higher grade ore from Dvoinoye has increased average gold grades at 21% year-on-year.

A number of site enhancement projects were completed during the year. Of note, Kupol executed an expansion of the south generating power plant very successfully, an enhancement which provides for greater flexibility in power usage at the mine.

While we anticipate a slight decline in Dvoinoye grades due to mine sequencing, we are targeting another strong year from Russia in 2015, with production expected to be approximately 710,000 to 760,000 gold equivalent ounces, and expected cost of sales of between $495 and $525 per ounce.

Our West Africa region had a solid year, meeting its 2014 production guidance, and achieving a 12% decrease in the cost of sales year on year. We have had considerable success implementing self-performed mining at Chirano. By investing some capital to purchase equipment and eliminating the use of contractors, costs have been reduced by 22% year-on-year transforming Chirano into one of our lowest cost operations.

In terms of costs at Tasiast, we have seen some success from our continuous improvement programs, resulting in approximately a $50 per ounce decrease in the cost of sales year-on-year. Nevertheless, costs remain higher than we would like. The operation is not currently cash flow positive. This is particularly due to the fact that we have preserved optionality at the site, in the event we decided to proceed with the mill expansion. Now that we have decided not to proceed at the mine at this present time, we plan to redouble our focus on increasing efficiencies and reducing the costs based on Tasiast's current production levels, in a similar way we did both Paracatu and Maricunga.

Looking ahead to 2015, we expect our West Africa operations to produce between 390,000 and 440,000 gold equivalent ounces. That is an expected cost of sales of $850 to $920 per ounce. We anticipate lower grades at Chirano this year due to mine sequencing, and reduced production from the Tasiast dump leach.

I would now like to turn to our year end mineral reserve and resource estimates. For the third year in a row, we have maintained our gold price assumptions at $1,200 for reserves and $1,400 for resources. At year end, proven and probable gold reserves were estimated to be approximately 34 million ounces. Year-on-year gold reserve estimates were reduced by 8 million ounces.

This is primarily a result of the reclassification of 6 million ounces at Lobo-Marte, to the measured and indicated mineral resource category. This was slightly offset by additions at Paracatu, due to the expected improved recoveries, lower costs and more favorable exchange rates. And at Kupol, where our drilling program not only replaced depletion, but added additional ounces to our mineral reserve estimates.

2014 was a positive year for exploration, as we continued to focus on brownfield projects and exploration within the existing footprints of several of our mines and surrounding districts. At La Coipa, we generated additional promising results at the Catalina target, located approximately one kilometer southeast of Phase 7. Results continue to be encouraging from the oxide mineralized zone, and drilling continues to outline the geometry and extent of the mineralization. In 2015, we will continue drilling at Catalina to better define the morphology, the extent and controls of mineralization. In addition, we will also continue to test district targets in the region.

At Moroshka, which is located approximately four kilometers southeast of the Kupol mine, drilling defined an indicated mineral resource estimate of approximately 240,000 gold equivalent ounces. Approximately 800 meters to the southwest of Moroshka, we discovered a new epithermal vein called Providence that runs parallel to Moroshka. Providence remains open and untested to the south and at depth, and we will be conducting further drilling this year to determine the size, grade and continuity of the mineralization.

At Dvoinoye infill drilling and trenching was completed at the September Northeast target, which is located 15 kilometers northwest of Dvoinoye. This work defined a high grade gold-silver mineralization within a breccia zone over a strap length approximately 150 meters. Further work is planned for this year to establish an initial mineral resource estimate.

At Chirano, we drilled from 150 to 600 meters below the bottom of the existing pit at Akoti and Suraw with successful results. Exploration drilling contributed to the addition of estimated M&R resources of 163,000 ounces at Akoti, and 78,000 ounces at Suraw. These additions are reflected in the 2014 mineral resource estimate for Chirano.

We also conducted drilling at a number of district targets in 2014, some of which warrant further work in 2015. At Tasiast, we defined near surface measured and indicated mineral resource estimates totaling approximately 327,000 gold ounces at Fennec, C67 and C68 satellite deposits which are located on the existing mine license. We also reported encouraging results at our Tamaya target which located on the Tasiast sud license. Additional drilling is planned for 2015 to better assess the size, continuity and overall potential of this mineralization.

Overall, it was a good year for exploration. We successfully replaced ounces depleted at Kupol, with an increase in our mineral resource estimates. We added approximately 800,000 ounces to our M&R and resource estimates and we generated encouraging results at many of our sites. And so, we look forward to continuing with our program in 2015.

Before turning the call back to Paul, I would like to extend my sincere gratitude to all our employees for their hard work and dedication in delivering these results. All while maintaining a safety record that was not only the best in Kinross' history, but one of the best in the industry. And I will now pass the call back to Paul.

Thank you, Warwick, and I would like to echo your comments. I am extremely proud of the fact that we have met or exceeded our guidance targets for the last three years in a row for production, cost of sales, and capital expenditures. We take our guidance seriously, and we expect to be held accountable for it.

We could not have achieved what we have quarter after quarter without the hard work, professionalism and commitment of our work force. Our employees are truly best-in-class, and I want to thank them for a job well done. Thank you, operator. And with that, I'll open up the call to questions.

(Operator Instructions)

John Bridges of JPMorgan.

Good morning, Paul, everybody; well done on the results. Could you just give us a little bit of some detail on what you expect from Catalina? Could that fill a gap that may be left by Round Mountain as that winds down in 2017 and beyond?

Thank you, John. I'll take this one. Just to, first of all, fill you in that we decided during the course of 2014 to start a pre-feasibility study on what we had defined at La Coipa. At this time, we are doing that work on work at what we call Phase 7, as well as the Puren deposits, and we are also doing some study work on what we are finding at Catalina. Catalina is not the subject of that pre-feasibility study, albeit still very much part of our exploration activities.

They are very encouraging results. And we also see, as a result of the relatively large [cover] that we have there, some 200 meters, that we would also consider underground operations. So, this is part of our study work right now. As to how it might fit into our current production profile, it is still too early to advise.

Okay, great.

And as a follow-up: I was just wondering about your reserve base. I see Casale is still there. How did that get through the impairment calculation?

John, it is Tony Giardini. As far as the impairment calculation goes, we indicated that we have included $157 million write-down with respect to Casale. It is included in our other income/losses number, and we own 25%, as you know; and the other 75% is held by Barrick.

So, our number doesn't flow through the property line, but rather an investment line. And for reserve calculations, or reserve purposes, we retained the reserves as part of -- in our reserve statement, and they haven't been reclassified.

Okay. Thanks, guys. Well done, guys. Keep it up.

Thank you, John.

Chitimukulu Musonda, Deutsche Bank.

Hi, everybody. It is Chiti sitting in for Jorge. My first question is on overhead; I guess, for Tony. When I look at slide 19, you have guided to $255 million if I combine overhead and other operating expenses. And comparing that to 2014, that is about 14% lower. Could you help me reconcile those two numbers? Because I notice that in 4Q, those two items actually spiked; G&A by about 30%, and other operating expenses was more than 4 times.

Sure. No problem. As far as -- I would point out firstly that we came in on guidance as far as our G&A and overhead for 2014. And we are holding the line with respect to G&A for 2015 of $205 million. So, when we looked at the amounts in the fourth quarter, what we end up picking up is some accruals that get picked up typically in the fourth quarter. And in fact, if you compare the Q4 numbers in other expense to last year, you'll see that there was also a pickup in the fourth quarter.

We also had some accruals for UTP, so unrecorded tax provisions, that flowed through that other income number, and that was actually the largest component that went through that. So, from a budget point of view in 2015, in the $50 million, what we have is, is we have a La Coipa study, of which we have broken out. There is also some other study costs associated with other areas as well; and in addition, we have business development costs that we have in. So, pretty consistent in terms of how we have been looking at the other amounts and expenditures.

I think where we have an opportunity to see G&A come down is, we have been conservative in terms of the assumptions on currencies. So, we've budgeted CAD1.10 for the Canadian dollar; and the Canadian dollar is roughly around CAD1.25 right now. We have a portion of that hedged, so we won't get the full benefit. But obviously, to the extent that we get some of that benefit, it will flow through in terms of reduction in our overhead costs. Certainly happy to provide any additional details if necessary.

Okay, appreciate that. That is helpful.

And the second question, if I may, on Tasiast -- and Paul alluded to this in the prepared remarks -- cost reduction opportunities -- what levers do you have? If you could shed some light on that, please?

I'll turn it over again. The point we were trying to make in the prepared remarks was really, whenever you have the possibility of a major project, there is a lot of things going on at site. We faced the same issue a couple of years ago at Paracatu where we had third ball mill, fourth ball mill, flash flotation, desulfurization. We had contractors running around, and lots of projects people, and that can be distracting to the site. So, that is certainly one of the first areas that will allow us to get more focused.

But maybe Warwick will elaborate a bit more.

I -- in support of what Paul has just mentioned, not only has the mine been focused on the preparation associated with executing the project, but also understanding a number of immediate issues that would need to be addressed as and when a project go-ahead is given. And so, all that would fall away in its entirety. And so, the mine is now in a position to reassess its goals and objectives, typically focusing on the day-to-day operations of what is happening there.

The plant is an area that we are going to continue to do work. We have a slight reduction in 2015 in terms of throughput associated with the harder materials that are being mined from the west branch. So, that is potentially an area that we want to address. And then, certainly the cost component, of which we have, we believe, not typically low-hanging fruit, but certainly an opportunity to address and bring down.

I'd just add to that as well. I mean, like the situation at Maricunga, it's never one big sort of silver bullet. It's a waterfall of several small items that get us to where we want to be, and that will be the focus.

Got it. Thank you. That's it for me.

Andrew Quail, Goldman Sachs.

Hi, morning, Paul, and guys. Congratulations on a very strong operational quarter.

Just a couple questions on Russia: Can you guys remind us, what percentage of costs is in local currency or in the rouble?

Sure, Andrew. It's Tony Giardini. What we've got is about 45% of our local costs are in roubles. And from a hedging point of view, the last hedge that we entered into in the rouble was April 2 -- I remember this day -- April 2, 2013. That was the last hedge that we put on.

We haven't added any hedge positions in the rouble at all. So, the hedges that we have -- we have about 26% of our exposure hedged for 2015; nothing beyond that. In fact, it is sort of front-end loaded.

So, we felt it was important to really provide those sensitivities with respect to the rouble. And as we noted, we used a budgeted rate of RUB40. There has been a lot of depreciation in the rouble. We don't know what the inflationary impacts will be, but it is about $11 per ounce for every 10% move in the rouble. So, hopefully that helps you guys on the modeling side.

Yes, it does. Thanks, Tony.

And just on sustaining CapEx -- you guys have been excellent at reducing that. As we go forward, obviously this year, but going forward, we are looking at, maybe a rate -- if you look at your guidance, mid-range or the midpoint of around $200 an ounce. Is that something that we can model going forward, or is that going to vary materially as we head into 2016, 2017?

I'll lead off, and Tony jump in. I mean, what we've said historically, generally, is a good assumption. I guess I'd start by saying: We believe our assets are very well maintained. And if you look back historically, a good sort of rule of thumb run rate has been about $400 million a year, plus or minus. But that's a safe kind of run rate on existing operations of sustaining capital.

Yes. So, I think that's the way we've looked at it this year. Sustaining capital is a little bit higher because of stripping programs at Maricunga and at Fort Knox, so those are included in the current year's budget. And so, it takes us up closer to your number, Andrew, of roughly $200 an ounce if you look at the sustaining budget. So, it is certainly a reasonable number for the current year. But I think, as Paul said, the stripping that we'll see at Maricunga and Fort Knox -- we will get the benefit of it down the road. So, some of that won't be coming back in.

And I think, although you didn't ask a question, I think I'll address it as part of this discussion. We also had stripping costs at Tasiast, which we've classified as non-sustaining. And the reason why we've treated these costs as non-sustaining is that the World Gold Council guidance on non-sustaining really sets out that for major projects at existing operations, which are expected to materially increase production, you classify the cost as non-sustaining.

So, we've looked at the stripping cost at Tasiast as non-sustaining because the benefit that we expect to get will be a material increase in the future production at the operation. And I would point out that this is consistent with how we've treated stripping costs at Tasiast in the past.

I'd also note, just to complete the story, because I expect we'll get the question, is that it has no impact on our financial statements.

Because what we do for financial statement purposes is we capitalize the stripping, and then we amortize it using the units of production basis through the P&L. And that the treatment of the cost is consistent with IFRS standards.

And lastly, the World Gold Council metric is subject to interpretation. We have broken out the details of the sustaining and non-sustaining, so we have been very transparent about it. But we'd welcome any further questions on it.

Thanks very much, guys. Very helpful.

Greg Barnes, TD Securities.

I guess, Tony, that begs the question: If you are doing stripping at Tasiast to increase production in the future, is this related to the expansion of $155 million? Or is it -- I'm just trying understand how it impacts the operation?

No, the $155 million isn't all stripping. There is some costs associated with winding down the project. So, what we are really looking at right now is -- we have just made this decision. And we are going to look at those costs in the context of what Warwick had described in cost-cutting exercises, and we may revisit the [quantum] of stripping that we are doing at the site, and we may be able to reduce those wind-up costs of the project.

So, we are hopeful that, when we have an update at some point in the future, we'll be able to come back on that capital number. So, it's really two components that's included in there.

So, how much is the project ramp-up?

It's ramp-down.

Ramp-down.

Probably, roughly, let's say, $35 million of that total.

Yes, I would agree with that. The issue is that we just made the decision, as you know. And we would be going through that review, as to how best we can bring the costs down in every facet of the project -- of the current operation -- be that the capital stripping as well as the operating expenses.

Okay. So, Warwick, a couple of questions for you then. Are you happy with the condition of the plant? I know it was never really constructed very well.

I mean, certainly we've got plants that are in much better state, both in design and in condition, elsewhere in the Group. As to its sustainability and longevity to satisfy the requirements that we have currently in our plan, the answer is yes. We continuously do work on the plant. And so, we have added some large capital works in the past, most notably the crushing circuit on the primary side. And so, these things have improved the situation. But clearly, it's not our best, but we are doing well with what we've got.

Okay. So, what do you think sustaining capital is going to be at Tasiast now for the next several years, until you revisit the expansion again?

Really, Greg, I would be speculating if I gave you an answer to that right now. We certainly want to put ourselves in a position within the very immediate future to be able to get an accurate number for you. But the best I can provide you right now is what is defined in our technical report. That's the best reflection we can give for Tasiast over the next quarter.

Okay. Okay, thank you.

David Haughton, Bank of Montreal.

Yes, good morning, Paul, Tony and Warwick. Thank you very much for the update.

I guess, we've all got quite used to what Tasiast could look like with the expansion. But we now have to think what it looks like if the 8,000 tonne per annum plant is to survive. And given you've got 9 million ounces of reserve there for presumably 45 years, can you just give us an idea what Tasiast could look like in the near term whilst it is running at the existing rate?

Well, I think I will lead off again here, David. I mean, look, we are not happy -- I think as I indicated in my opening remarks, we're not happy with where the costs are today. It has been a focus for us in the last couple of years. We have brought the cost down. But I think Warwick and the team really need to get in there, and have a bit of a clean slate to look at where we think we can take it.

And again, we did do the same thing at Maricunga; we didn't predict. We said we are going to send the team in. People were anxious to know what the outcome was going to be. And our answer was: Let's just give the guys some time; let them do their work. And you saw the results.

And I think it's a bit of the same situation here. It's hard to speculate too far forward from where we stand today. We've got some work to do ahead of us. We'll put the right guys on it, and stay tuned.

Yes. I would just like to reinforce what Paul has mentioned. The team has been distracted. This issue of project preparation, optionality has been really quite a diversion for many of the people on the team.

We have a really good and strong team there with -- in the operation. We are able to draw on the resources and expertise across the greater Company, if that is so needed.

But I am very confident that they can focus now on what is important. And they realize the importance of that, and they are really up to the challenge. So, in the very near future, I would say in the next quarter, or next two, we'll have a better understanding of what it's going to look like, and we'll certainly share that with you.

Okay. So, it's understandable that 2015 is going to be a transition year, given all of the things that you have mentioned. Is there a possibility, if you are just sticking with the 8,000 tonnes a day, that there are portions of the ore body that you could exploit that would be better, say, than the average reserve grade? Would you be able to optimize the 9 million ounces in such a way that it's suitable for an 8,000 tonne per day operation, as opposed to something 3 times bigger?

I think what is important is that the last thing we would want to do is compromise the future of the mine going forward. The 38,000 tonne a month project certainly is the most optimum, and it is something that we are -- whilst we have decided not to go ahead with it right now, it is certainly something of value that we'll always have in our back pocket. And we don't want to compromise that position.

We also know how the gold price changes in time, and we don't know when things will change. So, we don't want to compromise the short term for the long term.

Okay. So, it's reasonable then to conclude that it's kind of in a holding pattern until the economics look a bit more favorable for what is the ideal outcome of the expansion to the 38,000 tonnes a day?

Yes, I would agree with that holding pattern, with the understanding that we need to generate at least positive cash flow; at worst, have it flat. But that's the challenge that we will step up to in the next quarter and thereafter.

I guess I might just sort of add to that. I mean, I want to be clear: We are favorably disposed to this expansion project. I mean, we impairment-tested on the expansion scenario.

We think 38,000 is the right size throughput for that size of an ore body, and we are going to do what we can in the meantime. But I view this really more as a prudent pause, as opposed to a stop forever, in your 45-year scenario.

Yes, okay. Thank you very much for that clarification.

Adam Graf, Cowen Securities.

Thank you. Congratulations on the quarter and the year. I was curious if you would be willing to break down the CapEx expectations for the Americas? I know you guys give just regional guidance. But there is quite a few operations there; would you be willing to do that?

Was there a particular area that you wanted us to focus, or just Americas in general, Adam? Or what are you getting at specifically? Just want to get more detail for them all?

Correct.

Yes. Just give us a sec --

I think -- we certainly don't break it down on a mine-by-mine basis. Maybe what we might be able to help you with is -- if you consider the sustaining capital as a start. The Americas -- of the $500 million or thereabouts that we have provided for the greater Company, about $350 million of that is in the Americas.

There are really three large components to it. The first one is the Fort Knox Phase 8, which is taking us to the next portion of that life of mine. And then, the second one being our strip at Maricunga, with the Verde southwest. And then, we have Round Mountain, which we are doing mine sequencing.

So, the Phase 8 at Fort Knox is in or around [$60] million. And Maricunga, just to get to that number, it is between $10 million and $15 million, thereabouts.

Does that help you, Adam?

And Round Mountain?

Round Mountain is not listed in the two numbers I have provided you. If I remember correctly, and we certainly could give that to you --

Yes. Adam, it is Tony. Round Mountain is pretty consistent with where we were last year, as far as capital expenditures. They were roughly around $40 million. So, it will be slightly above that, but in that range. And I think, as Warwick indicated, the major changes are really going to be at Fort Knox with the Phase 8 stripping.

And then, Paracatu capital will be very consistent with what we had in 2014. And at Maricunga, it's the additional stripping that we are looking at Verde. So, those are the larger components overall.

All right. Thank you.

I understand from your initial comments that you have a new mine plan for Toronto. Should we be expecting a new 43-101 in March? And what other 43-101s should we be expecting?

I don't believe we have a new mine plan. It is not material in the greater scheme of things within the Company. And so, our intentions were not to produce another report.

I must have misunderstood. I understood that the write-down at Toronto, in your initial comments, was due to a new mine plan. So, maybe I misunderstood.

There was a slight -- there was a modification to the mine plan where we've ended up shortening the mine life by I think one year, and that caused us to take some of our exploration potential. It's a delicate message. But the point here is, we are quite excited about the exploration potential at Chirano. But given that we reduced the mine plan by one year, we thought it was prudent to pull back on some of our exploration upside from a timing perspective, at this point.

I think further to that, Adam, and to your -- the rest of your question -- we will be producing two technical reports, one for Fort Knox and one for Kupol, given their materiality to the greater Company. That will take place in the first half of this year.

Oh, that's great. Any 43-101s you can provide are always very helpful. (multiple speakers)

Maybe just a broader question: Can you guys maybe -- I came to the page 37 in your MD&A, which is your input hedges. But maybe you could talk a bit more broadly about your overall input hedging strategy?

Sure. Maybe I can sort of look at that. What we've done is we purposely shortened the duration of our hedges, on both the currency and energy side, and that was done about 1.5 years ago. Typically, we had hedged out three years, and we cut it down to 18 months; then we cut it down further to roughly 12 months. So, we have been really running off the hedge books, or the hedge positions, on a lot of the currency positions, and also on oil. So, it set us up reasonably well heading into 2015.

To the extent that we have out-of-money positions on FX, most of those positions were entered into in 2012, 2013. So, looking at 2015, we'll likely stay somewhere around the 50% on currencies. We certainly don't want to go above that.

I think on the oil side, we are looking for opportunities to probably add some additional hedges in 2015, just given where oil has gone to, and gas oil. And we may look a little longer term, probably out to 2016 somewhat, to hedge some portion of 2016 exposures.

I would point out that, with respect to oil, we had, roughly, a third of our hedgable amounts hedged going into 2015. The mark-to-market position on that is approximately $8 million based on current prices, so it is not a significant number overall.

But where we will start to get the benefit of energy will actually be as we look to negotiate our supply contracts for Kupol, for example, where we had already locked in the Kupol price last year because it's in a remote location. We've got to get the diesel to site, so we locked in that price. And we would expect to, as we enter into negotiations, hopefully see some relief in terms of the prices on diesel for Kupol.

So, we feel that we've run a fairly conservative, prudent strategy on hedging. We are in a position where we don't have a lot of hedges in place in 2015. We have nothing, zero, beyond 2015. There is no hedges in place for 2016 and beyond. We'll start to look to layer in some of those, but we're certainly going to benefit from a lot of weakness in currencies and in the oil price.

Yes, just a follow-up to that: What levels, both on the currency and oil, do you decide to start to hedge out, reverse your strategy, and take advantage of these low oil prices and exchange rates?

Well, I think we are going to be measured in terms of how we do that. I don't think we are going to wake up one day and say we want to be 75% hedged at a certain price. It is going to be -- we are going to layer into those positions as we go along. I think that applies to both currencies and to oil.

We have provided what the budget estimates are. But I wouldn't use those as the basis for how we are going to lock in prices. I think they are what we've put in for budget purposes. But we'll just have to look at the tone of the market, and see what the opportunities are over the next several months.

Anita Soni, Credit Suisse.

Hi. Both of my questions are with respect to Tasiast in the next couple of years. As David was asking about, how do we think about the 8 million tonne -- sorry, 8,000 tonne per day scenario, in terms of the grade that would be delivered in 2016, 2017?

I think, Anita, if I could just possibly reinforce what I have said already. But the best I can give you at this point, and it is certainly going to be updated further on in the year, is the grade and tonnages that are reflected in our technical report. We are moving into the Greenschist -- it is in the order of about 20% of what we are mining currently, and that increases as we go through 2015.

And with the Greenschist, we do suffer some -- to some extent on the -- as a result of the hardness of the material. So, it has an effect on the throughput, the loss, I would say that. We also see the better grades as they start improving as we go into the depth of the Greenschist at West Branch.

So, that is the best I can tell you right now. The mine is -- has a complete change in [focus], releasing itself of the -- its activities associated with the project. And so, hard at work to bring an understanding, or a better understanding, of what we've got in our technical report.

In terms of stockpiling of ore at Tasiast, how much do you think you'll be doing in terms of stockpiling? And then, is that included in the CapEx guidance?

There is -- I mean, stockpiling of material is limited in 2014. We would obviously do a -- in 2015, sorry. We would certainly see a -- the majority of the material that we mine will certainly go through the plant. We have completed the Piment pits, and so the focus is now going to be residing predominantly on the West Branch.

Completed the stripping, do you mean? Or the actual pit itself is depleted?

The Piment pits that were the source of oxide material during the course of 2014.

Has been mined out at this point?

They are coming to the end of their lives, that's right.

Okay. And lastly, I think I was -- the question was with regards to reserves. The reserves that were added in, I think sometime in 2014, perhaps mid-year, with the decision -- or the feasibility studies of 38,000 tonne per day. At what point, from a technical standpoint, would you have to re-evaluate whether or not those are considered reserves, if you do not go ahead with an expansion in, say, the next four years?

We've just completed the new reserve statement for 2014 on the understanding that we would be going ahead. We did a feasibility refresh as the result of us working through 2014.

So, from a cost point of view, on how we have modeled things going forward, they are accurate. Yes, there will be a change in approach, given this [hold] position, as we'll take a view on the extent of that hold position going through the course of this year. And certainly by the end of 2015, we would have a reviewed number based on the decisions we take, with regards to project restarts or any differences that we make to our current operations.

And again, I'll jump in, Anita. I mean, we can't sort of speculate what life is going to deliver over the next four years. We are favorably disposed towards this expansion. That is why we did our impairment testing on the expansion model.

We have a real opportunity with a very large resource, and a brownfield expansion project. So, what we have done is take a pause, given the current gold price environment, as we look to a major capital expansion that would take 35 months, and we are really just being prudent from that side of it. We still see all the benefits and merits of what this expansion could do for us.

All right. Thank you.

Patrick Chidley, HSBC.

Yes, good morning, everybody. Just going back to Tasiast then: I think I saw that you are planning to spend $155 million on CapEx on stripping, in particular, at Tasiast. Could you tell me how many tonnes that equates to?

I think the first thing, so what I would say there, Patrick, is that the $155 million is not in its entirety for stripping alone. What we have in that number is the close-out costs associated with the projects. And so, that number is closer to about $100 million, $110 million for the stripping.

As far as the tonnes that would be moved during that time, we are talking about [65] million or thereabouts. That is both ore and waste, yes.

Ore and waste, thanks. And would this be something that is effectively almost a pre-strip for the larger expansion?

Certainly, it lends itself towards exactly that.

That is why it's capitalized, as sort of a non-sustaining CapEx?

Yes, that includes a value of the greater project to greater mine going forward.

Right. And just to clear up an earlier question, you said that the Piment pit is coming to an end. So, where does that mean that by the end of the year, will you be mining all Greenschist?

No, no, we have got other sources online. We have -- as far as the Greenschist is concerned, we would be moving from around 20% during the course of the quarter one, quarter two, moving up to close on 40% towards the end of the year. So, we are moving deeper into that area.

So, we should expect grades to go up, and maybe processing costs to go up because of the harder ore?

Yes, what I would suggest is that the grades would be pretty consistent with what you saw in the last quarter of 2014. And that would be pretty consistent going forward.

As far as the ore material is concerned, again, what we saw in 2014, the end of 2014 in terms of throughput and costs, that would be pretty consistent. I would be quite sure that we would be able to maintain that with the efforts that I raised earlier on in this call.

Okay. Great. And then the costs of mining that you are forecasting for, in particular in that -- moving that to Tasiast -- that's assuming an oil price of $90 a barrel, is that correct?

That is what is in our budget. And what that also -- indicates that the cost of oil in Mauritania has a degree of control on it. As to whether we see the full benefits of the oil price as it changes on a global basis -- we don't see that immediately in our operations.

Okay. Thanks. All right.

Then just moving to exploration, you've highlighted a few interesting details I think at Tamaya. Wondering if you could maybe give us a little bit more color on what you see there? It looks like it's -- is it about a kilometer long already? And what sort of mineralization is it?

I've got Sylvain here with us, and so I'm going to ask Sylvain to take that one for us.

Good morning, and thank you for the questions. Yes, Tamaya is located on our Tasiast [south] license -- exploration license. It is about 10 to 12 kilometers to the south of the operation. It is a near surface mineralization with shallow dipping to the east. The [solid mineralization] is dissemination, and as well quartz veining and stringers. This is early stage exploration.

As you said, mineralization is defined about over a kilometer strike line. It is also defined down deep to a depth of 100, 250 meter. So, we are going to be following up in 2015, as infill drilling increase the level of confidence. And if all the right information is there, we are going to proceed with possibly our first resources on Tamaya.

First resource by the end of this year?

Yes.

Okay, great. And what can you say about the continuity, along strike and down dip?

We have been testing along strike this year, some reconnaissance fences. So, basically what the result is that we have delineated about a kilometer strike length, where we have good level of confidence. It is still open down dip, and there is more [delineating] requirement to increase level of confidence on continuity of that.

Thanks. And that deposit then, is it potentially a satellite deposit would you say? Or is it a little bit too far away for -- given what kind of grade are you looking at there?

Yes, it is considered as a potential satellite deposit to Tasiast. Of course, we are still evaluating, and need to define what will be the average grade, and which portion will be coming from the oxide, or what portion will come from sulfides, and all the economics attached to it, to get it to the Tasiast site there. But definitively believe, yes, this is considered as a potential satellite deposit to Tasiast.

Phil Russo, Raymond James.

Yes, thanks. Just in Brazil here, you talked about the possibility of power rationing there. Can you just expand on the situation down there?

Hi, Phil. As we currently stand, there is no rationing. However, we are consciously aware of the situation across the entire country, as far as the drought is concerned. We had the experience, going a number of years back, where the drought was not nearly as bad as it currently is, and where the country brought in restrictions on power usage. In fact, at that time, it was a restriction of some 20%.

What the country has done since then is introduce more thermal power-generated supply. And so, whilst there is less dependency on hydropower, hydropower still is a major component. And we keep an understanding of the state of the water sources across the country. And we are cautious that, and as they continue to speak across the country, we are cautious that those restrictions are going to be imposed on us. So, what we have done is we have given it some thought as to the duration and extent, and have put that into our current guidance of the 2.4 million to 2.6 million ounces across the Company.

Okay, thanks. Can you elaborate at all on what do you actually incorporated or included there at Paracatu?

I could best describe it as a 20% reduction on power supply for a period of six months.

Okay. Maybe just one more question for Paul. Just, now that Tasiast's expansion is in a -- we are calling it a holding pattern here -- how does this change your view towards M&A, if at all?

Look, I think what I've said in previous sessions is I don't know a single mining company in the world that's managed to maintain and grow from just internal exploration. I also observed that the nature of the industry is we have effectively almost sort of a pyramid type structure, where you've got builder operators up at the top, and you have got literally hundreds of explorer juniors down below.

So, I think M&A is part of the fabric of mining. It's always going to be there. And I think we, like everyone else in our size category, have a process where we keep an eye on what's out there.

It certainly hasn't been our focus in the past two years. We have been really focused on our four guiding principles. And I can't really speculate on what M&A might appear, or what opportunities might present themselves.

What I would say though is if an opportunity does present itself, that we would try to play from a position of strength, both balance sheet and technical track record. So, yes, I think it's -- M&A is always there. It certainly hasn't been our principal focus, but we, like everyone else, have a view on what's out there and what might make sense.

Okay. Thanks.

There are no more questions at this time.

Great. Well, thank you, operator. Thank you, everyone, for joining us today, and we'll look forward to meeting you in person in the coming weeks. Thank you.

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