紐蒙特黃金公司 (NEM) 2007 Q3 法說會逐字稿

Good afternoon, and welcome to the third quarter 2007 conference call. I would like to remind all parties, today's conference is being recorded. If you have any objections, you may disconnect at this time. All parties will be in a listen-only mode until the question-and-answer session of today's conference. (OPERATOR INSTRUCTIONS) I'd now like to turn the conference over to Mr. Richard O'Brien. Sir, you may begin.

Thank you, operator. Thanks for joining us today on our third quarter conference call. With me today are Russell Ball, our Senior Vice President and Chief Financial Officer; Guy Lansdown, our Senior Vice President of Project Development; Randy Engel, our Senior Vice President of Strategy and Corporate Development; and John Seaberg, Director of Investor Relations.

Before we get started I just want to remind you that we'll be discussing forward-looking information involving a number of risks, certain of which are unique to our industry as described in our SEC filings. On today's call, we'll focus on our third quarter financial results, but we will also take the opportunity to provide you with an update on our continuing progress with respect to our strategic initiatives.

In the four months following my appointment as CEO, our team has focused on execution and decisiveness, enabling us to successfully create the worlds premier unhedged gold company while renewing our commitment to our core goal business. I would remind you all that it's only been four months and that while I'm very pleased with the team, the team effort, and the focus that we have generated here at Newmont, we still have a lot of work to do.

As we begin to see the benefits of our strategic efforts, we also remain focused on our day-to-day activities, including stabilizing our operating cost profile, improving our operational performance, developing our existing projects and creating value from our perspective pipeline. We're also taking a renewed approach to sustaining our business through a combination of exploration, development, and from time to time where appropriately, accretive acquisitions. We also know that success will not come overnight, but we'll achieve through consistent -- consistency, commitment, and successful execution year after year, quarter after quarter, and day after day. As previously mentioned and shown on this slide, our strategic foundation has five main components, focusing on first, financial strength and flexibility; second, operational execution; third, project execution; fourth, exploration and development; and five, leveraging the scope and scale of our global operations. We'll cover each of these initiatives throughout the rest of this call.

Before we review the results from our third quarter, I want to spend a few minutes reviewing our outlook for the remainder of 2007. With only three months remaining in the year, we've narrowed our outlook for Equity Gold sales to between 5.2 to 5.4 million ounces, reflecting previously-announced lower equity Gold sales to Batu Hijau, the suspension of operations at Midas, and ongoing challenges at Phoenix, which I'll cover in more detail later. In addition we're implementing plans to reduce our traditional fourth quarter push, which should over time result in a flatter production profile on a quarter-by-quarter basis. So don't expect us to keep the foot on the accelerator here in the fourth quarter of every year going forward. We do expect that over time we will flatten out this production profile.

Moreover, this quarter we benefited from Batu Hijau being at the bottom of the pit. That will not be the case throughout all of the fourth quarter. We still have some additional work we're completing in Nevada to continue to move the Nevada profile up to the expected production levels at Leeville, but we still have some work to do here to continue to get our production profile where it needs to be.

Equity copper sales, the second line on this slide have decreased slightly from our initial guidance and this as well as the equity gold sales at Batu Hijau were both reduced as a result of a lesser economic interest that we have at Batu Hijau due to the repayment by our minority partner their carried loan. But this is consistent with the guidance that we provided in the second quarter after that loan was repaid. We now expect 2007 costs applicable to sales of between 400 and 430 per ounce up from 375 to 400 as we told people at the Denver Gold Show. We were expecting CAS to be beyond the upper range of the guidance. This is the new guidance. This change in outlook reflects the impact of the ongoing challenges at Phoenix, lost production at Midas, higher input costs, primarily fuel, and adverse exchange rate movements. The remainder of the items are largely in-line with our initial Q1 outlook or slightly positive in the case of capital expenditures and the effective tax rate.

As this chart illustrates, higher diesel fuel and consumable costs represent approximately half of our increase in costs applicable to sales for the year. So if you move from the guidance of the prior outlook on the left to our current outlook on the right, you can see that on the chart. The other major factor is the higher costs in Nevada at Phoenix and reduced production at Midas, both of which are reflected in the production segment of the chart. In addition, as we benefit from a higher gold price, we do see a negative impact on our costs in the form of higher royalty payments and workers participation at Yanacocha in Peru. The adverse changes in foreign exchange rates, primarily the Australian dollar, essentially represents the balance of the change in our outlook from the beginning of the year until now. Aside from our changes with Phoenix and Midas in Nevada, the operating cost escalation illustrated in this chart is probably reflective of the issues faced by the entire industry.

Shifting our attention from operating results to financial results, this chart illustrates the absolute change in our operating margin 2003 through Q3 2007. This is slide number 7. As this chart illustrates, gold is up over 85% since 2003, while our margins have grown by roughly 75% during the same period, reflecting the impact of industry-wide cost pressures. These pressures, when coupled with the mature nature of the world's gold deposits have somewhat suppressed the industry's average operating margins.

Ours have been impacted similarly with our margins remaining consistently between 40 to 50% of average realized gold prices over the past several years. As a result, gold equity valuations have remained underpressure with multiple attraction evident across the entire sector. We're keenly aware of these pressures and are focused on addressing them through the initiatives I continue to emphasize each time I have the opportunity to speak with you.

To offer compelling value proposition for our shareholders, we know we must remain vigilant and focused on cost control, operational execution, as well as new ways of exploring for and developing new projects. With the gold price today now significantly higher than the 681 shown for the third quarter of 2007 on this chart, we continue to focus on operational execution and cost containment. As we're successful at that, we and our shareholders will benefit from higher margin expansion going forward.

So we've committed to keep the market informed with respect to our progress at Phoenix and on slide eight, I'm going to talk about that for a minute, Phoenix continues to be the most challenging operation in our portfolio. While we continue to make progress and advance our improvement plans, it will still take time to successfully work through each of the issues, inhibiting the success of this long-term asset. For the third quarter, Phoenix's equity gold sales were 46,000 ounces at costs applicable to sales of $605 per ounce. For the year, Phoenix's gold sales were just over 130,000 ounces at cost applicable to sales of 743. So improvement in the third quarter clearly, but we still have a ways to go at Phoenix.

During the quarter, we made modifications to the blasting process, which led to improved ore fragmentation, enhanced recoveries, and process efficiencies. The Phoenix mill also continues to perform well, and has recently been running in excess of 90% availability. Even with these changes, we will not know whether significant improvements in operating costs and production can be achieved until we redefine the ore body and metallurgy. Our redrilling program is well underway with approximately 46 of the 183 planned drill holes complete. We remain on schedule to finalize this drill program in the first quarter of 2008.

The drill data will then be used to create a new life of mine plan, which we currently anticipate will be completed by mid-2008. We're also addressing ore hardness issues that have plagued us since start-up with the installation of a new crusher, which should be in place the first half of 2008. Also at Phoenix, we continue to evaluate a copper leach program that could allow us to process the oxide copper ore that sits on top of the sulfide ore body. The copper leach project is incremental to the existing Phoenix operation and has the potential to reduce the overall operating costs at Phoenix by generating positive net revenue from material currently characterized as waste. Although we remain optimistic about the possibility of this project becoming a reality, it still remains subject to considerable review and optimization studies, with permitting on the critical paths. Our current estimate is that the copper SXEW plant could start up in 2010, pending permitting and other factors. We'll continue to keep you informed on our progress on this project.

So in summary, for the first quarter -- or sorry, for the third quarter, I'm very pleased with the progress that the team has made with respect to the operational side of the business. I think people continue to exhibit all that I could ask for them to do to really focus in on keeping their operating costs in check and trying to move the business forward at the same time. I think that reflects positively on results because some people in the Company listen to this call, I would just like to take the opportunity to compliment people for keeping their heads down and getting the job done successfully. So with that I would to turn it over to Russell, who, focusing on financial strength and flexibility is going to walk through the highlights of the third quarter.

Thanks, Dick, and good afternoon, all. I'll start with the financial highlights for the quarter. Noting that the details are contained in our earnings release and our 10-Q, which we expect to file later this afternoon. In addition, for those who are watching our filings, you will see we'll be making three filings related to the proposed acquisition of Miramar, also hopefully later this afternoon. To the extent you have detail questions on your results, 'm sure that John Seaberg and his team will be happy to walk you through the numbers.

We had a strong third quarter, earning $0.88 a share, essentially doubling our earnings from the year-ago quarter. This was driven largely by higher commodity prices as we realized the benefit of being completely unhedged, both on the gold and the copper side, as well as increased production as Dick discussed earlier from our Batu Hijau operation. We generated approximately $520 million in cash from continuing operations, which is up about 150% from the previous quarter -- previous year's quarter.

It may be important to look just briefly at the negative operating cash flow number that you see on slide 10 of about $100 million for the year-to-date, because this hedge is reflecting a number of the strategic initiatives that we have implemented since the change in leadership at Newmont. We have used We have used about $580 million to eliminate the gold hedge book in Q2. We also spent about $280 million to settle a preacquisition tax contingency related to Normandy, and about $180 million to settle the copper hedge obligations, which expired in the first half of 2007. So when you look at operating cash flow for the year, essentially we consumed just over $1 billion getting out of those hedge positions and settling a preacquisition contingency.

So for the quarter, we realized an average gold price of $681 per ounce, which is up 11% from the year-ago quarter. Costs were $388 an ounce, which is an increase of 22% from the year-ago quarter, and I'll speak to that in some detail following. As Dick referenced earlier, the continuing operating cost pressures are not particularly unique to Newmont.

For those following the slides, on slide 11, you'll see that the reported net income for the quarter were impacted by two transactions. The first was a reversal of foreign tax credit valuation allowances of $84 million. You might recall that in the second quarter we provided valuation allowances to reflected a charge of approximately $109 million, which is essentially what we reversed in this quarter due to tax planning opportunities related to the sale of our merchant banking assets and the royalty portfolio in particular.

As you no doubt appreciate, our tax calculation is complex and is, as these last two quarters have proved, can be very volatile on a quarter-to-quarter basis. This is particularly so in light of our discontinued operations reporting for the merchant banking portfolio and the Zarafshan, Newmont expropriation and subsequent gain.

As we look internally at our business and for those of you crunching the numbers in your spread sheets, we use an effective tax rate of 32% for our planning purposes. And while you will continue to see volatility going forward, that's a number that we're comfortable with that reflects the attributes that we have and the assets we have in the locations we operate currently. In addition, during the quarter we received $80 million pretax related to the settlement of the Zarafshan expropriation, which again essentially reverses the $100 million pretax charge we took in the third quarter of '06 to reflect that event.

You'll note that the third quarter of 2006 benefited from the gain of our Alberta oil sands sale and the sale of the [Mutabi] project in Indonesia, and that's the $193 million that you see in parentheses for Q3 '06. So again a strong quarter, but clearly as Dick alluded to earlier, the $0.88 is not sustainable when you have a look at the gains that we have reflected here. In particular the two highlighted on this, and the fact that Bhatia had an outstanding quarter and I'll speak to that in a little more detail.

For the quarter, we sold approximately 1.3 million ounces of gold and when we look at the portfolio as a whole, our production was essentially in-line with our initial outlook. On slides 12 and 13, we will be presenting a different view of our results from what you've historically seen and where we'll compare this quarter's results not only with the third quarter of '06, which has been a traditional comparison, but also with our internal outlook for the year, which we communicated to you at the beginning of the year in the form of our Q1 guidance. Quite frankly, in my view, the comparison with the prior year is less meaningful, particularly in our industry given grades, strip ratios, and other mine plant changes that most of you on the call are intimately familiar with, and how we focus on comparing our internal results for the third quarter with what we told you in the beginning of 2007.

So if we look at the third quarter results for '07, shown here in the green bar, compared to our initial outlook for the third quarter shown in the blue bar, again the portfolio's generally performing as expected. Nevada continues to be a challenge, as we work our way through the issues at Phoenix and Midas that Dick alluded to earlier. For the quarter, Phoenix was short approximately 27,000 ounces and Midas was short approximately 28,000 ounces as the operation was effectively shut down for the quarter. Excluding Phoenix and Midas, Nevada is largely performing in-line with expectations.

Although it is essentially lower than the year ago quarter, Yanacocha is performing as expected and is actually doing a great job transitioning to lower production. In Australia, aside from the adverse impact of the Aussie dollar, we had a good quarter and exceeded production expectations. The KCGM operation continues to be an area of concern and we continue to work through issues and potential solutions to that with our joint venture partner, Barrack.

At Batu Hijau in Indonesia, our production is right on target on a 100% basis, and when you look at equity production after adjusting for the affects of our reduction in our economic interest that we reported to the market in Q2. A significant increase from last year's production was driven by both higher grade and higher throughput as we were in the bottom of the pit and not only did we have higher grade and recovery, but that softer oil we were able to process additional throughput for the quarter. At Ahafo in Ghana, we remain slightly above expectations as we continue to benefit from higher power availability from the grid and slightly higher grades than what we had modeled.

Moving to slide 13, a similar format here. Again, I'll focus more on the initial guidance in blue versus what we actually did in green for the quarter and then the comparative number from the year-ago quarter. That information will be provided ad nauseum in the 10-Q. For the quarter, CAS was $3.88 per ounce, which was an increase of 22% from the year-ago quarter. Aside from the previous mentioned challenges in Nevada and the FX rate in Australia, we're generally in-line with our original outlook for the year, as the bars on this chart will attest to. The challenges we face and quite frankly the challenges the industries face is that our assets are maturing, grades are falling, and stripping continues to increase as open pits mature. This coupled with the inflation in labor diesel and other consumables is obviously impacting costs.

Nevada costs, for the reasons discussed previously, are above expectations. The impact of Phoenix was approximately $15 per ounce in 2003 or $23 an ounce for the year-to-date. Midas shutdown impacted CAS through the fact that it produces significantly lower than average cost ounces by about $3 per ounce in the quarter. So not a huge impact.

Yanacocha continues to perform according to plan and has done an outstanding job managing costs in a very challenging environment. Keep in mind that in 2007, Yanacocha will move essentially the same amount of material for approximately 38% less ounces than we saw in 2006. Australia and New Zealand is outside of our original outlook as the Aussie and New Zealand dollars continue to appreciate. Our initial outlook for the Aussie was based on $0.75. While we have started a disciplined Aussie dollar hedging program, we are essentially fully exposed to the Australian dollar for the remainder of the year. For the quarter, the stronger Australian dollar increased CAS by about $49 an ounce, so not an insignificant increase. On an Aussie dollar basis, however, the region is actually under budget. When you look at it in Aussie terms, we had a budget of 607 for the quarter and we actually delivered $573 Australian. So positive FX issue aside.

Batu Hijau exceeded our original outlook as we access more of the higher-grade portion of the ore body in the third quarter. As we have communicated previously, the third quarter at Batu is generally our strongest given the fact that we are in the bottom of the pit and are able to deliver more high grade softer ore to the mill. As the rainy season approaches and we are forced to retreat from the pit bottom, we increase our stripping and process lower grade ores and stockpiles. So in short, we won't see another quarter like this one at Batu for a while.

Ahafo's costs were better than expected due to the increase in production discussed earlier and favorable power costs. There's no question that we must continue to on our cost containment efforts, but all things considered, our operations generally performed in-line with our original expectations set at the beginning of the year despite significantly higher oil prices in Australian dollar now approaching parody with the U.S. dollar. That's the bad if you want. The good is that the higher costs are now more than offset by a higher gold price, which is translating into increased margin, as Dick showed earlier on the slide with margins.

The weak U.S. dollar while hurting in respect to CAS is helping in that it is a key factor driving the gold price higher and resulting in that margin expansion discussed earlier. With that I'm going to turn it over to Guy Lansdown for an update on our project execution.

Thanks and good day to everybody. Moving to product execution, the construction of our wholly-owned 200-megawatt coal fired plant is approximately 82% complete and continues to be on schedule for start-up around the middle of 2008. The project's capital cost estimate remains between 620 million and $640 million. All significant contracts including rail, coal, and operations and maintenance are substantially complete. When fully operational the power plant is expected to reduct Nevada's total costs applicable to sales by around $25 an ounce. As you can see in the picture, first coal was delivered to the project in September and we are currently planning first fire on oil late this year or early next year.

Turning our focus now to Peru, the gold mill project at Yanacocha is approximately 85% complete with capital costs remaining on budget at between 250 million and $270 million. This processing facility is expected to start-up in the first half of 2008 and will have a positive impact on Yanacocha's operating performance as we move into the next generation of this storied mine's life with the processing of higher grade oxide and transitional ores.

Shifting our focus to Australia, Boddington remains one of the largest undeveloped mines in the world, with substantial exploration upside and current gold and copper reserves of around 9 million ounces and 840 million pounds, respectively. Boddington at present is approximately 50% complete and remains on schedule for start-up around the end of 2008 or early 2009. Located only 130 kilometers from [Perth], our ability to attract scarce skilled labor to this desirable location has been favorable. At the same time we are building Boddington, we are also taking all reasonable steps to ensure we maintain a competitive ongoing operating cost profile. To that end, we've signed a long-term agreement at competitive power costs for the life of the project.

We are also in the process of completing our definitive estimate to confirm our capital costs, including the impact of escalation and a stronger Australian dollar. This estimate is expected to be finalized by early 2008 and we will communicate it to you at that time. Given the scale and the exploration upside, this asset represents the cornerstone of the next generation of our Australian operating portfolio. Shifting our focus to our developmental assets, our Conga copper (inaudible) project located approximately 80 kilometers from Yanacocha in Peru is one of our more advanced development opportunities. Equity reserves at Conga currently stand at approximately 6 million ounces of goal and 1.7 billion pounds of copper. To date we have continued discussions with the local communities and the permitting process with the goal of making a development decision in 2008. Also, among our prospective development assets, our 100% owned [Achime] project in Ghana is in the evaluation and optimization phase. With gold reserves of around 8 million ounces, we continue to work toward the development of this project with a watchful eye on the power situation in Ghana and anticipate making a development decision on this project in 2008 as well. That's a brief overview of our developmental projects. With that I'll hand it back to Dick.

As I've emphasized since assuming my current roll, we recognize that we can't change the mature profile of our asset base overnight nor can we change it by simply focusing only on our internal initiatives and projects. As a result, we continue to take a fresh look at exploration, development, and growth opportunities across the globe, reevaluating prospects that might be considered too small or situated in potentially challenging locations historically.

As this slide shows, as part of these efforts, we recently agreed to offer to acquire all of the outstanding common shares of Miramar Mining for C$6.25 cash per share. Our robustly valued offer reflects among other things a premium that afford Miramar shareholders that the friendly transaction that is fully and unanimously supported by Miramar's Board of Directors and its senior management. The offering circular will be mailed today and subject to satisfaction or waiver of all applicable conditions, including Investment Canada approval, we could begin to take up deposited shares on December 6. This investment provides us the opportunity to establish a new core mining district in Canada with strong exploration potential, leveraging Newmont's technical and financial resources with the outstanding work completed to date by the Miramar team, we believe we are best positioned to maximize the true potential of the Hope Bay asset.

Once is transaction is finalized in early 2008, we'll review all of the technical data within the context of our staged gate process and determine which development decision is best for the relevant stakeholders. In addition, as we announced on July 5, we plan to monetize components of our royalty portfolio, preferably later this year through a dual track process to maximize for our shareholders the realized value of our discontinued merchant banking portfolio. To date the interesting in these assets -- the interest in these assets through both tracks and the associated values have been robust, with potential alternatives, including a possible public offering and/or private sale transactions. We will continue to work this dual track process hard, we'll anticipate and identify the best options for our shareholders before the end of this year. As I've indicated before, we intend to apply the proceeds from the value realized through this process to fund the development and growth of our gold business. We could not have picked a better and more opportune time to sell these assets.

In closing, I would like to thank you for your interest in our Company and for taking the time to listen to our call today. With the completion of our early initiatives over the last four months, they have been full, but there's only been four of them, we've created the world's premier fully unhedged gold producer with a renewed focus on our core gold business. As we now turn our attention to the end of 2007 and to our future, I feel very fortunate for a number of things.

First, we have had a successful third quarter; second, we're beginning to realize the value of not putting the accelerator to the floor every fourth quarter. Look for more levelized production from this Company going forward in the future. Third, a rich, talented group of employees who support me and support the Company and what we're doing. And lastly, a very rich asset base and a Board who supports us moving forward with that asset base to make this Company the best gold Company in the world.

The next chapter in our Company's long and established industry we'll continue to emphasize operational and project execution as well as gold price leverage and a renewed approach to replacing our reserves through exploration and business development. In addition, we are more committed than ever to leveraging our scope, scale, and standardized processes to open new doors for growth, cost efficiency, and increased effectiveness across every one of our global operations.

With these strategic foundations clearly established, we look forward to the opportunities that lie ahead for this Company. It's upon these foundations that we engage with confidence in our efforts to continue to rebuild Newmont as the gold Company of choice. In turn we realize it's our responsibility to earn your trust every day through consistency, commitment, communication, and execution. With that let me open the call up for your questions.

Thank you. (OPERATOR INSTRUCTIONS) Our first question comes from John Bridges with JPMorgan. Your line is open, sir.

Hi, Dick, everybody. I wonder if you can give us a bit of guidance as to the scale of the copper operation that you envision. Just sort of ballpark estimate so we can at least put something into our model?

John, we're still early in the stage gate process and depending on cut off, it can be anywhere from 50 to 150 million tons, is what we're looking at right now.

Okay. And what sort of grade of copper are you looking at in there?

It's about a 0.2 to 0.25 plus or minus. Again, a function of cut off, capital costs, and where we set it. We have a number of people focused on that right now. The beauty of this operation, this opportunity, John, is right now a lot of that oxide is what's causing us the problem as we treat some of those ores because of the lack of flexibility right now in the mine plan. And then longer term, those tons will have to get moved anyway, so we were able to convert waste, if you want, into revenue-producing. So there is some nice synergy. The issue for us, quite frankly, and the critical part, as in most operations we're go through permitting and we're working through the EIS with the BLM and relevant authorities out there.

Any sort of order of magnitude on the CapEx? What are we talking, 50 million 100 million, or something?

On the order of 150 to $200 million.

So inflation comes again.

I would just say it's still early days on this project, a lot of work to be doing on it. I just think in the light of keeping you informed on Phoenix, we felt it was important to let you know that there is this opportunity out there. It's several years away, but we'll keep you informed when we make progress.

I appreciate the numbers are fuzzy, but just wanted to get something. Just as a follow-up, on Ahafo, the costs there. Have the costs been sort of abnormally high because of the stripping that's going to come down and what sort of strip ratio should we expect going forward?

John, just try to normalize it. What we had in the third quarter last year, remember we started this up in the third quarter last year?

Yes.

Until we hit commercial production, we were capitalizing those initial mining costs.

Okay.

So the costs last year were artificially low as we only charge in effect, the incremental cost through CAS until we reach commercial production. The stripping in Ghana again, with the deferred stripping accounting is going to move and be pretty variable going forward given the number of pits in that operation. It's a string of pearls, if you want, on a necklace as supposed to one large pit. So as you get into new pits you may have some deferred stripping and some capitalization. So it's going to really going to move around over the life of that project. Again, we can get you through John's group some of the stripping numbers for the quarter and you can have a look there. But don't consider Q3 '06 as indicative, because again, we were unable to capitalize some of those start-up costs until commercial production.

Okay. How do I get to an indicative number, then? Can you tell me what the strip ratio was in 3 and what we should look for in like the mine?

John, we'll get you that. We have the numbers for the quarter in the attachment. We will get you through John's group and we'll get it posted on the website, some of the deferred stripping numbers or the strip ratios, if you want.

Okay, excellent. Congratulations on the quarter and I'm really looking forward to Q4.

Thanks, John.

Our next question comes from Oscar Cabrera with Goldman Sachs.

Good afternoon, gentlemen. Congratulations on the results. This is just related to to your, to the -- to your management team. We have talked about in the past about the hiring of a COO and adding to the core team. Just wondering what those plans are now. The fact that the operations are -- some of them appear to be reaching a point where their (inaudible) is very encouraging, but how are you guys thinking in terms of just building forward as you get Boddington and these other opportunities? That's the first one. I'll follow-up with another one, please.

Thanks, Oscar, for your questions. As I mentioned at the Denver Gold Show, I clearly realized that as a CEO I can't put in 24 hours a day, and even if I could, we need some additional operating strength in the Company. One of the five priority tasks that we have for this year is to get the organization structure right by the end of this year, an acknowledgement in that organization structure is two-fold. One, we need additional operating strength, but not just at the COO level, but at almost every level in the Company. Like a lot of other mining companies, we're competing for the best talent and we're finding it difficult and we're also being poached of some of our best talent.

With respect to the COO in particular, my senior leadership team, which is composed of 11 folks have all agreed that the Company needs to get a Chief Operating Officer or someone that looks like that and has that responsibility and we're all over that. The timing of that really is only reflective of how long it takes to attract the right person and get them into the Company. We want to make sure we have somebody that fits the concept that I have for running this Company, which is totally oriented towards the Company and towards team performance and it might take us a bit to find somebody. But we're going to find the right person and they'll help take the operations to another level and I acknowledge what you said that some of the Company's operations have reached a bit more stability. There's no question that we are in a challenging industry environment and we need to continue to stretch you our capacity and capabilities.

Thanks, Dick. Now the other thing that -- just wondering if you can help us put into context, during Buena Venturas conference call, the -- basically Buena Venturas stated that they were maintaining their guidance for 1.6 million ounces during 2007. How can we think about that project going into 2008? Do you still expect the mill or completion of the mill in the second quarter of next year and how should we think about the mine ramp-up following that? Thanks.

Oscar, what I would say is we continue to stick with the guidance we have put forward in our 10-K language, which basically says we're looking for stable production over the next several years. Think of the mill as really bringing forward economic wealth to the Company through quicker processing of oxide ores. It really doesn't add tremendous capability on a year-to-year basis in terms of incremental ounces. It will help on the cost side some. It will help enable us to better process more complex ores later. So there's lots of positives and it's a very positive economic for us because we're processing these higher grade oxide ores more quickly rather than putting them on the leach. So we clearly have economic benefit, but don't think of it as adding incremental capacity. Think of Yanacocha as stable over the next several years.

Oscar, Russ, I'll just add, we have had some guidance out there for awhile, as Dick's alluded to of 1.6 to 1.8 range. Again, that's just a function of stripping and grade as we mine different deposits. That's the range you should be thinking of Yanacocha.

Great. Thanks very much.

Thanks, Oscar.

Our next question comes from Victor Flores with HSBC.

Thanks. Good afternoon. I have a question related to Achime. It seems from what you're saying is that you've had another look at this project and I guess perhaps some of the concerns that you had with respect to going ahead with it have dissipated or changed or something's going on there and I was wondering if perhaps you could give us a sense of what has changed that's making you a bit more encouraged towards this progress?

I guess, Victor, what I would say is we're probably as encouraged as we were a year ago, we just continue to flush out the optimal way to develop this deposit. We did some work with the EPA. They asked us several questions which we've been responding to. In the meantime, we continue to do our community base line studies as we move forward to what an Achime development might look like, but this is not just about a one-off on wow, gold prices have really gone up so Achime looks great. This is more about sustainable commitment to getting value out of Achime in a form that we feel is sustainable.

So with that, one of the issues we still have is power availability around Achime and we're still narrowing down the options that we have for the particular mine plan to get the best part of the deposit and to make sure that we can comply with the EPA requirements. So in summary, Victor, what I would say is we've never really lost the confidence in the project. What we've really said is, boy, the power situation makes it difficult. The increase in inflation both on capital and operating costs requires us to go back and examine what our return profile looks like and in that we will continue to go forward with the right way to take this feasibility study to its end and what we're really saying is we're going to communicate that to you next year.

That's great, thanks. If I can just ask a follow up on Hope Bay, the folks from Miramar have put out a feasibility that looks at a fairly small -- a fairly small project. Obviously you're looking at this as a much bigger project. They had talked at one point in time about a couple of scenarios involving both a large-scale open pit operation with some underground and then a fully underground scenario as well. What do you think of those particular scenarios or how are you looking at this project?

Well, as you can imagine with our interest in, the interest we have held and currently hold in Miramar, we are very close to what they're doing from an operational perspective. We continue to look at the plans that they put on the table, provide them some technical advice around that, and I would say that at the end of the day, Miramar and us, we see exactly the same thing there, which is a long-term perspective, greenstone belt and what we're really trying to do is to optimize what's the best way to get started. I don't have the answer to that today, nor does our technical team. But when we take ownership of this Company, we'll look at the plans they currently have, we'll evaluate those in the context of what else we could do and then we will make a decision, but I think it's clear that what Miramar has on the table works. The question for us is there something that might work better, we're not in a position to answer that today.

That's fine, I understand that. Just let me ask one final question. When do you think that you'll have a sense of how to develop Hope Bay?

Well, clearly we're going to have a little bit of winter time here where we can think about and we'll come back--.

A long winter up there.

Yes. That's when we're going to hold the mine tour for everybody too.

Great. I'll send my associate. Thank you.

Yes.

Our next question comes from John Hill with Citi.

Yes. Thanks, everyone, and thanks for the detail on the call. I was just wondering if you could update us, where are we at in terms of Phoenix recoveries? And then secondarily on that, why so long to get the crusher on site? This was supposedly a priority when we visited site in September of 2006.

I can talk to the crusher, John. The crusher's schedule is driven primarily by the delivery time on the crusher itself. As a result, that will have it on site towards the first or second quarter of next year.

With respect to the first quarter, with respect to recovery grade, processing, all of those things, John, are things that we will answer in more detail when we have the definitive mine plan coming up next year. In the meantime, what we are seeing is more efficiency in what we do. As I said, I think fragmentation has led to a little easier processing both through the crusher and into the mill. The mill, as any mill start-up, we're still in a period where Phoenix is not even on for a year, so we're still working through some of those issues, but the mill is operating better than it has historically. We continue to see more availability, but with respect to recoveries, mill, ore grade, all the rest of that, we'll continue to provide more details as we get into next year.

John, Russ, for the quarter, we were somewhere between 65 and 70.

Okay, great. Then I was wondering if we can just branch off and talk a little bit about the merchant banking assets. There had been some discussion early on that gold assets, gold leveraged assets and royalties would be keepers. Now it appears that potentially the Gold Strike royalty is going and I was just wondering whether that's correct and what exactly we would plan to invest in that's going to be more sort of gold-exposed and unique and long-term in the world of gold in that royalty?

Yes. I guess with respect to that, we have been pretty definitive in almost every presentation we've made that we were selling the royalty portfolio. When you look at the royalty portfolio, you're right, Gold Strike is in that portfolio, as well as exposure to oil, palladium, copper, base metals, any number of other things. When we sell the portfolio, obviously we're trying to get the biggest dollar value that we can. Gold Strike helps with that. So I think it's an absolute key component to where we are going forward.

Where are we going to reinvest? Well, we have a number of opportunities inside our own portfolio. In a way, you could think of our reinvestment into Miramar. Our job is really to operate gold mines and I am definitive about that. We are going to operate. Our job, in some respects, the carryover activity out of Newmont Capital, that we will continue to look at, is looking into junior companies that have exposure to gold where we can find things in the earlier stage. Gold Strike, not one of those. So as we look forward, look for us to find earlier opportunities, opportunities that we believe have upside, and opportunities that come to us with operating gold exposure. That's our deal.

Okay, very clearly stated. Very clearly stated. Then if I could, just quickly, how do we plan to stamp the seasonality out of the Nevada system? That's been a pretty long-standing feature year-in and year-out.

Good question, we will not stamp it out in any one year. It will be something we'll have to do over time. But you have my management's team word on it. It's something we're going to work through. Now part of the variability we have is seasonal, right. But Nevada is not one of those generally, but in Nevada we do have to manage through the many processing plants that we have, making sure that we both fuel them as well as get the processing through them. So there is a little bit of that. We shut down during the second quarter. We'll always do that, but I think with respect to trying to levelize between the others, we're going to try to work harder to get that done. I would say come back to us at the end of 2010 and say, hey, you've done a great job flattening this out. It's going to take us a bit to get there, but we're going to get there.

Got it. Thanks.

Let me just add something. As we've gone through a change in our planning horizon, historically Newmont had planned on a calendar basis or a twelve-year basis -- twelve-month, sorry and that had driven behaviors. What we have gone out for this planning cycle, which again we're right in the midst of now and we'll communicate to the Board in the middle of December and to the Street in the January/February time frame, is what we're asking our operates to do is to give us a three-year plan that they can deliver on. So extending that time horizon to three years reduces that incentive to make this year look good by stealing from next year, which is not a particularly unique trait to Newmont. So I think part of it is behavior driven. And as we look to the regions to deliver on the three-year plan '08 to '010, in line with the mission and vision that we have communicated internally and externally I think you'll see a change in behavior.

One quick indicator of that might be if you look to the fourth quarter of this year or next year to see what sort of inventory we might be carrying over into the next year, I think we'll try to work through this in a systematic way.

And John, the key for us, quite frankly, is to look at the portfolio rather than just Nevada. We can, obviously, look at Nevada and that is the area that has historically been the one that's had the fourth quarter push, but what we really need to do is look at the portfolio and balance it across the entire region. Can, for example, Boddington in '09 help fill some of that gap in the year end? That's the issue that we have as management to manage around the portfolio just like an analyst or a PM would do with their portfolio. We need to look at the contribution by region and then balance that and it needs to be for a longer time period maybe than we've done historically.

Very good. Thank you.

Our next question comes from Mark Smith with Dundee Securities.

Yes. Hi, I guess this question is mainly for Russell. Maybe you could help me a little bit with some of the movements of deferred taxes on the balance sheet and how that reflected to the quarter? About $300 million added to deferred tax assets in the period.

Yes, Mark. As we alluded to earlier, the tax calculation is pretty complex and we have a number of moving parts. What we will commit to is through John to get you a greater breakdown on the tax calculation, including the split between current and deferred taxes. As you've seen, we had some significant movements negative in the second quarter if you want, through the income statement and then positive. So we'll get you that through John and again, we can get that posted up on the website. I think the key going forward for folks to realize is the 32% number. Yes, you'll see movements both into deferred and current in and around that, but for the long-term as we see it today, with the assets and attributes we have, 32 is a good number for a tax basis for modeling purposes. But we will get you more detail than you need through John's group.

Okay, good. Just following up that little -- just a little bit. You had $125 million in payable in the operating cash flow line, is that a reasonable number to go below the line go-forward?

Yes, Mark. You have to be a little careful. Remember that those payments are lagging.

Yes. But there's an awful big lag coming, right?

And a lot of the tax payments that we make on the consolidated basis are coming out of Yanacocha. So with that profile coming down, it will look different going forward. So again, we'll get something to you that gives you an indicative number, at least based on the current assets that you can plug.

Okay. Thank you very much, sir.

Take care, Mark.

Our next question comes from Patrick Chidley with BJM. Your line is open.

Good afternoon, everybody. Just wanted to ask about your oil prices that you've been experiencing through the quarter and how -- have you hedged any oil or would you have been exposed to the spot price for all of your diesel? And what's the price you're looking for in the fourth quarter, what are you planning for in terms of your plans?

Patrick, you cut out a little bit, but I think your question related to any hedging activity around oil; is that correct?

Yes, right.

Okay. So I would just say that we don't currently hedge oil on an accounting basis. We do have a hedge for oil with respect to the cash distributions that we received from Canadian oil sands and the principal appreciation or depreciation that comes along with that investment. So that's the way to think of it. At this point we consume about 3 million barrels of diesel every -- 3 million barrels of oil a year. That gives you some range of the exposure that we have and relative to that, Canadian oil sands covers with the distribution that we currently receive about 60% of the upside in price that we might have related to that. While it doesn't show up on the income statement that way, that's generally the way we're hedged.

Patrick, Russ, for '08, our budget assumption at least as of today was $80 oil and tied into that was $0.875 on the Australian dollar. So that is what we're thinking currently now for '08. Again, we'll reassess that before we finalize numbers, present to the Board and present to you. But clearly both of those will put cost pressures on CAS. But again, the hypothesis driven by a weaker dollar is good from a margin perspective seen in the gold price.

Your Canadian oil sands investment, you intend to continue holding that then or?

Yes. We have that, Patrick. That book value is roughly just over $1 billion. We paid about $300 million for that. So as Dick said, a nice gain. It has been a nice hedge that worked out well. Obviously we can't book that gain as a hedge, but it is -- from an accounting perspective at least, but it is an economic hedge. As we said earlier in the third quarter, we will continue to evaluate that asset and when the time is right and we have the opportunity, we will convert that asset into cash and reinvest it in our core gold business and we've been pretty consistent, telling investors that since the restructure and reorganization, if you want.

Okay. Just one more question, if I may. On Ahafo, you just appear to be warning that production will be lower in the fourth quarter. Is that because you're not going to have positive (inaudible) consolidation, as I think you talked about in the third quarter? Or is that because you really think that that's going to be the case?

Patrick, I think the question was Ahafo in fourth quarter. What you see more so than grade, it's just the impact of stripping as we move into new pits and new areas. So it's more driven by the mine plan and a function rather than any negative issues, if you want, with grade.

So more stripping, less throughput?

Yes, exactly. Or more strip and maybe lower grade. The throughput is largely fixed again. The throughput issue on the power side which has been the issue in Ghana has improved as the rains have come and the dam levels are up. So we do expect to generate less power ourselves and more through the grid. However, for those who have been watching the power situation in Ghana, there was a public announcement, I think it was this week or it might have been last week of rate increases and obviously that will impact us and we'll have to work that through in the economics on Achime as well.

Okay. Thanks a lot. Well done and good quarter.

Our next question comes from Barry Cooper with CIBC.

Yes. Good day. A few questions. First of all, fairly simple one, maybe. Could you explain the drop in the depreciation rate for Nevada? You basically dropped it $40 an ounce quarter on quarter, about $30 from the first half. That seems to be quite a bit for what we would normally consider a stable area.

Yes, Barry, that's a good question. We had two things going on. We looked in the second quarter and you'll see it in our Q where we reassessed asset lives, particularly on the whole fleet. We had been using a assumption of I think it was seven years on our large equipment fleet with some of the improvements in the maintenance function. We have extended that to 10.5 years, which is, probably equates to about 75,000 hours on a whole truck round numbers. That was part of it. And the rest was a -- moving with production. Again, the split is about 50/50 and it varies by region between units of production and on the straight line method. So again some of it is the mix of production, whether it's coming from underground or open pits and in fact where we're processing it. You will see that for the Company we have backed off on the guidance for DD&A for the year by about the same number, 40 million to $50 million.

Right. Okay. So going forward, what do you suggest we look at then?

Yes, I think, Barry, this quarter is pretty indicative. Again, we have a lot of production coming out of Batu and that will take some DD&A with it. But that revised number seems to be a reasonable estimate as we look forward in the planning process with ounces around 4.5 million round numbers.

Good. Then on your other guidance on the copper production, 190 million to 210 million pounds, you're at 183. I'm just wondering -- I realize you don't like probably changing guidance all that much, but that seems to be a pretty slow pitch there?

Sorry, Barry, for the year, and I'm just looking at the release on page 11 of 21, we're at about 170.

Is that -- are you quoting sales or are you quoting production?

Sales.

Okay, so there's a slight difference there. Okay.

There is a difference, Barry. And that's what Dick alluded to earlier with inventories moving around. Again, we are still currently today in the bottom of the pit. The rains have not come and I don't know if it's el Nino or la Nina, but we still have a shovel in the pit so again we will look to balance the production throughout the portfolio and that means you may see some operations sitting on more inventory at year end and again, and that's just a function of how long we can access that high grade in the bottom of that pit.

Then final question I have is, just wondering what your view is, and maybe it's not a view, maybe it's a defensive position that you're going to take of the overhaul of the 1872 mining law where the Feds are talking about imposing a 4% royalty on all Federal land. How much of your production comes off nonpatented land in Nevada?

This is Britt Banks talking out. I believe of our reserves in Nevada, only 4 million ounces are on Federal land at this time. Our expectation is that in a final bill, you won't see a royalty on existing reserves.

It will get washed down to nothing pretty much by the time it gets beaten around there?

That's certainly our hope and our expectation at this point.

Yes. That would be my guess as well, but you never know sometimes. Okay. Thanks a lot.

Sure.

Our final question comes from John Tumazos with John Tumazos Very Independent Research. Your line is open.

Congratulations on the improvement. I have several questions and maybe you can address some of them. How much output do you expect to get from Midas in the fourth quarter, first? Second, is it right to assume that part of Miramar's availability was the difficulty of staffing, management, and other positions in the far north and will there be more acquisitions where Newmont's ability to bring talented staff moving the project along as a unique synergy? Finally, in the Phoenix redrilling, what is the data you're looking for? Are you trying to exactly characterize ore hardness, oxide mix, sulfide, metallurgical character, or is there an uncertainty as to the gold or copper content or some other attribute?

I'll take those, John. First on Midas, think of Midas as a 10,000 ounce a month producer. As we ramp up during the fourth quarter, recognizing that it's already the end of October, at best we have two months at 10,000 ounces, at best. I would suggest that we are moving into new ground, new stoping, still trying to get it right out there, it will come in less than that, but think of it in that range. That is our capability. I'm not saying we will do 20, that is it at the most. Think of it that way.

With respect to Miramar, Miramar was not really available. Miramar was something that we understood the project, we understood the potential of the Greenstone belt and we just worked the deal with Miramar, a Company that we've had an investment in for some time. I think they've done a pretty extraordinary job of keeping their team focused on drilling, on putting the mine plan together. Clearly one of the things that Newmont does bring to this operation in answer to your subpart to this, I think that Newmont does have the capability, the technical capability, and other capabilities to really work through some of these issues that maybe some other companies don't have. We also have the balance sheet strength and we have a solid base of production that allows us both in Canada and other places throughout the world to take some risk. I think that that's one of the things you get when you buy a major gold company. We can take a hit and we can still keep on ticking, just like we did with what happened in Uzbekistan.

I would suggest going forward, when I talk about scope and scale benefits that is exactly the kind of thing that I hope we can take other places. Does that mean more acquisitions, I don't know, quite frankly, because if the market gets frothy, we are not going to be there. If the market makes things available that we think makes sense that we can do on an accretive basis, that we can do in a way that's respectful of our shareholders and our, because we all have an investment, the share price that we have, we'll consider that. But that's the calculus. It's not just get bigger, it's get better to make sure that we're bringing something to the table that we bring a unique aspect that maybe not everybody else does that we can bring this development into production in a way that brings value to our shareholders.

And lastly with respect to your subpart three question on Phoenix, the data that we are looking for is all of that that you suggested. It has to do with some older drill holes, that while we received data on those older drill holes, we're finding that we need to go back and update those drill holes for a variety of reasons, but we are looking for ore hardness, we are looking for metallurgical content, we are through that drilling going to continue to relook at the reserve content for copper, gold, all of those things are on the table at Phoenix right now and that's precisely why we're going to be drilling these 150 or so holes over the balance of this year and into next year.

If I could follow-up concerning Phoenix, or the first 46 holes suggesting net-net better or worse data? And concerning Miramar, just cruising their website there were a lot of job openings. It seemed like there were more jobs in management vacant than maybe filled and I didn't get the impression they had any material undisclosed event, because it was all up on the web. But it didn't give the impression like they were going to be on schedule with the small Doris North one and I would think there must be a lot of companies in situations where they can't really staff their projects that would be opportunities, not really bidding war situations, but--?

That could very well be with respect to Miramar. I haven't had the time to cruise other people's websites to see if that's the case, but we do have a group that keeps their ear to the ground here so we'll keep looking for those opportunities. With respect to Miramar, as I said, I think we'll work a complementary process here to keep the people they have to add our people and move this project forward. So that's sort of the last answer to that.

And with respect to Phoenix, again, we've drilled those holes. That doesn't mean we've had time to assay all of them. It doesn't mean we have any conclusions. At this point, still preliminary. As we'll keep saying, when we get the mine plan together, we will update analysts. With that, I want to thank everybody for their attention today and again if you have other questions, John Seaberg and the IR team would be happy to follow up with you. Thanks again.

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