紐蒙特黃金公司 (NEM) 2005 Q2 法說會逐字稿

Good afternoon and welcome to the Newmont's second quarter 2005 conference call. All participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. If you would like to ask a question, please press star 1. You will be announced prior to asking your question.

Today's conference is being recorded. If anyone has any objections, you may disconnect at this time. Now, I would like to turn the call over to Mr. Randy Engel, Group Executive Investor Relations. Mr. Engel, you may begin, sir.

Thank you, operator. Good afternoon to everyone joining us on the Newmont second quarter 2005 earnings call. Please note that this call and our presentation are being simulcast on our web site at www.newmont.com 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, our Senior Vice President and Chief Financial Officer.

As we will be discussing forward-looking information, please be aware that there are risks unique to our industry that are detailed in our filings with the S.E.C. As we indicated last quarter, we're now reporting cost applicable sales per ounce and per pound in accordance with U.S. GAAP. Costs applicable to sales exclude depreciation, depletion, and amortization which are shown on separate lines. We now also refer to consolidated gold sales and copper sales.

With that, let me turn it over to Wayne to begin the call.

Thank you. Good afternoon, everyone. To start with, I'll provide a second quarter overview, then Bruce will provide details of the financial results, and Dave will discuss operations. Pierre will discuss merchant banking and his thoughts on the gold market, then we'll conclude with a few words on our guidance for the remainder of the year. Then naturally we'll open it up to questions and answers at that point.

During the second quarter, Newmont generated $50 million in net income or $0.11 per share versus $37 million or $0.08 per share the year ago quarter. Our net income in the second quarter was impacted by a $30 million or $0.07 per share impairment charge on the sale of our Golden Grove zinc and copper operation in Australia which we previously disclosed.

Income from continuing operations for the second quarter then was $84 million or $0.19 per share. Our consolidated gold sales were right at 2 million ounces at cost applicable to sales of $244 per ounce. Our net cash from operations was $136 million after working capital increase of $139 million and the physical delivery of gold to reduce debt by $48 million which did not flow through cash flow.

The first half of 2005, Newmont earn the $134 million or $0.30 per share on consolidated gold sales of 4 million ounces at cost applicable to sales in the $241 per ounce. Net cash from operations for the six months was $324 million, and again, that's after working capital increase of over $200 million and that $48 million physical delivery of gold mentioned earlier.

The second quarter's operating performance was consistent with our plans and in that regard, very similar to the first quarter. As I said last quarter, we expect stronger operating results in the second half of the year as we put new stripping capacity into service, access some higher grade ores and processing rates and began production at Leeville in the fourth quarter.

Finally, our balance sheet remains extremely strong. Cash and short-term marketable securities and other investments at quarter end, totaled $2.4 billion with debt at $2.1 billion.

Now, I'll turn it over to Bruce Hansen for a closer look at the financial results.

Thank you, Wayne. Revenues for the second quarter totaled $1 billion with an average realized gold price for the quarter of $421 per ounce. This compares to revenues for the prior year quarter of $982 million and an average realized gold price of $395 per ounce. The slightly higher revenues were a result of a 7% higher gold price, partially offset by marginally lower gold sales.

Looking at the next slide, we can see that the second quarter net income was impacted by the following items. As Wayne mentioned earlier, we recorded a noncash after-tax impairment on the sale of Golden Grove of $30 million or $0.07 per share. We also had a tax consolidation benefit resulting from Australia, of approximately $7 million or $0.01 a share.

And finally, we expensed litigation and related costs for Minahasa of $8 million or $0.01 per share. As a result of these items, the net income for the second quarter was negatively impacted by $31 million or in total, $0.07 per share.

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

Thank you, Bruce. For the second quarter, consolidated gold sales were approximately 2 million ounces at cost applicable to sales of $244 an ounce. For the first half of 2005, consolidated gold sales were approximately 4 million ounces at a CAS of $241 per ounce.

Take a look at North America, second quarter gold sales were approximately 670,000 ounces compared with 585,000 ounces in the year ago quarter. Higher gold sales were primarily the results of the 14% increase mill through-put, a 10% higher heap leach ore grade, and this is partially offset by some lower mill grades. Loss applicable to sales increased from a year ago quarter due to mainly -- mainly due to increased diesel and input commodity prices and higher underground contract of services costs.

We expect Nevada's consolidated gold sales to be approximately 2.6 million ounces for 2005. Cost applicable to sales of $305 per ounce. To reiterate what I said the last quarter, our operating performance is weighted to the second half of 2005. In Nevada, our stripping activities should lead to higher grade ores, as Leeville begins production in the fourth quarter this year, and as Phoenix comes on-line in 2006. These higher margin projects should help lower the overall average brush across in Nevada and will have a real impact to our future.

Another item in our future is the construction of a proposed 200 megawatt power plant. We're awaiting final completion of the air permitting process right now. The plant is estimated to cost approximately $430 million and is expected to reduce consolidated costs applicable to sales in Nevada by up to $20 per ounce after an anticipated 2008 start-up.

In Canada, Golden Giant is forecast to sell 155,000 consolidated ounces in 2005 at cost applicable to sales of $325 an ounce. Holloway is expected to sell 90,000 ounces at cost applicable to sales of $405 per ounce. Golden Giant currently plans to end mining in the fourth quarter of 2005, and sell its final ounces in 2006.

Shifting to Peru, Minera Yanacocha sold 722,000 consolidated ounces at CAS of $156 per ounce in the second quarter. Gold sales increased 17% from a year ago quarter due to an increase in grade that we've been putting on the heap leaches, heap lead pads of about 18%.

Cost remains constant as higher production offset increased input commodity prices. Our 2005 guidance for Yanacocha calls for sales of 3 million consolidated ounces at costs applicable to sales of $145 an ounce. At Kori Kollo in Bolivia, we expect to 70,000 ounces at costs applicable to sales of $185 an ounce.

Moving on to Australia, Australia and New Zealand, we had consolidated gold sales about 5% less from a year ago quarter at 387,000 ounces at cost applicable to sales of $332 an ounce. At Tanami, gold sales were 20% lower due to a 21% decrease in ore grade from lower grades at the Callie underground deposit.

At Pajingo gold sales were 17% lower due to lower mill through-put and depletion of stockpiles. At Kalgoorlie, second quarter consolidated sales decreased 5% from a year ago primarily due to a temporary build-up of in-process inventory.

Now, all in all, partially offsetting these decreases, were 54% increase in sales at Martha reflecting a 55% increase in ore grade. We had a 9% increase at Jundee as a result of 20% higher ore grade milled partially offset by a 5% decrease in tons milled.

Overall, consolidated costs applicable to sales for Australia and New Zealand increased 11% from the year ago quarter. We're being hit by high diesel prices and other increases in input commodity costs. You're seeing higher underground contract services at costs at Jundee and milling harder ores at Martha.

For 2005, Australia and New Zealand are forecasted to sell 1.6 million consolidated ounces at costs applicable to sales at $308 an ounce.

At Batu Hijau, consolidated second quarter copper sales decreased 19% and 11%. That's from the second quarter of 2004. Costs applicable to sales increased 18% due primarily to lower production, increased maintenance cost and higher consumable and labor costs.

Now, we've talked about the sloughing in pit wall at Batu Hijau in the past. At the previous phone call, I mentioned that we would be producing 635 million pounds of copper and that's still our guidance. Actually the number is 631 in our latest forecast. We have a very high confidence in that number. And had to do a little bit of redesign in the pit, but I think we have a good solid plan going forward and I really like the quality of this forecast. This will give us sales of about 610 million pounds, cost of $0.50 a pound. Consolidated gold sales is 720,000 ounces at $150 per ounce.

Now at Zarafshan in Uzbekistan, consolidated gold sales decreased to 57% to 30,000 ounces in the second quarter due to a 29% decrease in ore grade. Mining of the stockpiles there, sometimes we encounter lower grade. We have had a little bit of slow recovery from the leach pads as a result of this lower grade. Cost applicable to sales of $235 an ounce were 61% higher than a year ago quarter, primarily as a result of lower production. Please note that the year ago quarter numbers on this slide include Ovacik which suspended operation in 2004, and was sold in March of 2005.

Now let me provide a quick update on our development projects. In Nevada, construction at Leeville remains on schedule for initial gold production in the fourth quarter of approximately 50,000 ounces. With production shaft is 94% complete. And the ventilation shaft is started hoisting operations. Overall, construction is 73% complete. Leeville is expected to produce roughly 450 to 500,000 ounces per year at steady state production.

Also in Nevada, we are on schedule at the Phoenix project. Production is expected to start in early 2006 with average annual gold sales of between 350 and 420,000 ounces. Engineering is complete and construction is 50% complete.

In Ghana, the Ahafo project is on schedule for initial gold production in the second half of 2006. Construction is now 47% complete. The first mining equipment has arrived on site. The initial trucks and excavators are due on site this quarter. Annual gold sales from Ahafo are expected to average between 500 and 550,000 ounces at steady state production.

At Akyem, we submitted an environmental impact statement to the government in May, and have applied to the Ghana minerals commission for a mining lease. I'm happy to report that earlier this morning, the Newmont Board of Directors approved the development of the Akyem project.

Now, I would like to turn it over to Pierre to talk about Newmont capital, and his views on the gold market.

Thanks, Dave. Good afternoon, everyone. I'll first start with the Newmont capital division. The royalty and dividend income in the second quarter was up 40% vis-a-vis last year at $21 million and close to $39 million for the six months.

Our marketable securities portfolio at the end of -- from the end of 2004 was up 25%, up $127 million and it is up again considerably as of today, as a matter of fact, I was just look at it before this meeting and we're now over $763 million in the equity portfolio in the merchant bank went over $3 million of unrealized gains as of today versus a second quarter market value of $632 million. So, I think we're doing extremely well and we're very happy with our investments.

Just bringing you up to date on our Alberta Oil Sand or our Black Gold project as we call it. The sculpting study that was started earlier this year will be completed this fall. And we have permitted 32 new wells for the winter drilling season and we're looking at -- if everything continues to go well, at doing a feasibility study sometime in '06.

Finally, the largest transaction that we did in the quarter was the sale of our Golden Grove operation in Australia for the sum of U.S. $205 million to Oxiana. This sale basically completes the portfolio rationalization that we have done over the last three years from the acquisition of Normandy and Franco, Nevada. And we're, you know, we're pleased with having found a buyer, a good buyer for this operation. And you know, now we can concentrate our Australian operation into the gold business.

In terms of gold, I just wanted to -- you know, address the supply/demand issue. I guess this time around, this quarter, I'm not going to talk about the macroeconomics. We'll leave that for another time. But -- and this stems from a conversation I had with an analyst last week. Is when you look at the supply side of the equation, it is very difficult as one -- as most of you know, to see, you know, a huge increase in supply or any increase in supply oer the next few years. Part of it stems from a number of developments, I guess.

When you compare where we are today to the 1980s, there is marked differences between the two periods. In the 1980s, of course and '90s, we saw a doubling of production with a gold price increase but in the 1980s, we had a whole new host of technologies that came to market. We had heap leaching, we had autoclaving, roasting, all new technologies that were able for companies to develop a whole host of new ore bodies that today these technologies are there but there's nothing new on the horizon.

At the same time, in the 1980s, we saw lands becoming available for exploration in South America, in Africa, and behind the iron curtain. Today, what we're seeing is the opposite. This land is being closed off to exploration because of conflicts, because of policies of government. And it makes the world actually more restrictive.

On top of that, we have a longer cycle of in terms of permitting, and in terms of construction as well. So that when you look at the entire cycle where before one could look at maybe four to seven years, we feel very strongly, I guess that the cycle for our business is closer to the seven to ten years today. We do think that, you know, with time, production of the whole industry will start to go up. But just as we see within our own Company, those pressures are still there.

On the other side of the coin, we continue to see very strong demand for the gold -- for gold. In the first quarter, gold demand was up 23%. This is staggering. And jewelry demand was up over 11%. In China, which continues to grow clockwork every quarter. And at the same time, we see, you know, smaller increase in industrial demand but large increase of increase in investment demand.

So, when you boil it all down, I think when you start to look at the gold price, June, July is usually cyclically during the year the lowest month for the gold price, and when you see that gold, does not breach, does not want to go down below 420 even though, you know, a lot of mornings, you look at the screen and it seems that the traders out there try to kick it down. It doesn't want to go down. I think what it's telling you is that if it doesn't want to go down come September, October, it is going to go up.

It is very much our feeling that given the supply/demand for the metal gold is in a continuing rising period. But also what it means is for those of us who have operations in a world where it is becoming more difficult to get new operations, these operations have a real franchise value. And I don't know whether or not that is realized at this point but with higher gold prices, I think it will be clearly understood that the operations like Nevada which have been around for 40 years have a real franchise value just like some of the greatest franchises that exist today.

So, I just wanted to leave you with these notes, and with that, I'll turn it over to Wayne for the guidance.

Thank you, Pierre. Good, solid quarter. As we had indicated, we should have a stronger second half of the year. For 2005, we expect consolidated gold sales to be in the range of 8.4 to 8.5 million ounces at cost applicable of sales of between $230 and $240 per ounce.

We have tweaked our cost estimates slightly as we continue to see cost pressures within the -- within the industry. But I think we've also made great progress from the Company at managing those costs.

The slightly lower gold sales outlook is attributable to the sale of the Golden Grove operation and slightly lower in Nevada gold sales, and slightly lower gold sales from the redesigned mine pit at Batu Hijau.

We also expect to generate consolidated copper sales of 635 million pounds at costs applicable to the sales of $0.53 per pound. This has that first half production from Golden Grove of about 25 million pounds at $1.35 per pound and, of course, the full year outlook, as Dave said, of about 610 million pounds from Batu Hijau.

The guidance breakdown as shown on the slide is also provided for your reference in the earnings release. Looking beyond this year, we continue to see encouraging exploration results. Particularly in Ghana and we're also encouraged by the added contributions of our projects at Leeville, Phoenix, Ahafo and now Akyem.

Again, thank you very much for your time. We'd now like to turn it over for questions and answers.

Thank you. At this time we're ready to begin the formal question-and-answer session. If you would like to ask a question, please press star 1 on your touch tone phone. You'll be announced prior to asking your question. To withdraw your question, press star 2. Once again, to ask a question, please press star 1. One moment please for the first question.

Our first question comes from Geoff Stanley from BMO Nesbitt Burns. You may ask your question.

Thank you very much. Good afternoon, gentlemen. Couple of questions really just housekeeping more than anything. Firstly, on Batu Hijau, you've indicated lower production of gold by about 10%. Is that all grade-driven or is the new mine plan see many meaningful changes in tonnage? That would be the first question.

The second one, just going through comparison of your quarterly report and Buenaventura, your joint venture partner at Yanacocha, seems to be a bit of discrepancy in grades of about 10%. You're reporting .028 and they're at .025. Are you quoting different tonnages, one stacked and one mined or something like that? Is there an explanation you're aware of? Or how do we explain that?

I think with respect to your second question, let us follow up on that.

All right. That will be fine.

Dave, you want to touch base on the Batu Hijau question?

Yes. If I understood your question, Geoff, it had to do with grades of Batu Hijau. Grades of Batu Hijau are compared to our models and our forecasts are holding up just fine.

As I mentioned previously, we've had to take some lower grade material in the first quarter. And we're now back in the pit. We're back in the bottom of the pit. Grades are coming up very nicely. And the grades that we're seeing in the mine are actually right in line with our plans and our forecasts.

But your forecasting guidance down about 10% on your previous guidance on the gold production side of things but essentially unchanged on copper. I'm just trying to reconcile it.

That basically relates to the revision we've made in the mine plant for this year. We'll get the ounces but we're not going to get them in this year just because of some additional layback that we're going to do.

Ok. Excellent. Thanks a lot.

Our next question comes from John Hill from Citigroup.

Thank you. And good day, everyone. I guess I would ask on the exploration side, can you fill in a few more specifics for us, anything of particular note at Ghana, Phoenix or elsewhere?

As we sit here at the halfway point of the year, how much or what kind of conviction do you have that you can replace reserves again this year?

I'll let Steve Enders provide a little detail. I think where we see ourself on our reserve replacement is pretty much right on plan. We feel good about it with where we are within the year. I think we have had some very exciting results in Ghana. We continue to be pretty excited about some results at Phoenix. So, I think we'll have a have a good mix this year. Steve, you want to provide a little more color?

Yes, John. I can fill you in a little bit on Ahafo. We've been doing drilling at depth on of some our deposits from the southern part of the district, and found more encouraging mineralization down there than we thought, and a long strike and not as deep as we had expected it to be, so that's given us some renewed interest in moving those things forward.

We've also tightened up our expiration models in the kind of data we're using to identify targets throughout the district. That's starting to yield results on the north side of the district as well, but we're not in a position to present those results today.

At Phoenix, we have an ongoing drilling program ahead of production and that continues to give us encouraging results as we continue to extend that project. So, I think that's basically a little bit of color on where we are.

Ok. Then one quick follow-up if I could. Fair bit of talk about lifting of Indonesian fuel subsidies and impact on various other mining operations. Did you derive any benefit from those in the past and is that part of the headwinds you're facing now? Any thoughts there?

Yes. John, yes, we're feeling those headwinds, as well. We're anticipating that in the second half of the year, our unit fuel prices are essentially going to double from where they've been and it is going to cost us about $25 million.

Ok, great.

That's in our guidance.

Very good. Thank you.

In terms of being in the cost numbers. Per ounce and per pound.

Our next question comes from Alberto Arias from Goldman Sachs. You may ask your question.

Good afternoon, everybody. Congratulations on the strong results. Just now that the Board has approved the Akyem project, if you could update us on the details of the development plan in terms of any change in the CapEx that you were expecting, the production rates and the start start-up for the project.

I think we'll be putting out a press release later today and at that time, we'll give you a little bit more detail, if that's all right.

Ok. Great. And maybe just a follow-up on Batu Hijau. From your previous conference call, it seems that you were going to make up for the lost production of the first quarter but it seemed that the plan has changed and it has led to a change in the mine plan. That is more prolonged than previously anticipated. If you could please elaborate in terms of what are the issues that [ INDISCERNIBLE ] is facing?

And does the new plan involve a change in the strip ratio of the mine and any kind of change in the cost structure that would be more permanent?

Yes, we have been looking, as I said, at the Batu Hijau plan. Strip ratios will change slightly. Our first look at it indicates we'll probably have to have a total material handling increase of about 6% over the next four years. Changes beyond that, I'm not sure of at this time until the plan is complete.

That's a relatively minor change. We're going to be flattening some slopes where we have had some sloughing. And I think our plan is solid. The pit is fine. It is just that this year, we're going to be producing less than we had in our plan but it is consistent with what we said at the last phone call back in April.

Any change in the 2006 production figures at all in terms of copper and gold production?

No, I think we're going to be fine at 2006 and 2007.

Ok. All right, thank you.

Our next question comes from Barry Cooper from CIBC. You may ask your question.

Barry, did we lose you?

Are you there? Can you hear me?

Now we can.

Ok. Just wondering, Dave, what did you have to do with respect to changing the slopes at Batu Hijau? Was it a one degree change or were there some more dramatic changes that were needed?

I wish I could answer it simply. It is probably about one degree in average but there is about 11 different geologic domains. Each one has a different head slope based on the strength of materials and the joint structure and I think what we're going to see is an overall flattening and probably one degree might be about right. I have not computed the average though. It is not a big change.

We're probably seeing a big change in really only one area of the pit. Where we have a fault going through the northwest section of the pit. That angle will be flattened probably as much as five degrees. Actually in other areas of the pit, we've increased the slopes. We're just flattening the slope into one problem area.

Ok. So, basically all of the increase in the extra handling material, is that all to be waste or would there be potentially some ore in that as well?

Well, no, I would say that's an overall 6% increase in total material moved. Most of that will be increased stripping in the next four years. Beyond that, I'm a little bit uncertain. It may actually go down from that. We're going to be taking an extra, oh, probably 55 to 65 million tons over the next four years to flatten that slope in the northwest corner of the pit.

Ok, thanks. Ok, then on the black gold project, I've had a number of people ask me, you know, what is this thing worth. And what it could mean for the Company. And I guess it is my understanding, I'm certainly not an oil analyst, but ground in that neck of the woods goes for $0.25 to $0.30 per barrel if it was a transaction on sort of [ INDISCERNIBLE ] resources with a little bit of drill information. However, you get that into production, it could be worth $3 to $4 a barrel. Ten-fold increase. Where do you see you guys taking this to? All the way to gain that ten-fold lift? Or would you stop part way along the way and sell it or what indeed are the plans?

Barry, Pierre here. The numbers you've quoted are about right in terms of what's going on today in the Canadian oil patch. Our neighbors to the north sold 17% interest in their property to the Chinese National Oil Corporation for about $170 million.

That was like three months ago and if you do the barrels and the ground, dollar and the stage of development, you come up with about that $0.25 to $0.35 a barrel in place and they are about the same stage as we are. So, and then if you look at the ones that are in production, that's about $3 to $4 about where you're going. In terms of our options, I think we've made it very clear in our two last conference calls, that we have basically three options going forward.

One is, you know, to complete a feasibility study. At that point, we have a decision to make. Either we go it alone and you know, Newmont puts up the money and becomes the operator and we own 100% of it.

Two, we can do a joint venture with a partner, let someone else come in, potentially a next door neighbor to say you put it in production and after you get your money back, we do a 50/50 deal or something like this a typical oil deal.

Or three, we do a Canadian, you know, oil trust type company where, you know, we put up the equity, borrow the money, float the Company as a trust unit. And you know, manage the trust. And you can see what kind of value with the current yield that you're getting out of these trusts today that, the value that we could get it for, something like that.

So, those are the three options. I think that we will know a lot more about a year from now as to where we're going.

Ok. Thanks a lot, Pierre. That clarifies a number of things.

Our next question comes from Victor Flores from HSBC. You may ask your question.

Yes, thank you. Good afternoon. I was hoping you could give us -- and maybe I'm jumping the gun but give us a bit of color on both Phoenix and Ahafo. You were talking in the case of Phoenix about production in the first half. Are you in a position to tell us, you know, when in the first half and what kind of production levels and costs you're looking at for next year?

And similarly, on Ahafo, second half, does that mean the second half or does that mean fourth quarter? How many ounces? I hear you chuckling, that wasn't a very good question, was it?

Victor, those are my questions. I don't think we're in a position today to give any dramatically different -- we're not going to change any guidance from the data that's already public on those. But I think the message is both of these projects are moving along, you know, well within the time lines that we had originally laid out. We're pleased with the developments.

I think especially with Phoenix, what we see because of the drilling results is something that's growing bigger than what we originally based our economics on, I think when we first put this together, it was about a six million ounce reserve. At the end of last year, we disclosed we were up to eight. At the continued to have good drilling results there and understand things better.

So, you know, positive from the standpoint of color we put on it but we're not in a position where we're going to give anything real much more specific at this point in time. As we get closer, we'll update it.

So, thanks. So, this is really something that you know, when you report the year-end numbers, we can expect it at that time, you know, tightening of the figures.

I think as we start to give guidance. We haven't given any kind of specific guidance yet for next year. But clearly, we'll do that well before year end. And as we focus in on that.

Great, thank you.

Our next question comes from John Bridges from J.P. Morgan. You may ask your question.

Good morning, Wayne and Pierre. I wonder if there is any comment on the change in the shape of the income statement, what drove that, was that more requirements from the FCC? In particular, I see your guidance on DDNA has dropped from 710 to 670 to 700. Could you explain this?

You know, first of all, I'll let Russell Ball address the specific question on depreciation, but I think very frankly, in this industry, we've been playing around with these cash cost disclosures for years. And we had to give all kinds -- under FCC requirements, all kinds of reconciliation information. As we looked at it, we weren't sure who that was serving or what good it was. It was an awful lot of data that frankly a lot of it didn't mean very much.

This ties directly into the financial statements, it relieves us of burdens of reconciliation and presents a clearer picture. That was what was driving the decision. Russell?

John, hi, Russ. Your question on DDNA, driven mainly by a couple of things. One is the sale of Golden Grove. It was about $15 million of DDNA in the second half then the other one is the slightly lower production, as you know, some of that DDNA is coming through in the units of production method. So, as we've -- the guidance is down marginally for the year. That has reduced the DDNA estimate.

Ok, fine. And then if I might follow up, I see your expiration is focused on the three regions. You talk about the sulfides at Yanacocha but probably high priority oxides you don't comment on. I wonder if you can give us an update on that.

Can you clarify your question on the oxide, please?

Any progress with more oxide at Yanacocha?

That's the sweet ore that we would like to find and we're looking for additional oxides in and around the existing pit in areas that were sort of left behind. That's one program we have going on as well as elsewhere on the Yanacocha property. We're looking for oxides in a different style of mineralization but again, near surface. So, we have a focus program looking for oxides in addition to what we are doing for sulfides. But frankly, the easy stuff that we've mined in the past is harder to find and we're looking at different kinds of targets in the oxide environment.

Ok, thank you.

Our next question comes from Patrick Chidley from Barnard Jacob Mellet. You may ask your question.

Hello, everybody. Two questions. One quick question on the tax rate. I think you've guided 28 to 30% for the year. Obviously so far we've been a little bit lower than that. Does that mean to say that the rest of the year is going to be higher?

And the second question is more complex question on the Australian assets. I just wanted to know for both the Australian and Canadian assets, what the life of mine on each of those is currently.

You've mentioned exploration at some of your projects elsewhere but has there been any significant possibility for mine extension, mine life extension at those assets?

Ok. This is Bruce Hansen. I'll take the question on tax rate. Yes, we have had a lower tax rate in the first half of the year. And based upon the guidance, we anticipate a higher tax rate in the second half of the year.

That being said, tax is a dynamic process and we continue to evaluate our tax position and there are potential for opportunities in the tax rate in the second half of the year. But those will be discreet events and you'll see more volatility going forward in our tax rates.

Ok. Thanks, Bruce.

Now, in regard to the Australian and Canadian assets mine lives, that would be Steve.

This is Steve Enders. We're doing exploration in Canada and in Australia on our mine sites. In Canada, at our Holloway Mine, I think it's a little too early in the year to provide any update on that particular program, but we have initiated aggressive exploration there in 2004. In Australia, we are continuing to have success at Jundee and at Callie. The extent of any mine life is too early to say. But we're having success in both of those areas.

Ok. Pajingo is that due to close in 2007 and no real finds there obviously?

Our next question comes from John Tumazos from Prudential Equity Group. You may ask your question.

Given that the gold environment has been tough for all of the producers in terms of costs, and Newmont with its leading size and stature has held a lot of shareholder value, I'm sure, you know, when Newmont sneezes, a lot of other people get a cold. Do you think this is appropriate time for Newmont to go out and make acquisitions, given that it is a very tough business environment for gold production even though the price is a little bit high?

John, this is Wayne. I think, you know, the standard answer is that we are always looking at opportunities throughout the industry, our focus is in our core areas and something that would be either strategic to one of our core operating regions or you know, something that would have the potential scope to become a core region.

So, we're looking at them. I think we've always tried to be opportunistic. And we take the view that, you know, when the opportunity is there, we're not afraid to pull the trigger but we don't -- you know, we don't start year saying this is the year we have to make an acquisition.

You know, throughout the mining industry, there has been huge cost pressures. I tend to view those as stair steps. I think there is an interesting chart we looked at awhile back. Where we looked at the cost in this industry and in the mid 90s in 1995-1996 and they lined up pretty close to where we are today. A lot of that is obviously driven by grade as we know and when you start looking at per ounce cost but we are clearly looking at opportunities and if we see something that makes sense, we'll do it. But when that happens, we'll announce it.

Thank you.

Our next question comes from Michael Dudas from Bear Stearns.

Good morning, gentlemen.

Hello.

Hello?

Go ahead.

I'm sorry. Thank you, guys. Bruce, working capital. Any chance second half of the year that switches the other way?

Well, I think of some the working capital increases that clearly we saw in the first half of the year will turn around. Trade receivables is predominantly related to Batu, concentrate shipments and that's strictly a timing thing. We have had some increase in leach pad inventory build at an area at Yanacocha, and we've seen some, I think, more permanent increase in working capital in terms of the materials and supplies, inventories that we're holding.

Some of that related to shortages, people have talked about in terms of tires and some other commodities. Some related to, you know, some new mining fleet additions that are coming on-line during the year.

The other part of it is accounts payable, reduction in accounts payable and that's a timing issue more than anything. We had a $40 million tax payment in the second quarter.

Thank you. My second question is relative to the power plant in Nevada that you guys are planning on. Are you ready to break ground if the permit comes through by the end of this year? And how is that initially going to be financed as you guys see it now?

Well, the financing, I think we've already disclosed. We did a $600 million bond issue and part of the rationale for that deal was to pre-fund and finance the power plant. I'll turn it over to Dave probably in regard to are we ready to turn dirt if we get the permits.

Yes, we'll be able to move pretty quickly on that. We would hope to get the permits lined up certainly before the end of the year. And be able to move fairly quickly right after that.

Have you guys locked in a coal contract for deliveries?

Not yet, but we've had an awful lot of discussion and to-ing and fro-ing and we believe we will not have any problem at all locking up coal delivery contract for Pada River Basin Coal.

Final question for Pierre. Can't let you get away without a macro question here, Pierre. Are you surprised at the lack of movement in gold relative to what happened with regard to the Chinese currency last week?

No, not really because I called it much adieu about nothing. It was the smallest revaluation on record. So, what do you expect? I think longer run though, it is very significant but not in the short run. And I say significant, because what it will permit the other Asian currencies to do will be to revalue and that it will feel a lot freer to revalue. We've already seen, for example, Malaysia abandoning the U.S. peg. We've seen the Korean Yuan appreciating.

So, in the longer run, we'll see good things happen. And if you go back to the 1970s, in the 1970s, the Japanese Yen went up 60% against the dollar and yet their trade deficit continued to increase right throughout that decade. And I would bet dollar for dollar today that ten years down the road, the [ INDISCERNIBLE ] will be 60% higher than it is today and the trade deficit won't change a bit, if not continue to increase because at the end of the day, their labor rate is so low that, you know, you go from $0.45 an hour to $0.65 an hour. It doesn't do anything.

They still are the most competitive nation on Earth. So, I think in the short run, no, I'm not surprised one second. In the long run, I really believe that it is going to have a significant impact on the gold market, simply and on all of the commodity market, not just the gold market. Kid you not, you know, you look at a stronger currency, they'll be competing for oil. They're going to be competing for all of the other commodities that they need to grow. And that's where you want to be. And the gold market is only going to be one part of this whole equation but for us, of course, a very important part.

Well said. Thank you, Pierre.

Thanks.

Our last question comes from Mark Smith from Dundee Securities. You may ask your question.

Hi, guys. More on a philosophical note, not really dwelling on your performance but you know, as the year has gone on and virtually all of the mining companies at the end of last year revalued their reserves based on higher metal prices assumptions, we've watched the fuel cost and cost creep in general come up into a presumably the cost ranges or above the cost ranges that went with the higher reserve price assumptions. Do you see yourselves and others revaluing reserves at the end of this year with the view of increasing grade again or are we going to see profitability shrink as reserve grade is approached by head grade? Hello?

Yes, I mean, you know, we're going to look at -- as we get close to the end of the year and as we see the gold price at the end of the year. I think you're aware that the SEC looks at a rolling three-year average in terms of feeling comfortable about the pricing used for reserve calculations. So, you know, it is probably going to be in that 375 to $400 an ounce range.

Clearly, we've seen some cost pressures as the rest of the industry has. And our cost -- those costs will be reflected -- the cost inputs will be reflected in how we do the calculations. So, we're going to -- we will not fully see the benefit of say $25 or $50 increase in the price when we calculate our reserves.

But I mean that being said, I think our reserve calculations have been historically very conservative. We look at a discount rate that we embed in the calculations. And so we'll see how it plays out.

Ok. Thanks very much.

With that, thank you very much for your questions and your interest this afternoon. As I said, we're putting out a press release a little later this afternoon on the Go ahead on the Latest project in Ghana. And we look forward to seeing many of you in our various Investor Relations programs over the second half of the year. Thank you.