紐蒙特黃金公司 (NEM) 2007 Q1 法說會逐字稿

We'd like to welcome everyone to the Newmont Mining Corporation's first quarter earnings conference call. (OPERATOR INSTRUCTIONS)

Now it is my pleasure to introduce your first speaker today, Mr. Randy Engel, Vice President of Planning and Investor Relations. Thank you, sir, you may begin.

Thank you, operator. Good afternoon, everybody. Thanks for joining us on Newmont's first quarter 2007 earnings call. Which is being simulcast with our presentation today on our website at www.Newmont.com. On the call today we have Wayne Murdy, our Chairman and Chief Executive Officer; Richard O'Brien, our President and Chief Financial Officer; Tom Enos, our Executive Vice President of Operations; and Steve Enders, our Senior Vice President of Exploration.

During the call today, Wayne will review our first quarter operating and financial performance and Dick will review our regional operating results, outlook, and project development efforts. Steve Enders will also give an update on the regional exploration program and Tom Enos will provide an update on some of our efforts in Nevada. Before we get started, please remember that we will be discussing forward-looking information, which involves risks that are unique to our industry and that are described in detail in our filings with the SEC. And with that I'd like to turn the call now over to Wayne Murdy, our Chairman and Chief Executive Officer.

Thank you, Randy and good afternoon, everyone. With our gold sales of 1.3 million equity ounces in the quarter, which were in line with our plans and expectation, however, our operating costs were higher than anticipated as a result of start-up challenges that we saw come to a head this quarter at the Phoenix mine in Nevada. Disproportionately higher waste removal in the first part of the year and adverse changes in the Australian dollar. As a result of our operating cost pressures in Nevada and Australia our net income was $68 million, down from last year's first quarter results of $209 million.

Gold sales were consistent with our plans in each region, with Nevada, Peru, Australia, Ghana, and Indonesia all producing as expected. Yanacocha and Ghana also had better than anticipated cost performance while Nevada experienced the challenges with the Phoenix project and Australia was hurt by the Australian dollar strengthening. When we isolate the $11 per ounce impacts of Phoenix on a companywide basis, the $6 per ounce adverse impact on a per-ounce basis of the Australian dollar and the $7 per-ounce impact of stripping at Batu Hijau, our remaining operating costs amount to $397 per ounce.

While we expect the second quarter to also be challenging, we expect the second half of the year to see positive impacts and increased production. We expect the waste removal costs to decline in the second half of the year. We expect to be able to resolve the metallurgical issues at Phoenix and hopefully have better performance there in the second half of the year. But as we will talk, there are some risks around that. The balance of Nevada is operating within our plans.

To oversee our efforts at Phoenix and Nevada, as well as the operational and financial performance of the Company going forward, we've appointed Dick O'Brien as President and Chief Financial Officer of the Company. As many of you know, before joining Newmont in 2005 as our Chief Financial Officer, Dick served as a senior executive at AGL Resources but actually spent the vast majority of his career at Pacific Corp. With over 20 years of experience in the energy, power, and natural resource business, Dick brings operational and financial discipline as well as leadership to our management team.

For the full year, we are maintaining our guidance of 5.2 to 5.6 million ounces of sales and 210 to 230 million equity pounds of sales from Batu Hijau. We also are maintaining our guidance for costs of between 375 to $400 per ounce for the year. However, there are 375 to $400 per ounce for the year. However, there are risks associated that -- to that as we shake out the issues at Phoenix and as we address the -- or as we see what happens with the Australian dollar. We will discuss most -- both of those in more detail as this call goes on. With that, now I'd like to turn it over to Dick to review our regional operating performance and outlook.

Thanks, Wayne. As you pointed out, our quarterly gold sales were in line with our plans, although our operating costs were higher than anticipated. Our equity gold sales in Nevada increased by 15% in the first quarter, compared against the year-ago quarter, with the commencement of commercial production at Leeville in Phoenix in October of last year. Total ore mined in Nevada increased to 11 million tons in the quarter from $9 million in the prior year quarter with the contributions, again, from Phoenix and Leeville. Mill ore gride decreased by 28%, however, with the processing of lower grade ore from Phoenix. The ore placed on leach pads decreased by 49% from the prior year quarter, as a result of the completion of mining at Lone Tree in 2006. Stockpile milling at the Lone Tree processing facilities is expected to continue throughout the remainder of 2007. Given the impact of Phoenix on this quarter, Tom Enos is going to cover some of the challenges and opportunities we have there.

Thanks, Dick. Phoenix optimization remains the primary risk factor, influencing our gold sales and operating cost outlook in Nevada for the year. During the quarter, we experienced lower-than-expected ore grade at Phoenix, with tailings line restrictions. Harder than anticipated ore. And lower mill recovery, all complicating our start-up efforts there. We continue to evaluate solutions to address the metallurgical and start-up challenges we are experiencing at Phoenix, much of which is related to the oxide and transitional orders.

At Phoenix, it's a bit of a different ore body there in that we have an oxide copper cap overlying the ore body. So, when we speak of transition ore, it's the transition between that oxide copper cap and the clean sulfide material. We do know that when the plant operates on -- on the clean sulfide material, we get the anticipated recovery and throughput that we've put in the budget. Again, Phoenix has a long line -- a of mine life of over 26 years. And we believe that the efforts that were started with the start-up of Phoenix in October and have continued on through this first quarter, we will have production where it needs to be and the -- the metallurgical solution to Phoenix in this first quarter.

Thanks for that, Tom. As Tom described, primarily as a result of our start-up challenges and lower byproduct credits at Phoenix, our operating costs in Nevada increased 25% from the prior year quarter, from 395 to 493 per ounce. Waste removal costs increased due to accelerated mining at Pete, Gold Quarry, and Twin Creeks. Underground mining contracts also increased at Leeville and Carlin East. Ongoing labor and input commodity cost escalation continues to impact operating costs in Nevada. We continue to expect equity gold sales in Nevada of approximately 2.35 to 2.55 million ounces for 2007.

We remain encouraged by our results at Twin Creeks and at Leeville for the rest of the year. At Leeville, we are currently producing in the 1800 to 2,000-ton per day range and we remain on track for production in the 3200 tons per day range by year-end. We also expect the back fill plant construction to be completed later in this quarter at Leeville. Costs applicable to sales were approximately 375 to 400 per ounce, are also expected, provided that the current oxide and transitional ore issues at Phoenix are solved as mitigated.

We expected contracted -- we expect contractor costs to decrease for the remainder of the year as we deploy Newmont employees throughout our operations. If ongoing challenges at Phoenix continue, we could see operating costs increase to the upper end or even above our expected range for the year. On the upside, potentially higher grades improving throughputs and increasing recoveries at Leeville and Twin Creeks, could provide offsetting cost opportunities in 2007. We also continue to expect Nevada's capital spending to be between 560 and $630 million for the year. Primarily focused on the construction of the power plant, mine equipment replacement and sustaining development depreciation. Construction of our 200-megawatt coal-fired power plant was approximately 55% complete at the end of the first quarter of 2007 and the plant remains on target for completion in 2008. We anticipate the total capital costs of the power plant to be between 620 and $640 million with expected operating cost savings across Nevada of up to $25 per ounce from lower cost, self-generated power.

Turning to Peru, our equity gold sales at Yanacocha decreased during the first quarter of the year to 234,000 ounces from 395,000 in last year's quarter. Ore mined and placed on the Leach pads decreased from 31 million tons during the first quarter of last year to 16.5 million tons in in the first quarter of this year, as Yanacocha moves into the deeper, lower grade transitional ore phase of its mine life. Consistent with this shift, the amount of waste material mined increased to 30 million tons from 19 million tons in the prior year quarter. Including the first quarter results, we continue to expect equity gold sales between 775,000 and 825,000 ounces for 2007.

Higher than anticipated gold sales during the first quarter of 2007 resulted from the sale of inventory from year-end. Yanacocha's gold sales for the remainder of the year could be adversely impacted by a potentially higher waste removal rates and lower ore grades. On the upside, opportunities exist for inventory reduction and increased recoveries at the [La Queenila] and [Kuchero] deposits. Costs applicable to sales per ounce increased in the first quarter of 2007 to $310 per ounce from $161 per ounce in the year ago quarter. Primarily due to the higher waste removal and lower production associated with Yanacocha's move into transitional ores.

Labor inflation also continues to pressure our operating costs in Peru. Consumption of fuel, cyanide chemicals and reagents decreased from the year-ago quarter as the volume of tons mined and placed on Leach pads declined. We continue to expect costs applicable to sales of approximately 340 to $360 per ounce for the full year at Yanacocha. Capital spending is expected to be between approximately 310 and $340 million for 2007. Construction of the gold mill was approximately 56% complete at the end of the first quarter of 2007 with progress continuing as expected. Final costs for the gold mill are projected between 250 and $270 million with commercial production anticipated by mid-2008. Once complete, the gold mill is expected to enhance the processing efficiency of complex transitional ores, improved financial returns, and extend the operating life of Yanacocha.

Turning to Australia and New Zealand, our gold sales remained essentially unchanged in the first quarter of the year, compared with the year-ago quarter. Lower production was essentially offset by the sale of gold and inventory. Gold sales at Kalgoorlie were constant from the first quarter of last year as increased inventory sales at Kalgoorlie offset low production due to poor weather conditions and limited shovel availability. Gold sold at Tanami increased 5% during the first quarter of 2007, compared with last year, due to inventory sales and 4% higher mill ore grade. However, mill throughput at Tanami decreased by roughly 10% due to unplanned mill maintenance. Gold sales at Jundee were also stable from last year's first quarter to this year, as a result of higher inventory sales and a 7% increase in mill ore grade, offset by decreased mill throughput as a result of ball mill maintenance.

At Martha, gold sales decreased by 62% in the first quarter of the year, resulting from the planned milling suspension related to underground mine development at Favona. Gold sales at Pajingo increased 50% in the first quarter of the year as mill throughput and mill ore grade both increased with improving mining and in ground conditions. Incorporating first quarter results, we continue to expect equity gold sales in the Australia/New Zealand region of between 1.275 and 1.325 million ounces for 2007. Costs applicable to sales per ounce increased during the first quarter in the region by 35% from the year-ago quarter, primarily as a function of lower production, higher input costs and adverse movements in the Australian dollar exchange rate.

The strengthening of the Australian dollar increased costs applicable to sales in the region by roughly $26 per ounce from the prior year quarter. Operating costs at Kalgoorlie increased approximately 32% as a result of lower gold production. At Tanami, unit operating costs increased 27% as a result of higher ore hauling charges and longer hauling distances as well as increased royalties due to higher gold price.

Costs applicable to sales per ounce increased 37% at Jundee as a result of higher maintenance, electricity costs, and drilling and technical services charges. At Martha in New Zealand, costs applicable to sales per ounce were higher due to lower production and the planned transition to underground operations. We continue to expect costs applicable to sales of approximately 445 to $470 per ounce in the Australia, New Zealand region. Provided that the Australian dollar exchange rate for the full year averages 77 or below.

Unfavorable changes in the Australian dollar exchange rate could result in operating costs for the region outside of the expected range for the full year as a significant portion of costs in the region are Australian dollar denominated. The region's operating costs this year are expected to change by about 5 to $6 per ounce for every $0.01 move in the Australian dollar exchange rate. On the capital front, spending for the full year in Australia is expected to be approximately 580 to $645 million. Our capital expenditures in the region are expected to change by roughly $8 million for every $0.01 move in the Australian dollar exchange rate above $0.75.

Capital investments in the region for the rest of the year will focus on the development of Boddington, which remains on schedule and is approximately 33% complete. Start-up at Boddington is expected in late 2008 or early 2009 with Newmont's share the expected capital, expected to be approximately 0.9 to 1.1 billion.

Moving to Indonesia, copper and gold sales at Batu Hijau increased by 12% and 15% respectively in the first quarter of the year. Compared with the prior year quarter. Total ore mine increased by 6% from the prior year quarter, due to the addition of 26 haul trucks and a loading shovel. The waste to ore ratio at Batu Hijau increased to approximately 40 to 1 in the first quarter, up from roughly 1 to 1 in the prior year quarter, to provide access to higher grade material later in the year. Mill throughput increased by 11% from the prior year quarter with an increase in stockpile fees.

Incorporating first quarter results, the Company continues to expect equity gold and copper sales of between 230,000 and 250,000 ounces of gold and between 210 and 230 million pounds of copper for the year. Higher grade and throughput opportunities exist for the remainder of 2007 with financial results enhanced by the completion of the copper hedges. Total costs applicable to sales increased by $76 million from the year ago quarter. Costs applicable to sales increased by $58 million from the year-ago quarter due to an increase in waste material mined and the processing of stockpiling ore from prior years. Costs applicable to sales also increased by $7 million from the prior year quarter due to higher melt throughput and stockpile rehandling costs.

Increasing labor and input commodity prices continue to impact costs as well as increasing selling expenses and royalties due to higher averaged realized prices for both gold and copper. We continue to expect costs applicable to sales of approximately 225 to 240 per ounce of gold and $1.10 to $1.20 per pound of copper for the full year. Fuel waste tons are expected to be mined during the remainder of 2007, resulting in lower costs applicable to sales per ounce for the rest of the year. And as we've indicated before, the change to deferred stripping will continue to impact the expense quarter-to-quarter in our income statement related to the treatment of stripping.

Additionally, the average realized copper price increased 32% to $2.74 per pound from $2.08 per pound in the previous year quarter. As the last remaining copper hedge contracts matured in February of this year. Average realized copper price will continue to be enhanced by the delivery of all copper hedges for the remainder of the year. We continue to expect capital spending for the full year of approximately 140 to $150 million with a focus on sustaining mine development. At Ahafo in Ghana, we sold 125,000 ounces of gold in the first quarter of 2007 with mill throughput and gold production in line with our expectations for the operation. Our ore mill grade at 0.063 ounces per ton was higher than expected during the first quarter of 2007. Incorporating the first quarter results, we continue to expect gold sales between 410,000 and 450,000 ounces in 2007.

Higher ore grades during the first quarter of 2007 may provide grade reconciliation opportunities for the remainder of 2007. Generators are currently being commissioned at Ahafo, allowing the plant to operate while meeting the government's power shedding requirements. An additional 80-megawatt power plant is under construction in Ghana with completion anticipated during the third quarter. Newmont will have a 25% share in the power supply from this plant. As a result of the mining industry's initiative to install this power plant, the Canadian government has agreed to distribute available power proportionately between participating mines and the public. The Company currently anticipates generating roughly 1/3 of Ahafo's power needs from this plant with the remainder coming from the Ghanaian power group. Ahafo's costs applicable to sales were $341 per ounce for the first quarter of 2007. Lower-than-expected due to higher ore grades and lower than anticipated power generation charges.

We continue to expect costs applicable to sales of approximately 460 to 500 per ounce for the full year, lower than anticipated power charges and higher than expected mill grades could result in costs applicable to sales in the lower end of the expected range, if sustained through the remainder of the year. Capital expenditures for the full year expected to be between approximately 180 and $200 million. Capital projects in Ghana are targeted for power generation solutions, mine development and mine optimization initiatives as well as the continued evaluation of the Akyem project. With that, I am going to turn it over to Steve Enders to give you an exploration update.

Thanks, Dick. Exploration expenditures for the first quarter of '07 were $40 million compared with $33 million in the prior year quarter. Near mine expenditures in the first quarter were $21 million, which is consistent with what we did last year at $22 million. And Greenfield expenditures in the first quarter of '07 were up over last year at $10 million compared to $8 million in the first quarter of 2006.

For 2007, the Company's exploration budget anticipates approximately 170 to $175 million of expenditures with roughly 55% focused on near-mine activities, 20% focused on Greenfield's initiatives, and the remaining roughly split between our involvement in diamonds with Shore Gold in Canada, follow-up opportunity funds for success and for technical support. Exploration in North America is primarily focused on near mine programs in Nevada at the Carlin Trend, in the Battle Mountain Eureka trend and the Northern Nevada rift. Exploration drilling for oxide gold targets east of Gold Quarry, intersected mineralization between 50 to 70-meters at 0.5 to 2 grams per ton. And we had positive results from drilling underground exploration targets in Nevada, also, at Turf and Exodus.

Drilling at the full house target, which is east of the Carlin underground mine, also intersected mineralization in an apparent extension of the main ore body. And drill results of the Twin Creeks area and at the Buffalo Valley joint venture identified encouraging oxide gold mineralization, so, all in all, it's a very positive story for us in Nevada. Exploration in South America is focused on near mine programs at Yanacocha in Peru, as well as Greenfield projects in the Ghana Shield, particularly in Surinam, as well as the Andes and Peru.

Drilling in Yanacocha, along the edge of the Maqui Maqui pit, intersected a sulfide mineralization that has 73-meters at 10.5 grams per ton of gold and 0.69% copper. And other drill holes in the district identified extensions of oxide and transitional mineralization. On district exploration and development at Yanacocha, progressing on sulfide targets at Yanacocha, Chaquicocha, and Conga, with results pending. Development drilling at Boddington is proceeding with eight drill rigs currently on-site today and they're targeting the conversion of nonreserve material to reserves and this is a multiyear -- a multiyear program. Intercepts beneath and adjacent to the reserve that we've recently received are things like 116-meters at 0.9 grams per ton and higher grades like 32 meters at 3.7 grams per ton. Ongoing pit dewatering at Boddington will allow access to future drill sites at Boddington in favorable locations and this is an upside for the program. Deep drilling for extensions of the Wilson chute at the Kelly deposit in the Tanami intersected visible gold at 2,000-meters. It's early in the year but we're encouraged with our exploration results so far. Wayne, back to you.

Thank you very much, Steve. In summary, then, I'd just like to comment that, we remain on track for expected gold and copper sales this year. As we've gone through the last several years, this is a -- the bottom of the trough and we expect to see growth in our sales and production over the succeeding years, 2008 and 2009. Capital expenditures for the first quarter were at $362 million companywide, in line with our program as we build new mines with strong exploration potential.

We are addressing the operating cost challenges. And while the first quarter was clearly disappointing from an earnings standpoint, we feel confident that the second half of the year will see strong improvements in this area. We have a balanced portfolio with the strong liquid balance sheet and institutional quality investment. We are out of the hedges at Batu Hijau and so we -- with the strong copper price we've seen recently, we should see substantially-improved performance at Batu Hijau through the balance of the year. The stripping that we did in the first quarter gives us some great opportunities for the balance of the year. With that, I think I'd like to turn it over to questions and operator, if you want to proceed with that, we'll answer those questions.

Thank you, sir. (OPERATOR INSTRUCTIONS) Our first question comes from Mr. John Hill, sir, your line is open.

Very good. Thank you for the presentation and congratulations to Richard on his appointment. I was wondering if we could just talk about Phoenix a little bit more. Many of us have visited this property a lot of times over the years and we've heard a lot of different stories. Hard ore or too soft, too much copper, not enough gold, multiple concentrates, primary crushers too small. What's the story and how much confidence should we have that we are going to be able to hit those targets towards the back end of the year?

Tom?

I think you pretty well covered it. Those -- those are the issues. And what we've been doing is putting a new model together to address those. Brant Hinze is also on the line. Brant, you may want to add to that?

Yes, and I think, from the metallurgical issues that you brought up, what we're doing, as well, too, is we're doing a complete review of the metallurgy not only the oxide in transition, but also the primary sulfide ores, as well, so that we can confirm what we have and understand what we need to do to deal with those. We should have that information back. I think as Wayne mentioned, about mid-year.

Great. Thanks for that. And then any further thoughts on the trade-off between Ahafo and Akyem as we look forward? It sounds like things are clearly going somewhat better in Ahafo and just wondering how the thought process is evolving?

Again, we're going back through and relooking at our costs structure at Akyem. And in light of the power issues with Ghana, we're going slower there. Probably in the short-term, the best opportunities, the best returns, are expansions at Ahafo itself. Ahafo, we continue to have tremendous drilling results there. We see better grades and so for incremental dollars spent, that's probably the better -- the better place to be spending our money and then as the power issues get resolved in Ghana, we will be in a position to move forward with the Akyem project. The Akyem project is a good project. There is a lot of ounces there, but, again, you're building Greenfield's mine. In today's world, it's much easier to do a -- to do an expansion of Ahafo as opposed to Greenfields. We will be cautious until we're satisfied that those power issues are really resolved.

Great perspective. Thanks, Wayne. Thank you very much.

Our next question comes from Mr. Oscar Cabrera of Goldman Sachs. Sir, your line is open.

Thank you. Good afternoon, gentlemen. Just got a couple of quick questions. I guess the first one has to do with Peru. We've been hearing about this official strike, I guess, the news has been coming out of the country have a few of the mining companies or Unions organizing marches, specific everything is supposed to be just raise awareness of wages and working conditions, et cetera. But just want to get your perspective from that. How do you, are you thinking about that? And then secondly, in terms of level, is that, -- the throughput is increasing and that's great, but could you comment also on the grade that you're seeing and your expectations for the balance of the year? Thank you.

Okay. All right, Randy, do you want to?

Yes, hey, Oscar, it's Randy. On the -- on the Peru front, yes, we've certainly been watching the press, as well, coming out of there with respect to the threatened national strike. Similar to last year, we believe that we are certainly in a better position under the current administration and with the support that we have in the local population there. We are keeping an eye on it. At this point we don't have -- we don't have anything definitive to offer. As far as the -- the potential disruptions that have been mentioned there, but Oscar, we'll certainly be keeping you and the rest of the market informed if that starts to take a turn for the worst. And then can you repeat the second part of your question?

In terms of, again, you know, we visited -- we visited Nevada with you guys and able to have improved significantly in terms of throughput and in terms of how the operation as a whole was looking? Just curious in terms of the grades. I know that the throughput is improving. But I'm just wondering what type of grade you're expecting? I should be looking at reserve, a closed reserve, a little over reserve grade -- if you just can give us color on that, that would be great.

I think, Oscar, what we're seeing there, obviously with the mill at Phoenix, we're operating -- we are milling lower grade material and the whole economics of that was driven by both the copper recovery, which has been part of the big disappointment in the first -- in the first quarter, so, that has an impact on the overall grades you're seeing out there. But, again, we've been having good results with the grades that we're seeing at -- at Leeville and continue to see the expansion opportunities there I think as was mentioned with Steve. We see turf extensions that could be very attractive. So we're not significantly outside of reserve grades and don't expect to be there.

Okay. Thank you very much.

Our next question comes from Mr. Victor Flores of HSBC. Sir, your line is open.

Yes, thanks. Good afternoon. I was hoping you could elaborate for us how the tonnage and grade will evolve at Yanacocha this year? And more importantly into next year, as the mill is brought online. I can understand that grades are coming down for a number of reasons, but it looks like tonnage placed on the pad has come down, as well. And I'd like to understand whether there's a specific technical reason for that or whether this is in anticipation of the mill coming on for next year.

Victor, there are two things, I guess from a grade standpoint, pardon me, two things from a grade standpoint. Clearly we are into lower grade material than we were producing in past years. So, you're going to see that also reflected on the pads. But further to that, is the strip ratio has gone up. So, we're moving the same amount of material that we did in prior years, but unfortunately less of that is ore. As you look out over the next couple of years, we do, in fact, see some improvement in -- in ore grade next year and the year after. Some of that will clearly be influenced as the mill comes up next year because obviously we'll be going after that higher grade oxide material and seeing recoveries at the 90% level as opposed to 65, 70% level.

Great. Thank you. Thank you very much.

Our next question comes from John Tumazos of Prudential. Sir, your line is open.

Tracking this to Tom and Brad, I think I recall from the Phoenix tour last September that there's a good sized oxide Leach copper resource -- I don't remember if it's 0.5 billion or 1 billion pounds. And I can sympathize with the difficulty of putting oxide in transition ores through the sulfide mill. Is it in any way viable to stockpile the nonsulfide materials so as to let the mill run on what it's intended? I know God put the oxide cap on top.

John, that's exactly what we're attempting to do, as well as get a -- an oxide copper Leach facility permitted. Which we are currently working on with the BLM. Within our plan of operations it was -- it was defined and right now the decision is whether or not we're going to have to do a full blown EIS or just an environmental assessment. So, within the next -- within this quarter, we will have a decision regarding that. We can start planning based on whether we've got to do a full EIS or an EA because there is a huge difference there in terms of the amount of time it takes to get through the process.

Is the ore oxide copper for most of the revenue? Or is most of the revenue oxide gold? In this oxide caps transition area?

The revenue has been gold and part of the problem is we have not been able to either hit the throughput and we're not getting the copper recoveries because it's oxide copper and so we don't get the byproduct credit that was originally budgeted as we've gone through this material. We've just hit more of this oxide copper than we anticipated.

And forgive me if I can ask one more question. Can you describe the variations in reagent consumption from plan as the metallurgical type is slightly different than expected?

Brant, you want to take that one?

Yes, I can. Obviously as we continue to change and optimize our blend going into the mill, until we get to a larger blend of the primary sulfide ores, we continue to see some of the higher consumption, you know, particularly in lime. We did have to add additional capacity to offset the need for additional lines. So, we do see additional reagent consumption as a result of the current blend that we have going through the mill, but attempts are continuing to optimize that blend.

What's the cyanide use like? 2 pounds per ton? 4 pounds?

I don't have that figure at hand, but we can certainly get it to you.

Yes, John, it's Randy. I will follow up on that.

Thank you.

Our next question comes from Patrick Chidley of BJM. Your line is open, sir.

Good afternoon. Just a couple of questions. Firstly, back to Phoenix, I'm afraid, I just wanted to maybe ask if you could -- could you give us some more detailed breakdown of what the production specifics were, in terms of tons throughput and grades and recoveries for copper and gold per quarter?

Patrick, we really couldn't hear you. It was breaking up significantly. I think the question -- maybe I can rephrase it, is some more detail on the operating stats at Phoenix?

Yes, that's right.

Patrick, it's Randy. We can provide some of that, in fact, what we can do for the people on the call is we can give a bit more of that detail and post that on our website but that's not something that we have the resolution of at this call.

Okay, thanks, that would be great. And second question, just at Batu Hijau, the strip ratio, 41 to 1 in the first quarter, is that -- could you give us an idea of what it's going to be in the next few quarters?

Patrick, I'll just rephrase it to make sure we got the question right. The 40 to 1 strip ratio, what we expect that to be for the remainder of the year?

That's correct.

We're at about, if memory serves, Patrick, about a 4 to 1 for the year.

Including the effect of the first quarter?

And you've got to remember we've spoken to this before, the seasonality at Batu, where in the wet season, which we're in now, we're generally at the top of the deposits and doing the stripping that sets us up for the late second and third quarter, when we're in the dry season and we get into the bottom.

Okay. Right, got it. And then final question on Ahafo, with respect to the power costs, do I understand correctly you're going to be moving to a generator for the next sort of two quarters, which will have higher costs and that for you, still forecasting cash costs between 450 and 500 an ounce for the year.

Patrick, this is -- the -- that is correct. What we're looking at is more self-generating in the second and third quarter than we saw in the first quarter. So, we will see an increase in the cost for generation but we don't see that trending as high as we had originally projected.

So you're being fairly conservative in terms of your call on the remaining at 450 to 500 in cash or CAS for the whole year?

Yes, based on the information that we have and what we've projected, yes.

Okay. Thank you very much, guys.

Patrick, it's Russ again. Just to go back to the food stripping, because you raised a good point here, as you know, 1/1/06 we changed with EITF-04 production we no longer have the deferred stripping accounting.

Yes.

And what we saw in '06 is a little bit of the portfolio effect working for us. In some areas we're ahead. In some we're behind versus our life of mine stripping and intended to wash out. What we see in the first quarter was, without exception at the large pits, increased stripping, which if you go back and obviously it's a hypothetical exercise, but we did run the numbers. Our CAS would be about $55 million which translated into production, would have been about $17 an ounce less on gold and $0.30 a pound on copper if we had applied the old stripping accounting. So, we're making an investment in the future and a lot of that washes out this year, but, again, it's a function of the individual mine plans. So, we will see that benefit later in the year. Not all of it will come back in this year, so, it's a bit of a timing issue, but we spoke to increased volatility as a result of the deferred stripping accounting and treating those costs in inventory. Frankly, that's what we've seen in the first quarter. Whether it be in Nevada or at KCGM, or Batu Hijau or Yanacocha, for that matter. So, it is an interesting point and Randy and I have been talking about how we can get you guys more information on that so that you can model it a little better because it does have a significant impact on the bottom line.

Yes, that's a great idea. And I think I'd really appreciate it if you can maybe give us an idea of what the fluctuations in stripping would be going forward. There are all sorts of complications with accounting, but it would be good if we could get that.

Randy and I will work on that and get you guys something.

Thank you.

Our next question comes from David Gagliano of Credit Suisse.

I just wanted to come back to Ahafo for a second. Can you remind me again how much power you need at Ahafo to get up to full production?

David, this is Bill Zisch. We're right now operating about 26 megawatts and full production with our harder ore is about 32 megawatts.

So, then, presumably that means you will be at full production by Q3, then?

Right now we're able to run at full production because we're able to blend some softer ore at the average blend we would be needing about 32 megawatts.

Okay, fair enough. And then just quickly on Yanacocha, I just want to make sure I have it straight. It sounds to me, obviously you've got a mill coming on. You've got grades going higher. Is there any reason to expect production to be down at Yanacocha next year versus this year?

No. We were, in fact, we were at Yanacocha about six weeks weeks ago when we were looking at some of the latest forecasts. It's in line with guidance we've given, but we have some -- I think next year we will see a little better production. Not markedly better, but a little better production and you'll see better costs in the next year. This is our toughest year as we look out over the next several years.

Okay, great, thanks very much.

And Dave, just one other thing to add. We will start up at mill in the first quarter so we will see a gradual transition. We want to be at full production right out at the gate. You're not going to get a full year's benefit in '08 of that higher grade going through the mill.

Got it. Thanks.

Our next question comes from Mr. Barry Cooper of CIBC World Markets. Sir, your line is open.

Yes, a couple of things. First of all, Wayne, I don't think you mentioned it, but there was probably a joyous event there this week with the exoneration of Richard Ness. One of the things that he indicated in a -- in the interview, I guess, was expansion plans for Batu Hijau as sort of a -- I guess affirmation that the Company is not abandoning Indonesia. Just wondering if you could confirm those and, indeed, what some of the details would be for an expansion plan at Batu?

Thanks, Barry. Obviously there was a lot of joy around the Company. I can tell you that all of us here were on our Blackberries, starting about 7:00 Monday evening. It took the judges about two hours to read the opinion. It's a 260-page opinion. They took every issue and allegation that had been raised there and dealt with it, based on the evidence presented in the trial. So, clearly we've been nervous about how this would be handled, but I have to say we were very pleased in how the court handled itself. It was excruciatingly long, but we were able to put all the evidence in that we wanted to and they found 100% in our favor.

That being said, we have been quoted as saying that the outcome of the trial certainly would have an impact on future investment plans. But we are currently going through feasibility for the third sag mill at Batu Hijau. It's always been in our mine plan there that there would probably be a third sag mill that would be necessary because we're in to harder ore. So, to maintain production at the original levels, clearly with what has happened over the last couple of years, we had slowed that down. But we expect to be pretty good shape by the end of the year we're working with, (Inaudible) with our outside engineering firm and looking at financing alternatives with respect to that mill. So, that's a -- that's kind of step one.

Step two is obviously there's a big body of material about 60-kilometers to the East of Batu Hijau, at Elang. We've drilled it. It's low-grade copper bolt. But it looks like if we can use facilities at Batu, this could have a very significant long-term impact on the reserves and obviously the life of mine plan. Present time it doesn't look like we would do a stand-alone project there. But we continue to study it and we're going back in and doing some more drilling. But it would have huge long-term impacts. The other aspect of all of that that plays into it is under our contract of work, we have selldown provision. We've gone through and valued the asset, including a fairly significant value on that Elang project and we've offered the first piece of that to a, which was a 3% interest. We're seeing how that whole process works. And that obviously will impact our decision, too, but we have every reason to believe that that will be handled in an appropriate way and would allow us to go ahead and look at expansions there at Batu Hijau.

Wayne, when that offer that was put forth to the government for their percentage there, what parameters did you use for valuing the assets?

Well, basically -- why don't I turn it over to David Harquail because David was intimately involved in all of that, but it's -- it's a--.

Barry, there's been two offers there. There was an initial 3% and now we've offered the subsequent 7%. It's a negotiated valuation. We have to sit down with the government representatives and argue what the various inputs are. And as well, it was difficult on Elang because there's not a feasibility study per se on that project, so we were using valuations on a -- on a per pound basis for copper deposits. I'd say -- we haven't sat down on the second valuation yet, but you can imagine that our expectation is we will be able to use higher copper and gold price assumptions than we did for the initial 3%.

Okay, correct me if I'm wrong, was the figure $4.3 billion for basically 100% of your Indonesian assets, kind of the right number.

That's right, it's the right ballpark.

Okay. Okay. Then one question for Steve. I was just wondering if you could elaborate a little bit about your drilling at Cali. You indicated visible gold, but it's down there quite at depth. Can you give us idea of what kind of numbers you're talking about? Because VG, you can see it sometimes if the right conditions are present at relatively low grades and at 2-kilometers down, I don't know whether we should be getting excited or not?

I think you should be getting excited, Barry. Because what we see in Cali is the same style of mineralization and the same beds at depth in the system as we see up high where we're currently mining now. The reason we said we saw VG, visible gold, at 2,000-meters, we don't have the assays back on it yet otherwise I'd give you assay results. But in general, there's a high nugget effect there. There's great continuity in the system. So, we're actually very encouraged that the system extends at depth beyond the drilling that we have in place now and we're looking at taking some significant step outs on that system at depth later in the year.

Okay, thanks a lot for your answers.

And, Barry, part of a stage gate process, we are looking at a shaft at the Tanami. As you know, the hole is still coming out of the decline and one of the projects we have in the process is looking at and, quite frankly, the issue for us on that right now is where you would put it because of their result that Steve's been getting. It's a moving target. So, from our perspective, the longer term future, they will likely have a share.

Right. And I guess as I recall from being there a few years back, the dip in the mineralization is pretty critical where you stick the shaft because there will be a -- a tramming distance will be required there depending where you stick that shaft. Because the ore body will be getting away from you at some point in time in terms of distance from a vertical shaft.

You don't forget much, do you, Barry?

I try not to.

(OPERATOR INSTRUCTIONS) Our next question comes from Mr. John Bridges of JPMorgan. Sir, your line is open.

Hi, Wayne, everybody. Just wondered -- you mentioned there that you've increased your revolver, I just wondered if you could give us a comment on the strategy there.

Dick?

John, really, the strategy was take advantage of an attractive credit market and extend when you can at costs that are cheap with spreads that are good and remove a covenant. That was really the strategy. As you know, this year capital spending will outstrip operating cash flow. And we just want to make sure that we have an appropriate facility for the interim financing that we might need to take during the year and that we use the balance sheet appropriately for a longer term financing when, as, and if we need that. So really look at it as financial tactics to take advantage of a good market, protecting the balance sheet, making sure we have available liquidity and then looking for smart ways to use the capital going forward, if we find an opportunity in the marketplace to help us with our growth goal.

Okay, thanks and congratulations on the new job.

Thanks, John.

Okay, operator, with that, it looks like we are about out of time. We've got two minutes left. So, I think we do not have time for anymore questions. It's -- if anyone was not able to get through, please feel free to contact myself, Randy Engel, my contact information is at the end of the release. With that, Wayne, if you'd like to make any closing comments.

Thank you all for your attendance today and we look forward to getting out and meeting with as many of you as we can over the coming months. And we would expect by mid-year to be in a position to talk a little more definitively about the Phoenix issues. Thank you.

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