紐蒙特黃金公司 (NEM) 2003 Q1 法說會逐字稿

Good afternoon and welcome to the Newmont Mining Corporation first quarter of 2003 conference call. All parties will be on a listen-only mode until the question-and-answer session of the call.

I would now like to turn it over to the moderator for today, Russell Ball. You may begin.

Thank you operator.

Good afternoon ladies and gentlemen, and thank you for joining us today to review Newmont Mining Corporation's first quarter 2003 results.

This call and presentation is being simulcast on our Web site at www.newmont.com and will be available for playback for a limited time.

As we shall be causing forward-looking information, it should be made aware that there are risks unique to our industry, that are described in detail with our filings with the SEC. The information we are discussing today May 7th, 2003, is relevant for the current period. For most up-to-date disclosures, please refer to our latest SEC filings and new releases.

During the course of the conference call, reference will be made to total cash cost per ounce and net cash cost per pound, both of which are non-GAAP measures of performance. The total cash cost per ounce or net cash cost per pound measures are intended to provide investors with information about the cash generating capabilities and profitability of Newmont's Mining operations.

Newmont's management uses these measures for the same purpose and for monitoring the performance of its mining operations. These measures differ from earnings determined in accordance with GAAP and should not be considered in isolation or as a substitute for measures of performance, or liquidity determined in accordance with GAAP.

These measures were developed in conjunction with other gold mining companies associated with the Gold Institute in an effort to provide a level of comparability; however Newmont's measures may not be comparable to some of these title measure of other companies.

With me for today's call is Wayne Murdy, our Chairman and Chief Executive Officer, Pierre Lassonde, President, Dave Francisco, Executive Vice-President of Operations, Bruce Hansen, Senior Vice-President and Chief Financial Officer; and David Peat, Vice President and Global Controller. Wayne, please go ahead.

Thank you, Russell, and good afternoon, everyone. Today's been a busy day for us here at Newmont with a Board of Directors meeting earlier today followed by our annual meeting of stockholders at which I'm pleased to announce the slate of directors was reelected for a one-year term. I would like to thank the board for their continued support and counsel over the past year, and I cannot proceed without also thanking the employees for their commitment to the - to the company this last year.

As many of you have seen in our news release earlier this morning, Newmont had a strong first quarter. We reported net income of 117 million, or 29 cents a share - a significant improvement from a loss last year. However, I should caution that net income recorded under GAAP has a number of nonrecurring gains and losses that require further discussion, and I will cover this in more detail later.

Sales and other income were $865 million, a 74 percent increase over the year-ago quarter on equity gold sales of almost 1.8 million ounces. Total [Inaudible] costs of $201 per ounce were three percent higher than the year-ago quarter, largely due to a stronger Australian dollar and increased fuel costs. Higher costs were offset by a $59 per ounce higher realized gold price. Operating cash flow before settlement of normal and accelerated deliveries of the acquired Australian hedge book was a very strong $186 million enabled (ph) the company to continue to strengthen its balance sheets with debt to capitalization dropping to just under 18 percent at the end of the first quarter from 20 percent at year-end.

In addition, Newmont reduced its committed hedge position by 1.4 (ph) million ounces in the quarter through deliveries or closeout of 100 - of 515,000 ounces and the purchase of 929,000 ounces at a cost $36.9 million. Hence the end of the first quarter through May 2, we repurchased a further million ounces of committed hedged ounces and delivered a further 22,000 hedged ounces. I am pleased to report that as of this morning, essentially the only remaining hedge obligations from the Australian hedge book is that contained in the Yandal hedge book, which as we have discussed in some detail, is non-recourse to Newmont.

As I mentioned earlier, reported net income for the first quarter was a noisy number, impacted by several nonrecurring gains and losses. These gains and losses had a net favorable impact of approximately $42 million or 10 cents per share and include the following. We had a $35 million nine cent per share non-cash after-tax charge to recognize the cumulative effect of a change in accounting principles to reflect the implementation of FAS 143, the new requirement for accounting for asset retirement obligations. We had a 42 million, 10-cent per share non-cash after-tax gain for the change in fair value of gold derivative instruments that do not qualify as effective hedges and are thus recognized as income. We had a net 68 million or 17 cents per share non cash after tax gain on the exchange on the company's 45 percent equity interest in Echo Bay for almost a 14 percent interest in the new Kinross gold.

We had a $13 million or three cent per share after tax loss on the extinguishment of debt as the company spent $135 million to retire early retirement of debt. Fair loss and miscellaneous write downs and legacy site reclamation accruals totaling $20 million or five cents a share, which included a write down of our investment related to Australian Magnesium Corp of some $11 million or three cents per share.

Newmont also had a very busy quarter and we continue to make significant progress disposing of non-core assets, simplying the corporate structure. I guess I would like to point out, though, that when you - in a flush through all of these various items, what we would say is that on a continuing basis we generated net income of $74 million or 19 cents per share on the quarter. The accountants and the SEC staff are probably having a heart attack that I used that number, but I think the investors deserve the right to see through what all the various adjustments mean.

In the quarter, in our asset rationalization program, we had a receipt of $170 million from the sale of the TVX Newmont America's joint venture interest with the balance of about $10 million received in April. So that $180 million's has now been realized. A negotiated letter of intent to acquire the Mondale (ph) interest and the Afllow (ph) project in Ghana for approximately $20 million principally in Newmont shares, this transaction will close later this year.

We took out the minorities and simplified the structures in Newmont Australia by acquiring the remaining interest in Newmont NFM and the other gold lines. Both companies will be delisted from the Australian stock exchange. As a result of solid operating performance in the first quarter we reconfirmed our guidance, but basically added 100,000 ounces as we would expect gold shares this year to fall within a range of 7.1 to 7.3 million equity ounces.

We've left unchanged our cash cost estimate at between 195 and $200 per ounce. Total copper sales on an equity basis are now forecast at between 380 million and 400 million pounds at a net cash cost of between 31 and 34 cents per share. We continue to see outstanding operations at our Batu Hijau mine in Indonesia.

Now let me turn the call over to Bruce who will discuss first quarter results in more detail.

Thank you Wayne, and good afternoon. First quarter gold sales totaled 1.78 million ounces, and those of you that have the web cast presentation in front of you can see the breakdown by region.

North America and Australia combined accounted for approximately two-thirds of our sales in the first quarter. Total cash cost as Wayne indicated previously were $201 an ounce or roughly three percent higher than the year ago quarter. This is largely attributable to higher cash costs at our Australian operations, which reported $135 an ounce. I'd like to point out that of the increase in Australia, $28 an ounce is attributable to a stronger Australian dollar, $4 is due to higher fuel costs and $14 an ounce is due to the reallocation of technical service and administrative costs.

Now let me take a moment to review the results and outlook for our other major operating sites. In Nevada, gold sold totaled approximately 633 thousand ounces at a cash cost of $226 an ounce. This represented four percent higher sales and five percent lower costs from a year ago quarter. During the quarter, gold recovered from refractory ores exceeded 70 percent of our production and this has been an ongoing trend. We see ongoing (ph) development of both the gold quarry South Wayback (ph) project and the Leeville (ph) project proceeding largely on schedule and on budget. We now expect that 2.85 (ph) million ounces of gold sales at a cash cost of approximately $220 an ounce coming from Nevada.

At Yanacocha in Peru, equity gold sales totaled approximately 335 thousand ounces at a cash cost of $124 an ounce. This represents a dramatic increase in sales of 35 percent at a nine (ph) percent lower cash cost from the year ago quarter. Higher production was the result of increased tonnage placed on our pads. For 2003 from an equity standpoint, we expect to sell 1.3 million ounces at Yanacocha at $120 an ounce.

Turning back to Australia, we sold approximately 408 thousand equity ounces in Australia at a cash cost again of $235 per ounce. When comparing year-to-year quarters, you need to keep in mind that during the first quarter of 2002, we, as Newmont, only reflected six weeks of consolidated results starting [Inaudible] 15th of 2002. For 2003 in Australia we expect to sell somewhere between 1.85 and 1.9 million ounces at cash cost of approximately $228 an ounce. obviously, as we discussed, the cost in Australia will continue to be [Inaudible] and will be impacted by changes in the Australian dollar exchange rate.

At Batu Hijau in Indonesia, we continue to see excellent (ph) performance. Equity sales totaled approximately 70 (ph) million pounds of copper at a net cash cost of 31 cents a pound. The realized copper price for us in the first quarter was 76 cents a pound. Batu Hijau had another impressive quarter with a three percent increase in copper sold and a 26 percent net cash cost per pound reduction. Lower net cash costs were largely driven by significant higher [Inaudible] credits as we got a higher gold price and we increased the number of gold ounces sold. We continue at Batu Hijau with our [Inaudible] deep drilling program to investigate the down dip extension of the deposit and to potentially evaluate the underground opportunity there and to help further define ultimate pit limits.

Now finally, as Wayne indicated earlier, we believe we've had tremendous success in reducing the Australian hedge quotes that we acquired. As of last Friday, May 2nd, we had a committed hedge position of only 2.6 million ounces and the negative mark-to-market had dropped to only 140 million, down from a negative 433 million at year-end and 224 million at the end of the first quarter, and as Wayne indicated, essentially the only remaining hedge obligations from these acquired books are contained in the Yandal operations book.,

Now at this point in time, I'm very please to turn the call over to Pierre Lassonde for some of his thoughts on the gold market.

Thanks Bruce and good afternoon ladies and gentlemen.

First of all, I just want to say how proud I am of this organization over the last, or last year. We are going from strength to strength. Just over a year ago, when we did the merger, we promised our shareholders to aggressively address the hedge book that Normandy was carrying at the time, which was 10 million ounces and as Wayne and Bruce indicated earlier, apart from the Yandal hedge book today, which is non-recourse, we've essentially eliminated that liability, such a tremendous accomplishment.

You look at the balance sheet a year ago, Newmont was 42 percent net debt. Today it's below 18 percent, another significant accomplishment. You look at the operating cash flow of this company in the first quarter, 186 million, it gives you an indication of what this company is capable at higher prices.

When you look at our exploration, last year we replaced reserves and this year, we currently have 92 drill rigs going and our commitment is to replace and start to grow reserve again.

And we have a tail wind, a very strong one in a very strong commodity price. And on that aspect, I just want to say a couple words. There's a few events in the last month or two that have occurred that I believe have been largely ignored by the investing community, but are very significant longer term for the goal price.

The first one is the de-regulation of the Chinese gold market. China has savings of U.S. $1 trillion per year and for the first time, the Chinese population will be able to access gold in every form. If you look at one-tenth of one percent of those savings going into gold, every one of those one-tenth of one percent represents a 100 tons of gold per year. It has the potential, a very large potential impact on the gold price, and as I said, I think I has been completely ignored by the investment community.

The second aspect is gold as a currency. Gold has been one of the best-performing currency against the U.S. dollar over the last 15 months. And when you look at the central bank's holding U.S. dollars, paying 1.5 percent interest rates, gold only has to go up $5 to beat that.

And I would just recall that in the 60's when the French became a little disenchanted with the U.S. policy, they decided to switch their reserve into gold, and by that very fact, they forced the U.S. to close the gold wind and de-regulate the gold market, and it finally needed up with the gold price going from $35 an ounce in 1970 to you know, $800 by 1980.

Now if you look at what's happening today with Iraq and the situation, the geopolitical situation between French, Germany and the U.S. I think it is well worth considering history and what could happen to gold in that [Inaudible] . So, we're continue to be very bullish on the commodity, and we think that this company is going from strength to strength. And with that, we are now ready to and more than happy to take questions.

At this time if you'd like to ask a question, press star, one. You will be announced prior to your question. To withdraw from your question, press star, two. Once again to ask a question, press star, one. We'll take a question - we'll take a moment for questions to queue.

Our first question comes from Michael Dudas.

I'm from Bear, Stearns. Good afternoon, gentlemen.

Afternoon, Michael.

Well, I guess you won't be talking too much about the hedge book any more.

It's going to take all the sport out.

Exactly. Bruce, could you talk a little bit about how it's going to be accounted in the second quarter and maybe how much it's going to impact the balance sheet or any earnings in the second quarter with regards to the retirement? And maybe you could discuss a little bit about what brought you guys to be so aggressive in this quarter. Was it price? Was it availability of liquidity in the marketplace? Just to shed some color on that.

OK, Mike, in regard to the accounting, it's hard to fully estimate until, you know, we get to the end of the quarter and - this next quarter and see what the price is - what the Australian dollar is. But obviously, you know, with the mark-to-market coming down from 224 million to roughly $140 million today we would anticipate, you know, another gain in the income statement. So, you know, I would - I would look for that.

In terms of reductions here, we've always said that we'd be opportunistic in reducing the hedge exposure. You know, with a higher gold price and the cash flow that we're generating on an ongoing basis, it allows us that flexibility and we saw, you know, a little bit of dip in the gold price and a little bit of a run-up in the Australian dollar which made it less expensive.

Terrific. Thanks, gentlemen.

Our next question comes from John Bridges.

Hi. Good morning, everybody. Sorry, good afternoon. I think I'm suffering from disclosure overload here.

You and us both, John.

Thanks for cutting through to the 19 cents. That's refreshing.

The buybacks that you've done post the year-end, do we have a number as to what that cost? And then, the - in the cash flow, you've got early settlement of derivatives and then derivatives. What's the difference between those two numbers?

The difference, Mike, is they both utilize cash. And one, the early settlement of derivatives, that is actually writing (ph) cash out the door. In regard to the derivative settlement of the 17 million, that is essentially the difference between what's in the income statement and reflected in the cash flow statement. Essentially we had designated the hedges at the time we acquired the hedge book on February 15, but we've been accelerating some deliveries and bringing those positions forward at a lower realized price to get them out of the way.

So the derivatives line, it's a negative $17 million use of cash. It reflects that.

OK. And have you got a number for what the cost was of buying down the ...

From the end of the quarter until now I don't have an absolute number, but I would - I think it's somewhere in the 25 to $30 million range.

OK. Thanks a lot.

Our next question comes from John Hill.

Good day everyone and congratulations on a great quarter. I was wondering if you could shed some light on which debt issues were retired in the 182 million repayment?

John, this is Bruce. It was a mix of maturities, some of the 2005 issues along with the 2011, little bit of the Australian issues. Overall what we anticipate here is a reduction in interest expense from the buy back of this position of about nine million a year. We'll be filing our Q, probably the end of this week and that would have full details issue by issue, John.

Great. Also from perhaps a bit more strategic perspective, it really seems like your company is one of the few that is adeptly integrating significant acquisitions in the wake of our transactions last year. I was wondering if you could give us some insight as to the pace of synergy realization both qualitative and quantitative and how much that's contributed to moderns (ph) in the current period?

Well, thank you for the comment. I mean, we've been through this a few times in the past and so we feel we do have some skill sets, plus I think, you know, as we entered into this transaction we had a very open mind as to looking at the best of each one of the companies.

Frankly, on the synergy realization we've done very well on tax and we probably see more tax energies going forward than we had originally anticipated. I will tell you we're disappointed with our performance in G&A, and that largely relates to the complexities that we inherited in Australia. We knew that that was a very complex structure. Obviously the hedge brook and a number of other factors there and we've been working diligently to clean that all up.

I think we originally said that we thought we could get there over a two-year period and I think we'll achieve that but it's been a slower pace. I'm pleased now we basically - other than the Yandolf (ph) piece, have this - the hedge book effectively closed out, although there will be some continuing monitoring there.

And as we go through a number of other matters there, I think you'll see the pace accelerate buying out the minority interests. We'll now be able to delist two companies in Australia. We'll also help.

So I think, you know, initially just order and magnitude we had indicated we thought it was probably on an annualized basis about $70 million. I think we would say today we see probably more like 80, 85 million but we probably only realized maybe 50,55 million to date. So that's spread over, obviously, two different annual reporting periods, but order of magnitude because it is something we stay on top of and continue to focus on within the organization.

Thank you very much.

[Inaudible] question comes from Jim Copeland (ph) .

Good afternoon, gentlemen. Just a question on Australia Magnesium Corporation; they've had a bit of a rough trot (ph) this quarter and looking through the 10-K, you do have a number of different exposures there beyond the 100 million that you've contributed in equity. Could you please just encapsulate for us the maximum exposure you have to that--to that entity and maybe just your view on what's been going on there most recently, please? Thank you.

OK, Bruce, you...

Yes, Jim, and we've obviously monitored the situation in Australia Magnesium Corporation. Seeing their announcements we did reduce the value of our equity investment on our books by $11 million in the quarter. In terms of balance (ph) exposure, Jim, combination of the equity on the balance sheet plus a 2001 note receivable, we have about 95 million U.S. balance sheet exposure and we have some contingent obligations as well. Obviously we've done everything that we were contractually obligated to do in regard to Australia Magnesium and continue to support their efforts and hope that they're successful. But we'll continue to monitor that situation.

And there's no changing your [Inaudible] at all towards that business? It's not a core business and at some point when you can and when it's the right time, you'd probably be exiting?

We've been pretty consistent in that we're focused on the gold business, Jim.

Thank you.

That being said, I guess I would just like to comment. there's some very neat attributes to that business and we think that there's value there and so we're continuing to watch that situation very carefully.

Thanks, Wayne.

Next question comes from David Christensen.

Yes, good afternoon, everyone. A couple of unrelated questions if you don't mind; the first is regards to the cash cost projections you provided for the full year. Could you give us an idea of what exchange rate you've anticipated in those projections and if they've been revised here for the second quarter? And then secondly could you review any Aussie dollar or Canadian dollar hedges that you may have in place that may run through the income statement rather than mark to market during the period?

Let me address the first question. I believe that our outlook is somewhere around 60 cents for the Australian dollar. If you have a one cent movement, that equates to about $4 an ounce on the Australian operations, and then on a consolidated basis translates to about 80 cents an ounce to Newmont's consolidated. In regard to--what was your other question? In regard to FX?

Yes, do you have any Aussie dollar FX transactions that would be included...

Well, you know we have historically with the Aussie [Inaudible] gold hedge book. At one point in time, David, we were sure when we acquired that on February 15th, sure gold of about 7.5 million committed, but we were long in excess of three billion Australian dollars. As that hedge book has worked itself up and as we've accelerated that, we have not added any specific FX hedges, but you know, we'll be continuing to look at that on a go-forward basis.

So no operating costs related to FX hedges, correct?

No.

And then as a follow-up question, in fact, something for you too Bruce, if you don't mind, could you review the financing needs the company may have over the coming 12 months, and in terms of financing, could you rank where you see your holding of Kinross gold relative to the sale of debt or equity in Newmont Mining.

We like, we love Newmont, and we're long Kinross and we love it as well, and you know, I think in terms of financial capacity with the net debt-to-cap being brought down below 18 percent, with $380 million of cash on the balance sheet, good strong cash flows in this gold price environment and under on credit capacity of $750 million, liquidity is not something I'm tremendously worried about in the short term.

I think one of the things that we have said is we want to, as we move through this year, provide more information about our project pipeline. We continue to have very good drilling success so far this year. And we continue to see good opportunities within the various projects we've laid out previously, all of which have, you know, double-digit returns, it's $300 goal. So I think as those things get more focus, we'll be ready to talk to the Street, hopefully by about mid-year this year about how that interplays with the whole question that you're asking.

All right. Thank you.

Our next question comes from Victor Flores.

Yes, good afternoon, men, just going back to the Australian hedge book, you've said that several times that the Yandal book is non-recourse to Newmont, which leads me to believe that you're probably still dealing with some rather ordinary banks.

Could you update us on he status of the Yandal book and your discussions with your counter parties.

Victor, at this point, I think you know, we've put out the information to the Street that's really available, you know, that we're really available to, as soon as we have something to announce, you can be sure that we will talk to you. We have said that there's a shortfall there as we look at future values versus the obligations of the Yandal. We want to be very open and transparent with the, both the counter parties to that hedge book, and the bond holders, and when we're prepared to make an announcement, you'll be the first to hear about it.

Great. Thanks. Second question regards the cost in Australia. That was $14 an ounce for reallocation of technical services, could you just clarify what that is please?

Yes, Victor, what we've done is somewhat a consistent to what we do at our other major sites around the world, is having their essentially home office G&A, the Adelaide (ph) expenditures, a lot of that allocated to the cost of goods sold, and to the operations that they manage. And so that was something that, you know, we did not do in 2002. We absorbed that in G&A and we just made that consistent throughout the world in terms of Newmont's approach. unid: OK, great. Thank you very much.

Our question is from John Tumazos.

Hey, John, you're on - you're on.

Congratulations on keeping your cost down and getting the hedges closed out.

Concerning the Ghana projects, Shawnee predicts a relatively high rate of inflation. Kaiser Aluminum has not had their electricity allocation. What sort of cost of input and cost forecast do you think you'll have for the two projects in Ghana?

John, this is Wayne.

You know, the - we're in that process. We're continuing to do drilling there, and we have a number of studies going on. Power is a very real issue in Ghana and the availability of power. We are spending a substantial amount of time understanding the Ghanaian economy and the impacts there. So, again, there's been a lot spoken about this.

Projects - the two projects as we see them look to be very attractive on the surface, but I think we're a company that's experienced in going into a number of different countries and these are not decisions that you make quickly. We would hope to be in a position to make an investment decision by the end of the year.

As I indicated earlier, we hope to give some further guidance to the street by mid-year on our pipeline of projects. But these look like, even given the situation there, that they could be extremely competitive from a cost-per-ounce basis and attractive on a capital-cost-per-ounce basis, also - very simple metallurgy - very straight-forward processing.

So, but you're asking good questions, and those are the questions we're asking ourself as we move through this process this year.

Thank you.

Our next question comes from Mike Jalonen.

I've been called worse, I guess. Just a quick call - quick question [Inaudible] what was the equity income from that in the quarter sort of cloudy with some of these write-downs.

Yes, it was 7.4 million, Mike. It was on the - on the same line. That's where we had the $11 million write-down of the investment about AMC.

Would have thought it'd be a little more, Bruce, given [Inaudible] the steep reduction in cost and the copper price staying the same. Was there anything ...

Well, obviously, Mike, when - you know, the [Inaudible] ...

There was a - we had a - we had a shipment that was deferred at the end of - or that was delayed at the end of the year, so our sales volumes there were not close to our production volumes. And that impacted income in the quarter, so we'll have some catch-up there.

OK. All right. Thank you.

I also think our depreciation rates were a little up because ...

Higher.

... we took that inferred material out of the base.

Thank you very much.

Our next question comes from Terrence Ordslan (ph) .

Actually I was going to follow up from Ghana and go into the deep drilling at Gold Quarry (ph) , I guess. Wayne, you want to talk about the [Inaudible] , as well? Are you going to operate a bit further what you got and what it means to the Gold Quarry?

I'm sorry. We got cut off a bit on your call there, but you were asking about the Gold Quarry drilling, and I'll ask Jeff Huspeni, who's here, to just comment on that. And if we don't have your question correct, you can come back.

I applaud your scrutiny at catching that item in the back under exploration. Let me just say in a real general sense, that in the gold core environment we've had a couple of holes now that have gone down and tested a lower strategify that happens to host a lot of the gold mineralization in the North area.

And the couple of holes that we've put in has suggested that there's mineralization down in the - we call it the top of the Robert's Mountain formation. So its very big (ph) days, but the indications are that that horizon is favorable to and that's what we're going to continue to be testing.

All right. And, I'm sorry, you said you had significant sections already. So you're testing is cellugraphy (ph) or it's beyond that? It's more like the geometry?

The hole that we drilled, from a standpoint of - it was off the Chucker (ph) footwall deposit. And it intercepted - it was over a 100 feet. That is underground mineable grade and we just have to determine what the dimensions are.

OK. And come back again, maybe comment right now, Wayne, about - obviously every deposit will carry its own critical mass, but what was the critical mass you'll be looking for a gunner (ph) project that would be cell site (ph) for a project? In terms of ...

Well, you know, I think when we talk about, you know, becoming a new, you know, core operating region for us, we'd like to see something that has at least the capacity to be 10 percent of our total production profile. So, I think, you know, there's been some numbers in the public domain that have talked about North of 700 or 750,000 ounces, and I don't think we're ready to retract those numbers.

So, again, the drilling continues to go well. We still don't know how big it's going to be. I think we had something right at about $5 million ounces at the end of last year and we think we have good capacity to grow that in a meaningful way this year.

And maybe last question for Pierre. Pierre, with the currencies floating around, obviously gold price ain't the same everywhere. And other than most of the statistics show that the gold demand is not investment demand, per se, or in fact the jewelry demand has been kind of backtracking a bit.

What have you seen to substantiate or diffuse those statements?

Well, I think what we've seen is investment demand taking off. And also the reduction, of course, in hedge book. Last year as Jeff pointed out, has been 423 tons of dehedging demand, basically. So - and that is going to continue. I mean, you've seen what we've done in the first four months of this year and I think you're going to see other companies continue to follow suit.

At the end of the year there was still 2,500 tons of gold that had been hedged with the central banks and our view is your going to continue to see dehedging and investment demand grow. And as I pointed out, you know, China is a new market that's opening up for gold investment. And with 1.2 billion people it doesn't take too many grams per person to create quite a substantial demand.

So overall we continue to be very bullish on the commodity.

I think also as you saw the gold price dip back down post conflict, we've seen more gold flows now starting to pick up, physical flows into India and the Middle East and Asia. And so, you know, that probably bodes well. I think, again, those markets (ph) opportunistic as they look at the gold price, they want to see some stability in the price before they come back and I think with the last (ph) price we saw, fourth quarter last year and the early days of this year, there was--I think you have to expect that the jewelry side of the market is going to back off a bit.

Thank you.

We like to emphasize to people that the average gold price in the 1990s was 350. We are not in unheralded ground by any means; we think there's a lot of movement left.

Our next question comes from Julia Gerf (ph) .

Good afternoon. I have a few questions on the Yandal operation. I was wondering if you could talk a little bit about the increase in cost at Yandal; what drove that and particularly, whether those cost increases came from the Junti (ph) mine or from the other two mines.

In regard to Yandal, yes, we did see higher costs due to lower grades processed and higher than normal mill maintenance costs. I think the cost increases were reflective of access to different areas of the Junti (ph) operation as well as cost increases at Bronswing (ph) in addition.

So can we expect the Junti (ph) costs to go up from where they were in the fiscal '02 period?

Well, I think--I mean with the rise in the Australian dollar, I think we've told everyone that we think all of our Australian operations have the potential of being a higher cost than what they saw in 2002.

How about on the Australian dollar basis?

On an Australian dollar basis it's clearly much more muted and it really is a function of the mining sequence.

OK. How about the shortfall--I thought there was a shortfall in production from the averages attained last year. Could you speak to that a little bit?

I have John...

Yes, maybe. We have John Dow here who runs Australia and maybe he can provide more in-depth insight.

Yes, thanks Bruce. Julie, the issues at Yandal were quite specific to the first quarter. We had some start (ph) scheduling issues and some grade delivery issues that meant that we were delivering lower grade material to the new Junti (ph) . I think you'll see that that particular component of production and higher costs in the first quarter will be reversed through this year. And the [Inaudible] cost relating to increased Australian dollar costs are likely to continue. But the specific operating issues in the first quarter are likely to be a quarter only issue.

OK, great. And could you talk a little bit about the exploration efforts at the Yandal operations? Has there been any--you know, you--there's a program in place and I'm wondering if there's any updates.

Nothing specifically to announce. We would have seen an increase in the reserves from Junti (ph) at the end of last year. Most of that was [Inaudible] high-grade [Inaudible] side operations at Junti (ph) . We're continuing to block out reserves at deeper below the Junti (ph) answers (ph) that were booked last year and we're also working on a prospect there called Gateway, so there's an opportunity for continuing to add ounces at the Junti (ph) part of the Yandal operations, but that's the main area of exploration upside.

OK, great. Could you tell me how much cash on the balance sheet there was in the quarter-end?

I'm, for normal Yandal, our ...

Yes, for Yandal.

I don't have that number right at hand.

OK, and could you give me again, I think you mentioned it earlier in the call, but the current committed ounces in the Yandal hedge book, and the mark-to-market value currently?

It's about 2.6 million ounces and the mark-to-market is slightly less than 140 million.

Negative.

Negative.

OK. All right. Thank you very much.

Our next question comes from Sean Keenan (ph) .

Hi there guys. I'll just go out, so far as I've got two questions about cap ex. To start does your, I'm wondering what your cap ex schedule is going to be like for the rest of the year on like on a quarter-by-quarter basis, if you can just elaborate on that a little bit.

And secondly, does your cap ex estimate for 2003, does that include Yanacocha? And then I've got a couple more questions if you don't mind, just if you can start on them, that would be good.

OK, as you noted from our results, capital spending for the first quarter was roughly 81 million.

Yes.

In terms of guidance for the full year, we're still holding to a range of between 560 and $580 million, which indicates, you know, obviously for the last three quarters they'll be an increase per quarter in capital spending.

We don't tend to give guidance out on a quarter-by-quarter basis, so you can just kind of do the math there.

In regard, and that does include 100 percent of the capital expenditures for Yanacocha, which we consolidate on our balance sheet. It does not include capital spending for Batu Hijau, which is treated as a equity investment.

Bruce, what is our capital this year at Batu Hijau.

Fifty-six on a 100 percent basis.

Hundred percent basis.

Fifty, we just, we're talking about Gallagher who runs our Dishu (ph) operations, their capital budget is 56 million on a 100 percent basis.

Sure, OK. That's great. And just a couple of questions about the, about the Australian operations, there was the optimization stay down at Kalgoorlie and I'm wondering what potential savings you hope to achieve out of these potential improvements and what additional cap ex maybe you acquired for that?

Yes, this is Dave Francisco. The optimizations split at Kalgoorlie and prove to be quite good. We've identified a number of opportunities to make metallurgical improvements, melt-through improvements. And I think from that benefit, it will be in the neighborhood of about $8 million per year to the up gradation.

OK, and any capital requirements to get to that, those operating improvements?

Very little.

Very little, really? OK, and I know it was asked just before, but about exploration around Yandal, there's a joint venture with Audex (ph) at Brunswick south, I think it is, where Newmont has 51 percent. And I think it was 32,000 meters was drilled in the last quarter? I'm wondering how - if you can elaborate on how that drilling went.

[Inaudible] OK, I'll just ask Jeff Huspeni to address that.

The - that meter [Inaudible] was drilled was a [Inaudible] , which is a - the surface drilling program that basically goes through the oxidized saprolite and then hits a point of rejection, if you will, on the bedrock. And so it really is a - giving you a sampling of, say, the top 50 to 70 meters. And the area just south of the property line was - for the mineral lease that we're working on was drilled. The results are coming in from a standpoint of whether there's shallow out-cropping (ph) minerals or shallow mineralization, and we're currently evaluating that.

Sure. And I guess I mean assuming there is a reserve eventually - I mean assuming something does come out of all this on this property, that would be included in the overall Yandal operations - would it? - in the reserves of Yandal. I mean this is looking a long way forward, even despite it being a joint venture.

[Inaudible] to John Dow to address that.

Yes, the joint venture with Ordec (ph) south of Brunswick is a separate joint venture between Newmont Australia and Ordec (ph) . And that joint venture is [Inaudible] milling agreement with the Yandal operations and their mill site at Brunswick. So any reserves found on the Brunswick site do not accrue to the Yandal operation.

OK. Right. That's good to know. That's good to know. All right. Well, thank you so much for your - for your time. Thank you so much.

Operator, could we take - excuse me - two more calls, and then we'll call it a day?

OK. Our next question is from [Inaudible] O'Hara (ph) .

Hi. Actually it's Barry Cooper from CIBC World Markets. Wayne, I'm going to try to pin you down a little bit more here on Ghana. Do you have any kind of a hurdle rate in mind of what you think would be an acceptable rate of return for entering into that country?

Barry, this is Bruce Hansen. Ghana - or, Wayne unfortunately had to leave to catch a plane. You know, we're continuing to evaluate and optimize the feasibility work in Ghana, but, you know, we've typically said we need plus-mid-teens type returns on projects. So I think Ghana, being a new district, we might want to see a little better than that.

Presumably that's kind of at current spot prices of gold sort of thing?

You know, in the 300 to 340 range is kind of where we're doing our evaluations right now.

Right. OK. And then might as well stick with you there, Bruce. I see the royalty guidance was fairly tight - between 38 and 42 at year-end, and now it's 40 to 50. Are you including any potential sales of assets within the royalty group there? Why is there the jump that's occurred?

[Inaudible]

No, go ahead, Pierre.

On the royalty, Barry, there's been some - well, first of all, our oil and gas royalty revenue in the first quarter and for the rest of the year is going to be quite a bit stronger than last year due to better prices and volume. And then we also have new royalties coming on stream this year and we also have catch-up payments. As we went through our royalty files, particularly in Australia and other places, we found some of the operators a little delinquent, and we're doing a bit of catch-up work.

OK, so that would probably then fall off next year, then.

May not necessarily fall off. But, you know, for this year, that's the guidance.

OK. And then, finally, are you considering getting gold [Inaudible] Batu Hijau's copper, because I see they're receiving 84 cents for their copper and Batu's only receiving 76 cents. Can you maybe just explain what that difference is?

Barry, it's a tough -- it's a function of timing associated with those various contracts and how provisional payments are settled over time. I think as we've discussed, and more so related to Batu Hijau in the past, because obviously we've only had Golden Grove for a little more than a year, if you have an acceleration over a short period of time in regard to underlying copper price, and if it's moving up, we tend to show a realized price that's actually higher than the spot price.

On the downside is that we've got a fairly short term dramatic move downward. We tend to show a realized price that is lower in fact than the spot price.

Yes, I understand that. I just wouldn't have thought that you'd ever get it up that you'd have to pay 84 cents for a realized price regardless.

Let me go back and take a hard look at that and make sure that we don't have anything that we need to look at.

Yes. OK. Good enough. Thanks a lot.

OK. Well, thank you everyone and appreciate the opportunity to talk about a very robust quarter for Newmont, and we look forward to the rest of the year. Thank you.

Thank you, everyone.

Thank you and have a nice day. All parties may disconnect at this time.