紐蒙特黃金公司 (NEM) 2001 Q1 法說會逐字稿

Good afternoon and thank you for holding. All participants will be able to listen only until the question and answer session of today's call. This conference is being recorded as the request of Newmont Mining Corporation. If anyone has any objection, you may disconnect at this time. I would like to introduce today's conference leader, Ms. Wendy Yang, Director of investor relations. Ms. Yang you may begin.

Thank you operator. Thanks for joining us today at the Newmont Mining first quarter conference call. This call is being simultaneously web cast on our website and that is at www.newmont.com. We will be discussing some forward-looking information on this call. So, you should be aware of the risk factors you need to eye in this industry that are described in more detail in our filings with the FBC. In view of FBC disclosure rule, we are trying to provide some guidance on our outlook for 2001 and beyond. However, we apologize in advance if this rule prohibits us from addressing some of your specific questions. With me on this call are Wayne Mardi, President and CEO and Bruce Hansen, Senior Vice President and CFO who will review the results for the quarter and comment on our outlook. We will begin with Wayne. Wayne...

Thank you Wendy. We again had a good operating quarter in terms of production and cash cost. However, we continue to be challenged by the low gold price. New Mart, in the quarter, produced 1.4 million ounces of gold at total cash cost of $172 per once. During the quarter, we also completed the Battle Mountain Gold Company merger and related adjustments with an eye to maximize the future cash flow in this gold market environment. First quarter was abroad to these efforts as we incurred nearly $44 million in after tax charges related to the merger transaction and some associated staff reduction cost. As a result, for the quarter on a bottom line basis, we have reported a net loss of $38 million or 20 cents per common share. Looking at operations, on a quarter-over-quarter basis, production rose 7% to 1.4 million equity ounces. While cash cost rose only a dollar, basically unchanged at a $172 an ounce despite higher energy cost and some planned lower grade in several of our locations. The biggest swing factor unfortunately for the quarter was price with our average gold realization falling $24 from a year ago to $264 an ounce. Our average copper price declining 4 cents to 74 cents per pound versus a year ago. Take a couple of minutes and look at the operations. First of all in North America, we saw production rise 9% to 857,000 ounces in the quarter. The data posted at a 16% increase in production almost 100,000 ounces with 9% lower cost due largely to higher grade or from some inventory stockpiles at the end of last year that came from the last mining of the post surface deposit. Higher grade than our underground mine and improved recovery rates through our refractory nodes. In Canada, we did see lower grade and fewer tons which cost us about 30,000 ounces in the quarter versus a year ago. Total cash cost in Canada were $193 per ounce. Overseas, equity production rose about 5% with cash cost of a $123 per ounce. Consistent with our plan, cost increased overseas due to longer hauls and higher striping at Yanacocha, Peru and lower grade Muruntau in Uzbekistan. Cost at Yanacocha will increase as La Herradura deposit comes into production at year-end and that has been consistent with what we have been telling the street. It had $109 in the first quarter Yanacocha remains among the lowest cost mines in the world and clearly a mine where we continue to see tremendous upside potential. Copper and gold production at Batu Hijau was on target with 90 million equity pounds of cooper and 70,000 equity ounces of gold respectively. Cash costs were also reduced by 5 cents, 48 cents per pound. We remained on target to produce copper this year at about 45 cents a pound as Batu Hijau continues to perform well. However, low metal prices caused us to have to report a $4.4 million loss for our account after having been profitable in the last two quarters. Our other overseas operations Minahasa in Indonesia, Kori Kollo in Bolivia and Vera/Nancy in Australia, all equaled or bettered their performance of a year ago. As we look at the business, our goals for the next several years in this gold price environment are still intact. We must return to profitability proving our return on the invested capital and reducing long-term debt over time as we manage our operations in this goal price environment. We continue to adjust capital and operating plans to minimize spending except for a higher rate of return capital projects like the La Quinua project, at Yanacocha and deep post underground mines in Nevada and the Zarafshan leach pad expansion in Uzbekistan. Response to the gold price in the first quarter we closed seven exploration offices worldwide following the Battle Mountain merger and reduced our exploration budget for the year to $45 million from $65 million spent last year. We have implemented gold metal performance programs with all the battle mountain mines, we have reduced the work force through a voluntary early retirement program targeted attrition programs and merger related synergies resulting in a reduction of the work force in the United States and our global exploration staff by about 5%. We deferred pre stripping and gold quarrying at the gold quarry expansion project in Carlin until we see better economics. As I noted earlier, the transition of the Battle Mountain operations to confirm to our systems is virtually complete. With additional reduction in exploration budget, this year keeping to the lower end of our cap ex projection of about $330 million, we expect to exceed our projected savings of $25 million in annual synergies from the merger and restructuring initiative. Our exploration program will concentrate on our producing districts where we have facilities in place, especially Yanacocha for which we spend about $20 million above the same level of last year down from a previous budget of Our longer-term goal of debt to equity ratio of 25 to 30% remains intact. The key to achieving all of our objectives is better planning on capital spending to ensure that funds are invested only in the highest return projects or realistic gold price assumptions. Our current projects meet that test and as Bruce will comment on it in a moment. We are focused on high return projects. We have several projects in the pipeline for the next generation of production. Phoenix gold quarry expansion, section 30 expansions at Twin Creeks and Lone Tree all in Nevada represent about 13 million ounces of gold. In addition, we see tremendous upside at Yanacocha beyond the 2-1/2 million ounce level that we will achieve in several years. Our mine planners are continuously improving on the economics of these projects and will go forward when they achieve our return goals or a higher price environment. Continue to demonstrate excellent operating skills. All of 2001, we are on schedule to produce about 5.4 million equity ounces of gold, the cash cost of about $180 an ounce. Think, as we get into the first quarter, we will say, we would have a reasonable shot at beating that cost projection. Buyer cost are soon rising energy cost as well as the fact the cost at Yanacocha will rise in higher diesel cost and lower ore grades. However, we have seen some good news from Nevada on the energy front. The legislature has mandated fixed rate for Sierra Pacific through balance of this year. Sierra Pacific provides us with about 110 megawatts per hour of the total 175 that we consume. This means our electric break through the rest of the year is fixed at 6.6 cents per kilowatt-hour frozen as of April 1st. But we will not have the previously anticipated monthly step-ups, potentially 7.5 cents per kilowatt-hour. We continue however to look at long term solutions to the energy dilemma in the west and we see some excellent potential for participating in projects that will fix our rates well over the long term. Peru at Yanacocha, we continue to be pleased with the operation and the continuation of our exploration of the sulfite stone steeper. On a longer term, Yanacocha represents a tremendous asset to its owners. As we look out over the next several years, we expect to remain a 5 million year plus ounce a year producer and we can see our cash cross from the 2004 to the 2005 time frame getting down to about a $160 an ounce. Let me now make a couple of comments about the gold market. These are tough times for gold but as we have said before, this industry is a marathon race not a sprint. We do not believe that these historic low gold prices are sustainable. With production beginning to decline worldwide, we expect to see less incremental producer hedging and less central bank lending twin punches that have largely been responsible for weighing the industry low over the past several years. We also expect to see some improvement in jewelry demand in the west as economies recover and the upcoming world gold counsel marketing effort expands, thus we believe the price will return, we continue to be largely unhinged. Our shareholders have suffered during the market down turn and want and deserve to fully participate in any gold rally. Hence we can predict that timing; we continue to find ways to do with less to maximize our cash flow. With that, I would like to now turn it over to Bruce to comment on more detail on our operation and financial results.

Thanks Wayne, clearly from an operating standpoint, we had a good quarter. Again, our net operating loss was 5.5 million or 3 cents per common share excluding one-time and non-cash charges. Compared to the consolidated profit of 10.3 million or a 5 cents per share in the year ago quarter assuming from a bowling prospective that the Battle Mountain merger had been in effect for that. The merger restructuring charges totaled $16 million pre tax or 44 million after tax. This includes 28 million for the battle Mountain merger and 10 million related to exploration office closures. In addition, the cost for the early retirement program was about 22 million of which about 15 is really non-cash for Newmont and will be paid from the Newmont retirement fund. Therefore, we expect to recruit this cash cost within a year and save about $8 million a year annually going forward. We continue as Wayne indicated to make adjustments relative to the price to enhance cash flow. However, operating cash from the quarter did drop to roughly 19 million from 92 million a year ago. This was driven by the cash impacts of the one time merger and restructuring charges. Of course, lower gold price realizations, we had $24 an ounce less than in regards of the gold price and the completion of deep post, open pit mine ore that benefited last year from the amortization of deferred stripping charges. Now, moving on to our financing plan, as you may see this, we commenced the marketing at the $250 million investment grade public debt issue. We used the proceeds of this issue to refinance and trim out our existing credit facility balances, which on March 31st, totaled 215 million. The excess funds will be we used to refinance other debt on an opportunistic basis or for general corporate purposes. This deal will essentially be net debt neutral. Upon completion of the public debt issue, we will then look at refinancing our existing revolving credit facility, which in total will provide the necessary financial flexibility and equity to sufficiently handle our upcoming 2002 maturity obligations. With the $150 million 85H notes, coming due in April of 2002 and the revolver coming due in July of 2002. Clearly, we feel that capital markets are favorable currently thus proving interactive opportunity to allow us to refinance debt and extend the overall maturity schedule of our obligations. Just a few more items on the income statement I am looking at, non operating items, you should notice that TDNA was cut by $11 million to $765 million, principally related to the write downs that were taken at the end of last year on the properties of Hallway, Kori Kollo, and Mesquite. Interest expense also dropped $4.5 million to $20.3 million due impart to a slightly larger component of capitalized interest in the quarter in 2001 and also lower interest rates on our revolver balance. Finally, in regard to capital expenditures, capital expenditures in the quarter were roughly $100 million of which nearly two thirds was Yanacocha primarily focused on La Quinua project. For the full year, we will continue to review our total, roughly $330 million capital budget. In addition, we spent roughly $23 million in Nevada including funds to facilitate the start of the deep post mine. These two principle projects La Quinua and deep post underground mine in Nevada are both high return projects that fully meet our criteria of investment. That concludes my formal remarks and at this point in time, both Wayne and I will be pleased to take any questions that you may have.

Thank you. At this time we are ready to begin the formal question and answer session. If you would like to ask a question, you can press star (*) 1 on your touchtone phone. You will be announced prior to asking your question. To withdraw your question, you may press star (*) 2, again if you would like to ask a question, you may press star (*) 1 on your touchtone phone. One moment please. Our first question comes from Mr. Victor Flores of HSCC. Sir, you may ask your question.

Thank you, good afternoon. Three quick questions, first of all over the Nevada cost of 215, how much of that was due just to the power situation? Sorry, 215 was your estimate for the year.

And Victor what is your question?

How much of the reduction we previously had talked 2.5. Victor, I think roughly $7 or $8 million or roughly $3 an ounce is related to the power situation. In addition to the power cost stabilizing, we are looking at some re-sequencing operations. We will be taking some of our fleet that was previously scheduled for the gold quarry expansion to the North area leech and we should see some benefit from that as well.

Great thank you secondly there was a mention of when I went through the call about some transitional ore that was processed and I guess that accounted for perhaps somewhat lower production given the lower recovery. Is there is a lot of that material that you expect to be processing? Because my understanding was that you are just going to do pure oxide ore for a long time to come.

Our operation is focused on the oxide ore there is a large amount of transitional ore in the Yanacocha that in fact we are looking for what I will call our next generation process. Some of that may get in from quarter to quarter but its not a focus and should not be a big impact on our operations.

Great gentlemen, just finally can you give us an update on Phoenix?

Phoenix as we continued to move on the permitting we expect to have the permitting completed by September. I think at this point in time, we continue to be encouraged by the metallurgical work we are doing on processing and that's all then to enhance the returns and though we see a difference in gold price we continue to say the best is our.

I apologize you cut out their way and I did not hear the last part of your comment.

We continue to say that that is deferred at least another year, until we begin to see better gold prices.

Okay great. Thank you very much. Leann Baker of Salomon, Smith, Barney, you may ask your question.

Good morning I have just a couple of questions could you elaborate a bit on the situation in Nevada with Sierra Pacific? Eric had indicated that there is some proposed legislation that would potentially produce I guess reduce the dependence of the gold companies on Sierra pacific is Newmont involved in lobbing for that how do you view this status of it at this point?

Oh yes Leann, we are involved especially in effort to carve out per say large industrial users from essential the regulatory regime within Nevada for us that would provide flexibility automatically for the development of the power of gas fire power plant near Carlin that I believe you have seen on the release some time ago about entering in with a letter of intent with El Paso Energy. So that helps to facilitate as well does provide some additional options. I think politically within Nevada this is a mechanism of baby taking some of the larger load off of the system and providing flexibility for the reach out consumers.

Okay thanks, and then on the deferral of gold quarry what would the impact be this year on your capital spending of that how much you will be spending this year?

About 6 million dollars.

As you recall Leann, you know earlier we talked about just stripping a gold quarry as we had incremental capacity to do so that's what we have been doing but at this point of time we are now deferring that project until we see better days.

Okay great and then one last question has to do with your insights in terms of any recent developments that you may have heard of regarding the central banks and the possible second stage of the Washington agreement is there anything currently going on in which the gold producers are involved with discussion with the central banks?

I think it is fair to say that there is continuing dialogue but there is really nothing new to announce there with it essential banker's reaction is that you know very early at this point. There is also I would say nothing to indicate that there is any different views as long turned then what they have already done.

Okay great, thank you very much. John Tumazos of Sanford C. Bernstein, you may ask your question.

Good afternoon, excuse me, your press release indicates a 74 cent copper realization I believe that the Commix averaged 82 and the LME 80 for the quarter could you please explain the pricing formula you have with your customers?

John this is Wayne there is a provisional price based pay based on spot at the time the concentrated ships from port and then there is a series of adjustments, which is basically the price gets adjusted to about 90 day lap so in a period when the prices are declining you have a catch up overlay.

So there was a six sign adjustment from the fourth quarter shipments?

Yes. You can put it that way.

Thank you. Could you also explain the 14.8 million dollar minority interest by mine? There may have been something in there from Kori or Minahasa as opposed to Yanacocha.

The impact of the other mines other than Yanacocha is relatively minimus.

How much of the 14.8 is Yanacocha?

John, we are going to have to get back to you on that break down.

Thank you. Mr. John Bridges of JB Morgan, you may ask your question.

Good afternoon everybody. I guess like last year the production schedule profile is going to be pretty loaded into the end of the year given the Deep Post and La Quinua. I wonder if you can give us some guide lines in particulars to what sort of production profile you are expecting out of Yanacocha and maybe give us some ideas is to bench marks on the La Quinua development. You know, what you are looking for in terms what production you expect when?

In regards to the production profile, I mean John we have given you the full year equity ounce target of 5.4 million ounces. We did 1.4 in the first quarter and I do not think it is probably going to be as back loaded as we saw it in the past. So I think I mean that is about as much guidance that I can give you in that regard.

Thank you. Looking your La Quinua project you know what sort of wise actions are you looking in that you have to get power there to make that work. When do you expect that to happen?

At work, we are currently looking at a scenario where we would probably hold off starting up La Quinua or Kori Kollo until the power is available just because of the alternate cost of using diesel. So, that is probably a November December time frame. We are saying that once La Quinua was up and running full ore we would be producing about a million ounces a years. We will now ramp up over next year but we do not expect to suffer any production decline because of that decision we can take additional ores from the Yanacocha pit in the forth quarter to make up for that delay.

Okay. Thank you. Mr. Adrian Day of Global Strategic, you may ask your question.

Yes thank you. If I may I would like to congratulate you on actually being one of few gold companies to discuss gold in your annual report that is very gratifying to see. My question regarding your new debt you mentioned 200 and something that is outstanding, what is the total amount available on the revolver? And when you do renegotiate it, are you intending or hoping the renegotiate the same amount or more on the revolver?

Yeah, current order, the end of the quarter balances are on the revolver were 215 million total capacity under the revolving credit facility is currently a billion dollars. When we look into the market going forward, it is our goal to bring that revolver capacity amount all the way down into the 5 to 6 hundred million dollar range. Quite frankly, we don't want to pay for the additional commitment fees associated with it. And looking at our long-range plan and the cash flow capacity of the company frankly we don't need the additional capacity.

Okay that is good. Good to hear. Thank you. Jeff Stanley of B&O firm, you may ask your question.

Thank you very much. Most of my questions are been answered but perhaps you could give us some idea of the cost of the debt that you are in the process of arranging the moment and I believe that is all I have.

Jeff, I mean right now we are an investment grade rated company with triple B with SMP and DAA3 with moody's. We would anticipate to issue the step was spreads that are relatively consistent with those ratings obviously we are in a more singular sector and so there may be some adjustment there.

Okay, great. Thank you very much. Leo Larkin of Standard & Poor's, you may ask you question.

Good afternoon. Could you give us any guidance for Capex for 2002?

We have not previously given guidance to the market in terms of Cap X going beyond 2001. I can say that it is safe to say that with Newmont over the last few years has invested significantly in regard to capital expenditures. I think on the ongoing basis looking forward we would anticipate generally half lower capital expenditures on a go forward longer term basis.

Thank you. Mr. Terrence Ortslan of TSO Associates, you may ask your question.

Gold quarry expansion project. What was the total number? Could you remind on that, so you take the deferral decision on that.

I think we are going to save six million and I think initially at the first year we talked about maybe spending as much as 10 million dollar so I think maybe 4 million is what will be spent.

How big was the project initially, the stripping?

How big is it in total? It is a multiyear project roughly 20 to 25 million dollars worth of stripping total.

If you are going to back in there, you can go back in there within about quarter or two?

No, we cannot go back into it immediately. We can just setup the loaders and the trucks and away we go.

From a point of power what do you think the long-range sustainable rate is in Nevada for industrial operators like the mining industry for new and barracks and all? I mean, you say 6.6 cent per hour, I still scratch my head compare to what I have seen in Canada's lower rates. Are we stabilizing on this level or is there any potential of it coming down?

Now it is hard to speculate you know as going forward in regards to supply and demand balances and the Western United States and hopefully where that will legalize. I think it is fair to say that we are accurately managing our power situation in Nevada than we look forward in regards to our potential involvement with this power plant in the Carlin area. It is our hope to bring power cost back down to our historic cost structure that we have seen in the past which is you know in the 4 to 5 cent per kilowatt hour range.

Okay, first on the SMP they have you down to negative from stable. You mentioned early, the investment grade stall. Has this impacted your present public day offering and also the revolver?

Obviously the investors when they are going to look at Newmont and they are going to look at the releases that were issued by both SMPs and Moody so we will take that change and outlook in the consideration. But obviously we were down graded. I think both the agencies appreciate the capacity and flexibility that Newmont has had and will continue to have in managing its business as the function of the price.

Thank you guys. Ben Irwin of Green Murray and Company, you may ask your question.

There is another question on the $250 million purposed public debt offering. Part of which is going to be used for general corporate purposes. With your cost snugging up a little bit gold prices down a bit, are you beginning to feel little bit of tightness in you cash position, one and two, your debt equity ratio what will this do to it and where would you like to see that debt equity ratio say 2 years from now?

Let me address the last part of your question first. We have publicly stated that we are roughly at a 40% debt to cap ratio currently looking forward. Now our target ranges it to get into 25 to 30% debt to cap range. In regard to short-term impacts you know combine cash flow from operation plus the liquidity provided by our revolving credit facility, that does not strain us as a regards to our financial flexibility. We have a lot of financial flexibility currently.

Thank you. Again if you would like to ask a question please press star (*) 1 on your touch-tone phone. One moment please. Michael Fowler of Harris Partners Limited, you may please ask your question.

When you mentioned alternate sources of power, can you just elaborate on that comment?

We have previously announced that we have signed a letter of intent with El Paso. El Paso is looking at a project that would bring natural gas from the rocky mount region on a pipe line initially would go into Nevada and probably ultimately going to California and they intend to build a 500 megawatt power plant and on our GS ranch. That is the alternative that we are looking at. Based on the review at this point and time it is relatively early days but that looks like a very attractive proposal the nice thing with gas fired plants is that you can permit them fairly quickly and as Bruce indicated politically within the state of Nevada we are getting a lot of encouragement.

When did you say the timing was on that?

I think that the earliest date there would be towards the end of 2003.

2003? And have you had any work stoppages like barricades in your facilities?

In Nevada?

Yeah.

Not that I am aware of, No.

Okay. Thank you. Chris Temple of the National Investor, you may ask you question.

Yes guys, I have 2 questions. One is with some of the funds you are going to be raising or anticipate rising, do you have any intention of looking, shopping around for some cheaper assets that might be accretive to earnings down the road as to your own current asset basis? Secondly, as far as the price of gold is concerned how much credence do you put in the efforts of this outfit called GATA the Gold Antitrust Action Group to try to bring to life the short selling game that has been going on for the last few years?

I think your first question, the purpose of this offering is met to be a refinancing occurrence of current debts so it would not be used for accusation purposes, however, you know, we continue to look at the accusation opportunities and if we see something out there that accretive to our shareholders that is due able, we will pursue it. With respect to your second question we have watched GATA with interest but really have no comment on there efforts per say.

Operator. Mr. Martin Royer of MSR Capital management you may ask your question.

Proved receptive to this offering would you have any interest in raising the quantity of funds you are looking to finance?

I mean the target right now is $250 million. You know, we are just going to have to see how it evolves and whether there is additional capacity but we would not look for much more than that if there were stronger demand.

Thank you. Ms. Yang, at this time there no further questions.

All right well, thank you very much for joining us today, and this concludes our calls.