紐蒙特黃金公司 (NEM) 2006 Q3 法說會逐字稿

[OPERATOR INSTRUCTIONS] I'll turn the meeting over to your host today, Mr. John Gaensbauer. Sir, you may begin. Thank you, operator.

Good afternoon everyone and thank you for joining us on Newmont's third quarter earnings. Please note that this call and presentation are being simulcast on our Website at www.newmont.com and are available for playback for a limited time. On today's call, as you may have seen, we have some recent management appointments that the slide doesn't reflect. We do have Wayne Murdy, Chairman and Chief Executive Officer; Pierre Lassonde, President; Richard O'Brien, Executive Vice President and Chief Financial Officer; and Tom Enos, Executive Vice President Operations.

On today's call, Wayne will cover our third quarter financial highlights. Dick will review the performance at our operating regions. Tom will give us an update on our capital projects. And Pierre will cover merchant banking and give us his thoughts on the gold market. We will be discussing forward-looking information that involves unique risks to our industry that we describe in our filings with the SEC. With that, I will turn the call over to Wayne.

Thank you, John. And good afternoon, everybody. During the third quarter, we continued to generate earnings growth and gold price leverage for our shareholders. Our net income grew to $198 million or $0.44 per share, compared to $126 million or $0.28 per share for the third quarter of last year. For the year-to-date, net income grew to $568 million from $260 million in the same period last year, an increase of over 100%.

During the quarter, we continued to make progress in our development pipeline. Ahafo reached commercial production in August after a successful start-up and first gold pour in July. In Nevada, we expect our Leeville and Phoenix projects to reach commercial production during the fourth quarter. Our investment in these new mines will form the base from which to grow our business in the years to come. And as we discussed in September, we also expect to grow our reserves net of depletion this year. And Pierre will talk to that a little bit later.

Turning back to the financial highlights, again, net income was $198 million for the quarter on revenues of $1.1 billion. And we sold $1.7 million consolidated ounces of gold at an average realized price of $615 per ounce. Costs applicable to sales were higher than the year-ago quarter. Unfortunately, as has been the theme for the whole industry. Primarily due to the lower production and increased costs at Yanacocha but remained competitive at $318 per ounce.

I would refer you to this morning's press release for a description of the various items impacting net income for the quarter. But of note, as previously announced, we sold our oil sands leases and our Martabe project in the Indonesia, generating after-tax gains of $193 million in the third quarters. These gains were partially offset by the write-off of our remaining investment in Zarafshan-Newmont joint venture in Uzbekistan, as a result of the Uzbek Government's expropriation, expropriation, is a fancy word for stealing, of the asset earlier this year. We have filed a case against the Uzbek Government in international arbitration and will seek to recover our investment and our lost profits.

In the third quarter, we also extinguished the roughly 160,000 ounces of prepaid forward gold deliveries scheduled for June '07 at a cost of $26 million. With that, I will turn the microphone over to Dick to discuss our operating results in a little more detail.

Thanks, Wayne. [Nevada] had a good quarter in the third quarter producing 569,000 consolidated ounces. At costs applicable to sales of $428 per ounce. On an equity basis, third quarter gold sales were equivalent to the year-ago quarter. Gold sales also increased over second quarter levels.

Costs applicable to sales increased 20% from the prior year quarter, primarily due to higher labor, energy and consumable costs. Costs were also impacted by this year's change in accounting for stripping costs, which reduced costs applicable to sales by $25 per ounce in the third quarter of 2005. For the year, we expect Nevada to produce between 2.31 and 2.36 million equity ounces, at costs applicable to sales of between $380 and $395 per ounce, as both costs and grades improve in the fourth quarter. At Yanacocha in Peru, gold sales were 578,000 consolidate ounces in the quarter, at costs applicable to sales of $210 per ounce.

As projected, gold sales decreased 25% from the year-ago quarter due to fewer tons placed on the Leach pads and lower greats. Costs applicable to sales for the third quarter increased 46% per ounce, as a result of the lower production and higher stripping and labor costs. During the third quarter, Yanacocha recorded a $19 million charge related to a negotiated royalty reached with the Peruvian Government to provide additional funds for community improvement during this period of higher metal prices. Payment is based on 3.75% of net income, beginning January 1, 2006 and continuing for a period of up to five years.

For the year, we expect Yanacocha to produce 1.33 and 1.37 million equity ounces, at costs applicable to sales of between $200 and $210 per ounce. In Australia and New Zealand, the Company sold 355,000 consolidated ounces at costs applicable to sales of $376 per ounce. Third quarter consolidated gold sales decreased 6% from the year-ago quarter. At the Tanami operations, we had lower mill throughput than the year-ago quarter when we were processing Groundrush stockpiles.

At Kalgoorlie, we experienced hard and more abrasive compared to the same quarter of 2005. In addition, the roaster was down for planned maintenance in the third quarter. At Pajingo, we milled 9% fewer tons than the year-ago quarter, as a result of ground control issues at Vera South Deeps and slower than planned access at Jandam. Mill throughput at Martha was lower as we transitioned from open pit to underground mining there.

The lower production, however, was partially offset by higher grades at Tanami, Jundee and Martha. Costs applicable to sales increased 17%. Primarily due to the lower production rates. Higher royalties and the changing accounting for stripping, which lowered 2005 costs by $7 per ounce. For the year, we expect Australia, New Zealand to produce between 1.37 and 1.4 million ounces at costs applicable to sales of between $380 and $395 per ounce.

Batu Hijau had consolidated sales of 90 million pounds of copper and 59,000 ounces of gold, at costs applicable to sales of $0.73 per pound of copper and $286 per ounce of gold. Production at Batu continues to be impacted by lower copper and gold grades, as well as lower mill throughput, due to harder ores. Costs applicable to sales were also higher than the year ago quarter due to the lower production and lower grades. For the year, we expect Batu Hijau to produce between 185,000 and 200,000 equity ounces of gold and 215 and 230 million pounds of copper. At costs applicable to sales of between $200 and $225 per ounce of gold and $0.70 to $0.75 per pound of copper.

As we indicated in our press release, production is expected to remain at approximately these levels through 2009. Primarily as a result of the mine plan resequencing and the hardness of the ore. We are, however, currently evaluating additional grinding capacity to increase throughput at the mill.

In Ghana, the Ahafo mine commenced commercial production in August, after a successful start-up in July. Gold sales for the quarter were 77,000 ounces at costs applicable to sales of $251 per ounce. Operations continued to be impacted by nationwide power shortages due to low water levels serving Ghana's hydroelectric facilities. We are in the process of installing additional diesel generating capacity at the site. And along with our industry peers, exploring other long-term lower cost alternatives. Costs applicable to sales for the balance of this year and next are expected to be continued to be impacted by the power shortages. For the year, Ahafo is expected to produce between 160,000 and 195,000 ounces, at costs applicable to sales of between $260 and $290 per ounce. Now, I will turn the call over to Tom to discuss project development.

Thanks, Dick. As Wayne mentioned, our Leeville underground project in Nevada is now operating at the targeted 2,100 tons per day rate for 2006. And is expected to achieve commercial operation status in the fourth quarter. We have completed the first materials handling system and are hoisting ore through the production shaft. We remain on track to obtain targeted production rates of 3,200 tons per day by the end of 2007.

At the open pit Phoenix project in Nevada, we also expect to achieve commercial operation status in the fourth quarter. The mill has achieved its design production rate and was operating at a rate of 3,100 tons per day at the end of October. We continue to optimize the plant to increase recovery rates and are evaluating installation of a new crusher to address unexpected ore hardness. We are also progressing study of a copper oxide leach program to potentially expand the scope of the Phoenix project.

Also in Nevada, our 200-megawatt power plant remains on schedule for completion in 2008. Capital costs at the plant are now expected to be between $610 and $640 million, in part due to higher labor and commodity prices and purchases of rail cars and track upgrades. At the Boddington Project in Australia, construction is approximately 11% complete, with initial production expected in late 2008 or early 2009. At Yanacocha, construction of the gold mill is underway, with anticipated start-up in 2008.

Finally, as we announced in September, we have delayed the construction of the Akyem project in Ghana, pending completion of permitting, resolution of the power shortages there and optimization of project economics. Now, let me turn it over to Pierre.

The estimated royalty and other income for this year's -- I'm sorry, I didn't have my microphone on. Thanks, Tom. [Laughter] We'll start all over again. Newmont capital is having another record year. The royalty and other income for this year is now estimated at over $105 million. And as you all know, our target originally four years ago -- five years ago, was to be over the $100 million and we've now achieved that target and surpassed it. Not only that, but in this quarter, we've booked over $300 million of pretax gains from sale of noncore asset. The major sale was the Alberta heavy oil, our black gold property, in which we had an investment of $20 million, that we sold for a net proceed of U.S. $280 million.

We've taken some of that money back and put it back into buying our next acorn, as I call them. And that's a $152 million investment in the FALC JV, with the Shore Gold, in which we purchased a 40% interest. And on that investment so far, this year over 200 PQ holes have been completed, totaling over 50,000 meters. And on the Orion cluster, in particular, and what we're finding is that the kimberlites are larger than originally thought, particularly on Orion North and South. And six new feeder vents were discovered during the 2006 program, which it all bodes well. It's a very early stage, again, exploration program but it's certainly one that is very attractive for Newmont.

I will turn over to the gold market update very quickly. What we see here in the U.S., I call them the U.S. economic factors, is that we are now entering the mid-cycle slowdown and it's going to become more pronounced next year. The third quarter this year, of course, was 1.6% and I think it's going to probably slow down from here on.

The next important point is that we believe that inflation has peaked. However, it's likely to stay at a much higher level than what the Fed, I think, is intimating. What we're seeing, certainly in our industry and other industry, is labor settlements are coming in at a higher level and that is feeding through the chain. And I think you're going to see higher rate. So, the choice that the Fed will face at the end of the year is going to be with interest rates, what do they do if they're facing stagflation, are they going to raise rates and get the U.S. economy into a recession or not? What you can be sure of is that the gold price will anticipate the Fed action. And I think what the gold price is saying right today or over the last week is that the Fed will blink and will start to lower rates because it doesn't want to have a recession.

So, when you look at the gold market, what we see is in the last quarter, the physical demand has been very, very robust at the jewelry level in particular in India and China, when the gold price came back closer to $575, $585, very, very robust, physical demand. Mine production is set for a fourth annual decline and it's a reflection, again, of the lack of investment that were made back in the early part of this decade.

Another very significant point is Central Bank selling is abating and in October, for example, Germany announced that it will not sell any gold in this -- in the new year of the Washington Agreement, which means for the second year in a row, the 500 tons that is allowed under the WGA, the Washington Agreement, will not be met. It will probably be closer to 300 to 350 tons. And, yet, on the other side, we are seeing Central Bank -- some Central Banks starting to buy gold and the whole notion is that we're going to have less gold for sale and higher demand.

The gold ETF is now over 544 tons at the end of the month of October. That's an increase of about 40 tons in had the last month. And it just goes to show the increasing level of investment demand for gold. Considering all of that, our view is that the gold price over the next 12 months could see a downside of possibly $20 to $35, something like that, but on the upside, we're thinking that we could very well likely see $700 gold in the next 12 months. And with that, I will turn it over to Wayne.

Thank you, Pierre. We are maintaining our production and cost outlook for the balance of 2006, with annual production of between 5.6 and 5.8 million equity ounces of gold, at cost of sales of between $290 and $310 per ounce. And between 215 and 230 million pounds of copper, at costs applicable to sales of between $0.70 and $0.75. Capital cost estimates for the year have been increased slightly, as a result of the delays in the commercial start-up of Leeville and Phoenix. We've got higher costs at Ahafo and the challenges -- and the changes in estimate for the power plant.

As I said at the beginning of the call, we're focused on making steady progress in the ramp-up of these three new operations. And as we advance them towards steady state production levels. In the meantime, our net income and operating margins have continued to grow at rates faster than the gold [price.] Our unit operating margin grew almost 50% for the first nine months. With our production weighted to the fourth quarter, we expect to continue to generate expanding margins and earnings leverage to gold prices over the balance of the year.

I'd also like to make note that we put out an organizational announcement release after the close of the market today. We included our Board meeting. And in this announcement you will note that Pierre is going to change his role within the Company. He's going to move to a part-time status but will continue to be very involved in the strategy and the direction of the Company. I think you will continue to hear his prognostications on the gold price as we move forward.

When we formed this partnership five years ago, I think initially we called it a trial and we're going to work together for a couple of years. That has continued to go on and we expect that to continue for some number of years in the future. However, as part of the transition and management's succession plan, we have promoted Dick O'Brien, Tom Enos, Britt Banks, and David Harquail to Executive Vice Presidents; and Sharon -- and Steve Enders and Darla Caudle to Senior Vice Presidents. We will continue to increase their responsibilities in the coming years and look forward to getting back to a growth mode in this Company after next year. And we see tremendous leverage because of the gold price. And because of once again, beyond 2007, we'll start to see real unit growth. With that, I think we'll turn the call over to the operator and provide you all with opportunities to ask questions.

Thank you. [OPERATOR INSTRUCTIONS] First question, Mr. John Bridges of J.P. Morgan.

Hi. Morning or afternoon, everybody. Pierre on -- could you fill us in a bit on the Central Banks, your comments on the reduced sales? Because I thought the jury was still out on exactly what was sold this year to September?

John, the number that we have at the WGC is that the sales for last year were only about 352 tons. And for next year, 2007, our view is that it's going to be broadly similar because Germany is not coming in with their 200 tons. So probably someone else will step up a little bit. But even that is questionable because some of the other countries are starting to back down, as well. So, that's where things are at this point.

Because what's impressions about metal would have been sold forward and not exercised or something like that?

Well, even if they sell forward, at some point it comes in -- on the quarterly basis, they have to report, so it comes in. And we certainly haven't seen anything of that nature.

Okay. A quick mining question on Martha. Could you give us a bit guidance as to what that's turning into it. Was it open pit and you've taken it into an underground? Is it a mix of underground and surface going forward? Or what can we expect?

Tom Enos will answer it.

Actually, we're doing a layback there in the surface mine, as well as an underground development.

Okay. So, what can we expect going forward? Is it going to be a mix? Will the layback last just a year or something?

Yes, it is. It will be a mix. The layback lasts three years.

Okay. And then the mine itself? What do you expect from that?

Well, there's approximately over 100,000 ounces that are going to come out of the mine year.

Okay. And what sort of life do you expect from it?

The way things have been going there in New Zealand, I'm not sure what we've got in the plan.

Yes. We'd have to get back to you on that, John, but basically what happened there is we thought we were at the end of the life at the end of the open pit. And we're transitioning to all underground and we found some additional ore that looks real good at the bottom of the pit. And it will require this other layback. We had to move some surface -- I want to say facilities but that's not the right term. Some historic surface facilities --

Historic pump house.

And that's now been moved. And so we've started this additional layback, but it does extend the life of the mine, but the underground is like all underground. We've just drilled it out for the next few years but we think there will continue to be a relatively long life there.

Okay. It was a pleasant surprise anyway. I just wanted to see what to model. Thank you.

The next question from Mr. Michael Dudas from Bear Stearns.

Good afternoon, everybody. My question addressed to maybe for Tom. Could you expand a little bit more on the outlook for Batu Hijau? What are you thinking about relative to your crusher opportunities? And what could possibly come through in evaluating different alternatives to possibly improve the output or better mill throughput our of that operation as you put forth in 2009.

We currently are doing a study on additional grinding, which will probably amount to a third sag line. So, we'll be complete with really an evaluation of what it's going to take to get it permitted by mid-next year and make a decision from there.

Fair enough. And could you also, -- maybe Dick could go over the rolloff of the copper hedges for us again and how that's going to play through?

What we've said previously is we anticipate that the copper hedges will come off in had the first quarter with about a quarter of the production in the first quarter subject to hedges on a financial basis.

And then subsequent to that? You will have --?

Subsequent to that, we have no additional hedges outstanding at Batu. We will be out of our copper hedges.

My final question for Pierre. There's been pretty heavy buyback opportunities from the producer side this year. How much of an impact do you think that's had on the gold market this year? And if we don't get similar-type situations, unless we get a pretty strong spike in gold price, is that going to be somewhat hurtful if we get a little bit more concern about the disinflation or deflation?

The sensitivity of gold to the tonnage, it's about $7 to $10 per hundred tons. And this year, if you look at the total amount of gold bought back by Barrick and the others and minus the new hedging by other producer, it's probably going to be in the order of 250 tons or so. So, you could be looking at $15 to $25, somewhere in that range. And then, add another 150 tons from the Central Banks or closer to 200, probably, that's another $14, $15 to $25.

But again, next year, total worldwide production will be down again. So, whether or not the dehedging next year is going to be at the same level, probably not. Probably a bit less. But you're only talking, $7 to $15, in my mind, on the gold price of over $600. So, it's not -- it's 2%. It's not that material. I think that the total level of demand is far more important. And you just look at the gold ETF, it's close to 300 tons -- the gold ETF was launched two years ago, November 14, and it's almost 550 tons over two years. That's real, real, new, heavy demand.

And we think it's going to continue. We just listed the gold ETF in Singapore. It's going to be listed on Hong Kong in not too long. We're looking at listings in Tokyo and Dubai. New listings in India. And we're going to -- at the WGC, we're going to circle the world with that gold ETF and create even more demand.

Pierre, I'm sure you're quite busy with some other things going on, congratulations. Thank you.

Next question from Mr. Victor Flores, HSBC.

Thank you, I have a couple of questions this afternoon. First of all, with respect to Leeville, you noted that the production shaft is now operational, you're at about 2,100 tons a day. But my understanding is that in order to get production up to the levels you want -- and you have to get the backfill plant in. And my understanding is the backfill production was actually somewhere around 1,500 tons a day. Where are you with respect to the backfill? And is that one of the items that's keeping you from producing at a higher level? And when will that come through?

Actually the next ramp-up phase is another ore pass that will take the tonnage to the design of 3,200 tons a day. Currently, we have the ability to hoist through the ventilation shaft and we are hoisting some of our backfill material through there now. So the plan is to have the other ore pass in by April of next year.

Okay, sorry. So, then getting backfill down into the [stope] is not permitting you at this point in time?

No, sir, it is not.

Great, thanks. Second question goes to the voluntary contribution in Peru. Of that 3.75%, has it been established? What percentage of that will be managed directly by the Company and what percentage will be managed by the Government?

No, it has not been established yet.

Do you have a sense for where that's going to go? Or is there still a bit of horse trading around that number?

The latter. Still a bit of horse trading.

Okay, great. Thank you so much.

And the next question from Mr. John Tumazos, Prudential.

Good afternoon. I missed the press release on the organizational changes. Wayne, I wanted to congratulate you on continuing on. Have you made any commitment as to how many more years to go. I know that 65 is only a technicality when you like the business [Laughter.] Could you just review the ages of the different EVP's and Senior VP's and has anyone been designated COO?

Just before Wayne answers. John, I take it very personally, the way you phrased that question! [Laughter] And you will note, that they had to move four people up to replace me. Okay?

Pierre, you've got so much money that I don't worry about you! [laughter]

Thank you, John. You don't have to advertise it! Actually the -- I don't know if anybody really looked. I was worried about when this announcement went out, whether people would start shorting the airlines, thinking that Pierre wasn't going to be flying quite as much next year. But I think -- I'm 62 years old, John. And so, we're working through this, but I've always said that I'd -- as long as my health is good and the Board will put up with me, my intention would be to work to the normal retirement age, which I guess would be 65. But we take that a year at a time. But in all reality, I fully intend to do that.

If it I suddenly leave earlier, you will know that something happened. I think when you look at the team we've put in place and I don't have the -- I don't have the 10-K in front of me, but I will do it a little bit by -- Dick O'Brien is 51 -- 52. Tom Enos is 55. Britt Banks is a teenager. David Harquail, I think, is 48. 49? 48. Steve Enders is 52. And Darla would be very upset. She's not in the room and I don't want it reported that I reported her age, but I think she's in the general range of the other people that were named.

Thank you.

And the next question from Michael Fowler, Desjardins Securities.

Yes, I was wondering about the -- in the cash flow statement under Investing Activities, there's some quite nice swings, in terms of investments in marketable debt and equity securities and proceeds from the sale of marketable debt and securities, et cetera, et cetera. I wondered if you could explain what is going on there? I understand, Pierre, that you've been selling and buying but if you could be a bit more specific?

Mike, Russ Ball. That is a peculiarity of U.S. GAAP. What we have there is our surface cash is invested in marketable debt securities mainly. And the GAAP requirement is that if the tenure of that investment is longer than 90 days, you have to reflect both the investing and the subsequent redemption of that as an inflow and outflow in the cash flow in the investment activity section. So, when you see that big movement -- and I'm looking at the nine months in the earnings release, you will see there investments in marketable debt and equity securities of $1.4 billion and proceeds from the sale of marketable debt and equity securities of $1.9. All that is, in effects Mike, is that's moving cash, around, surface cash, to generate the highest investment yield.

Okay. I got that, Russ. Thanks. And the acquisitions there of, what, $348 and proceeds from sale of assets, that's Newmont capital?

Exactly. The $348 is the year-to-date number and that's our own interest in Boddington and as Pierre mentioned, the FALC JV. And then there's a little bit else in there, we subscribe to a couple of placements but nothing of any significant other than those two.

Okay. Thanks. The second question here is probably more of in terms of the costs going forward, with some of these projects coming onstream, do you think, Wayne, that you could actually contain those -- your costs have been going up quite dramatically, with new sources of production. Do you think you can actually keep the costs around where they are right now with the addition of the Boddington team and all the other developments?

Well of course, that's something that we're working very hard to do. Over the longer term, obviously, bringing in newer mines that are replacing the older, depleted mines helps. But the reality is we've been going through a period, while our costs have gone up, the whole industry cost curve has changed. And we're roughly in line, maybe even if slightly down, a little better.

The big issue that affects us is that we had the very low costs at Yanacocha. As as that mine matured and the change in mix, it's a smaller piece of the total pie. And so, that's something that's a little unique to our circumstance. But we're working through our business plan for next year and when we're ready to put out the guidance, we will, but it's -- I can tell you it's something that the management team is spending an incredible amount of time on -- at. So, it's an item that is of active discussion, as you can imagine with our Board of Directors. But the world has changed and with where energy costs are and all the other consumables and the shortages of labor globally in the trades, it's a very different world today.

So, we expect to continue to be very competitive, vis-a-vis the industry and bringing on new generations of mines is part of that strategy.

Well, just as a general comment -- is -- are all these projects that are coming on onstream, would they have cash costs, which are less than what you have, say, reported today?

It's -- we have said that all of them would have cash costs that should be more competitive to the industry average. But I think you've got to look to what's happening in the costs that we can't control. And that's primarily the commodities. So, we expect to be very competitive vis-a-vis the industry. And I think you have to take a view on where you think those costs will be. Because there is just too many inputs in that. But when we look at the mines we're building, Boddington, very long life.

We think there's tremendous upside potential as we start to get into a next wave of drilling there. Leeville has been tough to start up but we've always said, once we get down there, we expect to find a lot more ounces and we expect to see some better grades. And we've had indications that would say that that's our expectations will be met there. So, we're in a business that has taken a step change in its cost structure. And I think if you just look at the report this year, the whole fields, that you can see that across the whole industry.

So, if it sounds like I'm dancing a little bit, it's because I am tapping my shoes here because until we really do see energy costs flatten out, we really do see the labor situation improve in the trades globally, it's hard to say where the costs are going to be. But that being said, we've been able to see expanding margins and expect to see that continue on as we go forward.

Okay, very good, Wayne. And just a quick one for Pierre. I think when you said the downside on the gold price was -- I think you said $20 to $30 but it was kind of muffled at that time. Is that what you were saying?

That's correct, Michael. And let me just add something on -- you made a statement that our costs had gone up dramatically. That is so, but Gold Field Mineral Services just came out recently with their half-year costs for the industry average and that number is $306. And let me point out that that number is 75% higher than the industry average five years ago. So, what you're seeing is an industry-wide phenomena. And when you look at AngloGold, that reported yesterday, their numbers were $311.

And I think when you look at the other competitors that have more than one mine, the average for this year is very likely to be between $305 and $310 an ounce. And that's where the industry is going. So, we're still very competitive but less so than we were two or three years ago, when we had the advantage of a strong dollar vis-a-vis other currencies.

Now, the dollar is sliding back and it's hurting us. But the industry is converging and we're all doing, I'm sure that our competitors are doing the same thing we're doing, working very hard to keep those costs in check. And I think that it is a step function, every sort of like five, 10, 20 years, you see a step up and then they stay there for 10 years or so. And I think we are going to get there within the next 12 to 18 months.

Thank you very much.

[OPERATOR INSTRUCTIONS] And we have a question from Mr. Don MacLean of Paradigm Capital.

Good afternoon, guys. This one is for Pierre and Dave Harquail. Congratulations and good luck to both of you for your changes just announced. Newmont Capital certainly has had an outstanding performance. I was wondering if you could characterize a couple of other acorns that you planted a while ago, the Miramar and the Gabriel. Both of those investments have probably tripled in value, it looks like, since you invested. But yet, they would represent maybe 20% of current production levels if you ended up owning both of them. Could you just characterize the strategic nature of those investments?

Well, they are exactly what you called them, strategic investments. And, the role of Newmont Capital from day one was to basically find acorns and plant them and water them and help the management to grow them and if we do not -- if it -- the acorn doesn't fit our profile, we sell them. That's what we did with black gold. Or we harvested that investment. And the other ones, they've grown, they've done very well. They've done everything we had expected them to do so far. And you will just have to wait and see what we do with them. But we're very pleased and we continue to -- we're not going to talk too much about our future investment because what we're finding is that too many people are following what we're doing. And so you may see some numbers going in the statement and not see an explanation for them. We're going to keep our acorn a little in the shade for the time being. But we are going to continue to do so.

Thanks. That's the sign of a good portfolio manager, people following you.

Well, we're very pleased. It's done extremely well. We're very high on the Shore JV. We think that it is something very unique. It's in Saskatchewan. It's in Canada. A great place. And we're very high on this one. But I got to say that [Allen Hill] has done an exceptional job with Gabriel. We're tickled pink by what he's done. He's done a great job. And Miramar, the same thing. So, we're very pleased with the entire profile. And of course, the Canadian oil sands, I can't talk enough about it, we have over $0.5 billion capital gains unrealized, of course, but it's very nice to see that.

Thank you.

And the next question from Mr. Oscar Cabrera of Goldman Sachs.

Good afternoon, guys. Congratulations to all people making moves sideways or upwards. Just related to the costs in Ahafo. Your press release indicates that you're expecting higher costs in 2007. Just wanted to see if you could give us a little bit more color in terms of the size of the increase, now that this year the expectation is between $216 and $219 an ounce? I was just trying to -- for modeling purposes, trying to assess what the impact of higher diesel or less power costs will be next year. That's one. And then I will have another one with respect to Yanacocha.

Oscar, it's Dick O'Brien. With respect to the first question on Ahafo, we're not prepared to give further guidance than what we did today, which is just to indicate that future power costs is still a situation we don't fully understand, with the impacts of that costs and costs of our replacement power. And it's still a mine in start-up. So, we still have other things that are in flux. And when we come with our production and costs estimates for 2007, we will be very clear about what you should put in your model. I certainly understand why you would want that today, but we're just not in a position to do that today.

Okay. And then I wondered if you could comment -- [Buena Ventura] in their conference call yesterday, said that they expect Yanacocha to produce 1.6 million ounces of gold at approximately $300 to $320 an ounce. Would you be able to corroborate those figures or comment on that at all?

With respect to the cost and production for Yanacocha, we have indicated in our 10-Q's previously that we think production on a consolidated basis is about 1.6 million ounces a year. So, we can corroborate the first one with respect to costs for 2007. We've indicated where we think the general indication is on costs on average over the next four or five years. Again, I don't have a number that I'm comfortable giving you for guidance for 2007 CAS at this point.

Fair enough. Thanks very much.

Okay. Thanks, everybody. I think that's it. If you have any questions, we're here, give us a call.

Today's conference is concluded. You may disconnect at this time.