紐蒙特黃金公司 (NEM) 2007 Q2 法說會逐字稿

Welcome, everyone, to the Newmont Mining Corporation's second quarter earnings release conference call. We would like to inform all participants that your lines will be placed in a listen-only mode until the question and answer session. (OPERATOR INSTRUCTIONS). We would also like to inform you that this call is being recorded. If you have any objections to this, you may disconnect at this time.

It is now my pleasure to begin and to introduce the first speaker for today, Mr. Richard O'Brien, CEO and President. Thank you, sir you may begin.

Thank you very much, operator. Thank you everyone for joining us today on our second quarter conference call. With me today on our call are Russell Ball, our recently-appointed Senior Vice President and CFO, Brant Hinze, our Regional Vice President of North American Operations, and Randy Engel, our Senior Vice President of Strategy and Corporate Development. I'd also like to introduce today John Seaberg, who working with Randy, will head up our Investor Relations Group, going forward. Fell free to call John and his team with any questions you might have following our call today. Before I get started, I'm going to turn it over to John to make a few brief comments about our risks inherent in the material we're covering today.

Thanks, Dick. Before we get started, please remember that we'll be discussing forward-looking information involving risks that are unique to our industry as further described in our filings with the SEC.

Thanks, John. Now I'd like to start by outlining our path forward as we enter the next chapter of Newmont's storied history, a chapter that's focused on rebuilding Newmont's position as the gold company of choice for investors seeking leverage to rising goal prices.

Like many of our peers in the industry over the last few years, we have faced our share of challenges. We hold ourselves accountable to you to address these challenges decisively and systematically every day and in everything that we do. Over the past several months and since my appointment as CEO on July 1, we worked with our board to initiate a programmatic approach as the world's largest fully unhedged goal company. To renew our focus on and commitment to our core gold business and to improve our financial foundation. The actions are designed to quickly refocus our tale on rebuilding the world's premier gold mining company.

As we move forward, we also acknowledge that we have much work ahead, including stabilizing our cost profile, improving our operational performance, delivering on our existing projects and creating value from our investment prospects. This work will require consistency, commitment and execution in a very competitive environment and it will require that execution and commitment every day, day after day and every quarter. We know that our success will be measured incrementally, just as confidence will be earned through consistent delivery of results. And we're blessed here at Newmont with a rich foundation of legacy from which we can begin these efforts to rebuild Newmont as the gold company of choice for investors seeking leverage in a rising gold price environment.

Unlike our conference calls in the past, we won't be going through every detail of our quarterly results. These details are well covered in our earnings release, and in our 10-Q, which was filed earlier today. So all the numbers are transparent and what we want to do is add color on this call. To the extent that you have questions after the call regarding the details as I suggested, call John or Randy and they'll be happy to walk you through the results. Throughout today's call, you'll hear us talk about emphasizing accountability, focus, decisiveness and execution. Admittedly, these themes are not unique or complex and they're not intended to be. They're the basic building blocks and foundation of any renewal process. Our efforts to date have been executed from this foundation, starting with the divisive elimination of our hedge book, to refocus on our core gold business with the decision to monetize certain merchant banking assets and the successful execution of our $1.15 billion convertible debt issuance. While these measures represent a solid beginning to our renewed focus on our core gold business, I recognize and my team recognizes that we're only at the start of the race.

On that foundation, we turn our attention to aggressively managing costs, delivering consistent results in our operations and in our projects and our successful exploration endeavors. During today's call, I'll talk about each of those areas and more importantly how we intend to capitalize on those opportunities and address the risks in each of our operating regions. Specifically, our team is focused on a host of world class opportunities, including the development of our 9.1 million ounce gold deposit at the Boddington mine in Australia ,scheduled for completion late next year or early 2009. The continued ramp up over time of production at our high grade [Rigo] underground mine in Nevada, increasing grade and recovery opportunities this year at our Twin Creeks Mine in Nevada.

The completion of our power plant in Nevada by mid next year, generating up to $25 per ounce in cost savings throughout our operations in the state. The construction of our new gold mill in Peru by the middle of next year, increasing gold recovery from transitional ores at our Yanacocha operation, and our ongoing optimization of our internal portfolio of highly prospective projects, Including Conga in Peru, [Akyem] in Ghana, and [Nassau Chernow]. Our team also remains focused on addressing the challenges of Phoenix and Nevada. The challenges of power shortages in Ghana, and the challenges of recent adverse exchange rate movements in Australia.

As part of our renewal process, we recognize it's not sufficient to simply focus on our internal initiatives and internal projects. Therefore, I've asked the team to take a fresh look at exploration and growth opportunities across the globe. Re-evaluating prospects. Some prospects that we might have ignored or considered too small in the past or perhaps situated in challenging locations.

With that context established, I'll now touch on the highlights of the quarter, make a few comments about our guidance for the rest of the year before reviewing each of our regional businesses by region. See our results for 2007 second quarter, equity gold sales of 1.25, million ounces at $433 an ounce. Average realized gold price is $667 an ounce. If you haven't heard it yet, completely unhedged going forward. Respect to the second quarter 2007 earnings, you can note in this table that our reported net loss was $2.062 million, and in that loss is incorporated the merchant banking goodwill writedown after tax of about 1.7. The settlement of or price cap forward sales contracts of $460 million. Then related to the company's economic interests being reduced from 52.875 to 45% at Batu as a result of our minority interest partner fully repaying their loan and accrued interest, we took a charge of $25 million. You can note the other two smaller charges in this table.

Next slide is going to spend three slides, the first focusing on equity gold sales, the second on CS and the third on capital. The point of the slides is to remind you that we are reconfirming our guidance, first on this slide, reconfirming our guidance of 5.2 to 5.4 million equity ounces for the year. 5.6, sorry. 5.2 to 5.6. Admittedly, we must continue to have operational execution as we are more dependent on production the second half of the year than we'd like to be. One of our tasks going forward is to figure out how to smooth this out a bit more. We'll focus on each of the regions in a minute, but just a few major themes.

First Nevada has been and will continue to be a corner stone of Newmont operations over 40 years. We'll continue to be in Nevada for a long time. In addressing those challenges, Brant Hinze is in town today and we've asked Brant to give you a rundown on Nevada. In Yanacocha, the sales guidance is approximately 40% lower than 2006, as we have told you time and again, we're transitioning from the easier to process lower cost oxide ores into a more mature body. In Australia, several maturing mines, but we're preparing for the next chapter in Australia as well with the building of the Boddington project. And at Batu, I mentioned our equity production is now beginning to be impacted by repayment of the minority interest loan, the balance this year and into the future. And then lastly, at Ahafo, the mine is operating better than we'd expected, with better power availability and again we'll spend a few minutes on that later.

In looking at the top right of this slide, important to continue to emphasize that over 70% of our production comes from AAA-rated countries. Very solid performance for the year-to-date. 2007 CAS on the next slide. $375 to $400 per ounce. Cost inflation clearly impacting the entire industry. We're not alone but we're accountable for our own costs. We've talked before about about industry inflation through 2006. Newmont compares for the industry. We have to take responsibility, though for moving forward and constantly understanding and controlling our cost drivers.

On that, I'd just like to address a few of the steps that we're taking. First, realizing year-to-date we have about $1.6 million in consolidated costs applicable to sales of $1.6 billion in year to date consolidated costs applicable to sales. It is certainly the case that opportunities exist. It will take us time to programmatically specify the necessary and required actions to reduce those in a responsible way. We do have a renewed commitment to standardize across the Newmont globe. Our internal best practices for mine dispatch, mine maintenance and mine planning, the I.T. systems, taking the best of what we do across the world, standardizing, getting more programmatic about how we take costs out, how we improve efficiencies across our operations. Power plant, as I mentioned in Nevada, $25 per ounce savings. The gold mill in Yanacocha will extend the operating life through additional recoveries at Yanacocha. The power plant at Ahafo that we're building in conjunction with other mining countries in Ghana should provide additional capacity to Newmont preventing or at least unplanned shutdowns.

Fleet replacements globally continued to increase productivity and should lead to decreased maintenance costs all the time. We continue to work on training and develop underground miners through both educational and investment programs and continue to hope that that will allow us to displace higher cost contracted services. So every day we're committed to utilizing every opportunity we have in Newmont to look to reduce costs over time.

Next slide, 2007 capital expenditures guidance on target, 1.8 to $2 billion. You'll notice our major projects detailed out, the power plant, $620 to $640 million with expected completion by mid-2008. The gold mill in Peru, 250 to $270 million with expected completion by mid-2008, and then the Boddington project. These projects do make up the majority of our 2000 capital spending, and we continue to be on track to beat those projects on time, on budget, and as I go into the details of these a little bit, you'll see that the Boddington project in Australia, the cost structure could be impacted by the continuing run of the A-dollar, we'll have to see how that goes. With that discussion, I'm going to turn it over to Brant for the next three slides.

I'd like to start out by saying the ex-Phoenix, Nevada, the rest of Nevada is on track with guidance, and the second half of the year of Nevada is weighted toward the second half. We do have some items I'd like to talk about here, Leeville right now is coming into its own. We are expected to be on plan at 3200 ton per day production by the end of the year. We have our Twin Creeks and Collin n operations that are performing in line with plan with our hydrate oxide currently being exposed in Twin Creek's pit as well as in North Carlin, the Pete mine coming on strong. Additionally as well, too, we have two leach pads that are coming online in the second quarter. Two leach pad expansions coming online in the second half of 2007. As Dick mentioned, we do have the power plant that is under construction and we'll see the benefits of that next year in 2008 and also the reinvestment into our mining and operating fleets which we're beginning to see some benefits in the second half of 2007, but we'll realize the full benefits of that reinvestment in 2008.

We do have operating challenges. I'll talk a little bit more in detail about Phoenix in coming slides. And we have some of the same challenges that others have in labor shortages. Which has resulted in increased contract services costs. Some of the things that we're doing about that are training programs that we have implemented are bearing fruit, and we're seeing the benefits in particular in the underground training program as well, too, our Carlin East mine is coming to an end. And we're utilizing the manpower from Carlin east to move over into the Leeville operations and reducing pressure on contracted services underground as well. We do have active recruitment programs that, again, are bearing fruit and we're seeing our shared services model beginning to benefit us from taking better advantage of the expertise and talent that we do have in Nevada.

You can see on consolidated gold sales on an outlook and equity gold sales, we're still in guidance. Our costs applicable to sales for quarter 2 and year-to-date 2007 are high, but at this point right now, as stated, the rest of Nevada ex-Phoenix, is doing well but our guidance for 2007 outlook has increased and that is primarily the Phoenix issue. We are certainly in guidance on capital expenditure for North America. Our exploration expenditures are as well. The next slide shows some of the Phoenix -- has some of the Phoenix discussions. If we look at Phoenix status right now, We have seen improved blasting performance which gives us significant improvement in fragmentation, which relates to improved crusher throughput and improved mill throughput.

We are beginning to see the benefits of the mining fleet, and the productivity gains and cost improvements as a result of that. We have overall plant availability. That is now exceeding 90%, and we're approaching the 91%, which is still 1% below what was planned. At this point right now, the 92% target is -- we're in line with that. We have seen improvements in the flotation circuit, and our efficiencies in the flotation circuit. At this point right now, we still do have some challenges in our gravity circuit and C.I.L. circuit. The impacts of those due to variability or characterization. The -- additionally, we have begun the drilling program that will get us to a new model and a new understanding of the Phoenix deposit by mid-year next year.

From a timing perspective, in October we will start the tailings construction program, just a capacity issue. As I mentioned, the supplemental drilling program will be complete in the first quarter of 2008, allowing us time to review and modify the existing models based on the new information for the Phoenix deposit. The crusher replacement is on schedule for the first half of next year, and then we have our copper S.X./E.W. plant progressing through optimization study and internal review. On the upside potential, I would like to say at this point that the copper oxide does provide us some upside potential as we go forward and we'll be able to realize what that potential is as we complete the studies.

Thanks, Brant. So moving on to Yanacocha now. The cusp of the sales for the quarter per ounce, $426 per ounce was impacted by an NRV impairment of about $13 million or roughly $38 per ounce for the quarter. Additionally as noted on the slide, we had the successful renegotiation of a three-year union labor agreement. Negotiations went smoothly, minimal impact to operations. We do seem to be getting encouraging support from both the local and central governments in terms of their support of the national labor movement in support of rational approaches to settlements of these issues. So we appreciate that going forward.

With respect to the gold mill, the project is about 68% complete. It is on track. We do continue to anticipate commercial production mid-2008. As we've talked about before, it will extend the mine life and improve recoveries of the transitional ores and the lower-grade oxide ores. We're focusing on completing the project that costs between 250 and $270 million as I talked about earlier. And Yanacocha, as people remember, Yanacocha, still one of the largest if not the largest gold mine in the world. It is in a transitional state as we've talked about, moving from higher grade oxide ores to more complex lower grade oxide ores. The gold mill is the foundation of continuing to make investments in the Yanacocha district, to continue to allow us to better process those complex ores and to give us a peek into the future as we start to move into these transition ores.

Consolidated gold sales from 2008 to 2010 as we've indicated before, are expected to continue to be in that 1.6 to 1.8 million ounce per year range. Moving on to Australia and New Zealand, the Australian mines are performing as well if not better than our expected results, considering the nature of these assets, their age, the fact that in the A-dollar only category, our operating costs were in line with budget. Clearly, the improving A-dollar has had an impact on our costs. I would just note that this acceleration in the A-dollar since May 1 being up about 7% relative to gold price which has actually remained relatively flat. As you know, there's been a historical relationship as gold prices go up, the A-dollar usually goes up. Right now, we're in a position where gold is not running the same way that the A.-dollar is.

We continue to look at the challenge of cost inflation in Australia, western Australia in particular, as we look at the main challenge, it really is A-dollar strength. Our original cost applicable to sales guidance has been revised from 460 to $500 per ounce to $490 to $515 per ounce, almost entirely in consideration of the strength in the A-dollar. The second half impact is approximately $5 to $6 per ounce for every further movement in the a-dollar above 0.8.

With respect to Boddington on the next slide, this is, as I mentioned up front, the cornerstone of our future in Australia, project about 44% complete. Still on schedule for completion late 2008 or 2009. I'll remind that you we own about 67% of the project. We are the managing partner. Equity reserves at the end of 2006 of about 9.1 million gold ounces and 480 million copper pounds. Boddington should provide a long-term stable asset for us at competitive costs. One of the about Boddington is it is all about location for us in terms of attracting the right employees, the right contractors both with respect to construction and with respect to operation.

In a competitive labor environment, location means a lot. This mine is located a short 80 miles southeast of Perth. It will not be a fly-in, fly-out operation. We believe to date we have shown the opportunity to attract and retain employees. In the first applications for some of the more permanent jobs, we were oversubscribed. At this point, we feel good about the location. We think that will allow us to manage costs going forward and to make sure we have the right talent. As I said, Boddington's share, our share of Boddington's total cost, $0.9 to $1.1 billion, and spending particularly in the back half of the year and next year could continue to be impacted by the strengthening A-dollar. We continue to have development drilling at Boddington with up to nine core drill rigs. (technical issues) conversion.

With respect to Batu, consolidated sales are in line. We are realizing higher copper and gold prices. Copper ore grades are increasing and our higher concentrate inventories at the ender of quarter 2 lead to us continue to be well on track to meet this year's guidance. And we do have, as noted on the slide, ongoing divestiture requirements under the contract of work. We continue to work with our local partners with Sumitomo and with the government to make sure we can effectuate that divestiture in the correct way.

Moving on to Ghana, mill throughput and recoveries at the Ahafo mine are on target, though ore grades continue to be higher than expected. We've had less power shedding requirement than we expected year-to-date, but it is likely to change in the second half of the year even though water behind the dam is beginning to move up. We still are very subject to the hydro flows in Ghana. The 80 megawatt power plant that we're completing with three other mining companies should be production by the end of August. That power plant brings to us a couple of advantages. First, 25% of that capacity is allocated to cover the Ahafo power shedding requirements and secondly it has allowed us to enter into an arrangement with the government to provide for proportionate power shedding in agreement in the same way that power is shed throughout the rest of the population and the industrial population in Ghana. This capacity, both the power shedding -- sorry, the 80-megawatt power plant that we have our share of that, plus on-site generation should allow to us meet 100% of Ahafo's power requirements. Lastly, with respect to our future portfolio Akyem, we continue to build an optimization study, and we do expect to make a decision on Akyem in 2008.

The last couple slides focus on gold price. You've seen we have completely unhedged our portfolio. Must mean that we have a view that we're bullish toward gold price and we are. These two slides just briefly show why. The first focuses on declining mining supply. You can see from the G.F.M.S. study that 2006 number's down from 2005 with an expectation, I think, that production will again drop on average over the next several years going forward. Combining that with the next slide of increasing demand as we see increasing jewelry demand, gold prices should continue to run with respect to the gold supply and demand and then also with respect to gold as a currency. We continue to see challenges with the U.S. dollar.

With that, I'd like to close. Thank you first for your interest in our company and for taking the time to listen to our call today. As we turn our focus to the second half of 2007 and to our future, I feel very fortunate to be building up a foundation with extremely talented people, a rich and storied asset base here at Newmont. On this foundation that we engage with confidence in our efforts to rebuild Newmont as the gold company of choice. And in turn, it is our charge to earn your trust every day through consistency, commitment and execution.

We enter the second half of the year as the world's largest unhedged gold producer on track for our 2007 production and costs. While we refocus on our core gold business. We also remain the only S&P 500 and Fortune 500 gold stock, with a balanced global portfolio and a strong and liquid balance sheet. Throughout today's call, you've heard me emphasize accountability, focus, decisiveness and execution as the foundation of our path forward here at Newmont.

As we focus on the delivery of consistent operating project and exploration results, we hold ourselves accountable as we know you will to the decisions we make and how we execute upon them. With that, we're going to open up the call for your questions.

Thank you. At this time, we will begin the question and answer portion of today's program. (OPERATOR INSTRUCTIONS). Please stand by while the questions register. Our first question comes from John Hill, Citi Investment Research.

Yes. Good afternoon, everyone. Thanks for a very detailed presentation. Looking at the guidance for Nevada for the rest of the year, looks like you need to achieve something on the order of $370 an ounce cash cost to hit that overall guidance band of 400 to 440. How much conviction do you have that we're going to get there? That's a pretty good step down.

As I stated earlier, we're weighted to the second half of the year and with the -- with what we have coming online, like I said, the ramp up of Leeville, coming into the oxide ores at Twin Creeks, what we're seeing at Pete and North Carlin and the leach pads coming online in the second half, I feel that we're certainly within that guidance on the remainder of Nevada.

Okay, great. A quick follow up. The commentary on Phoenix on the call sounds quite a bit more hopeful than the press release. The press release really could have been written a year ago on the hard scar ore, pressure availability, recoveries with multiple concentrate streams. That's what we heard last August or so on site. What have we really accomplished in the last year?

I think I went through a list of some of the accomplishments that we have seen, and, you know, the thing that I also emphasize is that we're in a new drilling program at Phoenix. And until we have that new drilling program completed in that new model built, at this point right now, it's hard to give any additional information on Phoenix.

I think it is important, John, to recognize, though that we have worked hard on the metallurgical issues. We improved the recoveries, cyanide utilizations. I think they have made progress in some areas of Phoenix, but as Brant says, we are not out of the woods in Phoenix at all. We still have work to continue to do there as he mentioned by next year, mid next year, we should have a more detailed analysis of where the plan is going to go, going forward. So not out of the woods. We continue to work Phoenix hard and as we've said, both in the press release and on the call, it really is probably the number one here risk for us in production and guidance in Nevada.

Very good. Thank you.

Thank you. Our next question comes from John Bridges, JPMorgan.

Hi, Dick, everybody. Many thanks for the update on the progress. We heard this morning about sustainable development and mining companies building windmills. I thought Brant might be talking about hybrid trucks for later in this year. Maybe next quarter. With Phoenix, could you give us a sort of a bit of color as to where you are going with this program? You know, it feels a little bit like the difficulties that Newcrest went through with lower-grade peripheral ore at Telfer. Any parallels with that?

I can't speak to at the time ores at Telfer. What I can say right now is one of the variabilities we're seeing seeing is because of the ore characterization and recognizing where we are in the deposit early on in a long life deposit. We're on the very fringes of it. And this variability right now on the characterization whether it's oxide transition or sulfide I think is one of the major contributors to the difficulties that we're seeing.

And, you know, these fringes tend to be poorly drilled because they represent a small fraction of the old body I seem to think.

That is correct. That is one of the reasons as well, too, that we're going back with the additional drilling program so that we can better define and characterize the ores.

Okay. Just a follow-up on Nevada. You had a pretty chunky strip ratio this quarter. Is your cost going to come down in the second half?

Yes. That's true. If you look at Nevada, we're in that cycle in Nevada where we tend to be heavy strip in the first half of the year and then we hit the ores and come online with our higher grade ores like we see in Twin Creeks in the second half of the year. We certainly love to break that cycle, but, you know that's the nature of our operations at this point right now. So we will see these ores come online and come in stronger in the second half.

From your writeup, it sounds as if you're back to your old Newmont way of coming through with a bump in fourth quarter. Can you give us indication what's going to happen in the ship ratio Q3 and Q4?

Yeah. Certainly as indicated our strip ratio will come down. And you're right. If you look at the second half of the year, you know, from a Nevada perspective, one of the things I will be looking at going forward is breaking that second half cycle in future planning.

Any, you know, something like 6 to 1 this quarter. Are you going to 4 to 1, something like that?

John, I don't think we have the number available for today. We'll try to get you a number going forward.

Thanks. I'll look out for that hybrid truck next time.

Working on it.

Thank you. And our next question comes from Victor Flores, HSBC.

Thank you. Good afternoon. I have two or three questions. First of all, just turning to the operations, the comment was made that Leeville is, I believe, coming into its own, which is great. Could you give us some statistics to sort of point us as to how it's coming into its own perhaps for what the cash costs were and where you see that going, say in the second half and in 2008?

Yeah. When you look at Leeville and saying that it's coming into its own, we are completing the development phases of Leeville. So we had the batch plants that came online in June and July, and then we have the second batch plant that's coming online in September. And looking at that, that gives us the full capacity then for back filling at that 3200 ton a day rate. When we say it's coming into its own that's what we mean. So we will reach the 3200 ton a day rate by the end of the year and these batch plants allow to us get there.

Victor, Russ. Also what we're seeing with the Collin East mine shutting down, we're moving some of our own employees that Brant talked to earlier that have gone through their training prime minister and replacing the expensive contracted labor that we have had there to get the development to get the production out. So we are seeing a shift in that workforce and it is significant to the bottom line as far as costs.

Okay.

And to answer your other question, Victor, we don't give production, separate production and cost guidance for Leeville just because of the way Brant is running the Nevada operation. We really are looking at a lot of centralized processing and costs.

It's just an indication of what we think for the third quarter and speaking to Brant's earlier comment, we were mining about 315,000 tons Nevada 0.459 contain ounces of about 140,000 ounces, those ounces get processed at different locations, but we're looking at CAS roughly about $300 an ounce for those ounces in the third quarter. Obviously that CAS will fluctuate quarter on quarter base on the amount of production versus development as you well know Victor.

Okay, now that's a good indicator. Similar question with respect to Yanacocha, with the mill coming on next year, and then having a full year in '09, I believe I was talking about some production numbers that perhaps were indicative and perhaps Newmont as the operator can give us a bit of a sense of where that project is going in terms of the oxide mill and what you see happening to heap leach tons going forward?

Victor it's Randy. Newmont's guidance that we have out there right now in the 10-K is the 1.6 to 1.8 that you've seen. There is, as we've discussed, recovery upside in the gold mill but really our 10k language is what's out there for Newmont for the time being.

Fair enough. Great, guys. Thank you.

Thank you. (OPERATOR INSTRUCTIONS). Thank you. And our next question comes from Patrick Chidley, Barnard Jacobs Mellet.

Good afternoon. I would like to ask a few more general questions about strategy, I think with the opening comments there, you alluded to different ways of doing business, and during what that would mean breeze whether you'd be looking to hedge more of your costs in interprets of fuel costs for example and also in terms of looking -- relooking at exploration projects. Which ones would you be looking at and perhaps would you be looking at demanding a higher rate of return on new projects?

Well, with respect to the first question on hedging costs, I think the last several years have shown the importance of cost applicable to sales per ounce in terms of value in gold companies. I think to the extent that we can manage our costs through an appropriate hedging program, it is definitely something that we will take under consideration. We will analyze that, we'll have some debate about it internally and then we'll make a decision as to whether we're going to execute. I say that applies to input commodities, whether that's oil or diesel, whether it's some of the other commodities that we need that are derivatives of that. We currently already have in place some initiatives in the purchasing side of the business with respect to tires and other commodities that we need to process. So I think we are going to be perhaps more active in evaluating. We'll let you know when as and if we execute something that would be material.

All right.

With respect to exploration projects and returns, I'd say a couple things, one, I think it's important for us when we talk about replacing reserves to focus on exploration but to also focus on development opportunities and other growth opportunities across the world. We can't just rely on exploration. When we look at returns for projects, I think it's important to recognize that our job is to provide gold optionality to investors which partially comes from the return we should expect at a expected gold price in the future but partly comes from the ability to expand and contract based on what happens with gold prices, building in some more flexibility into some of our projects and focusing on a more consistent delivery pattern over a longer period of time. So I think while that is the formula we're considering, again, it's only words at this point and we need to put that down in terms of the investments that you see us make. The leverage to gold price that those projects are able to actually show and we have some work in this regard that we need to do. But I think the view should be that we will make investments in gold, those vestments should lead to gold price leverage, when as and if gold prices respond, we should get the proper returns out of those gold projects.

Basically, adding flexibility to your investments in terms of being able to switch on production as of when the gold price allows?

Partly that and partly just being responsive to market prices in terms of retaining our cost structure, you know so that we're not always reaching to be that last ounce of cost in the latest pit that we designed trying to design how we operate to be more predictable over a series of years rather than one year focused. And again, continuing to look for the responsibility to look for replacing reserves in the outyears through that combination of exploration, growth oriented projects around the world and development some of the opportunities we have internally.

All right. Could you maybe highlight a couple of opportunities that perhaps are not at the forefront of the current plan that maybe you could be in a year's time we'd be hearing a lot more about.

I mentioned the ones I'm comfortable mentioning which are those in our portfolio, Akyem in Ghana, Conga in Peru, and potentially the Nassau project.

There's no talk about the Elang project for a while in Indonesia. I was wondering if that would be one of those projects or is that --

It could potentially be. As you'll recall, we were in a drilling program there last year. We had a social incurrence at the drill camp when through some social unrest, the camp was burned. Luckily, our people were evacuated and there weren't any issues. We are still working out with the community as we always try to do. How do we get back that Elang and continue the drilling program that we had in place? Once that's done, we'll continue to further look at optimizing that ore body and determining whether or not it's economical at a reasonable copper price.

Right. One final thing I'd like to ask if you could consider releasing more information in terms of what the future strip ratios of some of the mines would be going forward because it's obviously one of the largest variables that, you know, analyst side here we just don't necessarily get that information.

Patrick, we've noted your request. We'll see what we can do about that.

Thank you. And our next question comes from Barry Cooper, CIBC World Markets.

Yes, good day. Question on Batu Hijau with respect to accounting method. Now that you've dropped below 45%, will you go back to equity accounting as opposed to consolidated accounting on that asset?

It's Russ. No, we won't. You're right, normally one would expect a 45% ownership interest we could be equity accounting, but in terms of the FIN-48 requirements which relates to the special purpose entities of the post-Enron world if you want, through out disproportionate share through the partnership, we will still continue to consolidate but at a 45% rate. There is some disclosure in the Q which we provided earlier today, which reflects that. But we'll consolidate, but it will be at the 45%, rather than the 52.875% we have been doing historically.

So the minority interest expense on the income statement will go up.

Right. Okay. Further on Batu, you show you had a realized copper price of $3.92 for the quarter I'm assuming in part that was due to provisional pricing carry over into the second quarter. I'm wondering is that $3.92 also include TCRC charges which traditionally you deducted from your realized price when you quoted it?

Yes, Barry, good question. It's a little bit of both. If you look on page 37 of the Q, what that's made of is a gross, which was essentially the spot price of $349. Again, we are 100% unhedged at Batu as those hedges are done. We had a mark to market adjustment of $0.43 based on the increase in the copper price from Q2 quarter end. Refining charges were $0.39 per pound for a net of $3.53 a pound. Again, you'll see a table both based in dollars and cents per pound on page 37 of the Q if you want more details.

Okay. So then when you have the two paragraphs in your press release, one related to $1.10, $1.20 for your costs and then you realize the $3.92, is that an apples to apples comparison?

The $1.10 would include the TCRC

Right. Okay. Good enough. Then the last question you indicate the Midas is not a big component there now that it's shut down, and I'm assuming you're not anticipating that it's going to be. Can you give us an idea what kind of production levels and costs we're coming from Midas? Either, you know, historical basis or what you had planned for this year? Because we don't get that breakdown anymore.

Midas is around numbers around 120,000 ounce operation a year. So we were shut down towards the end of June as everyone knows in that unfortunate incident. And, you know it's a function of when we would be back up and running. The holding costs there for us are about a million and a half a month round numbers, so that puts it in perspective. It's not a huge driver in Nevada. I'll ask Brant to speak to when we may potentially be up and running again.

Yeah, at this point right now, our maximum exposure for the second half would be 60,000 ounces assuming we're not reopened there before the end of the year. We have completed our reopening plan and have submitted that to the agencies and we're now waiting for a response from them.

And the costs on that 120,000 ounces would be roughly what?

340 an ounce.

Okay. Then the final question relates to Boddington. I guess when Phoenix was originally acquired, there was expectations that okay, somehow the learning process of Phoenix or conversely Boddington, depending on whichever one got built first, would lever yourself into a better understanding of how to tackle the second one. I'm just wondering, given the rather unfortunate circumstances with Phoenix, how has that changed your view on Boddington, and indeed, has there been any change of scope or plan there because of when's happened at Phoenix?

I'll address that. When we look at Boddington, very different flow sheet, fairly different ore body. We did go to the high pressure grinding rolls as everyone's probably aware. We have looked at how those have performed at Sierra Verde and are very comfortable with that decision quite frankly. We have done some extended work looking at some of the lessons learned out of Phoenix and have applied those to Boddington. When we look at the overall process, we have had a number of people look at the flow sheet, revisit our plan as far as the metallurgical balance and the estimated ramp-up curve, and we're very comfortable despite the issues at Phoenix. I will say that the Boddington project was a little more fortunate in that we went through more of our stage gating process than we did on Phoenix, given the construction schedule. So we have had more internal and external peer review. Obviously Anglo is a partner on that, as was [Nicraise] until fairly recently. So in addition to the Newmont folks looking at it, we have had a lot of people looking at it from Johannesburg and from Melbourne, in the case of Newcrest. There are no real changes. It is a very different flow sheet. We have had people from Boddington at Phoenix to look at it but the issues are somewhat more Phoenix-specific than in general to the nature of the copper. Remember that the copper at Boddington is a pretty small stream in the scheme of things.

Thanks a lot.

Our next question comes from John Tumazos from John Tumazos Independent.

Congratulations on all of the busy work you've been getting done. Concerning the merchant banking business and I apologize if there was something in a recent disclosure I might have missed, with that business decelerating, are the investments in shore gold, Gabriel resources, energy properties continued long-term investments or are they something that if the opportunity came you could use the proceeds to pay for a mine or a mill somewhere?

Hey, John, it's Randy. On the Newmont capital portfolio, the two sides of the spectrum, keep in mind we tried to emphasize divestiture of our noncore assets for reinvestment in our core gold business. Those assets that have gold investment characteristics such as a Miramar, Montana and although shore gold is the diamond play would have some comparable gold investment characteristics to it, those would be assets we'd be more likely to classify in that core business. The things that would certainly sit outside that would be the oil and gas, strains, things of that nature.

Thank you very much.

Thank you. And our next question comes from Oscar Cabrera, Goldman Sachs.

Good afternoon, guys. Just I think most of the points have been covered but I've got two quick questions. With respect to Akyem in Ghana, you talk about development studies. Can you remind us what the options there are and when you say efficiencies are expected in 2008, would this be early 2008 or later in the year?

Oscar, Russ. The Akyem pros cease, we recycled it based on the significant increase in capital costs not only Newmont has experienced but the industry. We are looking at that. It is a nominal 500,000 ounce a year operation, it's 1.8 grams, and it's pretty near surface. The economics are compelling and we have a significant infrastructure in Ghana we can leverage. However, we made a conscious decision to slow down given the capital spend that we have and quite frankly the ability to get resources to develop that project not only internal resources but resources through our EPC contracts whether it's Fleur or Aka Cavera. You guys know that story as well as anyone. We continue to evaluate it. The real issue for us still remains the economics which are looking better as we continue to optimize it. The issue relates to backfilling of that. I think we disclosed that over the last couple quarters. It is a two-pronged approach. I would say from a social and local perspective, we have strong support for the project, and we continue to work that in addition to at the national level working through the appropriate channels. Again, power remains an issue in Ghana. If we brought this project on, we would just be adding to the load. Tie into the decision needs to be an overall understanding and whether that means I can provide down the roid or more reliability around the Hydro power. We need to make sure if and when we do decide to develop this project we have the power to keep the mill.

That decision would probably get made towards the latter part of the next year as we work through all of the issues. With that, Oscar, did you have another question?

If I may just a real quick one. On Boddington, you talk about the 44% completion. You give us an idea of what the type of capital expenditures you are looking for in the project. In terms of the capital expenditures that you need to make like I mean 44%. Does that mean that you're about 450 million dollars spent there and the rest would have, you know, have an impact on based on the exchange that we're seeing now?

No. I'd say we're less spent than that because the bulk of the progress to date has been engineering. We're real really only getting into the field right now. Most of the long lead items have been procured. The spend relates to the construction in the field and really that's ramping up as we speak. So it would be less. I don't have the exact number, Oscar, but I'll get them to John and can he forward them later.

Thanks very much, guys.

Thank you for your attention today. We appreciate you participating in our call. As I mentioned, the IR department Randy, John and others are prepared to take your questions should you have some after the call. Thanks again. Appreciate your attendance.

I would like to thank everyone for participating in today's Newmont Mining Corporation teleconference call. At this time, all parties may disconnect.