紐蒙特黃金公司 (NEM) 2002 Q2 法說會逐字稿

Good morning and thank you for standing by. All participants will be able to Lynn only until the question and answer session of the call. This conference is being recorded at the request of Newmont Mining Corporation. If anyone has any objections you may disconnect at this time. I would like to introduce one of your speakers for today's calls Mr. Russell Ball, group executive of investor relations. Mr. Ball, you may begin.

Thank you, operator. Ladies and gentlemen, thank you for joining us today to review Newmont Mining Corporation's second quarter 2002 financial and operating performance. This call is being simulcast on our web site and will be available for play back until August 15th. As we will be discussing forward-looking information, you should be made aware that there are risks unique to our industry and these risks are described in detail in our filings with the SEC. The information we're discussing today August 7th, 2002 is relevant for the current period. For the most up-to-date material disclosures, please refer to our latest SEC filings and news releases. On the call today we have Pierre Lassonde, president of Newmont. John Dowe [ph] Managing director of Newmont Australia and myself, Russell Ball, speaking to you from Calgarian [ph] West Australia. In Denver, we have Wayne Murdy, chairman and chief executive officer, and Bruce Hanson, senior vice president and chief financial officer. Dave Francisco, executive vice president for operations is traveling en route to Indonesia and as such won't be on the call. Let me turn the call over to you, Wayne. Wayne, please go ahead.

Thank you, Russell. Good morning, everyone. This is our first full quarter for consolidated Newmont, including results from our February acquisitions of Franco-Nevada and Normandy. I'm pleased to report Newmont earned 65 million dollars or 16 cents per share for the second quarter. This is a significant improvement from a year ago, when we had a net loss of 34 million, or 17 cents per common share. For the six months Newmont earned 54 million, or 16 cents per common share against a loss of 73 million, or 37 cents for the prior period. Our net cash flow from operations for the quarter was 134 million dollars, and for the six months 206 million dollars, or 65 percent higher than the prior year. We've also moved quickly on our sales of noncore assets as part of the integration and rationalization of Normandy and Franco-Nevada. With good cash flow and a strong balance sheet, we've been able to reduce our debt by some 398 million dollars, for a net debt to book capitalization ratio at the end of the quarter of 20.8 percent. We had thought it would be below 20 percent by the year-end and we're clearly on course to achieve that goal. Pierre will talk a little later about some of the rationalization projects that we have underway. To date we've realized some 216 million dollars in proceeds from those sales. True to our nonhedging philosophy, to give our shareholders the most leverage to a rising growth price, we aggressively reduced the hedge book and have been restructuring the hedge book of Normandy. During the quarter, we reduced the hedge book by about three-quarters of a million ounces of committed production. Bruce will describe these activities in his section of the presentation. On top of it all, we've had a record quarter of gold sales of some 600 million dollars, a 67 percent increase in over a year ago. Certainly we've benefited from improved gold market. Newmont sold approximately 1.9 million equity ounces in the quarter, a 43 percent increase in sales, at a 46 dollar higher average realized goal price, at 314 dollars for the quarter, versus the prior year. Our cash cost was 195 dollars per ounce during the quarter, compared with 193 dollars in the 2001 second quarter. For the six months Newmont sold 3.3 million equity ounces at a cash cost of 195 per ounce. Based on our half year results, and looking forward to even stronger financial performance in the second half, we expect to achieve our earnings forecast of 40 to 50 cents per common share before mark-to-market adjustments based on a 300 dollar gold price. We should also generate cash flow for the year of about three-quarters of a billion dollars. 750 million dollars. We believe this is consistent with the current market outlook and we continue to be bullish on the gold price which we'll discuss a little later. During the second half we expect to produce 4.2 million equity ounces at a cash cost of 170 dollars per ounce, as our mine plans indicate higher grade ore in Nevada, Peru and Australia. This will put us on track for seven and a half million ounces at a cash cost range of 180 to 185 dollars per ounce. The higher end of the cash cost estimate is in line with our adjustment of Nevada's cash cost to 215 dollars per ounce. Slightly higher than the previous guidance we'd given. And slightly higher cash costs in Australia in line with exchange rate fluctuations. We expect to see slightly lower costs at Yanachocha, and Bruce will highlight these during the operations portion. We'll announce we'll go ahead with the build of the Leeville underground mine in Carlin and the Gold Quarry South Layback [ph] Which have an integrated capital plan which will generate 6.6 million ounces and our average cash cost of 205 dollars per ounce from the two projects over their mine wise. Leeville is expected to start production in 2006. It will produce over four million ounces of the seven year mine life based on the current reserves. The Gold Quarry South Layback [ph] Is scheduled to begin production in 2004 and will produce 2.6 million ounces based on current reserves over a six year mine life. However, at both of these projects, we believe there's considerable exploration upside. Cap ex is estimated at 180 million dollars for the Leeville project at 36 million dollars for the Gold Quarry Layback. We'll fund these projects through our own cash flow generation. Leeville accelerates Nevada's transition to a greater portion of high grade low cost underground production. This year ounces from our underground mining will account for about 30 percent of total ounces sold. Next year that will rise to about 35 percent. As I mentioned earlier, all our core operations, Nevada, Yanacocha, Peru, Australia and our copper gold Batu Hijau mine in Indonesia will be stepping up to higher production and corresponding lower costs over in the third and fourth quarter. The best is clearly yet to come in the second half. Now let me turn it over to Pierre for some comments on the gold market and our exploration and rationalization projects. Pierre.

Good day, everyone, from Calgoly [ph]. In terms of the gold price, what we're seeing, what we've seen in the past month is typical of seasonal pattern of weak summer price, as the Italian jewelry manufacturing industry goes on vacation. Typically the gold price increases in the fall as the gold volume for the holiday season approaches and I think that we will see that pattern repeat itself again. The fact that gold did not break the 300 dollar floor in the last month to me is very, very encouraging. Overall we remain bullish on the gold price through the rest of the year and for the longer term. As the supply demand picture remains unchanged with strong fundamentals, including a weaker U.S. dollar and we've pointed out that the dollar is one of the key fundamental driver for the gold price. Lower overall production and net hedging buy back by producers. We've talked about the U.S. dollar being overvalued. The latest research by Goldman Sachs shows that their numbers is pegged at 14 percent over valuation, while the economists number is closer to 20 percent. Whether it's 14 or 20, it really doesn't matter. The direction is what really matters and the direction in terms of the dollar is down and in terms of gold price is up. As far as the equities are concerned, every new bull market has to claim the proverbial lull of worry. We certainly have to do that with the Newmont stock and we've not been immune to some of the down drafts in the overall market. But I just want to let everyone know that my friend and Newmont board member see more SHU lick and I are major shareholders of this company and not only haven't we sold one share, but we firmly believe as ever that Newmont is well positioned for value indication and value realization to be and still continue to be the premiere gold company in the world. I just want to pass on to the hedging for just a second. And I know Bruce will talk a lot more about it. But as you saw in our release, we have reduced our inherited hedge book by 1.1 million ounces of committed and uncommitted position this quarter alone. We were opportunistic in the quarter and unwanted [ph] Positions during dips in the gold price. But I think just as importantly over the next six quarters, at a minimum we will deliver 2.3 million ounces in the hedge book. That is at a minimum and that is if we don't accelerate any other position, which we intend to do. But that being said, the hedge book on the minimum alone will represent at that point in time less than or approximately six months of production. I'll turn the attention for a second toward Newmont Capital. As you may have seen during the quarter, we announced the support of a pending exchange of our 45 percent equity interest in echo bay for approximately 14 percent of the proposed new Kenross [ph], which would combine Kenross [ph], Echo Bay and TBX. We also expect to realize 180 million in cash by year-end from the pending closing on the sale of our 50 percent interest in TBX Newmont America's joint venture with TBX. Once the sale is closed, we will have exceeded our goal, a reformatted goal because as you remember we started the year with a goal of 250 to 300 million. We raised that goal to 400 million of sales in noncore assets for this year. We have already realized approximately 216 million from asset sales, including the 84 million from the sale of our midyear stock as well as Franco-Nevada interest and Aver [ph] Diamond and Inco [ph] Warrants. Once the Kenross [ph] Deal closes, Newmont Capital will have an equity portfolio of approximately a value of 300 million at current market prices. This is I think a pretty good accomplishment in less than five months. Now, I'll turn your attention to our exploration effort in Nevada. Underground development drilling continues along the gold margin corridor, which is the one mile corridor between deep post and deep start. And what we are seeing is preliminary deep post extension drill results, show interest steps of 30 to 125 feet in the range of half ounce to .086 ounces of gold per gold rate. This is an area of exploration that is very promising and the grades that intercept that we're encountering are very encouraging for replacement of reserve at deep post. In Peru, at Yanacocha, the current value ore zone continues to be extended to southeast with recent drilling to intersect with future high gold grades in the point 15 to half ounce goal per ton. Again, very encouraging. In Australia, one of the unsung exploration success has been Golden Grove, where high grade zinc copper gold mineralization in the range of 17 percent up to 30 percent, on top of that precious metal credit has been recorded, the extension of the ethyl catapalzone [ph] . The point at Golden Grove is that over the last two and a half years, if you were to take the equivalent gold discovered by taking the copper zinc and putting all that in terms of net smelter return into gold, we have added approximately five million ounces of gold have been found at Golden Grove. This is a very impressive record of the exploration department here in Australia. In terms of new project pipeline: The highlight is the advanced exploration and major drilling campaigns that have been started at Akeem and Yen Fo Sofween [ph] In Ghana, as well as at Martibi [ph] In Indonesia. We're pushing these projects that have a good prospect of being low cost, low cash cost and low capital costs, new generation projects for Newmont. Overall, our goal remains to replace our nine million ounces of reserve for this year. Now, just to finish up and before I pass on to Bruce, I just would like to say personally that when you look at what our people have accomplished in the space of five months, while integrating three cultures, a number of various operating systems and continuing to meet the daily challenge of producing almost eight million ounces of gold per year, I can say that I am absolutely astonished, gratified and awed by the determination of our people and I'm really proud to be with this company. Bruce, I'd like to pass it on to you at this point.

Great. Thanks, Pierre. As Wayne earlier indicated we did have a very solid quarter. Contributing to our 65 million dollars in reported net income were the increased revenues from a higher gold price, a 47 million dollar gain on the sale of our Lehere [phonetic] Stake and excellent performance at the copper gold; mind in Indonesia which contributed 13 million dollars in equity income. These positive factors were offset by a noncash mark-to-market hedge related loss of eight million in the quarter. In the 2001 second quarter the net loss of 34 million dollars was also impacted by a noncash derivative mark-to-market loss of 15 million dollars. As Wayne indicated earlier, we did sell 1.85 million equity ounces of gold at a cash cost of 195 dollars an ounce. And a total production cost of 261 dollars per ounce. During the quarter cash costs were slightly higher than what we saw a year ago, impacted primarily by three factors. Overall lower grades at our core operations, which will improve in the second half. Secondly, lower gold sales in Nevada from a temporary buildup of in process inventory, that will flow through later in this quarter. And finally an increase proportion of higher cost production from the Akeem [p] That production which requires crushing and conglomeration before leaching at Yanacocha. Let me talk specifically about some of the production operating performance at our sites. Our consistent cash generator is Nevada. We sold nearly 600,000 ounces at a cash cost of 243 dollars an ounce. During the quarter Nevada's in circuit inventory was built up by about 34 thousand ounces at Midas and at Twin Creeks. Primarily related to processing higher grade ores at the end of the quarter. For the year, Nevada is clearly on track for producing 2.7 million ounces at a cash cost of roughly 215 dollars an ounce. Despite the temporary in circuit buildup that we had in Nevada, I will tell you that our Nevada team has been consistently focused on reducing overall inventory and is doing so by processing a number of stockpiles in Nevada. And this increases our cash flow. It does have the obvious impact in the short-term of increasing cash costs per ounce as well. Nevada, based on a 300 dollar gold price for the remainder of the year will generate more than 200 million dollars in free cash flow. In the second quarter, Yanacocha, in Peru, sold 478,000 ounces, 245,000 ounces to our account, at a total cash cost of 139 dollars an ounce, with total production costs of 217 per ounce. The commissioning of la keen yeah project and its crushing and conglomeration circuit is now complete. The plant is running at its design rate of over 130,000 tons per day. As Yanacocha grades improve in the second half, and as our mining rate reaches 550,000 tons per day, Yanacocha will hit its four-year targets of 2.3 million ounces, 1.2 million equity ounces to us, at a total cash cost of 125 dollars an ounce, at the low end of our previous forecast. At the Australian operations, gold sales totaled 458,000 ounces at a cash cost of 196 dollars an ounce, and total production costs of 265 dollars per ounce. Pachingos [ph] Continues to perform very well as our lowest cost Australian operation and contributed 74,000 ounces sold in the quarter at a cash cost of 95 dollars an ounce. Calgoly [ph] Sold 85,000 equity ounces at a cash cost of 219 dollars per ounce, during the quarter. I will point out that at Calgoly [ph] We've initiated a joint venture committee with our partner to evaluate operating initiatives to improve its cost structure. For the full year, combined Australian operations are expected to sell 1.7 million ounces at a cash cost of approximately 180 dollars an ounce. Turning to Batu Hijau, we continue to see very positive grade reconciliation and excellent operating performance at that site. As a result, we've lowered our 2002 cash costs forecast to range between 38 and 40 cents per pound of copper. For the full year, the sales of copper forecast remains unchanged at 300 to 340 million pounds of equity copper sales and 235,000 ounces of gold. Our G and A expenditures in the quarter were 28 million and recent exploration and research were 19 million. Both in line with our full year forecast which remain unchanged at 95 million for the year in G and A. And between 70 and 75 million for exploration expenditures. Keep in mind that we will periodically review our exploration spending, while retaining flexibility, increased spending, when a site has encouraging results. Capital expenditures during the quarter totaled 96 million dollars. And are totally in line with our total capital expenditure forecast for 2002 of 450 million. As Pierre indicated, our integration effort transformation, what we call it, and bringing together free companies with free cultures, is preceding very well. Not only from a human resource standpoint, but also from a financial standpoint. And we are now estimating acquisition synergy to be in excess of 75 million dollars on an annual steady state run rate by the end of the fourth quarter. We're seeing improved cost savings in the areas of procurement, including utilizing our E commerce platform, increased tax savings and even more benefits than previously recognized from the Midas integration into Nevada operations. Now turning to one of my favorite topics, enhancing financial flexibility and liquidity. As Wayne indicated, we did reduce debt by nearly 400 million dollars in the second quarter, through the repayment of 150 million dollar eight five-eighths note that became due on April 1st by lowering the Australian revolving credit facility of 171 million, for the repayment of 63 million dollars and other notes, and 14 million dollars in routine amortization. We also redeemed our convertible preferred stock during the quarter with common stock, thus saving seven and a half million in preferred stock dividends annually. As we look forward, with the pending exit out of the Banff [ph] Resource Cacesse [ph] Cobalt project in Uganda, we'll be repaying its 34 million dollar price [inaudible] This quarter. So debt continues to fall with a net debt to total capitalization ratio of just under 21 percent. And also retained very significant liquidity. At the end of the quarter we had 285 million dollars in cash and an undrawn revolving credit facility with capacity of 750 million dollars. By the end of the year we feel very comfortable with our target of being under 20 percent net debt to total capitalization. Now let's turn to what Pierre mentioned earlier in regard to our aggressive program in terms of hedge book reduction. As Pierre mentioned, we did reduce the total hedge book by 1.1 million ounces during the quarter. And this was comprised of 724,000 ounces of committed positions and 347,000 ounces in uncommitted positions. Since the acquisition, our total reduction has been 1.5 million ounces. The current status of the acquired hedge book is 6.6 million ounces of committed positions and 1.8 misdemeanor ounces in uncommitted positions. We've also accelerated our scheduled deliveries. We now have 827,000 ounces of committed positions and 210,000 ounces of uncommitted positions scheduled for the remainder of 2002. And as Pierre indicated, if you look over the next six quarters, we have over two and a half million ounces of deliveries scheduled. We've also worked in simplifying and restructuring the hedge book. During the quarter we fixed the lease gold lease rate exposure on 2.2 million ounces of positions, thus our fixed to floating ratio is 62 percent gold rate fixed and 38 percent floating lease rate. We've done a lot already. But we're far from being done. And I will tell you we intend to do much more than the currently published schedule of deliveries. We are currently actively evaluating our options of more rapid closeout of this book, including buying back positions with cash. The mark-to-market June 30th was a negative 364 million dollars, improved from the negative mark-to-market of 411 million dollars at March 31st. Primarily due to normal deliveries and closeouts. And, again, we want to reduce this liability, just as we're reducing debt as quickly as practicable. I'll tell you, we have significantly more ounces to be sold at spot even in the short-term. So we remain committed to be supportive of the gold market. Now let me quickly summarize the points that you heard throughout this presentation. First of all, we expect a much stronger second half with 4.2 million ounces of gold to be sold at a cash cost of 170 dollars an ounce. Our outlook for gold is positive. And we'll continue to reduce this inherited hedge book to maximize gold price leverage for our shareholders. And reduce this liability as we reduce our debt. We remain supportive of the gold market. We're significantly more ounces to sell on the spot and we'll continue to be supportive. We're ahead of our targets in terms of debt reduction and we'll continue to exceed our expectations and terms of asset sales and restructuring. For the full year our earnings per share estimate remains unchanged at 40 to 50 cents per share, before the mark-to-market adjustments, based on a 300 dollar gold price for the remainder of the year and our full year forecast on cash flow is on track for 750 million dollars, which translates to roughly 300 million dollars in free cash flow. That concludes our presentation and we're more than willing to address any questions you may have at this point. Thank you. 00:30:00

Thank you. At this time we are ready to begin the formal question and answer session if you would like to ask a question, please press star one on your touchtone telephone. You'll be announced prior to asking your question. To withdraw your question, press star 2. Once again, if you would like to ask a question, press star and then 1 on your touchtone telephone. Our first question comes from John Bridges with JP Morgan.

Good morning, everybody. Or afternoon or evening, wherever you are. On Lehere [ph], the number that's given there, is that a pretax or post tax number? And then I wondered if Bruce, perhaps, you could walk us through how the grade at Batu Hijau went down but the costs also went down. It's just a bit tricky to understand how that developed.

Let me address those in order. In regard to Lehere [ph] Sale it's both pretax and post tax, because the way that that deal was structured, we were not anticipating tax liability. In regard to the grade, it's a combination, in Batu Hijau it's a combination of operating efficiency and through put volume. The guys have been very good at ramping up the through put at Batu Hijau. We're running at about eight to 10 percent higher than name plate capacity.

So there's no ratio factor or anything like that that's coming through?

I don't believe so, John.

Thank you.

Once again, to ask a question, press star 1 on your touchtone telephone. One moment, please. Victor Flores with ASBC. You may ask your question.

First of all, on the new projects that are being developed in Nevada, could we perhaps get a breakdown of what the expected grade is for each of Gold Quarry and Leeville and what the cash costs are. You've given us an average, but perhaps if you could give us for each one.

With respect to Leeville, that range is between - I think the average grade there is about .45 ounces per ton. About half an ounce. And I don't have the grade off the top of my head. I don't know whether anybody else has it, on the gold at Layback. Gold at Layback is a higher cash cost, very little capital on it. The reason we give that together is because there's a huge synergy in doing those projects together with respect to the processing through the roaster. So Leeville is just under 200 dollars an ounce. The Gold Quarry is more like about 220 dollars an ounce, Victor. But that's kind of order of magnitude.

Thanks. Just going back to the Gold Quarry, I suppose it's fair to say that the grades haven't changed from when the original Gold Quarry Layback project was outlined.

No, that's not true. The grades in fact have improved. We've done substantially more drilling there and have gotten a much better feel for the grade. And in fact when I commented about potential up side, we think there's substantial up side at Leeville. That's always been our history when we've gone underground. But we're also pretty encouraged by some of the things that we're learning with respect to the grades at Gold Quarry also.

Just filling in some information for you, Leeville is grade's 4.6 ounces per ton. And the Gold Quarry Layback is roughly two grams,.063 ounces per ton.

Excellent. Thank you, Bruce. Now just following on John's question about the sale of the Lehere [ph] Block. I'm a bit curious as to why that was put through the income statement but some of the other sales of investments were put through the statement of cash flows, is there an accounting reason for that?

Yes. And really I mean most of the sales of mining related properties are considered ordinary course of business. And especially as we picked up Newmont Capital and that is clearly part of its business. Investments, they all go through P and L. But -

If you look at the P and L, basically we have the gain on Lehere [ph] Broken out by itself. The other incomes line would have the net gains on the other property sales. And on the cash flow statement, we back out the gain on Lehere [ph] And down in the dusting area, we have the proceeds from the sale here.

That was David, our global controller, has just joined us this quarter.

What about some of the other sales? Those don't appear in these financials, for example, sale of shares in amber, for example.

Those sales occurred prior to the consolidation and the acquisitions on February 15th. But in regard to our goals , we've also indicated that was part of the overarcing sales goals and quite frankly that cash was generated through those sales was inherited as the company's came together.

There weren't any subsequent sales?

There have been some miscellaneous subsequent sales of smaller properties. For example, during the quarter we sold the Deture [ph] Lake property. We sold a property in Brazil. A couple other miscellaneous sales that total about 4.6 million during the quarter and year-to-date about six and a half million. That's pretty small stuff. So just to finish up, and I won't take up more time, the sale of short-term investments of 406.7 million that you show on your cash flow statement, that is just short-term investments like treasuries or something -

That's essentially the acquired cash that comes through.

Okay. Perfect. Thank you.

Question from Dave Christiansen with Credit Suisse First Boston. You may ask your question.

Good morning. Looking on the Lehere [ph] Thing has been well hashed out at this point. But a follow-up question, can you detail the best you can, because I realize you're getting shares in Kenross, whether or not any gains or losses will be incurred in the transaction for the TBX/Echo Bay one, and likewise does your earnings per share guidance for the full year of 40 to 50 cents include the Lehere [ph] Gain?

Let me answer the second question first. Yes the guidance for the full year does include the Lehere [ph] Gain. Does not include any potential gain that would come out of the Echo Bay TBXNA transaction. In regard to that situation, we're going to be going through an and evaluating whether or not that will have a gain at the time that we record it. And it ties into our relook at purchase price adjustment for the complete transaction. And kind of starting balance for those assets. So at this point in time we're not in a position to indicate whether that will show a gain on the income statement or will be rolled into our purchase price allocation.

Finally as a last question to that. Could you also outline what the current thoughts are of the company with regards to the Australian magnesium corporation?

With respect to that project, one of the conditions, requirements to obtain the foreign investment review board approval for our transaction was that we live by and remain committed to the contractual obligations that Normandy had relative to that project. So we have individuals, Newmont representatives on the board of directors and we're committed to see that project developed and move forward. I think we've consistently said that over the long haul we're not a magnesium producer. So over the long haul it doesn't meet - probably does not meet our business model, but we do want to see the project successfully developed. It looks like that's moving forward well at this point.

Thanks.

John McQueen with Beacon Group Advisors.

Hello. All ships at sea. You guys have covered a lot of ground in six months. What I'd really like to hear is an update on the exploration. In particular, maybe John can touch on what's going on west side. So Pierre you had some pretty interesting intersections there. So Deep Post, we would like to hear more about the interpretation what's happening there, Cory Mile and if you can touch on Yafosawfe [inaudible] Akeem [ph] As well.

It's Tom Bell. Here I'll comment on the west side stuff and then leave other people to talk about the other things. Exploration in Jonde [ph] Has been working in a geologically parallel setting to the concurrent baton operations. We've encountered some encouraging new intersections with lots of visible well, we've drifted out into the area where the mineralization has been discovered. We'll have that in production in the first half of next year. It's parallel setting to the Jonde [ph] Mineralization, doesn't have any surface expression. We see other possibilities for repeating that mineralization even further to the west. It's quite an encouraging thing. It's a thing you would expect to find once you're on the ground with these kind of problems. With regard to other things in Nevada and Yanacocha, I think that's for Pierre to talk about.

On the west side could you give us the sense of the dimensions or the volumes involved, John.

No, we haven't formally defined that. I think there's a possibility that it might be as much as a million ounces but we didn't done enough drilling to know. It's quite high grade it's not that wide but the grades are spectacular. It's kind of typical to some of the other mineralization that we've been meaning there already. It's open end in several directions. It's one of these things it's hard to give a figure to because we haven't done enough drilling to know but it looks pretty good.

Thank you.

[Inaudible] With Scotia Capital.

Very directly, I was wondering if the gold purchases from Normandy's book has been accelerated in the last week?

Gold purchases, we've not added to the hedge book at all.

With regards to the buy backs?

You mean in the last week?

Yes.

We have normal deliveries and we do look at opportunities to buy back positions. I think it's fair to say that we don't report on individual transactions in that book. We've said what our game plan is and that we're going to accelerate when we have opportunities.

I was wondering if in particular the gold price moved over the last 24 hours might have been a function of Newmont.

As I said we don't comment on individual transactions.

Thanks.

Jeff Stanley with [inaudible] Anessa [ph] Corp.

Most of my questions have been asked, but perhaps one you could elaborate on. I do apologize, I was dragged off the call momentarily, if you've dealt with it you can dismiss accordingly. But I was hoping you could outline for me why the costs from the Australian operations, John, they seem to have been on the disappointing side and just exactly what the story was there. And how that may be rectified in the future.

Yes, you've implied it's most entirely due to the U.S. dollar and exchange rate. There were no material operational issues that have caused that. I think you'll find it's almost entirely due to exchange rate movements.

They're a little higher than we had anticipated. Great. Thank you very much.

Clark Smith with First Associates.

Just a couple of questions, first on the hedge book can you give me an indication of how many ounces you expect to deliver actual or book in 2002 and what price those would be, and then 23, while we're waiting for the 10-Q?

Yes, in total, in terms of total obligations for the remainder of 2002, that will be about a [inaudible] Ounces a little more than 800,000 of committed positions, 200,000 ounces of uncommitted positions. 1.8 million ounces are expected to be delivered in total in 2003. With regard to price, realized price, we're looking at some around 300 dollars an ounce per both 2002 and 2003.

Great. Another one, when you sell the TBX America's block, or Newmont TBX Americas to Kenross, does the hedge book that Normandy had attach, go with that sale?

It's very small it's on the ordinary of a couple of hundred ounces. I don't believe those ounces that we have are U.S. gold denominated and our hedge book and I think they stay with us.

Give me an indication, if you would, for your estimated cap ex for the second half of 2002 and 2003.

We've not filed projections in terms of our plans for 2003. For the full year 2002, total cap ex was going to be, including capitalized mining, would be about 450 million.

That includes the new expansions in Nevada.

That was included in that estimate.

Thank you very much.

It also includes 100 percent of Yanacocha if I'm not correct.

That's right. We consolidated Yanacocha and it includes a hundred percent of Yanacocha's spending

Valerie Cline with CDS Asset Management.

Good afternoon with the first item is on the derivative gains are they all noncash as reported in the income tax for the three months and six months.

Yes, they're not cash, gains and losses.

Great. The final question is on Phoenix. We haven't heard anything mentioned about developments at Phoenix for quite a while. Are the trends still in place for bringing that on stream before mid next year?

No, Phoenix is a project we've previously indicated to the street that we have pushed this project back in our sequencing. It's probably out in - it's in our mind plan and I want to say the 2006 time frame on when we'd start to see production there.

Construction would be 2004 time frame, that's when our current plans are. Of course, if we see a higher gold price and continue to see better economics there that may accelerate.

Thank you very much.

Jackie [inaudible] From National Bank Financial.

I guess a question for Bruce. Just a little bit surprised, Bruce, in terms of just the buy back on the hedge book. I actually thought during the quarter we would see a bit more in terms of buy back. There were positions, particularly the fixed boards of 2.1 million ounces and the synthetic boards about 439, which I would have thought with the Aussie dollar going from 53 to 57 we would have seen a bit more in terms of buy back. Maybe a comment there. And just what the break even of the hedge book on a mark-to-market right now is and lastly just when gold gets below 300 dollars per ounce, can I assume at that point you are also in the market trying to restructure your hedge book?

First, as we do see dips, and they're really dips in the Australian price of gold, we will look for opportunities to restructure and buy back the hedge book. In regards to the kind of average realized break even price, over the long-term and realizing a mark-to-market position is kind of a discounting back, under the average prices, around 290 an ounce for the complete hedge book. In regard to the specific positions within the 724,000 ounces we delivered or closed out in the second quarter, about 500,000 of that was in the form of buy backs. We only delivered about 200,000 ounces of those committed positions. So we do do buy backs during the second quarter. We can follow up, Tanya, in terms of looking at what specific positions and you can give us a call on that.

Sure, thanks.

Michael Jarden [Gap in audio].

There are a number of questions on your balance sheet, Bruce. One is the long-term liabilities of 108 million. Is that mostly reclamation expenditures or what is it?

Yes, that's a good portion of it. Reclamation accruals and for both operating sites and legacies. We also have some employer related benefits, pension plan obligations there.

Second question on the derivative instruments, is that just totally the gold?

No, it also includes miscellaneous other derivatives. We do a little bit of rolling copper hedging at Batu Hijau, although that's off the balance sheet. We do some fuel hedging in Nevada and also at Batu Hijau, a little bit of silver, and probably the biggest component, other than the gold book, is inherited FX, U.S. dollar, Aussie dollar swaps associated with Golden Grove. So there's a little bit of cash dogs there. The mark-to-market on all of that is about 26 million dollars negative.

345.4, is that mark-to-market number of the total derivative?

Yes.

In the longer term that is.

Longer term. Then you have 55 in short-term. There's also some offsetting derivative instruments in the assets, which is relatively small.

In terms of the other assets on your balance sheet, what does that include?

Primarily long-term inventories. Deferred income tax assets. Stockpiles, things of that nature.

Okay. That's a long sort of inventory, I guess.

That's correct.

Thanks.

[Inaudible] Flynn with DSO Associates.

Could you go back to the Calgoly, the committee you set up with your partner and discuss what the mandates are, what you're trying to achieve in terms of given the time frame you have. And second question -

We've formed an optimization team, study team there with Barrick and have given that team a mandate to come back with a plan. I think John, your game plan is to have that by the end of the year?

That's right. We're looking at all of the options and we've got two bearing engineers and two Newmont engineers with a mandate to look at what we might do based on profitability in Calgoly with a requirement to report back by the end of the year?

Could you give us more detail what they maintain the parameters?

One thing is to look at is whether or not it makes sense to increase production to get the benefits of economy of sale. Whether we should look at high grading the operational element. That's the least likely of the four options. We're looking at the possibility of using bio ox option to treat sulfide concentrates and perhaps the least likely option is we're not changeable we'll do some minor incremental improvements in the cost structure. But it's really a full spectrum of options. This is an asset that's been expanded five times since it started in 1994 and there's an opportunity I think now to stop and ask ourselves what should be the thing to do now that it's been proven that [inaudible] Operations are viable and sensible. How can we make them more profitable.

It will not be ready by 2003 after the accommodations.

Until the end of this year. We should have an answer at the end of this year.

Update on Battington [ph] [Inaudible] And three is on Hemlow [ph] With your partners. Are you ready or are the numbers are pretty well driving [inaudible] Something going to happen pretty soon?

Not much is happening in the Battington [ph] Area. We've got four and a half ounces, four and a half million dollars on the books. They're profitable ounces, but what we're looking to do is to find ways to make them profitable. The opportunity there really is to find a mid level break through to mill the hard Baddington [ph] Ores using new technology to lower the operating costs. We've got a plan to do some high pressure grinding roll tests at our [inaudible] Operation in Nevada using the existing processing infrastructure there and some rented high pressure grinding roll technology, and the idea was to take it up from Navesco [ph] Which has already been tested already by the partners of Baddington, see if we can scale it up to commercial scale and significantly reduce the operating costs and therefore improve the profitable which would then make it a more attractive opportunity for development.

Hello, Terry, we are in working to rationalize these assets and we are in discussions with various parties. And when we have something to report, we'll make an announcement.

Why did it take so long, Pierre? It's been going on almost six months now?

Well, wait a minute.

I'm just kidding.

Thank you.

Thanks, bye.

Mike Darose [ph] With Morgan Stanley, you may ask your question.

Just a couple of very quick questions. Firstly, Bruce, with respect to Batu Hijau, I think you indicated earlier you wanted to sort of push back the debt repayments. I was wondering if you could update us there.

We did restructure the credit facility, allowing the flexibility during 2002 and 2003 to defer principal payments. And this is really to preserve flexibility in a low copper price environment. Obviously Batu Hijau has performed better than our expectations and they are and will continue throughout the end of this year to build a cash balance and we'll be looking toward the end of the year in terms of whether we voluntarily prepay some of the debt as we look at our 2003 and beyond plans.

Second question, could you provide us an update on what's going on in Nevada, specifically with respect to sort of environmental costs and bonding requirements, whether or not it has any impact on legacy costs that you were sort of describing whether there's a potential liability that you guys might have to book and maybe provide a bit of insight as to what the discussions are with the BLM and the mining industry in general.

The whole issue on surety and bonding is a very topical issue. We feel very confident here at Newmont in regard to the type of bonding structures we have in place, along with self-guarantees in Nevada and with the stronger balance sheet, access to other alternatives such as LCs, if need be. I think as an industry there have been significant discussions both internal to the industry, along with discussions with regulators on how we should collectively move forward. Internally the industry is looking not just the gold industry but strong counter parties or strong mining companies are looking at whether we should do some kind of self-bonding captive type insurance situation. That's pretty premature at this point in time. But it's sufficient to say that we're very comfortable with where we are. Obviously here and elsewhere around the world environmental regulations and the cost of managing environmental programs and bonding continues to increase. I think it generally is a competitive advantage for a company like Newmont given our financial strength.

Thank you, Bruce.

Are there any more questions?

One further question from Keri [ph] Smith with Haywood Securities.

Just a quick question. Most have been answered. But on the cash flow statement, you've got 51 million dollars of cross currency swaps that were closed out. I was wondering if we could expect any more of that during the second half?

I think that's about it. It really was a position that Normandy had on to essentially swap U.S. dollar debt to Australian dollars. And since now we're reporting in U.S. dollars, we swapped that back into U.S. dollar obligations.

I understand. That's great. Thanks.

Thank you all very much for participating in today's call. This has been obviously a period of immense workload carried out by a lot of people within the organization. We didn't really touch on the various transfers that we made, but at senior levels in the company we've had excellent cooperation. We have moved people from both from Toronto and from Australia to Denver and we've moved some operating people from the United States into Australia. The management team is in place and very invigorated. When you stop to think about the number of transactions that have been consummated in this short period of time, it is a bit mindboggling. Again we didn't touch on things such as tax reorganizations, the debt restructurings. A tremendous amount of restructuring went in the hedge book to get it in position to be able to do to do the kinds of things we want to do over the next year and a half. We're off and running with our partners on some of the rationalization at the profit level which we think will have incredible value to shareholders over the next few years. There's a lot going on. That pace is not going to slack for the rest of this year. We look forward to talking to you at the end of the quarter. Thank you very much.