紐蒙特黃金公司 (NEM) 2004 Q3 法說會逐字稿

Good afternoon and welcome to the Newmont third quarter earnings conference call. At this time, I'd like remind participants that your line will be in a listen-only throughout the duration of today's call. After the presentation, we will conduct a question and answer session. (Operator Instructions). Today's call is being recorded. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Randy Engel. Sir, you may begin.

Thank you, operator. Good afternoon and welcome to Newmont's third quarter earnings conference call. Before we get started, I'd like to introduce myself and two other members of Newmont's investor relations team. I'm Randy Engel, and I was recently appointed as Group Executive of Investor Relations following Russell Ball's recent appointment as the Company's Vice President and Controller. Also with me today are Wendy Yang and Jennifer Van Dinter of Newmont's Investor Relations team. You should feel free contact any one of us with your questions and comments going forward.

Now let's move on to the call. Please note that today's call and presentation are being simulcast on our Web site at www.newmont.com and will be available for playback for a limited time. As we will be discussing forward-looking information, you should be aware that there are risks unique to our industry that are described in our filings with the SEC. During this call, we will refer to non-GAAP financial measures. A reconciliation to the most comparable GAAP measures is included in the supplemental information section of the third quarter earnings release, which is available on our website. In particular, we will be referencing total cash cost per ounce and per pound, both of which are non-GAAP measures of performance. These measure are intended to provide investors with information about the cash and profit generating capabilities of Newmont's 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.

On today's call, we have Wayne Murdy, Chairman and Chief Executive Officer; Pierre Lassonde, President; Dave Francisco, Executive Vice President of Operations; Bruce Hansen, Senior Vice President and Chief Financial Officer, Steve Enders, Vice President of Worldwide Exploration, Jeff Huspeni, Vice President of Mineral District Site Exploration; Russell Ball, our Vice President and Controller and Bill Zish (ph), Group Executive of African Operations. With that, let me turn the call over to Wayne Murdy, our Chairman and Chief Executive Officer.

Thank you, Randy, and good afternoon to everyone. On today's call, we will review our third quarter financial and operating results and we will also ask Pierre to give us some of his thoughts on the gold market.

Newmont reported higher net income of 129 million, or 29 cents per share for the third quarter. We also generated net operating cash flow of almost $340 million on equity gold sales of 1.7 million ounces. Our margin for the third quarter improved some 7 percent from a year ago to $108 per ounce based on total production costs and average realized price. Our higher earnings and cash flow this quarter reflect the scale and flexibility of our core asset portfolio.

As we anticipated during our previous earnings call, equity gold sales were higher than in the second quarter and we continue to expect solid operating performance through the end of the year. Total cash costs also improved slightly to $233 per ounce from the second quarter. Total cash costs were higher than last year due to lower grades that were processing and higher stripping in Nevada. We also see higher consumable prices and lower production from some of our non-core asset sales as a result of some of our non-core asset sales.

A comparison of this quarter's earnings with the year-ago quarter highlight the impact of several transactions and accounting adjustments. Net income for the third quarter was reduced by about $10 million, or 2 cents a share due to increased reclamation accruals and write-down of some assets in Australia and at Yanacocha. These reductions were partially offset by a gain on the sale of the Bronzewing mine in Australia.

By comparison, you can see from this slide that we had several transactions during the third quarter of last year largely related to the Yandal transaction and other derivatives. That had the net effect of decreasing net income by $14 million, or 3 cents per share. Therefore, when you set these aside, you can see that the net earnings on a more normalized basis were basically flat on a per-share basis with a year ago.

For the full year, we expect to generate gold sales of approximately 7 million ounces -- it's going to be a push -- with total cash costs of between $230 and $235 per ounce. We also expect to generate copper sales of about 415 million equity pounds at a total cash cost of about 56 cents per pound of copper. We expect our stronger second half performance from our operations to continue into the fourth quarter.

The guidance breakdown of the other items shown on this slide is also provided in the earnings release. Remember, when we furnish these numbers that they reflect 100 percent of Batu Hijau as it is now being fully consolidated.

Before I turn over to Bruce, I'd like to say a few words about recent events in Indonesia. Following the recent accusations related to the alleged pollution in Buliat (ph) Bay near our Minahasa mine, five of our employees were detained for questioning by the Indonesian police. There was subsequently released from the police detention facility in Jakarta last Saturday. As I said before, neither our employees nor our company has done anything to justify these false accusations that had some NGOs that have created blatant lies when they described our operation. I've said that before and I continue to stand by it. Independent tests conducted by the World Health Organization, the Indonesian Government, which put together an integrated team consisting of eight agencies, four universities and to NGOs, as well as independent tests we commissioned by a highly respected Australian organization, have all demonstrated that Minahasa has not caused pollution. We remained steadfast that the accusations against our employees and our company are completely unsustainable and false and we will continue to defend our people and our reputation vigorously. With that said, let me turn the call over to Bruce Hansen for a more detailed discussion of our third quarter operating results.

Thank you, Wayne, and good afternoon. Again for the third quarter, equity gold sales totaled 1.73 million ounces, had a total cash cost of $233 per ounce. I would point out that in the year-ago quarter, almost 100,000 ounces of gold sales came from non-core asset which have since been sold, including Bronzewing and Laluna (ph) in Australia. Obviously, this quarter's gold sales (technical difficulty) also impacted by the permitting related suspension of operations at Ovacik, and as mentioned before, lower grades and higher stripping in Nevada.

Turning to Nevada, our Nevada operations sold 570,000 ounces in the third quarter. Compared to the year-ago quarter, lower gold sales and higher cash costs were largely the result of processing lower grades ores, lower heat bleach production and continued to stripping of laybacks at Gold Quarry and Twin Creeks. The (technical difficulty) and sequenced campaigns at Gold Quarry and Twin Creeks are in fact expected to augment Nevada's production and decrease total cash costs beginning next year in 2005.

At Gold Quarry, the continued layback stripping has begun to uncover higher grade refractory ores and recent exploration results have also identified mineralization extensions containing additional refractory and oxide ores. With additional drilling, we continue to expect favorable reserve additions at Gold Quarry.

For 2004 in aggregate, we have slightly reduced the Nevada gold sales guidance to approximately 2.4 million ounces at a cash cost of $280 an ounce, again, primarily due to lower grades. Our total cash cost hence was impacted of course by full year production reduction in terms of ounces as a denominator, along with increased labor, fuel and consumable cost.

In Canada, we recently completed the acquisition of Holt-McDermott Mill and the property joining Newmont's Holloway mine. The closure of this agreement with Verick (ph) has furthered our efforts, in terms of district optimization and Canada.

Shifting down to Peru where Yanacocha sold 397,000 equity ounces to our account in the third quarter at a total cash cost of $139 per ounce. Compared to the year-ago quarter, lower gold sales were a result of decreased bleach tons placed and slightly slower recovery rates at La Quinua. Higher costs, which were anticipated, were largely due to increased consumable prices, additional stripping and longer haul distance. For the full year, our 2004 guidance for Mira (ph) Yanacocha remains unchanged with it contributing 1.5 million equity ounces to our account and a total cash cost of $135 an ounce.

Going across the Pacific to Australia and New Zealand where our (indiscernible) sold approximately 473,000 equity ounces at a total cash cost of $269 an ounce. As I mentioned before, our comparative third quarter gold sales were clearly impacted by the sale of Laluna and Bronzewing and lower mill ore grades at Pajingo as compared to the year-ago quarter. Higher total cash costs increased slightly and were largely due to the result of a stronger Australian dollar, as well as higher consumable and fuel costs.

For the full year, equity gold sales in Australia and New Zealand combined are expected to be slightly higher than prior guidance at 1.87 million ounces at a cash cost of $276 an ounce. This is based upon an Australian dollar exchange rate of roughly 72 cents for the remainder of the year.

Turning to Batu Hijau. As you are aware, effective January 1, the Company began consolidating Batu Hijau and changed to a co-product cost accounting method for both silver and gold. For the third quarter with higher copper prices, Batu Hijau has performed very, very well. Batu Hijau sold 111 million equity pounds of copper at a cash cost of approximately 56 cents per pound and produced and sold (technical difficulty) 134,000 ounces of gold at a cash cost of $166 per ounce.

The high copper and gold sales reflected increased pressure throughput and higher ore grades throughout the quarter. Obviously, ourselves and others have been impacted by higher treatment or refining costs in addition to some costs for processing harder ores.

For the full year 2004, our guidance for Batu Hijau calls for 380 million equity pounds of copper to our account at a cash cost averaging 53 cents per pound, along with 390,000 ounces of gold to our account at a cash pound of $170 per ounce. I'd like to mention that our economic interest in Batu Hijau has decreased from 56.25 percent to 52.875 percent, effective starting October 1st, reflecting that we have reached a cumulative positive retained earnings position at the end of the third quarter and this result in the initiation of dividend payments to our minority partner.

Our operations in Central Asia and Europe contributed equity gold sales of approximately 81,000 ounces at a cash cost of $169 per ounce for the third quarter. Zarafshan in Uzbekistan contributed 46,000 ounces of that total at a cash cost of $165 an ounce, with production being slightly impacted by a planned transition to a lower grade ore zone. At Ovacik, the operation remains suspended with the proposed sales deferred (ph) pending resolution of the operating permit issues, but we're making progress in that permitting process.

Now at this point in time, I would like to turn it over to Dave Francisco to give you an update on our project pipeline.

Thank you, Bruce. Leeville, our first shaft access underground mine in Nevada, contained 2.6 million ounces of reserves at year end 2003 and is expected to produce roughly 450 to 550,000 ounces per year at a total cash cost of about $195 to $205 per ounce. Destruction at Leeville goes very well and remains on schedule for fourth-quarter 2005 startup and initial gold production. We're also optimistic about further exploration upside as we continue to drill some underground development platforms. In 2005, the drill program will be intensified to focus on infill and edge definition drilling for near-term mining, while surface exploration will test targets outside of the current reserve footprint.

In our Phoenix gold copper (indiscernible) project, we are on schedule for gold production starting in mid 2006. We expect to begin construction before the end of the year in 2004. We continue to expect annual gold production at Phoenix to average 372 to 420,000 ounces of gold per year at a total cash cost of about $190 to $225 per ounce. We have been pursuing an aggressive 150-hole drilling program for 2004 with the opportunity to expand several of the tips. We remain optimistic about additions at year end to our existing 6.1 million ounce gold reserves.

Now I'd like focus a little bit on Ogdona (ph), our targeted fifth core district. As we've previously announced at our Ahafo and Akyem projects, we expect to increased equity reserves by 33 percent, or 4 million ounces, going from 11.9 million ounces at year end 2003 to approximately 16 million ounces at year end 2004. At Ahafo, construction has started and that construction is on schedule, the site access and the construction camp now in progress. First full production is expected in the middle part of 2006.

At Akyem, which is approximately a year behind Ahafo in development, the updated feasibility study is progressing in is based on new information and new positive exploration results. We expect to make a development decision in early 2005. Exploration upside in Ghana (ph) remains extremely encouraging. The mineral systems at Ahafo and Akyem remain open at depth and along strike.

At Boddington, we're working closely with our partners to update the feasibility study at that project. We expect to have that completed in the middle part of 2005 and we have commenced a detailed community and social impact assessment this quarter.

Moving to Bolivia, we do have a new oxide satellite deposit called Kori Chaka (ph), located near our Kori Kollo district. It's scheduled for a $20 million development investment in 2005. In addition, another $3 million will be invested in a new heap reach project to reprocess palings (ph). Leveraging off the infrastructure at Kori Kollo, Kori Chaka and the new tailings reprocessing project are expected to add life to Kori Kollo with an incremental production of between 250 and 300,000 equity ounces in aggregate at a total cash cost of $160 to $170 an ounce. This production will start in 2005 and continue through 2008. Now I will turn it over to Pierre to talk about Newmont Capital and his views on the gold market.

Thanks David, and good day, everyone. I will start first with our position in Canadian oil and just go over the rationale of this position. At the beginning of the year, management looked at oil price and I guess what was happening in the world oil market, and we really believe that oil price were going to be materially higher for a longer period of time because the issues of reserve replacement in the oil business. And basically, the same issues that we saw back in the '70s. These cycles are very long. And we looked at our own needs over the next five to 10 years, Newmont basically burns 2.5 million barrels of fuel a year. And with Ghana, this number is going to go up to over 3 million barrels a year.

And when we look at doing a hedge position, you can do a hedge, but that's only good for a year and you have to pay a fairly substantial premium. At the same time, there was a really significant arbitrage possibility in the market between oil price and the stocks. Because if you look at the stock that we're trading as if oil was going to stay at $25 or $27 a barrel forever, well oil was 45 and today, it's $52 or 53. So looking at the universe, we ended up purchasing 6 million units of Canadian oil sands trust. And when you boil it down, these 6 million units give Newmont on an equity basis 3.1 million barrels equivalent of oil per year. Starting in 2006 once their production is up, they're increasing production by 50 percent. And reserve 122 million barrels and we purchased that hedge position at an effective oil price of $27. So we have a 50-year option on oil price on 122 million and an effective hedge price of $27 a barrel. And that position today has a capital gain of over 100 million. So we believe that we have done something here for Newmont that will serve us well over the next five to 10 years.

With that, I will turn it over to the gold market. And this following chart goes to the heart of our belief that today that gold is a currency. And if you look at the last 3.5 years, 4 years and the correlation between the Euro/dollar exchange rate and the gold price, you'll see that correlation is about 95 percent. Gold is money, gold is a currency.

Now when you look at what is happening in the U.S., we have said it for the last four years, but it has not really changed at all. The financial and fiscal imbalances in the U.S. are continuing to grow. And when you look at the twin deficits, the budget deficit and the current account deficit, they are now over 10 percent of GDP in the United States. The bottom line is the dollar will continue to fall. But I will caution you that the Asian central banks, which for the past four years, have materially played in the market to suppress the value of their currencies going up, in our view are going to continue to do so until the pain becomes unbearable. And for them, it has not reached that point.

We're in a very interesting situation today which has never really happened in the past. The fact is that China today is the price setter for all of the commodities that it purchases, as well as all of the goods, finished goods, that it sells. If you are a producer of finished goods, you have no pricing power whatsoever, because China can under-price anybody in the world.

On the other hand, all of the commodities that they need to purchase, they will pay whatever price they need to continue to grow. And when you look at oil, and that is probably the linchpin of any economy today, China has doubled its oil consumption in the last 10 years and now they will double again in the next five years. And if you look at oil production, it is a very flat curve. The oil companies have the same issues that a lot of the mining companies have, particularly in the gold sector. They did not reinvest in production over the last 10 years when we had low oil prices. And now they have to catch up. But it takes a long time for that cycle to happen.

So China will be competing. At the end of the day, I think that they will be competing against U.S., they will be competing against Europe to buy oil, more oil in a production environment. And at the end of the day, they will end up revaluing their currency because they will want to buy oil with a strong currency, not a weak currency. At this point, they're more interested in selling goods at low prices. And so overall, we see that the gold market will be limited on the upside, even though the financial imbalances are growing, simply because the Asian central banks have not reached a threshold of pain that will let them revalued their currency.

We take to heart the line that Paul Volker said a few months ago, that in his view, there's a 75 percent chance of a financial crisis in the next five years. We believe that he is absolutely right. And if there is any surprise on the gold price, it will be on the upside.

Given all of that, however, and because of the financial imbalance is continuing to grow, it is our belief that the gold price over the next 12 to 15 months, that is to the end of next year, is probably going to stay in a bit of a higher bracket than what we had before and we are looking at 400 to 475 gold for the next 12 to 15 months.

Again, if you -- one interesting -- I was in the Middle East just a few weeks ago, and it's very interesting -- back in the '70s, the money that came out of the petro dollars were all recycled into the U.S. dollar and into loans to various countries, all in U.S. dollars. Today, what you see is these petro dollars are recycled at home in real estate in Saudi Arabia, and in Abu Dhabi, Dubai, in Lebanon. They are recycled in Euros, in gold, in any other currencies that they can outside of the U.S. dollar. And that is impacting and will continue to impact the dollar, and that is why we also believe that if there are any substantial shocks, it will be on the upside for the gold price and the downside for gold.

So these are my comments. And with that, I will pass it on to Wayne to conclude this call.

Thank you, Pierre. In summary, then, the third quarter was our strongest earnings and cash flow quarter this year. The Company generated net income of $129 million, or 29 cents per share and net cash from operating activities of almost $340 million in the quarter. As you saw in our dividend announcement this morning, we increased our quarterly dividend by a third to 10 cents per share. This is the fourth increase in the past two years, raising the quarterly dividend some 230 percent from 3 cents a quarter. s we continue to work our way towards paying our shareholders an S&P 500 type dividend yield. The philosophy has been very consistent in that regard and we do it with an extremely strong balance sheet. With the equity gold price averaging $404 for the quarter and for the first nine months, we remain bullish about gold prices and continue to call for 2004 gold sales of approximately 7 million equity ounces at total cash cost between 230 and $235 per ounce.

Finally we expect companywide reserve growth from the drill bit again this year in 2004 based on the strength of our increases in reserves in Ghana. With that said, I'd like to turn it over now to the operator so that we can take questions, any questions that you may have. Thank you very much for your attention.

(Operator Instructions). John Hill, Citigroup.

Good afternoon, everyone, and congratulations on a strong quarter, and as well, accelerating cash returns to shareholders. That's always great to see. I was just wondering if you could provide us with a little bit of an update on Phoenix and Nevada? The last time we spoke, you were drilling on about four targets within the project. There were some expanding envelopes in the 0.1 ounce per ton range. And obviously, that has been a project that has been around for awhile, so we're very interested in how that's going?

Thank you, John. I'm going to Dave Francisco to address that.

We approved the Phoenix project about a year ago. We've started construction now. And what we're trying to do is enhance the project, come up with some higher grades, look at areas around the fringes of the known deposits, also try to develop some different targets. And we're actually in another phase of exploration at Phoenix that's actually proving to be good. We expect to increase reserves and we expect to increase reserves at what we would call favorable grades. I don't think we will want to comment too much at this point because we're not ready to finish the feasibility work on that, but we are very pleased with the Phoenix and it's a good, solid project.

Thank you. And then on a similar note, turning to Ahafo and Kinyasa (ph), obviously, you've had some great drilling results there, the new pit at $325 an ounce. How sensitive do you see those reserves being to the gold price assumption?

What we find at both Ahafo and Akyem is that the mineralization does go down at depth and you do have the potential, especially at Ahafo, for underground targets. So, there is some sensitivity as you look at strip ratios and the possibility of increasing reserves with higher gold prices. But we do find that we're focusing on reserve additions along strike where they would be perhaps available for production earlier. There is some sensitivity, but it is primarily the strip ratio and bringing underground ounces into our reserve category.

Very good, thank you.

Victor Flores, HSBC.

I have two questions. First of all, relating to the Yanacocha, can you give us any sense at this time how the feasibility is going on the outside mill at Yanacocha, or is it too early to talk about?

I would say we continue to do work, but it's really probably too early. We're not in a position to disclose any results on that. We continue to look at other options down there, but the work on the mill is continuing. And when we get to the appropriate point, we will share those results.

Excellent. Second question relates to the effects of the Canadian oil sands. It's a very interesting thought process about how to hedge your energy exposure. And one of your competitors yesterday was talking about a traditional hedge and basically gave us some guidance with respect to if the average oil price was above a certain level, it will work out to about to $2 an ounce saving on every $10 (indiscernible). How would you characterize or put into context for us the "savings" that you would achieve from the Canadian oil sands on your energy cost?

This is the aspect of Newmont that I think is very, very different from our competitors, and that's the capability and skill sets we have in Newmont Capital. And I'll ask Pierre to talk about this a little bit. But, very different philosophy from our competitors. Pierre?

Well, Victor, I think you (indiscernible) the number that we gave you. We've purchased our position effectively at 27 (ph) -- the equivalent of $27 (ph) (indiscernible). And we will have burned this year 2.5 million barrels, to 3 million barrels. All of them are at the same price, $27. So if you think a $20 difference, actually it's 25, today on 2.5 million barrels, you will quickly find out that that's worth a great deal of money. And since they're (indiscernible) by their number of ounces, (inaudible). We have a 50-year hedge; that's the difference. That hedge is going to be in place year after year after year. If you look at the Canadian oil sands trust, it's a trust, so all of the income is going to be distributed back to the shareholders. And at a $40 oil price in 2006, that dividend is expected to be about $15 a share. That's 20 million Canadian, Newmont. That is year after year. That $50, I don't have to tell you, that number goes up dollar for dollar because your costs are (inaudible).

So, it's a long-term hedge. It's a very long-term hedge, it's not a Band-Aid, it's not a one-year fix. We take the view that oil prices are not coming back under $30, ever.

Just a follow-on. Is your intention then to net that some of these dividends against your cost or show the market, this is what came in from this investment if we had applied it as a "credit," this is what it would have done? Or, is there any intention to perhaps take some profits in these positions and say, okay, we took some profits. If you applied this against our production cost, this is what we would have saved the shareholder?

I think, Victor, the accounting rules would not allow us to take those profits or those yields against our operating costs. The bottom line is, we are in business to make money. We do see substantial increase in oil cost. So this is a natural hedge I will say to the bottom line of our company. And that's the way we look at it.

The fundamentals of this enterprise are very interesting. And here, again, this trust hedged their oil out some time ago at $24. That hedge comes off at the end of this year. So even at current production, substantial increases in cash flow, which as Pierre pointed out, mean substantial distribution. So oil does not have to be $50 to make this an extremely attractive investment. And they're also going through a very significant expansion up there, so we also have increased production. But it's kind of a classic -- good research takes no management time, once we have made the investment decision and generates cash to the bottom line for our shareholders, much like our loyalty operations do.

Thank you very much.

John Bridges, J.P. Morgan.

Good afternoon, Wayne. Congratulations on the out of the box thinking on the oil trust. I just wandered, with the slower leaching at La Quinua, what does that do with your expectations for the production profile there going forward?

We had some higher lists (ph) at La Quinua, it has taken the solution a little bit longer to break through. And we were seeing a little bit slower leave cycle times. A lot of that seems to be behind us now and we have had excellent production out of La Quinua in the past 45 to 60 days. And it seems like things are moving again and production is up.

So it was just a one-off chemistry problem?

Well, I think it's maybe a little bit of a chemistry problem, but also where we were on the list, we were at the top of leach pad and breakthrough is just taking longer than we thought.

And then I wondered if somebody could just talk through what you see at Rosa Montana (ph), the project over there in eastern Europe?

We took an investment in Rosa Montana. We see a fairly significant project. We're in the process of looking at all of the information that is available. And the total allowances looks pretty impressive. And we will in due time I guess gas let you know whether we do anything or we do nothing. At this point, we're just like most of the shareholders. We're looking at our options.

Okay. Thank you and well done.

John Tumazos, Prudential Equity Group.

Congratulations on the good performance. You described the 2.5 to 3 million barrels a day of -- or per year of oil usage at Newmont. Can you describe the total energy consumption, including diesel fuel and derivatives, such as cyanide, to give us a flavor of how much per ounce or within cost of sales it is at recent energy prices?

John, we can break down that detail, and we will get back to you with the actual numbers. Obviously, energy costs are a huge cost for us. The 2.5 million barrels a year is our, basically, our consumption of diesel. And then the other thing that of course we look at very hard is our power cost, which is another huge cost for us. I think when you look at the total energy component, it is probably, after labor, the second largest component of our cost structure. And of course on that side, we are fortunate at Batu Hijau, we have a coal-fired plant there, we produce our power based on long-term coal contracts at something right at about 3 cents a megawatt hour. We are currently in the process and final stages of permitting a 200-megawatt plant in Nevada. Again, we like coal. We think coal has -- you can do long-term contracts there and it is still an underappreciated commodity from the standpoint of its ability to generate a lot of power in this country.

So I think that we're trying to be ahead of the curve there, and with clean coal technology, we are hoping to effectively put in a long-term hedge on our power cost in Nevada. Because with the new projects out there, our power costs will, (indiscernible) from consumption, will actually increase. So we'll get you the detailed numbers. We're going through a period of huge inflation in all commodities. And all of industry has seen that and we want to be as proactive as we can in addressing those kind of issues long-term.

Thank you.

Barry Cooper, CIBC.

A couple of questions. Bruce, just starting off with you, you indicated one of the reasons for the cost increase was the increased stripping. However, at most of your operations, you capitalize the strip ratio when it gets above life of mine average. So I'm assuming, if you're using that as a reason for some of the costs going up, that the strip ratio is changing in some of these operations. Is that because we are seeing additional reserves being brought into the pit, even ahead of when they're being shown on the books? Is that one of the reasons (multiple speakers)?

Let me clarify that, Barry, and maybe we did not do a good enough job in explaining it in the release. We're doing more stripping to access higher-grade ores. And in the interim, we've been processing lower-grade ores and lower-grade stockpiles. So when we talk about stripping, it's really stripping going forward and getting access to higher-grade material. It really is all about grade. Just processing lower grade is driving costs higher this year in Nevada. But, we are uncovering higher grade mineralization and we hope to see lower costs in 2005.

Okay. Then moving over to Indonesia, first at Batu Hijau. It looks like grades there are well above the reserve grade there. Are you still seeing a good positive reconciliation as has been the case at that operation?

Year-to-date, we've seen somewhere probably around 8 to 10 percent, both copper and gold, in terms of positive reconciliation. But recently, the issue when we see the second and the third quarter, we're down in deep into the core of the ore body. And then we will be pulling out of the deeper parts and going back up in the fourth quarter and the first quarter with additional stripping phases.

So, we should assume that grades drop off then over the next 12 months?

They tend to be lower in the fourth and the first quarter and tend to the higher in the second and third quarters of the year.

Second and third, we're in the bottom of the pit. The first and the fourth, because of the rainy season, is when we go up under the side and you're doing stripping and also mining lower-grade material. So that's it. But, Batu Hijau has been very good to us cumulatively on grade reconciliation, it continues to be very positive. It's a hell of a mine and we have reached that point now where it has turned into one of our real cash registers.

Great. Now having said that, Wayne, obviously, you have feasibility of being done on Matabi (ph), and as well I think last quarter, maybe the quarter before, you indicated that there was a discovery on the other side of the island from Batu Hijau. Just what is your commitment to Indonesia, given all of the troubles that you've had there of late? And just how much do you think you ought to be spending there?

It's a good and fair question, Barry. I think we're obviously long-term investors in Indonesia. We have to make very long-term decisions. This event we just went through was, I would characterize it as a real aberration. It was caused by some pretty blatant activities from some pretty narrow-minded people. But, the police reacted and we really got caught a little bit in a power vacuum there. We were between governments, if you will. It was after the election of President Yudhoyono, but before he was sworn in, he came into office based on a campaign based on fighting corruption and improving the environment for foreign investment. He is a very competent individual. We have known him for a number of years. He is a former Minister of Mines and Energy, in fact. And so, obviously, he is just starting out.

I have to say, I am pleased that the third day in office, our people were released. And I don't think that was an accident. So we are guardedly optimistic. We will watch what happens there. He was elected by -- it was the first direct presidential election in the country. And he was elected by a substantial majority. But he does not have a strong party base there. And so in his cabinet appointments, it's clearly, it's clear there's somewhere horse trading that went on there and that has been widely reported. But we are guardedly optimistic. We always have to make long-term investment decisions and we will watch over the next year and see how things develop in Indonesia.

Okay. Well, hopefully, all things work out well for everyone there on that one. Thanks.

Thank you.

Jim Copeland, Goldman, Sachs & Co.

Good afternoon, everybody. Just on Yanacocha, after the blockade, or during the blockade, you indicated that the costs might be affected in the second half of the year, but you haven't actually changed guidance. So it looks like costs aren't going too badly at all there. Can you please explain that? And just a concern -- that write-down that you had; that wasn't associated with the blockade at all, was it?

No, it wasn't. It was really a portion of the aglomerator that we had built for La Quinua and we're not fully utilizing that facility. A lot of that facility will ultimately be a part of a mill there. But under the accounting rules, we felt that since we were not fully utilizing it, we should take a write-down, and that's what that related to. The cost per se the blockade were a couple, probably about $2 million all in. So not insignificant, but not enough to move the meter much, based on the scale of our operations.

Thank you very much.

Geoff Stanley, BMO Nesbitt Burns.

Thank you and good afternoon. A couple of questions. Probably first, for Dave. I'm hoping you can outline for as the weather relationship at Boddington, the joint venture there is going and kind of characterize for us how you expect negotiations regarding that development to proceed. And then, obviously, the presentation indicates that you have an update during the middle of next year and I'm trying to get a little more detail, in terms of the likely timing for development there and how that once quite fractious JV is proceeding?

On Boddington, one of the things we're focusing on right now is making sure we have agreement between the partners on what you might call the technical side of Boddington, making sure there's agreement on the geological model and the interpretation of the grades and the ores themselves, getting agreement on the plant characteristic, in terms of process design and equipment and overall production rate. Those technical discussions I would have to say are going fairly well. And we are also progressing on reaching the agreement on going into an operating mode and basically how is the joint venture going to be operated and is there going to be a lead operator or not and what type of control mechanisms might we have. So that has I think taken a little bit longer than I would've liked, but on the other hand, we've made good, solid progress. And I think we're going to be pitching some very interesting and solid decision points in 2005.

Any thoughts you might leave us with, with respect to potential timing for a development there? Just rough numbers on CapEx, start-up those sorts of things?

I don't think I want to talk about that too much. We do plan to have the feasibility study done in probably August of 2005. It's going to be a significant project at high tonnage rates and you can probably make some pretty accurate estimates of capital on your own.

Very good. We will wait for the details there. A second question. There has been quite a bit of speculation in the press and elsewhere regarding a potential ban on cyanide in Turkey. And obviously, that has pretty negative implications for Ovacik. There was actually some speculation that they had actually ruled against using cyanide in mining in Turkey. So, I'm wondering if you can elaborate on the status of that. It was pretty unclear from the press exactly what was going, (indiscernible) any good information?

Yes. We've actually had a little bit of mildly good news overnight in that we've gotten some endorsement from the local authorities regarding the project and the use of cyanide and we have to go to the next level up to get one more permit. But the outcome there does remain a little bit uncertain.

And the asset is essentially for sale, once that result is resolved?

Correct.

Sometimes, I'm the optimist, sometimes I'm the pessimist. I'd be a little more optimistic. We had to go through a process and submit an EIF. That has now been done, it's completed and it has been approved and we have received -- we're going to go into a 30-day comment period basically on the permit itself. But we've basically received provisional approval of the permit subject to this 30-day comment period. It could drag out a little bit. But I think we remain optimistic that whole situation will be resolved by year end.

Excellent, good. Thank you very much.

Alberto Arias, Goldman, Sachs & Co.

Good afternoon, gentlemen. Congratulations on the strong numbers. On Batu Hijau, if we look at the copper price realization for the third quarter, it was 142 versus DRME (ph) at 130. Could you explain to us what the reason for the significant premium over the LME? Were there any provisionally priced adjustments that might be temporary that might have distorted your corporate price realization?

Alberto, that is exactly what occurs is, just getting true-up adjustments from prior period provisional sales. And so, again, as copper price increases, we tend to have to have a realized copper price in excess of spot. And then as copper price falls, we tend to have a realized copper prizes below spot.

Second question on Kori Kollo. With the new ore value (ph) that has been found that you're planning to develop, are you going to be processing these materials through your mill? I understand that you had originally plans to transfer that mill to Yanacocha that was going to save some of the CapEx for the mill at Yanacocha. Is that the case?

No. The Kori Chaka project will be a small heap leach.

So your option of transferring the processing facilities to Yanacocha is still open and you're going to decide on that?

That is correct.

Great, thank you.

Michael Fowler, DesJardins Securities.

Pierre, I was listening to your commentary and I thought it was logged onto the Suncor conference call, rather than Newmont's conference call as you talked about oil most of the time. Give me a sense of your feeling for oil prices going forward, especially in light of the fact that you might think there is a financial crisis coming down the road?

Michael, if you listen to the Suncor, why do you bother to ask? You probably know a lot better than we do.

I guess, in terms of oil price, what we see, or in terms of the whole commodity complex, that the period that we're living through today is not a whole lot different than the 1970s. In the 1970s, the price center was the U.S., because you had a baby boom generation who wanted cars and homes and infrastructure being built in Japan. And today, you have China and India and Asia wanting the same things. They are growing. And basically, you had China go from something like a 2 million barrel a year -- the 2 million barrel a day to 4 million in 10 years. And then over the next five, they're going to go from 4 to 8. And the production worldwide is pretty well stretched to the limits.

There is just no spare capacity, and yet you have continuing economic growth in these countries of 9 to 10 percent per year. So they will be fighting for oil and they will, in our belief, keep the price a lot higher than what we have seen over the past 20 years. And so that is what we're looking at, and the same as what happens in the 1970s. And it takes five to 10 years for production to respond to these high prices.

Ultimately, I suspect that it will be met, but when is the big question. If you look at Russia today, they have gone from 6 million to 9.2 million barrels a day. But they have said in the last week that, don't count on an awful lot more, we're stretched. And the same that you find in just about every producing country. Canada can increase its production, but they are at 2.3 million barrels. So even if you double that, China alone will require 4 million barrels a day. And that does not include India, it doesn't include Thailand, it doesn't include the other Asian tigers who are also growing by about 7 to 9 percent per year.

So we think that the oil prices will remain high for quite a few years, and that is why we basically took a natural hedge long-term. And it was an incredible opportunity because, even though oil prices were $45 or $50, you look at oil equity, their price says this oil was going to be the 25 or 27 forever. There was a huge arbitrage that could be done, and that's what we chose to do.

What price did you buy those units at -- $42 Canadian?

The average for us is 44.53 Canadian. And the one dollar U.S. was 76 and change. It's now 81.

Okay, let's get onto another subject. Just on Leeville, what are the ground conditions like at Leeville?

The ground conditions are very similar to Deep Post, maybe marginally better in that we do have both the cut and fill scopes, but we do have some areas where we can do some larger (indiscernible) stopes.

Okay. I have not been under Deep Post lately, but I thought the ground conditions there were -- let's say moderate at best. Is that correct?

At this point, our indications are that the ground conditions at Leeville are moderately better and we can do a little bit more of these larger scale build stopes (ph) than we can at Deep Post.

Okay, thanks.

With that, we'd like to conclude today's call. We'd like that everyone for joining us. Again, if you do have questions that you'd like to follow up with us, please fill free to contact Randy Engel, Wendy Yang Jennifer Van Dinter in the Newmont Investor Relations Group. Thanks again for joining us.