紐蒙特黃金公司 (NEM) 2005 Q4 法說會逐字稿

Hello, and welcome to the Newmont fourth quarter and year end 2005 results conference call. Following today's presentation, there will be a formal question and answer session. To ask your question, simply press star 1. Until then, all lines will remain in listen-only mode. At the request of the Company, today's conference is being recorded. If anyone has objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Randy Engel. Sir, you may begin.

Thank you, operator. Good afternoon to everyone, and thank you for joining us on our fourth quarter and year end 2005 earnings call. Please note that this call is being presented and simulcast on our website at www.newmont.com, and will be available for playback for a limited time. On today's call, we have Wayne Murdy, Chairman and Chief Executive Officer, Pierre Lassonde, President, Richard O'Brien, Senior Vice President and Chief Financial Officer,Tom Enos, Senior Vice President of Operations, and Bruce Hansen, our Senior Vice President of Operations Services. As we will be discussing forward looking information, you should be aware there are risks unique to our industry which are describe in detail in our filings with the SEC. And with that, I'd like to turn the conference over to our Chairman, Wayne Murdy.

Thank you, Randy, and good afternoon, everyone. I'll review our fourth quarter and year-end financial and operating highlights, then Dick will provide the details of our financial results and Tom will cover operations. Bruce will then give an update on our new projects, and Pierre will review the merchant banking reserves and exploration, and give us his thoughts on the gold market, I'm sure. I'll conclude with our 2006 guidance.

Newmont had a strong fourth quarter and a solid year in 2005, generating industry-leading operating cash flow of some $1.3 billion, despite lower earnings from industry-wide cost pressures and various non-cash accounting items. During the fourth quarter, we had higher margins, selling 2.4 million consolidated ounces, or 1.8 million equity ounces, at an average realized gold price of $472 per ounce, with costs applicable to sales of $230 per ounce. We generated fourth quarter income from continuing operations of $72 million or $0.16 a share, and generated net cash from continuing operations of almost $500 million at $489 million. Dick will cover some of the accounting items, but these had the net effect of reducing income from continuing operations for the fourth quarter by some $84 million or $0.19 per share after tax. For the full year 2005, we sold our target of 8.6 in consolidated ounces.

That translated to 6.5 million equity ounces at an average realized gold price of $441 per ounce and costs applicable to sales of $236 per ounce. We generated full year income from continuing operations of $374 million or $0.84 per share. Again, accounting items had the effect of decreasing income from continuing operations by $34 million or $0.07 a share after tax. At year end, our balance sheet remained strong, with cash and cash equivalents, short-term marketable securities, and other investments of some $1.9 billion. Finally, we increased our reserves for the fourth straight year, finishing 2005 with 93.2 million equity ounces, using a $400 gold price assumption. Given the impact of some January transactions -- January and February -- where we increased our interest in the Akyem project and the Boddington project, on a proforma basis, our reserves at year end stood at 98.6 million ounces.

Before I turn it over to Dick, I'd like to say a few words about cost pressures. Over the past year, you've heard us and the rest of the industry talk quite a bit about cost escalation and its impact on margin growth. We have seen significant increases in fuel and other input commodity costs, labor costs -- and labor costs -- primarily in our Nevada operations and Australian operations. For 2006, our guidance indicates that we expect our average cost applicable to sales to be in the range of $280 per ounce and nearly $380 per ounce in Nevada. However, of the roughly $47 per ounce increase expected in Nevada, about $25 is attributed to the effect of accounting changes, deferred stripping specifically; which in 2005 was a credit to our cost structure, but in 2006 will actually be an additional expense.

You'll also see the impact of expensing stock options, although that does not have near the effect of the deferred stripping change. And this is something that will add a fair amount of volatility to the cost structure in all operations for all mining companies going forward. Of the remaining increase, approximately $10 is attributable labor costs, as we made a large out of cycle increase this last year in Nevada which will impact the full year 2006, and $15 is the full year impact of increases in energy costs, primarily electricity costs in Nevada. Our consolidated cost structure will also be negatively impacted this year by lower production from Yanacocha, our lowest cost operation, where costs are expected to increase from last year's $145 per ounce to an expected $185 per ounce this year.

Almost all of the cost increase at Yanacocha is due to the lower denominator -- lower production -- resulting from lower grades and higher stripping. We have several initiatives underway to address cost escalation. During the call, you'll hear about our development projects, which over the next three to four years will give us five new mines producing about two and a half million ounces with competitive cost structures. Three of these projects will come on in 2006. We've also begun construction on our power plant in Nevada, having finally received the full clearance on our permits a couple days before Christmas. Together, we believe these initiatives will help lower our average costs in Nevada and worldwide. With that, now I'll turn it over to Dick O'Brien for a closer look at the financial results.

Thanks, Wayne. Focusing on slide 6, you can see revenues for the fourth quarter were 1.3 billion at an average realized gold price of $472 per ounce. This compares to revenues for the prior year quarter of 1.2 billion at an average realized gold price of $436 per ounce. As Wayne mentioned, income from continuing operations for the fourth quarter was 72 million or $0.16 per share compared with 150 million or $0.34 per share for the year ago quarter. For the full year 2005, income from continuing operations was 374 million or $0.84 per share compared with 453 million or $1.02 for 2004.

Looking at the next slide, you can see that income from continuing operations for the fourth quarter was impacted by various items that had the effect of decreasing income from continuing operations by 84 million or $0.19 per share. We mentioned income from continuing operations for the full year 2005 was 374 million or $0.84 per share, and was impacted, again, by a number of items that had the effect of reducing income from continuing operations by 34 million or $0.07 per share. As Wayne noted, we also generated net cash from continuing operations of .25 billion in 2005. Now to focus on operations, I'll turn it over to Tom Enos.

Thanks, Dick. For the fourth quarter 2005, consolidated gold sales from continuing operations were approximately 2.4 million ounces at costs applicable to sales of $230 per ounce. For the full year, consolidated gold sales from continuing operations were approximately 8.6 million ounces at costs applicable to sales of $236 per ounce. Looking at Nevada, fourth quarter gold sales declined by 7% from the year ago quarter, as an 8% increase in mill throughput and a 14% increase in heap leach [INAUDIBLE] were offset by a 14% decrease in mill ore grade. Similar to the third quarter, the adverse mill grades were the continued result of unfavorable ground conditions and labor shortages at our underground operations, which impacted production rates from higher grade underground ore zones.

Costs applicable to sales for the fourth quarter increased 25% from the year ago quarter, primarily due to lower volumes, increased labor, and underground services costs, as well as increased diesel and input commodity prices. For the full year 2005, Nevada operations sold approximately 2.4 million ounces on a consolidated basis at costs applicable to sales of $333 per ounce. In 2006, we expect Nevada's consolidated gold sales to be approximately 2.6 million ounces at costs applicable to sales of $380 per ounce. As Wayne discussed, cost control and improving production are major focuses for our Nevada operations in 2006. We have made significant investments in new projects and new mining equipment, and we expect these investments to help reduce costs by approximately 5 to 10% in 2007.

As Wayne mentioned, we have also begun construction on our Nevada power plant, which will also contribute to lower costs. Shifting to Peru, Minera Yanacocha had a record fourth quarter, selling 1.1 million ounces at a -- on a consolidated basis at costs applicable to sales of $145 per ounce. Gold sales increased 25% from the year ago quarter, as a 15% increase in ore placed on the leach pads was only partially offset by a 14% decrease in ore grade. Costs applicable to sales for the fourth quarter increased 10% to $145 per ounce, as the result of increased labor and commodity cost. For the full year 2005, Yanacocha sold 3.3 million ounces on a consolidated basis at costs applicable to sales of $147 per ounce. In 2006, we expect consolidated sales at Yanacocha of approximately 2.6 million ounces at costs applicable to sales of $185 per ounce.

The rise in cost is almost entirely attributable to the lower expected production resulting from lower grades. Moving on to Australia, New Zealand, consolidated gold sales decreased 16% in the fourth quarter 2005, primarily as a result of lower grades at Tanami and Kalgoorlie, combined with lower throughput at Tanami and Pajingo. Costs applicable to sales increased 8%, primarily due to the lower production and increased commodity costs. Consolidated sales for the year were 1.6 million ounces at costs applicable to sales of $317. In 2006, we expect to sell approximately 1.5 million ounces at costs applicable to sales of $327 per ounce. At Batu Hijau in Indonesia, copper sales decreased 22% in the fourth quarter to 129 million pounds, and consolidated gold sales remained constant from the year ago quarter at approximately 181,000 ounces. Costs applicable to sales per pound of copper and ounce of gold increased 25% and 19%, respectively, as a result of increased fuel, maintenance, consumable power and labor costs.

For the full year 2005 on a consolidated basis, Batu Hijau sold 573 million pounds of copper and 721,000 ounces of gold at costs applicable to sales of $0.53 per pound and $152 per ounce, respectively. In 2006, we expect to sell 565 million pounds of copper and 575,000 ounces of gold on a consolidated basis at costs applicable to sales of $0.45 per pound and $155 per ounce, respectively. Now, I'll turn it over to Bruce.

Thank you, Tom. At the Phoenix plant in Nevada, commissioning of the plant has already begun, and we expect initial gold production to show up in April. Leeville project, also in Nevada, is approximately 86% complete. The production shaft has reached its final depth in November of 2005, and the mine is dewatered below the shaft bottom. The remaining construction work primarily relates to completion of the underground facilities. We see Leeville ramping up to achieve approximately 2100 tons per day of production by the end of 2006.

Also in Nevada, as previously discussed, we have begun construction of our power plant, which was approved by our Board of Directors in January. Project engineering is 50% complete, and we're targeting a mid-2008 completion. This power plant, again, is a significant part of our cost control initiatives, and will provide long-term reliable energy for projects like Leeville and Phoenix. In Ghana, we're now advancing both of our projects, the Ahafo project and the Akyem project. At Ahafo, engineering, procurement, camp and general infrastructure construction is essentially complete. The process plant and related facilities are now approximately 76% complete, and overall construction was 83% complete at the end of January. We've also began -- begun commencing mining and stock piling of ore, which started in January, for initial gold production in the second half of this year.

In 2006, we expect Ahafo to contribute approximately 260,000 ounces. Annual gold sales from Ahafo are expected to average between 500 and 550,000 ounces at a steady state production rate. As a result of continued explorations there, we are also already undertaking early studies of expansion opportunities at Ahafo, looking at process capacity additions and potential underground development. The Akyem project was approved in 2000 -- in July of 2005. We are awaiting approval of our Environmental Impact Statement, and we are targeting initial production in the second half of 2008. We also expect Akyem to produce approximately 500 to 550,000 ounces per year on a steady state basis.

Finally, as we announced this morning, Newmont's Board of Directors has approved the development of the Boddington project in Western Australia. In February, Newmont entered into an agreement to acquire an additional 22.22% interest in Boddington from Newcrest, Limited, taking Newmont's interest in the project to two-thirds. The other third is owned by AngloGold Ashanti. The Boddington project has total gold reserves of over 11 million ounces, and a current estimated life in excess of 15 years. Newmont's share of initial capital will range between 900 million and $1 billion, and we expect our share of annual production to be approximately 700,000 ounces for the first five years of production and approximately 600,000 ounces per year over the life of the project. We are currently targeting completion and initial production toward the end of 2008.

We feel that Boddington has substantial exploration opportunity and extensive non-mineralization material, which indicates the potential to potentially ultimately double our reserves at Boddington. Now with that, let me turn it over to Pierre to talk about reserves, exploration, and Newmont capital.

Pierre Lassonde P. Eng., MBA & CFA: Thanks, Bruce, and welcome, everyone. As Wayne mentioned earlier, I think the achievements of our exploration team this year has been to replace reserves and grow reserves for the fourth straight year. Using $400 for price assumption, we grew reserves from 92.4 million to 93.2 million ounces at year end; and mostly from Ghana, which continues to outperform and where we grew reserve by 17% to 18.7 million equity ounces. Nevada has also had a great year, Phoenix in particular, adding 600,000 ounces to now almost 9 million ounces of reserve. And in Peru, Minas Conga grew reserves by 36% to 6.1 million equity ounces. And also notably, Australia this year replaced reserve at 1.5 million ounces. Very notable achievement. And also, as Wayne pointed out, subsequent to year end, we acquired the remaining 15% of the Akyem project in Ghana, as well assigned a letter of agreement to acquire the 22% interest of Newcrest, increasing our total reserves to something like 98 million ounces.

If you look at the reserve sensitivity, at 425 gold, our reserve would increase approximately 5 million-ounces to -- actually, 6 million to almost 99 million ounces; and at 450 gold by about 11%, in line with the gold pricing, and really at 103.7 million ounces. A decrease of $25 would decrease our total reserve by about 8% to 86 million ounces. Now, the higher gold price -- the full impact of higher gold prices is constrained by limited bureau data on the margins of known mineralization. What we're really saying is that we have not drilled our pits at 450 or $500 gold, as we just haven't had the time and/or the money to do so. We are working on it, but it will take a long time for us to get there. When you look at the fourth quarter and the full year 2005, our fourth quarter expenditures were 43 million; and for the full year, $147 million.

For 2006, the guidance will be about -- spend of about 155 to 165 million in exploration and an additional 40 to 45 million for advanced projects, research and development. And when you look at the dollars spent, 56% is near mine brown-field and 44% is green-field. And you can see that we're putting a lot more emphasis on green-field exploration to increase our non-reserve mineralization pipeline so that we can continue to grow our reserves in the future. For the -- for 2006, our outlook is continued [INAUDIBLE] extension at Ahafo. Since we've started to work in Ghana four years ago, we've had new discoveries, and that trend we hope will continue this year again. In New Zealand, on the ground extension in Martha will go on, the same as the underground program at Tanami and Jundee in Australia. And finally, we will do a fair amount of work on the soft gold copper target at the Conga, [Mike] in Nevada, [Eli] in Indonesia and Boddington in Australia. These are all very large scale gold, copper targets that could add significant mineralization, and down the road reserves to Newmont, if we can bring them to reserve.

Now I'd like to turn your attention to Newmont Capital, which had a fabulous year in 2005. The royalty portfolio [INAUDIBLE] income was up 24% to 23 million in the fourth quarter, and it was up 20% to 79 million for 2005 versus 2004. The equity portfolio -- the year end market value of the equity portfolio -- was 940 million, an increase of 433 million from year end 2004. If you look at our return on average invested capital for the year, it's 80%. We're quite proud of that. And the unrealized capital gains exceeded over 500 million at year end. In terms of our asset portfolio -- and we're talking here about our black gold property, the Alberta oil sands -- we have started environmental baseline studies and in-field drilling.

We've done a prefeasibility study, which indicates that there's a 165 million economically recoverable barrels of oil, with potential production of 25,000 barrels per day via a phase development. We just completed the in-field program for this winter. We're going to look at the results and continue to develop this asset. Finally, in terms of the gold market -- and I'll be very brief -- I think that usually between February and May we see, on a seasonal basis, a decline in gold price. We haven't seen it this year, and I think that that is a very significant factor. It means the gold ETS in the market has now taken over 430 tons of gold in less than 14, 15 months. It has a significant impact on the gold market. And whether or not we will see the seasonality this year I believe remains a question.

I think, for the time being, we're looking at a gold price for the next six to nine months of 525 to 600, in that bracket, and, you know, barring any unforeseen major blowup in the world. And with that, I will turn it over to Wayne for his concluding remarks.

Thank you, Pierre. Again, for 2006, we expect consolidated gold sales of about 8 million ounces at costs applicable to sales of approximately $280 per ounce. We also expect to generate consolidated top sales of about 565 million pounds at costs of about $0.45 per pound. The guidance breakdown shown on this slide is also provided for your reference. In 2005, we saw a good year, but a year that clearly had challenge. Earnings were affected by various noncash charges and asset write downs; and of course, we were not immune to the rising costs facing the industry. However, we generated industry leading operating cash flow for the year and saw our margins improve in the fourth quarter.

Our leverage to gold prices increased over the last six months of 2005, and we also increased our reserves for the fourth straight year. Looking forward, we see several positive developments that we believe will deliver increased leverage to the gold price and value to our shareholders. We will be bringing on three new projects this year in Nevada and Ghana, and have two more significant projects, Boddington and Akyem, in development for completion in 2008. We also remain steadfast in our commitment to cost control and our opposition to hedging. We believe we are in a long-term bull market, and that these projects are a cornerstone of Newmont's growth story over the next several years. Thank you very much for your time. And with that, let me turn the call over to the operator so that we can take your questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone touch pad. If you are using speaker equipment, you may need to lift the handset prior to pressing star one. To cancel or withdraw your question, press star 2. Please be reminded to record your name if you would like to ask a question. And our first question comes from --

John Hill. Citigroup. Good afternoon, everyone.

Hello, John.

Hello. I was just wondering if you could share a few additional thoughts on Boddington in terms of the flow sheet and some of the equipment selection. There have been a number of variables [INAUDIBLE] on that one over the years.

Okay. John, I'm going to ask Bruce to talk about Boddington. We're very excited about that project.

Yes. We are extremely excited about Boddington, John. And you know, we're looking at roughly a throughput rate at Boddington at approximately 35 to 38 million tons a year. The flow sheet will have primary and secondary pressures, followed by a series of high pressure grinding rolls feeding into a ball mill, set of ball mills going into flotation followed by CIL. So it'll be big. It'll be a very robust plant. We're very confident in determines of the capacity of that plant and our ability to deliver it. On the mining side, we'll have -- we'll be using large rope shovels, electric shovels, and we'll be loading roughly 230 metric ton trucks -- a fairly significant fleet, and fairly conventional in terms of its nature. So a big project, but not overly complex.

Okay, great. Thanks for that. And then very briefly, on your reserve side, there's some interesting asymmetries, I guess. We took the gold price modeling assumption up from 375 to 400. That was worth 2.6 million ounces; but in your sensitivity table, if we carve a $20 an ounce off today, we go down by 6.9, and I assume that's lower grades in Nevada, but just I wondered if you could shed some light on that unusual asymmetry there.

I think what you're talking about there, John, is the fact that, you know, in the actual results for 2005, that also had the net impact of increases in costs. When we look at sensitivities on a go-forward basis, we're essentially freezing costs, and we're adjusting the gold price only.

Very good. Thank you.

Our next question comes from John Bridges of JP Morgan.

Hi. John Bridges. Sorry. I was just wondering with respect to the way the gold price has been moving up, I seem to remember on a visit a year or two ago, there was a lot of low grade material at Kalgoorlie. You know, on the face of it, the lower grade there is a negative, but I seem to remember there was a big potential increase to the reserves. And what's the prognoses there?

John, this is Leroy Schutz. At Kalgoorlie, there's a sizeable NRM that fell out of our numbers earlier on because of the pit angle not being able to take it in. We've seen, however, that this material has potential with the higher gold price environment to go underground; but we're investigating the engineering capabilities and the other process capabilities as well. So the upside is largely in that setting.

So you're working on that one?

Yes, we are. We've got a plan this year to do some additional drilling in that setting.

I wonder also, with respect to the green-fields portion of your exploration budget, could you point out to or maybe rank the targets that you're looking at?

Pierre Lassonde P. Eng., MBA & CFA: John, it's Pierre. In terms of green-fields, we're sticking basically 80% to the countries where we already operate; so you look at our budget in Ghana, it's quite significant. Our budget in Peru also is quite significant. And Nevada and Australia are the other two places. And I would say that approximately 80% of our budget would be in those four countries. And then the other 20% of it in other places where we see opportunities.

Okay, great. And perhaps for the technically inclined, is there a summary of the Boddington feasibility study we could get our hands on?

John, I mean, we put out a press release today; and you know, as things evolve, we'll be providing you with additional information. I don't know if we have in essence a summary of the feasibility study that we are distributing.

John, we -- it's Randy. We don't have anything of that nature at this point. We have the release out there at this point.

Okay. Thanks, guys.

Pierre Lassonde P. Eng., MBA & CFA: Just also John, just to re-emphasize, when you talk about asymmetry, the fact is today the gold price is 550. Our reserves are calculated at $150 less than today's gold price. But also the fact is that we just haven't drilled our pits at $500 gold, or let alone 550. And the effort to do so and the money is significant, and it will take us literally at least a couple of years to get there. So there should be a lot more to come. And -- in terms of -- you know -- higher gold prices. But we're also very mindful of the profit lid prosperity. When you add reserve ounces that will cost you 500, you know, your margin is only 50, we'd rather spend the money on ounces that, you know, will cost you 250 where you have a 200 or $300 margin. And that's the choice that we have to make. Otherwise, we'd end up with a 500 million exploration budget.

Yes. That was the other John's question, I think. I think we understand that. It's just trying to get a sense as to where the new reserve additions are going to come from.

Pierre Lassonde P. Eng., MBA & CFA: Okay.

Thank you. And again, if you would like to ask a question, please press star 1 on your telephone touch pad. And star 2 to cancel. And our next question comes from --

Mike Dudas, Bear Stearns. Boy, he sounds good, doesn't he? Good afternoon, gentlemen.

Pat you on the back, Mike?

Can you -- can someone go over the copper realizations for 2006? How long the hedges may run through and when we might see more market based realizes for Batu Hijau?

I'll ask Russell to do that.

Hey, Mike, we'll be filing our K on Wednesday, and you'll have plenty of detail in there. Suffice to say, these hedges are done in the first quarter of next year. There's very little that rolls over into next year. And the last schedule I looked at had about 60% for '06 hedged. But we'll check with -- check and finalize it. If it's any different, I'll let Randy know, and he can get back to you. But it's about 60% at $1.35.

But for -- I'm sorry, for 2006?

2006. It's minimal that rolls over into 2007.

Terrific. Thank you. And a question for Pierre. Where do you see the Newmont Capital opportunities going forward the next couple of years, given what you have on the plate and some of the things that may not be as visible to the rest of the market?

Pierre Lassonde P. Eng., MBA & CFA: Well, if we told you, you couldn't trade it.

[ LAUGHTER ]

Pierre Lassonde P. Eng., MBA & CFA: Mike, where we've done of course exceedingly well is on our position with Canadian oil. It does represent probably over 80% of our capital gain. And we continue to hold that position. We continue to believe that the stock is going to go higher. And once the dividend reaches approximately 10, $11 a share, which we think it's going to be in the next 18 months, it's the equivalent of $10 an ounce on the price of gold on energy at, you know, 55, $60 oil. And anything higher in oil price will have higher dividends. So that means a great deal to us.

In terms of our positions, you know, we've made a number of them fairly public in terms of the Gabriel and the Shore and others, and we continue -- the great thing about this business is that, you know, there are discoveries all the time, and we continue to look for opportunities. We have 300 and almost 50 geologists that are eyes and ears on the ground, and they feed us opportunities, and we continue to believe that there will be new discoveries made by juniors over the next two, three years, and we want to participate in at least one or two of these five new five million oil discoveries. And we will be there. We are absolutely totally confident that they will come.

Terrific. And one final question for Tom. Could you elaborate a little bit more on the labor issue, especially on the underground side in Nevada? And do you think that could limit some of the development that you or other companies might have over the next three to five years as some of these [INAUDIBLE] transitions are lower, given some of the lack of availability we're hearing about now in [INAUDIBLE] mining from a skill set base?

Well, I think we've got our arms around it and we've put in place a training program. We're -- we've also been in the process of building a subdivision in ALCO that's been an issue for employees -- the underground employees. Just no place to live. So I think we're in front of that one.

Terrific. Thanks, gentlemen.

Thank you. And our next question comes from --

John Tumazos, Prudential.

Hi, John.

Good afternoon. Could you elaborate a little bit on the 300 -- I believe I heard $380 costs applicable to sales forecasts for Nevada this year. Hopefully, the Leeville ounces will be much lower cost than that and gas prices have fallen; and last year, I thought, was an easy comparison at 333. And just give us a little rundown of what's getting better and what's getting worse.

Okay, John, I think maybe -- let me just cover a couple of things. First of all, part of the increase is in fact accounting changes. It's the expensing of deferred stripping. And in that 333 number -- and if you go back in the detail in the press release, you'll see that there was actually a $23 credit for deferred stripping. Next year, that will be an expense of $5. See that's obviously a sizeable swing for us. While the gas price drop-off is well appreciated, the big factor for us is what's happened to electric costs out there. That's a big item for us. We've seen great [INAUDIBLE] kilowatt hour for the majority of our electricity out there. And that's been a big factor.

And then the third item is on the labor costs. We did do an out of cycle 8% across the board increase to our Union and non-Union people last August, and the impact of that on the full year is about $10. Leeville is coming on slower than we anticipated. [INAUDIBLE, AUDIO DIFFICULTIES], bring that up to about 2100 tons a day by the end of the year. But it'll be well into next year when we get to the full capacity there of about 3200 tons a day, and that is primarily the result of the ground conditions there, which have been much more difficult. We've run into more water and tougher ground conditions than was anticipated from the surface. So while we are going through the toughest part of that this year, as we look out in 2007, we can see costs coming back off 5 to 10%. I think we have some other moves in place.

As you're aware, we haven't invested a lot of cash [INAUDIBLE, AUDIO DIFFICULTIES] that has caught up with us there. We're putting a bid on a new mining fleet in a large part of Nevada this last year and this year, and so we'll see improved maintenance costs. So while this is a difficult year to look at, we think we can see the other side and [INAUDIBLE] have a much better cost structure.

Thank you for the explanation.

Thank you. Our next question comes from --

Dave Gagliano, Credit Suisse. Hi, thanks. In your remarks, you commented briefly on the 2007 outlook for Nevada. And I was just wondering if you could shed some light on the 2007 operating outlook for Yanacocha as well, please, please.

I think in 2007, we'll again see production decline. And again, that's grade and strip related. And then we kind of turn the corner. Again, as we've said several times over the last couple years, Yanacocha, you know, has gone through those real easy years. It's becoming a more mature operation. And while 2007 has a fair amount of strip, and that will affect the cost structure. longer term, you know, Yanacocha is going to settle into kind of a, you know, 230 to 250 kind of cost structure there. The key thing is in the out years being able to bring production back up a little bit.

But we're at the big decline now with 2006, 2007. We're building a gold mill down there -- will be. We're looking at the development of the Conga project, which again is further out. It's in the 2010, probably, time period. But this is a wonderful gold district. It has always -- it has always performed very well. But clearly, we're past its prime days, and so it's a matter of it settling down. But it will be a very good long-term producer at very competitive costs for us. Not going to be at 140 or $150 an ounce, unfortunately.

Okay. In terms of -- for models purposes, in terms of your order of magnitude in the production decline, in '07 versus '06 is --

I think if you look in the 10-Q when that comes out --

10-K.

I mean -- pardon me -- the 10-K, there's good guidance that we've been giving in there, and it will be pretty consistent.

Yes, David, it's Randy as well. If you refer back, obviously, to last quarter's queues and the previous quarter's queues, a 10% to 20% decline in '06 over '05, and then we showed another 25 to 35% decline in 2007 over 2006.

Perfect, thanks. And just a follow-up question unrelated. Realized gold price in the quarter noticeably lower than spot. Is that just a timing issue? Is there anything that we should be looking at there?

It was timing and then also we had 150,000 ounces that we delivered at 350.

Okay.

Price capped.

Any of those price capped out as far as '06?

No. There's nothing in '06 or '07.

Okay.

The only items that we'll be delivering at non-spot is the prepaid forward, which is 161,000 ounces, June '06 and June '07, and that has a structure that allows us to participate up to 380, and then we're capped out.

Okay. Thanks.

Our next question comes from --

John Doody, Gold Stock Analyst. Gentlemen?

Yes.

Great quarter at an annual rate of about 7.2 million ounces a year equity basis. I'm carrying, or at least the most recent public statement that I have for you, has a total production for '07 of around 7.7 million ounces. Is that still in the range of reaching?

No. I'm not sure where you got that from, but we've been very consistent in our guidance for this next year. The guidance that we've put out is about 6.25 equity ounces.

No. I mean for '07. 2007.

We've never given specific guidance in '07.

I think maybe in Denver, but okay. And my other question has to do then with the cash costs. Obviously, the fourth quarter of '05 benefited from higher production and cut the cash costs to 230, and then it's going to jump up to 283, just taking the midpoint for all of '06. Can you give us some kind of sense on how it gets the 283? Does it pop right up in the first quarter, or is it sort of increasing through the year?

Well, a significant portion of it, as you pointed out, is the accounting changes. We used to be able to capitalize deferred stripping and amortize that. So there's a fairly significant swing there that takes place,, and that'll take place right from the beginning. But again, we give annual guidance, and we've stayed away from quarterly guidance. It's like your 2.4 million comment for the fourth quarter. We typically do better at the end of the year. But you can't take our guidance and divide it by four. It just doesn't work that way.

Okay, so the first quarter is going to be fairly close to the 283 number?

I -- you know, it'll be what it is. We give guidance for the year.

Okay. Great. Thank you very much.

Thank you. And our next question comes from --

Mark Smith, Dundee Securities.

Hello, Mark.

Yes, hi. Just have a couple of really quick questions for you. Just with regard to Boddington, when do you -- are you guys going to consolidate that or equity account that?

The legal structure is actually an undivided interest, so we will probably be equity accounting for it. I say probably because --

Proportional.

I mean proportional accounting.

Okay.

I say probably because the accounting profession continues to look at this, and it's not clear that by 2008, when we get into production, what the rules will be.

Okay, no that's fine. Okay, so when you said 900 to a billion in capital, that was entirely Newmont's portion on an equity basis?

That's correct.

That's correct.

Okay. And this year, your capital guidance for 2006, is that -- does that include any capital for Boddington?

Yes, it does.

Yes, it does. It includes our original share mark, which was 49. With us stepping up with the Newcrest acquisition, it will be about another 47 million.

Okay.

Per year. So there will be a delta for a change in scope.

Okay, so what would it be -- what is the exact number now for 2006 for Boddington?

It's an additional 47 million. Again, depending on how the project develops and how the expenditures go.

I mean, we're looking in aggregate at about $200 million to Newmont's account for Boddington in 2006.

Okay, that's cool. That's good. Just another quick question. So just on the same note, because we're switching back from consolidated to equity accounting. When you give your guidance for capital expenditures for 2006 overall, does that include your 100% of Yanacocha and Batu Hijau, or is that just your equity portion of Batu Hijau and Yanacocha?

It's consistent with the financial statement, so it is the consolidated totals. It's 100% of Batu and 100% of Yanacocha.

All those numbers in the release, looking at financial guidance for '06, are on a consolidated basis; so the same logic would apply to exploration.

Yes, but you don't do that much exploration on Batu Hijau right now. Right? It's hard to break that out. Right?

Yes.

Okay, thanks, Russ. Thanks, guys.

Thank you. I show no further questions at this time, and will turn the meeting back over to Mr. Randy Engel for any closing statements.

Okay. We'd like to thank everybody for joining us on the call today, again reminding you, if you have follow-up questions you'd like to put forth to us, you can reach either the Investor Relations Group or the Media Group on the numbers posted at the end of the release. Thank you very much for joining us.

Thank you for participating in today's teleconference, and have a great day.