紐蒙特黃金公司 (NEM) 2002 Q1 法說會逐字稿

Your lines on a listen-only mode until the question and answer session of today's call. Today's call is being recorded. And if -- on behalf of Newmont, if you have objections, please disconnect at this time. I'd like to turn the call over to Mr. Russell ball. Sir, you may go ahead.

Thank you for joining us today to review the first quarter 2002 financial and operating performance of Newmont. I wanted to briefly introduce myself. I'm Russell Ball and I'm the new Group Executive of Investor Relations. I recently returned to Denver after almost five years in Indonesia Finance Director of Indonesian Operations and Controller at the copper gold mine. You already know Wendy Yang, Director of Investor Relations. We are working at a team you should feel free to contact either one of us if you have any questions. Now, I on to the conference call. The call is smell cast on the web site and available for a limited time for play back. As discussing forward looking information, you should be aware there are risks unique to the industry detailed in the filings with the SEC. The information we are discussing today may 15, 2002, is relevant for the current period. For the most up to date information, refer to the latest SEC news filings and releases. Speaking today are Wayne Murdy, Chairman and Chief Executive Officer, per less song, President, and Bruce Hansen Senior Vice President and we have with us Dave Francisco, executive Vice President of Operations. Wayne, please go ahead?

Thank you, Russell. Good afternoon. We had our 77th annual meeting of shareholders this morning which was very significant because it was our first annual meeting as the new Newmont Mining, Franco-Nevada Mining Corporation Limited and Normandy Mining Corporation. This is an exciting time for all of us as shareholders or employees as we forge a new path for the gold company of choice. We are well positioned at the premier gold stock and as you can see from our full year forecasts, released today, 2002 should be a strong and profitable year. The gold price has been strengthening this year, as you all know. We're seeing gold spot prices trading within a bandwidth of higher highs and higher lows. We remain committed to our no-hedging philosophy to provide our shareholders with maximum exposure to rising gold price. First quarter of 2002 represented a transition and is not indicative of our full year's performance. It was a noisy quarter, from the standpoint of consolidated results for just a half quarter or frank Nevada and Normandy and accounting adjustments related to the acquisitions. For the quarter, Newmont had a net loss of 10.9 million dollars or 4 cents a share after a noncash, after tax mark to market gain from derivatives of 12.3 million. This compares to a net loss of 39.1 million or 20 cents a share after a mark to market gain and merger related charges for the first quarter of 2001. Our results for the recent quarter were impacted by higher operating costs and reduced production due to lower grades from mine sequencing, at several of our major operations. First quarter will be our lowest production and highest cost quarter for the year. Our mine plants in Nevada, and Carachugo in Peru and in Australia indicate a rising production profile for the year and a corresponding decline in costs for subsequent quarters of 2002. Despite lower production, and increased operating costs, net cash generated by the operations increased almost four fold to $73 million for the first quarter. But don't let all the noise of the quarter distract you. Our 2002 goals outlined in the news release earlier today are realistic and achievable. For the full year, reflecting 10 1/2 months of Normandy and Franco-Nevada results we expect to accomplish the following: Equity gold sales should be 7 1/2 million ounces at a cash cost of 180 dollars an ounce. Operating cash flow should approximate three quarters of a billion dollars. We see asset sales now achieving some 400 million dollars of cash generated this year. And we will reduce our debt to a debt to total capitalization ratio of less than 20% by year end. And we expect to replace reserves net of production by year end 2002. Achieving these goals should provide Newmont with full year earnings per share from operation in the 40 to 50 cent per share range, assuming current gold prices and before accounting for mark to market adjustments. As a largely unhedged producers, Newmont's cash flow and profitability are leveraged to gold price. A 25 dollar per ounce increase in the gold price generated $106 million approximately in incremental annual cash flow, and $110 in incremental annual net income. As we continue to integrate and harness the strengths of the three companies, we fully expect to achieve our synergies previously stated between 70 and $80 million per year. As part of the integration and synergies program, several finance related initiatives were completed that enhanced our liquidity while reducing our long term debt. Bruce will give you an overview on the activities in this regard. Our plan for 2002 and beyond has a simple bottom line. We are dedicated to creating value with every ounce. And maximizing value to our shareholders. In combining the resources of Normandy and Franco-Nevada with Newmont, we're focused on two strategic value drivers. Value created -- creation headed by the group that peer what son runs and value realization which is headed by the group that Dave Francisco runs. The value creation component combines Newmont's and Normandy's proven track record with the new business of Newmont Capital. Newmont Capital is modeled after Franco-Nevada's successful merchant banking and royalty investment business. The value realization component will build on our global skills to generate the maximize value from our existing operations and development projects. We will continue to emphasize major gold districts in Nevada, Peru, Australia, as well as the Batu Hijau project in Indonesia. The key objective of Newmont Capital is to help the corporation manage its portfolio of assets and to maximize the potential of our vast land package of 94,000 square miles. Including holdings in some of the world's best gold districts in Nevada, Peru and Australia. With Pierre handling the reigns, we'll be relentless creating value whether we're buyer, sellers or traders. We have previously announced a goal between 250 million and 300 million in noncore asset sales for 2002. Today, we're raising that goal to approximately 400 million primarily as a result of increased buyer interest in the current rising gold price environment. We have already realized 210 million with our sale in April of our 9.7% equity interest in what here gold for 84 million, as well as funds realized from Franco-Nevada's sale of its stake in amber diamond company earlier this year. Further to our asset portfolio management, Newmont is also focusing on district rationalization opportunities with its gold mining neighbors and partners in Canada, Nevada, and western Australia. Both Newmont Capital and exploration are under Pierre's direction so let me turn the Mike over to Pierre for a few minutes to remark about those exciting opportunities.

Thanks, Wayne. Good afternoon, ladies and gentlemen. It's a pleasure to be on this conference call to talk about the new Newmont and our vision for the future. At Newmont Capital, the group that is in charge of value creation, we have three objectives clearly in front of us. The number one objective is to maximize the value of the assets that do not fit this company core assets and values going forward. As Wayne pointed out, we're well on our way to realize $400 million of value from some of these asset, and we will be relentless in pursuing the best opportunities for the disposal of assets that do not fit this company. Our second objective is to maximize our royalty cash flow. We said when we did the three-way transaction that the royalties would be a cushion for this company against low gold prices and one of the ways to increase our royalties to maximize our tremendous land package. We talked in terms of 60 million acres, the size of the U.K., and how do we leverage that? Well, we intend to be open for business, let other people, let other companies, junior who have better ideas and that have the means to come in and explore in our land, they're going to be welcome. And we're going to work hand in hand particularly in the places where we have already infastructures like Nevada where we have considerable amount of expertise. We have assets, mills, roaster, and other facilities that are available. We are going to be open for business, and leverage ourselves up by using their talents and financing capability. And then the third way is to maximize our own exploration effort on our land. Newmont as a core competency in exploration and I won't hide the fact that replacing 7 1/2 million ounces of reserve a year is not a challenge. It is. There's no question about it. But the law of size works for us. When we have the kind of land package that we have, I think that we have a better chance of doing it than anybody else. We are going to be focusing on the three major gold belts to start with. Brown field exploration, in Nevada, we are transitioning to more high grade, low coast underground mines. We have opportunities to further development underground reserves at -- in the -- what we call gold margin corridor between deep post and deep star. We also are looking at developments of [Lesel]. Progressing with studies on that particular deposit. The point here that I want to make, though, is that as we transition to underground reserves you can't expect us to have 15 years of reserve on those deposits. It clearly would not be economic to develop underground reserve you're not going to mine for 15 years. Typically what you'll find in Nevada is that we'll start with somewhere like 5 to 7 years of reserves and it's going to stay at 5 to 7 years for a long time to come. I'll give you Carla niece as an example. Brought into production in 1994 with 400,000 ounces of gold in reserve. Eight years later, after we've mined and what we have in reserve, the deposit grown to 1.7 million ounces. More than quadrupled the original reserve. Don't expect to quadruple every single one of our underground deposits. Some, of course, will be what you see is what you get. And others will be like this one, but the reality is that these deposits do tend to grow as we get underground and we start mining and better defining them. In addition, the Normandy acquisition has given this company a number of very, very excellent development projects. We have in Ghana, two projects, and in Indonesia, we have mar that by. Between these three deposits, we have well over 100 million tons of about two grams gold and for those who don't quite understand grams, that's about 0.06 gold per ton. They're low stripping, low capital costs, potential low capital costs deposit to develop. And very attractive in the current environment. What it boils down to is in pooling the collective talents and the proprietary exploration technologies of Newmont and Normandy, we have a pipeline of projects that we believe is unequal in the business. And, our goal this year at Newmont is to replace reserves net of production. Now, Wayne knows that when I have the microphone, I just have to speak about one of my passions which is gold. And, I won't belittle the fact that the gold has been in very good rising market and the fence sitters that missed the 45% rally in the XCO, the Philadelphia gold and silver index so far this year and I'm pleased to say that Newmont is up more than that in the year and it is, I believe, a clear investment choice as our nonhedging philosophy is promising, I think, financial returns that are the best in the industry. We want to be known as the gold company. And, as the broader markets and paper and currency reflect economic weakness in the global market, gold has reclaimed its role as a store of value and safe haven. If you look at what's happening in Japan, that is only a little indication of increasing financial demand. Last year, Japan used about 70 tons of demand. This year, the number is going to be well over 200 tons, and climbing. Gold has an enduring role in portfolio diversify and for good return in counter cyclical to the broader market. In my view, gold is climbing the proverbial wall of worry that characterized every early stage of every bull market. This is the time for gold. Now let me turn it over to Bruce for more details on the financial results.

Thank you, Pierre. As Wayne noted earlier, the first quarter had a lot of accounting related noise due to the acquisitions in mid February. Reflecting approximately half a quarter of consolidation. For this reason, the first quarter is really not an accurate representation of coming quarters. The full year forecasts we provided reflect ten and a half months of consolidated results and sales from Normandy and Franco-Nevada. Now, let me give you just a two minute summary of the nuances of purchase accounting and the impact on these acquisitions. One affect of the accounting rules is in our depreciation. Depreciation and in process inventory increased due to the step up in the basis of the recently acquired assets under purchase accounting rules. Which is contributed to our higher total production costs of $262 an ounce this quarter. The higher step up in inventory value which was about 7 million dollars will be largely drawn down by the end of the second quarter. The increase in depreciation represents a $24 increase in production costs, or DDNA per ounce cost for the cumulative sales related to the former Normandy operations in the quarter. So that $24 increase in DDNA that's flowing through the total costs per ounce for the Normandy assets. Also, under purchase accounting, goodwill was recorded as an asset of 2.5 billion and is not subject to further amortization as we go forward. Goodwill representing the excess of the purchase price over fair market value will be reviewed, however, annually for possible impairment on a fair value basis. Obviously, the first quarter benefited from half a quarter of consolidation, and a higher realized gold price relative to what we saw a year ago, but as stated before, with lower production, slightly higher cash costs, equity gold sales increased about 100,000 ounces to 1.5 million equity ounces compared to the quarter a year ago. In Nevada; gold sales declined to 606,000 ounces as mine sequencing assessed lower grades resulted in total cash costs in Nevada of 239 dollars an ounce up from the quarter a year ago. The year ago quarter had the benefit of processing remaining stock piles of high grade ore from the open pit mine that seized at the end of year 2000. Gold sales at yeah that coach increased 4% to slightly over 471,000 ounces, but cash coasts rose to 137 dollars an ounce with lower gold grades and the on going commissioning of the new crushing and [gromoration] operations at [Lakeewa]. Gold sales from Australia totaled 239,000 attributable ounces at a cash cost of 170 dollars an ounce. Again, reflecting sales from less than 45 days in the quarter. Our copper gold mine in Indonesia sold 120 million pounds of copper, roughly 68 million equity pounds at a cash cost of 41 cents a pound. We realized an average price in the quarter on copper of 77 cents a pound, which was 4% higher than a year ago. As many of you know, (inaudible) investment, thus it's copper sales are not included in Newmont revenues. For the full quarter, Batu Hijau lost 1.2 million. Primarily driven by lower copper prices compared to a loss of 4.4 million in the 2001 quarter. As Wayne indicated earlier, all of the major operations including Batu Hijau are expected to show an increase in production and a decline in costs over subsequent quarters. Operating costs should also improve by the fourth quarter, through the cross fertilization of best practices of Newmont's gold medal performance initiative and the Normandy improvement program. As an early example of part of the synergies expected to generate, seeing $5 million in synergy savings through the integration of the Midas line under Nevada -- under the Nevada processing and administration umbrella and over 10 million dollars a year in worldwide procurement savings. Now, let me give you a recap of the financing activities that we have focused on and continue to work on in regard to the goals of reducing long term net debt and further strengthening our balance sheet. We have a stronger balance sheet. Cash on hand at the end of the quarter totaled nearly $512 million versus $47 million a year ago. Since the end of the quarter, we have since repaid Newmont's revolving credit facility and a zero balance at the end of the quarter. We also reduced our debt in terms of paying off $150 million note issue and totaling paying off the Normandy revolving credit facility in Australia. At the end of the quarter, our net debt to total capitalization ratio improved dramatically from roughly 40% to 23%. And our goal is to improve on this ratio to be under 20% by the end of the year. A major component of our identified synergies is reduction in interest expense and those reductions in debt that I described earlier will be a key driver in realizing net interest savings. Later this month, the company will also increase its long term financial flexibility and liquidity by closing an expanded revolving credit facility that takes the current facility up from 600 million to 750 million with the addition of 150 million dollar Australian bank front. We have no purpose at this point in time to draw on this facility. But, in the balance will be zero, but it does provide longer term flexibility. As previously announced, Newmont has redeemed all the issued and outstanding shares of its convertible preferred stock by issuing approximately 4.4 million in common shares. This redemption acreeditive to earnings and free cash flow will save the company about $5.6 million in cash this year for the remaining three quarters and approximately 7 1/2 million dollars annually thereafter. Also, during the quarter, Newmont provided a prorata advance of roughly 25 million to Batu Hijau under the continuing support facility to fund capital expenditures. But due to low copper prices on May 9th this last month, we have restructured our third party senior debt to allow for deferral of up to 173 million dollars in principal, currently due in 2002 and 2003. The remaining contingent support facility now stands at 115 million, and our prorata's share 165 million. I will remind you that the senior debt other than this contingent support facility is nonrecourse to the partners and is not recourse to Newmont. Also, as you may have seen on April 26th, Newmont filed with the SEC for an increase on its universal shelf registration statement from 500 million to 1 billion dollars. Which we believe is much more appropriate given the size of Newmont. This is essentially a company that has doubled in size and I think it's prudent for Newmont to have the financial flexibility afforded under this shelf as opportunities may arise in the future. Finally, let me discuss Newmont's nonhedging philosophy and our plans to continue to proactively reduce and simplify the inherited Normandy hedge book. As you saw in the first quarter release, we reduced the hedge book by about 250 ounces this last quarter to a total of 7.3 million committed ounces. We also have 2.2 million ounces of [putz] that provide downside protection but provide total upside participation. In the quarter, we reduced the floating lease rate expose your down to -- if you look at the entire book in terms of committed, plus the [putz], it was roughly 40% lease rate floating lease rate exposure. We'll be bringing that down over time as we go forward. Clearly, our goal as we've stated publicly before is to close out this hedge book in an orderly and timely manner. At the same time, we'll look at opportunities to accelerate delivery into and close out this book. For the remainder of 2002, we expect to deliver a minimum of 1 million ounces into the book. Whether it's the opportunistic unwinding of hedge book or investing in new ounces production, we're focusing on creating value with every ounce. It's about funding the highest return project given the current environment. We've allocated capital this year in a total budget of 450 million for 2002. 200 million of that will go to Yanacocha. 105 million is allocated to Nevada. And 100 million for Australia. With the full year forecast of gold sales of 7.5 million ounces, at a total cash cost of 180 dollars an ounce, we're well along in generating approximately 750 million in cash flow from operations for the full year. We have a winning strategy. We have world class core assets, an unrivaled land position, and skilled management team to accomplish our goals, our 2002 goals and more. We're geared and leveraged to the gold price and we're positioned truly to be the premier gold company, the gold company as Newmont. Thank you. That concludes our remarks and we're more than willing to address questions at this time.

Thank you, sir. If you would like to ask a question, please press star and then 1 on the touch tone phone. Questions will be answered in the order in which they're received. Our first question comes from Daniel Mcconvey. Please announce your name and your company's name. Sir, you may go ahead.

Goldman Sachs. Three questions. First, a couple, I want to make sure I believe it's right. 7.5 million is only for the excludes stub period for frank and Normandy, correct?

That's correct.

The price per ounce, only for the Normandy ounces?

That's correct.

Okay. Pierre -- excuse the background noise. For the reserve that you're going to replace this year, can you just go through maybe the best opportunities are replace those ounces again?

We're going to focus primarily around our existing head frames where the most of the money will be spent will be in Nevada. We think that Nevada is still one of the best places to find an ounce of gold in the world. So we are spending a fair amount of money there. The only place will be [Tatami] and around the ground rush operations and up and down the corridor, and then, in the yen do what gold belt between [Jonde] and bronze wing. And finally, also, of course, that Yanacocha. There's still great deal of potential for upside reserves at Yanacocha. We have like well in excess of 15 years and it's going to continue. I think we have a good chance there. Where else to mention, I mentioned the develop project, will advance the two projects in Ghana, [Akeem] and [Yemsosefowe] as well as [Martibi] and Indonesia.

Okay. From the areas is focused to replace the reserves?

That's correct.

Okay. Thank you.

Thank you. Our next question comes from John Brigs.

Hi. John Brigs, JP Morgan. I wonder, you're obvious allocating your funds to the higher rate of return projects, but there's so much negotiation presumably going on with respect to rationalizing different properties and I just wondered what we could expect to see coming from that. Could we expect to see a very different industry within six to 12 months as these negotiations develop?

John, this is Wayne. I guess I would say we're committed to this process of rationalization. I'm not sure you'll see a different industry in 6 to 12 months, but we are engaged in conversations with our neighbors. We have a history of achieving success in this area. Like anything else, you build on your past successes. So, in our -- we may do some smaller ones first before we approach the obvious larger ones, but I think some of our neighbors have made the same kind of public statements.

Okay. Just a quickie on Yanacocha. The capital budget, previously it was 270. It's been reduced to 200 now. What does that mean? What's that -- why did that come about and developed?

I think, John, reflects that fact that we've completed the [Laquonawa] project and we're in kind of more of a steady pattern. I don't know, Dave, if you have anything to add? Most are on going development of leech paths.

Is there a step wise quarter by quarter forecast of Yanacocha or do they want to keep it under wraps?

I think, John, we've given some guidance here in terms of the full year from the site, and I think with Nevada, with Yanacocha and Batu Hijau and [Tanama] mine, we have an increasing production profile through the subsequent three quarters of the year and that will be reflected in declining cash operating costs.

Thank you very much.

Thank you. Next question from Victor Florence.

Yes. Victor Florence from HSBC. A couple of questions perhaps Bruce can help me out to kind of cut through the noise. The $24 per ounce on the Normandy ounces probably works out to maybe 6 or $7 million. 7 million bucks in process inventory. Were there any other significant items in the quarter that ended up contributing the noise?

Yes, Victor. Another item is some foreign currency exchange losses of about $11 million in regard to the valuation of the monetary assets on the balance sheet that came over from Normandy that were classified in Australian dollars. So we're going to have on an ongoing basis, obviously, and we'll work to mitigate and minimize some future noise per se. We are going to have some of this in subsequent quarters, as well, along with the mark to market volatility related to the ineffective components of the Normandy hedge book. Our focus going forward, however, is to try to mitigate, simplify, reduce these volatile items going forward.

Great. Thank you. Can I ask a follow up on the hedge book, gut feel would be with the price going up, the price of gold going up, that is, that the mark to market adjustment on the hedge book would have been a loss opposed a gain.

Yeah, it's a timing issue, Victor, from the period from February 15th when we made the acquisition to the end of the March quarter, the actually the Australian dollar gold price went down from $581 an ounce to $571 an ounce. So, it was just the timing issue. Obviously, if the gold price increases in U.S. dollars, that has an impact. And, you have to remember the sensitivity to the Australian-U.S. dollar exchange rate. It really is an Australian dollar gold -- Australian dollar gold book. So, it's really gets -- has both the impact of U.S. dollar gold prices and Australian exchange rates, as well.

So, the mark to market adjustment would be from the time when you closed the transaction in mid February through the end of the March?

That's correct.

Great. Just a final follow up or Dan will be saying things about me, could you give us a sense of what the earnings were separately for both Normandy and Franco-Nevada for the quarter or for the period?

I mean, we really did not break that down, and it's very difficult to do so as you integrate these companies. I mean, there's a lot of sharing of attributes and of costs. So, it's -- we don't have that separate disclosure.

Okay. That's fine. Thank you very much.

Thank you. Our next question from Dave menu.

Thank you. Scotia Capital. Quick question for you. With regards to your production profile going forward perhaps in the next two years, when your analyzed about 7.5 million ounces, what's your feeling to what would be the optimum production let's say in 2003 or 2004?

Well, the 7 1/2 million ounces for this year truncated on a full analyzed basis. Production more at the 8 million ounce level probably, that would be as we see it today what you would see in 2003.

So you're suggesting that 2003, the optimum level probably be still be at the 8 million ounce level?

Well, again, we'll be working that through but based on today's model, that's about the level we have in our plan.

Okay.

I would caution you, David, as we indicated, we are looking at asset dispositions of noncore components of the business. As we sell producing assets that will have an impact on the consolidated equity production.

Yeah. Just a thought we might get a bit of a flavor for what it might be after that. Next question.

Thank you. Next question from Gordon put numb.

East born capital. Probably the last sucker to do so. Welcome. Great to hear you. It's going to be real interesting with someone with so much skin in the game being able to manage the big Newmont. Good luck to you.

Thank you.

A couple of questions to Bruce. In the reserve statements in the 10-k and apologize. They get on the phone first, the copper reserves, you didn't quote a copper price at least in the 10-k that I've printed out. What copper price did you quote the copper reserves at?

I believe we're using somewhere around 90 cents a pound as a long-term copper price which if we look back the last ten to 20 years is pretty representative.

No argument with that. I heard somebody nodded yes. I'll jot that in. Also, and I may have not heard it clearly, did you tell us what the costs were at Batu Hijau at an unit basis on this quarter.

On a cash cost basis, 46 cents a pound. For the full year, forecasting for that to come down into the 40 to 43 cent range.

Okay. And the last question that I have and that's again because I obviously behind the guy, I was wondering with the attention to the balance sheet which sounds really good and the rationalization of assets which will fund that and that sounds terrific, and I like the focus on better margin ounces, but I find no one is looking an at the pension or other benefits obligations which look to me to be increasingly underfunded and you're carrying a 9.25% expected rate of return on the assets and the last two years had losses on the portfolio. I wonder what can we look for as far as cash to address the underfunding?

Well, we have a requirement every year through an actuarial process to look carefully at our pension funding requirements. I will point out that if you look at the total in the pension footnote, that includes both the funded plans and the supplemental plans that are unfunded plans, and will be unfunded plans associated with the corporation typically relate to the staff and senior management.

Right, right. I'm aware of that but -- exactly. Okay. Well, I'll watch to see how this develops. Thanks very much. Good luck this year.

You bet.

Thank you. Our next question from Don McClean.

Beacon Group Advisors. Good afternoon, everyone. Just wanted to gate bit better sense maybe from Dave Francisco or Wayne about how the Australian assets performed. If I could get a total for what they would have been if you'd owned Normandy in Q1, '2 opposed to '01 and that would be helpful and a sense of what the Batu Hijau debt position was or your share of that debt.

Okay. I think with respect to the Australian operations as we looked at them, they performed pretty much right in line with what our expectations are. I don't have a -- let's see. We break it down differently now because North American stuff came in but I think on a full quarter basis, you're looking at a half a million ounces a quarter excluding the joint venture with TBX. They were expected this year to produce 2.3 million ounces, and they're pretty much right on target. We have, as I said, spread them out differently now because we've clearly segregated out the TBX joint venture ounces and Midas has gone into the North American line.

And don, in regard to the outstanding Batu Hijau long term third party debt including the current portion, it's 936 million dollars. That is the debt at the project. Of course, that is off balance sheet to us. That's the project debt.

Okay. Thank you very much.

Thank you. Next question from Jeff Stanley. Please announce your name and company name.

Thanks. Just have one question. Wondering if you could tell me what the capitalized cost of the mergers were, Bruce. You know, what went on the balance sheet in terms of cost of the three companies together.

Transaction cost, roughly $90 million.

Not materially different from the guidance you gave us earlier.

Okay.

Good. Well done. Thank you.

Thank you. Next question from Michael Fouler.

Harris Partners Limited. I have a few questions here. I might have missed it. What's the mark to market hedge book at the moment?

Mark to market on the inherited Normandy hedge book totaled at the end of the quarter at a negative $411 million if you include and we -- I think we have very good disclosure in the 10-q and I would point you to that. If you look at the forwards, the convertible options, and some floating [putz] contracts, we have fair value disclosure there. In addition, also in the q, we describe the 600,000 ounce gold obligation, essentially, a gold swap related to some of Normandy's prior financing, and that has a mark to market loss associated with that. When you aggregate that, it's negative $412 million.

Does that include other derivatives? Copper and --

Doesn't include the other derivatives but in the 10-q, you will see for fuel and interest rates swaps, kind of a fair value associated with those, as well.

Okay. Got the sensitivities in there?

No. We have not provided sensitivities. I can give you general sense on some of the main attributes. For every 1 cent change in the exchange rate, that has a mark to market impact of about 48 million. U.S. For every change in 1% change in lease rates, that has roughly a 24 million dollar mark to market impact. And, for every dollar change in the gold price, it's pretty linear. It's about 9 million dollars for every change -- every dollar change into U.S. dollar gold price.

Okay. Thanks. Good answer. Just -- give me a flavor of what's going on with the integration. Talk about where you've closed offices or moved people around. Can you give us a flavor of what's been going on?

Sure. With respect to people, we have, you know, we went through a process, I guess, let's break it down. We went through a process from the date of closing and or taking control in the case of Normandy through roughly the end of the March what we call stabilization. It was just getting a handle on everything, starting to operate as one company. Authority levels. That sort of thing. In the month of March, we started talking to people about new assignments because we want to get a mix. We want to bring the best people into the optimum position for the company as a whole. We have made some announcement of management changes. We have two key senior executives of Normandy that are moving to Denver. Paul [Doud] in the operations area will be working directly for Dave Francisco. And organizing a renewed effort and implementation of gold metal throughout the company. Secondly, Bruce Kay who headed worldwide exploration for Normandy is also moving to Denver and he'll head worldwide exploration for Newmont. We have a -- we have also transferred two operations individuals from Newmont operations into Australia. John Dow who was in South America has moved to Australia, and is the managing director of that operation. David Harkwell who worked at Franco-Nevada has moved to or will be moving to Denver probably when his kids are out of school probably in June. He heads up the Newmont Capital group. So, we're real pleased with those key moves. It begins the process. These things will tier down throughout the organization. Also, we've had an ongoing process. I think we have identified 13 or 14 tasks that we're going through with various teams and sequence here, some in sequence. Some in parallel and deal with getting the best methods of doing allocation of capital, compensation issues, a whole series of expenses. From an operation standpoint, I think Dave expects to have that integration effort completed by -- in October, November time frame. We've got some longer term projects in the systems area that will probably take some period of time, but we have a large, energized team. Senior management group in Denver last week. We had about 40 or 45 of the senior management. We can't get them all together at one time because people tell me we have to keep the operations going and kick me in the shin when I want to do something like this but for a couple days off site, working on the cultural issues. They're real. But by the same token, they'll be our strength as we develop the new culture for the company.

Okay. Thanks for that. Just last question. Pierre, showed a slide in the presentations about the assets for sale. Is that the basically the same as today or are you changed any of your mind about the assets?

Well, I think that looking at Newmont going forward, we want to concentrate on fewer, higher margin operations, and it's the 80/20 rule that we got to really focus on the 20% of our assets that gives us 80% of our profits. And, therefore, the asset that don't fit that bill will be up for disposal. And, no, there hasn't been any change to that philosophy and we are pursuing every opportunity to have to maximize the value of these assets for Newmont.

Okay. Thanks very much.

We'll take one more question.

Thank you. Our next question from Michael Derose.

Morgan Stanley. Hi. Congratulations on the first quarter as an integrated company. A couple of quick questions. Bruce, what sort of Australian prices should we be thinking about in terms of potentially you guys buying back positions or accelerating the buy back of those positions?

I think, Mike, when you look at on an ongoing basis, if you look at 10-q disclosure, and you apply the exchange rate, obviously, this year -- the U.S. dollar basis, if book is break even for the 2002 time frame at about 290 per ounce, and that's assuming today's roughly 54 cent Australian dollar exchange rate. And, but I will caution you. It's still a 7.3 million ounce hedge book. And it's going to be something that we're going to be looking at over time. And we cannot turn -- turn a switch. Even if we wanted to pay the mark to market and get rid of it instantaneously.

Okay. In terms of the goodwill, I see you booked 2 1/2 billion and did disclose the breakdown between Normandy and frank in the 10-Q. Wondering with the review process going through, is there anything in the numbers where you think you've been conservative or what are the key sort of asset that is you think you may be able to revalue and perhaps bring that goodwill value down?

Well, I mean, we'll be relooking at that calculation here in the second quarter. We've got an independent appraisal firm that will be finishing up their work in the second quarter so there may be some balance sheet adjustments under U.S. gap we have a year to make such adjustments. I think that the underlying assumptions we have used to make the estimate for the first quarter are not dissimilar to what will be used by the independent appraisal firm. So I don't see a lot of potential volatility there. On an ongoing basis, we will have to look and see if there's any impairment to goodwill and that will really be driven by the gold price at that point in time. How the stock market is treating gold equities, basically your priced NAV ratio for comparable firms and the reserve resource outlook for the assets that were acquired.

Okay. And I'm going to ask one more question, in terms of Nevada costs and to what extent is power still an issue and how much is that adding to your costs on a per ounce basis?

Power situation is I think gotten fairly stabilize. I think we're kind of in the 6 to 7 cent per kilowatt hour range. Hasn't moved a lot recently. We continue to look at options over the long term to take more control of our own destiny in record to power in Nevada.

Thank you very much for your attention and in the calls and questions today. Again, I guess I would wrap this up by saying the group here is extremely energized. We started the meeting, we had an annual shareholder's meeting today. We had a director's meeting. The key point I guess I would say is as we have pulled this together, we have had really no negative surprises. We do see some opportunities that have us excited, that over future quarters we'll be able to talk about as they come to pass but it's not an easy process that we're going through but it's one that certainly has the management team within Newmont extremely excited. Thank you very much.

Thank you. This ends today's conference call. You may all disconnect.