紐蒙特黃金公司 (NEM) 2004 Q4 法說會逐字稿

Welcome to the Newmont fourth quarter and year end conference call. All participants will be in a listen-only mode until the question-and-answer portion of the conference, to ask a question, please press star one. You will be prompted to record your first and your last name. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to Mr. Randy Engel, Group Executive Investor Relations.

Thank, operator. Good afternoon, everyone, and welcome to Newmont's 2004, fourth quarter and year end earnings conference call. Today's call and presentation are being simulcast on our website and will be available for playback for a limited time at www.Newmont.com.

On today's call we have Wayne Murdy, Chairman and Chief Executive Officer, Pierre Lassonde, President, Bruce Hansen, our Senior Vice President and Chief Financial Officer, Steve Enders, our Vice President of Worldwide Exploration, and Russell Ball, Vice President and Controller.

Given that we will be discussing forward-looking information today, 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 of the most comparable GAAP measures is included in the supplemental information section of our fourth quarter earnings release which is available on our website. In particular, we'll be referencing total cash costs per ounce and per pound, both of which are non-GAAP performance measures. These measures are intended to provide investors with information about the cash and profit generating capability of Newmont's operations. These measures differ from earnings 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.

With that, let me turn the call over to our Chairman and CEO, Wayne Murdy.

Thank you, Randy, and good afternoon. As Randy indicated, I will review the fourth quarter and year end financial and operating results. Bruce will then just cover some of the details of our operating results, and Pierre will finish up with an overview of exploration and merchant banking activities, and, of course, his always insightful thoughts into the gold market.

Newmont has had a strong fourth quarter and a solid year. Our equity gold sales was 1.8 million ounces in the fourth quarter with total cash cost of $226 per ounce. For the year we produced right at, or just slightly under 7 million ounces with a total cash cost of $231 per ounce. For 2004, our earnings and cash flow reflect the strength of our portfolio and our leverage to rising gold prices. We reported net income for the quarter, of $182 million, or $0.41 per share, and net income for the year of $435 million or $0.98 per share. We also generated super strong cash flow from operating activities. For the quarter, $587 million, and for the year, almost $1.6 billion. We continue to improve our balance sheet by generating significant free cash flow.

For 2004, our operating margin improved by 17 percent, to $117 per ounce, based on total production costs and average realized price. Our capital expenditure requirements for 2005 and beyond are focused on the development of new projects. New projects in Ghana and in Nevada. We're also looking at a significant investment in a power plant in Nevada. We will work to secure project financing for the development of two projects in Ghana, and that is primarily, as we always do in developing countries, a risk mitigation strategy.

Our balance sheet's strength continues to improve as our cash, marketable securities and investment portfolio exceeded our debt by approximately $490 million at year end. Debt repayments totalled almost $200 million, including $143 million of Batu Hijau loan repayments. As you saw in our February 3rd news release, we exceeded our goal of replacing reserves after depletion again. Increasing our reserves to over 92 million ounces, using a $350 gold price.

Revenues for the quarter were $1.2 billion, and grew to a record $4.5 billion for the full year. As our average realized gold price for the quarter and the year were $436 and $412 per ounce respectively. Looking at the revenue line, obviously, the significant increase in revenue was driven by the full consolidation this year of Batu Hijau, which in prior years had been accounted for on an equity basis. A comparison of this quarter's earnings with the year ago quarter shows the impact of several transactions and accounting adjustments. They are listed out on the table on the website.

The following transactions on an after-tax basis impacted net income for the quarter. We had a write-down of assets of over $9 million or $0.02 a share. We recorded goodwill impairment at Pajingo in Australia of some $52 million or $0.12 per share. We recorded a net gain on the disposition of our QMC asset in Australia, and Parama mine in Greece, of $3 million or a penny a share. As I think everybody getting used to, with the changes in tax law and other true-ups, our next tax revisions were a benefit of $62 million or $0.14 per share.

We had some reclamation accrual true-ups of some of $16 million or $0.04 a share. Thus, net income for the fourth quarter was positively impacted by $19 million or $0.04 a share. Now, the accountants will all go running for shelter, as I refer to normalized income, but if you take those out, our normalized income for the quarter was $162 million or $0.37 per share, versus what I would refer to as a normalized income of $139 million or $0.32 per share a year ago. That's a 17 percent increase in results and I think that truly reflects the ability of Newmont to pass through gold price increases to the bottom line.

Year over year, if you look at a normalized income, take out the adjustments I referred to and the others for the full year, the details are in the press release. We earned $487 million or $1.10 a share, versus what I would refer to as a normalized $415 million or $1.02 a share last year. We have included a slide for the full year comparison of 2004, and 2003 earnings for your reference.

Turning to the operating results for the quarter, equity gold sales were on target at 1.8 billion ounces, compared to 1.7 million ounces in the year ago quarter. Our total cash costs were down a bit, $226 per ounce, compared with -- from the earlier quarters, compared with $197 an ounce in the fourth quarter of 2003. Just as we see throughout the industry, we're all fighting significant inflation within our -- within our cost structures, but Newmont is working very hard to control that and, again, I think the improvement in our margin by $17 an ounce year-over-year shows the strength of our operating group.

The 2004 fourth quarter gold sales were impacted by lower ore grades and higher stripping in Nevada and the permitting related suspension of operations at Ovacik in Turkey. For the full year, Newmont's equity gold sales were approximately 7 million ounces, compared with the 7.4 million ounces in 2003. Lower gold sales for the year were attributable to the non-core asset disposition program, primarily at the Yandal assets a year ago. Increased stripping and lower ore grade in Nevada, and as I referred to the suspension of the Ovacik operations in Turkey since August.

Total cash costs for the year was $231 an ounce, compared with the $203 per ounce for the prior year. Lower grade, higher energy, and consumable costs and increased Australian and Canadian exchange rates were the primary reasons for the higher total cash costs in 2004. As the industry continues to face mounting cost pressures, we are focused on controlling our rising costs through ongoing investments in our mining fleet and the development of new higher margin projects. As you will note, this slide illustrates our increased competitiveness and improving position on the industry's total cost curve. We have moved from the 60th percentile two years ago, to below the 40th percentile in 2004.

Now, let me turn this over to Bruce for an overview of our operating results.

Thank you, Wayne and good afternoon. Looking first at Nevada, our operations there sold 668,000 ounces in the fourth quarter. Compared to the year ago quarter, higher gold sales were the result of increased mill throughput along with recovery. Higher total cash costs at $265 an ounce were largely the result of higher energy and maintenance costs. For the full year 2004, Nevada sold 2.4 million equity ounces at a cash cost of $278 an ounce, compared to 2.5 million ounces at $235 an ounce in 2003.

Looking at 2005, we expect Nevada's gold sales to be roughly 2.6 million equity ounces, at a cash cost of approximately $285 per ounce. Going forward, however, we are very proactively focused on managing Nevada's cost structure. We'll begin to start to benefit from the stripping campaigns at Gold Quarry and Twin Creeks. Also in 2005, as Wayne mentioned, we're working to upgrade our fleet, and particularly in Nevada, where we plan to add up to 16 new haul trucks, along with other mining equipment to enhanced surface mining rates, and to lower unit cost. In addition, we expect the start-up of the lower cost, higher margin Leeville and Phoenix projects in 2005 and 2006 respectively.

Finally, over the long term, the proposed development of a new coal-fired power plant in Nevada is expected to lower our total cash cost there by up to $20 an ounce when it's estimated to start approximately in mid-2008. In Canada, Golden Giant for 2005, was forecasted to sell approximately 160,000 ounces at $305 an ounce, while Halloway is expected to sell 85,000 ounces at $355. Gold Giant currently plans in mining in the fourth quarter of 2005 with it's final ounces expected in early 2006. At Holloway we continue to do drilling of underground platforms with a goal of converting further mineralized material through reserves.

Shifting down south to Peru, Minera Yanacocha , sold 436,000 equity ounces in the fourth quarter of 2004 at a cash cost of $124 per ounce, compared to the year ago quarter, we had higher gold sales, which was a result from higher ore grades and faster gold recovery, with the addition of three new carbon columns that we put in at the third quarter as we continue to reduce working capital in Yanacocha. Lower unit costs were driven by increased gold production but were partially offset by higher diesel costs along with higher diesel consumption, increased reagent use and higher royalty.

For the full year , Yanacocha sold approximately 1.6 million equity ounces at a total cash cost of $135 an ounce, compared to 1.5 million equity ounces, or -- at $120 an ounce in 2003. Again, cash costs for the full year were -- were the result -- the increased cash costs were the result of increased fuel consumption, higher input commodity prices and higher royalties. Similar to 2004, our 2005 guidance for Yanacocha calls for the sale of 1.5 million equity ounces, at a cash cost also of $135 an ounce. Yanacocha is still focusing on further optimization studies related to a potential oxide mill, which is targeted to improve economic returns and improve gold recoveries.

Moving across the Pacific to Australia and New Zealand. Our operations in this region sold approximately 477,000 equity ounces at a cash cost of $280 an ounce. (Inaudible) gold sales were impacted by the sale of non-core assets in Yandal, as Wayne indicated, specifically, the Laluna and Bronzewing operations. Higher total cash costs were largely the result of stronger Australian and New Zealand currency, combined with lower mill ore grades at Pajingo and higher diesel and consumable costs.

For the full year equity gold sales for Australia and New Zealand were 1.9 million ounces, at a total cash cost of $272 an ounce. This compares with 2 million ounces at $234 an ounce in 2003. Again, the increased costs driven by currency strength and higher consumable costs throughout the year. For 2005, we're projecting equity gold sales in this region at $1.6 million equity ounces, at a cash cost of $295 an ounce. This is based on an Australian dollar exchange rate of $0.75.

Now, going over to Indonesia, talking about Batu Hijau. As you are aware, and as Wayne mentioned, effective January 1st, 2004, the Company began consolidating Batu Hijau on a full consolidated basis. We also revised our co-product, cash cost accounting for both copper and gold. Whereby identifiable production costs were assigned to each product with the remaining costs allocated in proportion to the sales revenue generated by each product, versus the part whereby all the costs were allocated proportionately.

For the fourth quarter, Batu Hijau realized the copper price of $1.39 per pound, 32 percent higher than in the 2003 quarter. During the 2004 quarter, Batu Hijau sold approximately 87 million equity pounds of copper at a cash cost of $0.65 per pound and approximately 95,000 ounces of gold at a cash cost of $124 an ounce. Higher copper and gold sales reflected increased mill throughput and higher ore grades during the quarter. Mining and processing costs were lower when we looked back to 2003, as compared to the quarter in 2004, primarily driven by higher treatment, refining and freight costs that we saw in the fourth quarter of 2004.

For the full year, Batu Hijau generated equity copper sales of approximately 379 million pounds at a cash cost of $0.60 a pound. And almost 400,000 ounces of gold, at a cash cost of $128 per ounce. Our guidance for 2005 calls for Batu Hijau to sell between 330 to 360 million pounds of copper to our account at cash costs ranging between 58 to $0.64 a pound. And about 430,000 ounces of gold at a cash cost of $145 an ounce. In 2005, Batu Hijau will continue to focus on operational efficiencies, to mitigate increasing cost pressures, improved metal recoveries and incremental enhancements to the mill floatation circuit.

In central Asia, specifically, Zarafshan in Uzbekistan, we saw equity gold sales of 39,000 ounces, at a total cash cost of $157 per ounce, for the fourth quarter of 2004. A scheduled transition to low grade ores impacted the fourth quarter results. For the full years Zarafshan sold 210,000 equity ounces at $152 an ounce in cash costs, compared 218,000 ounces at $147 an ounce reported in 2003. Our guidance for 2005 for Zarafshan is that we expect it to sell approximately 150,000 ounces at cash costs of $215 per per ounce as we are continuing to see lower grades.

Now, I would like to quickly review the projects under development, beginning with Leeville, which is our first shaft access underground mine in Nevada. Construction in Leeville remains on schedule for gold production beginning in the fourth quarter of 2005. At steady state, Leeville should produce roughly between 450,000 to 550,000 ounces per year at a cash cost ranging from 195 to 205 per ounce. Also in Nevada, our Phoenix project is progressing and is on schedule for gold production starting in mid-2006. With average annual gold sales ranging between 370 and 420,000 ounces at cash costs ranging between 190 and 225 per ounce, after by-product copper credit. Reserves at Phoenix were 8.5 million ounces at the end of the year, with a step up of over 2 million ounces from prior reserves.

In Ghana, the Ahafo project construction is on schedule for gold production, slated for the second half of 2006. Camp and infrastructure construction is progressing, also major pressure in mill foundations are being poured along with the earth works progressing on the tailings and water storage dams. Ahafo will have annual gold sales at a steady state rate between 500 and 550,000 ounces at a cash cost of approximately $200 an ounce. At the other project in Ghana Akyem, the updated feasibility study is moving forward, based upon positive exploration results generated in 2004. We expect to make a development decision on Akyem by mid-2005.

Now, with that, I would like to turn it over to Pierre to talk about the exciting developments in our exploration, Newmont Copper and Newmont Capital areas, along with, again, his insightful views on the gold market.

Thank you, Bruce and welcome, ladies and gentlemen. Our exploration team had a good year last year. We were able to, again, for the third year in a row, grow reserves from 91.3 million ounces last year to 92.4 million ounces, and that's based on a conservative $350 an ounce assumption. From the drill bit itself, our Explorers came up with 8.6 million ounces of gold and that, again, is a very good record. Over the past two years we've been able to grow reserve by about 3 percent per year compounded, and while we -- while it's a pretty good number for a large company like Newmont, we're hoping that in the future, we can up that somewhat.

As per the last few years, the best area where we were able to continue to increase our reserves were in Ghana, where we added 4.1 million equity ounces this year. This is an increase of 35 percent over last year to a record 16 million ounces now of reserves.

The next best place was Nevada. We -- as you know, own approximately 2 million-acres of land, and it is one of our primary exploration target once more. Not only we were able to replace depletion last year, we added 3.2 million ounces of equity before record reserve of 34 million ounces of gold. Now, Nevada has been in production for 40 years, and we have never had as much reserves as we have right now. I think that is a point worth making.

Our Phoenix project increased its reserve by 2.3 million ounces. Now, several of you analysts, I think, several years ago challenged us to make Phoenix a valuable project to this company, and I think you can see that with years of effort, this company is turning Phoenix into one of our star operations in Nevada. Not only Phoenix reserves were 8.5 million ounces at the end of the year, but we also had 660 million-pounds of copper and we have extended the mine life from 13 to 17 years, and there are more good things to come, I believe, out of Phoenix.

In Peru, while we were challenged at Yanacocha to replace reserves, mostly because of the loss of the Sero Kirish(ph). We were able to bring the Minas Conga deposit into reserve and that added 4.5 million to equity ounces of gold. This is the early days for Minas Conga. I think we have a lot more exploration to do over there. I think the project is going to look a lot better with a year or two more of engineering, drilling and engineering exercise. We are looking forward to it.

If you look at our reserve sensitivity, it's very simple. At $375 goal, as some of our competitors have chosen to use, we would be up at about 98 million ounces of reserve, a 6 percent increase over today, and at 400 goal would be over the 100 million ounce mark. So, I think we'll get there in the next year or two. And we're looking forward to it.

For 2005 we are planning to spend somewhere between 170 to $200 million in exploration, research and development. We have upped our dollars in R&D. We are doing more work in that area, because we want to be the best Explorer in the business. This money will be divided mostly 70 percent for Near Mine and 30 percent for Green Fields. Now, three years ago, there was no money at all for Green Fields, so, we've come a long way. It does take time, though, and this year we have several Green Field projects I would call, swing for the fence, things that we think that could materially affect our numbers, and we're hoping to be successful, but I know one thing, over the next few years we will be successful.

In terms of where we are going, we have mentioned it many times the best place to find a mine is beside a mine. Ghana number one on our list, we are systemically going through the gold trends that we currently own in Ghana and the ones that we do not known that are open. And we are looking for more mineralization, along the Ahafo, the Sefwi belts and the other belts.

In Nevada, Phoenix will be our number one target, but so will Gold Quarry and Leeville, which the completion of the development will occur this year, and we'll be able to drill from underground. And finally, in Peru, Minas Conga will see a lot more drilling and optimization studies over the current year.

Now, I will turn over to Newmont Capital. Newmont Capital had a tremendous year in 2004. The royalty portfolio generated $66 million in royalty and dividend which is a 17 percent increase over 2003. And that number will continue to go up over the next few years. Our equity portfolio finished a year at over $500 million, and as of today, we're sitting on over $200 million of gain in that portfolio. So, the guys have done a tremendous job. We continue to use the portfolio to enhance our pipeline of projects, look at opportunities, and do joint ventures with smaller companies on whose property we think there is considerable potential.

When we look at our portfolio of assets, the most important asset that we have in Newmont Capital is our Black Gold Project in Alberta. This is a project that is located adjacent to Devon's Energy Jackfish Project, who is -- they are bringing into production, spending $350 million. We completed an 18 well drill program last year. We are completing another one at the end of next week. We're going into a prefeasibility study that will be available sometime in the second half of this year. This is a project that, at this point, we are given somewhere around a 540 million barrels of insitu(ph) resource, and very identical, again to Devon's Jackfish, and over time, we believe that we have the potential of deriving an asset value that is in the $2 billion plus range. So, we are very confident that this project is going to increase value for Newmont.

Now, I will just go over the -- our view on the gold market very briefly. The fundamentals in terms of the gold markets are very supportive. And I'm talking about supply/demand. Mine supply for this year, 2005, will be flat, in our view, after a 4 percent drop last year. So, that means no more -- no more supply coming on the market than what you have seen over the past few years. The hedge buyback will continue, probably at a slightly slower pace than last year, but it will continue. The central banks last year, some of them have turned buyers, the overall numbers from a -- the high when central banks were selling 700 tons of gold a year, in total, last year that number was down to about 350 tons overall, since some central banks were net buyers. We think that that trend is likely to continue and will support the gold price.

And then, finally jewelry demand for the first time in four years was up in 2004, by 4 percent, and, as well as fabrication up 5 percent, and bar demand for savings, a very strong up 35 percent. We believe that these trends will continue in 2005, mostly because the world economies are continuing to expand. China, in particular, the U.S., Europe is sort of muddling through but it's also expanding. So we are feeling very comfortable that the gold price is well supported on the supply/demand side, in the low $400 range.

In terms of gold as money, we believe that the dollars fall is far from over. The core problem facing the currency is unchanged. Private capital flows are not enough to finance the rising current account deficit. Central banks over the last year have been purchasing from 50 to 70 percent of all U.S. bonds, however, their appetite is starting to wane. If you remember earlier this week, South Korea announced that it will start diversifying its reserve, and into other currency than the dollar. Well, that is, in our mind, the second crack in the foreign bank syndicate to hold the value of the dollar. The first was actually Russia, which a month ago said that it it had abandoned efforts to tie the rubles movement closely to the dollar and switched to shadowing both the Euro and the dollar.

Now, as a rule, with respect to Russia, it's advisable to believe nothing, including the weather report or the central bank reserve data. So we will just have to wait and see whether or not that is the case. But in our view, the smaller nations are likely to be the next defector. And I'm talking about mostly the Asian smaller nations such as Malaysia, Thailand, Singapore, they are likely to be the next defector, with China and Japan, to be the very last. And the dollar will only hit bottom when it has fallen enough to make the returns attractive to private capital, to come back into the United States. So our view, the dollar is going to continue to fall, and gold to go up. But to use the words of our esteemed chairman of the Federal Reserve Board, this is going to happen in a measured -- in a measured pace.

So we, for the year, continue to look at gold price that will trade generally speaking between 425 and $475 an ounce.

And with, that I will turn over the meeting to Wayne for his concluding remarks.

Thank you, Pierre. In summary, then, the fourth quarter was our strongest quarter of the year for revenues, earnings and cash flow. The Company generated revenues of $1.2 billion, income of $182 million or $0.41 per share, and cash from operating activities of over $580 million. With the average gold price realized at $436 an ounce for the quarter and 412 for the year, and listening to Pierre's comments, we continue to be bullish about the gold price and expect to have a strong year again in 2005.

In 2004, the annual dividend per common share increased again, and we are now paying $0.10 per share per quarter. The board will continue to evaluate dividends as the Company works towards its goal of an S&P 500 type yield.

Turning to 2005 guidance, we expect to generate full year gold sales in the range of 6.6 to 6.8 million equity ounces at a total cash cost of between 235 and $245 per ounce. Again, we have continued our program of optimizing our portfolio of properties, and we are very close to having -- to selling the Turkish operation, hence impacting our production for 2005. We expect to generate equity copper sales of between 370 and 410 million equity pounds, at a cash cost of between 63 and $0.69 per pound.

Again, in 2005, our second half of the year will be much stronger than the first half. It's a continuing saga for Newmont. The guidance breakdown on the other items, is shown on the slide and in the press release. Remember, when referring to these numbers, that they reflect 100 percent of Batu Hijau as it has now been consolidated.

Our capital expenditures for 2005 will exceed $1 billion, of which between 6 and $700 million will be slated on new projects, which will generate higher margins as we look forward over the 2006 '7 and '8 time period. Before I -- as we prepare to address the challenges facing our industry in the near term, we remain focused on maintaining our leadership position in the gold market. The largest market capitalization in the industry, we remain the most liquid gold stock traded, and the only one in the S&P 500 and the Fortune 500. The initiatives and projects we described today are focused on improving our profitability and delivering value to our shareholders, with continuing exposure to strong gold price fundamentals.

Thank you for your attention, and I'd like very much now to open it up to any questions.

Thank you. At this time we are ready for the question-and-answer portion of the conference. If you would like to ask a question, please press star one. You will be prompted to record your first and your last name. To withdraw your request, press star two. Our first question comes from Elliot Glazer with [Dupis Squire] and Company.

I would like to ask a question, please, about technical recovery of gold and copper oils -- copper ores. I want to apologize in advance because it's a difficult question. There was a conference call earlier today from Phelps Dodge claiming they, in conjunction with Placer Dome, have come up with a new way of recovering ores that were to go through floatation into refining and smelting by heating the mixture in floatation and adding chemicals, and therefore, separating the copper, so that it could follow a normal heat leach circuit.

Have you gentlemen heard of this? Does this sound feasible to you? And are you trying any new technical approaches, such as your bioleaching approach to recover very expensive ores?

Elliott, this is Bruce Hansen. I mean, we have -- we have looked at that. We have done some research on those types of processes in the past. There's not a lot that's out there that's available and is commercially operating. Prior to looking at the Phoenix project, we had actually -- we were going to be sending concentrates through the Long Tree autoclave, and extracting a solution that we would SXEW the copper, and then just run the tails, the remaining stream through CIL to get gold recovery, and so the technology is out there. It's not really been used on a large scale. But, we continue to watch, it, and those kind of things would have an impact on projects like Minihasa.

Great. Thanks a lot.

Our next question comes from John Hill with Smith Barney. You may ask your question.

Good afternoon, everyone. I was wondering if you could provide us with any more color on some of the high grade drilling intercepts to the south of Ahafo? It sounded like there was some good news flow there, I was wondering if there was anything new to report?

We'll ask Steve to comment on that.

Yes, this is Steve Enders. We have had some success in the southern portion of the Ahafo trend, particularly at depth, and we continue to look at that, including the potential, ultimately to see if some of that may be minable underground in the future.

What kind of grades and thicknesses are you seeing?

I don't have that number right in front of me right now, but they're on the order of 4 to 5 grams at depth or higher.

I was just in Ghana and I saw some of the (inaudible) mineralization. It's ranging between 6 to 12 grams.

Great. Just a follow-up question. Last quarter, there was a fair bit of discussion about grade reconciliations at Batu Hijau. I was wondering if those have been resolved or whether you have a greater degree of comfort as you head into the early part of the year? I understand there are some differences between the bottom and the top of the pit, but do you think that's something that's behind us?

I think we feel, John, we're in good shape at Batu Hijau going forward.

Okay. And last but not least, there was also previously some discussion about Gold Quarry and Twin Creeks contributing to a lower cost profile in '05, some high-grade sulfide mineralization exposed, et cetera, looking at the 265 numbers for Nevada, and 285 guidance for next year, doesn't look like that's offsetting some of the other things going on. Can you update us on that?

Well, we still see some high -- well, we still see some high grade potential, especially in Gold Quarry with the checker foot wall extension. But basically for 2005, in Nevada, we're seeing higher strip ratios and lower grades as we kind of push back the pits at both gold quarry and at twin creeks to expose better grades for 2006, and beyond. Along with bringing Phoenix and Leeville online. So 2005, is a bit of a transition year. But we anticipate to see better cost performance in Nevada beyond 2005.

Great. Thank you very much.

Our next question comes from Victor Flores with HSBC.

Thank you. Good afternoon. I was hoping could spend a couple of minutes talking about what you are seeing out there in terms of pressures; A, on the Capital side, with the various projects that you are building, and perhaps more importantly, with respect to availability of equipment, haul trucks, et cetera, et cetera, in the current environment?

Victor, this is Wayne, and, clearly, as I referred to in my comment, we are facing, and the industry is facing huge challenges, after so many years of cuts in exploration and lack of new projects, the construction side of the industry is clearly stretched. And I think, this is -- this is something that we're very mindful of, as we -- as we budget and schedule our projects. And I think the internal experience that we have is -- is very beneficial, because a lot of the major construction firms, frankly, because of age, in a lot of cases, have lost some of their talent, and then, of course there's a great strain on the whole system, with respect to equipment again, we've had a -- we have a very strong strategic alliance with Caterpillar and you form those in the tough times and they pay off in times like this.

And so we're very thankful for that relationship, but there's no question the entire industry is challenged. The big construction companies are challenged, and, of course it's not just what's going on in the mining industry, but also, obviously, what's going on with the petroleum industry. So is it a time when you -- when you work up -- work up your projects and work up your capital budgets that a little bit of gray hair or no hair is a good thing. Because, these are going to, at least foresee it for a number of years, going to be very challenging periods for both our industry, and I would say basic industries, in general.

And Wayne, do you get the sense that because of your size, you are perhaps in a better position to get allocated the equipment that you are after?

Absolutely. I mean, again, we could -- we could have those relationships during the lean times, and that's -- that's when it pays off. So, we're not immune to the -- to the issues, but we can certainly mitigate them a lot better than others.

Great. Thanks. And, perhaps if I could ask Pierre to perhaps talk about two or three of his favorite exploration projects for this year.

Well, thank you! Steve is flinching now. [ LAUGHTER ]

Look, as far as I'm concerned, in terms of exploration projects, as I said earlier, the three best places, I believe, is going to be Ghana, it continues to be a great place for us, Nevada, I think so. In terms of greener pasture, we're having some success in Srianem(ph), it's very early days, but, as you know, we have a very large concession there. We started drilling late last year, so we don't have a ton of information, but what we do have is starting to look very good.

And that's a province that, has been really under explored from a geologic standpoint, it's the continuation of Ghana. They were separated at birth a couple billion years ago. But, you know, we're trying to piece them all together, and that -- that's looking very interesting. And then we -- we have a few other things up our sleeves, but it's too early to talk about them. I will just leave you dangling out there.

All right. Great. Thank you.

Our next question comes from Barry Cooper with CIBC. Your line is open.

Yeah, either for Pierre or Steve. Just wondering, with respect to the drilling that's taking place, one of the issues that you have outlined in the past is that, quite often your drill constrained on your reserves and resources, i.e., the hole stopped short or what not, what kind of advice are you giving the guys in the field now with respect to how far they should be extending these holes and what not, given where gold prices are today and where they might be in the future?

Yes, this is Steve. I mean, as you guys know, it's the rare -- it's a rare deposit where you can actually see gold. So, although we would like to give all of our geologists the advice of drill until the gold stops in the drill hole, we can't do that. So, the advice to drill -- to drill to the target and through the target based on the indicators that we see, they might be favorable, including the characteristic of the rock and the depth limitations really are a function of the kind of target that we are looking for.

So, for example, if we are looking at -- if we are looking at a deep target, it has to be underground -- mineable underground and it has to have the grades and characteristics accordingly. So our depth limitations are based on the kind of target that we are testing, rather than anything to do so much with the -- with the economics of what's going on today. So, our depth limitations really are directed on the basis of the kind of target that we are testing, rather than anything to do so much with the -- with the economics of what's going on today.

Because, as you know, most of what we do in exploration is for tomorrow. So, we have to look a little longer term than what's going on today.

Are you having to go back and redrill areas where don't have sufficient information?

No, that's one of the key things that we do in all of our operating districts, where we're taking a look at ore deposits, for example Leeville and Phoenix are great examples this year. We've done additional drilling beneath and adjacent to areas that we've already drilled and it continues to yield additional ores.

I think your question, Barry, was, I think we are still drill constrained, in terms of the reserve estimates that we put out there, and, we'll continue to drill on the margins to tighten that information up, but, clearly we are still drill constrained.

Just to add to that, to drill to $400 reserve will probably cost us another $100 million. So, we're not going to do it this year or next year. This is a two, three year exercise.

Pierre, while I got you there, you indicated Newmont Capital, look for bigger and better things beyond the $65.7 million for '04, and yet guidance suggests 55 to 65. Are you holding back on us?

We've got to hold something back from you guys! But, look, when we look at the world of exploration out there, the juniors -- they've been in a dry spot for eight years now. And they finally got money in 2003. They raised about 2.2 billion in 2003, and in 2004 they raised another couple of billion and they are now starting to spend it. And juniors typically will discover about 30 percent of new plus 2 million ounce deposits over time.

And the role of Newmont Capital, basically, is to watch what's going on in the world, and be part of one or two or three of these discoveries, before they get too big. And that's what we are doing. We're actively managing that portfolio. We look everywhere. And our guys are very active. I think last year our travel budget was in the millions of dollars. Our guys are out there looking.

Okay. And then finally, for Bruce, can you just tell me the calls that are likely to be exercised this year on the gold prices? Are they set in any one specific quarter? Or are they over the entire year?

In terms of gold?

Correct.

Yes, We have prepaid for sales obligations that hit in June. It's 161,000 ounces, and then we have 500,000 ounces related to the price cap sales contracts. None of which of these get mark-to-market through our income statement, but that's 500,000 ounces and it's 50,000 ounces a month, starting in March.

Okay. Thanks a lot.

Once again to ask a question, please press star one. Our next question comes from Alberto Arias with Goldman Sachs.

Yes. Good afternoon. Congratulations on this quarters results. Maybe a couple of questions with regard to your comments on Yanacocha. You mentioned you make a reference on the Oxide mill as a potential way of improving recoveries. How close are you to taking a position on that investment?

Alberto, this is Wayne. We're -- you know, we continue to study that. I think that we had hoped to maybe make a decision by the middle of this year, but I think that could -- that could lag a little bit. We're -- as you understand, we've got a lot of complex ores there, and it's -- and it's extremely important that that first mill decision be the right decision. So, we don't feel under any pressure to accelerate that decision. I compare it a lot to the Phoenix project. We went in to -- we bought that project in 2000, and, there were studies out there that said it was economic but we felt that by putting the time into it, we could substantially approve the economics and that's what's happened and now that project is looking extremely attractive with a very high rate of return. Probably double what the return was in 2000, forgetting about gold price a minute.

I'd like to give you a more definitive answer, but we're going to go slower rather than faster, with respect to that first mill decision down there, because if will be very important. There's huge potential, as you know, as we move through the transition ores into the salt side and the Oxide mill decision needs to have the flexibility behind it that will allow us to -- to move it into those other more complex ores.

And a follow-up, with regards to the exploration on Yanacocha in the year 2004. There was a significant step up in the investments, but despite that, the only ounces that you added were ounces from Minas Conga, which had been discovered before, and it was a result of a feasibility study being finished. But when you evaluate the actual results of your new exploration efforts, they seem to have been disappointing in the year at 2004, there were Capital project that were actually reclassified as mineralized resources.

So, to understand a bit better what happened there, if you could elaborate what's the reason of that lower than expected discovery rate at Yanacocha, given that you were investing more money. And has your decision of invest exploration capital in Yanacocha changed as a consequence of the results you had in 2004?

I will let Steve respond to that, Alberto.

Alberto, this is Steve. You bring up a good point, but actually, our investment in exploration at Minas Conga was a balanced -- that's an advanced project, right? And that was a balanced in effort throughout the Yanacocha district on a genitive basis to build new targets. And so a lot of the investment that we did in 2004 was preliminary work to get us good targets to follow up with in 2005 and going forward.

So, we can't expect year on results to continue from an individual target when we continually have to generate new ones. So last year was an opportunity to both work hard at Minas Conga as well as develop a pipeline of opportunities elsewhere in the district.

So, your budget remains around on the same level you had in 2004 for Yanacocha in 2005?

It's a little less in 2005, principally because we won't be working in the Sarakeish(ph) area.

Okay. Great.

Our last question comes from Wayne Cooperman with Cobalt Capital. Sir, your line is open.

Hey, guys, how are you.

Good.

I've got two questions. Well, one is more of a theory, but -- first I ran some numbers on the back of the envelope. I guess assuming current stock price -- current commodity prices, is it right your free cash flow will be about zero for the year? Am I missing something?

I mean, for 2005, we really don't give those projections and, you can do your back-of-the-envelope calculations.

Right. Okay. But is that unreasonable -- am I way off, or that's about right?

I think, if you look at 2005 and 2006, we are spending a lot of capital because we are building new generations of mines.

Got you. Do you mind if I ask you a question that's a little bit theoretical. I'm curious how would you answer it. Now that it's easier for the average investor to buy gold through these gold -- whatever they call those. The speckles --

Yes.

How does that change the investing -- do you think -- I mean part of the investment case of Newmont has been exposure to gold. I mean, how would you -- if someone said, well should I buy gold or should I buy Newmont, how would you answer that? How should we look at that?

You know, this is Pierre. The answer to that is actually quite simple. It depends on your risk appetite. If you want to be absolutely no risk, then you buy the gold bullion, and I think you are going to see a lot of the pension funds, and some of the larger hedge funds use the gold ETF as their proxy for investment in gold.

When you look at the equities, you have a built in option value in the equity, as well as it's an ongoing business. We're spending $180 million in exploration out of cash flow. We come up with a significant discovery like Yanacocha. We can add enormous value to the Company, and you participate in that as a shareholder, but you are going to have more volatility. So, at the end of the day, it's your risk appetite, and I think what you are going to find is that most people who have never been exposed to gold, will start maybe by buying the bullion, and then they are going to start to feel more comfortable, understanding the investment, understand the optionality value of the gold equity, and at the end of the day they will probably add some gold equities to their portfolio.

So, our view is that any increase in interest in gold is good. It's good for the industry. The ETF right now has absorbed 9 million ounces of gold in less than a year in total. This is an enormous about of gold that has gone in there. And we think it's going to continue and that's good for the industry in general. It's supportive of the price. It basically. gets the gold as money, and as a diversifier of portfolio into the realm of portfolio management, and we think that's good for the industry.

Right. Okay. That makes sense. I appreciate your answer.

You're more than welcome.

Okay. Thank you all very much for your attention, and we look forward to another exciting expanding year for operations [audio difficulties] [ Inaudible ] Thank you.