紐蒙特黃金公司 (NEM) 2003 Q4 法說會逐字稿

Good afternoon and welcome to Newmont Mining's 2003 Earnings and Results Conference Call. All participants are in a listen-only mode. After the presentation we will conduct a question-and-answer session. To ask a question please press "*" "1". Today’s conference is being recorded. If anyone has any objection you may disconnect at this time. Now I would like to turn the call over to Mr. Russell Ball, Group Executive Investor Relations. Mr. Ball, you may begin.

Thank you, Ellison (ph.). Good afternoon and thanks all for joining on Newmont's fourth quarter and year-end 2003 conference call. In addition to fourth quarter earnings, we will be discussing our exploration results for the year. This call and presentation are being simulcast on our website at www.newmont.com and will be available there for playback for limited time.

We shall be discussing some forward-looking information; you should be made aware that there are risks unique to our industry that are described in detail in our filings with the SEC. The information we are discussing today February 4, is relevant for the current period. For the most up-to-date disclosures, please refer to our latest SEC filings and news releases. During the call, we will be referring to non-GAAP financial measures; a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is included in our news release, which is again available on the website. In particular, we'll make reference to total cash cost per ounce and net cash cost per pound both of which are non-GAAP measures of performance. They are intended to provide investors of information about the cash generating capabilities and profitability of Newmont's operation. These measures are different from earnings determined in accordance with GAAP and should not be considered an isolation or as a substitute for measures of performance in accordance with GAAP.

On the call today ,we have Wayne Murdy, Chairman and Chief Executive Officer; Pierre Lassonde, President; David Francisco, Executive Vice President of Operations; Bruce Hansen, Senior Vice President and Chief Financial Officer; David Peat, Vice President and Global Controller. And as we will be talking about or providing an update on our year-end results joining us today is Steve Enders, Vice President for Worldwide Exploration; Jeffrey Huspeni, Vice President for District Exploration; and Ian Douglas (ph.) Director of Reserves. With that let me turn the call over to Wayne, Wayne please go ahead.

Thank you Russell and good afternoon everyone. Newmont as you can see from the press release had a strong fourth quarter and a tremendous 2003. Revenues, net income, earnings per share, and our realized gold price were all up substantially. The bottom line for the quarter and year grew by triple digits. And as importantly, we increased gold reserves to a record 91.3m ounces, up 5% from a year ago despite our asset rationalization program in which we sold properties containing about 4m ounces, tremendous growth. For 2003, we delivered on our promises to eliminate the Australian gold hedge books and to reduce debt. Through deliveries and buybacks totaling approximately a $176m, we eliminated more than 5m committed ounces in 2003. Newmont remains unequivocal in its no hedging philosophy and will continue to provide shareholders maximum exposure to the gold price.

Our outstanding debt was reduced by $739m from a year ago to approximately $1.1b at year-end 2003. We had substantially strengthened the balance sheet to be among the strongest in the industry with year-end cash exceeding consolidated debt by some $237m. In 2003, with $69 higher realized gold price of $366 based on total production cost of $266; margins were $100 an ounce, a 59% increase over 2002. For the fourth quarter, our margin increased 63% from 2002 to $135 per ounce. Our earnings leveraged to higher gold prices, is clearly shown in our enhanced margin.

For the full year, net income more than tripled to $476m, earnings per share were $1.16, a 176% increase over the prior year. Revenues were record $3.2b, a 21% increase over 2002. Higher revenues from a higher realized gold price offset 3% lower gold sales, which were largely a result of divestitures of non-core operations during the year.

In 2003, net cash provided by operations totaled some $589m after using a $121m for settlement of cash flow hedges. Bruce Hansen will discuss 2003 operating cash flows in more detail later on in the call.

For the fourth quarter, Newmont reported net income of 153m, more than double the year ago quarter, while earnings per share of 36 cents increased 89% over the 2002 period. Revenues rose 3% to $821m as lower gold sales offset -- were offset by higher realized gold price, again Bruce will discuss this in more detail.

For the year our total cash cost increased 7% to $203 per ounce, and you will see in our release that we are providing 2004 guidance of sales between 7-7.2m ounces, the total cash costs of between $220-230 per ounce. We have seen cost pressures from higher energy related costs and foreign exchange rate. While we are working hard to control rising costs where we can, our key focus is on growing our margin per ounce to efficiently extract the best returns for our shareholders. In general, excluding the impacts of currency movements and energy-related costs, our total cash costs are expected to trend downward overtime as our newer lower cost margin projects particularly in Ghana replace maturing mines.

Our fourth quarter net income was impacted by several unusual items. We provided a $30m or 7 cents per share after-tax reserves on an inherited guarantee on QMC Finance, which was part of the Australian Magnesium Corp. Group. This entity, which is an operating entity, lost one of its largest customers during the period due to bankruptcy, and therefore, we have took a new look at this guarantee and provided an appropriate reserve. We had a $10m after-tax loss on the earlier extinguishment of debt as that has to do with premiums we are paying as we retire debt, which carries a higher interest rate cost. We had an $18m non-cash after-tax impairment charge at Golden Giant, which we'll discuss a little bit more, and we had the benefit of about $72m or 17 cents from the release of valuation allowances in our deferred tax asset account. These transactions had the net affect of increasing net income for the fourth quarter by 14m or 3 cents per share. So, as all of you [gained] under accounting rules lay this up, but we try to provide all the pieces so you can see what we would consider a normalized income for the quarter is about 33 cents.

Let me now turn this over to Bruce for review of our operating results and our 2004 guidance. But I would be really remised, if I don’t comment once more on the tremendous success that we saw in the reserve replacement. These are high quality reserves. We changed our price this year in accordance with [SEC] guidelines to $325 to $300. But these reserves had very little impact from the price change, we'll talk about this a little bit more, but what we are adding is higher quality reserves frankly as we'll go forward, which will produce higher margin ounces in future period. Thank you, Bruce.

Great, thanks Wayne, and good afternoon. If you remember on our third quarter conference call, we indicated that we are expecting a much more modest fourth quarter in regard to gold sales than is our usual custom where we have a ramp-up in gold sales at the end of the year. So for the fourth quarter, we had equity gold sales that totaled 1.7m ounces, a decline of 23%, but that's from a record quarter a year ago, and the decline, as Wayne indicated before, really resulted from the divestiture of non-core operations along with some lower sales in Nevada and Australia.

Total cash costs of $197 per ounce in the fourth quarter were about 11% higher than the year ago quarter. For the full year, we sold approximately 7.4m ounces at a total cash cost of $203 an ounce compared with 7.6m ounces at cash cost of $189 in 2002. As indicated before, we did have higher costs attributable to lower, -- higher energy, higher royalty costs, lower grade ores processed in Nevada and of course a higher Australian dollar exchange rate. During the quarter, as Wayne indicated before, Newmont generated a $151m in cash flow from operations, after a net working capital increase of $93m. The increase of working capital was primarily driven by a temporary build-up of inventories related to the scheduling of gold production and our gold shipments. The majority of the working capital increase will reverse and come back to us in the first half of 2004. For the full year, Newmont generated cash from operations of $589m, again after the settlement of cash flow hedges and spending a $121m to buy back hedges and also net over a working capital increase of $82m along with the impact of paying $146m in dividends to the minority partners in Yanacocha. In total, Yanacocha paid $300m in dividends and since we consolidate Yanacocha's results, the payments of dividend for minorities naturally reduces Newmont's consolidated cash flow.

Now let's take a look at the performance of our key operating districts beginning with Nevada. Nevada operations sold roughly 626,000 ounces in the fourth quarter that was down 21% from a year ago at a cash cost of $221 per ounce. Lower sales were primarily due to processing lower grade refractory ores and increase in the in-process inventories along with reduced low throughput as we shifted some of our production capacity and stripping capacity to the Gold Quarry and Twin Creeks Section 30 laybacks. Cash costs were higher due to increased labor, fuel, and maintenance cost. For the full year, Nevada operations sold 2.5m ounces for total cash cost of $235 an ounce. This compares to 2.7m ounces sold at a cash cost of 225 in 2002. As Wayne noted, we did take $18m after-tax impairment at Golden Giant. We looked at the -- at the mine plants and we eliminated marginal stopes due to geo-technical reasons and also as we are bringing the mine to closure. We are seeing higher projected life-of-mine operating cost due to strong -- due a stronger Canadian dollar, higher power costs, and higher labor cost. Golden Giant is moving towards closure and is currently expected to effectively end its life in 2006.

Finally in North America, the Mesquite mine was sold effective November 7. We believe that Nevada is undergoing what we would call a renaissance in regard to new developments. We had the development of the Phoenix project, the Leeville underground mine, the Twin Creek Section 30 layback, and not to mention our win-win agreement with Placer Dome for 25% interest in the Turquoise Ridge and Getchell mines. The $205m Phoenix project is approved for development in December with production accelerated to start beginning delivering production in 2006. The Leeville underground mine is under construction; it's 45% complete, it's on budget; it’s on schedule and should deliver the Newmont, first production at the end of 2005. We are also building a bio-flotation circuit for Mill 5 at Carlin to enhance the recovery at the bio-milling -- for the bio-milling process.

In 2004 in aggregate, Nevada’s gold sales are expected to total 2.6m ounces at cash cost approximately $250 an ounce as mine plants have been adjusted to reflect higher gold prices and as we continue to see energy related cost pressures. Also in 2004, the overall mill head grade will be lower in Nevada by approximately 8%, reflecting mine sequencing and a lowering of cut off rates.

In Peru, we sold 338,000 ounces at Yanacocha to our account in the fourth quarter; slightly down from a year ago quarter at cash cost of approximately $126 an ounce. For the full year, Yanacocha sold 1.5m equity ounces to our account, an increase of 25% over 2002 with cash cost of a $120 an ounce. In 2004, we expect Yanacocha to sell for our account approximately 1.6m ounces at cash cost of $135 an ounce. Cash cost are slightly higher and attributable to lower grades being processed in 2004 along with drawing down higher cost leach-pad inventories.

Our Australian operations sold 439,000 equity ounces in the fourth quarter, about 14% lower than we saw a year ago. Total cash costs were $231 an ounce, up about 22%, but that's less than what we saw in terms of the increase in the Australian dollar, which grew 28% over the year. For the full year, the Australian operations sold roughly 1.9m equity ounces, about 200,000 ounces more than we saw in 2002 and full year 2003, cash costs were $236 an ounce. Largest contributor to higher sales for Australia in '03, were Kalgoorlie, which had sales up 25% and Pajinko, which had sales up 11%. Our '04 guidance for Australia calls for equity sales of roughly 1.7m ounces with cash cost of roughly $275 an ounce. We make usually an exchange rate assumption of 74 cents for the Australian dollar. The reduction in sales largely reflects the sale of Wiluna property in the Yandal district in December along with the expected completion of mining at Bronzewing also in the Yandal at the end of the first quarter. The feasibility study of Boddington continues to be updated and we should have completed that update later this year.

Turning to Indonesia, at Batu Hijau fourth quarter equity copper sales totaled approximately 79m pounds with net cash cost of 36 cents a pound. For the full year, Batu Hijau obviously benefited from higher copper price with the realized copper price of 86 cents, which was up 19% over the last year and contributed to Newmont record net income of $83m. In addition, Batu Hijau's margin based on total production costs grew 79% from 2002, again reflecting higher copper prices, positive grade reconciliation, increased gold byproduct credits, and lower smelting and refining charges. As a result of higher metal prices, improved operating and financial results along with increased life-of-mine expectations regarding cash flow generation, Batu Hijau will be paying dividends in 2004. This will result in Newmont's reported net economic interest dropping from 56.25% to 52.875% recognizing that we'll be paying a net 6% economic interest dividend to the project's Indonesian shareholder.

While the lower economic interest has been applied to report -- the reported 2003 reserves, it will only show up in the earnings when the joint venture reports positive retained earnings. This is expected to occur in the second or third quarter of 2004. For 2004, at Batu in terms of guidance we expect equity copper sales to range between 360m and 400m pounds, at net cash costs ranging between 24 and 28 cents per pound, after consideration of gold byproduct credits from the sale of 360,000 equity ounces.

Our other operations around the world contributed 587,000 equity ounces to Newmont at total cash cost of a $168 per ounce. Largest contributor in this category was Zarafshan which sold 218,000 ounces at a cash cost of $147 per ounce. More importantly from a cash flow perspective, Zarafshan contributed $40m in dividends to Newmont in '03. As you will recall in December, we announced the signing of a foreign investment agreement in regard to our projects in Ghana following unanimous approval by the Ghanaian Parliament. We then approved this development of the $350m Ahafo project also in December. Ahafo is the cornerstone of our newest region and we believe marks an exciting beginning of what will be a long and mutually beneficial relationship with the government and people of Ghana. The agreement which also covers the Akyem project has a flat 32.5% tax rate throughout the life of the projects, fixed royalty rates, and in addition the government's previously 10% carried interest in these projects which converted to a 10% net cash flow interest after capital recovery.

At Akyem, we expected to have an updated feasibility study and a development decision on that project by year-end. You'll hear more about some of the exciting drilling that we are doing there from Steve later.

As Wayne mentioned before, in terms of guidance for 2004, we should be between -- with gold sales between 7m and 7.2m ounces with cash cost in the $220-230 range. Obviously, these costs are higher than previous guidance and that’s really driven by a $16 an ounce impact from currencies, Australian and Canadian exchange rate assumption, $8 an ounce from changes in mine sequencing reflecting lower cut-off grades along with some other expenses and about $3 an ounce related to royalties and taxes that are impacted by gold price.

Continuing with '04 guidance in the copper area, consolidated copper sales or actually total equity copper sales should range between 410m and 416m equity pounds and this reflects both Batu Hijau and Golden Grove in Australia, and net cash cost between 29 and 33 cents a pound. Our 2004 capital expenditure should run between $700m and 750m, 29% of which is for new projects and 38% of which is for mill upgrades or general PP&E such as mill upgrades, expansion of tailings facilities, leach pad expansions, primarily in Yanacocha and replacement mine equipment at various operations.

From a geographic standpoint, obviously, Peru and Nevada and Australia will receive the largest degree of spending, but we will be spending about 14% of our consolidated CAPEX budget in Ghana during 2004. With that, let me now turn the call over to Steve Enders for an overview of what we believe is our very exciting reserve announcement today along with an exploration update.

Thanks Bruce, and good afternoon everyone. As Wayne highlighted earlier, Newmont had a great year increasing proven and probable reserve from 86.9m ounces to 91.3m ounces at the end of 2003. Interestingly, the largest reserve growth came from our newest region Ghana and also our oldest region in Nevada, which testifies to the long-term quality and prospectivity of Newmont’s exploration lands. I will talk more about these two areas in a minute.

Reconciliation of our reserve growth begins with year-end 2002 reserves of 86.9m ounces and these are reported at $300 gold. Depletion from mining accounted for a decrease of 8.8m ounces followed by 4.1m ounces of divestments. We then added 2.3m ounces from acquisition, 2.8m ounces from just $25 increase in the gold price assumptions to $325 and best of all, the 12.3m ounces, the majority of which were from new discoveries and reserve extension.

With our great land possession of approximately 60,000 square miles in some of the world’s best gold districts, we are confident we can continue to deliver positive results this year as well.

Our reserve sensitivity analysis suggests a 5% decrease in reserves at a $300 gold price, an increase of 4% and 10% higher at gold prices of $315 and $375. Keep in mind that reserve estimates at higher gold prices are constrained by a lack of adequate drill information rather than lack of mineralization and I think it’d be safe to say that with additional drilling our reserves would be larger.

Turning to Ghana, our year-end reserves in our newest regions grew by 7m ounces to nearly 12m ounces. Ahafo increased reserves alone by 4.3m ounces to 7.6m, while Akyem grew from 2.7m to 4.3m equity ounces. Mineralization in both of these systems remains open along strike and down-dip. As illustrated in the two cross-sections I have shown in the right, drilling in 2003 resulted in significant pit expansion, which could be further expanded through drilling in 2004. In addition to all of this work at Ahafo and Akyem, we are also accelerating district and in-country regional exploration programs in 2004.

Going to Nevada, Newmont’s long-lived core operating region, year-end reserves increased by 3m ounces after depletion by 3m ounces, the record of 33.7m. Significant reserve additions included approximately 2m ounces of gold each at Gold Quarry and at Twin Creeks and over 400,000 ounces from Long Tree. The bulk of our Nevada reserve additions came from areas where we were able to define higher grades with greater continuity than previously modeled. This was primarily the result of additional core drilling and reevaluation of old data, some dating back to more than 10 years.

A good example of how we have achieved reserve addition within the cross-section through Twin Creeks on the right. For example, the middle drill hole completed in 2003 that has 420 feet at a 0.134 ounces per ton grade expanded the amount of plus 0.1 material by more than two times the old block model shown in the background. [Drills have been] turning since early January beginning yet another aggressive year in Nevada where we continued to optimize the current open pits, explore for new shallow mineralization, and advance several prospective underground targets. With that, I'm going to turn it over Pierre for his thoughts on gold. Pierre

Thank you. He’s going to turn it over to me before he dies. Thanks Steve, and good afternoon everyone. Let me put in perspective a little bit of what Steve has said. In 2001, at the bottom of the gold cycle, Newmont did not replace any of its reserves. Last year 9 months into the merger with a lot of hard work, we were able to finish the year with a 100% reserve replacement. And in '03 with our people firing in all cylinders, we accomplished a 182% reserve replacement. That is a tremendous accomplishment and it reflects a large -- in large part the value of Newmont’s land holding of some 60m acres in the best gold camps of the world and the diversity of our portfolio. If you look at again the fact that the two-thirds of the reserve increase that come from our newest and oldest portfolio assets attest to that front. And finally, when you look at our reserves sensitivity, particularly like the 375 number of a 100m ounces, that’s sort of elegant; but more importantly, when you go back a couple of years there was some concern that Newmont with the reserve life of less than 9 years might be in dire shape. If you look at those numbers today and at 375 Newmont is a 12 years old reserve and still growing. And I tell you, this year for '04, we look -- the reserve replacement numbers look very attractive once more. So, I just want to congratulate all of our employees, near mine and geologists all over the world who have really accomplished a great -- tremendous efforts in '03.

And before I turn my attention to gold price, I just also want to mention that Newmont Capital had a great year last year. It -- we did something like 44 transactions with a nominal value of over 1.2b and it continues to reposition our assets for maximum return to their shareholder and that is the credo of Newmont Capital and deals like the Getchell, Turquoise deal, the purchase of the Tanami minority interest, dispositions of non-core assets are tremendously helpful to focus this attention and reposition the assets and the money on the assets that we want to keep and continue to grow. So, again we had a great year at Newmont Capital.

Now I just want to turn your attention a little bit to the gold price. It's been a bit more volatile in the last couple of weeks and I would like to spend just a bit of time. If you look at the chart here it is quite evident that in the last 2.5 years, the dollar has had a correlation of something like 90% with the euro. In fact, what it says is that in the last 2.5 years, the euro has taken the brunt of the dollar devaluation. Now at a $1.32, you know, at a $1.30 you are closing in through the euro, it's starting to be very painful for European in particular. But what has had not happened is devaluation against Asian currencies and they are fighting it to the hilt.

Japan in December spent 21b to defend their currency. In the first three months of January they spent 20b. Now, if there is a contest between Japan buying the currency and the Fed printing the money, I'll vote for the Fed. I think they can print it faster than the Japanese can buy it. At the end of the day, the Fed has a very benign neglect attitude to the dollar; as long as it doesn't fall too fast and too far they are going to let it go. And that is what we are seeing.

In terms of the economy worldwide, we are very positive, in fact, for the next 2.5-3 years. There is a worldwide recovery led by China and the U.S. In fact, in the U.S., we are seeing the best recovery money can buy. And that is a function of the deficit that we are looking at. Now, with a recovery worldwide, our interest rates in the U.S. is about to go up.

Well, when I look at the total debt level of the private, household, corporate. and government in the U.S. and that level is at currently close to 295% of GDP, it seems to me that the Fed has painted itself in a corner. There is a not a whole lot of room to grow -- to move interest rates from here. Can they go up 1%? Absolutely. Is that going to happen before the election? I don’t think so. The Fed is very sensitive to the President-elect and they are not about to mess up as the chance of reelection.

Is it possible that in a growing economy that the rates could rise by 1% or even 2%? Yes. Is that going to have any effect on the gold price? I don’t think so. Can they rise 5%? I don’t think so either. There is just not the room for that. And again, when you look at the next slide, you can see another reason why. The deficit continues to grow, that is do not alleviate the problem and in fact the Congressional Budget Office forecasted just in the last month that our current rate of deficit will surpass the $15t mark within 10 years. Just like who is going to our pay for it? Well, right now we are basically funding it through a joint account deficit, which is at 5% of GDP, is a record. That again will not continue. Who is funding that -- all those deficits? Well, [Jim Gram] says it is the kindness of strangers, mostly the Asian central banks.

And again, as you can see in the last 5 years, the Asian central banks have been the dominant buyer of our debt and I would like to say we consumed, they produced, we spend, they save. And by doing so we are digging ourselves a whole way to China; that too is not going to last forever.

In short, the fundamentals of the gold market continue to point to rising prices in the coming year? Yes, it will continue to be volatile; there is, you know, no question about it. Currently the loans are suffering a little bit, a [little about] of selling and the gold prices has been under pressure, but longer-term we continue to be very positive.

Finally, I just want to recap. It has been a tremendous year for this company, bottom line earnings tripled to $476m. Our reserved increased to 91.3m ounces. Our balance sheet is in the best shape it has ever been with $237m of cash and excess over debt. We continue to generate very strong cash flow from operations, and so far the merger integration it is complete, it has been a great success and we are heading in 2004 with enormous momentum. Thank you very much for your attention, and with that we will open it up for questions.

Thank you. We will now begin the question-and-answer session. If you would like to ask a question please press "*" "1" you will be prompted to record your name. To withdraw your question, press "*" "2"; one moment please for the first quarter. Our first quarter comes Mr. Michael Dudas with Bear Stearns. Sir, you may your question.

Good afternoon gentlemen.

Good afternoon Mike.

Where does Newmont plan to spend money on the drill bit in 2004? It looks like a pretty hefty increase in exploration so where are the targets?

Steve, you just want to comment on that briefly?

Yeah, we have aggressive programs planned in all of the same areas that we explored in 2003, which dominantly is around our large land holdings in Nevada, Australia, Yanacocha, and in Indonesia, in the contract to work around Batu Hijau, but in addition to that we have regional exploration programs in play in the Antonio and Quecher primarily in Peru, a small program in Turkey, and we are looking at aggressively entering exploration in Mexico this year as well.

Bruce, when did you guys anticipate earlier that Batu Hijau would be paying dividends, I am assuming it wasn’t this quickly, was it?

No not at all Mike, obviously, you know the ramp-up in the copper price combined with the performance of the operation and you know its ability to essentially repay the deferred debt that, you know, we had deferred when times were tough, you know, all of that has played into, you know, a much more robust outlook and you know we need to recognize that we are going to be paying dividends, and reduce our equity interest, still a hell of a great essence generating a hell of a lot of cash flow to Newmont.

And what’s the gold price you are assuming on those cash costs at Batu Hijau?

I, you know, we are assuming on a look forward basis reduced sensitivities between 360 and 400.

Terrific and then one final thought for Wayne and Pierre, how different are you guys managing Newmont given the level of the gold price, given the success of the integration, and may be what the expectations about the company two years ago, how much of a differences are we going to see going forward managing the company then, what you guys were thinking about may be even just as much as 6 months to 1 year ago?

I think, you know, the challenge is to be prudent in how we maximize that -- the margin. You know, the price increases from currency which you know, not about 30% of our costs are non-U.S. dollar based, and so that, you know, we get impacted by that, but frankly I'll trade that for that -- for what has happened to the gold price any days. The margin increase there is what we really have to focus on from the day-to-day operation standpoint. We are looking at a number of ways to attack our cost on a real dollar basis. We are very mindful of the cost of energy and power, and looking at alternative there that could improve, but I think you know, we'll run the company for the bottom line and so the reserves we add are quality reserves. The projects we built -- we want to build quality projects that have long life where we are going to be there for an extended period of time. And you know being the largest gold producer is important to us, but the bottom line profitability to our shareholders and share performance is what really drives us. So, real net asset value growth and how we compensate our people is built around a balance between long-term objectives and short-term, but the waiting is about two to one long-term. Pierre.

I don't really have a whole lot to add. Focus-focus-focus those are three key words around the organization; focus on the lands that we have because they are some of the best in the world, 80% of the ounces that we discover come from near mine and 20% from the greater exploration. If we continue on that record, we are going to continue to increase reserve replacement. In terms of operation, focus on cost, '04 is going to be a little more challenging and it reflects the lack of investments that happened in the late 90s, early 2000 when the world was saying we don't need more gold and so as an industry we are paying the bit of the price this year, but I think that’s going to be the maximum pressure on cost next year and particularly after that. As Wayne pointed out the reserve that we are putting on the books are better quality reserves than I think we've ever had and the cost structure should start to come down, that is what we are predicting. And in terms -- again Newmont Capital is, you know, get rid of the asset that are not important and keep the focus of everybody on the bottom line. The greatest danger in this period is what I call profitless prosperity where the gold prices go up and there is nothing that comes down to the earnings. I think some of our competitors who operate in other currencies are feeling that very much. We are blessed as 70% of our costs are U.S. dollars and we are going to maximize that advantage that we have and by continuing to seek for U.S. dollar based asset in particular. So that’s our advantage I think.

Gentlemen thank you for your answers.

Mr. John Tumazos with Prudential you may ask your question.

Congratulations on all the progress. You forecasted about 590m of depreciation in '04, up a little from '03 well up or will be down, would you describe which portions of the operations involve the changes in depreciation costs?

John, I guess could you repeat that, I am trying to understand it?

You guidance for depreciation was 5 --

For 2003?

For 2004 was 580-600, DD&A 500, 600m and the line in the year just ended was 564?

Right.

So you are looking for about a $25m increase in depreciation while the output level will be a little less?

Right, right.

Is that foreign currency translation because you are depreciating foreign assets from Australia?

Some of that, close to that. But you know I think it's reflective -- I have to look at the tables in terms of -- and look at the details in terms of DD&A. I think a lot of it's in Nevada in terms of the startup and amortization of costs at Gold Quarry. But John let me go back and look at that and give you a better answer, have our people give you a call on that.

Mr. Tumazos does that complete your question?

Yes, thank you very much.

Mr. John Hill with Smith Barney, you may ask your question.

Yes good day everyone and congrats on the exciting developments. I guess I’ll also say it's nice to see somewhat come clean on the tax rates we have seen a fair bit of engineering to optimistic EPS through dramatically below guidance tax rates for a number of companies across the space. However, my first question has to do really just with the reserve table, it seems a rather interesting coincidence that the '03 reserves measured at $300 an ounce equal exactly where you were a year ago and again I’m going to assume it’s a coincidence but it certainly does break that question that has been asked in the media already. Also I would ask if the reserves at this point are -- why they are more sensitive this year than last [thing] as you had a gain of $2.8m ounces from the change in gold price assumption versus what you are showing this year 4.4m ounces.

John, [inaudible].

John, last year's reserves were [down] at $300 gold. The 86.9 is exactly what we reported last year. I may not clearly understand your question there. The gold price impact of going, you know, if you’ll adjusting that for 300-325 with the 2.8m ounces, so that we take up about 89m ounces than you had the sales of properties that had about 4.2m, the majority of that was the TVX sale at the beginning of the year.

Very Good. No -- arcane detail required. Just -- it is an interesting coincidence again that this year's reserve is calculated at 300 equal exactly where you were a year ago?

Yeah, that's just purely coincidence.

Yeah. Okay.

Since it is at 375, it's 100m.

Looking in the right direction. Okay, and I am just going to ask a final question on Kalgoorlie, when we were last down there, grades were running sort of ahead of reserve average about 2.3 grams versus 2; look like there were some upside to tonnage and the operation characterized is entering it's cash flow sweet spot; just interested why the total cash cost guidance for '04 is so high up at 315? I mean, I understand the mature operation and there are some sell activity issues and currency and forex, but it does seem somewhat incompatible with what we saw in November on site?

I think that, you know, reflects our best estimate at the current time John and you know hopefully, you know, with the improvements that they have been able to make and optimize throughput and the production schedules at Kalgoorlie though, be able to do better.

Very good, thank you.

Mr. John Bridges with J.P. Morgan, you may ask your question.

Hi, Wayne and Pierre. I see you put a team back on the development at Yanacocha the oxide mill and the sulfide to date. And, you know, when you look at the big copper-gold sulfide, do you think it is sort of $1b concentrates and that sort of thing. But I know initially there was a thought of sort of nibbling at the better, sort of, phases of that mineralization, what do you see that's, you know, how do you see that development work proceeding in a particular, you know, on the sulfide side?

Yes. Let me ask Dave Francisco to comment on that that a bit, John.

Well, we have several things going on in Yanacocha right now. We do have some high-grade oxides and there is some possibility of putting in a small milling operation that could get better recoveries and then increase our cash flows. They are actually milling the high-grade oxides; that sand mill could be converted over and actually process certain amount of the sulfide material that will be showing up in the lower portions of the Yanacocha [tip]. The other thing that’s going on in the general neighborhood of on a general subject of sulfides is Minas Conga with the metal prices where they are today with recent successes we have had at drilling in the area. Minas Conga is looking actually quite good right now. We have been [inaudible]. So, Yanacocha is I guess almost ready to embark on that next phase not unlike Nevada did a few years ago on the way from oxide to refractory. And when we take a look at the future of Yanacocha you see the sulfide, their possibilities, and their potential at Yanacocha combined with the sulfide potential at Minas Conga, I think it's pretty exciting and we are working pretty diligently on that right now. But we’ll have more to say about that towards the end of the year.

What do you think the trigger [for us] would be for Minas Conga? Is it passed that already?

No. Like I said that at the current metal prices, it’s very attractive.

Okay, and a lot of that sulfide has arsenic in it. And is there any thought within Peru to put in a smelter which can, you know, specialized smelter to treat that material?

Well, there are possibilities to put in a treatment facility that can deal successfully with arsenic bearing ores but not all sulfide ores at Yanacocha they are arsenic. Despite of that we can do to avoid the arsenic and then we do have the arsenic, there are treatment options that are being considered as part of why we are looking at, so to, speak the sulfide universally at Yanacocha not just Minas Conga or not just the sulfide that are below Yanacocha [inaudible].

Okay, thanks a lot guys.

Mr. Victor Flores with HSBC Securities. You may ask your question.

Yeah. Thank you. Good afternoon. First question I have is on the two Ghanaian projects, can you give us on this call a sense of what the global resource currently is for those two projects and what broad economic parameters other than the gold price were applied to calculate the reserves that you gave us today?

I will ask Wayne to touch base on that with respect to reserves and resources.

Yeah, the Ghana is still pretty wide open, you know, we've got the reserves at 12m ounces and then on top of that deploying resources in the order of 3-4m ounces beyond that. We kept our resource calculations at $350 gold, so there's a lots of room for upside on that in higher gold prices. [inaudible] on strike and down debt.

Now, this is Dave. One comment I'll make about Ghana. You know we were very pleased with the quality of the asset when we first took a look at subsequent to the merger. It is then moving along pretty fast and we have actually made some investment decisions before the resources fully defined. So, Ghana continues to look very good, the reserves continue to grow, and I think we are going to have a very fine future there.

Couple of follow-ups on Ghana and thanks for those answers. How much of this additional resource is the resource by virtue of lack of information, and how much of it is a resource because it just doesn’t' fall within a [pad] at the current time?

All of our resources fall within floated columns, but we are not counting anything outside of what we could find in an economic column at $350 per ounce.

Great. And how much money do you plan on spending on exploration in 2004 and '05 or is this now fully moved to the development phase?

Do you have the budget on drilling?

No, the drilling is substantially all expensed drilling because it is going to be step-ups or new areas there. So, a very little is capitalized. Do you have the --

Victor, I'll get you after the call.

Okay. Great and then just moving on quickly to Yanacocha, could you tell us how much money was spent on exploration at Yanacocha in 2003 and how that was split between focusing on mineable oxide targets and how much of it was focused on perhaps longer term sulphide resources?

Bruce, why don't you go ahead?

Victor, I am actually focused on your last question in terms of exploration spending in Ghana for 2004. I mean, we are looking at total expensed an exploration of around a 140m, about 13% will be spent in Ghana. So that translates to about $16m.

So, still a significant amount of ongoing exploration work even as you gear-up the build?

Yes.

Victor, I am trying not use my Yanacocha line that I used for so many years. We still don’t know how big Ghana is going to get.

All right, great. Just one final question on exploration; last year you expensed about a 115m on exploration and from what you told us earlier that came out to about 12.3m new ounces that were discovered, so about 9 bucks an ounce. Was there any additional amount of exploration that were capitalized or is that $9 ounce a good rule of thump number to use?

No, there was capitalized exploration of about $30-40m, as well in addition to what shows up on the income statement.

So your finding cost is probably more in the order of say 12 bucks an ounce?

Yeah.

Okay, great. Thanks.

That’s been a very good long-term historic cost for us too.

But -- thanks and I'll let someone else carry on with the questioning.

Thank you Victor.

Mr. Jim Copland with Goldman Sachs. You may ask your question.

Thank you and good afternoon. You had quite a large reserve growth in Nevada, you were looking at some old drill holes, which seemed to understate the grades in there, I am just wondering what percentage of the reserve increase was simply a function of upgrade to the grade, or you are involving no additional mining of tons just basically additional gold?

Yeah. Jeff will answer that.

Jim this is Jeff Huspeni. The material that we drilled was not in reserves and it came into reserves, both at the layback at Gold Quarry at [Dozakizanet] and at Twin Creeks. So, it wasn't that we were just upgraded current reserve material, but it actually was new material that came in.

Got you, that answers it. Secondly, just broadly speaking over the last few years, the industry, especially in gold prices alone, the industry has a record of mining at above reserve grade and this doesn't necessarily a price at Newmont. I just wondered in '04 your mine plan, how does the mine plan compared to your reserve grade, please?

Dave.

You know, I think that’s an important observation. If you are in a time of falling gold prices, you know, most of mine operators will do what they can to get their operating costs down and you tend to mine and above the reserve grade in those times. But I’d we remind everybody that it was just a little over a year ago that Newmont was doing its reserves at $300,000 an ounce. And today it's -- the reserves are computed at 325. Our mine plans are still primarily being run at about $325 an ounce. We have not fully reacted to the current prices of $400 an ounce, as has been mentioned we have an awful lot of drilling yet to do. So I think right now we are going to be mining at close to the reserve grade. But I think you are going to see the reserve grades change as we report reserves at high gold prices.

So we might actually expect reserve grades to come down as well?

Yeah. That’s right.

Again, we will manage this for growth in margin and so, you know, with better nice cushion and we want try and grow that margin.

Understood. Thank you very much guys.

Once again to ask a question, please press "*" then “1”. Mr. Mike Jalonen with Merrill Lynch, you may ask your question.

I guess, I have been called worse.

Now, come on Mike. [inaudible]

Well, [inaudible]. He has always been up and up with me, but just on your capital cost, Bruce, may be you can give us more of a project-by-project or mine-by-mine breakdown for 2004 please? Ghana is about 100m, I estimate, but sounds like Nevada has got the largest one, if you can provide that please?

In terms of 2004?

Let’s say ‘03 - ’04.

Without looking in '04 in regard to capital cost, we’ve provided the graph during the presentation on that.

I haven’t found that.

28% was focused in regard to project development and about 38% related to PP&E. You wanted --

Like how much Nevada, Yanacocha?

Oh, by location.

Yes.

We will get back to you on that Mike, I don’t have that specific table, but we can get back to you on that and we will give you as much detail as you want to get into.

Okay, I will call, Russell.

If you look at the pie-chart, Mike, substantially all of North America is Nevada, so it’s 20% of the 700-750m, Australia is 18%, Ghana is 14% and Yanacocha, this again is on a 100% basis is 38% of those numbers. But we’ll give you detailed breakdown to go through this.

Mr. David Mallalieu with Scotia Capital, you may ask your question.

Thank you very much. Just following up on Mike’s, if you could post those CAPEX numbers by project that would be great. And just two questions for you, Pierre, you mentioned profitless prosperity and it’s a great [literism] there, but I was just wondering that if you have a very bullish view on the gold price, wouldn’t it be providential if one started or commenced a very aggressive acquisition program right now because you would definitely have profits if gold prices were exceeded $500 an ounce; what’s your -- what’s the position of Newmont on that?

Well, it all depends what you pay for the ounces, you know, if you look around and you are buying ounces for $300 an ounce, for example, and it cost you another 200 to mine, gold price even at $500, you are not doing anything for your shareholders.

Right. So, you have got a view of what the gold price may top [out that then]?

No, I think that the way we operate is we, you know, the gold price today is $400. If we can find an acquisition where we can make a return on capital at current gold price without having a view of whether the gold price is going to be higher or lower a year from now is the right thing and. you know, we, of course, would build a cushion in there, but that’s the idea. Now, are we doing that? Absolutely. Look at the transactions we've done in the last year. We added through transaction about 2.4m ounces to reserves and also a few ounces to move to NRM and our goal in '04 is to definitely increase our class 2 and 3 NRM and pre-NRM numbers greatly because those are the cheapest ounces to buy right now and then let our engineers and our exploration guys bring them to class 2 and then class 1 reserve and that's -- those are best acquisitions, we are very focused on that.

Okay. Good [segway] into my last question, which is with regards to the accounting for the Normandy acquisition and given that Ghana has turned out to be so successful, what you might apply for that for unappreciated capital cost, so what are you going to do with the Normandy book value and how are you going to distribute it?

The Normandy acquisition had to be fully accounted for within the first year. So, the purchase price is allocated out to the asset based on our view value at that time. So, with respect to Ghana, you know, we didn't put a lot of incremental value on that asset from the acquisition since the discovery has really started growing afterwards.

We don't adjust that with respect to basis. We book basis as what it is from the time of acquisition.

Okay, so can we read into that there will be no modifications to the shareholders’ equity in 2004 as a result of looking at -- re-looking at Normandy?

Lot of what.

That we won't have any -- there will be no write-downs?

Adjusting shareholders’ equity is a function of Ghana increasing in value.

So, that's a no.

Yes.

Okay. That’s all I want to know, thanks.

Operator, this is Russell, if we could take one more question, thanks.

Ian Preston with Goldman Sachs, you may ask your question.

Good afternoon gentlemen, just given a very strong result, can we assume that you might be reviewing the dividend path? I know you reviewed it during this year, but, you know, looking forward with the kind of forecast that we would be seeing, would you be looking to reward shareholders further through a change in dividend path?

Yes. Our Board discusses that every quarter.

Thank you.

Okay. With that, we would like to thank you all for participating in the call. Some of the questions that were asked we didn't have the specific detailed answers; feel free to contact Russell and his staff or he will contact you. Again, we are very -- I think as a management team and an employee team, we are very pleased with this last year, but we, you know, I think with the reserve growth question I ask right away is how does the [cupboard] look and that’s the real exciting thing. We've got a lot of organic growth left in reserves and that will translate to organic growth in our unit production overtime. So, as Pierre talked about, the gold price and we think the fundamentals are extremely good, very attractive for some period to come. I was amazed he didn't predict the price today, but he probably will tomorrow. But anyway, we really are very fortunate; we've got a great asset base to work with, great people to work with. We think we've got good value drivers to motivate our people and we expect to continue to provide very strong results that focus on the bottom line. Thank you all very much.