紐蒙特黃金公司 (NEM) 2005 Q1 法說會逐字稿

Welcome to Newmont's 2005 results conference. At this time all participants are in a listen-only mode until the question and answer session. Today's conference is being recorded. If you have any objections you may disconnect at this time.

Now I will turn the meeting over to Mr. Randy Engel. Sir, you may begin.

Thank you, operator. Good afternoon to everyone and thank for joining us on Newmont's 2005 earnings call. Please note that this conference call is being presented on our webcast in simulcast form and will be available for play back for a limited time.

On today's call we have with us Wayne Murdy, our Chairman and Chief Executive Officer; Pierre Lassonde, our President; Dave Francisco, Executive Vice President of Operations; and Bruce Hansen, Senior Vice President and CFO.

As we will be discussing forward-looking information you should be aware that there are risks unique to our industry with are described in detail in our filings with the SEC. During this call, we will be referring to nonGAAP financial measures. For a reconciliation of the nonGAAP financial measures to the most directly comparable GAAP measures is included in the supplemental information section of the first quarter earnings release which is available in the Investor Relations information section of our website. In particular, reference will be made to total cash cost per ounce and per pound both of which are nonGAAP measures of performance. These are intended to provide investors with information about the cash generating capabilities and profitability 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 measure for performance or liquidity determined in accordance with the GAAP.

With that in mine we would like to note that going forward we will be focusing on consolidated gold sales and copper sales and consolidated total costs applicable to sales, as opposed to total cash cost per ounce. Costs applicable to sales as we refer to them will exclude depreciation, depletion and amortization, which are shown separately in the news release. Beginning the second quarter and although we will be continuing to provide annual guidance that's updated quarterly we will discontinue reference to equity gold sales and equity total cash costs.

With that let me turn the call over to Wayne Murdy, our Chief Executive Officer.

Thank you, Randy, and good afternoon, everybody.

To start with I'll provide our first quarter financial operating highlights. Bruce will then provide some additional details on financial results. Dave Francisco will review our operations. And Pierre will give us an overview of exploration, merchant banking and thoughts on the gold market. And I'll say a few words about our 2005 guidance.

During the first quarter Newmont generated $84 million in net income, or $0.19 per share, slightly lower than the year ago quarter. Our consolidated gold sales were approximately 2 million ounces at a cost to applicable to sales of $239 per ounce. We are referenced this quarter. Dave will provide equity gold sales and total cash cost figures for your reference. As we have seen throughout the industry, rising fuel and commodity prices have adversely affected operating costs. Our first quarter production was also negatively impacted by geo-technical factors at Batu Hijau in Indonesia. As we have seen in prior years, we again anticipate a significantly stronger operating performance and higher sales in the second half of the year as new stripping capacity is put into service, generally higher grades are accessed and Leeville in Nevada begins production in the fourth quarter. We expect the second quarter's performance will be similar to the first quarter's performance.

Net cash from operating activities totaled $188 million in the first quarter of 2005 and was negatively impacted by a $78 million increase in working capital. This primarily had to do with building inventory at Yanacocha. Again, we will see some of this come back later in the year.

On our balance sheet against strength in the balance sheet, this cash and short term marketable securities and other short term investments, totaled some $2.2 billion, essentially offsetting our outstanding debt. As you saw during the first quarter, we issued a $600 million 30 year note at 5 7/8% due in 2035. As a result, our outstanding debt and cash balances increased by a net of about $580 million at the end of the quarter. This will be used to fund capital projects, primarily focused on the 200-megawatt power plant in Nevada and for other general corporate purposes. Our 2005 capital program covers our development effort on the Ahafo project in Ghana and the Leeville and Phoenix projects in Nevada. We continue to maintain the financial strength and flexibility to finance our growth internally through operating cash flow. We will however look to finance a small portion of some of our international projects, as is our practice, to help mitigate political risk with multilateral agencies. We are currently looking at financing about 25% of Ahafo's initial development costs.

Now let me turn this over to Bruce for a closer look at our results.

Thank you, Wayne.

Revenues were $961 million for the first quarter, and our average realized gold price for the quarter was $425 an ounce. This compares to revenues for the first quarter of the prior year of $1.1 billion, at an average realized full price of $412 an ounce. Lower revenues were primarily the results of lower consolidated gold and copper sales, slightly offset by higher gold and copper prices. A comparison of this quarter's earnings with the year ago quarter reflects the impact of several transactions and accounting adjustments.

The following transaction impacted net income. First of all we generated a gain on the sale of the Mezcala property in Mexico, totaling $20 million or $0.04 per share. We also had a net tax benefit gain from changes in the Australian tax law of $19 million or $0.04 a year -- or $0.04 per share. We expensed litigation and related costs at Minahasa in Indonesia of $5 million or $0.01 per share. And finally we expensed and accrued approximately $4 million or $0.01 per share per waste dumper mediation cost in Nevada. As a result of these transactions, net income for the fourth quarter was positively impacted by $30 million, or $0.07 per share.

Now for a review of our operating results let me turn this over to Dave Francisco. Dave?

Thank you, Bruce.

Turning to the operating results for the quarter, consolidated gold sales were approximately $2 million ounces of consolidated costs applicable to sales at $239 an ounce. Equity gold sales were 1.6 million ounces of a total cash cost of $257 an ounce. As Wayne mentioned earlier higher consumable costs have increased our operating costs and our production was temporarily affected by the movement of material at Batu Hijau. We'll talk about Batu Hijau in a bit.

Looking at Nevada, for the first quarter of 2005 consolidated gold sales were approximately 588,000 ounces, compared with 653,000 ounces in the first quarter of 2004. Lower gold sales were primarily the results of a 9% lower mill grade in 2005, partially offset by 14% increase in mill throughput. During the quarter consolidated costs applicable to sales increased by 5% from the 2004 quarter due to increased vehicle prices, higher underground contracted service and maintenance cost and lower production. We expect Nevada's consolidated gold sales to be approximately 2.6 million ounces for 2005. Without Nevada's consolidated costs applicable to sales, it is expected to be about $295 an ounce for the full year 2005.

I want to point out that as Wayne mentioned earlier our operating performance weighted towards the second half of 2005. In Nevada we will benefit from 16 new haul trucks and other equipment that will be delivered in the coming months. As a matter of fact we have trucks being delivered now and as some of you may know, there's a shortage of tires. We have tires for the trucks. Also Leeville begins production in the fourth quarter 2005. We will actually have some development ore available to us in June of this year. Phoenix, a project that's going very well right now is currently scheduled to come on in early 2006 and we expect that both Leeville and Phoenix, being higher margin projects, would help reduce the cash production costs in Nevada.

To address the long-term power needs in Nevada, the plan development of a new power plant is awaiting final permits and approval. The proposed power plant is expected to reduce total cash cost in Nevada by up to $20 an ounce, after estimated start up in 2008.

In Canada, Golden Giant has forecast to sell 155,000 consolidated ounces at $335 an ounce. Consolidated costs applicable to sales. While Holloway is expected to sell 90,000 ounces at cash cost of $400 an ounce in 2005. Golden Giant currently plans to end mining in the fourth quarter 2005 with its final ounces expected to be sold in 2006.

In summary, we are not changing our guidance as far as production in Nevada.

Shifting to Peru, Minera Yanacocha sold 773,000 consolidated ounces at $143 per ounce in the first quarter. That's compared to a year ago quarter, slightly lower gold sales were the result of a 6% decrease in tons placed, partially offset by a 36% increase in the grade of the ore placed. Slightly higher costs were the result of increased labor expenses and higher commodity prices. Our 2005 guidance for Yanacocha calls for almost 3 million consolidated ounces at consolidated costs applicable to sales of $150 an ounce.

At Kori Kollo in Bolivia, that line is expected to produce 85,000 consolidated ounces at consolidated costs applicable to sales of $175 per ounce. Ore from a satellite deposit Kori Chaca is expected to be placed on leach pads this quarter with a production of 38,000 ounces in 2005.

Moving on to Australia and New Zealand, our operation sold approximately 440,000 consolidated ounces, at consolidated costs applicable to sales of $303 per ounce. Lower production resulted primarily from 42% lower sales at Pajingo, due to a 25% decline in ore grade caused by some grounds stability conditions, 38% lower sales from Yandal due to the sale of the Bronzewing mine in 2004 and 20% lower sales at Tanami due to lower grade. Costs were up as a result of lower production, increased grounds support costs at Pajingo, higher underground development costs at Yandal's Jundee mine and increased consumptions and reagents in branding media caused by mill throughput increases at the mill at Kalgoorlie. In New Zealand, gold sales increased 95% due to 123% increase in ore grade, resulting from mining higher grade in the open pit. Costs applicable to sales per ounce decreased 35% due to increased production that was partially offset by higher processing costs from this ore being harder. In 2005 Australia and New Zealand are forecasted to sell 1.6 million consolidated ounces at costs applicable to sales of $305 an ounce.

Now let's go to Batu Hijau. At Batu Hijau, copper and gold sales decreased 24% and 25% respectively from the first quarter of 2005. This was primarily from the impact of some geo-technical difficulties we had during the quarter. During the first quarter of 2005 pit wall sloughing and associated clean up in the pits, has temporarily disrupted access to ore in what we call phase III in the very lower portion of the pit. But Joe has resumed normal operations. The mill had always operated at normal levels, simply processing lower grade stock piles. Plus applicable to sales per pound and per ounce of gold increased 45% and 66% respectively due to the lower production and some increased maintenance costs and higher line production. Now, for Batu Hijau, the guidance in the release says consolidated copper production is expected to be approximately 635 million pounds of consolidated costs, applicable to sales of $0.45 per pound, consolidated gold production is expected to be 800,000 ounces and consolidated costs applicable to sales of 135. I would point out that we have taken action in the pit. We have developed some remediation plans and we do expect to actually improve upon these numbers that I just stated. We are not changing our guidance for Batu Hijau. We are going to have a very good year and a remediation on our change of plans are already well underway. We are going to have a good year at Batu Hijau again.

Now, going to Zarafshan in Uzbekistan, consolidated gold sales decreased 39% to 34,000 ounces during the first quarter due to 16% lower tons placed on leach pads. We did have some unscheduled plant downtime as we had a fairly difficult winter there and we had some lower ore grades. Costs applicable to sales were $199, were 33% higher in the quarter primarily as a result of the lower production. In 2005 Zarafshan is expected to sell 155,000 ounces at CAS of $220 per ounce.

Finally the Ovacik mine was sold in Turkey and it was sold on March 1, 2005.

Now let me move on and talk a little bit about some of our projects. Let me begin with Leeville, our first shaft access underground mine in Leeville. Construction at Leeville remains on schedule for initial gold production in the fourth quarter of approximately 50,000 ounces; the production shaft is 92% complete while the ventilation shaft is expected to begin hoisting ore by the third quarter. Overall, construction is 64% complete. Leeville is expected to produce roughly 450,000 to 550,000 ounces per year at a total cash cost of $195 to $215 per ounce. We are looking forward to that mine coming into production.

Also in Nevada, the Phoenix project. The Phoenix project is moving along ahead of schedule and it's ahead of that schedule, but has gold production starting in early 2006. We do plan as an average, annual gold sales of between 370,000 and 420,000 ounces at a total cash cost of between $190 and $225 after live product copper credit. Engineering is 97% complete. Construction is 25% complete. We also remain very optimistic for further reserve additions this year to the 8.5 million ounce Phoenix researches. It's going very well at Phoenix.

Now in Ghana, the Ahafo project is on schedule for gold production in the second half of 2006. Engineering is 90% complete. Construction is 30% complete. Work is progressing on the mill foundations. Water storage is down on the scalings facilities. The project remains on schedule for initial gold production in the second half of 2006. Annual gold sales from Ahafo are expected to average between 500 and 550,000 ounces. At Akyem, the updated feasibility study was recently completed with the development decision expected buy mid-year.

Now at this point in time I would like to turn it over to Pierre to talk about Newmont capital and his views on the gold market.

Thanks, Dave.

I'll start with the merchant banking. We had a good first quarter for 2005 with our royalty income up 38% from last quarter, last year, to $18 million. And we continue to see royalties as a very good business for us. Our marketable securities portfolio is up $101 million. That is 20% from year end 2004 and at this point we have just slightly over $600 million invested in our portfolio. And of that, I have to point out that we have over $200 million of unrealized capital gains in the portfolio. So obviously, leveraging our intellectual capital is paying off at Newmont. In terms of transactions we completed the second phase of our Alberta Oil Sands Black Gold project. We drilled 18 wells at a cost of $4 million and we are in the process of completing a scoping study to see where we are going with this very important oil project this year.

As Dave pointed out earlier, we closed the sale of Ovacik in Turkey and we also closed the sale of our Mezcala property in Mexico for $70 million at the end of March. Finally we did an initial purchase of 9.9% in Shore Gold which is a big misnomer being a diamonds project in Canada.

Now I'll turn over to the gold market. I will spend just a few minutes, because there is really nothing new at the same time there is everything to talk about. When I say there is really nothing new is that the gold price continues to be approximately 90% to 95% correlated to -- or inversely correlated, I should say, to the dollar, the U.S. dollar. And when we look at the two drivers, they are the current account deficit and in my mind, the budget deficit. And the current account deficit, the last quarter the U.S. current account deficit in the U.S. was running at $752 billion a year. Just to remind you, the current account deficit in 2004 was $666 billion or 5.6% of GDP. Now it's going to become more interesting this year ever because with rising oil prices and rising inflation pressure, we see interest rates continuing to rise and the economy more than likely to soften up in the second half of this year, while we continue to see the current account deficit enlarge. In fact, one of the brokerage -- big investment firm on -- in New York predicted that the U.S. current account deficit was going to rise from 5.6% to over 10% of GDP by 2010 and that in turn would have the ratio of foreign debt to GDP in the United States rise from 25% to 100% of GDP.

Now the politicians in Washington are focusing on China as the culprit and -- but I think we have to understand that the -- that only accounts for 10% of the U.S. trade. Even if the Rim/ME was going to be revalued by 25%, that would only account for a 2.5% difference in the trade weighted dollar in the United States. No where near enough to change the current trend. And more importantly is the confidence that the Chinese or Japanese or the Asian central banks would have in the dollar if it was to fall very aggressively. I mean, that is one of the big dangers and I'm always reminded of that, of the saying by Saint Augustine, this august priest of the fifth century who use to say, "Lord, give me chastity, but not just yet." I think it would be very dangerous for the dollar to all of a sudden to fall very appreciably, but at the same time I believe that the confidence in the U.S. dollar has been somewhat misplaced and mispriced and I think when we talk about mispricing we see it in the gold price. In fact, we are very heartened to see that in the end of April a cyclically, probably the softest period for gold price during the year, that gold is still well above $425 and we believe that we are going to see the full band of gold prices that we talked about this year of $425 to $475 later during the year.

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

Thanks, Pierre.

Turning to our guidance for 2005, again, we expect to generate full year consolidated gold sales in the range of 8.5 to 8.7 million ounces, at a consolidated cash cost of $225 to $235. Normal equity gold sales have not been changed to expect to produce between 6.6 and 6.8 million ounces at a total cash cost and we raised this about $5 of between $240 and $250 per ounce. We also expect to generate consolidated copper sales of some 695 million pounds at a cost applicable to sales of about $0.48 per pound. On an equity basis, we expect to sell 395 million equity pounds of copper at a total cash cost of about $0.77 per pound. As we mentioned before, we expect the second half operating performance to be much stronger than the first half of the year. I would not expect the second quarter to be substantially different from the standpoint of operations than the first quarter. I've been here many years. I put a lot of pressure on our operating people every year not to get behind the eight ball in the first half of the year. But they just love coming on like gangbusters. We are second half players, I guess and we just can't seem to break that trend.

The quarter was what tough quarter. But the issues that we faced are issues that we can plan around the nature of our business and we know how to do it and we will do it again this year. The guidance breakdown of the other items shown in this and the following slides are provided for your references. Finally we expect capital expenditures for 2005 of between $1 and $1.25 billion, of which a little over $600 million are for new projects. We have said before we are in a period of transition; some of our older mines are depleted out and we are bringing on some of these new mines over the next couple of years. That will have a significant impact on our operations going forward and on our margins going forward in a positive way. In 2005, our operations team will continue to focus on cost containment and control, as we work to improve our competitive position in the industry cost curve. The largest market capitalization in the industry will remain the most liquid gold stock and the only one traded in the S&P 500 and a Fortune 500 company. Thank for your attention and with that let me turn this call over to the operator, so we can take any questions that you may have.

[OPERATOR INSTRUCTIONS]

Alberto Arias, your line is open and please, state your company name.

Good afternoon. It's Alberto Arias from Goldman Sachs. If you could please elaborate on the nature of the problems in Batu Hijau with regards to the ground movement on the pit walls. What are the reasons that caused this event and what degree of confidence do you have that it won't happen again in the coming months?

Thank you. What happened in the south wall, southeast wall of Batu Hijau, where we mined in phase I and phase II we had two fault zones that as we mined through them were not a problem. As we got into phase III these fault zones actually intersected and there was actually a flattening of the dip. So what we had was a failure along two intersecting fault zones that actually started to fail in late November, 2003. We took some remedial action at that time with managing the benches and we thought it was actually not going to be a big issue. The Batu Hijau pit is characterized by having raveling failures here and there. And unfortunately in late March it began to move and what it did was it cut off access as we lost part of a ramp and it cut off access to the bottom of the pit. This is a sliver of ground in the mine.

Normally in a normal year in Batu Hijau we have what we said was 1 to 2 million tons per year of planned pit slope remediation, cleaning up little raveling failures. This year that could go as high as 2.5 million, maybe 3, maybe an extra one, excuse me, 500,000 tons, maybe 1 million tons of pit slope clean up. And actually what happens is there's a small sliver of phase III at the bottom of the pit that's now going to be taken in phase IV. This amounts to a total of only 3.5 million tons of ore, as it stands right now and we are going to make a good recovery. We are going to have these raveling failures. We've had them in the past, but they've never been as large as this one. We do have a team put together, a team that meets actually every year and reevaluating the pit slopes and perhaps in this area we may have to flatten the pit slope a little bit. We don't know yet. But in general we are going to have a good year in 2005. 2006 and 2007 are unaffected.

Yeah. Just to follow up on that point. The lost production was significant in the first quarter. How are you going to manage to maintain your levels of production that you were expecting? Is it an issue of great or how are you going to recover the lost production?

That's a good question. If you take a look at the plan for processing we had at Batu Hijau for 2005, it's a total of roughly 45 million tons of mill throughput. We had planned during the year to take about 9 million tons of low-grade stock pile and the rest coming from the pit. So when we had the, these raveling failures, we dug heavily into the planned stock pile production for the year. And that's one of the reasons we can make such a nice recovery at Batu Hijau is that we had primarily been milling the planned low-grade material. Instead of feeding it in throughout the year, we took almost all of it or will take almost all of it in the first half. So what you are going to see is we are going to be able to match the overall grade for Batu Hijau pretty closely. Grades will come up and will be higher than previously planned for the remaining nine months.

And you are mining the higher grades right now or you are still processing the low-grade stock piles at this moment.

Grades are coming up right now.

Okay. Great. Thank you.

Your next question comes from John Hill. Your line is open and please, state your company name.

John Hill, Smith Barney. I guess we are just a little bit curious about the results this quarter and I would just inquire given the events at Batu Hijau and the view that the last time earnings were this soft for the third quarter of '02, when the gold price was $314 an ounce, whether you feel that you've communicated clearly with investors and what's your plans are to address this going forward.

John, let me address that because obviously the -- this is one of these things. If it was one event it would have been significantly different as Dave said, we had some of it at the end of last year. We thought we had it in hand. We had some more in January and then some more in March. Very frankly, we've gone back and looked at this and I will tell you that we probably should have got the word out sooner. 20/20 hindsight. At the time, we felt we could recover and make a lot of in the quarter. Clearly we couldn't. And I think, frankly, a little bit of it was our eye was off the ball here as we dealt with a lot of the wonderful issues of internal controls and some of the other things that we all had to deal with this year for the first time. So we have got back, looked at our internal -- we have procedures. When bad things happen, I want to here about it sooner rather than later and this one failed a little and all we can do is say we -- is own up to that. It ain't going to happen again. I think we have a good record historically of communicating with the Street and this one got a little bit away from us.

Very good. And thank you for that, Wayne.

Your next question comes from John Bridges. Your line is open and please, state your company name.

John Bridges, JPM. You've put on these sort of hedges via equity investment. I wonder to what extent the weaker earnings this period represent the full negative effect of higher ore prices but were absent the capital gains which are coming through in the -- in the merchant bank. Is that a factor?

Let me address that, John. Clearly the diesel costs flow through our cash operating costs and our costs applicable to sales. But in terms of capital gains related to the Canadian Oil Sand trust investment, they don't go through the income statement. They go through other comprehensive income. You don't see that income for income perfect kind of hedge correlation. You have to look at things over a longer period of time from a value perspective.

So it does sounds as if the earnings you are showing at the moment, granted the Batu problem, but they seem to be showing the full negative effect of higher energy costs without the hedging effect which is in --

Absolutely, but from a value perspective we are getting the benefit on the other side. We are not seeing it in the income statement or in the cash flow statement.

Right. Right. And then just tidying up, the other income category, the $68 million. Could you break that down for us?

The big differences there are the gain on the Mezcala sale, pretaxes about $30 million, $18 million related to royalty and dividend income, and the other big piece is interest income of about $11 million for the quarter.

That's great.

There's some rats and mice in addition to that. And it will be fully broken out in the 10(Q).

Okay. Thank, guys. Good luck.

Your next question comes from Barry Cooper. Your line is open and please state your company name.

CIBC World Markets. It's been quite awhile now since we've had an update on capital expenditures on these projects. I think probably the better part of a year and a half, maybe two years since you've given us sort of the Cap Ex ballpark that you thought it was going to be and it takes to build these projects. I was wondering if you could give us an update on where things sit with respect to Ghana, Phoenix and even Boddington. The first two obviously are well underway, Boddington is in its infancy at this point in time. We hear stories about numbers being bandied around by some of your own staff on Boddington and I'm sure there is some drastic changes to some of these other projects as well.

Barry, this is Bruce. In regard to Leeville, Phoenix and Ahafo, our things really haven't changed with respect to our capital expenditures. We have purchased and gone ahead in terms of commitments on in terms of large -- lot of the long lead items. We don't see significant cost pressures there. We may eat into some contingency and some planned excalation. And then in regard to Boddington, there is continuing ongoing feasibility work being done there and looking at ultimately what's the right size project and what's the right capital expenditures there.

I guess -- this is Wayne, I would just add, I think, with respect to the projects that Bruce described at Boddington, we were very fortunate to get out in front of a lot of this. I think the one project that we are seeing impact and we've slowed it down by about three months; we want to take a little harder look is the Akyem project in Ghana. And so we are going to tweak that one a little bit more and I would expect by the end of the second quarter, we will be in a position to update you on that particular one and I would expect that we will probably be taking it to our board at that point in time.

Right. I guess I just find it a little bit difficult to understand how you guys can escape what virtually everyone else in the world has succumbed to it.

We are not escaping on the operating side, I assure you that. A lot it of it goes to when we placed orders and again we have a series of projects that we are working on.

Did you even change the scope of it?

We are seeing benefit, I was talking to our broadband of directors yesterday, the benefit of some of our strategic alliances that we had in place with a number of years with our suppliers clearly, the ability to get the CAT equipment in on time and Jim Owens over there likes to talk about his increased margins and we are seeing some of that. But the critical factor for us is the timeliness of the delivery, because that directly effects our mine plan. That's a very strong relationship for us and this is when you can see benefits of that. The tire issue is a huge issue globally. We spent some time last week -- In fact I was drilling our operating people on exactly that. How can I be satisfied we are not going to run out of tires? Because I think you are going to start seeing operations -- that's going to start to impact operating margins. So, again, the strength of our supply change relationships is very important. Can we put dollars and cents to it? Not always, but in times like this you are sure glad you have them.

Didn't you change the scope of Phoenix to some degree? That would almost by definition would change the Cap Ex?

I don't think we changed any scope at Phoenix. What's happening at Phoenix is the reserve position is growing so the life has been extended out. And whether -- knowing our operating people and our construction people at some point here, they may come in with some way to try to squeeze more tons through the plants, but we have not changed the scope. I haven't. And I don't think anybody else has.

Okay. Good enough. I must have been mistaken. Thanks.

[OPERATOR INSTRUCTIONS]

Next question comes from Patrick Chidley. Your line is open and please state your company name.

Hi. It's Patrick Chidley, Barnard Jacob Mellet Securities. Just have a question on your change over to CAS reporting as opposed to cash costs. I'm not sure whether you covered this earlier, but what was the reason for that? Was it something that was forced by GAAP and therefore is it going to be something that other companies will have to do? Or is it an election that you made?

Basically, an election that we made, Patrick, not forced by GAAP, but clearly we are seeing the SEC putting more and more scrutiny on nonGAAP measures. We wanted to get away from nonGAAP measures and all the reconciliations that we have to provide in our public documentation in that regard. Also CAS links more directly with the income statement. I think it provides a better transparency and linkage there and when we talk about consolidated gold sales and copper sales, it reflects what we manage globally.

And, Bruce, what are the differences between cash costs and CAS in terms of -- there are obviously some non-cash items there?

There are some minor differences. I will have Russell follow up on the two major ones.

Really it's not a lot of differences at all. There's two items; one is the accretion of the FAS143 reclamation and closure liability, which is part of cost applicable to sales and is not part of cash costs, and the other is inventory NRV impairment / write downs which we look at quarterly and on an NRV basis. We will charge that cost applicable to sales as opposed to cash costs. The difference in the slides that we spoke to between on an absolute basis, cash costs and CAS is that we consolidate a lot more ounces from the departure at 140 to 150 an ounce, which brings down the weighted average. But other than that, they are essentially the same if you look at it on a mine site by mine site basis. They're within a percent or two of each other.

And we do provide it on a mine site by mine site basis. So you can apply our equity ownership position and come up with a number that you want.

Just one other thing that I should point out, Patrick, if you ever look at the copper cash cost versus cost applicable to sales, you will see a significant differences there. And that relates to the treatment charges and refining charges and a byproduct of accounting, we are allocating those and netting them off against the copper revenues, whereas for costs applicable to sales they don't show up. So that is the one where there is a significant differences. Between Randy and myself we would be more than happy to speak you through that.

That's good. Thanks. And any, have you had time to sort of give a position on this FASB, what issue '04-6, with relation to interfered stripping?

Interfered stripping. A very good point there, Patrick. As you know most of our ore operation where we have significant differences in grade in ore, we generally applied to deferred stripping model which is pretty common across the industry. The EITF met in March and the FASB ratified on March 30 that a deferred stripping account is going away. That is going to be a significant change to the financial statements. We will have language in there on this issue in the Q which will be filed in a couple of days. We are looking at an implementation date for new model 1106 at which stage there will be a cumulative effect accounting adjustment similar to what we saw when we implemented FAS143, which is the reclamation accounting or the consolidation of Boddington when we couldn't conformed their accounting policy. So we will have a catch effect which you will see below the line on 1106 to incorporate that change.

So it's fair to say that there will be quite a large cumulative charge because you guys must have quite a lot of that stuff.

It is interesting there is a lot on the debit side, but at Boddington we actually have advanced stripping which is a credit. That all states that, so net on a consolidated basis at the end of the quarter was about $45 million at debit but it's not that simple as flashing that because what we have to do under this EITF language is treat these costs as inventory costs. So we will put them into inventory. So if you are still sitting with those ounces or tons in inventory you will have to do an NRV test and if you are in a big stroke you want to be able to meet the NRV and you will have more write off. So it's not just a question of looking at what's on the balance sheet and fleshing it out. We will say that going forward and this won't be a Newmont issue, it will be across the industry. You guys are going to see a lot more volatility.

Absolutely.

You look at the deferred stripping model that is essentially smoothing stripping costs over time. So again we have been talking with our peers at both Eric Classer and some of the other mining companies to make sure we are all on the same page. But --

But some are coming out in the actual 10(Q)?

You will see something on that.

Okay. Thanks a lot.

Thanks.

Your next question comes from Michael Dudas, your line is open and please state your company name.

Bear Stearns. Good afternoon, gentlemen.

Michael.

Could you remind us or walk through us a little bit over the next couple of years what the depletion looks like in some of your more mature operations that weren't offset by your new operations being brought on?

Let me -- I will take a stab and then I'm sure I'll --

In a broad sense.

I will get some help here. I think when we look at the projects that are in their last few years of operation, clearly Golden Giant is going to produce out over the next couple of years. Pajingo is two to maybe we will get a third year out of it, but it's basically gone over the next couple of years. At Zarafshan, what we've done is move into lower grade material. So we are kind of right in that transition, but then that really will flatten out. So it will be producing at a about a 300,000 ounce a year level. But 150 to our account, roughly. Let's see, where else? Kori Kollo, we've gone into some leach operations there, but we had just a couple of years left there.

The other place that we will start to see some significant decline is at Yanacocha in Peru. This year it will be relatively stable. We will see some decline next year and some more decline the year after that. Depending on what we find in the way of additional lock side and bring on -- the nice thing about Yanacocha is with respect to oxide leach ore you can bring that on pretty quick. But as we look at the mine plan right now. So that's I think pretty much covers --

Martha is transitioning from open into and underground and so it will have a lower production base.

Right.

I appreciate that, Wayne. Thank you. Could you -- a little bit on the exploration? Where is the targets and where your budget is, the $160 or $170 that you are budgeting for 2005, where is that going to be mostly focused?

Basically in the five core areas that we have already. As you know in Nevada has been able to not only replace, but grow a reserve in the last three years. We hope to do the same thing again this year. It has more reserve today than its ever had in its 40 years history. So that is our number one priority.

Ghana has been contributing something like 12 million ounces of reserve in the last two years. I think it's a bit more in fact. And we see this, the -- Ghana is a country that will continue to provide us the reserves, so very much a target.

Australia and Peru; Australia is at a very difficult time in the last two years. We haven't replaced, in fact reserve last year in Australia. The year before was very little. This year we are hoping to see a much better number coming out of Australia. I think we are a bit encouraged.

And in Peru we, we are looking at the -- what our guys did in Nevada two years ago, relook at the entire database and being able to look at it through new eyes and start to grow reserve which had not been done in Nevada. We are starting to do that now in Peru. And we had a meeting about two weeks ago and I'm very encouraged by what we've seen and I think that on the oxide side, over the next 12 months, we will start to see some very positive news coming out of there.

On the exploration front. Ghana is looking very good to us. We are spending serious amount of money in that country and hopefully we will have some good news for the market by the ends of the year. But we are quite encouraged at this point in time. So those are I think the key areas that we are focusing on. In Canada and Holt-McDermott, as you know we bought out the Barrick mill. We are drilling now. We've had some success and we are hoping to literally revitalize that complex over the next 12 months and that's also an area of priority to us.

Also Minas Conga, I think.

Mina Conga will contribute more reserve this year. We are doing -- we're continuing the infill program. We have a new smaller deposit marrow not too far a way with very nifty, nifty grades and it's looking better today than even it did a year ago and we think we can improve the economics of Minas Congo over the next 12, 18 months.

Thank you, Pierre, for the update. I appreciate it. Thanks, gentlemen.

I think we will take one more question and after that we will need to wrap it up.

Your final question comes from John Tumazos. Your line is open and please state your company name.

John Tumazos, Prudential. With all the day-to-day uncertainties and inadvertent things like slippages and no Nevada guidance that confused the market and the big cash position that you have, what sort of outlook would there be for share repurchase program?

John, let me address that. Zero. Newmont, as long as I'm making recommendations to the board, will not do a share repurchase program. We will continue our program of increasing dividends. I think we've been very clear what our intentions are there. And we constantly look at that a couple of times a year as far as what is a good long-term sustainable dividend rate. But -- and our capital, our capital structure is tied to that consideration, but I see little likelihood of a share repurchase program .

Thank you.

With that we thank you for joining us on our call today. If you have any questions, you would like to follow up with us, please feel free to contact myself, Wendy Yang, or Jennifer Van Dinter on the numbers posted on the earnings release. Thank you again